Explain the Rights of an Unpaid Seller.

An unpaid seller has two-fold rights:

  1. Rights against the goods.
  2. Rights against the buyer personally.

Rights Against the Goods.

If the property in goods has not passed to the buyer, the unpaid seller gets a right of withholding the delivery of goods. If the property in goods has passed to the buyer an unpaid seller has the following rights:

  • Right of lien.
  • Right of stoppage in transit.
  • Rights of resale

Right of Lien: Lien is the ‘right to retain the possession of goods until certain charges due in respect of them are paid. According to Section 47 to 49 the unpaid seller of goods who is in possession of them is entitled to retain his possession until payment or tender of the price in the following cases:

  • Where the goods have been sold without any stipulation as to credit, or
  • Where the goods have been sold on credit, but the term of credit has expired, or
  • Where the buyer becomes insolvent.

Stoppage in Transit: According Section 50-52, when the buyer of goods becomes insolvent the unpaid seller who had parted with the possession of the goods, has the right of stopping them in transit, i.e. he may resume possession of the goods as long as they are in course of transit and may retain them until payment or tender of the price. Thus stoppage in transit requires four conditions to be fulfilled:

  • The seller is unpaid and he has parted with possession.
  • The buyer becomes insolvent.
  • The goods are still in transit.
  • The seller has reserved to himself the right of disposal.

Right of sale: According to Section 54 an unpaid seller who has the possession of the goods, can resell them under the following circumstances:

An unpaid seller can sell the goods, without any notice to the buyer, if the goods are of perishable nature.

When the unpaid seller has exercised the right of lien or stoppage in transit, the seller has to give a notice to the buyer of his intention to sell the goods. If the buyer does not pay the price within reasonable time after receiving the notice, the seller may sell the goods.

When the seller has expressly reserved the right of sale in case of buyer’s default, the seller may sell the goods without any notice to the buyer.

Rights Against the Buyer Personally.

In addition to rights against the goods, an unpaid seller has some rights against the buyer personally. These rights are also known as “suits far breach of contract.” The following rights are available to the unpaid seller against the buyer personally:

  • Right to sue for price.
  • Right to sue for damages.
  • Right to sue for interest.

Suit for price: According to Section 55, where under a contract of sale, the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue him for the price of the goods. Where under the contract of sales the price is payable an a certain day irrespective of delivery and the buyer wrongfully :neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and.the goods have not been appropriated to the contract.

Suit for damages for non-acceptance: According to Section 56, where the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue him for damages for non-acceptance. Damages are assessed in accordance with the principles laid down in Section 73 and 74 of the Contract Act.

Where the goods have a ready market, the buyer has to pay the loss that the seller has sustained on sale of the pods on the day of breach. If the seller does not sell, the difference between the contract and market prices of the day of breach is measure of damages. This principle will apply even if the seller has actually sustained less loss.

Suit for interest: Accounting to Section 61, where there is a specific agreement between the seller and the buyer as to interest on the price of the goods from the. date on which payment becomes due, the seller may recover interest from the buyer. In absence of any specific agreement, the seller may charge interest on the price, when it becomes due from such day as he may notify to the buyer.

In the absence of a contract to the contrary the court may award interest to the seller in a suit by him at such rate as it thinks fit on the amount of the price from the date of the tender of the goods or from the date on which the price was payable.

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