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1. INTRODUCTON In a transaction of sale it is not possible to avoid credit sales.

In credit sales there is a risk of a debtor not paying the price of the goods even after the credit period is over. The seller of the goods therefore must possess some rights which he can use to secure payment of the price. If the recovery of the price is not possible due to the reason of bankruptcy of the buyer, he must have some other remedies. The Sale of Goods Act has made elaborate provisions regarding the rights of an unpaid seller. 2. DEFINITION The term unpaid seller may be defined as the seller to whom the full price of the goods sold had not been paid. The seller of goods is deemed to be unpaid (Sec. 45-1) (1) The seller of goods is 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 conditions on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise. (2) 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 whohas himself paid, or is directly responsible for, the price. 3. FEATURES OF THE UNPAID SELLER I. He must sell goods on the cash basis and must be unpaid. II. If he sells on credit basis, he is not an unpaid seller during the period of credit. III. The term of credit has expired and the price has not been paid to him. IV. He must be unpaid wholly or partially. If a part of price remains unpaid, he is unpaid. V. When the price is paid in the form of negotiable instruments and it has been dishonored. VI. If buyer offers payment and seller refuses to accept, the seller is not an unpaid seller. 1

Illustrations (a) Z sells goods worth Rs. 50,000/ - to B on credit of 5 months. After 5 months B did not pay the price. Z shall be regarded as an unpaid seller. (b) In the above example if B accepts a bill of exchange and it is dishonored by him on due date, A shall be considered as an unpaid seller. A seller of goods who received only part of the payment for the goods is an unpaid seller. A seller of goods who received a negotiable instrument e.g. bill of exchange, promissory note, cheque is not an unpaid seller. But before delivery of the goods, if the negotiable instrument gets dishonored, then the seller becomes unpaid seller. Negotiable instrument is something given as conditional payment. But when negotiable instrument is given as absolute payment, the seller wont become an unpaid seller, for the payment was already done in complete. In J.L.Lyons & Co. v. May & Baker case, L Co., sold a quantity of citric acid crystals to one P, who resold the goods to M & B. The goods were not of the contract quality. L Co., therefore, agreed to take them back and refunded the price to P. The latter gave a cheque to M & B, in refund of the price. This cheque was dishonoured and, therefore, M & B sought to retain the goods till their price was refunded. The Court held that they have to return the goods since P is not an unpaid seller. P bought, paid, and rejected the goods.

Goldshede v. Cottrell(1836) 2 M & W 20: 6 LJ Ex 26. J.L.Lyons & Co. v. May & Baker(1923) 129 LT 413: [1923] 1 KB 685. 2

4. RIGHTS OF AN UNPAID SELLER I. Rights Against The Goods 1. Where the property in the goods has passed to the buyer. 1. Right of Lien 'Lien is the right to retain possession of goods until certain charges in respect thereof are paid. An unpaid seller who is in possession of the goods is entitled to retain them until payment of the price, where a. The goods have been sold without any stipulation s to credit; b. The goods have been sold on credit, but the term of credit has expired or c. The buyer becomes insolvent. The seller may exercise his right of lien notwithstanding that he in possession of the goods as agent or bailee for the buyer. In Bloxam v. Sanders3 case, the Court ruled that The buyer has no right to have possession of the goods till he pays the price. The sellers right in respect of the price is not a mere lien which he will forfeit if he parts with the possession, but grows out of his original ownership and dominion, and payment or a tender of the price is a condition precedent on the buyers part and until he makes such payment or tender, he has no right to the possession. Where the goods have been sold on credit, the right of lien shall remain suspended over the period of credit and shall revive on the expiry of that period.

Bloxam v. Sanders 4 B & C 941, 948: 28 RR 525

Termination of Lien (1) The unpaid seller of goods losses his lien thereon (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, (b) When the buyer or his agent lawfully obtains possession of the goods, (c) By waiver thereof. (2) The unpaid seller of goods, having a lien thereon, not lose his lien by reason only that he has obtained a decree for the price of the goods The right of lien is linked with possession of the goods and not with the title. It is not affected even if the seller has transferred the documents of title till he remains in possession of the goods. However, if the buyer has further transferred the documents of title to a bona fide purchaser the seller's lien is defeated. In the case titled Bharneha v. Wadilal4,(28 Bom. L.R777P.C) a person had sold some of his shares to another person (buyer), and had also delivered those share certificates to the buyer along with the share transfer deed duly signed by him. The payment was, however made by the buyer by means of a cheque. Subsequently, before the cheque, representing the payment of the price of the shares, could be realized by the seller, the buyer had become insolvent. It was held in this case that the seller of the shares did not have any lien on the share certificates so sold and delivered to the buyer along with the share transfer deed duly signed by him, because his lein thereon (shares) had already ceased the moment he had delivered the shares to the buyer.

Bharneha v. Wadilal,(28 Bom. L.R777P.C)

2. Right of Stoppage in transit The right of stoppage of goods in transit, arises to an unpaid seller after he has parted with the possession of the goods. The seller has the right to resume possession of the goods while they are in the course of transit and to retain them until payment or tender of the price. The right of stoppage in transit is available to an unpaid seller, when the buyer becomes insolvent and the goods are in transit. The buyer is said to be 'insolvent' when he has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they becomes due whether he has committed an act of insolvency or not. In Booth Steamship Co. Ltd. v. Cargo Fleet Iron Co. Ltd.5 case, the Court held that It is a right founded upon the plain reason that one mans goods shall not be applied to the payment of another mans debts.

It is not necessary that the goods should be actually moving. In Schotsmans v. Lancashire and Yorkshire Railway Co.6 case, the Court held that The essential feature of a stoppage in transitu is that the goods should be in the possession of a middleman, or some person intervening between the vendor who has parted with and the purchaser who has not yet received them. Duration of Transit (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 the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee. (2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end.

Booth Steamship Co. Ltd. v. Cargo Fleet Iron Co. Ltd.[1916] 2 KB 570, 580 Schotsmans v. Lancashire and Yorkshire Railway Co.(1867) 2 Ch App 332: 36 LJ Ch 361

(3) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer. (4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back. (5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the master as a carrier or as agent of the buyer. (6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end.(7) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainder of the goods may be stopped in transit, unless such part delivery has been given in such circumstances as to show an agreement to give up possession of the whole of the goods. How Stoppage in Transit is Effected (1) The unpaid seller may exercise his right to stoppage in transit either by taking actual possession of the goods, or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the later case the notice, to be effectual, shall be given at such time and in such circumstances, that the principal, by the exercise of reasonable diligence, may communicate is to his servant or agent in time to prevent a delivery to the buyer. (2) Whether notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of the goods, he shall re-deliver the goods to, or according to the directions of, the seller. The expenses of such re-delivery shall be borne by the seller.

3. Right of Resale The rights of lien and stoppage in transit, would not have been of much value if he seller had no right to resell the goods, because the seller cannot continue to hold the goods indefinitely. Section 54 provides an unpaid seller with a limited right to resell the goods. An unpaid seller may resell the goods -1. When the goods are of perishable nature, without giving any notice to the buyer, of the resale. 2. In case of other goods, when after giving a notice to the buyer of his intention to resell the goods, the buyer does not pay the price within a reasonable time; and 3. Where the seller has expressly reserved the right of resale in the contract. No notice to the buyer is required in that case. 2. Where the property in the goods has not passed to the buyer. In Andhra Pradesh Tobacco Growers Co-operative Union Ltd. v. Anjaneya Tobacco Co.7 case, the buyer failed to take away the quantity of tobacco purchased by him. On his application, extension of time was given. Still he failed to take away what he purchased. Resale was conducted after the last extended period. The Court held that the resale was done after waiting a reasonable period. 4. Right of withholding Delivery Where the property in the goods has not passed to the buyer, the unpaid seller has the right to withhold delivery of the goods, which is similar to and co-extensive with his rights of lien and stoppage in transit which he would have had if the property had passed.

Andhra Pradesh Tobacco Growers Co-operative Union Ltd. v. Anjaneya Tobacco Co.(1998) 5

Andh LT 331 AP (DB)

5. Rights Against the Buyer Personally (Seller's Remedies Against buyer for Breach of Contract) Besides, the above rights against the goods, an unpaid seller have certain rights against the buyer personally. The seller enjoys the following rights in personam (also known as remedies for breach of contract). 1. Suit for Price -- When the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay the price, the seller is entitled to sue him for the price. Where under a contract of sale the price is payable on a certain day irrespective of delivery or passing of property, and the buyer refuses or neglects to pay on that day, the seller may sue him for the price. 2. Suit for Damages for Non-Acceptance -- Where the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue him for damages for non-acceptance. 3. Suit for Damages for Repudiation of contract before date of delivery Where the buyer repudiates the contract before the date of delivery, the seller may adopt any of the following two courses of action, viz.1. The seller may treat the contact as rescinded and sue the buyer for damages. This is also known as 'damages for anticipatory breach'. The damages will be assessed according to the prices prevailing on the date of breach. 2. The seller may treat the contract as subsisting and wait till the date of delivery. The contract remains open at the risk and for the benefit of both the parties. If the buyer subsequently chooses to perform there shall be no damages; otherwise he shall be liable to damages assessed according to the prices on the day stipulated for delivery. 4. Suit for Interest --The seller may recover interest or special damages whereby law interest or special damages may be recoverable. 5. Effect to sub-sale or pledge by buyer.- (1) Subject to the provisions of this Act, the unpaid sellers right of lien or stoppage in transit is not affected by any sale or other disposition of the gods which the buyer may have made, unless the seller has assented thereto. 8

Provided that where a document of title to goods has been issued or lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for consideration, then, if such last mentioned transfer was by way of sale, the unpaid sellers right of lien of stoppage in transit is defeated, and, if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid sellers right of lien or stoppage in transit can only be exercised subject to the rights of the transferee. (2) Where the transfer is by way of pledge, the unpaid seller may require the pledge to have the amount secured by the pledge satisfied in the first instance, as far as possible, out of any other goods or securities of the buyer in the hands of the pledge and available against the buyer. 6. Sale not generally rescinded by lien or stoppage in transit.(1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit. (2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notices to the buyer of his intentions to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such notices is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale. (3) Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer. (4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and on, the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages.

CONCLUSION Nothing in this Act or in any repeal affected thereby shall affect or be deemed to affect. Any right, title, interest, obligations or liability already acquired, accrued or incurred before the commencement of this Act, or Any legal proceedings or remedy in respect of any such right, title, interest, obligation or liability, or Anything done or suffered before the commencement of this Act, or Any enactment relating to the sale of goods which is not expressly repealed by this Act, or Any rule of law not inconsistent with this Act The rules of insolvency relating to contracts for the sale of goods shall continue to apply thereto, notwithstanding anything contained in this Act. The provisions of this Act relating to contracts of sale do not apply to any transaction in the form of a contract of sale which is intended to operate by way of mortgage, pledge, charge or other security.

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BIBLIOGRAPHY 1. Avtar Singh. (2000) Law of Sale of Goods & Hire Purchase. (5/e) Lucknow, Uttar Pradesh: Eastern Book Company. Chapter 7. Rights of Unpaid Seller Against the Goods. Pages: 168-189. 2. Pollock and Mulla. (Dr. Justice G. C. Bharuka (Editor)) (2007) The Sale of Goods Act. (7/e) New Delhi, India: LexisNexis Butterworths (A Division of Reed Elsevier India Pvt Ltd.) Chapter 3. Rights of Unpaid Seller Against the Goods. Pages: 359-420. 4. The Sale of Goods Act, 1930 (Act No. 3 of 1930). Bare Act with Short Comments. (2009) Allahabad: Law Publishers (India) Pvt. Ltd. Chapter V. Rights of Unpaid Seller Against the Goods. Pages: 18-20. Sections 45-54.

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