An unpaid seller, defined under Section 45 of the Sale of Goods Act, 1930, is a seller who has not been paid the full price for goods sold, either because the full amount remains unpaid, a credit period has expired, or a negotiable instrument like a bill of exchange has been dishonoured. The law provides specific rights to protect the unpaid seller's interests, which are categorized into rights against the goods and rights against the buyer.
The primary rights of an unpaid seller against the goods include:
Right of Lien (Section 47): The right to retain possession of the goods until the buyer pays the full price. This right exists when the goods are sold without credit, the credit period has expired, or the buyer has become insolvent. The seller can exercise this right while in possession of the goods, including as an agent or bailee for the buyer. The lien is lost if the goods are delivered to a carrier without reserving the right to dispose of them, if the buyer or their agent gains lawful possession, or if the lien is waived.
Right of Stoppage in Transit (Section 50): The right to regain possession of goods while they are in transit to the buyer. This right can be exercised if the buyer becomes insolvent while the goods are in transit, or if the seller has not yet delivered the goods to the buyer or their agent. The transit period begins when the goods are delivered to a carrier and ends when the buyer or their agent takes delivery, the carrier acknowledges the goods are held for the buyer, or the carrier refuses to deliver.
Right of Resale (Section 54): The right to sell the goods to another buyer under specific circumstances. This right is available for perishable goods or when the seller has exercised the right of lien or stoppage in transit and has given notice to the buyer of the intention to resell. If the resale price is lower than the original contract price, the seller can claim the difference as damages from the original buyer.
The rights of an unpaid seller against the buyer include:
Right to Sue for the Price (Section 55): If the property in the goods has passed to the buyer, the seller can sue the buyer for the price of the goods if the buyer refuses to pay.
Right to Sue for Damages for Non-Acceptance (Section 56): If the buyer wrongfully refuses to accept the goods, the seller can sue for damages. The damages are calculated as the difference between the contract price and the market price on the day of the breach, or the cost of reselling the goods if the seller chooses to resell.
Right to Sue for Interest (Section 61): The seller can claim interest on the price from the due date, either based on a prior agreement or as determined by the court if no agreement exists.