As per the sales of goods act of 1930, Unpaid Sellers means when somebody is in the position of selling goods or an agent of a seller of goods has not been paid in full the price of the goods they sold or when the conditions of a conditional payment, received as a bill of exchange, have not been fulfilled by the reason of dishonour of the bill of exchange or some other similar reason. The seller who has received only a part of the payment is also said to be an unpaid seller. The 3 most significant rights of an unpaid seller are – Right of Lien as per section 47 of the abovementioned act, the right of stoppage of transit in process, and the right of resale.
We will now critically examine these three most important rights of an unpaid seller,
1) Right of Lien. Lien is a legal claim to keep possession of the property of a person as collateral until the required debt is paid. An unpaid seller has a right to retain such goods as collateral if the payment has not been made, under a few conditions given in section 47 of the sales of goods act. When the sale has been made without any requirement to the credit score or when the term of credit has expired after the sale has been made. This right of Lien can be exercised by the unpaid seller as long as they have possession of the goods. They are merely agents of the buyer in possession of the goods. The unpaid seller’s right to withhold shipping of the good due to incomplete payment or any other reason also comes under the right of lien. This specific right can only be exercised when the goods have not been transferred to the buyer. The right of lien depends upon the possession of the goods. The right is lost, if the possession of the goods is misplaced or given away by the unpaid seller. After that, the seller cannot claim the right of lien.
2) Right of Stoppage of Goods in Transit. This is comparable to a lien, with the exception that the seller may reclaim the title of being the owner even after the good has been given away. The seller has the right to halt the travel of the goods at any time throughout the transaction, even if the goods are in transit, and recover control of the commodity until payment is received. This right can be exercised under a few conditions under section 50 of the sales of goods act. For example, the transit of the goods can be stopped, and the seller can take back the possession if the buyer has become insolvent or it is now known they cannot make the payment to the seller. The right can also be exercised when the goods are in the shipping phase of the transit, and the goods are neither in possession of the buyer or any of its agents or the seller or any of its agents. The goods should be in possession of the third party which oversees the shipping. The transit is said to be ongoing if the goods have not reached and are not in the possession of the buyer or their agent. That means the transit can be stopped by the seller if it is enroute and has not reached the buyer. The seller may simply take back the possession to announce the stoppage or make a declaration regarding the stoppage of the transit.
The third right would be the Right of Resale of the Goods. The right to resell the goods due to the non-payment would be the right of resale. The above 2 rights give the seller the chance to claim possession till the payment has been made or the right to cancel the transit. This gives the seller the right to resell the goods if certain conditions are met. Section 54 of the Sales of goods act defines the conditions under which the goods can be sold again. For example, if the products are perishable, the seller who has not been paid may resale them. The products may be resold if the vendor has stipulated that the things may be resold after a certain amount of time if the customer fails to make payment within that time period.
In the case of Moll Schutte and Co. V. Lachmi Chand, (1898) 2nd 505 (FB), it was held that the unpaid seller, normally, does not have the right to resell the goods on the breach of contract by the buyer, unless a condition is specified in the terms of the contract stating the right of the unpaid seller to resell the goods after a certain time period. The case also mentions that the goods may be re-sold if they are perishable in nature.
Author’s Name: Arnav Sengar (Bennett University, Greater Noida)