Rights of Unpaid Seller :-
Ø
Rights of unpaid seller against the goods, and
Ø
Rights of unpaid seller against the buyer
personally.
- Rights of
Unpaid Seller against the Goods.
An unpaid seller has the following rights against the goods
notwithstanding the fact that the property in the goods has passed to the
buyer:
- Right of lien
- Right of stoppage of goods in transit
- Right of resale.
1. Right of lien.
‘Lien’ is the right to retain possession of goods and refuse
to deliver them to the buyer until the price due in respect of them is paid or
tendered. An unpaid seller in possession of goods sold is entitled to exercise
his lien on the goods in the following cases:
(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, even though the period of credit may not have yet
expired.
In the case of buyer’s insolvency the lien exists even
though goods had been sold on credit and the period of credit has not yet
expired. When he goods are sold on credit the presumption is that the buyer
shall keep his credit good. If, therefore, before payment the buyer becomes
insolvent, the seller is entitled to exercise this right and hold the goods as
security for the price.
The unpaid seller’s lien is a possessory lien, i.e., the
lien can be exercised as long as the seller remains in possession of the goods.
He may exercise his right of lien notwithstanding that he is in possession of
the goods as agent or bailee for the buyer
Transfer of property in the goods or transfer of documents
of title to the goods does not affect the exercise of this right, provided the
goods remain in the actual possession of the seller. In fact when property has
passed to the buyer then only retaining of goods is called technically ‘lien.’
Where the property in goods has not passed to the buyer and the title is still
with the seller then it is, strictly speaking, anomalous to say that the seller
has a lien against his own goods. The seller’s lien when property has not
passed to the buyer is termed as ‘a right of withholding delivery.
“Where the property in goods has not passed to the buyer,
the unpaid seller has, in addition to his other remedies, a right of
withholding delivery similar to and coextensive with his rights of lien and
stoppage in transit where the property has passed to the buyer.”
This right of lien can be exercised only for the non-payment
of the price and not for any other charges, i.e., maintenance or custody
charges, which the seller may have to incur for storing the goods in exercise
of his lien for the price. This right of lien extends to the whole of the goods
in his possession even though part payment for those goods has already been
made. In other words the buyer is not entitled to claim delivery of a portion
of the goods on payment of a proportionate price. Further, where an unpaid
seller has made part delivery of the goods, he may exercise his right of lien
on the remainder, unless such part delivery has been made under such
circumstances as to show an agreement to waive the lien Also, the lien can be
exercised even though the seller has obtained a ‘decree’ for the price of the
goods.
When lien is lost? As already observed, lien depends on
physical possession of goods. Once the possession is lost, the lien is also
lost. The unpaid seller of goods loses his lien thereon in the following cases:
(a) When he delivers
the goods to a carrier or other beilee for the purpose of transmission to the
buyer without reserving the right of disposal of the goods; or
(b) When the buyer or
his agent lawfully obtains possession of the goods; or
(c) When the seller
expressly or impliedly waives his right of lien. An implied waiver takes place
when the seller grants fresh term of credit or allows the buyer to accept a
bill of exchange payable at a future date or assents to a sub-sale which the
buyer may have made.
2. Right of Stoppage of Goods in Transit:
Meaning of Right of Stoppage of Goods in Transit: The right
of stoppage in transit means the right of stopping the goods while they are in
transit, to regain possession and to retian them till the full price is paid.
Lord Cairns LJ in case of Schotsmans v. Lances and Yorks Rly. Had made the
following observation in this regard:
“The essential feature of stoppage in transit is that the
goods should be in the possession of a middleman or some other person
intervening between the vendor who has parted with and the purchaser who has
not received them.”
Conditions under which Right of Stoppage in Transit can be
Exercised [Section 50]: The unpaid seller can exercise the right of stoppage in
transit only if the following conditions are fulfilled:
(i) The seller must
have parted with the possession of goods, i.e., the goods must not be in the
possession of seller.
(ii) The goods must be in the course of transit.
(iii) The buyer must have become insolvent.
Note: The buyer is said to be insolvent when he has ceased
to pay his debts in ordinary course of business, or cannot pay his debts as
they become due, whether he has committed an act of insolvency or not.
Note: The seller’s right of stoppage in transit is based on
the principle that one man’s goods shall nto be applied to the payment of other
man’s debt.
Duration of Transit :-Goods are deemed to be in course of
transit from the time when they are delivered to a carrier or other bailee for
the purpose of transmission to the buyer, until the buyer or his agent in that
behalf takes delivery of them from such carrier or other bailee.
Note: The carrier must hold the goods in the capacity of an
independent person and not in the capacity of an agent for the seller or buyer.
If the carrier holds the goods as an agent for the seller, there is no question
of exercising the right of stoppage in transit because the seller can exercise
his right of lien. If the carrier holds the goods as an agent for the buyer,
the seller cannot exercise the right of stoppage in transit because the
delivery to the carrier amounts to delivery to buyer..
3. Right of Resale
The right of resale is a very valuable right given to an
unpaid seller. In the absence of this right, the unpaid seller’s other rights
against the goods, namely, ‘lien’ and ‘stoppage in transit,’ would not have
been of much use because these rights only entitle the unpaid seller to retain
the goods until paid by the buyer. If the buyer continues to remain in default,
then should the seller be expected to retain the goods indefinitely, specially
when the goods are perishable? Obviously, this cannot be the intention of the
law. The unpaid seller has a limited right to resell the goods in the following
cases:
(a) Where the
goods are of a perishable nature; or
(b) Where such a
right is expressly reserved in the contract in case the buyer should make a
default;
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