Who is an unpaid seller? What are the remedies of the unpaid seller?

 

Who is an unpaid seller? What are the remedies of the unpaid seller?

Meaning- U/S 45, a seller is said to be unpaid when:

(i)                  When the seller does not receive whole or part of the price; or

(ii)                Where the seller had a negotiable instrument, such as a bill of exchange, that was dishonoured.

Example- A seller draws a bill of exchange on the buyer for the price of goods. It was duly accepted by the buyer. However, on the maturity date, the buyer refused to pay. According to the seller, he is an unpaid seller.

Remedies of unpaid seller-

In addition to cancelling the contract for non-payment of price, an unpaid seller has a number of other options. Some of them are as follows:

(i)                  Right to Lien- If the buyer fails to pay the agreed-upon price within the specified time frame, the unpaid seller has the right to keep the goods in his possession and refuse to deliver the goods until the due payment is received.

When right of lien can be exercised (Sec-47)-

a)       When goods are sold on cash basis, but payment is unpaid.

b)      When goods have been sold on credit and the credit term has expired.

c)       When the buyer becomes insolvent, even if payment is made within the agreed time period.

d)      So long as the goods are in the possession of the unpaid seller, he has the right to exercise it. When goods are lost or surrendered, the right of possession/lien is also lost or surrendered.

Termination of Right of Possession-

a)       Through the delivery of goods to the buyer/his agent.

b)      By delivery of goods to the carrier/ courier company.

c)       By waiver.

d)      When the buyer has lawfully obtained possession of the goods.

(ii)                  Right to stop goods in transit- If a buyer fails to pay the agreed-upon price within the specified time frame, the seller has the right to stop the goods in transit.

Conditions for stoppage of goods-

a)       When a seller is not paid in full or in part.

b)      When the buyer becomes insolvent.

c)        Goods must be in transit- This means that goods must not be in the seller's possession and must not have reached the buyer's possession as well.

Termination of Transit-

a)       By delivery to the buyer/ his agent.

b)      The buyer's interception.

When the buyer or his agent obtains delivery of the goods prior to their arrival at the designated destination, the transit is terminated.

c)       When the carrier/courier company acknowledges to the buyer that they are holding the goods on the buyer's behalf, transit ends.

d)      Goods delivered in instalments.

If only a portion of the goods are delivered to the buyer, the transit for the remainder of the goods ends as well.

(iii)                  Right to Resell- The unpaid seller has the right to resell the goods.

Conditions for resale:

a)       If the goods are perishable, the unpaid seller may resell them immediately without informing the buyer. However, in the case of non-perishable items that have not been paid for, the seller must inform the buyer before reselling them.

b)      When a seller is given money and sends a notice to the buyer, the buyer does not pay.

c)       Where the resale right is reserved/mentioned in the contract.

 If the contract expressly states that reselling is not permitted, or vice versa.

d)       Buyer becomes insolvent.

e)      The buyer fails to pay the purchase price of the goods.

Conclusion-

These are the main remedies of unpaid seller.