Unpaid Seller

by • 24/06/2013 • GeneralComments (0)599

Q.1      Write a note on “Unpaid Seller”. OR Discuss the right of “Unpaid Seller” against the goods; also discuss those circumstances under which he looses the lien on goods sold. OR How a Hen of unpaid seller is exercised? When this lien is considered to be finished?

Ans:    SELLER

A person who sells the goods or agrees to sell the goods is called seller.

 

UNPAID SELLER

“Unpaid seller” means a person who has sold the goods for a price but price has not been paid to him or the instrument, which was given to him, has dishonored on its maturity.

Under section 45 of Sale of Goods Act defines the “Unpaid seller” in the following words:

“Unpaid seller is a person”.

(i)         To whom the price has not been paid or tendered.

(ii)        And where a bill of exchange or other negotiable instruments has been accepted by him as a condition on which it was received has not been fulfilled by reason of dishonour of the instrument or otherwise.

Section 45 also declares that any person who is in the position of a seller like agent is also considered seller.

So unpaid seller is unpaid if:

(a)        The price remains due and is unpaid.

(b)        The bill of exchange of other instrument has been received and the same has been dishonoured.

(c)        He has an immediate right of action for the price.

Seller does not mean the actual seller only but also the person who is in the position of a teller, e.g., An agent of the seller.

 

FEATURES

Following are the feature of unpaid seller:

(1)        He must sell goods on cash terms and not on credit and he must be unpaid.

(2)        He must unpaid either wholly or party. If only a part of the price remains unpaid, he is consider as unpaid seller.

(3)        He must not refuse to accept payment when tendered.

(4)        Where the price is paid through a bill of exchange or other negotiable instrument 1 the same must be dishonoured.

(5)        He must not refuse to accept payment when tendered. If the price has been ceases to be an . unpaid seller.

(6)        Where goods sold on credit, he is not considering as unpaid seller.

 

EXAMPLE

(1)        X sells 10 chairs to Y on one-month credit period. X is not unpaid seller. After one week Y declares insolvent by the order of court, A consider unpaid seller.

2)         X bells 5 bags of sugar to Y for Rs.2000/=. Y paid Rs.800/= and the remaining amount is still payable. X is an unpaid seller.

(3)        X sells to T.V set to Y for Rs.IOOOO/= and draw a bill of exchange for 3 months on Y. Y duily accepts the bill* Before the due date, the bill is dishonour due to Vs insolvency. X becomes an unpaid seller.

 

BIGHT OF UNPAID SELLER OR LIEN OF UNPAID SELLER

They are two rights of unpaid seller:

(a)        Right of unpaid seller against the goods.

(b)        Right of unpaid seller against buyer personally.

 

(a)        RIGHT Of SELLER AGAINST THE GOODS

1. RIGHT OF LIEN (See 47 to 49)

An unpaid seller has a right to retain the goods and not to deliver it to the buyer before the payment of due amount. An unpaid seller used its right of lien in following cases:

(i)         If the goods have been sold without any stipulation to credit.

(ii)        If the goods are sold on credit but the term of credit has expired.

(iii)       If buyer becomes bankrupt ” even the period of credit may not have yet expired.

EXAMPLE

Ali sell 5 office table to Shahid for Rs.20000/^, Shahid pay only Rs.5000/= at the times of formation of contract and promise to pay the remaining balance after one week. Ali has a right of Lien on the office table till the remaining balance Rs. 15000/= is recovered.

 

RULES REGARDING LIEN

Following are the rules for a valid lien.

(1)        Seller can use right of lien when holds the goods personally.

(2)        Where the seller has only possession and the title of goods has been transferred.

(3)        Where he is just a bailee or agent of buyer, he can use his right of lien.

(4)        Right of lien is restricted only up to the price of goods and not for other charges.

(5)        In case of part delivery, he has a right of lien on remaining goods.

(5)        Right of lien is not lost where the seller obtains the decree of the price of goods.

(6)        When the part delivery has been made under such circumstances as to show an agreement to waive the lien the seller cannot retain the remaining Roods.

 

2.         RIGHT OF STOPPING

If the buyer becomes insolvent, an unpaid seller has a right of stopping goods in transit and the goods remains in the possession of carrier. The buyer or sellers of goods have no right of possession gocds in case of stoppage under following conditions:

(a)        When buyer becomes insolvent.

(b)        When the seller has the right of stopping the goods.

(c)        The goods are in the course of transits.

(d)        When the property has passed to the buyer Sec-46 (2), 54,

EXAMPLE

X sells 500 bags if sugar to Y for Rs,!bc, X transfers the bags to a local carrier to deliver it to Y, before the delivery of sugar the Y declares insolvent. X can stop the delivery of sugar during transit.

 

3.         RIGHT OF RE – SALE:

The unpaid-seller has right to resale goods in following conditions,

(a)        When seller expressly reserve the right of resale.

(b)        If the goods are of perishable nature.

(c)        Where the unpaid sellers have given a notice of resale to the buyer but the buyer does not reply to seller or not to pay the price within a reasonable time.

(d)        The unpaid seller must have exercised his right of lien or steppage in transit.

EXAMPLE

Ali sold goods on credit to Shahid for Rs.10000/=- at the due date Shahid does not pay the amount. Ali can sell the goods to any other person*    *

 

4.         RIGHT OF DELIVERY

The unpaid seller has a right of withholding the delivery of goods where the property in the goods has not passed to the buyer.

 

5.         RIGHT OF CLAIM

The unpaid seller has also a right to claim the buyer for price of goods.

 

6.         RIGHT TO SURPLUS OR DECENCY SEC-54 (2)

According to Sec-54 “Unpaid seller has an additional right e.g. surplus or deficiency.

(a)        When notice given

When the sale made by seller with the notice of the buyer, the position of unpaid seller is as follows:

(1)        If there is profit is or surplus on resale the unpaid seller can retain it.

(2)        If there is loss on resale, the seller can claim damages and recover the amount from buyer.

(b)        When notice is not given

When the sale made by seller without the notice to the buyer, the position f unpaid seller is a follows:

(1)        He had no right to recover the loss from buyer.

(2)        If there is profit on resale, he can retain it.

 

7.         RIGHT OF WITH HOLDING COOPS SEC-AG (2)

If the property in the goods has not passed to the buyer, the unpaid seller has a right of with holding the delivery of the goods.

 

(b)        RIGHT OFF UNPAID SELLER AGAINST THE BUYER PERSONALLY

Following are the rights of unpaid seller against the buyer personally:

(1)        SUIT FOR PRICE (SEC-55)

When property in goods has passed to the buyer and the buyer wrongfully refuses to pay the price according to the term of the contract the seller is entitled to sue the buyer for price. It is the duty of buyer to accept the goods when seller transfers it as per the terms of contract.

(2)        SUIT FOR NON-ACCEPTANCE (SEC 56)

The unpaid seller has a right against the buyer for damages of non-acceptance if the buyer wrongfully refuses to accept and pay for the goods, because buyer is bound to accept the goods deliver by the buyer under the contract of sale of goods.

(3)        SUIT FOR SPECIAL DAMAGES AND INTEREST SEC-61

When there is a breach of warranty or by the seller or where the buyer is compelled to treat the breach of condition as breach of warranty the buyer, can claim reduction in price of goods, if he has paid the price to the seller. The buyer can file a suit for damages if the price has already been paid.

EXAMPLE

X agrees to deliver 25computer collage on i* September 2005. X fails to perform his promise in time and deliver the computer on 25 September. City collages can file a suit against X for damages.

(4)        SUIT FOR BREACH OF CONDITION

When there is breach of condition by the seller, the buyers have a right to discharge the contract and can claim damages.

EXAMPLE

X agrees to sell to V the syllabus of Metric class, but X sends him the syllabus of B.A. Y can refuse to accept the delivery ad claim damages.

(5)        SUIT FOR PRICE ANO INTEREST SEC-64

When a buyer makes an full advance payment to the seller and even then seller refuse to deliver the goods in time, then buyer can claim the whole price of contract with interest value.

EXAMPLE

AH purchase a machinery form Shahid for R$.1000/= and gives him the full amount. Shahid refuse to delivery the machinery without any reason, Ali can claim the value of machinery with interest,

 

TERMINATION OF LIEN

An unpaid seller loses the lien in the following cases,

1.         TERMINATION BY WAIVER

If an unpaid seller himself waives his right of lien then it will be terminated.

2.         COOPS IN BUYER’S POSSESSION

When a buyer or his agent obtains the possession of goods lawfully, unpaid seller lien terminates,

3.         DOES NOT RESERVE THE RIGHT OP DISPOSAL

When unpaid seller fails to reserve the right of disposal of the goods at the times of delivery to the bailee for transferring it to the buyer, then this right of lien terminates.

 

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