Rights of an Unpaid Seller – S.

39

Buyer’s duty (common terms sheet)

 Duty to pay price – S.27

 Duty to take delivery of the goods – S.27 and 28

Definition of an unpaid seller: S.38

S.38(1) – Where the whole of the price has not been paid.

Is there Late Payment?

S.10 – If no time for payment has been stipulated the price is due on completion of the contract (i.e. on delivery) if
the seller is willing to deliver the goods. S.10(1) state that unless a different intention appears in the contract then
stipulations as to time of the payment are not the essence of a contract.

 This means that failure is not a breach of condition but a breach of a warranty limiting the remedy price and
to damages for late payment if any.
 Sensible to make time for payment of the essence in the contract.

Breach of Contract Remedies for Unpaid Seller

Negotiation
Don’t forget always an option!!
Offer at a discount?

- The solicitor can always draft a new set of standard terms if there is confusion of rights.

Action for Price

S.49 – Provides that an unpaid seller can sue the buyer for the price of the goods where the buyer has the property
in the goods (possession) but has not paid for them, or where the price is payable ‘on a day certain’ regardless of
delivery.
- This does not help if the buyer is insolvent or likely to become so.

Damages –
S.50 – Where the buyer has wrongfully refused to accept and pay for the goods, the seller can sue the buyer for
damages.

 The prima facie basis for the assessment of damages is laid down in S.50(3): Where there is no available
market – the measure of damages if the contract value of the goods and any additional direct expenses
caused to the seller.
 ‘Special damages are also available. The second limb of Hadley v Baxendale – Consequential Loss
 Damages for late payment may be awarded by the Court for additional costs caused to the seller –
Wadsworth v Lydall (1981)

Interest

 May be awarded under the Late Payment of Commercial Debts (Interest) Act 1998.
 More sensible to provide in the contract for interest for late payment, as this avoids having to rely on these
statutory provisions.
 Any contractual arrangement to recover, by way of damages or interest, for late payment must not ‘amount
to a penalty’ but must be based upon a genuine pre-estimate of loss – Jeancharm Ltd v Barnet Football Clus
Ltd 2003 - A clause requiring interest of 5% per week was struck out as penal.

= However sometimes this course of action is not a great deal of use to the seller as it can be expensive and take a
long time. It certainly won’t be useful to the seller where the buyer has no money.

Where Goods are in the possession of the seller

  S.41 – 48 – The rights of an unpaid seller assume that the seller to be possession or has physical control over
the goods.
 Where the goods are in the physical control of the buyer this can cause major concern for the seller
especially where the buyer is going insolvent as the goods could be sold by a liquidator. The seller would
only be an unsecured creditor and would be likely to be paid much, if anything by the liquidator.

1. A Lien on the Goods – S.41, 43

Gives the unpaid Seller a right to retain possession of the goods as against their owner, until paid.

- This only applies where any credit period has expired or when the buyer becomes insolvent.
- This does not allow the seller to resell the goods
- Nor does it allow the seller to take the goods is they are not in its possession.

S.43 - A lien is lost when;

- the goods are consigned to a carrier without reserving the right to dispose of the goods,
- or when the buyer has possession of the goods,
- Or by waiver by the seller.

2. A right to stop the goods in transit – S.44-46

A seller may stop the goods in transit where the buyer has become insolvent, and retain them until paid.
Postmaster-General v WH Jones & Co (1957) – there is no right to interfere with the postal system, so the
goods sent by post cannot be stopped.
S.46(1) – The stopping could be either by taking actual possession of the goods, or by giving notice of the
seller’s claim to the carrier.

3. A right of re-sale
The buyer’s failure to accept the goods does not itself allow the seller to sell the goods to someone else but
S.39(1)(c) – which does allow re-sale to another buyer, subject to the conditions in s.48.
S.48(3) – The right of re-sale is limited to;
a. goods of a perishable nature
b. Or to the unpaid seller giving notice to the buyer of intention to re-sell and not receiving the price
within a reasonable time.

Where the unpaid seller remains in possession of the goods and re-sells them, the original contract of sale is
rescinded and the buyer is discharged from further liability to pay.

S. 48(2),(3) and s.25 – The unpaid seller who resells the goods to another buyer (a third party) passes good
title to the goods, even where the goods were subject to the unpaid seller’s lien or were stopped in transit.
RV Ward v Bignall 1967 – The seller is entitled to keep the proceeds of the re-sale and to sue the original
buyer for non-acceptance if he makes any loss on the re-sale (including the expense of re-selling) as against
the original price.

4. An action for the price of the goods

The unpaid seller can sue the buyer for the price of the goods where the buyer has the property in the
goods, i.e. possession of the goods, but has not paid for them, or where the price is due on ‘a day certain’
S.49.
- This does not help if the buyer is insolvent or likely to become so.

5. A right to retain title to the goods until paid

There is a right to reserve title to the goods in ss17 and 19. This can be done by retention of title clause, also
called a Romalpa Clause after the case Aluminium Industrie Vaassen BV v Romalpa Aluminium (1976). The
idea behind this is to allow the seller to recover the goods, still being the property of the seller.

Retention of Title Clause

 There is a right to reserve title to the goods in ss.17 and 19. This can be done by retention of title clause, also
called a Romalpa Clause after the case Aluminium Industrie Vaassen BV v Romalpa Aluminium (1976). The
idea behind this is to allow the seller to recover the goods, still being the property of the seller.