Law- Unpaid Seller

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Who is an Unpaid seller?

The seller of goods is deemed to be an "unpaid seller"

(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,...
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