Question

• What do you understand by the term

“Unpaid Seller”?
 Definition of Unpaid Seller (Section 45)
• The seller of goods is deemed to be an “unpaid seller”
within the meaning of this Act—
• (a) when the whole of the price has not been paid or
tendered;
• (b) when a 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 the dishonor of the instrument or otherwise.
• The term “seller” includes any person who is in the position
of a seller, as for instance, an agent of the seller to whom
the bill of lading has been endorsed, or a consignor or agent
who has himself paid, or is directly responsible for the price.
 Question
• If the amount of money (price) has been
tendered (offered) by the buyer to the
seller, but the seller has refused to
accept the same, can he claim to be an
unpaid seller?
 Unpaid Seller
• An unpaid seller is a seller to whom the whole of
the price has not been paid.
• If only a part of the price has been paid and not the
whole of it, the seller is an unpaid seller.
• If the amount of money (price) has been tendered
(offered) by the buyer, but the seller has wrongfully
refused to accept the same, he is not an unpaid
seller.
 Rights of an Unpaid Seller

• Chapter V (Sections 45 to 54) of The Sale of

Goods Act, 1930, deal with the rights of an
unpaid seller.
 Unpaid Seller’s Rights (Section 46)
• Subject to the provisions of this Act and of any law
for the time being in force, notwithstanding that
the property in the goods may have passed to the
buyer, the unpaid seller of goods, as such, has by
implication of law—
• (a) a lien on the goods for the price while he is in
possession of them;
• (b) in case of the insolvency of the buyer, a right of
stopping the goods in transit after he has parted
with the possession of them;
• (c) a right of re-sale as limited by this Act.
 Right of Withholding Delivery
(Section 46)
• Where the property in the goods has not
passed to the buyer, the unpaid seller has, in
addition to his other remedies, a right of
withholding delivery similar to and co-extensive
with his rights of lien and stoppage in transit
where the property has passed to the buyer.
 Seller’s Right of Lien (Section 47)
• 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.
• The seller may exercise his right of lien notwithstanding
that he is in possession of the goods as an agent or
bailee for the buyer.
 Example

• A sells a Horse to B on 1st May 2022.

• B is given the right to take the delivery at any time
he likes and the price is to be paid on or before 1st
August 2022.
• If B does not take the delivery by 1st August 2022
and demands the delivery after this date, A can
refuse to deliver the Horse until B pays for it.
Lien and Part Delivery (Section 48)
• Where an unpaid seller has made part
delivery of the goods, he may exercise
his right of lien on the remainder, unless
such part delivery has been made under
such circumstances as to show an
agreement to waive the lien.
 Example
• A (the seller) requests B (the buyer) to take the
delivery of 1000 bags of Wheat which he (A) has
sold to him (B). The price is to be paid on delivery.
• B sends his transport which can carry 200 bags in
one trip.
• B takes away 400 bags in two trips and makes
payment for them.
• However, he refuses to make payment for the
remaining 600 bags.
• The seller can exercise the right of lien over the
remaining 600 bags.
 Termination of the Right of Lien
(Section 49)
• 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.
• 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.
 Termination of the Right of Lien
(Section 49)
• By payment of price.
• By delivery to a carrier or bailee.
• By the buyer or his agent obtaining
possession of the goods.
• By disposition of the goods by the buyer.
 Question
• Whether an unpaid seller’s right of lien or
stoppage in transit is adversely affected by
any sale or other disposition of the goods
made by the buyer?
Effect of Sub-Sale or Pledge (Disposition
of Goods) by the Buyer [Section 53(1)]
• Subject to the provisions of this Act, the
unpaid seller’s right of lien or stoppage in
transit is not affected by any sale or other
disposition of the goods which the buyer may
have made, unless the seller has assented
thereto.
 Exceptions to Section 53
• When the seller himself assents to a sub-sale
or other disposition of the goods by the buyer;
• When the buyer has lawfully obtained
possession of the documents of title to the
goods and transfers the same to a bona fide
transferee for consideration by way of sale.
 Right of Stoppage in Transit
(Section 50)
• Subject to the provisions of this Act, when
the buyer of goods becomes insolvent, the
unpaid seller who has parted with the
possession of the goods has the right of
stopping them in transit.
• That is to say, he may resume possession of
the goods as long as they are in the course of
transit, and may retain them until payment
or tender of the price.
 Question

• Whether the stopping of goods in transit by

the seller leads to the rescission of the
contract or not?
 Stoppage in Transit
• Under this right, the unpaid seller regains the
possession of goods after they have been delivered to
a carrier for the purpose of transmission to the buyer.
• As per Section 54(1), the exercise of this right does
not result in the rescission of the contract or revesting
of the property in the goods in the seller.
• It only means that the seller after getting back the
goods from the carrier, has the right to retain them
until the buyer pays for them.
• If the buyer fails to pay, the seller can re-sell the
goods.
 Duration of Transit (Section 51)
• Goods are deemed to be in course of transit from
the time when they are delivered to a carrier or
other bailee for the purpose of transmission to the
buyer, until the buyer or his agent in that behalf
takes delivery of them from such carrier or other
bailee.
• If the buyer or his agent in that behalf obtains
delivery of the goods before their arrival at the
appointed destination, the transit is at an end.
 Duration of Transit (Section 51)
• If, after the arrival of the goods at the appointed
destination, the carrier or other bailee
acknowledges to the buyer or his agent that he
holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his
agent, the transit is at an end and it is immaterial
that a further destination for the goods may have
been indicated by the buyer.
 Duration of Transit (Section 51)
• If the goods are rejected by the buyer and the
carrier or other bailee continues in possession of
them, the transit is not deemed to be at an end,
even if the seller has refused to receive them back.
• When goods are delivered to a ship chartered by
the buyer, it is a question depending on the
circumstances of the particular case, whether they
are in the possession of the master as a carrier or
as an agent of the buyer.
 Duration of Transit (Section 51)
• Where the carrier or other bailee wrongfully
refuses to deliver the goods to the buyer or his
agent in that behalf, the transit is deemed to be at
an end.
• Where part delivery of the goods has been made
to the buyer or his agent in that behalf, the
remainder of the goods may be stopped in transit,
unless such part delivery has been given in such
circumstances as to show an agreement to give up
possession of the whole of the goods.
 How Stoppage in Transit is Effected
(Section 52)
• The unpaid seller may exercise his right of stoppage in
transit either:
• by taking actual possession of the goods, or
• by giving notice of his claim to the carrier or other bailee in
whose possession the goods are.
• Such notice may be given either to the person in actual
possession of the goods or to his principal.
• In the latter case, the notice to be effectual, shall be given
at such time and in such circumstances that the principal,
by the exercise of reasonable diligence, may communicate
it to his servant or agent in time to prevent a delivery to the
buyer.
How Stoppage in Transit is Effected
(Section 52)
• When notice of stoppage in transit is given by
the seller to the carrier or other bailee in
possession of the goods, he shall re-deliver
the goods to, or according to the directions
of, the seller.
• The expenses of such re-delivery shall be
borne by the seller.
 Question

• What are the differences between the

Right of Lien and the Right of Stoppage
in Transit?
 Answer
• The right of lien gives the unpaid seller the right to
retain the goods. It can be availed only if the seller
has not parted with the possession of goods. On the
other hand, he right of stoppage in transit gives the
unpaid seller the right to regain possession.
• The right of stoppage in transit cannot be exercised
unless the buyer has become insolvent. On the
other hand, the right of lien can be exercised even if
the buyer is solvent.
• The right to stop the goods in transit can be availed
only after the right of lien has ended.
Similarities between the Right of Lien
and the Right of Stoppage in Transit

• Both rights can be exercised by an unpaid

seller.
• Both rights can be exercised even after the
property in the goods has passed to the buyer.
Right to Re-Sell the Goods (Section 54)

• After exercising the right of lien or stoppage in

transit, the seller has a right to retain the goods
until the buyer pays the price.
• However, if within a reasonable time after the
exercise of this right, the buyer does not pay the
price, the unpaid seller can re-sell the goods.
Conditions in which Goods can be Re-
Sold
• If the goods are of a perishable nature [Section
54(2)]; or
• If the unpaid seller who has availed his right of
lien or stoppage in transit gives notice to the
buyer of his intention to re-sell [Section 54(2)];
or
• If the seller has expressly reserved a right of re-
sale in case the buyer makes default [Section
54(4)].
 Seller Reserving Right of Re-Sale
[Section 54(4)]
• Where the seller expressly reserves a right of
re-sale in case the buyer should make
default, and, on the buyer making default, re-
sells the goods, the original contract of sale is
thereby rescinded, but without prejudice to
any claim which the seller may have for
damages.
 Title of Subsequent Buyer
[Section 54(3)]
• Where an unpaid seller who has exercised his
right of lien or stoppage in transit re-sells the
goods, the subsequent buyer acquires a good
title thereto as against the original buyer,
notwithstanding that no notice of the re-sale
has been given to the original buyer.
 Suit for Price (Section 55)
• Where under a contract of sale the property in the
goods has passed to the buyer and the buyer
wrongfully neglects or refuses to pay for the goods
according to the terms of the contract, the seller
may sue him for the price of the goods.
• Where under a contract of sale the price is payable
on a certain day irrespective of delivery and the
buyer wrongfully neglects or refuses to pay such
price, the seller may sue him for the price although
the property in the goods has not passed and the
goods have not been appropriated to the contract.
 Suit for Damages (Section 56)
• Where the buyer wrongfully neglects or
refuses to accept and pay for the goods,
the seller may sue him for damages for
non-acceptance.
• Such a suit generally arises when the
property in the goods has not yet
passed to the buyer.
 Interest by Way of Damages and
Special Damages (Section 61)

• Nothing in this Act shall affect the right of the

seller or the buyer to recover interest or
special damages in any case where by law
interest or special damages may be
recoverable, or to recover the money paid
where the consideration for the payment of
it has failed.
 Interest by Way of Damages and
Special Damages (Section 61)
• In the absence of a contract to the contrary, the
Court may award interest at such rate as it thinks
fit on the amount of the price—
• (a) to the seller in a suit by him for the amount of
the price, from the date of the tender of the goods
or from the date on which the price was payable;
• (b) to the buyer in a suit by him for the refund of
the price in a case of a breach of the contract on
the part of the seller from the date on which the
payment was made.
 Antim Dubey vs State of MP
(AIR 2018 MP)

• https://www.casemine.com/judgement/in/
5e9783ad4653d048ca2bbfbe
 Facts
• The complainant lodged a complaint that the
respondent (a minor) had entered into an agreement
to purchase a 10-wheeler truck for Rs. 13,75,000/, out
of which Rs. 5,85,000/- was paid to the complainant
and the remaining amount of Rs 7,90,000/- was to be
paid to a Finance Company by the respondent.
• Thereafter, the respondent neither paid the remaining
amount to the Finance Company nor to the
complainant.
• The complainant sent various notices to the
respondent to deposit the amount but to no avail.
 Arguments
• It was alleged by the complainant that the
respondent has committed criminal breach of
trust and therefore a FIR was filed against him
u/s. 405 & 406 of the IPC.
• The respondent contended that his consent to
the agreement is not valid as he was a minor
at the time when the agreement was entered.
 Criminal Breach of Trust
(Section 405, IPC)
• Whoever, being in any manner entrusted with
property, or with any dominion over property,
dishonestly misappropriates or converts to his own
use that property, or dishonestly uses or disposes
of that property in violation of any direction of law
prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or
implied, which he has made touching the discharge
of such trust, or wilfully suffers any other person so
to do, commits “criminal breach of trust”.
 Punishment for Criminal Breach of
Trust (Section 406)
• Whoever commits criminal breach of trust
shall be punished with imprisonment of
either description for a term which may
extend to 3 years, or with fine, or with
both.
 Decision
• It was held that although a minor cannot enter
into a valid contract, but he can be prosecuted
for criminal breach of trust under Section 406
of the IPC.
• Therefore, the respondent’s (minor’s)
application for the quashing of FIR was
dismissed.