INTRODUCTION:
In every contract of sale, there is a reciprocal promise to be performed by the seller and buyer. Any seller becomes an unpaid seller when the whole price of the good has not been paid to them. Whereas the term unpaid seller has been defined clearly under the Section 45 of sale of goods act,1930 [1] .
A seller can be a “Unpaid seller”, when the whole of the price has not been paid or tendered; when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise as defined under section 45 of the sale of goods act. [2]
Section 45(2)[3] of the Sale of good act,1930 mentions that a seller would also encompass an individual who is acting as the agent to the seller, or also the person on whom the bill of lading has been issued, or an endorsed or agent who has himself paid, is or directly responsible for the price. A seller, when the price of goods hasn’t been paid in part, would be an unpaid seller to that extent.
Also, A seller would not be classified as an unpaid seller when he has received a negotiable instrument, like a bill of exchange, promissory note or cheque but if the good has been delivered and that particular instrument gets dishonoured, then the seller would be an unpaid seller and accordingly he can make use of his rights. Furthermore, it is also assumed that the negotiable instrument always functions on conditional basis and when it gets dishonoured, the condition does not fulfil.[4] However the buyers who have rejected the goods don’t come under the ambit of Unpaid seller and they also do not enjoy the same rights as an unpaid seller.[5]
All the different rights pertaining to the unpaid sellers have been enumerated under the Chapter V of Sales of goods act named as “Rights of Unpaid Sellers against the goods”. There are three rights available to an unpaid seller if in the case any default has been made by the buyer are, Right to Lien, Right to Stoppage in Transit and Right of Resale.
These rights of an Unpaid seller do not depend upon any agreement express or implied, between the parties. They arise by the implication of law. These rights typically assume that ownership of the goods has transferred to the buyer. However, to ensure that the seller has been given the same rights and protections even when ownership has not passed, Section 46(2)[6] off the sale of good act,1930 explicitly states that in cases where ownership of the goods has not transferred to the buyer, the seller still retains the same rights of lien and stoppage in transit as if the ownership had been transferred.[7]
There are a few characteristics that must be taken in to notice while classifying a seller as unpaid seller. They are Seller must be unpaid either partly or wholly and payment of the goods hasn’t not been received during the specified time period, and the seller shouldn’t have refused the payment when the buyer has endorsed a negotiable instrument it got violated.
This paper attempts to delve into the intricacies of the rights provided to an unpaid seller under sale of goods act,1930. It also looks forward to critically highlighting various judicial pronouncements where a significant dictum has been stated. It is also going to examine the veracity and significance of the rights provided to an unpaid seller.
[1]Ishika Mittal, Rights of an Unpaid Seller under the Sale of Goods Act, 3.3 JCLJ 756 (2023)
[2] §45, Indian Contracts Act,1872
[3]§45(1), Indian Contracts Act,1872
[4]Laxmi Lal v Paras Ram, AIR 2008 Raj 302: 2007 AIHC (NOC) 109 (Raj),
[5] J.L. Lyons & Co Ltd v May & Baker Ltd (1923) 1 KB 685: (1923) 129 LT 413
[6] §46(2), Sale of Goods act,1930
[7]Bloxam v Sanders, (1825) 4 B&C 941, 948: 28 RR 525.