Rights of Unpaid Seller against Goods – Lien, Stoppage in Transit, Re-Sale

Who is an Unpaid Seller?

An unpaid seller is one to whom the whole of the price has not been paid or a bill of exchange or such other negotiable instrument given to him has been dishonoured.

Rights of Unpaid Seller against Goods

Rights of Unpaid Seller against Goods – Right of Lien, Right of Stoppage in transit, Right of Re-sale

Rights of an unpaid seller against the goods

These rights of the unpaid seller are known as ‘rights in rem’. If the property in the goods has already been passed on to the buyer, the unpaid seller has the following rights against the goods:

1. Right of Lien

The right of lien is the right to retain possession of the goods until payment for the same is made. Such a right is available to the unpaid seller having possession of the goods if the goods have been sold without any stipulation as to credit or they have been sold on credit, but the term of credit has expired. Such a right is also available in case the buyer has become insolvent.

Rules regarding lien

1. Possession of goods is important to exercise the right of lien.

2. The right of lien is not affected even if the seller has parted with the document of title to the goods.

3. The possession of the goods by the seller must not expressly exclude the right of lien.

4. The lien can be exercised by the unpaid seller only for the price due and not for any other charges like warehouse rent or carriage expenses.

5. If the unpaid seller has already made part delivery of the goods to the buyer, he may exercise lien on the remainder.

Termination of Lien

The unpaid seller loses his right of lien on the goods in the following circumstances:

1. If 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.

2. If the buyer or his agent lawfully obtains possession of the goods.

3. If he waives his right of lien on the goods. The seller may waive his rights either expressly or impliedly. If the contract of sale itself provides in express terms that the seller shall not retain possession of the goods even if the price has not.been paid, it is said to be an express waiver of lien. Implied waiver of lien takes place when the seller sells the goods on credit, or grants a fresh term of credit on the expiry of the original term of credit.

2. Right of stoppage in transit

It is a right of stopping the goods while in transit after the unpaid seller has lost possession of the goods. This right enables the seller to regain possession. Such a right is available to the unpaid seller when the buyer becomes insolvent and when the goods are in transit. Goods are deemed to be in course of transit if they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent takes delivery of them.

Differences between right of lien and right of stoppage in transit

3. Right of Re-Sale

The unpaid seller can re-sell the goods if the goods are of a perishable nature. He can also make a resale of the goods if he has given notice to the buyer of his intention to re-sell and the buyer has not within a reasonable time paid the price. If on resale, the seller incurs loss, he can claim the same from the buyer as damages for breach of contract. If there is a profit on resale, he is not bound to hand it over to the buyer.

If the property in the goods has not passed to the buyer, the unpaid seller has, in addition to all other remedies, the right to withhold delivery.

Rights of an unpaid seller against the buyer personally

These rights of the unpaid seller against the buyer are called ‘rights in personam’. These are as follows:

1. If the property in the goods has passed to the buyer and the buyer wrongfully refuses to pay for the goods, the seller may sue him for the price.

2. Even if the property in the goods has not passed to the buyer, the unpaid seller may sue the buyer for the price if he wrongfully refuses to pay.

3. If the buyer wrongfully refuses to accept and pay for the goods, the seller may sue him for non-acceptance.

4. If the buyer abandons the contract before the date of delivery, the seller may treat the contract as existing and wait till the date of delivery or he may treat the contract as cancelled and sue the buyer for damages for the breach.

5. If there is a specific agreement between the seller and the buyer as to interest on the price of the goods from the date on which payment becomes due, the seller may recover interest from the buyer. If there is no such agreement, the seller may charge interest on the price when it becomes due from such day as he may notify to the buyer.

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