[Commerce Class Notes] on Rights of Unpaid Seller Against Goods Pdf for Exam [2024]

The seller of goods has certain rights against the goods and the buyer. As per the right of lien in the Sale of Goods Act, when a seller delivers the goods to the buyer, the buyer promises to pay the amount decided as per the contract. This is a reciprocal promise that forms the consideration for the contract. When the buyer refuses to pay for the goods, the unpaid seller has certain rights against the goods. This is called the right of lien. Let us understand in detail the rights of unpaid seller against goods and what the right of lien means.

Lien is the right of the seller to hold on to the goods until the payment for those goods has been made by the buyer. The right of lien meaning as per Section 47 (1) of the Sale of Goods Act, 1930 is that an unpaid seller in possession of the goods can retain their possession until payment is made by the buyer.

The Rights to Lien are Applicable in the Following Instances:

The seller has sold the goods without any credit stipulation.
The goods have been sold on credit, the term of which has expired.
The buyer of the goods has become insolvent. In this case, the seller can exercise his right of lien even though goods were offered on credit and the credit duration has not expired.

According to Section 47(2), the unpaid seller can exercise his rights of lien while he is in possession of the goods by acting as an agent or bailee for the buyer. This is called possessory lien and can be exercised by the seller as long as he is in possession of the goods.

Lien in Case of Part Delivery of Goods -Section 48

If an unpaid seller has made part delivery of the goods then he can exercise his right of lien on the remainder of the goods. The rights of unpaid seller against the buyer are applicable only when there is no agreement to the contrary for waiving of the lien of the seller in case of part-delivery of goods.

Lien Termination- Section 49(1)

An unpaid seller loses his lien over the goods:

If the goods have been delivered to a carrier for their delivery to the buyer, without reserving the right to dispose of the goods.
When the buyer or his agent gets lawful possession of the goods.
If the rights of lien are waived.

Section 49(2) states that lien rights can also be exercised by the unpaid seller even if he has received a decree for the price of the sold goods.

Right of the Seller Against the Buyer in Stoppage of Goods in Transit

The seller of goods can exercise the right of stoppage of the goods in transit as an extension to the right of lien. He can regain possession of the goods and retain them until the payment is made by the buyer.

According to Section 50, This Right can be Exercised by the Seller:

If the buyer becomes insolvent while the goods are in transit. The seller can ask the carrier to return the goods to him.
The goods are in transit route- The goods are neither with the seller nor with the buyer or his agent. In this case, the goods must be with the carrier who is acting as an intermediary. This carrier must not be an agent of either the seller or the buyer.

Duration of Transit (Section 51)

The duration of transit for goods starts from the time they are delivered to the carrier by the seller for transmission to the buyer or his agent. The transit of goods ends when:

Delivery of the goods is taken by the buyer or his agent before the goods reach the destination.
The carrier informs the buyer or his agent that the goods have reached the destination and are being held by him.
If the buyer refuses the goods and the seller refuses to take them back it is not considered the end of the transit.
If goods are delivered to a ship chartered by the buyer, it needs to be determined if the master is acting as an agent or carrier of the goods.
If the carrier or bailee wrongfully refuses to deliver the goods to the buyer or his agent, it is considered the end of the transit.
If part-delivery of the goods is done, the delivery of the remaining goods can be stopped by the unpaid seller. It is the end of transit for the remaining goods if there is no agreement to give up the possession of all the goods.

Rights of an Unpaid Seller

A person who has sold goods to another person but has not been paid for the goods or been paid partially is called an unpaid seller .According to section 45 of Sale of goods act An unpaid seller is one who has been given a negotiable instrument like a bill of exchange that has been dishonoured .

Rights Against the goods
Rights Against the buyer of goods

Rights Against the Goods (Section 46)

When the buyer has not paid the full or partial price of goods supplied to him , the seller has the following rights with regard to the goods .

Rights of lien
Rights of Stoppage of goods in transit
Right of resale

A. Rights of lien (Section 47-49)

Lien is the right to retain possession of goods until payment in respect of them is paid. According to Section 47 ,if the seller of goods has not been paid and the ownership of goods has been transferred to the buyer but the goods are in the possession of the seller ,the seller has the right to retain the good .

The seller has this right when the goods have not been sold on credit . When the payment has not been made on the promised date and when the buyer has become an insolvent .

Termination of Lien

According to section 49 the lien of an unpaid seller terminates in the following circumstances.

When the seller delivers the goods to a carrier for the purpose of transmission to the buyer .
When the seller has waived his lien on the goods.

B. Rights of Stoppage of Goods in Transit (Section 50-52)

The seller has the right of stoppage of goods in transit in following circumstances :

The seller must be unpaid .
When the goods are in transit.

Duration of Transit – According to Section 51, when the seller has delivered the goods to the carrier for transmission to the buyer , until the goods are received by the buyer or his agent is the duration of transit .

The Carrier may Hold the Goods –

A seller’s agent , In this case , there is no transit because the goods are under the seller’s lien .
As buyer’s agent .In this case the seller cannot exercise his right of stoppage in transit because the buyer has acquired possession
As an independent contractor .In this case the seller has and can exercise the right of stoppage in transit , it is not necessary that the goods should be actually moving .

The Transit Can End if :

If the buyer or his representative obtains delivery of the items prior to their arrival at the agreed-upon location.
If after the arrival of the goods at the appointed destination ,the carrier or other acknowledges to the buyer or his agent that he holds on his behalf.
If the carrier or other party refuses to deliver the goods to the buyer or his representative for any reason.

Rights of Re- sale (Section 54)

A vendor who has not been paid has the right to resell the items. The general criteria for the resale of goods by an unpaid seller are defined in Section 54. The following are the main guidelines:

The unpaid seller may re -sell the goods if the goods are perishable .
When the unpaid seller has acquired the possession of goods by virtue of lien or stoppage in transit and has given notice to the buyer of his intention to re-sell.