UNPAID SELLER. WHO IS AN UNPAID SELLER?(Sec.45)
An unpaid seller is one who not been paid or tendered the whole of the price or one who receives a bill of exchange or other negotiable instruments as conditional payment and the condition on which it was received has not been fulfilled by reasons of the dishonor of the instrument or otherwise. The term seller includes any person who is in the position of a seller, for example, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has him paid or is directly responsible for the price. A seller who has been partly paid is also considered as an unpaid seller for part unpaid. Therefore, unpaid seller is one who (i) has not received the whole of the price;(ii) he has received payment in the form of bill of exchange or negotiable instrument which is dishonored. (1) When the whole of the price has not been paid or tendered. (2) When a negotiable instrument or a bill of exchange has been received as conditional payment and the condition in which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise. The seller remains as unpaid seller as long as any portion of the price, however small, remains unpaid. Where the whole of price has been tendered, and the seller refused to accept such a tender, seller ceases to be an unpaid seller. In such a case the seller loses all high right against the goods. If there is a period of credit then the seller is not unpaid until the price become due. Against if there is a condition attached to payment it must be fulfilled. The unpaid seller’s right can be exercised by an agent of the seller to whom the bill of leading has been endorsed, or a consignor or an agent who has himself paid, or is directly responsible for the price.
RIGHTS OF AN UNPAID SELLER The rights of an unpaid seller can be studied under two heads: 1.) When the property in goods has been passed to the buyer. 2.) When the property in goods has not been passed to the buyer. Section 46 (1) lays down that notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of the goods, as such has by implication of law. (a) A lien on the goods for the price he is in possession of them; (b) in case of insolvency of the buyer , a right of stopping the goods in transit after he has parted with the possession of them. (c)a right of re-sale Section 46(2) lays down when the property in the goods has not passed to the buyer, the unpaid seller has in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer. In short, the rights of an unpaid seller are: (1) Against the goods (a) When property in the goods has passed (i) Right of lines (ii) Right of stoppage of goods in transit (iii) Right of re-sale (b) When property in the goods has not passed (i)Right of withholding delivery. (2) Against the buyer personally (i) Right to use for price. (ii) Right to sue for damages. (iii) Right to sue for interest.
Against the buyer personally The unpaid seller, in addition to his rights against the goods as discussed above, has the following three rights of action against the buyer personally: 1. Suit for price (Sec. 55). Where property in goods has passed to the buyer; or where the sale price is payable 'on a day certain', although the property in goods has not passed; and the buyer wrongfully neglects or refuses to pay the price according to the terms of the contract, the seller is entitled to sue the buyer for price, irrespective of the delivery of goods. Where the goods have not been delivered, the seller would file a suit for price normally when the goods have been manufactured. 2. Suit for damages for non-acceptance (Sec. 56). Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. The seller's remedy in this case. The damages are calculated in accordance with the rules contained in Section 73 of the Indian Contract Act, that is, the measure of damages is the estimated loss arising directly and naturally from the buyer's breach of contract. Where the goods have a ready market the principle applicable is that the seller may recover from the buyer damages equal to the difference between the contract price and the market price on the data of the breach of the contract. Thus, if the difference between the contract price and market price is nil, the seller can get only nominal damage. But where the goods do not have any ready market, the measure of damages will depend upon the facts of each case. For example, in Thompson Ltd. Vs Robinson the damages were assessed on the basis of profits lost. In that case, T Ltd., who were car dealers, contracted to supply a motorcar to R.R refused to accept delivery. It was found as a fact that the supply of cars exceeded the demand at the time of breach and hence in a sense there was no market price on the date of breach. Held, T Ltd., were entitled to damages for the loss of their bargain viz., the profit they would have made, as they had sold one car less than they otherwise would have sold. To take another illustration, if the goods have been manufactured to some special order and they are unsalable and have been manufactured to some special order and they are unsalable and have no value at all for other buyers, then the seller may even be allowed the full price of the goods as damages.
1. Suit for special damages and interest (Sec.61) This Section entitles the seller to sue the buyer for 'special damages' also for such loss "which the parties knew when they made the contract, to be likely to result from the breach of it." In fact the Section is only declaratory of the principle regarding 'special damages' laid down in Section 73 of the Indian Contract Act (a) Suit for Damages for Non-delivery [Section 57] where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages. (b) Suit for Specific Performance [Section 58] In any suit for breach of contract to deliver specific or ascertained goods, the court may direct that the contract shall be performed. (c) Suit for Breach of Warranty [Section 59] Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled. Example: X sold a second hand Radio to Y who spent Rs 100 on the repair of this Radio. This Radio was seized by the police as it was a stolen one. Y filed a suit against X for recovery of damages for breach of warranty of quite possession including the cost of repairs. (d) Right to Treat the Contract as Rescinded or Operative in Case of Repudiation of Contract by Seller before due Date [Section 60] Where seller repudiates the contract before the date of delivery. (e) Suit for Interest [Section 61(2)] In case of breach of the contract on the part of the seller, the buyer may sue the seller for interest from the date on which the payment was made.
RIGHTS OF AN UNPAID SELLER
RIGHTS OF AN UNPAID SELLER
WHERE THE PROPERTY IN THE GOODS HAS NOT PASSED
WHERE THE PROPERTY IN THE GOODS HAS PASSED
Lien
Stoppage in transit
Resale
Withholding delivery
Other rights
1. RIGHT TO LIEN. SEC (46) Meaning of lien: Right of lien means ‘right to retain’ the possession of the goods or
property until the claims is paid or satisfied or satisfied. A lien, therefore, is a right of any person to retain that, which is in hios possession belonging to another, until certain demands of as person in possession are satisfied. Possession is essential to create a right of lien. it must be rightful and continuous. Lien may arise by: (i) statue ;(ii)express or implied contract ;and (iii) in ordinary course of dealings. Lien is of two kinds: (a)General lien; and (b) Particular or Specific General lien means the right to retain the goods until all the claims of the holder are satisfied. It is right of retention of goods not only towards the demand arising out of the article in possession but for general balance of account in favor of the holder. RIGHT OF LIEN AS APPLICABLE TO UNPAID SELLER:
The unpaid seller of goods, who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases: (i) Where the goods have been sold without any stipulation as to credit. (ii) Where the goods have been sold on credit and the term of credit has been expired. Therefore, during currency of credit right cannot be exercised. (iii) Where the buyer becomes insolvent and the seller is in possession of the goods.
The seller who is unpaid is given right to retain the goods for the price therof, while he is in possession of them. His rights of lien are that of a particular lien. The right of lien can be exercised only when the seller is in actual possession of the goods. If he loses the actual possession of the goods, he lost the right of lien. But even if the seller has parted with the documents of the title to the goods, he does not lose his rights of lien; if he continues to have actual possession of the goods .Lien extends to the whole of the goods. It cans be exercised only for the non-payment of the price and not far any other charges or claims. Part delivery of the goods: (Sec.48) when an unpaid seller has made part delivery of the goods, he may exercise his rights of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien. Seller losses his right of lien, if he parts with the actual possession of the goods. If he had only part of the goods and not whole of the goods to be delivered, then he can exercise his rights of the lien on the reminder part in his possession, because as a rule, delivery of the part dose not continues delivery of the whole. However, where delivery of the part expressly or impliedly continues delivery of the whole, the seller lien ends with delivery of the part.
When are the rights of the lien lost? Termination of lien : (Sec. 49)
The unpaid seller lien is lost under following circumstances: (1) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyers without reserving the rights of disposal of the goods; (2) When the buyer or his agent lawfully obtains possession of the goods; (3) When the seller waives his agent right of lien. Waiver may be done expressly or by implication .it is n implied waiver when the seller assents to a sub-sale by the buyer.
2. Rights of the stoppage in transit (Sec. 50) When the buyer of the goods becomes insolvent, the unpaid seller who had parted with the possession of the goods has the rights of stooping them in transit, that is to say, he may resume possession of the goods as long as they are in course of the transit and may retain until payment or tender of the price. Meaning of transit: transit does not mean that the goods should be in motion. If the
goods are delivered to the carrier or other bailee by the seller the transit is commenced and it comes to an end when the buyer acquires possession thereof. Therefore, when goods are in hands of the middle man, goods are said to be in transit. Even if the goods arrive at the destination of the buyer the transit continues until the buyer obtains possession from the middleman. When the rights of the lien ends, rights of stoppage in transit begins. If the buyer becomes insolvent after the unpaid seller had parted with possession of the goods, the unpaid seller can resumes the possession of the goods by exercising his rights of stoppage in transit. In order that seller may be able to exercise the rights of stoppage in transit, must be present.
Essential :(1) The seller must be unpaid whole or partly
(2) The buyer must become insolvent (3) The goods must be in transit, for example, the seller musty has parte with the possession of the goods and the buyer must not have received the goods. The rights of stoppage in transit can be exercise in respect of part of the goods in transit even if part has been acquires by the buyers. Duration of transit (Sec. 51): goods near deemed in course of the transit from the time
when they are delved to carrier or other o daily for purpose of transmission of buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or daily.
The transit begins from the time from the seller parts with the possession to the goods and come to an end when the buyers acquires possession of the goods, the rights of the seller to affect the stoppage in transit comes to an end. Right of stoppage of goods in transit:
Unpaid seller has right to stop the goods in transit. Conditions: Following are the conditions (i) The seller must be unpaid. (ii) Goods must be in transit. (iii) Property has passed to the buyer. (iv) Buyer is insolvent. Modes of stoppage: Following are the modes of stoppage: (i) By taking possession of the goods. (ii) By giving notice of his claim to the carried or other bailee in whose possession the goods are (c) Right of resale: Unpaid seller can resale the goods: Conditions: (a) Goods should be of perishable nature. (b) Right of resale should be expressed in contract. (c) Buyer has not paid. (d) Buyer has received the notice from seller. (II) Rights of unpaid seller against buyer:
(i) Suit for price:
Where property has passed to the buyer, and the buyer wrongfully refuses or neglect to pay for the goods, the seller may sue him for the price of the goods. (ii) Suit for repudiation: If buyer repudiates the contract before the date of the delivery the seller may treat the contract as subsisting and wait till the date of delivery or may tread the contract as rescinded and sue for damages for breach. (iii) Suit for damages for non-acceptance: If buyer refused to accept and pay for the goods the seller has right to sue for damages for non-acceptance. (iv) Suit for interest and special damages: Unpaid seller can recover the interest on the unpaid price. He can also sue for special damages.
When does transit of the goods comes to an end? The transit of the goods comes to an end when the buyers acquire possession. The buyers acquire possession or are deemed to acquire possession of the goods under following circumstances: (1) When the buyer takes delivery of the goods from the carrier or other bailee. (2) When the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointment destination, this is done in acceptation by the buyer or seller exercising his rights of stoppage in transit. (3) When the carrier or bailee on arrival of the goods at the appointed destination, acknowledgement to the buyer or his agent that’s he is holds the goods on his behalf and continues in possession of them as bailee for the buyers or his agent. (4) When the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent. (5) When part delivery of the goods has been given in such circumstances to show an agreement to give up as the possession of the whole of the goods.
When buyers refuses the goods: if the goods are rejected by the other and the carrier or other bailee continues in possession of them the transit is not deemed to be an end even if the seller had refused to receive them back. When the buyers do not accept the goods, the transit continues. How is stopping in transit effected?(Sec.52):the rights of stoppage may be affected by unpaid seller in any of the following ways: (1) By taking actual possession of the goods or (2) by giving notice of his claims to the carrier or other bailee in whose possessions the goods are, to re-deliver the goods to the seller or according to his directions. When is righs of stoppage in transit lost? The rights of stoppage in transits lost under following circumstances: (1) If the buyer or his agent obtains delivery of the goods from carrier or other bailee or (2) if after of the goods at the apponmited destination the carrier or other bailee acknowledgment to the buyers that he holds the goods on his behalf; (3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyers or his agent; (4) Where a part delivery of the goods had been made up to buyers or his agent in that behalf in such circumstances as to show an agreement to give up possession of the whole of the goods.
Unpaid seller lien and rights of stoppage in transit distinguished; 1. Rights of lien can be transit exercise by the seller if the buyer does not pay thought his is able to pay. The right of stoppage in transit can be exercised by the seller only when the buyer becomes insolvent. 2. The seller can exercise the right of lien when the has actual or constructive possession of the goods. It is lost with parting the possession of the goods to the middleman for delivery to the buyers. The rights of the stoppage in transit begins where the rights of the lien, for example where the seller has parted with the possession of the goods he can exercise the rights of stopping them in transit. 3. The rights of the lien end with the parting of the possession of the goods. A right of stoppage in transit commences with the parting of possession of the goods by the seller and continues until the buyer acquires the possession of the goods. 4. Rights of the lien to retain possession. Rights of stoppage in transit is to regain possession..
3. Rights of Re-sale (Sec.54) When the unpaid seller has exercised his rights of lien on his retaining the possession of the goods or resumes possession of the goods by exercising his rights of stoppage in transit upon insolvency of the buyer, he can re-sell the goods under the following circumstances: (1) Where the goods are of perishable nature; (2) Where the seller gives notice to the buyers of his intension to re-sell the goods (no notice is necessary in case of perishable goods) and buyer does not pay or tender within a reasonable time after the notice; (3) Where the seller has expressly reserved his rights of re sale in case the buyer makes default. The seller can hold the buyer responsible for loss suffered due it breach of contract .if on resale the unpaid seller receives any profits and his had to given notice to the buyer of re-sale the unpaid seller so entitled to retain the profits. However, when the unpaid seller has not given notice to the buyer, then his is loses his right to recover damages from the buyers and also had trod pay the profits to the buyers arising from re-sale. It’s however in a re0sale there is loss to the seller he can claim it from the buyer as damages for the breach of contract. No notice is necessary where the seller has expressly reserved the rights of re-sale in the case of the price is not paid. The purchaser from the unpaid seller gets an absolute and goods title to the goods as against the original buyer, even if the seller had filed to give notice to the buyers of his intension of re-sale. The goods once again become the property of the seller and the unpaid seller affects a fresh sale as on original owner of the goods. The damages which the seller can claim are the different between the contract price and the market price as the date of the breach.
4. Rights of withholding delivery. Where the property in the goods has not passed to the buyers the seller has the rights to withhold delivery of the goods.
5. Reservation of right of disposal (Sec.25) Under the following instances the seller reserves the right if disposal over the goods; (1) Where seller impose certain conditions and until conditions are fulfilled; (2) where the goods are shipped or delivered to a railway administration for carriage by railway and by the bill of landing or railway receipt as the case may be, and the goods are deliverable to the order of the seller or his agent; (3) where the seller transmits to the buyer bill of exchange for the price with bill of landing or railway receipt, and the buyer fails to honor bill of exchange and wrongfully retains the bill of exchange or railway recipt.where goods are sent by value payable parcel, until actual delivery and payment is made . The goods remain the property of the sender.
6. Other rights: (Sec.55&56) Beside the above rights the seller has the following rights against the buyer personally: (1) Sure the buyer for the price of the goods (Sec.55) (2) They may sure the buyer for the damages wrongfully neglecting or refusing to accept the goods ;( Sec.56) 3. Recover interest from the buyers where there is specific agreement to that effect. if there is no specific agreement .the seller may change interest on price when it becomes due. In absence of a contract to the contrary, the court may award interest to the seller in a suit by him as such arate as it thinks fit on the amount of the price from the date of the tender of the goods or from the date on which the price was payable.
Conclusion. When delivery is made by the seller, and acceptances made by the buyer, thecontractofsaleis complete in so far as executing the sale is concerned, but there may be nevertheless, outstandingrightsin either party. The right to enforcepaymentby the seller, where payment was not aconditionprecedent to passing the title, and the right in the buyer to hold the seller for delay in delivering the goods, where there is no express waiver ofdamageshown by the buyer, or where the circumstances of acceptance do not show an intention to waive damages of delay by accepting the goods. An acceptance under compulsion, would not thereby waive damages suffered by reason of delay.22 Acceptance of the goods does not ordinarily conclude the buyer, as to awarrantymade in reference to the goods, but if by the terms of the contract of sale acceptance is to conclude the buyer on this point, the contract governs. The contract may also properly provide that notice be given to the seller of any defects in the goods sold, within a reasonable time and the effect of the retention of the goods beyond that time, without notice or complaint, would be to deprive the purchaser of relief.23
Bibliography. www.authorstream.com Himalaya Publishing House- K.R.Bulchandani. Vipul Prakashan- kalaivani Venkataraman.
