GSB - MBA – TM III

Business Law
Unit I
Rights of unpaid seller

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 Who is an unpaid seller?
• The seller of goods is deemed to be an "unpaid
seller“
(a) when the whole of the price has not been
paid or tendered;
(b) when a bill of exchange or other negotiable
instrument has been received as conditional
payment, and the condition on which it was
received has not been fulfilled by reason of the
dishonour of the instrument or otherwise.
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• The term "seller" includes any
person who is in the position of a
seller, as for instance, an agent of the
seller to whom the bill of lading has
been endorsed, or a consignor or
agent who has himself paid or is
directly responsible for the price.
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• If the property in the goods has passed to the
buyer, the unpaid seller may have
> a lien or
> right of stoppage in transitu and
> a right of re-sale.
The seller in respect of goods of which he has
ceased to be the owner. The buyer gets a good
title.

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 1. Lien
The seller can retain the goods until payment or
tender of the price, provided:
> goods have been sold without any
stipulation regarding payment,
> if sold on credit, the period has expired,
and,
> buyer has become insolvent.
Lien can be exercised even if he holds the goods
as buyer’s agent
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Unpaid seller’s lien is a particular lien
and can be exercised only by him or
his creditors. It is indivisible and
buyer cannot claim partial delivery
on payment of a part of the price.
If the seller has made part delivery he
can exercise the lien against the
remainder.

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 Termination of lien
The unpaid seller of goods loses his lien
(a) when he delivers the goods to a common
carrier or other bailee for transmission to the buyer
without reserving the right of disposal of the goods;
(b) when the buyer or his agent lawfully obtains
possession of the goods;
(c) by waiver.
(d) by destruction of the goods.
(2) The unpaid seller of goods having a lien does not
lose this right by reason only that he has obtained
decree for the price of the goods.
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 2. Stoppage In Transit
A lien depends upon possession. The right of
stoppage in transit can arise
> only after the seller has parted with
possession
> the buyer is insolvent.
> goods are in transit
> they have not come into the possession
of the buyer
> seller is unpaid.
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• The right of stoppage in transit is
lost, if,
> buyer obtains delivery of the
goods, and /or
> obtains delivery of the
documents of title to the goods and
assigns them to a bona fide
purchaser for value.
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Stoppage in transit – how effected
> the unpaid seller taking repossession of
the goods, or,
> by giving notice to the carrier or other
bailee in whose possession the goods are.
In such case, the carrier or other bailee must
deliver the goods as per seller’s instruction.
Expenses of such delivery should be borne by
the seller.

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 3. Re-Sale By Unpaid Seller
> Where the goods are of a perishable nature, or
> where the seller expressly reserves the right of
resale in case the buyer should make default, or
> where the buyer has been in default in the
payment of the price an unreasonable time,
an unpaid seller having a right of lien or having stopped
the goods in transit may resell the goods, after giving
notice to the buyer of his intention to resell. He shall
not thereafter be liable to the original buyer upon the
contract to sell or the sale or for any profit made by
such resale, but may recover from the buyer damages
for any loss occasioned by the breach of the contract or
the sale.
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 > Where a resale is made, the buyer
acquires a good title as against the original buyer.
> It is not essential to the validity of a
resale that notice of an intention to resell the goods
be given by the seller to the original buyer.

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(4) It is not essential to the validity of a resale
that notice of the time and place of such
resale should be given by the seller to the
original buyer.
(5) The seller is bound to exercise reasonable
care and judgment in making a resale, and
subject to this requirement may make a resale
either by public or private sale.

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 Actions For Breach Of The Contract.
Remedies Of The Seller
1) Where, under a contract to sell or a
sale, the property of the goods has
passed to the buyer, and the buyer
neglects or refuses to pay for the
goods according to the terms of the
contract or the sale, the seller may
maintain an action against him for
the price of the goods. 14
2) Where, under a contract to sell or a
sale, the price is payable on a day
certain, irrespective of delivery or of
transfer of title and the buyer
wrongfully neglects or refuses to pay
such price, the seller may maintain
an action for the price, although the
properly in the goods has not passed,
and the goods have not been
appropriated to the contract .
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3) Although the property in the goods has not
passed, if they cannot readily be resold for a
reasonable price, the seller may offer to
deliver the goods to the buyer, and, if the
buyer refuses to receive them, may notify the
buyer that the goods are thereafter held by
the seller as bailee for the buyer. Thereafter
the seller may treat the goods as the buyer's
and may maintain an action for the price.
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4. (Action for Damages for Non-Acceptance of the
Goods.)
(a) Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller
may maintain an action against him for damages
for non-acceptance.
(b) The measure of damages is the estimated
loss directly and naturally resulting, in the
ordinary course of events, from the buyer's
breach of contract.
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5. Suit for interest: In the
absence of a contract to the
contrary, the court may award
interest at such rate as it
thinks fit on the amount of the
price.
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