Chapterization:

 Introduction………………………………………………………………………. 2

 Right of lien………………………………………………………………………. 3

 Case Laws………………………………………………………………………… 4

 Stoppage in transit………………………………………………………………… 5

 Duration of transit………………………………………………………………… 6

 Case Laws………………………………………………………………………… 7

 Unpaid Seller Rights of Resale…………………………………………………… 8

 Case Laws………………………………………………………………………… 9

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Introduction: -

The term ‘unpaid seller’ may be defined as the seller to whom the full price of the goods sold has
not been paid. The legal definition of ‘unpaid seller’ is given in section 45 of the Sale of Goods
Act, as under:

“The seller of the goods is deemed to be an unpaid seller within the meaning of this Act:

1.When the whole of the price has not been paid or tendered;

2.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
dishonor of the instrument or otherwise.”

Rights against the goods:

Unpaid seller’s rights against the goods may be discussed under the following two heads,
namely:

1.Where the ownership of the goods has transferred to the buyer: In this case, the unpaid seller
has the following rights:

(a)Right of lien.

(b) Right of stoppage of goods in transit.

(c) Right of resale.

2.Where the ownership of the goods has not transferred to the buyer: In this case, the unpaid
seller has the right of withholding the delivery of goods sold.

Rights against the buyer:

Unpaid seller has the following rights against the buyer

(a) Suit for price

(b) Suit for damages

(c) suit for interest

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(d) Suit for repudiation of contract.

Right of lien:

The Unpaid seller of goods who is in possession of them is entitled to retain his possession until
payment or tender of the price in following cases, namely:

(a) Where the goods have been sold without any stipulations as to credit,

(b) Where the goods have been sold on credit, but the term of credit has expired, and

(c) Where the buyer becomes insolvent.”

This right can be exercised by the unpaid seller if the following conditions are satisfied:

(i)he unpaid seller must be in actual possessions of the goods sold.

(ii)The unpaid seller can retain the goods only for the payment of the price of the goods.

The right of lien is linked with the possession of the goods and not with the title of the goods.
Thus, the goods must be in actual possession of the seller. It is, however, not necessary that he
should possess the goods as an owner. He can exercise the right of lien, even if he is possessing
the goods as an agent or bailee for the buyer [Section-47(2)]. The important legal provisions
relating to unpaid seller right of lien may be stated as under:

1.Where the goods are sold without any stipulation as to credit, the unpaid seller may retain the
goods if the buyer fails to pay the whole price [Section 47(1)(a)]. He cannot retain the goods for
any other charge e.g. maintenance, charge of storage during the exercise of lien.

2.Where the goods are sold on credit, the unpaid seller may retain the goods if the buyer fails to
pay the whole price after the expiry of credit period. [Section 47 (1) (b)]

3.Where the buyer becomes insolvent, the unpaid seller may retain the possession of the goods
until the whole price is paid. It is so because, the law does not compel a person to deliver the
goods to an insolvent [Section 47 (1) (c)].

4.Where the unpaid seller has delivered a part of the goods, he may exercise his lien on the
remaining part of the goods. But where the part delivery is made under the circumstances which
show an agreement to waive a lien, the seller cannot retain the goods [Section 48].

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5. The right of lien is indivisible in nature and the seller cannot be compelled to deliver a part of
the goods on payment of proportionate price of the goods.

Case laws:

Kalka prasad ram Charan v. Harish Chandra:

Harish(h) entered into a contract for sale of 67 thans of silk with Kalka Prasad(k). 10 thans were
delivered immediately. Delivery of the remaining, were not accepted by K. H sold off the
remaining thans and then notified the K about the sale. But due to a government control order the
sale fetched a price considerably less than what had been agreed between the two. H brought a
claim to recover the damages after deducting the price from the sale. In this case court held that
There was a contract awarded to H without considering the question whether notice of the
intended sale was given to K.

Eduljee v. Café John Bros:

In this case, the seller sold a second-hand refrigerator to a buyer for Rs. 120 and it was further
agreed that the seller will put that in order at a cost of Rs. 320. The buyer took the delivery of the
refrigerator and admitted that it was working satisfactorily. Subsequently, two of its parts were
delivered to the seller for further repairs. The seller now refused to deliver it back claiming a lien
on them until the amount originally due had been paid. It was held that once the delivery of the
refrigerator had been made to the buyer, the right of lien had come to an end and the same could
not be revived by the seller again by getting the possession of those goods.

Suchetan Exports Pvt. Ltd. vs. Gupta Coal Ltd. and Ors:

In this case supreme court held that wherein the contract for sale provided that the seller would
retain its lien over the goods and title would pass to the buyer on payment of the full price of the
goods, then the unpaid seller of the goods is entitled to exercise lien over the goods,
notwithstanding that the possession of the goods may not be with the unpaid seller.

Jain Mills & Electrical Stores v State of Orissa:

the counsel for the appellants argued that as the appellants are shown to be unpaid seller, in
exercise of their right to lien under sections 46 and 47 of the Act, they are entitled to the return of

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the goods. From section 46 (1) (a) it is seen that notwithstanding that the property in the goods
has passed to the buyer, the unpaid seller of goods has, as such, by implication of law, a lien on
the goods for the price while he is in possession of them. The plaint „A‟ Schedule goods were
dispatched by rail to the defendants and the defendants received the same after 30th March,
1973. The lien ceases to subsist the moment the seller loses possession of the goods. So, in the
present case, in view of the admitted facts that the possession of the plaint „A‟ Schedule goods
was delivered to the defendant on or about 30th March, 1973, the plea of the appellants that they
are entitled to the return of goods in exercise of their right of lien as unpaid sellers is without any
basis and, therefore, merits no consideration.

Termination of lien:

1.By delivery of goods to the carrier: The unpaid seller loses his right of lien over the goods
when the goods are delivered to some person for the purpose of transmission to the buyer
[Section 49 (1) (a)].

2. By delivery of goods to the buyer: The unpaid seller also loses his right of lien when he
delivers the goods to the buyer or his agent [Section 49 (1) (b)].

3. By waiver of the lien; The right of lien is for the benefit of the seller. If he like, he may waive
his right. And by waiver, the lien is lost [Section 49 (1) (c)].

Stoppage in transit:

This right is contained in Section 50 of the Sale of Goods Act, which provides that where the
buyer becomes insolvent, and the unpaid seller has parted with the possession of the goods, he
can stop the goods in transit until the price is paid or tendered to him.

The right can be exercised if the following conditions are satisfied:

(i)The buyer has become insolvent.

(ii)The goods are in the course of transit, i.e., the goods have gone out of the actual possession of
the seller. But they have not reached in the possession of the buyer.

(iii)The unpaid seller can stop the goods in transit only for the payment of the price of the goods.

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Duration of transit:

The duration of transit is the period between the commencement and end of transit. The
transit commences from the time when the goods are delivered to the middleman, and it continue
till the buyer or his agent takes the delivery of the goods [Section 51 (1)]. Important provisions
were:

(i)Where the goods are rejected by the buyer and the carrier continue to have the possession of
the goods, the transit does not come to an end [Section 51 (4)].

(ii)Where the goods are delivered in parts, the seller may stop the remainder of goods unless the
delivery of part of the goods shows an intention to give up the possession of the whole of the
goods [Section 51 (7)].

(iii) Where the goods are delivered to a ship chartered by the buyer, then it is a question of fact in
each case whether the carrier is acting independently or as an agent of the buyer. If the
circumstances show that the carrier is acting as an agent of the buyer, then the transit comes to an
end as soon as the goods are loaded on board the ship [Section 51 (5)].

Termination of Rights of stoppage in transit:

1. Interception by the buyer: Sometimes, the buyer or his agent takes the delivery of the goods
from the carrier (middleman) before the goods arrive at the appointed destination. In such cases,
the transit comes to an end. [Section 51 (2)]

2.Carrier’s acknowledgement to the buyer: Sometimes, after the arrival of the goods at the
appointed destination, the carrier acknowledges to the buyer or his agent that now he is holding
the goods on buyer’s behalf. In such cases, the transit comes to an end. [Section 51 (3)]

3.Carrier’s wrongful refusal to deliver the goods to the buyer: (Section 51(6))

The important point here is that the refusal should be wrongful i.e. without any just cause.

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Case laws:

Bird v Brown:

In this case, a notice to stop goods in transit was given by a certain stranger, who had no
authority from the seller to do so. On a demand for the delivery of the goods by the assignees of
the insolvent buyer, the carrier refused to deliver the goods to them. Subsequently, the seller tried
to ratify the stoppage in transit made by the stranger. It was held that the transit had come to an
end when the buyer’s assignees demanded the delivery of the goods because the carriers refusal
to deliver the goods to them was a wrongful one and the right of stoppage, which had come to an
end could not be revived by subsequent ratification of an ineffectual notice to stop.

Turner v. Trustees of Liverpool Docks:

In this case, the cargo of cotton was put on the ship of the buyer but the goods were made
deliverable to seller or their order. Patterson J. while giving judgment observed that unless the
vendor protects himself by special terms, restraining the effect of such delivery, there is no doubt
that delivery was made to him.

Whitehead v Anderson:

In this case, on arrival of the ship the assignee of the buyer who had become insolvent went to
take the delivery of the timber. They only saw and touched the timber. The Captain refused to
deliver the same until the freight had been paid. The seller subsequently gave a notice of
stoppage in transit. It was held that neither the buyer’s assignee had taken the actual possession,
nor had the Captain of the ship contracted to hold the timber as the buyer’s agent, the sellers
right of stoppage in transit had not come to an end.

Litt v. Cowley:

In the case, after the receipt of notice to stop the goods, the carried by mistake delivered the
goods to the buyer. It was held that the assignees of the insolvent buyer were bound to deliver it
back to seller or be liable to pay damages.

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Schotmans v Lancashire & Yorkshire Ry. Co:

there was delivery of the goods by the seller on board a ship belonging to the buyer. The bill of
lading was also taken in buyers order. It was held that in this case it amounted to the delivery of
the goods to the buyer so that the seller was precluded from exercising his right of stoppage in
transit. Lord Cairns said: “The master was his servant. No special contract was entered into by
the master to carry the goods for or to deliver them to any person other than Cunliffe, the
purchaser. In point of fact, no contract of affreightment was entered into… The essential feature
of a stoppage in transitus, as has been remarked in many of the cases, is that the goods should be
at the time in possession of a middleman, or of some person intervening between the vendor,
who has parted with, and the purchaser, who has not yet received them. It was suggested here
that the master of the ship was a person filling his character, but the master of the ship is the
servant of the owner; and if the master would be liable because of the delivery of goods to him,
the same delivery would be delivery to the owner, because delivery to the agent is delivery to the
principal.

Unpaid Seller rights of resale:

1.Where the goods are perishable: The seller may resell the goods to another person within a
reasonable time. The term ‘reasonable time’ is a question of fact in each case.

2.Where the seller expressly reserves his right of resale: It may be noted that in such cases, the
seller is not required to give notice of resale. He is entitled to recover damages from the original
buyer even if no notice of resale is given.

3.Where the unpaid seller has exercised his right of lien or of stoppage in transit and gives notice
to the buyer of his intention to resell the goods: If after the receipt of such notice, the buyer does
not pay or tender the price within a reasonable time, the seller may resell the goods. In such
cases, on the resale of the goods, the seller is also entitled to:

(a) Recover the difference between the contract price and resale price, from the original buyer, as
damages.

(b)Retain the profit if the resale price is higher that the contract price.

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However, if the goods are resold by the seller without giving any notice to the buyer, the seller
cannot recover the loss suffered on resale. Moreover, if there is any profit on resale he must
return it to the original buyer, i.e., he cannot keep such surplus with him [Section 54 (2)].

Case laws:

RV Ward Ltd. V. Bignall:

In this case, there was a contract for sale of 2 cars. The buyer defaulted in paying a price despite
a reasonable notice. The seller then tried to resell but could find customer only for 1 car. He,
then claimed damages for the balance price and advertising expense. Hon’ble Court held that
when the seller resells the goods, the contract is rescinded and goods once again become his
property. Thus, the unsold car became his property and he could not recover his price. But he
could recover the shortfall in the sold car and the advertising expense.

Mysore Sugar Co. Ltd Bangalore v. Manohar Metal Industries:

In this case, the buyer having made a default in taking the goods, the seller gave him a notice on
12.09.1966 that if the buyer did not lift the goods within three days, the contract would be treated
as cancelled. The buyer did not lift the goods. The seller made a re-sale 30.12.1966. Seller
sought to recover the loss from the re-sale. It was held that there was inordinate delay of over 3
months in making re-sale after the notice to buyer and due to such delay, particularly in the
falling market as in the present case, the value realized on re-sale did not afford the ground for
fixing the damages. If the re-sale had been properly made in September 1966, the seller would
have suffered no loss, and therefore, seller’s claim for compensation was rejected.

Knight v. Wiffen:

In this case, A sold 80 maunds of barley out of a large stock lying in his granary to B. Out of his
purchase, B sold 60 maunds to C before the goods had been ascertained and C obtained delivery
order and presented it to A, who informed to C that the barley will be given to him in the due
course. Subsequently, B became insolvent and A wanted to exercise the right of lien over barley
which he had sold to B. It was held that A had assented to sub-sale of 60 maunds of barley,
therefore he could not exercise his right of lien over those 60 maunds of barley, though such a
right could be exercised in respect of remainder i.e. other 20 maunds.

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P.S.N.S Ambalavana Chettiar & Co. v. Express Newspapers Ltd:

In this case court held that for the purpose of measure of damages under SOGA, the re-sale is
properly made if the property in the goods re-sold had passed to the original buyer. On the other
hand, if the property in the goods has not passed to the original buyer, the re-sale is not properly
made and therefore, the damages are not awarded accorded to Sale of Goods Act (difference
between the contract price and the re-sale price) but they are awarded according to the formula
under the Indian Contract Act (difference between the contract price and market price on the date
of breach of contract).

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