The concept of the rights of an unpaid seller refers to the legal rights that a seller has against the buyer and the goods in case the buyer fails to pay the price of the goods or breaches the contract of sale. The Sale of Goods Act, 1930 provides for these rights and they are important to ensure that the seller is not left without recourse in case of the buyer’s default.
The Sale of Goods Act, 1930 provides for the rights of an unpaid seller against the goods and the buyer. Here are the key rights of an unpaid seller:
- Right of lien: An unpaid seller who has not yet delivered the goods to the buyer has the right to retain possession of the goods as security for the payment of the price. This right is known as the right of lien. The seller can retain possession until the price is paid or until the buyer’s credit period expires.
- Right of stoppage in transit: If the seller has delivered the goods to a carrier for delivery to the buyer, but the buyer has not yet received the goods, the seller has the right to stop the goods in transit if they become aware that the buyer is insolvent. This right is known as the right of stoppage in transit. The seller can stop the goods by giving notice to the carrier or other bailee in possession of the goods, and can retain possession until the price is paid or until the goods are resold.
- Right of resale: If the buyer fails to pay the price within a reasonable time after the due date, the seller has the right to resell the goods and claim damages for any loss suffered. This right is known as the right of resale. The seller must give notice to the buyer of their intention to resell, and the resale must be conducted in a commercially reasonable manner.
- Right to claim damages: An unpaid seller can claim damages from the buyer for any loss suffered as a result of the buyer’s breach of contract. This includes loss of profit, expenses incurred in storing or reselling the goods, and any other losses arising from the breach.
- Right to sue for the price: An unpaid seller can sue the buyer for the price of the goods if they have not yet been paid. However, the seller must have a right to sue for the price, which can be established by proving that the property in the goods has passed to the buyer, or that the buyer has accepted the goods.
- Right to claim interest: If the contract of sale provides for the payment of interest on the price, or if the seller has given notice of their intention to claim interest, the seller can claim interest on the price from the due date of payment.