Meaning of unpaid seller
The goods are sold on both cash and credit term. The value of the
goods sold and purchased may be paid immediately after sale or in
future as agreed by the parties. Under cash sale, payment is made
immediately after the purchase and no questions as to unpaid seller,
arises in case of payment made by cash fully. But this question arises
in case of payment made by check, when the check is dishonored by
bank the seller becomes unpaid seller.
For example- M sells a house to N for Rs.5,00,000/- and payment
received in cheque. But the bank dishonor it, on the date. Hare, M
becomes an unpaid seller.
The seller become an unpaid seller under
credit sale, if he does not get the whole payment from the buyer on
the due date or if the negotiable instrument received for payment is
dishonored by the buyer. In short, when seller does not get cash
value for his goods in time, he becomes the unpaid seller.
For example- M sales a Tv to N for Rs. 25,000 /- on a credit of one
month and one month have expired price remains unpaid. Here, M
becomes an unpaid seller because the price remains unpaid even
after the expiry of credit period.
Rights of unpaid seller
A seller who fails to get cash value for his goods from the
buyer in time is said to be an unpaid seller. So, the unpaid seller
exercises or enjoys the following rights:
A) Rights against the goods.
a) Seller’s right of lien.
b) Right to stoppage of goods in transit.
c) Right to re-sale.
B) Rights against the buyer.
a) Suit for price.
b) Suit for damage.
c) Claim for interest.
A) Rights against the goods: -
Under this, the unpaid seller is entitled to exercise
the following rights.
a) Seller’s right of lien: - Lien is a kind of right which the
unpaid seller exercises to retain the possession of goods until the full
price is received as stated in section 47 of the Indian sale of goods
act 1930. But he may exercise this right only in any of the following
cases: -
The goods are sold for cash but no payment is yet received
from the buyer.
Where the goods have been sold on credit, but the time of credit
has expired.
Where the buyer becomes insolvent.
b) Right to stoppage of goods in transit: - Another right,
which is available to an unpaid seller is the right of stoppage of
goods in transit. It means, if the seller gets information that the buyer
has become insolvent, he may ask the carrier to stop the goods in
transit. Sec.50
c) Right to re-sale: - The third right of unpaid seller, is the right
to re-sale. It means, to sale the goods, which have been already sold.
But he can enjoy a right to re-sale the goods retaining them with him
or stopping them in transit in some cases. As stated in sec.54 of the
Indian sale of goods act 1930. The unpaid seller has a right to re-sale
the goods retained or stopped in the following cases: -
The goods are perishable nature.
If the right is expressly received in the contract.
The seller asks the buyer to pay the price within a certain time
and threatens to re-sale the goods, but the buyer does not pay
and any attention to pay the price.
B) Rights against the buyer: -
In this, a seller enjoys the following rights against the
buyer:
a) Suit for price: - If the seller becomes unpaid seller he may
sue the buyer in the law court for recovering the price.
b) Suit for damage: - If the buyer wrongfully neglects or
refused to accept the delivery of goods he can sue the buyer for
damage or losses.
c) Claim for interest: - If the buyer fails to make payment on
the promised date, the right to claim the interest at certain rate or
reasonable rate for the time delayed.
Duties of unpaid seller
The goods can be sold on cash and credit basis. So, the seller has to
perform some duties. But there is no clear cut provision found in the
law relating to sell of goods. Whatever it is the duties of the seller
can be deemed to be the duties of the unpaid seller. Generally main
duties of unpaid seller are as follows: -
A) To deliver goods.
B) To handover document.
C) To compensate to the buyer.
A) To deliver goods: - In accordance with the terms of
the contract of sale, the seller has to deliver the goods to the buyer.
He must do such things within the time and mode mentioned in the
contract.
B) To handover document: - The unpaid seller, as per
the NMCC act, must handover all the documents related to the
ownership of the goods to the buyer.
C) To compensate to the buyer: - The unpaid seller
must deliver the sold out goods in a fixed place and time. If the fails
to deliver the goods, it is regarded that the unpaid seller is depriving
the buyer from earning profit and is bound to face economic loss.
etc.
