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DEFINITION OF UNPAID SELLER
The seller of goods is deemed to be an unpaid seller is the following circumstances:
1. When the whole of the price has not been paid or tendered
2. When a bill of exchange or other negotiable instrument has been received as a conditional
payment and it has been dishonored.
The term seller includes any person who is in the position of a seller, e.g. an agent of the seller.
[Sec 45)
Features of Unpaid Seller
The following are the features of unpaid seller:
1. He must sell goods on cash basis and must be unpaid.
2. If he sells the goods on credit, he is not an unpaid seller during the period of credit.
3. If the term of credit has expired and the price has not been paid.
4. He must be unpaid wholly or partly. If a part of the price remains unpaid, he is an unpaid
seller.
5. When the price is paid in the form of negotiable instrument and it is dishonoured.
6. If the price is offered by the buyer and the seller refuses to accept it, the seller cannot be
called unpaid seller.
EXAMPLES

A sells a car to· 8. B. offers the payment. A refuses to accept payment. A is · n.ot an unpaid
seller.
Example: A sells his bike to B for Rs. 60,000 and receives a cheque for the price. Till this
time seller will only be called as seller. But when subsequently, the cheque is dishonoured
due to insufficiency of funds in B’s bank account, then only A becomes an unpaid seller.
Seller's lien

(1) Subject to the provisions of this Act, 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,
namely:

(a) where the goods have been sold without any stipulation as to credit;

(b) where the goods have been sold on credit, but the term of credit has expired;

(c) where the buyer becomes insolvent.

(d) The seller may exercise his right of lien notwithstanding that he is in possession of the goods
as agent or bailee for the buyer.

Termination of lien

(1) The unpaid seller of goods loses his lien thereon-

(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to
the buyer without reserving the right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possession of the goods;

(c) by waiver thereof.

(2) The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that
he has obtained a decree for the price of the goods.

Rights of Unpaid Seller

An unpaid seller has the following rights:
1. Rights against Goods
An unpaid seller has the following rights:
a. Right of Lien
The right of lien means the right to retain the possession of goods until the full price is received.
An unpaid seller can exercise his right of lien in the following cases: (Sec 47-49)
1. When the goods are sold for cash and not on credit.
2. When the goods are sold on credit but the term of credit has expired.
3. When the buyer becomes insolvent, even if the period of credit has not been expired.
The others rules regarding lien are as under:
1. It can be exercised when the goods are in possession of seller as agent or bailee of the buyer.
2. It can be exercised even if the documents of title have been delivered to the buyer.
3. It can be exercised for price and not for other expenses.
4. If seller delivers some goods to the buyer, he can exercise his right of lien on the remainder.
5. If the seller delivers the goods under the circumstances which show that he has agreed to
waive the lien, he cannot retain the remainder.
6. The seller can exercise a right of lien even though he has obtained a decree for price of the
goods.
The unpaid Seller loses his right of lien in the following cases:
1. When he delivers the goods to a carrier or other bailee for transmission to the buyer.
2. When the buyer or his agent lawfully obtains possession of the goods.
3. When the seller waives his right of lien on goods.
4. The right of lien once lost will not restore even if the buyer delivers the goods to the seller
for any particular purpose.
5. When the buyer further sells the goods and the seller agrees.
E sold and delivered a refrigerator to J. It was not functioning properly so J delivered it back to
E for repairs. It was held that E could not exercise his lien over the refrigerator. (Eduljee vs.
John Bros.)
b. Right of Stoppage of Goods In Transit
The right of stoppage in transit means the right of stopping the goods while they are in transit
and to take possession until the price is paid. The unpaid seller can stop the goods in transit in
the following cases: (Sec 50-52)
1. When the buyer becomes insolvent.
2. When the goods are still in transit.
3. When the seller has the right of stopping the goods.
4. When the ownership has already been passed to the buyer.
The seller cannot stop the goods in transit in the following
cases:
1. When the buyer or his agent takes delivery of the goods after the goods have reached at the
destination.
2. When the buyer or his agent takes delivery of the goods before the goods have reached at the
destination.
3. When the buyer requests the carrier to carry the goods to a new destination after the goods
have reached at the original destination.
4. When the carrier wrongfully refuses to deliver the goods to the buyer or his agent.
5. When some of the goods have been delivered to the buyer or his agent under the
circumstances which show that there is an agreement to give up possession of the whole of the
goods.
A sells 20 bags of cement to B. A delivers the cement to a carrier to carry them to B. Later, A
gets a news that B has becomes insolvent. A can stop the delivery.
c. Right of Resale
The unpaid seller can resell the goods in following cases: (Sec. 46-54)
1. When the goods are of perishable nature.
2. When there is provision regarding the right of sale in the contract.
3. When the seller gives a notice to the buyer of his intention to resell and the buyer does not
pay within a reasonable time, he can: i. Recover loss on resale of the goods. ii. Retain any
surplus on resale of goods. If the seller resells without giving notice to the buyer, he cannot: i.
Recover any loss on resale of the goods. ii. Retain any surplus on the resale of the goods.
a. aliza sells rice tofatima on credit. fatima does not pay. aliza can resell to any other person.
b. Mehroz sells 50pianoto Nida and gives him one week for payment. Nida does not pay.
Mehrozcan resell those blankets to any other person.
2. Rights against Buyer
The unpaid seller has the following rights against the buyer:
a. Price
When the ownership in goods has passed to the buyer and the buyer refuses to pay the price
according to the terms of the contract, the seller can sue the buyer for price irrespective of the
delivery of goods. (Sec 55)
A sells the goods to B. B refuses to pay. A can sue for the price.
b. Damages for Non-acceptance
When the buyer refuses to accept and pay for the goods, the seller may sue him for damages for
non-acceptance. The seller can recover damages only. He cannot recover the full price. (Sec. 56)
A sells the goods to B. B refuses to take the goods and pay the price. A can sue B to compel him
to take the goods.
c. Special Damages and Interest
The seller can sue the buyer for special damages when the parties are aware of such damages at
the time of contract The unpaid seller can recover interest at a reasonable rate on the total unpaid
price of -goods from the time it was due until it is paid. (Sec. 61)
mosa sells some goods to afaq. afaqdoes not pay the price.mosa can Sue for damages and
interest if the parties are aware of such circumstances.
Buyer's Rights against Seller
The buyer has following rights against the seller for breach of contract:
1. Damages for Non-delivery
Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may
sue the seller for damages for non-delivery. (Sec. 57)
EXAMPLE
 A contracts to repair B’s house in a certain manner, and receives payment in advance. A
repairs the house, but not according to contract. B is entitled to recover from A the cost of
making the repairs conform to the contract. 
2. Suit for Specific Performance
When there is a breach of contract for the sale of specific goods, the buyer may file a suit for
specific performance. This remedy is granted only when damages would not be an adequate
remedy. It is granted when subject matter of the contract is rare goods, e.g. picture by a dead
painter. (Sec. 58)
A promises to sell B, a rare painting. Later, A refuses to give the painting. B can sue for specific
performance.
3. Damages for Breach of Warranty
When there is a breach of warranty by the seller, the buyer is entitled to sue for damages if he
has paid the price to the seller. But if the buyer has not yet paid the price, he may ask the seller
for a reasonable reduction in the price. (Sec. 59)
EXAMPLE
Ali promises to sell and deliver tables to B on20thjanuary2019. But A delivers on30th March.
Bilalcan claim damages.
4. Cancellation and Damages for Breach of Condition
When there is a breach of condition by the seller, the buyer can avoid the contract and claim
damages. [Sec. 12(2)]
Ali promises to sell mobiletotayyab. But tayyab sends Sharp mobiletayyabcan avoid the contract
and claim damages.
5. Recovery of Price with Interest
If the buyer has already paid the price to the seller and the seller does not deliver the goods to the
buyer, he can sue the seller for refund of the price and interest at a reasonable rate. (Sec. 61)
ahmad agrees to buy a fridge from Yawar and makes payment in. advance. '?" does not
supply.ahmad can sue for refund of price and interest on that amount.