Meaning of Unpaid Seller – A person who has sold goods to another person but has not been paid for the goods, or has been paid partially, is called an unpaid seller. According to Section 45 of the Sale of Goods Act, an unpaid seller is one:
- Who has not been paid the price of the goods he has supplied, or has been partially paid for the goods.
- Who has been given a negotiable instrument like a bill of exchange that has been dishonoured. It is immaterial whether the seller is directly involved in the transaction, or he is acting through his agent.
Rights of Unpaid Seller
A. Rights against the goods
(1) Right of lien: According to Section 47, if the seller of goods has not been paid, and the ownership of goods has been transferred to the buyer but the goods are in the possession of the seller, the seller has the right to retain the goods till he receives the price of goods from the buyer. The seller has this right in the following circumstances:
- When the goods have not been sold on credit.
- When the payment has not been made on the promised date, if the goods were sold on credit.
- When the buyer has become an insolvent.
(2) Right of stoppage of goods in transit: According to Section 50, when the seller has delivered the goods to a carrier for transmission to the buyer and the goods are in transit, if he receives information that the buyer has become insolvent, the seller has the right to stop the goods in transit and retain their possession till such time as he is not paid the price of goods. The seller has the right of stoppage of goods in the following circumstances
- When the price of goods has totally or partially not been paid.
- When the buyer has become insolvent before paying for the goods.
- When the goods are in transit.
(3) Right or Re-sale: Besides the right of lien and stoppage of goods in transit, an unpaid seller has the right to re-sell the goods. Section 54 defines the general rules for the re-sale of goods by an unpaid seller.
B. Rights Against the Buyer
(1) Suit for price: According to Section 55, if the ownership of goods has been transferred to the buyer and he refuses to make the payment for the goods, the seller has the right to file a suit against the buyer.
(2) Suit for damages: According to-Section 56, if the buyer refuses to accept the goods or defaults in making the payment for them with a malafide intention, or refuses to accept the goods or pay for the same, the seller has the right to file a suit against the buyer for damages.
(3) Repudiation of contract before due date: According to Section 60, if the buyer repudiates the contract before the due date for the delivery of goods and the seller does not accept the repudiation and waits for due date, to make the delivery, he reserve the right to sue the buyer for repudiating the contract.