In the context of Sale of Goods Act 1979 explains the meaning of sale of goods and unpaid

seller. Explain THREE (3) rights unpaid seller against goods with suitable examples.

Answer:
A Sale of Goods Act is a contract in which seller transfers or agrees to transfer the ownership of
goods to the buyer for monetary consideration known as price. The most frequently used terms
in this act are as follows.

A) Buyer and Seller: Buyer is a person who buys or agrees to buy goods. Seller is a person who
sells or agrees to sell goods. Buyer and seller are complementary terms for each other and
represent two parties of the contract.
B) Goods: Goods means every kind of movable property other than actionable claims and
money.

i) Existing Goods: They are such goods which are in existence at the time of contract.
ii) Future Goods: Those goods which are to be manufactured or produced by the seller after
making the contract of sale.
For example :

 Ram agrees to sell Hari all the milk yield by his cow in the coming year. This is
the contract of sale of future goods.
 Rita agrees to sell Sita all the oranges which will be produced in her garden this
year. It is the contract of sale of future goods amounting to an agreement to sell.

iii) Goods which have perished before making contract: When there is an agreement to sale
specific goods, and the goods are perished without the knowledge of seller at the time
when contract is made, then contract will be void.
For example: Mr Ram agrees to sell Shyam 50 kg of potatoes stored in Ram’s godown.
Due to water logging all potatoes were damaged. Neither of the parties was aware of such
damage at the time of making contract then such agreement is avoided.
iv) Goods Perishing before sale but after agreement to sell: Where there is contract to sale
specific goods and subsequently goods perish before risk is passed to buyer where there
is no fault on the part of both buyer and seller then such agreement is avoided.

c) Delivery : its form of derivates: Voluntary transfer of possession of any goods from one
person to another is known as delivery of goods. Delivery has the effect of transferring
possession of goods from seller to buyer or any person authorized to hold them on behalf of
buyer.

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Forms of delivery are as follows

 Actual delivery
 Constructive delivery
 Symbolic delivery

d) Ascertainment of price of goods: Price is the monetary consideration for the sale of goods.
Price in the contract is fixed by the contract or agreed to be fixed in a manner provided by the
contract or determined by the course of dealing between the parties.

e) Agreement to sell at valuation: It means determination of price to be fixed by third party.

Where there is agreement to sell goods on the terms that price is to be fixed by the third party
and he either does not or cannot make such valuation , then agreement will be void. If in case
the third party is prevented by the default of either the party from fixing the price, the party at
fault will be liable to bear damages to the other party who is not at fault. Buyer who has got the
delivery of goods must pay reasonable price to seller.
For example:
Mr A has two cars. He agrees to sell both of his car to Mr. C at a price to be fixed by Mr F. He
gives delivery of one car immediately. Now, F refuses to fix the price. Then A asks C to return
the car which was delivered to him while C claims for the delivery of second car as well. In this
case buyer C shall pay reasonable price to A for the car already delivered to him. In case of
second car, the contract can be avoided.

A contract of sale of goods is a contract where by seller transfer or agrees to transfer his
property of goods to the buyer for price. The contract of sale may be absolute or conditional.
Under the contract of sale possession of goods is transferred from the seller to buyer. This
contract is called as sale.
Where the transfer of ownership or control of possession of goods is to take place at future time
or subject to some condition to be fulfilled, then such contract is called as agreement to sell.
Ownership of the goods is not immediately transferred in agreement to sell.
Following elements are very essentials to constitute contract of sale.
 There must be at least two parties ie buyer and seller
 The subject matter of the contract must be goods of movable property.
 The price in money should be paid or promised.
 There should be transfer of ownership of goods from seller to buyer. The contract of sale
is made by an offer to buy or sell goods for a price by one party and acceptance of such
offer by another party,
 It is equally important that all other essentials elements of a valid contract must be
present in contract of sale.

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 Seller of goods is said to be unpaid seller when
 The whole of the price has not been received by seller and the seller has right of action
for the price.
 When bill of exchange or other negotiable instrument has been received as conditional
payment and the condition on which it was received has not been fulfilled by reason of
dishonor of the instrument or otherwise.

The term seller means the person who is in the position of a seller. For example, agent
of the seller to whom the bill of lading has been endorsed or agent who has himself
paid, or who is directly responsible for the price.

For example:
 Gita sold certain goods to harish for Rs 50,000. Harish paid Rs 20000 but fails to
pay remaining balance.Here, Gita is an unpaid seller.
 X sold some goods to Y for Rs 1 lakh and received cheque for full price. While
presenting cheque at bank, cheque was dishonored by the bank. Here Mr X is
said to be unpaid seller.

In short a seller is said to be unpaid seller when either he has not received the entire sum of sale or the
buyer has failed to meet bills of exchange or other negotiable instrument at maturity which was
accepted by seller as conditional payment.

The right of unpaid seller against goods can be categorized under two headings.

Against the goods

The property in goods has passed to The property in the goods has not passed to buyer
the buyer

Right of unpaid seller against goods are as follows

a) Seller’s Lien: It is the right the possession of goods and refusal to deliver them to buyer until
the price due on it is paid. The unpaid seller of the goods who is in possession of them is
entitled to retain possession of them until payment or tender of price in the following cases
 Where the goods has been sold without any stipulation as to credit.

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  Where the goods has been sold on credit but the term of credit has been expired.
 Where the buyer becomes insolvent.

Right of lien can be exercised as long as seller remains in control of the goods.

Example: X sold certain goods to y for a price of Rs 60000 and told him to pay with in
one month. Y becomes insolvent with in this time frame. X, the unpaid seller can
exercise right of lien.

b) Right of stoppage in transit: It is the right of seller to stop the goods while they are in transit to
regain possession and to retain them until the full price is paid.
This right is the extension of the right of lien because it enable to regain possession even when
seller has parted with the possession of goods.
When the unpaid seller has parted the goods to the carrier and the buyer has become insolvent ,
he can exercise this right so that carrier would return the goods back or not to deliver the goods
to buyer.
This right can be exercised only when the following conditions are fulfilled.
 The seller must be unpaid
 He must have parted with the possession of goods
 The goods are in transit
 The buyer has become insolvent

For example: X who is Kathmandu orders goods of Y from Delhi . Y consigns and
forwards the goods to X. On arrival at Kathmandu, goods are taken to X’s warehouse
and left there. X refuses to take this goods and payment is not made by X to Y. The
goods are in transit and Y can take back them.

The goods are deemed to be in transit from the time then they are delivered to a carrier
for the purpose of transmission to buyer, until the buyer or his agent takes delivery of
them from such carrier.
The stoppage in transit is done by taking actual possession of goods or by giving notice
to the carrier not to deliver the goods to buyer.

c) Right of re-sale: It is the most valuable right given to unpaid seller because right of lien and right
of stoppage in transit entitle the unpaid seller to retain goods only until paid by the buyer.
He can exercise this right of resale under following circumstances,
 Where the goods are of perishable nature: In this case there is no need to inform buyer
with the intention of resale
 Where he gives notice to the buyer with intention to resale: If the buyer fails to pay the
price after receiving notice from seller to resale goods then seller has right to resell the
goods.
In this case seller is also entitled to retain the profit if resale price is higher than contract
price.
He is also entitled to recover the difference between contract price and resale price , from
the original buyers as damages.

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 In case goods are resold without giving any notice to the buyer then seller cannot
recover the loss suffered on resale. Moreover, if there is any profit on resale then he has
to return it to original buyers.
 Where unpaid seller who has exercised his right of lein or stoppage in transit , resells the goods.
The subsequent buyer acquires the goods title there of as against the original buyer , instead of
fact that notice of resale has not been given by seller to the original buyer.
 Where the property in the goods has not been transferred to the buyer: The unpaid seller has
right of withholding delivery of goods.

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