Unpaid Seller and its Rights

Unpaid Seller

Ø  The seller of goods is deemed to be an “unpaid seller” within the meaning of this Act.

Ø  at the point when the entire of the cost has not been paid or tendered;

Ø  at the point when a bill of trade or other debatable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

An unpaid seller is a seller who has not received the hole price, or to whom the whole price has not been tendered, or to whom a bill of trade or other debatable instrument, such as a cheque has been given as conditional payment and the condition on which it was given has not been fulfilled either on account of the instrument having been dishonored, or otherwise. If the bill of exchange or other instrument is given as absolute payment the seller will not be an unpaid seller.

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The seller is unpaid not only when the price has not in any way been paid or tendered in full, but also if the has taken bills of exchange or other negotiable instruments as conditional payment and the buyer has failed to meet them at has expired without the price having been paid or tendered; and the third is, where the buyer becomes insolvent before the price is paid or tendered. In this third case, the seller is entitled to retain possession even if the goods are sold on credit and the term of the credit has not expired.

Unpaid seller’s rights

Ø  Subject to the provisions of this Act and of any law for the time being in force, not withstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods as such, has by implication of law--

(a)    A lien on the goods for the price while he is in possession of the;

(b)   In case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them;

(c)    A right of re-sale as limited by this Act

Ø  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. Section 46

Seller’s lien

Subject to provisions of this act the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in these conditions

• Where the goods have been sold without any stipulation as to credit;
• Where the goods have been sold in credit but the term of credit has expired;
• Where the buyer becomes insolvent

Case in which a  lien arises

This section declares that there are three cases in which an unpaid seller is qualified for a lien. The main is, the place good are sold using a consideration but neither the time of payment nor the time of delivery is fixed; the second is where the goods are sold on credit but the period of credit, the seller waives his lien during the currency of the credit, or where the seller accepts a bill of exchange for the price payable at a future day, he waives his lien during the money of the bill. In the last two cases the lien restores when the period of credit expires or when the bill is dishonored.

In possession of

The lien of an unpaid seller depends upon the actual possession of the goods and upon a mere title thereto So long as the actual possession of the goods is with the seller, the right of lien can be exercised.

Termination of lien

The unpaid seller of goods loses his lien thereon

• 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;
• When the buyer or agent lawfully obtains possession of the goods;
• By waiver thereof

Delivery to carrier or other bailee

The general rule is that when goods are delivered to a carrier or other baliee for the purpose of transmission to the buyer the property in the goods is completely transferred to the buyer and the seller has, in that case, no connection with the goods. But an exception has been recognized by law to this general rule. It is that the property in the goods does not pass to the buyer in the above circumstances if the seller reserves the right of disposal of the goods. 

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