Rights of an unpaid seller

Meaning of an unpaid seller under section 45 of the sale of goods act defines an unpaid seller as under :
(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. In this Chapter, 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 who has himself paid, or is directly responsible for, the price.

Rights of an unpaid seller are classified under two heads:

Rights Against the goods

Rights against the buyer

Right of lien or retention Right of stoppage of goods in transit Right of resale Right to withhold delivery

Right of lien or retention

A lien is a right to retain possession of goods until the buyer pays the price. The unpaid seller can retain the goods in his possession in the following cases: The goods have not been sold on credit The goods have been sold on credit but the period of credit has expired The buyer has become insolvent [Sec. 47(1)].
It should be noted that an insolvent here means a person who is commercially insolvent as against a person who has been adjudged insolvent under the Insolvency law. A person is deemed insolvent who has ceased to pay his debts as they become due or if he is unable to pay his debts in the ordinary course of dealings or business, whether he has committed an act of insolvency or not [Sec. 2(8)]. It should also be noted that in case the buyer becomes insolvent, the unpaid seller can exercise his right of lien even if the period of credit has not expired

Condition under which right of lien can be exercised

1. Right of lien is a possessory right. As such, it can be exercised only
2. 3. 4. 5. 6. when the goods are in possession. If the possession is lost or gone, the right of lien is also lost or gone. The right of lien can be exercised against the goods even if the goods are in possession of the seller in any other capacity such as bailee or trustee. The right of lien can be exercised even if the document of title has been delivered but the goods are in the possession of the seller. Right of lien can be exercised only when the price is due and not for other expenses, e.g., godown charges, dock charges, etc. Right of lien cannot be exercised on the goods repossessed after sale. For example, when the buyer returns the goods for repair. Even if the seller has made part delivery, the lien may be exercised on the goods remaining in possession. However, if the part delivery has been made so as to show an intention to waive the lien, the right of lien cannot be exercised (Sec. 48).

7.

Right of stoppage of goods 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. When the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit.

For Example:
A, in Mumbai sends goods to a buyer in Pune through a carrier. The goods are in transit when it leaves As possession and B or his agent has not taken possession

Conditions under which right of stoppage in transit can be exercised

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 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. Note: 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. Note: The sellers right of stoppage in transit is based on the principle that one mans goods shall be applied to the payment of other mans debt.

Difference between lien and stoppage in transit

To exercise the right of lien goods must be in actual possession of the seller.
This right is available when the buyer is in default, no matter whether he is insolvent. The right remains in force till the right of stoppage-intransit commences.

The right of stoppage in transit can be exercised when the seller has parted with his goods but the goods are in transit. This right too is exercised against non-payment of the price but only when the buyer has become insolvent. The right as a matter of fact is an extension of right of lien & operates only when lien is no more forceable.