Amit.kanabar 2011002 PG13 Assignment Rights of Unpaid Seller V1

ASSIGNEMENT : 01 RIGHTS OF UNPAID SELLERSubmitted to Prof. HARI PARMESHWAR Submitted by AMIT KANABAR 2011002 Indus World School of Business Greater Noida Date: 12/03/2012 Amit Kanabar Indus World School of Business Page 1 RIGHTS OF UNPAID SELLER Unpaid seller: An unpaid seller is defined as the seller to whom the full price of the goods has not yet been paid. The legal definition of ‘Unpaid Seller’ is given in Section 45 of Sale of Goods Act as: “The Seller of goods is deemed to be an unpaid seller (Sec. 45-1)  When whole of the price has not been paid or tendered.  When the bill of exchange or negotiable instrument has been received as a condition of payment and the condition on which it was received has not been fulfilled by the reason on dishonor of the instrument or otherwise.” Features of Unpaid Seller:  He must sell goods on cash terms and not on credit basis and should be unpaid.  If he sells on credit basis, he is not an unpaid seller during the period of credit.  He must be unpaid either wholly or partly. Even if only a portion of the price, however small, remains unpaid, he is deemed to be an unpaid seller.  When the price is paid in the form of negotiable instruments and it has been dishonored.  He must not refuse to accept payment when tendered. If the price has been tendered by the buyer but the seller wrongfully refuses to take the same, he ceases to be an unpaid seller. For example: I. Mr. Gupta sells a car to Mr. Sharma and the payment has not yet been received. Here Mr. Gupta is an unpaid seller. II. A sells TV set to B on the same day cheque basis, the cheque is dishonored due to insufficient funds. A is an unpaid seller. Amit Kanabar Indus World School of Business Page 2 Rights of Unpaid Seller: The unpaid seller has the following rights: I. Rights against the goods a. Rights of lien. b. Rights of stoppage of goods in transit. c. Right of rescale. II. Rights against buyer personally a. Suit for price. b. Suit for damages for non-acceptance. c. Suit for special damages and interest. Rights against the goods Rights of lien The right of lien means lawfully right to retain the goods possession until the full price is received. An unpaid seller can exercise his right of lien in following cases. Sec 47-49 i. ii. iii. Where the goods have been sold on the cash basis. Where the goods have been sold on credit basis and the term of credit has expired. Where the buyer has become insolvent even if the period of credit has not been expired. Other rules to satisfy the conditions for this right are i. ii. iii. iv. The unpaid seller must be in actual possession of the goods sold. It can be exercised even If the documents of title have been delivered to the buyer. It can be exercised for the price and not for other expenses If the seller delivers some goods, it can be exercised on the remaining. The rights of goods 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 rights of lien, even if he possesses the goods as an agent or bailey for the buyer. Amit Kanabar Indus World School of Business Page 3 Termination of right of lien Seller’s right of lien is terminated in following cases. i. ii. iii. iv. v. When he delivers the goods to the carrier or other bailey for transmission to the buyer When the buyer or his agent lawfully obtains the possession of the goods When seller waives his right of lien on the goods The right of lien once lost will not be restored When the buyer further sells the goods and the seller agrees Example: A seller “S” sells a TV set to “B” and delivers it to “B” and since the TV set was not functioning properly, “B” delivered it back to “S” for the repairs. It was held that “S” can not exercise his right of lien over TV set. Right of stoppage of goods in transit This right is contained in Section 50 of Sale of Goods Act, which provides that where the buyer becomes insolvent and, and the unpaid seller has parted with possession of goods, he can stop the goods in transit until the price is paid or offered to him. Unpaid seller can stop the goods in transit in the following cases. i. ii. While the buyer becomes insolvent While the goods are out of actual possession of seller, but have not reached buyer’s possession i.e. goods are in transit with career. iii. The unpaid seller can stop the goods in transit only for payment of the price of the goods and not for any other charges. The unpaid seller can not stop goods in transit in following cases. i. ii. iii. When the goods reaches the destination. While the buyer or his agent takes possession of delivery even if it is not reached destination. In case the carrier is agent of the buyer, the transit comes to an end the instance carrier receives the goods and seller can not stop the transition iv. Carrier’s wrongful refusal to deliver goods to the buyer. Amit Kanabar Indus World School of Business Page 4 Example: “A” sells TV set to “B”. “A” delivers the TV to the carrier to carry it to “B”. Later on gets news that “B” has become insolvent; “A” can stop delivery. 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 (i.e. carrier), and continues till the buyer or his agent takes the delivery of the goods. The important provisions relating to duration of transit are as follows: a. Where goods are rejected by the buyer and carrier continues to have the possession of the goods, the transit does not come to an end [Section 51(4)]. b. Where the goods are delivered in parts, the seller may stop the remainder of the goods unless the delivery of the goods shows the intention to give up the possession of the whole of the goods.[Section 51(7)] c. 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 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)]. Rights of Resale: Unpaid seller’s right of resale is contained in the Section 54(2) of Sale of Goods Act, which provides that if the buyer fails to pay or offer the price within a reasonable time, the unpaid seller has the right to resell the goods in following circumstances: a. Where the goods are of perishable nature. b. Where the unpaid seller has exercised his right of lien or stoppage in transit and gives a notice to buyer of his intension of resell the goods. c. Where the unpaid seller has expressly reserved his right of resale. d. Where seller gives notice to the buyer of his intension to resell and the buyer does not pay within a reasonable time, he can i. Recover loss on resale of the goods, if any ii. Retain any surplus on resale of goods, if any Amit Kanabar Indus World School of Business Page 5 However if the seller sells with out the notice to the buyer, he can not a. Recover any loss of the goods, if any b. Retain any surplus on the resale of the goods, if any Example: a) “X” sells vegetable to “Y” on credit, “Y” does not pay, “X” can resell to any other person. b) “M” sells 100 blankets to “N” and gives him one week for payment. “N” does not pay. “M” can resell those to any other person. Rights against Buyer Personally The unpaid seller has following rights against the buyer: Suit for Price Where property in goods has passed to the buyer, or where the sale price is payable ‘on a day certain’ although the property in goods has not passed; and the buyer wrongfully neglects or refuses to pay the price according to the terms of the contract, the seller is entitled to sue the buyer for price, irrespective of the delivery of goods. Where the goods have not been delivered the seller would file a suit for price normally when the goods have been manufactured to some special other and thus are unsalable otherwise. Suit for damages for non-acceptance (Sec. 56). Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. The seller’s remedy in this case is a suit for damages rather than an action for the full price of the goods. • The damages are calculated in accordance with the rules contained in Section 73 of the Indian Contract Act, that is, the measure of damages is the estimated loss arising directly and naturally from the buyer’s breach of contract. Amit Kanabar Indus World School of Business Page 6 • Where the goods have a ready market the principle applicable is that the seller may recover from the buyer damages equal to the difference between the contract price and the market price on the date of breach of contract. Thus if the difference between the contract price and market price is nil, the seller can get only nominal damages (Charter vs Sullivan). But where the goods do not have any ready market, the measure of damages will depend upon the facts of each case. Suit for special damages and interest (Sec. 61) This Section entitles the seller to sue the buyer for ‘special damages’ also for such loss ‘which the parties knew when they made the contract, to be likely to result from the breach of it.” In fact the Section is only declaratory of the principle regarding ‘special damages’ laid down in Section 73 of the Indian Contract Act. The Section also recognizes unpaid seller’s right to get interest at a reasonable rate on the total unpaid price of the goods sold, from the time it was due until it is actually paid. Amit Kanabar Indus World School of Business Page 7