TOPIC : RIGHTS OF UNPAID SELLER ACT 1930

COURSE TITLE : LAW OF CONTRACT-2

COURSE CODE : LAW120
COURSE : B.A.L.L.B (H)
SEMESTER :2
ACADEMIC YEAR : 2025-2030

Submitted By: Submitted To:

Shayanti Mazumder Ms. Rinkey Sharma
A90811125106
 ACKNOWLEDGEMENT
I express my sincere gratitude to my respected teacher Ms. Rinkey
Sharma for her constant guidance and encouragement in
completing this project on “Rights of Unpaid Seller under the Sale of
Goods Act, 1930.” Her valuable suggestions helped me understand
the topic in a better manner.

I would also like to thank Amity University for providing me with the
opportunity to prepare this project. I am grateful to the authors,
websites, journals, and other sources from which I collected
important information related to this topic.
TABLE OF CONTENTS

1. Meaning and Definition of Unpaid Seller

2. Features of Unpaid Seller

3. Rights of Unpaid Seller

4. Rights Against the Goods

5. Right of Lien

6. Right of Stoppage in Transit

7 Right of Resale

8. Rights Against the Buyer Personally

9. Landmark Cases

10. Critical Analysis

11. Conclusion

12. Bibliography
TABLE OF CASES

1. Biddle v. Bond
2. Lickbarrow v. Mason

3. Valpy v. Gibson

4. M/S Aluminium Industries v. Minerals & Metals Trading

Corporation

5. Kemp v. Falk
INTRODUCTION

The Sale of Goods Act, 1930 is an important branch of mercantile

law in India. It governs contracts related to the sale and purchase of
movable goods. The Act defines the rights, duties, and liabilities of
buyers and sellers involved in commercial transactions. One of the
most important protections provided under this Act is the
protection given to an unpaid seller. In commercial activities, goods
are frequently sold on credit. A seller may deliver goods to a buyer
with the expectation that payment will be made within a specified
time. However, sometimes the buyer fails to pay the price of the
goods or becomes insolvent before making payment. In such
circumstances, the seller may suffer serious financial loss. To
prevent injustice to the seller, the Sale of Goods Act grants certain
rights and remedies to an unpaid seller. The provisions relating to
unpaid sellers are mentioned in Sections 45 to 54 of the Sale of
Goods Act, 1930. These provisions aim to balance the interests of
buyers and sellers. The law ensures that a seller who has not
received payment can recover the goods or claim compensation.
The rights of an unpaid seller are divided into

1. Rights against the goods.

2. Rights against the buyer personally.
Rights against goods include:

* Right of lien
* Right of stoppage in transit
* Right of resale
Rights against the buyer personally include:

* Suit for price

* Suit for damages
* Suit for interest
These rights are extremely important in business transactions
because they provide security to sellers and promote trust in
commercial dealings.

MEANING OF UNPAID SELLER

Section 45 of the Sale of Goods Act, 1930 defines an unpaid seller.

According to the Act, a seller is deemed to be an unpaid seller when:
1. The whole price of the goods has not been paid or tendered.
2. A negotiable instrument such as a cheque or bill of exchange has
been received as conditional payment, but it has been dishonored.
Thus, even if partial payment has been made, the seller remains an
unpaid seller for the unpaid [Link] :Suppose A sells goods
worth ₹50,000 to B. B pays only ₹30,000. Since the full amount has
not been paid, A becomes an unpaid seller for the remaining
₹20,[Link], if B gives a cheque for ₹50,000 and the cheque
bounces, A is considered an unpaid seller. The law gives special
rights to such a seller in order to protect him from financial losses

FEATURES OF AN UNPAID SELLER

The important features of an unpaid seller are as follows:

1. Price Must Be Unpaid : The seller must not have received the whole price of
the goods.
2. Partial Payment Is Not Sufficient: Even if part payment has been received,
the seller is still treated as unpaid for the remaining amount.
3. Dishonor of Negotiable Instrument : If payment was made through claque
or bill of exchange and it is dishonor, the seller becomes unpaid.
4. Seller May Possess Goods : The seller may still possess the goods or may
have already delivered them.
5. Legal Rights Are Available : The unpaid seller gets certain rights under the
law to recover the price or protect his interests.
RIGHT OF LIEN
Meaning
The right of lien means the right of the unpaid seller to retain
possession of goods until payment of the full price is made.
Under Section 47 of the Sale of Goods Act, the unpaid seller who is
in possession of the goods can keep the goods with him until
payment is received.
This right exists only when the seller has possession of goods.
Circumstances When Right of Lien Can Be Exercised
1. Sale Without Credit : If goods are sold without any credit
period, the seller may retain the goods until immediate
payment is made.
Example : A sells furniture to B for cash payment. B fails to pay. A
can refuse delivery and retain possession
2. Expiry of Credit Period : If goods are sold on credit and the
credit period expires without payment, the seller may
exercise lien.
Example : A sells goods to B on 30 days credit. After 30 days,
payment is not made. A can retain the goods.
3. Insolvency of Buyer : If the buyer becomes insolvent, the
seller may exercise the right of lien even before expiry of
the credit period.
Example : A sold goods to B on three months credit. Before
payment, B becomes bankrupt. A can retain the goods.
LOSS OF RIGHT OF LIEN
The seller loses the right of lien in the following cases:
1. Delivery to Carrier : If goods are delivered to a carrier for
transmission to the buyer without reserving ownership rights,
lien ends.
2. Buyer Obtains Possession : When the buyer or his agent
lawfully obtains possession of goods, lien is lost.
3. Waiver of Lien : The seller may voluntarily waive the right of
lien.
Right of Stoppage in Transit

The seller of goods can exercise the right of stoppage of the goods
in transit as an extension to the right of lien. He can regain
possession of the goods and retain them until the payment is made
by the buyer.

According to Section 50, This Right can be Exercised by the Seller:

If the buyer becomes insolvent while the goods are in transit. The
seller can ask the carrier to return the goods to him.

The goods are in transit route- The goods are neither with the seller
nor with the buyer or his agent. In this case, the goods must be with
the carrier who is acting as an intermediary. This carrier must not be
an agent of either the seller or the buyer.

Duration of Transit (Section 51)

The duration of transit for goods starts from the time they are
delivered to the carrier by the seller for transmission to the buyer or
his agent. The transit of goods ends when:

Delivery of the goods is taken by the buyer or his agent before the
goods reach the destination.

The carrier informs the buyer or his agent that the goods have
reached the destination and are being held by him.

If the buyer refuses the goods and the seller refuses to take them
back it is not considered the end of the transit.

If goods are delivered to a ship chartered by the buyer, it needs to

be determined if the master is acting as an agent or carrier of the
goods.

If the carrier or bailee wrongfully refuses to deliver the goods to the

buyer or his agent, it is considered the end of the transit.
If part-delivery of the goods is done, the delivery of the remaining
goods can be stopped by the unpaid seller. It is the end of transit
for the remaining goods if there is no agreement to give up the
possession of all the goods.

Rights of Resale (Section 54:)

A vendor who has not been paid has the right to resell the items.
The general criteria for the resale of goods by an unpaid seller are
defined in Section 54. The following are the main guide lines. The
unpaid seller may re -sell the goods if the goods are perishable
.When the unpaid seller has acquired the possession of goods by
virtue of lien or stoppage in transit and has given notice to the
buyer of his intention to resale

Rights of the Seller against the Buyer

Suit for Price: It is the first and foremost right of an unpaid seller
against the buyer. It is used whenever the seller has delivered all his
goals to the buyer, and the buyer refuses to pay the amount then he
can make use of his right and file a case against the buyer by suing
for price. The sales of goods act clearly to explain that the seller has
to receive the payment from the buyer after delivering the goods.

Suit for Damages: This right is beneficial to the seller when the
buyer refuses to take the goods, and it causes certain damage to the
goods then the seller can file against the buyer for the damage of
goods because of his non-acceptance. For instance, food products,
dairy products will get damaged if the buyer refuses to take them,
once the order has been placed.

Suit for Interest: Generally, the buyer and seller will make a contract
or agreement to provide goods at one particular time, and the
payment will be made after being sure. Of time with interest rate.
This contract is made with the acceptance of both parties. But if the
buyer refuses to pay interest or less rate of interest during the time
of payment, then the seller has a right to sue for the interest for
goods that he has delivered earlier.
Rejection of Contract: If the buyer refuses to continue the contract
or if he rejects the contract in the middle itself without any prior
notice and genuine reason, the seller has the right to sue for the
contradiction of the contract before the due date. It is also available
in the Indian contract act due to the name of anticipatory breach of
contract. Breach of contract means quitting either of the parties
from the contract without any reason or any information.
Remedies of the Buyer Against the Seller
Sue for Damage: The buyer also has the option to sue for damage or
can sue for non-delivered goods in the specified time by the seller.
Because without goods, the buyer fails to perform his required
activity at that time.
Performance-Based Suit: If the seller refuses to deliver the goods or
he may breach the contract before the due date, then the buyer can
take help from the court to file a case against the seller.
Suit for Warranty: If the seller promises to provide the goods with a
specific warranty and fails to do it or refuses to do it while delivering
the goods, then the buyer can sue for the warranty as well as can
reduce the amount to be paid for the goods.
Repudiation of Contract: It is common for both the seller as well as
the buyer. Similar to the seller, the buyer also can have an equal
chance to file against the seller if he refuses to continue the
contract or he breaches the contract in the middle or before the due
date.
Sue for the Interest: The buyer has the right to claim for the interest
for damaged goods or for the delay in delivering the goods against
the seller.
Land mark cases

1. Biddle v. Bond

Facts of the Case

In this case, goods were sold by the seller to the buyer, but the
buyer failed to make payment for the goods. The seller retained
possession of the goods and refused delivery until payment was
made.

Issue

Whether the unpaid seller had the right to retain possession of the
goods until the price was paid.

Judgment

The court held that the unpaid seller had a valid right of lien over
the goods. Since payment had not been made, the seller could
legally keep possession of the goods until receiving the price.

2. Lickbarrow v. Mason

Facts of the Case

In this case, goods were sold and handed over to a carrier for
transportation to the buyer. Before the goods reached the buyer,
the seller discovered that the buyer had become insolvent. The
seller attempted to stop the goods during transit.

Issue

Whether the unpaid seller could exercise the right of stoppage in

transit after goods had been handed over to the carrier.
Judgment

The court recognized the unpaid seller’s right of stoppage in transit.

It held that the seller could reclaim the goods while they were still in
transit if the buyer had become insolvent

3. Valpy v. Gibson

Facts of the Case

The seller sold goods to the buyer and the goods reached the
destination. The buyer or his representative obtained possession of
the goods. Later, the seller attempted to exercise stoppage in transit
due to non-payment.

Issue

Whether stoppage in transit can be exercised after the buyer

obtains possession of goods.

Judgment

The court held that once the buyer or his agent takes possession of
the goods, the transit ends and the seller loses the right of stoppage
in transit.

4. M/S Aluminium Industries v. Minerals & Metals Trading

Corporation

Facts of the Case

In this Indian case, disputes arose regarding payment for goods

supplied under a commercial contract. The seller claimed protection
as an unpaid seller and sought remedies available under the Sale of
Goods Act.
Issue

Whether the seller could claim remedies available to an unpaid

seller for recovery of dues.

Judgment

The court recognized the seller’s rights under the Sale of Goods Act
and emphasized that the remedies provided to unpaid sellers are
essential for protecting commercial interests.

5. Kemp v. Falk

Facts of the Case

The seller delivered goods to a ship for transportation to the buyer.

During transit, the buyer became insolvent. The question arose
regarding whether transit had ended.

Issue

When does transit begin and end for the purpose of stoppage in
transit?

Judgment

The court held that transit continues until the buyer or his
authorized agent takes delivery of the goods. Therefore, the seller
could exercise stoppage in transit before delivery was completed.
CRITICAL ANALYSIS

The provisions relating to unpaid sellers are fair and practical. They
recognize the economic importance of protecting sellers in
commercial transactions.

However, some difficulties may arise in practical application:

* Determining insolvency may be difficult.

* Delay in legal proceedings may affect recovery.

* Rights may conflict with rights of third parties.

Despite these limitations, the provisions remain highly effective and

continue to play an important role in trade and commerce.
CONCLUSION

The rights of unpaid seller under the Sale of Goods Act, 1930
provide strong legal protection to sellers in commercial
transactions. These rights prevent injustice and ensure that sellers
are not left helpless when buyers fail to pay.

The Act grants rights such as lien, stoppage in transit, resale, suit for
price, and damages. These remedies create confidence and fairness
in the market system.

In modern commercial practice, credit transactions are very

common. Therefore, the concept of unpaid seller continues to
remain highly relevant. The provisions help maintain discipline in
trade and encourage honest business practices.

Thus, the rights of unpaid seller form an essential part of mercantile

law and contribute significantly to the smooth functioning of
commercial transactions.
Bibliography

1. Avtar Singh – Law of Sale of Goods

2. Pollock & Mulla – Indian Contract and Specific Relief Acts

3. R.K. Bangia – Law of Contract