Page 135 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 5.7.1 Who is an Unpaid Seller?

A seller of goods is an unpaid seller when (i) the whole of the price has not been paid or
tendered. (ii) 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. The term seller includes any person who is in the
position of a seller, e.g., an agent of the seller to whom a bill of lading has been endorsed, or a
consignee or agent who has paid for the goods or is responsible for the price (s.45).

5.7.2 Rights of an Unpaid Seller

The rights of an unpaid seller may broadly be classified under two heads, namely: (i) Rights
under the Ss.73-74 of the Indian Contract Act, 1872, i.e., to recover damages for breach of contract.
(ii) Rights under the Sale of Goods Act, 1930: (a) rights against the goods; (b) rights against the
buyer personally. The rights against the goods are as follows:
Where the property in the goods has passed to the buyer; (i) Right of lien; (ii) Right of stoppage
of goods in transit; and (iii) Right of resale. Where the property in the goods has not yet passed
to the buyer, he has an additional right of withholding delivery [s.46 (2)]. The rights against the
buyer personally are: (i) Right to sue for price; (ii) Right to sue for damages; (iii) Right to sue for
interest.

For example, Akshay buys certain goods from Sudeep, and agrees to pay for them later. Akshay
leaves the goods with Sudeep to be sent to him later. Sudeep shall have a right of lien if in the
meantime he learns of Akshay’s insolvency.

Unpaid seller’s lien - how lost. An unpaid seller loses his lien in the following five cases:
(i) when the seller delivers the goods to a carrier or other bailee for the purpose of transmission
to the buyer, without reserving a right of disposal of the goods to himself, e.g., takes railway
receipt or transport receipt in the name of the buyer or his agent; (ii) where the buyer or his
agent lawfully obtains possession of the goods; (iii) the seller waives his right of lien; (iv) where
the seller assents to a sub-sale by the buyer; (v) where the seller takes a security from the buyer
for the payment of the price in place of his lien.

Notes Lien on Goods (Ss. 47-49)
The word lien means to retain possession of. An unpaid seller who is in possession of
goods is entitled to retain them in his possession until payment or tender of the price in
three situations, namely, (a) where the goods have been sold without any stipulation as to
credit; (b) where the goods have been sold on credit, but the term of credit has expired; (c)
where the buyer becomes insolvent. Lien can be exercised only for non-payment of the
price and not for any other charges due against the buyer. For instance, the seller cannot
claim lien for godown charges for storing the goods in exercise of his lien for the price.
The lien of an unpaid seller is a particular lien, it is a personal right which can be exercised
only by him and not by his assignees or his creditors. The unpaid seller may exercise his
lien notwithstanding that he is in possession of the goods, as agent or bailee for the buyer.
Further, this right of lien is available even after part delivery of the goods has been made,
unless such part delivery is made under such circumstances as to show an agreement to
waive the lien (s.48).
An unpaid seller, however, does not lose his lien by reason only that he has obtained, a decree
for the price of the goods [s.49 (2)]. The lien of the unpaid seller is a possessory lien, that is, once
the possession is lost, lien is lost.

128 LOVELY PROFESSIONAL UNIVERSITY