(a) When the whole of the price has not been paid or tendered. (b) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the conditions 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, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price. A seller who has been partly paid is also considered as an unpaid seller for part unpaid.
Rights of an Unpaid Seller Subject to the provision of this act the rights of an unpaid seller can be studied under two heads: 1. When the property in the goods has passed to the buyer: Section 46(1) lays down that notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law- (a) a lien on the goods for the period while he is in possession of them, (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them. (c) a right of re-sale.
2. When the property in the goods has not passed to the buyer: 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 co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer Rights of Lien
Right of lien means ‘right to retain’ the possession of the goods or property until the claim is paid or satisfied. Possession is essential to create right of lien. It must be rightful and continuous. Lien is of two types:
• General lien: It means right to retain the goods until all the claims of the holder are satisfied. • Particular lien: It means the right to retain the particular goods until claims arising on those goods are satisfied. Particular lien is attached to specific goods for the unpaid price or claim thereof. Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the 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. (c) where the buyer becomes insolvent.
Part delivery.- 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.
As seen above seller loses his right of lien, if he parts with the actual possession fo the goods. Now, if he has only part of the goods and not whole of the goods to be delivered, then he can exercise his right of lien on the remainder part in his possession, because as a general rule, delivery of the part does not constitute delivery of the whole.
When is the right of lien lost? The unpaid seller of goods losses his lien thereon - (a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods. (b) when the buyer or his agent lawfully obtains possession of the goods, (c) by waiver thereof.
Right of stoppage in transit When the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price. Meaning of Transit: When goods are in hands of middleman, goods are said to be in transit. Even if the goods arrive at the transit continues until the buyer obtains possession from the middleman. When the right of lien ends, right of stoppage in transit begins. Now, if the buyer becomes insolvent after the unpaid seller has started the possession of the goods, the unpaid seller can resume the possession of goods by exercising his right of stoppage in transit. Duration of transit
(1) 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. (2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end.
(3) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer. (4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back.
(5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the master as a carrier or as agent of the buyer. (6) Where the carrier or other bailee wrongfully refuses to delier the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end. (7) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainder of the goods may be stopped in transit, unless such part delivery has been given in such circumstances as to show an agreement to give up possession of the whole of the goods.
How stoppage in transit is effected (1) The unpaid seller may exercise his right to stoppage in transit either by taking actual possession of the goods, or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the later case the notice, to be effectual, shall be given at such time and in such circumstances, that the principal, by the exercise of reasonable diligence, may communicate is to his servant or agent in time to prevent a delivery to the buyer.
(2) Whether notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of the goods, he shall re-deliver the goods to, or according to the directions of, the seller. The expenses of such re-delivery shall be borne by the seller.
Right of Re-sale When the unpaid seller has exercised his right of lien on his retaining the possession of the goods or resumes possession of the goods by exercising his right of stoppage in transit upon insolvency of the buyer, he can re-sell the goods under the following circumstances: 1) where the goods are of perishable nature;
2) where the seller gives notice to the buyer of his intention to re-sell the goods ; and where the buyer does not pay or tender the price within a reasonable time after the notice; 3) where the seller has expressly reserved his right of re-sale in case yhe buyer makes default. The seller can hold the buyer responsible for loss suffered due to breach of contract. If on re-sale, the unpaid seller receives any profits, and he has given notice to the buyer of re-sale, the unpaid selleris entitled to retain the profits.
Right of withholding delivery Where the property in the goods has not passed to the buyer, the seller has a right to withhold delivery of the goods.
Effect to sub-sale or pledge by buyer (1) Subject to the provisions of this Act, the unpaid seller’s right of lien or stoppage in transit is not affected by any sale or other disposition of the gods which the buyer may have made, unless the seller has assented thereto. Provided that where a document of title to goods has been issued or lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for consideration, then, if such last mentioned transfer was by way of sale, the unpaid seller’s right of lien of stoppage in transit is defeated, and, if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid seller’s right of lien or stoppage in transit can only be exercised subject to the rights of the transferee.
(2) Where the transfer is by way of pledge, the unpaid seller may require the pledge to have the amount secured by the pledge satisfied in the first instance, as far as possible, out of any other goods or securities of the buyer in the hands of the pledge and available against the buyer.
Sale not generally rescinded by lien or stoppage in transit.- (1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit.
(2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notices to the buyer of his intentions to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such notices is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale.
(3) Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer. (4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and on, the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages.