Q.2: Who is an unpaid seller? What are his rights against the goods?
As provided by the Sales of Goods Act of 1930?
1. Introduction
Unpaid sellers are those who are in the position of selling goods or
who acts as a seller's agent but have not received payment in full for
the goods they have sold. According to the Sale of Goods Act of
1930, the seller must obtain the right to receive the agreed-upon
consideration while selling his products or property.
2. Definition of Unpaid Seller:
An unpaid seller is a seller to whom either no price of his goods has
been paid or only conditional payment has been made. As long as
the cheque or promissory note is with the seller, he is only called a
seller, but as soon as these instruments are dishonored, the seller
becomes an “unpaid seller”. (A bill is said to be dishonored when
the drawee (a person who is liable to pay) is not able to make the
payment on the date of maturity of a bill.
As per the Sale of Goods Act of 1930, a seller is considered an
unpaid seller under the following conditions:
When he hasn’t received the whole price of his goods.
When the negotiable instruments have been received as
conditional payments, but the conditions on which they were
received haven’t been fulfilled for any reason.
3. Rights of an Unpaid Seller Against the Goods
The rights of an unpaid seller have been outlined in Sections 46 to
55 of the Sale Goods Act, 1930. These include:
a. Right of Lien (Section 47):
A lien is a claim or legal right against the assets that are typically
used as collateral to satisfy a debt. The right of lien means that the
unpaid seller can retain possession of his goods until the buyer pays
the full payment. This means that the seller has the right to refuse to
deliver the goods to the buyer until the outstanding amount is settled.
The possession of goods can be retained by the unpaid seller under
three conditions:
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Where the goods have been sold without any stipulation as to
credit
This means that the seller hasn’t agreed to extend credit to the buyer
and the buyer is expected to make the payment for the goods within
the time agreed upon by both parties. Now, when the buyer fails to
make the payment, the seller has the right to possession of those
goods.
Where the goods have been sold on credit, but the term of credit
has expired
If the buyer hasn’t made payment for the goods within the agreed-
upon time and the term of credit has expired, the buyer is considered
to be in default. Now the unpaid seller has the right to take
possession of his goods and take action against the buyer.
Where the buyer becomes insolvent
The third condition refers to a specific scenario where the financial
condition of the buyer has deteriorated to a point where he is unable
to meet his financial obligations including the payment for the
goods. In this situation, the seller has all the rights over his goods.
b. Right of Stoppage in Transit (Section 50):
The second most important right that the Sale of Goods Act grants
to an unpaid buyer is the right of stoppage in transit. As per the Act,
if the goods are in transit, meaning that they have been dispatched
by the seller but not received by the buyer (who has become
insolvent), the seller has the right to either stop the delivery of those
goods or give notice of his claim to the buyer. In both cases, the
seller has the right over his goods.
c. Right of Resale (Section 54):
The unpaid seller also has the right to resale his goods in cases where
the buyer has not paid for the goods even when the seller has given
him enough time to pay for the goods.
d. Right to Sue for the Price (Section 55):
In cases where the buyer has received the goods, but hasn’t made
payment to the seller, the seller has the right to sue the buyer for the
price of the goods.
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4. Conclusion
Conclusively, along with the rights and obligations of the seller and
the buyer, the Sale of Goods Act of 1930 also addresses the rights
and obligations of an unpaid seller. It is the responsibility of the
buyer to pay the agreed-upon price for the supplied products;
otherwise, the seller will continue to be owed money.
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