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CHANAKYA NATIONAL LAW

UNIVERSITY

A Project On




Rights of Unpaid seller against the goods



Made By: GANESH KHANNA
2
nd
year (3
rd
sem)
ROLL No.926
B.A.LL.B. (Hons)
SUBMITTED TO: - VIJAY KUMAR VIMAL
SIR
FACULTY: - LAW OF CONTRACT

Rights of unpaid seller against the goods
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ACKNOWLEDGEMENT
I am feeling highly elated to work on the topic Rights of unpaid
seller against the goods under the guidance of VIJAY KUMAR VIMAL SIR, my
faculty of LAW OF CONTRACT. I am very grateful to him for his exemplary
guidance. I would like to enlighten my readers regarding this topic and I hope I have
tried my best to pave the way for bringing more luminosity to this topic.

I also want to thank all of my friends, without whose cooperation this
project was not possible. Apart from all these, I want to give special thanks to the
librarian of my university who made every relevant materials regarding to my topic
available to me at the time of my busy research work and gave me assistance. And at
last I am very much obliged to the God who provided me the potential for the
rigorous research work.

And finally yet importantly I would like to thank my parents for the
financial support.

-----------
Thanking you
GANESH KHANNA
C.N.L.U.


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CONTENTS:
1. INTRODUCTION :UNPAID SELLER: DEFINED
2. CHARACTERISTIC OF UNPAID SELLER
3. RIGHTS OF UNPAID SELLER AGAINST THE
GOODS
4. Case AND FEW IMPORTANT JUDGEMENTS
5. CONCLUSION
BIBLIOGRAPHY




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A.) RESEARCH METHODOLOGY
The researcher aims to conduct his research through Doctrinal methods accessing data
from internet, library etc. which would be further backed by Empirical method and its
stats obtained during field work.
B.) Sources of Data
The whole project is made with the use of both primary and secondary sources. As the
primary source, the field work and peoples views is taken and for the secondary sources,
books, journals, newspaper article, material available on net and articles written by
eminent jurists is taken.
C.) Method of Writing
The method of writing followed in the course of this research paper is primarily
analytical.



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INTRODUCTION
DEFINITIONS:
Before discussing the topics in detail the researcher would like to throw light on the
definitions of some of the basic terms which would be encountered during the preparation
of the project. The definitions are in accordance with the Sales of Goods Act,1930.
BUYER: In this Act, unless there is anything repugnant in the subject of content-
buyer" means a person who buys or agrees to buy goods,

GOODS" means every kind of movable property other than actionable claims and money;
and includes stock and shares, growing crops, grass, and things attached to or forming
part of the land which are agreed to be severed before sale or under the contract of sale;

SELLER" means a person who sells or agrees to sell goods


UNPAID SELLER:
Section 45 lays down that a seller is unpaid :
(1) When the whole of the price has not been paid or tendered.
(2) When a negotiable instrument or a bill of exchange has been received as conditional
payment and the condition in which it was received has not been fulfilled by reason of the
dishonor of the instrument or otherwise.
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The seller remains as unpaid seller as long as any portion of the price however small,
remains unpaid. Where the whole of price has been tendered, and the seller refused to
accept such a tender, seller ceases to be an unpaid seller. In such a case the seller loses all
high right against the goods.
If there is a period of credit then the seller is not unpaid until the price become due.
Against if there is a condition attached to payment it must be fulfilled.
The unpaid sellers right can be exercised by an agent of the seller to whom the bill of
leading has been endorsed, or a consignor or an agent who has himself paid, or is directly
responsible for the price




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CHAPTER-2
CHARACTERISTICS OF AN UNPAID SELLER
As per the provisions in section 45 an unpaid seller of goods is defined and hence based
on the above provision the researcher has mooted out various characteristics that define
the unpaid seller of the goods.
The following are the few characteristics of an unpaid seller in accordance with section
45 of the Sale Of Goods Act,1930.
1. He must sell goods on cash terms and not on credit, and he must be unpaid.

2. He must be unpaid either wholly or partly. Even if only a portion of the price, however
small, remains unpaid, he is deemed to be an unpaid seller. Where the price is paid
through a bill of exchange or other negotiable instrument, the same must be dishonoured.

3. He must not refuse to accept payment when tendered. If the buyer has tendered the
price but the seller wrongfully refuses to take the same, he ceases to be an unpaid seller
1











1
http://mercantilelaws.blogspot.in/2012/05/who-is-unpaid-seller-characteristics-of.html

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CHAPTER-3
RIGHTS OF THE UNPAID SELLER AGAINST THE GOODS

Broadly there are two kinds of rights of the unpaid seller according to the provisions laid
down in the Sale of Goods Act,1930.They are:
Broadly
I. Rights of unpaid seller against the goods, and
II. Rights of unpaid seller against the buyer personally. We shall now examine these rights in
detail.

However since the project topic deals with the right of the unpaid seller against the goods
hence
The researcher tends to focus only on that part of the project topic.

1. Rights of Unpaid Seller against the Goods.
An unpaid seller has the following rights against the goods notwithstanding the fact that the
property in the goods has passed to the buyer:
1. Right of lien;
2. Right of stoppage of goods in transit;
3. Right of resale [Sec. 46 (1)].


1. Right of lien (Sec. 47)
Lien is the right to retain possession of goods and refuse to deliver them to the buyer
until the price due in respect of them is paid or tendered. An unpaid seller in possession
of goods sold is entitled to exercise his lien on the goods in the following cases:
(a) Where the goods have been sold without any stipulation as to credit;
(b) Where the goods have been sold on credit, but the term of credit has expired:
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(c) Where the buyer becomes insolvent, even though the period of credit may not have yet
expired.
In the case of buyers insolvency the lien exists even though goods had been sold on
credit and the period of credit has not yet expired. When he goods are sold on credit the
presumption is that the buyer shall keep his credit good. If, therefore, before payment the
buyer becomes insolvent, the seller is entitled to exercise this right and hold the goods as
security for the price.

The effect of buyers insolvency is that all stipulations as to credit are put to an end and the
seller has a right to say, I will not deliver the goods until I see that I shall get my price paid
2

The unpaid sellers lien is a possessory lien, i.e., the lien can be exercised as long as the seller
remains in possession of the goods. He may exercise his right of lien notwithstanding that he
is in possession of the goods as agent or bailee for the buyer [Sec. 47(2)]. Transfer of
property in the goods or transfer of documents of title to the goods does not affect the
exercise of this right, provided the goods remain in the actual possession of the seller
3
. In
fact when property has passed to the buyer then only retaining of goods is called technically
lien. Where the property in goods has not passed to the buyer and the title is still with the
seller then it is, strictly speaking, anomalous to say that the seller has a lien against his own
goods. The sellers lien when property has not passed to the buyer is termed as a right of
withholding delivery. Accordingly, Section 46(2) provides:

The term insolvent here does not mean a person who has been adjudged insolvent under the
Insolvency Law. In Sale of Goods Act a person is said to be insolvent who has ceased to pay
his debts in the ordinary course of business, or cannot pay his debts as they become due,
whether he has committed an act of insolvency or not [Sec. 2(8)].

But if the buyer has transferred the documents of title to a bona fide purchaser, the sellers
lien is defeated (Sec. 53).


2
Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307
3
The James W Elwell, [1921] P 351
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Where the property in goods has not passed to the buyer, the unpaid seller has, in addition
to his other remedies, a right of withholding delivery similar to and coextensive with his
rights of lien and stoppage in transit where the property has passed to the buyer.

This right of lien can be exercised only for the non-payment of the price and not for any other
charges, i.e., maintenance or custody charges, which the seller may have to incur for storing
the goods in exercise of his lien for the price
4
. This right of lien extends to the whole of the
goods in his possession even though part payment for those goods has already been made.
In other words the buyer is not entitled to claim delivery of a portion of the goods on
payment of a proportionate price
5
. Further, where an unpaid seller has made part delivery of
the goods, he may exercise his right of lien on the remainder, unless such part delivery has
been made under such circumstances as to show an agreement to waive the lien (Sec. 48).
Also, the lien can be exercised even though the seller has obtained a decree for the price of
the goods [Sec. 49(2)].

When lien is lost? As already observed, lien depends on physical possession of goods. Once
the possession is lost, the lien is also lost. Section 49 accordingly provides that the unpaid
seller of goods loses his lien thereon in the following cases:
(a) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the
buyer without reserving the right of disposal of the goods; or
(b) When the buyer or his agent lawfully obtains possession of the goods; or
(c) When the seller expressly or impliedly waives his right of lien. An implied waiver takes
place when the seller grants fresh term of credit or allows the buyer to accept a bill of
exchange payable at a future date or assents to a sub-sale which the buyer may have
made.

It may be noted that right of lien, if once lost, will not revive if the buyer redelivers the
goods to the seller for any particular purpose. Thus, where a refrigerator after being sold
was delivered to the buyer and since it was not functioning properly, the buyer delivered

4
Orchard v Rackstraw 9 CB 700; 137 ER 1066
5
Proctor v Nicholson (1835) 7 Car & P 67; 173 ER 30
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back the same to the seller for repairs, it was held that the seller could not exercise his
lien over the refrigerator ( Eduljee vs John Bros
6
.).
2. Right of Stoppage of Goods in Transit:
Meaning of Right of Stoppage of Goods in Transit: The right of stoppage in transit means
the right of stopping the goods while they are in transit, to regain possession and to retain
them till the full price is paid. Lord Cairns LJ . Had made the following observation in this
regard
7
:

The essential feature of stoppage in transit is that the goods should be in the possession of
a middleman or some other person intervening between the vendor who has parted with and
the purchaser who has not received them.

Conditions under which Right of Stoppage in Transit can be Exercised [Section 50]: The
unpaid seller can exercise the right of stoppage in transit only if the following conditions are
fulfilled:
(i) The seller must have parted with the possession of goods, i.e., the goods must not
be in the possession of seller.
(ii) The goods must be in the course of transit.
(iii) The buyer must have become insolvent.

The buyer is said to be insolvent when he has ceased to pay his debts in ordinary course of
business, or cannot pay his debts as they become due, whether he has committed an act of
insolvency or not
8
.

: The sellers right of stoppage in transit is based on the principle that one mans goods shall
not be applied to the payment of other mans debt.
9

Duration of Transit [Section 51(1)]: Goods are deemed to be in course of transit from the
time when they are delivered to a carrier or other bailee for the purpose of transmission to

6
AIR 1943 nag 249
7
Bevan v Waters (1828) M & M 234
8
Bowmaker Ltd v Wycombe Motors Ltd [946] 1 KB 505
9
Forth v Simpson (1849) 13 QB 680
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the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier
or other bailee.

Note: The carrier must hold the goods in the capacity of an independent person and not in
the capacity of an agent for the seller or buyer. If the carrier holds the goods as an agent for
the seller, there is no question of exercising the right of stoppage in transit because the seller
can exercise his right of lien. If the carrier holds the goods as an agent for the buyer, the seller
cannot exercise the right of stoppage in transit because the delivery to the carrier amounts
to delivery to buyer
3. Right of Resale
The right of resale is a very valuable right given to an unpaid seller. In the absence of this
right, the unpaid sellers other rights against the goods, namely, lien and stoppage in
transit, would not have been of much use because these rights only entitle the unpaid seller
to retain the goods until paid by the buyer
10
. If the buyer continues to remain in default, then
should the seller be expected to retain the goods indefinitely, specially when the goods are
perishable? Obviously, this cannot be the intention of the law. Section 54, therefore, gives to
the unpaid seller a limited right to resell the goods in the following cases:

(a) Where the goods are of a perishable nature; or
(b) Where such a right is expressly reserved in the contract in case the buyer should make a
default;


10
EH Parakh v G Mackenzie & Co Ltd AIR 1934 Oudh 380
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CHAPTER-4

CASES AND FEW IMPORTANT JUDGEMENTS.
In the case of Feise v Wray
11
it was held that where the seller draws bills for the price of
the goods on the buyer ,who accepts them, and the seller negotiates them. Before the bills
arrive at maturity the buyer fails. The buyer would be in the position of an unpaid seller.
In yet another case of Jenkynes v Usborne
12
A had consigned cargo to z in London
exceeding the quantity which Z had contracted to take and drew two bills on Z, one for
the price contracted for and other for the price residue. Z accepted the first bill but
refused to accept the second. It was then agreed that B who was As London agent should
himself take the smaller portion. This agreement the court held gave Z the right to take
possession of and receive the goods on ships arrival and B the right to receive the
residue. B sold his interest in the cargo to P , taking Ps bill. There was only one bill of
lading which was held by Z, and P had only a delivery order addressed to the master of
the ship. P pledged his interest in the cargo to Q and him his delivery order . Before the
ship arrived P failed and the bill which he had given to B was dishonoured. B notified his
master not to give the share to anyone without further instructions.
The court held that B was in the position of an unpaid seller, and was entitled to stop his
portion of the cargo in the transit.
In the case of Hodgson v Loy
13
,it was held that at one time there was a question whether
a seller who had been partially paid was entitled to the rights of the unpaid seller ,the
decision was held by the court in affirmative.
In Cohen v Rosh
14
it was held that where a seller waives tender of the price of the buyer,
the seller would be stopped from claiming that he is an unpaid seller for the purpose of
exercising his remedies under section 46.

11
(1802) 3 East 93
12
(1844) 7 Man & G 678
13
(1797) 7 TR 440
14
(1927) 1 KB 169,p 180
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In the case of Longbottom & Co Ltd v BassWalker & Co
15
, it was held that where the
goods are to be delivered by separate instalments and to be paid separately the price may
be apportioned accordingly and the expression whole of the price will take colour from
the context.






15
(1922) WN 245,p 246
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CONCLUSION

In the project the researcher has highlighted the various aspects of the rights of the unpaid
seller against goods .in the commercial world a seller and buyer have lots of mutual rights
and duties towards each other, which define the dynamics of the commercial world. In
such a situation where a seller is unpaid , it is very essential and very obvious indeed to
impart some rights towards such seller .In this project the researcher has tried to highlight
these very rights and the dimensions which such right carry with them.

The researcher has tried his level best to dig deep into the project topic and do
justification to it. The Researcher has also acknowledged and cited all the source
authentically as far as possible.
It was really an enriching experience to work on the above dimensions of Sales of Goods
Act, which the researcher is quite sure to have led to opening of new windows for
thought, and rejuvenation of the grey cells. He requests to encourage such endeavours
even in future.

Hope you have liked the project, and any deterrence to the enjoyment due to the
researchers fault is deeply regretted.



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BIBLIOGRAPHY
BOOKS REFERRED
1. Dr. R.K. Bangia Indian Contract Act, 14th edition, 2012
2. Pollock & Mulla, Indian CONTRACT and Specific Relief Acts 14th edition,
2013
3. Avtar Singh, Contract Law, 1st edition, 2012
4. www.manupatra.com
5. www.indiakanoon.org
6. S.S.Ujjannavar, Law of Contract, 2
nd
Edition. 2009

WEBSITE REFERRED
a. www.manupatra.com
b. www.indiankanoon.org
c. www.lawyersclubindia.com
d. www.legalserviceindia.com
e. www.manupatra.com