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This article has been written by Chandan Kumar Pradhan from KIIT School of Law, Odisha. This article talks about the rights of an unpaid seller against the goods under the Sale of Goods Act, 1930.

Introduction

As per Section 2(f) of the Indian Contract Act, the seller must transfer the goods sold, and the buyer must pay the required amount in return, under the contract of sale by them. This is known as Reciprocal Promise. In other words, any set of promises made which forms the consideration or part of the consideration for each other are called reciprocal promises and every contract of sale of goods consists of reciprocal promises.

Three important rights of an unpaid seller against the goods

  • Right of lien
  • Right of stoppage of products in transit
  • Right of resale

Rights of lien (Section 47)

“Lien” is the right to keep possession of products and refuse to give purchaser until the fee is paid by the purchaser. An unpaid seller, in possession of products, is entitled to work out his lien on the products within the following instances:

  1. In which the goods were sold without any requirement as to credit score.
  2. Where the goods were sold on credit however the term of credit has expired.
  3. In which the buyer will become insolvent even though the period of credit began to expire.

In the case of the purchaser’s insolvency, the lien exists even though goods were offered on credit and the duration of credit has not expired till the time. When the products are offered on credit, the presumption is that the customer shall preserve his credit suitable.

If before payment the buyer turns insolvent, the seller is entitled to exceed his rights and hold the products as security for the charge.

The unpaid seller’s lien is a possessory lien, the lien may be exercised so long as the seller stays in ownership of the products. He may exercise his rights of lien but he is holding the ownership of the goods as agent for the customer [Section 47(2)].

Any property in the transfer of files, identify that the products which are not affecting these rights, supplied goods should stay inside the real possession of the seller. In truth, when a belonging has passed to the consumer then the most effective maintenance of products is technically known as “lien”.

In which the belonging goods have not exceeded the customer possession and the same remains with the seller, then it will be very difficult to maintain that the seller has a lien towards his own goods.

The seller’s lien when an asset has not exceeded the purchaser is called as a right of withholding shipping. For that reason, Section 46(2) states in which the belonging goods have not handed over to the customer, the unpaid seller has a right to withhold the transfer. 

The seller may additionally incur from storing the products inside the exercise of his lien for the charge. This right of lien extends to the entire product on his own despite the fact that the part price for the one’s items has already been made. In other phrases, the consumer is not entitled to claim delivery of a part of the products.

In addition, wherein an unpaid seller has made component shipping of the goods, he may also exercise his rights of lien on the rest, except such element shipping has been made under such instances as to reveal an agreement to waive the lien (Section 48). 

Also, the lien can be exercised even though the seller has received a ‘decree’ for the rate of the products.[Section 49(2)].

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When is lien lost?

As already discovered, lien relies upon physical ownership of products. As soon as the possession is misplaced, the lien is also misplaced. The unpaid dealer of goods loses his lien thereon inside the following instances:

  1. When he provides the products to a carrier or other bailee for the motive of transmission to the customer without reserving the rights of possession of the products.
  2. When the buyer lawfully obtains ownership of the goods.
  3. When the seller expressly or impliedly waives his rights of lien. An implied waiver takes place while the seller offers a fresh time period of credit or allows the customer to just accept an invoice of trade payable at a particular date to a sub-sale which the purchaser may additionally have made.

Accordingly, when a refrigerator after being bought, will be delivered to the purchaser and if it no longer functions well, the buyer takes it again to the seller for repairs, here we can say that the seller could not exercise his lien over the fridge.

Rights of Stoppage of Goods in Transit

The right of stoppage in transit method is the right of stopping the transit of the goods even if they may be with a carrier for the cause of transmission to the buyer; resuming the ownership of the customer and retaining possession until they made the payment of the good.

Hence, this right is an extension of the right of lien because it entitles the seller to regain ownership even if the seller has parted with the possession of the products.

When can this right be exercised? (Section 50)

An unpaid seller can exercise this right in the simplest way when:

  • The purchaser becomes insolvent

The buyer is said to be bankrupt when he has denied paying his debts inside the normal route of business, or if he cannot pay his money then it will be due. [Section 2(8)]

  • The property has exceeded the buyer

If assets have not surpassed the buyer then this right is called the “right of withholding shipping”.[Section 46(2)]

  • The products are within the route of transit

This means that goods should be neither with the seller nor with the buyer nor with their agent. The product has to be within the custody of a carrier as an intermediary. At that time, the carrier needs not to be either a seller’s agent or customer’s agent. Because, if he is the seller’s agent then the products are still in the arms of seller in the eye of regulation and consequently there may be no transit, and if he is the customer’s agent, the consumer gets transport in the attention of law and hence query of stoppage does now not rise up.

Duration of transit (Section 51)

Since the right of stoppage in transit can be exercised simply as long as the goods are inside the route of transit, it becomes important for the seller to recognize the transit route where it starts and where it comes to the destination. When the transit involves a stop, the right of stoppage can’t be exercised.

Items are deemed to be in course of transit from the time when they’re added to a service or other bailee for the motive of transmission to the buyer till the purchaser or his agent takes transport of them.

Thus, the transit continues as long as the products aren’t delivered to the customer or his agent, irrespective of whether or not they should be mandatory at the destination with the service expecting transmission or are in real transit.

When the transit is deemed to be at near the destination, then the seller can’t exercise his right of stoppage in the following instances:

  1. When the customer or his agent takes shipping after the products have reached the destination.
  2. When the buyer or his agent obtain delivery of the goods before their arrival at the appointed destination.
  3. While the products have arrived at their destination and the seller acknowledges to the consumer or his agent that he holds the products on his behalf.
  4. When the products have arrived at their destination then the customer in preference to shipping requests the seller to hold the products to some further destination then the seller agrees to take them to the new destination.
  5. When the service wrongfully refuses to supply the goods to the consumer’s agent.
  6. When some part of shipping of the goods has been made to the customer with the intention of handing over the whole of the products, transit can be at a quit for the rest of the products.

How is the right stoppage exercised? (Section 52)

The unpaid seller may additionally exercise his right of stoppage in transit both:

  1. Through taking real possession of the goods.
  2. By means of giving a declaration to the seller in whose possession the products are.

Such words can be given to the person in real ownership of the goods. Within the latter case, the word must accept well in advance to permit the superior to talk together with his agent or servant in time, for transport to the customer.

If with the addition of a mistake he offers the products to the purchaser, he may be responsible for the conversion. The fees of redelivered are to be tolerated by the seller.

Difference between the right of lien and right of stoppage in Transit?

The principal points of difference among these rights of an unpaid seller are as follows:

  1. The seller’s lien attaches when the purchaser is in default, whether or not he is solvent or bankrupt. The right of stoppage in transit arises best while the customer is bankrupt.
  2. Lien is to be held only when the goods are in actual possession of the seller at the same time as the right of stoppage is available, when the seller has half part with his own and the products are within the custody of an independent service.
  3. The right of lien comes as soon as the seller has possession over the products to the carrier for the motive of transmission to the purchaser.

On the other hand, the right of stoppage in transit starts after the seller has introduced the goods to a carrier for the purposes of transmission to the buyer and maintains until the customer has acquired the ownership. The right of lien includes preserving the possession of the goods when the right of stoppage includes regaining ownership of the goods.

Right of resale

The right of resale is a completely valuable right given to an unpaid seller. Within the absence of this right, the unpaid seller’s other rights in opposition to the goods, specifically, “lien” and “stoppage” in transit could no longer have been used due to the fact, this rights only entitle the unpaid dealer to keep the products until paid with the aid of the buyer.

If the customer maintains to stay in default, should the predicted price maintained in order to retain the goods indefinitely, especially while the products are perishable?

Largely, this cannot be the aim of the regulation. Section 54, therefore, offers to the unpaid supplier a confined right to resell the goods inside the following lines:

  1. In which the goods are of a perishable nature.
  2. In which this type of right is expressly reserved inside the settlement in case the buyer needs to make default.
  3. In which the seller has given a promise to the buyer of his purpose to resell and the customer does not pay the price within an affordable time.

If on a resale there is a loss to the seller, he can get better from the defaulting customer. However, if there is a surplus at the resale, the seller can preserve it with him because the customer cannot be allowed to take advantage of his personal identity. But, no word of resale [as required in 3 above] is given to the customer, the right of the seller to assert loss and maintain a surplus, if any, is reversed.

In different words, if the unpaid seller fails to present the observation of resale to the buyer, he can not recover the loss from the customer. For this reason, it’ll be visible that giving of observing to the purchaser, when so required that very necessary to make him responsible for the breach of settlement.

It’s so due to the fact this kind of observation gives an opportunity to the purchaser that pays the charge and has the products.

It is vital that the absence of observation when so required affects the rights of the unpaid supplier himself best as mentioned above and it does not have an effect on the name of the following customer who gathers an excellent title to the goods.

Section 54(3) particularly announces- “Where an unpaid seller has exercised his right of lien or stoppage in transit in transit resells the products, the customer acquires a terrific identify thereto as in opposition to the unique purchaser, however, that no note of the resale has been given to the original customer”.

Conclusion

Any set of promises made to form the consideration or part of the consideration for each other are called reciprocal promises and every contract of sale of goods consists of reciprocal promises. The seller’s remedy, in this case, is a suit for damages rather than an action for the full price of the goods.

References


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