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Amit Kanabar 2011002 PG13 Assignment Rights of Unpaid Seller V1 PDF
Amit Kanabar 2011002 PG13 Assignment Rights of Unpaid Seller V1 PDF
Submitted to
Submitted by
AMIT KANABAR
2011002
Unpaid seller: An unpaid seller is defined as the seller to whom the full price of the goods has not yet
been paid. The legal definition of ‘Unpaid Seller’ is given in Section 45 of Sale of Goods Act as:
He must sell goods on cash terms and not on credit basis and should be unpaid.
If he sells on credit basis, he is not an unpaid seller during the period of credit.
He must be unpaid either wholly or partly. Even if only a portion of the price, however small,
remains unpaid, he is deemed to be an unpaid seller.
When the price is paid in the form of negotiable instruments and it has been dishonored.
He must not refuse to accept payment when tendered. If the price has been tendered by the
buyer but the seller wrongfully refuses to take the same, he ceases to be an unpaid seller.
For example:
I. Mr. Gupta sells a car to Mr. Sharma and the payment has not yet been received. Here Mr. Gupta
is an unpaid seller.
II. A sells TV set to B on the same day cheque basis, the cheque is dishonored due to insufficient
funds. A is an unpaid seller.
Rights of lien
The right of lien means lawfully right to retain the goods possession until the full price is received. An
unpaid seller can exercise his right of lien in following cases. Sec 47-49
The rights of goods lien is linked with the possession of the goods and not with the title of the goods.
Thus the goods must be in actual possession of the seller. It is, however not necessary that he should
possess the goods as an owner. He can exercise the rights of lien, even if he possesses the goods as an
agent or bailey for the buyer.
Example:
A seller “S” sells a TV set to “B” and delivers it to “B” and since the TV set was not functioning properly,
“B” delivered it back to “S” for the repairs. It was held that “S” can not exercise his right of lien over TV
set.
The unpaid seller can not stop goods in transit in following cases.
i. When the goods reaches the destination.
ii. While the buyer or his agent takes possession of delivery even if it is not reached destination.
iii. In case the carrier is agent of the buyer, the transit comes to an end the instance carrier receives
the goods and seller can not stop the transition
iv. Carrier’s wrongful refusal to deliver goods to the buyer.
Duration of Transit:
The duration of transit is the period between the commencement and end of transit. The transit
commences from the time when the goods are delivered to the middleman (i.e. carrier), and continues
till the buyer or his agent takes the delivery of the goods.
The important provisions relating to duration of transit are as follows:
a. Where goods are rejected by the buyer and carrier continues to have the possession of the
goods, the transit does not come to an end [Section 51(4)].
b. Where the goods are delivered in parts, the seller may stop the remainder of the goods unless
the delivery of the goods shows the intention to give up the possession of the whole of the
goods.[Section 51(7)]
c. Where the goods are delivered to a ship chartered by the buyer, then it is a question of fact in
each case whether the carrier is acting independently or as an agent of the buyer. If
circumstances show that the carrier is acting as an agent of the buyer, then the transit comes to
an end as soon as the goods are loaded on board the ship [Section 51(5)].
Rights of Resale:
Unpaid seller’s right of resale is contained in the Section 54(2) of Sale of Goods Act, which provides that
if the buyer fails to pay or offer the price within a reasonable time, the unpaid seller has the right to
resell the goods in following circumstances:
a. Where the goods are of perishable nature.
b. Where the unpaid seller has exercised his right of lien or stoppage in transit and gives a
notice to buyer of his intension of resell the goods.
c. Where the unpaid seller has expressly reserved his right of resale.
d. Where seller gives notice to the buyer of his intension to resell and the buyer does not
pay within a reasonable time, he can
i. Recover loss on resale of the goods, if any
ii. Retain any surplus on resale of goods, if any
Example:
a) “X” sells vegetable to “Y” on credit, “Y” does not pay, “X” can resell to any other person.
b) “M” sells 100 blankets to “N” and gives him one week for payment. “N” does not pay. “M” can resell
those to any other person.
• 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.