This article is written by Shilpi. This article sheds light on the rights of an unpaid seller as provided under various legislations. The article also provides for the legislative gaps that are present in the laws in force, the impact of digital transactions on the rights of unpaid sellers, the conflict between consumer protection and seller rights, and the role of alternative dispute resolution for resolving the dispute between an unpaid seller and defaulter buyer. 

Introduction

The trade and commerce between different parties heavily impacts the global economy. In the cases of commercial transactions, the rights of sellers and buyers form the basic foundation on which trade and commerce are carried out. An important facet of these transactions is ensuring the seller gets paid for the goods supplied and the buyer gets the goods bought as agreed. However, sometimes, the case could be that the seller delivers the goods at the right time and never gets paid. In such a scenario, the laws come into play to protect the right of the unpaid seller. 

In absence of any law enforcing the rights of an unpaid seller, the sellers will become apprehensive towards entering into any contractual transactions. In order to maintain the sanctity of a business relationship as well as enforcing the rights of an unpaid seller, there must be legislation in place. Law is the supreme protector of all. Hence, to recognise the rights of a seller and a buyer, there are multiple pieces of statutes. Now, as we are going to move further with this article, we are going to be a bit more knowledgeable about the rights of an unpaid seller in India. 

Governing law in India on the rights of an unpaid seller 

In order to have a remedy for breach of one’s right, there should be a law which must be used for enforcing such a right. In India, the rights of an unpaid seller is primarily governed by the Sale of Goods Act, 1930 (hereinafter referred to as “the Act”). The Courts refer to Indian Contract Act, 1872 for determining the amount of damages depending upon the facts and circumstances of the case. Therefore, to understand the nuances behind the rights of an unpaid seller, we have to understand the relevant provisions of these two Acts. So, it is time to dive into the elements of these two Acts.

Unpaid Seller

Meaning and definition under the Sale of Goods Act, 1930

When the buyer fails to pay the seller for the goods delivered to him, the seller becomes an unpaid seller. Section 45 of the Act defines an “unpaid seller.” Section 45 of the Act defines an “unpaid seller” as the following:

• A seller is said to be “unpaid” where in respect of the goods delivered by him, the whole of the sale price has not been paid or formally offered by the seller.
• A seller also becomes an “unpaid seller” where a bill of exchange or other negotiable instrument was accepted as a conditional mode of paying against the goods, but the conditions were not fulfilled due to a dishonoured instrument or other reasons.
• Section 45 of the Act also further clarifies that the term “seller” includes anyone acting on behalf of the seller, that, for the purpose of this chapter, the term “seller” includes any agent who has either received the bill of lading or a consignor or agent who has either paid the price himself or himself is liable for the price.

Rights of an unpaid seller under the Sale of Goods Act, 1930

In order to support the ease of doing business, there should be certain protection granted to the parties of a contract. Therefore, the Act provides certain rights of an unpaid seller. An unpaid seller has rights against the goods as well as the defaulting buyer. 

Rights of unpaid seller against the goods under the Sale of Goods Act, 1930

An unpaid seller has following rights against the goods under the Act. These are as follows:

• Right of lien (Section 47 to 49) under the Act
• Right of stoppage in transit (Section 50 to 52) under the Act
• Right of resale of the goods (Section 54) under the Act

Rights of unpaid seller against the buyer under the Sale of Goods Act, 1930

An unpaid seller has following rights against the defaulting buyer under the Act. These are as follows:

• Suit for price (Section 55) under the Act
• Action for damages for non-acceptance (Section 56) under the Act
• Suit for repudiation of contract before due date (Section 60) under the Act
• Suit for recovery of interest (Section 61) under the Act

Now, you do not need to be worried about these rights just being written in bullet points. Here comes a detailed description and analysis of these rights of an unpaid seller provided under the Act. Besides, we will also be discussing appropriate precedents aligning with these rights of an unpaid seller under the Act. 

Industry examples related to an unpaid seller

It is believed that the unpaid seller’s rights are important in business transactions. These rights protect the sellers from industries. This ensures fairness in trade and safeguards financial interests. Following are some of the industrial examples related to unpaid sellers:

• Manufacturing: A machinery supplier repossesses equipment in case of default of payment.
• Retail: In case of the retailer’s failure to pay, a cloth manufacturer stops further deliveries.
• Agriculture: Resale of grain, in case of insolvency by the wholesaler.
• Automotive: A parts supplier files a case in court for repossession of the goods against the buyer in case of non-payment.
• Technology: The IT company withdraws access from licensed software users if they fail to pay.
• International trade: The legal mechanism allows the sellers to recover their goods from a cross-border transaction.

It helps business firms to minimise risks associated with credit sales and safeguard financial interest.

Rights of an unpaid seller against the goods under the Sale of Goods Act, 1930 

An unpaid seller has rights against the defaulted buyer as well as the goods. The law has provided certain rights to an unpaid seller in order to secure his financial interests. An unpaid seller has the following rights against the goods:

Right of lien: Sections 47 to 49 under the Sale of Goods Act, 1930

Sections 47 to 49 of the Act provide an unpaid seller with the right of lien. As per his right to lien, an unpaid seller has the authority to retain the custody of the goods, as well as, withhold the delivery of the goods till the buyer has paid the whole price of the goods. As per Section 47 of the Act, the seller is entitled to retain the possession of the goods until payment or tender of the price in the following case: 

1. Goods have been sold without any stipulation of credit;
2. Goods have been sold on credit, but the terms of the credit have expired;
3. The buyer has become insolvent

The seller can exercise his right of lien even if he is in possession of the goods as an agent or bailee for the buyer. According to Section 48 of the Act, this right to lien extends in the cases of part delivery also. Where the seller has made part delivery, he can retain the possession of remaining goods. 

In the case of Grice & Ors. vs. Richardson & Anr. (1877), the seller was responsible for supplying three parcels of the tea as included in the sale. The seller supplied one of the three parcels of the tea. However, the seller was not paid for the portion that remained with him. The court allowed the seller to keep the remaining portion of the goods till the outstanding dues were cleared by the buyer.

In the case of Bloxam vs. Sanders (1825) 4 B & C 941 (A), Bayley J. held that the buyer has no right to have possession of the goods till he pays the price of the goods. The rights of the seller with respect to the price of the goods are more than just a lien. The buyer is obligated to either pay or offer to pay the price of the goods before they can claim the possession of the goods. 

This right to lien can only be exercised where the goods are in the possession of the seller. The right of lien extends till the time payment is made or till the seller voluntarily relinquishes his possession over the goods. Once the custody, physical as well as constructive, has been passed over to the buyer, the seller will lose his right to exercise lien. Section 49 of the Act provides that the seller loses his right of lien in the following cases:

1. When the seller has delivered the goods to the carrier or the bailee for putting the goods in transmission to the buyer, he will lose his right to lien. 
2. When the buyer or his agent has obtained the possession of the goods as per the provisions of the law.
3. When the seller has expressly or impliedly has waived his right to lien. 

Right of stoppage in transit: Sections 50 to 52 under the Sale of Goods Act, 1930

Sections 50 to 52 of the Act empowers an unpaid seller with the right of stoppage of goods in transit. Section 50 of the Act provides that where the buyer has become insolvent, this right can be exercised by the seller, when the goods have been put into delivery but have not yet been delivered to the buyer. This right can be exercised by the seller till the goods have reached into the possession of the buyer. This possession can be actual or constructive. Once the goods come into the possession of the buyer, the seller loses any control over them.

Section 51 of the Act provides for the duration of transit. It provides for the following:

• Section 51(1): Transit starts when the seller delivers the goods to the carrier or bailee to put the goods into transmission to take them to the buyer. It ends when the buyer or his agent receives the delivery of the goods from such a carrier.  

Sometimes, it so happens that the buyer declines to receive the delivery of goods following their landing at the place of destination. But the rule is that even when the delivery has landed at the place of destination; the transit does not reach its final stage. 

One such matter where this was discussed is James vs. Griffin (1926). The goods arrived in the port of river Thames which was the port of destination. The buyer of the goods asked his son to oversee the landing of the goods. However, he told his son that since he was insolvent, he had no intention to accept the goods and wanted the seller to keep the goods with him. When the goods were left as they were lying at the port of destination, the seller sent the instructions to stop them which were received. The trustee of the buyer’s bankruptcy claimed goods. It was ruled that the goods were deemed to be still in transit.

• Section 51(2): This further provides a clarification for the above. It provides that the transit comes to an end when the buyer or his agent gets the delivery of the goods before their delivery to the agreed destination.

In Lyons vs. Hoffnung (1890), the buyer of the goods, took a seat in the same ship that was transporting his bought goods. The Privy Council ruled that his act does not amount to delivery of the goods to him prior to the arrival at the agreed destination.

• Section 51(3): This sub-section deals with the effect where the carrier has reached the destination but instead of delivering the goods, the carrier acknowledges that they had received possession of them on behalf of the buyer. In those cases, transit shall have ended even if the buyer wished for the goods to be sent somewhere else after that.
• Section 51(4): Section 51(4) of the Act states what occurs when the buyer declines the delivery of the goods. Even if the seller does not want to accept the goods back, as long as the carrier continues to hold onto them, they are considered to be “in transit.”
• Section 51(5): It relates to cases where the goods are delivered to a ship by which the buyer has chartered. It states that whether the captain of the ship acts either as a carrying or agent of the buyer depends upon the circumstances of the case.
• Section 51(6): Section 51(6) of the Act states that if the carrier wrongly refuses to hand over the goods to the buyer or their agent, the transit is deemed to have come to an end.
• Section 51(7): Section 51(7) of the Act deals with part delivery of the goods. It states that if part of the goods has reached the buyer, the later shipments may be stopped “in transit” unless it appears from the partial delivery that the seller had agreed to divest himself of his right to possession of the remaining shipment.

Section 52 of the Act provides for how stoppage in transit takes effect. It provides for the following:

• Taking possession: The seller can stop the goods through taking possession of them. This possession can be actual as well as constructive. 
• Giving notice: The seller can also halt the delivery of the goods by giving notice of his claim to the carrier or any other third party who is transporting the goods.
  • This notice can be given to either the person who physically is in possession of the goods or to his employer. 
  • If the notice is sent to the employer, it must be delivered in a timely manner to provide the employer with enough time to inform his employee to deliver the goods to the buyer. 
• Re-delivery: Where the seller gives notice to the carrier or other party in possession of the goods, the carrier is obligated to return the goods to the seller or conform to the instructions of the seller regarding delivery. The seller shall pay all costs of reshipment.

Right of resale of the goods: Section 54 under the Sale of Goods Act, 1930

Section 54 of the Act provides that in certain circumstances the unpaid seller has the right to resale the goods. Once the unpaid seller has exercised his right to lien or right to stoppage in transit, the unpaid seller can exercise his right to resale the goods. Before selling the goods, the seller must notify the buyer of his intention. In case of any loss incurred by the unpaid seller during reselling the goods, the unpaid seller can recover such loss from the buyer. 

In the matter of Ward (R v) Ltd. vs. Bignall (1967), two cars, namely Vanguard and Zodiac were to be sold for $850 as per the contract. Buyers of the car deposited $25 upfront but failed to pay the due amount even after getting a reasonable notice. Owing to this, the seller made an attempt to resell those cars but succeeded in selling only Vanguard for $359. He sought damages from the first buyer for a loss of $475 as the balance price and additional $22 for advertising expenditure. The court ruled that once the seller resells the goods, the contract gets rescinded and the buyer has no right to seek damages. However, he can ask for expenses made on advertising the goods and the difference of price in the Zodiac due to which he suffered loss.

In the case of Dhanrajamal Gobindram vs. Shamji Kalidas And Co. (1961), there was a clause for reselling the goods in the contract entered into between the parties. The buyer failed to fulfil his part of the contractual obligations. Subsequently, the seller exercised his right to resell the goods as per the clause of the contract. Later on, the seller claimed the deficit amount from the buyer. This action of reselling the goods by the seller was upheld by the court. 

In the case of Bhajan Singh Hardit Singh And Co., Delhi vs. Karson Agency (India) And Ors. (1967), the court held that in order to exercise the right to resale, the seller must have exercised either the right of lien or stoppage in transit. However, in this case, the goods were not passed to the buyer, hence, the court held that the seller could not claim his right to resell. 

Difference between right of lien and right of stoppage in transit

The key points of difference between the right of lien and right of stoppage in transit are as follows:

• The right of lien of the seller can be used when the buyer makes a default in payment. However, the right of stoppage in transit is essentially used when the buyer becomes insolvent.
• The right of lien is exercised before the goods leave the possession of the seller. The right of stoppage in transit is used while the goods are in transit to the buyer.
• The seller loses his right of lien when he parts with the goods. The right to stoppage in transit is lost once the buyer receives the goods.
• During the right of lien, the seller retains the possession of the goods. During the stoppage in transit, the goods can be in possession of the carrier or the intermediary of the seller.

Rights of an unpaid seller against the buyer under the Sale of Goods Act, 1930

Suit for price: Section 55 under the Sale of Goods Act, 1930

Section 55(1) of the Act provides that if the ownership of the goods has been passed to the buyer, and the buyer wrongfully omits to pay for the goods, the seller is empowered to sue the buyer for the price of the goods. The seller is authorised to bring an action in the court to recover the payment.

Section 55(2) of the Act provides for the scenario of a contract of sale where the price is payable on a fixed date irrespective of the delivery of the goods. In such a case, the sub-section permits the seller to bring a suit against the buyer for wrongful neglect or refusal on his part to pay for the goods, if the due date of payment has already expired, even if the goods have not been passed to the buyer.  

In the case of Gordon vs. Whitehouse (1856) 4 WR 231, it was held that when the contract between the parties provides that the buyer must pay by a bill which will be due in the future, and the buyer fails to provide the bill. In this case, the seller can only demand payment when the bill would have been due. Until the bill becomes due, the seller can only ask for damages from the buyer for breach of contract. 

Action for damages for non-acceptance: Section 56 under the Sale of Goods Act, 1930

Section 56 of the Act provides that if the buyer wrongfully neglects or refuses to accept and pay for the goods, then the seller may bring an action against the buyer for damages for non-acceptance. 

In order to calculate the quantum of damages, Sections 73 and 74 of the Indian Contract Act, 1872 can be used. In order to calculate the damages, the following should be taken into consideration:

• difference between the contract price and the resale price of the goods if the goods have been resold;
• if not resold, the difference between the contract price and the market price at the time of the breach;
• Steps taken by the seller to mitigate the loss.

One of the landmark Supreme Court rulings that talks about the duty of the nature of mitigation is  M. Lachia Setty & Sons Ltd. Etc. Etc vs. The Coffee Board (1980). In this matter, a coffee auction was taking place where a dealer bid for the same. His bid was accepted. However, he declined to perform the contract. Owing to this, the coffee had to be auctioned at the second highest bidding price following the one that was cancelled. Consequently, the dealer responsible for refusing to carry out the contract ended up paying  the difference in losses suffered by the board between the highest bidding price and the second highest bidding price.

In the case of Mysore Sugar Co. Ltd. vs. Manohar Metal Industries (1982), the buyer agreed to pay for the goods, however, he failed to complete the purchase which led to the breach of the contract between the parties. The unpaid seller resold the goods to another party due to the said breach. Subsequently, the unpaid seller sued the buyer for a difference in price. They claimed that it was damages which arose from the breach. The court held that in order to claim damages based on resale, the resale must take place within a “reasonable time” after the breach. In this case, the resale was delayed for 3 months which was held to be unreasonable.

Suit for repudiation of contract before due date: Section 60 under the Sale of Goods Act, 1930

Non payment of goods generally amounts to a repudiation of contract. Hence, in a case where the buyer fails to pay the amount, the contract will stand repudiated. Therefore, when the contract stands repudiated before the date of delivery, as per the provisions of Section 60 of the Act, the seller can sue for damages for the breach. 

In the case of Garnac Grain Co. Inc. vs. HMF Faure and Fairclough Ltd., (1968), the plaintiff considered the refusal of the defendant to be an immediate breach of the contract. The court held that in order to determine the market price, the relevant date is the one that is set for delivery, not the date when the breach of the contract took place or when the plaintiff accepted the breach of the contract. It is the duty imposed upon the plaintiff to mitigate the losses. 

Suit for recovery of interest: Section 61 under the Sale of Goods Act, 1930

Section 61 of the Act provides that the seller can claim interest on the due amount from the buyer. The interest can be claimed from the date from which the payment becomes due. 

In the case of Andhra Cotton Mills Ltd. vs. Sri Lakshmi Ganesh Cotton Ginning Mills (1966), the seller filed a suit only for the recovery of the interest, not the principal amount. The Andhra Pradesh High Court held that even if a suit is filed solely for recovery of interest, the court is empowered to grant it under Section 61 of the Act.  

Impact of digital transactions on the rights of an unpaid seller

Digital sales have significantly impacted the rights of an unpaid seller by dislodging long-standing habits and even introducing new problems. Automated payment systems remove payment delays but deprive the right to exercise traditional rights such as stopping goods in transit. Equally, instantaneous processing of payments reduces the need for these rights since payments are made prior to the dispatching of goods.

For digital goods, since there are no tangible products involved in transactions, concepts such as stoppage in transit or resale rights will hardly apply. Instead, the sellers shall have to rely on licence revocation to control access upon payment defaults. Cross-border digital transactions are complicating the means of enforcement of these rights due to jurisdictional problems. Therefore, the seller may have to include jurisdiction clauses and understand international standards.

Applications that offer real-time monitoring and fraud detection help mitigate the risks of the payments and further reduce dependence on traditional rights for an unpaid seller.

Critical analysis of legislative gaps

In the cases of digital transactions and international trade, the present legislations are somehow inadequate and outdated. The present legislations have their scope of applications only with respect to our country, i.e., India. Following are some of the legislative gaps:

1. Insufficient legal guidelines with respect to digital goods: The present laws primarily deal with tangible objects. In recent times, there has been a rise in the business dealing with digital goods and services. This change of circumstances has raised certain complexities in the present legislation due to the inadequacy of its application. In the case of physical goods wherein, in case the buyer does not pay the seller, the latter can repossess the goods. This would not be feasible in case of digital goods when merchandise is delivered digitally. 

In the commercial laws of India, it has not been clearly spelt out as to what are the rights of the unpaid seller to recover the digital goods that had been delivered to the buyer. This will keep the unpaid seller at a disadvantageous pedestal. Additionally, there are no well-defined provisions related to the right of the unpaid seller to revoke access to the digital goods already delivered to the buyer. In absence of any straight-forward legislative provisions, an unpaid seller will incur financial losses. 

2. Issues related to jurisdiction with respect to international trades: In the era of ease of doing business, international trade is a sine-qua-non for achieving the same. Where in a transaction, parties from two or more different countries are involved, the legal principles governing their rights will be different. Legislations across the globe have different sets of principles regarding the rights of an unpaid seller. In this scenario, it will be challenging to enforce the rights of the unpaid seller. Due to the presence of different sets of rules, inconsistencies may arise between them. These inconsistencies will further undermine the rightful claims of an unpaid seller.

Parties to a transaction have the option to enter into a contract and agree on the set of rules and forum that will be applicable to all the parties. However, their mutually agreed terms can also give rise to legal battles if the enforceability of the contract comes into question. These complex legal battles will further sabotage the rights of an unpaid seller.   

3. Issues arising in the insolvency of the buyer: As we have seen a rise in business transactions, we have been also witnessing a rise in insolvency proceedings. There is always a prospect of the buyer going insolvent. In the case of insolvency of a buyer, the claims related to secured creditors get precedence. The Indian laws (Section 53 of the Insolvency and Bankruptcy Code, 2016) provide more importance to secured creditors over unsecured creditors. This preference for the secured creditor over an unsecured creditor will shorten the ability of the seller to repossess the goods or the payment. 
4. Inadequate provisions related to stoppage in transit: An unpaid seller has the right to stoppage in transit, but this right can only be exercised till the goods are not in possession (direct or constructive) of the buyer. The laws were framed during the time when delivery of goods used to take days. However, with the advent of the fast-paced delivery system for tangible goods, the window for the right of the seller to stop in transit has been narrowed down. 

In the case of digital goods, there is no transit period. The goods or services are delivered immediately. Nevertheless, there are no regulations that can entitle an unpaid seller to revoke the access already granted to the buyer. It will leave the unpaid seller without any legal recourse to reclaim the goods or services. 

5. Uncertainty with respect to the right of repossession: If the transaction of goods is related to raw materials then once these raw materials have been processed for the manufacturing of the final product, repossession of the raw material will become impossible. The existing laws do not have a proper understanding in this regard. There can be situations related to partial payments made to the seller. In this scenario, the seller authority to repossess the shipment can be questioned by the seller. This will ultimately give rise to legal disputes. 

Conundrum between consumer protection and seller rights

The issue of consumer protection against the rights of an unpaid seller is complex and often debated in commercial law. Both elements are necessary for fairness and a working market, but sometimes both sides can even oppose each other. Following is the analysis of how these two aspects interact: 

1. The need for consumer protection: Consumer protection laws serve to safeguard buyers from unfair dealings, ensure quality and standards, and provide a course for resolving action in case a dispute arises.

• Protection against exploitation: In most commercial dealings, the consumer, that is, individual buyers, is usually considered to be the weaker party. The consumer protection law prevents the other party from taking advantage of this weakness, for instance, withholding goods or services after having received payment for the same.
• Right to goods as described: The consumer has the right to goods matching in description, quality, and performance according to their advertisements. If not, then the consumer may seek remedies through refund, replacement, or repairs.
• Cooling-off periods and return policies: In many jurisdictions there exists a right of the consumer to cancel a purchase within a certain “cooling-off” period, particularly in cases of purchases over the Internet. This right complicates the position of the seller, by the time a seller realises what has happened, the goods may well have been delivered. For instance, when a consumer purchases something over the internet and the product, when received, is not what the seller had described it to be, then under the consumer protection laws, the buyer might have the right to return the product and receive a refund, despite the fact that the seller might have already dispatched the goods.

2. The rights of an unpaid seller: An unpaid seller has the right to protect himself against financial risk in case the other party fails to pay. It enables him to recover his goods or seek any other legal way whatsoever if a buyer defaults. 

• Retention of title: The seller can retain his title in goods until full payment. It is going to be very important in safeguarding a seller from buyers who could otherwise default after goods are delivered to them.
• Right of repossession: Upon default in payment, the seller can repossess goods that have not been irrevocably delivered or consumed.
• Right of stoppage in transit: When a seller notices that a buyer is insolvent, he may stop the goods in transit to avoid loss of goods without being paid. For example, a business sells machinery to another company for which payments are extended over several months. If the buyer defaults on these payments, the seller can take the machinery with him with the retention of title clause without facing any loss.

3. Tensions between consumer protection and rights of the sellers

• Non-refundable deposits vs. consumer refund rights: A seller has the option to ask for a non-refundable deposit as protection against last-minute cancellations. However, this can sometimes go against the consumer protection laws that may demand for complete refunds.
• Repossession and consumer hardship: In the event of a consumer default in paying for goods, the right of repossession by the seller may lead to considerable hardship for the latter, especially if such goods are essential (e.g., home appliances or vehicles).
• Digital goods and services: How this balance works in the digital marketplace between consumer protection and the rights of sellers becomes even more complicated. A consumer could demand a refund for a ‘digital’ product; it might be impossible for the seller to repossess the product or prevent its further use, making the enforcement of the rights of an unpaid seller difficult to implement. For example, a customer purchases an expensive licence for certain digital software and then disputes the charge. The customer is entitled to a refund under consumer protection laws. However, due to the lack of any legal system to support it, it is a challenge for the seller to revoke the customer’s access to the software. 

4. Legal and practical resolutions

• Clear contract terms: The conflict can further be avoided if the terms of payments and refunds, as well as those of ownership conditions, are clearly stated by sellers in their contracts. To consumers, clarity about return rights and conditions under which goods can be repossessed or payments withheld is very important.
• Balancing legislation: A balance needs to be struck between consumer protection and the rights of sellers to arrive at a just framework that attends to the interests of both parties. For example, the establishment of specific rules with respect to refund policies, especially for high-value non-refundable deposits, or the laying down of conditions with regard to the repossession of goods, would be helpful.
• Digital transaction details: Clear guidelines on the right of the seller to revoke access and the right of the consumer to refunds/exchanges in digital transactions should be developed to promote fairness while recognising the differences between physical and digital goods. For example, the legislature can frame a law that in the case of specific digital content, a partial refund system would be in place in cases where a consumer withdraws after a certain period of product use. By doing so, the seller would be partially protected against total loss, while the consumer rights are nevertheless respected.

5. Jurisprudence

• Unbalanced consumer protection causing distress to the seller: When the law of consumer protection is biased to one side, there are situations where undue hardship may befall the seller. It causes big losses for the sellers when the customers take advantage of the return policies, for example- returning the used goods during the trial period. In this case, sellers might end up with goods that cannot be resold as a new product. 
• Consumer injustice due to leading seller rights: On the other hand, when the rights of sellers are given too much importance, it is the consumers who would suffer. These scenarios include enforcing non-refundable deposits with stringency and stringent repossession practices that harm consumers, especially during economically trying times. For instance, a consumer purchased an automobile and then became unemployed. When one payment was late, the seller repossessed the car, but public outcry might arise over whether or not such processes could or should be deemed fair, particularly under consumer protection laws to show clemency during hard times.

Consumer protection and the rights of sellers, more importantly those of the unpaid seller, must maintain a delicate balance. The consumers need protection against unfair practices, and the sellers require protection against non-payment of dues. It is only possible when legislation is clear, agreements are well thought out, and the laws are adaptive to the peculiar challenges of both physical and digital transactions. There is a requirement for fair play on both sides and assurance of trust and stability in the marketplace.

Role of Alternative Dispute Resolution for resolving dispute between an unpaid seller and a defaulting buyer

Litigation as a mode of dispute resolution has been facing a lot of difficulties in the present times. This has ultimately given rise to the resolution of disputes with the help of alternative dispute resolution mechanisms (hereinafter referred to as “ADR”). Therefore, ADR has become a go-to method for resolving a dispute in case of commercial transactions. These mechanisms provide for speedy resolution of disputes, take lower costs and it also aids in maintaining a cordial relationship between the disputing parties. In ADR there is no win-loss situation;, rather, it is a win-win situation. As both parties benefit from the final result, it helps in maintaining the business relationships. 

ADR can be used to protect the rights of an unpaid seller. The following features of ADR will be beneficial for protecting the interests of an unpaid seller:

• Speedy resolution of the dispute: Rather than following a long stretched litigation in a court, it is easier to resolve the dispute through ADR. Generally, small businesses aim to maintain liquidity. Hence, it is beneficial for those businesses to resolve their disputes speedily and obtain the payment quickly. 
• Economical and lucrative: An unpaid seller is already suffering loss of finance due to not receiving the payment from the buyer. Going through litigation will saddle the seller with additional economic constraints. Hence, obtaining ADR will be economical and lucrative for the disputing parties to resolve their disputes. 
• Confidentiality: We live in a society where any kind of dispute can lead to loss of reputation for the parties. If an unpaid seller takes the dispute to the court, it will come into the knowledge of the general public. It could amount to a loss in business relationships with other buyers. However, confidentiality is one of the crucial features of ADR. Hence, this confidentiality will assist in maintaining the interest of the unpaid seller. 
• Flexibility: In ADR, the unpaid seller has the flexibility and the control over the process and outcome of the process. The unpaid seller can negotiate the settlement with the buyer. By the process of negotiation, the parties can agree to give payment in instalments or repossession of the goods.
• Business relationships can be maintained: Mediation and negotiation assist in maintaining the business relationship of the parties in dispute. These dispute resolution methods save the day for continuing commercial relationships between the parties even when there is a dispute between them. 
• Awards are enforceable: There are enforceable awards wherein the same has been passed in an arbitration and have the force of a decree passed by a civil court. Therefore, it is legally binding on the parties. In other words, if an award has been passed in favour of an unpaid seller, he shall be entitled to the payment from the buyer.
• Custom arbitration clause: The seller and buyer may modify the arbitration agreement according to their needs. This would be a precautionary measure and would help to determine the evidentiary issues of disputes beforehand when any dispute arises. 
• Neutrality: Parties have the autonomy to choose their arbitrator who will decide the matter without any biases. This will be beneficial in cases of international transactions, where the unpaid seller might be subjected to bias in a foreign court.
• Negotiation and Conciliation: These methods help the parties to reach a mutually decided result. An unpaid seller will be able to recover the amount through compromise while keeping the business relationship intact. It will also save the cost and time that will be wasted by dragging the dispute into a formal process. 

Disadvantages of ADR

• Execution of award through cross-border: While an award is generally executable across the world, the enforcement of the award across jurisdictions is rather more difficult. Even with the high point of enforceability of ADR agreements, enforcing these awards can be a bit difficult. These can be more difficult especially when the buyer is in another jurisdiction that does not recognize such agreements.
• Binding vs. Non-Binding outcomes: The result of the arbitration is binding and thus helpful to the seller who needs closure. Most ADR methods, including mediation, are not binding upon the two parties unless the terms of the outcome from the ADR method are agreed upon by the two parties. In that case, there may be a lot of water left in the river for the unpaid seller if the buyer does not keep their end of the mediated agreement.
• Power imbalance: In the ADR system, negotiation and mediation included, there may be power imbalances between sellers and buyers. When one party is much larger or more powerful than the other, it will probably affect settlements less favourably for the unpaid seller. Example: A small supplier dealing with a large retailer may be forced to accept an unfavourable agreement in a mediation, for instance, a significant discount or more liberal payment terms. purely as a result of the desire to avoid the litigation process.

Recommendations for best practices

A set of best practices would be advantageous for an unpaid seller to protect his rights and avoid part of the risks associated with non-payment. These practices include contract management, risk assessment, dispute resolution, and adherence to legal standards. Below are some of the best practice recommendations to safeguard the rights of an unpaid seller:

• Strong contractual provisions: The agreement should highlight the due dates of payments and a schedule for the same. A late payment penalty and interest on overdue amounts may be useful to make both parties aware of their roles. Retention of title clauses should be included to ensure ownership of goods remains with the seller until full payment is received. Pre-agreed arbitration clauses to resolve a dispute also offer clear dispute resolution methods.
• Carrying out comprehensive credit and risk checking: This would include extending credit checks on prospective buyers by means of checks on their financial stability, as well as keeping an eye on industrial situations, which may affect the buyer’s paying ability. A credit control policy has to be formulated by the seller, including laying out limits of credit and requesting advance payments from buyers considered to be risky.
• Proactive monitoring and communication: It is very critical to have proactive monitoring and communication. Modern payment tracking systems automatically monitor the status of payments in real-time. They can quickly detect any delays. This communication helps in building trust between the buyer and the seller. It also allows for negotiation regarding adjustments to payment plans to keep the things on track.
• Legal and technological tools: This includes the institution of immediate legal action, where necessary, and recourse to experienced counsel in the assertion of rights to the unpaid seller. In the case of electronic products, the institution of digital rights management would imply that a seller has the right to withdraw access to the products should his payment not be made. Smart contracts and blockchain technology are also useful methods of automating payment and delivery mechanisms.
• Preparation for international transactions: This includes learning about jurisdictional differences in laws regarding the rights of an unpaid seller when cross-border deals go bad. A seller should use a ‘choice of law’ clause to state the law that controls the transaction. The seller should also arrange for pre-drafts of payment such as letters of credit, bank guarantees, or export credit insurance to secure payment.
• Continuous review and improvement: This includes periodic auditing of the contractual terms with respect to legal and industry changes, followed by updates to reflect such changes. Additionally, strategies for risk management and training of staff in protecting seller rights through periodic reviews will provide teams with enough knowledge and tools to handle non-payment risks.

Through the adoption of such best practices, unpaid sellers will be able to protect their rights, reduce exposure to the possibility of non-payment, and ensure that business interests are best protected. Applying these methods is important in finding one’s way through a flexible commercial landscape while being able to continuously maintain professional relations in a positive light.

Conclusion

The Sale of Goods Act, 1930 has provided a detailed regulatory framework to safeguard the rights of sellers where they suffer minor or major losses due to a buyer’s failure or refusal to make payment. The provisions contained in the Act towards both, against the goods and against the buyer— are such that they ensure that the seller does not lose his financial security along with sticking to a fair pricing structure that does not cause loss to the seller. Several legal resources enumerated in the Act throw light on the fact that it is highly important for a seller to secure his payments. Whenever a seller feels that his payment may not be made timely or not made at all, he can turn towards the courts to seek justice. 

No transaction can take place in the modern day if good faith is missing. Buyers and sellers need to trust each other and must believe that even when the other fails to discharge his promises, the legal structure in the country is such that they won’t be deprived of something that they are entitled to receive. Following this, the Sale of Goods Act, 1930 has time and again lived up to its legislative intent and smoothened the process of commercial transactions between buyers and sellers. 

Frequently Asked Questions (FAQs)

Are there any remedies available to unpaid sellers against the buyer?

An unpaid seller has the following remedies:

• An unpaid seller can terminate the contract
• Sue the price of the goods provided if the ownership has passed to the buyer.
• Sue for damages if the buyer wrongfully refuses to take or pay for the goods.

Will the unpaid seller’s right to stop goods in transit apply under international trade?

The right to stop goods in transit is applicable to both inland and foreign trade. However, the seller may consider, in an international transaction, some factors like issues of jurisdiction and legal impediments in the buyer’s country.

If the payment made by the buyer has been dishonoured, what will be the result?

In case the payment made by the buyer has been dishonoured, and the possession of the goods has not been passed to the buyer, the seller can withhold the possession of the goods. In case the goods have already been passed to the buyer, then the seller can sue for the price of the goods and the damages.

Whether an unpaid seller can claim interest on delayed payments?

Yes, if the contract between the buyer and the seller provides for the same. Otherwise, the seller has to claim compensation through a suit.

Under what circumstances, can the right of possession be exercised?

The right of possession can be exercised under the following circumstances:

1. Whenever the seller sells the goods on the basis of cash and the seller doesn’t pay full amount.
2. Whenever the seller sells the goods on the basis of credit and the buyer does not clear the payment during the term of credit.
3. Whenever the buyer declares insolvency during the period he was supposed to make the payment.
4. As long as the goods remain in the possession of the seller who is yet to be paid, he has the lawful right to exercise his right of possession. 

References

• https://mgcub.ac.in/pdf/material/202004260019317b0f8224a9.pdf
• https://rajdhanicollege.ac.in/admin/ckeditor/ckfinder/userfiles/files/Ch-18%20Sale%20of%20goods%20act,%201930%20Unpaid%20seller%20and%20his%20rights.pdf
• https://www.defactolaw.in/_files/ugd/f721f3_fe134b606895427cbfabe0a2838fded7.pdf?index=true
• http://jmpcollege.org/Adminpanel/AdminUpload/Studymaterial/rights%20of%20unpaid%20seller.pdf

https://www.cvs.edu.in/upload/BUSINESS%20LAW3.pdf