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Unpaid seller

Unpaid seller


Section. 45, the Sale of goods act defines an unpaid seller. A seller is deemed to be an unpaid seller:

i)If the whole of the price has not been paid or tendered or

ii)When a bill of exchange or other document has been received as conditional payment and the condition has not been fulfilled by reason of the dishonour of the instrument. Seller includes his agent or consignor. Unpaid seller's rights:

1)A lien over the goods in his possession.

2)A right to 'Stoppage in Transit' when the buyer becomes


3)A right of re-sale as per the sale of goods act.

Unpaid sellers lien : (Sn. 47) :

An unpaid seller who is in possession of goods, is entitled to retain possession of them until the price is paid or tendered in the following cases:

i)When the goods are sold without any condition as to credit,

ii) When sold on credit, but the time of credit has expired,

iii) When the buyer becomes insolvent.

Further, the seller may be in possession of the goods as an agent or bailee for the buyer, even then the right of lien can be exercised.

Part delivery: When the unpaid seller has made part delivery, he may exercise his right on the remainder. This will not apply, if by the transaction it may be presumed that the seller has waived his right

of lien. Eg., an essential part of a machinery, in which case the lien may not be exercised.

Termination of Lien:

The lien is lost or terminated:

i)When the seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer - (without reserving the right of disposal).

ii)When the buyer or his agent takes lawful possession of goods,

iii) By waiving the right.

Further, he does not lose his right of lien, merely because he has obtained a decree from the court (for the price of goods (Sn. 49).

Stoppage in transit: (sn. 50)

Stoppage in transit is the right of the unpaid seller. This right may be exercised if the following conditions are fulfilled.

i) The seller must be unpaid.

ii) The buyer must be insolvent.

iii) The seller must have parted with the possession of goods.

iv) The buyer must not have acquired the goods i.e., the goods must be in transit.

The duration of transit: (Sn. 51) :

i)Goods are in transit, from the time they are delivered to a carrier (or bailee) for transmitting the goods, until the buyer (or his agent) takes delivery.

i) Goods are in transit, from the time they are delivered to a carrier (or bailee) for transmitting the goods, until the buyer (or his agent) takes delivery.

iii) If after arrival of goods at destination, there is an attornment (transfer) by carrier to the buyer, the transit is at an end. (This means there is a new agreement to hold goods, until the buyer (or his agent) takes actual delivery.

iv) If the buyer rejects, and the carrier continues inpossession, the transit is not at an end even if the seller refuses to take back.

v)When goods are delivered to ship chartered by the buyer, the question whether possession is with master as carrier or as agent of the buyer, depends on the circumstances.

vi)Where the carrier wrongfully refuses to deliver the goods, to the buyer the transit is deemed to be at an end.

vii)Where part-delivery has been made to the buyer, the seller may stop in transit the balance of the goods. (There may be an agreement to the contrary in which case there is no stoppage in transit).

How effected :

Seller may take actual possession of goods: or may give notice to the carrier or any bailee who is in possession. Such a notice may be given to that person or to his principal. If given to the principal, it must be given at such time and in such circumstances, that he may with due diligence stop the goods in transit. The expenses, if any, of re-delivery to the seller, shall be borne by the seller.

In James Vs. Griffin : A sent his goods by a ship to B, deliverable on the river James. B became insolvent. He sent his son to take possession of the goods at the Wharf. B. had no intention to take delivery, but had done so, as the Captain of the ship had demanded. Question was whether transit was at an end. Held, it was not at an end. Hence, A may exercise his right of stoppage.

In G.I.P. Railway V. Hanuman Das, H. the seller booked his goods to the buyer B, through Railways, to a destination. At the destination, the buyer endorsed the R/R, loaded the goods to the carts. When the carts were still in the compound of the railways, the railways got notice of insolvency of B. Held, transit was at an end.

Effect of sub-sale or pledge by buyer :

The right of stoppage in transit is not affected by the sub-sale or pledge by buyer.

Exception : (i) A person who buys in good faith for value from the buyer is protected.

A sells goods to B and sends documents to B. B becomes insolvent, but sells the documents to C who buys in good faith for value. A cannot stop the goods in transit.

ii)If the buyer pledges the goods with a pawnee and takes money, the seller may exercise his right subject to the right of the pawnee after paying the amounts due to the pawnee.

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