A seller who does not receive full payment for the goods sold is called an unpaid seller. The rights of the unpaid seller protect this seller under the law. These rights help the seller to stop delivery, take back the goods, or even sue the buyer. There are two main types of rights: rights of the unpaid seller against the goods and rights of the unpaid seller against the buyer. The law clearly explains the rights of unpaid sellers to ensure that sellers get justice.
Meaning and Scope of Rights of Unpaid Seller
Sellers often face situations where the buyer does not pay on time or does not pay at all. The rights of unpaid sellers give sellers legal power to protect their interests. These rights apply under the Sale of Goods Act when the seller has not received the full price and has not agreed to give credit. In simple words, if the buyer fails to pay, the seller gets the power to hold or get back the goods or file a case.
Understanding the Role of an Unpaid Seller
An unpaid seller means a seller who:
- Did not get the full price.
- Got a cheque or bill of exchange that bounced or was dishonored.
Once the seller becomes unpaid, they can stop delivery, claim back the goods, or take the buyer to court. These rules apply whether the seller sells the goods directly or through an agent. The law protects both individual sellers and companies.
Legal Basis for the Rights
The Sale of Goods Act, 1930, mainly covers these rights in Sections 45 to 54. The law separates the rights into two clear types:
| Type of Right | Applies To | Legal Power Given To Seller |
| Rights against the goods | Goods sold | Stop delivery, lien, resale, reclaim goods |
| Rights against the buyer | The person who didn’t pay | Sue for price, damages, or cancellation |
Both types give sellers complete control and legal help if payment does not happen. These laws help sellers avoid losses and unfair treatment in business.
Rights of Unpaid Seller Against the Goods
The most important protection for any seller is the power to control the goods. The seller gets legal rights over the goods when the buyer does not pay. These are called the rights of the unpaid seller against the goods. Depending on the situation, they help the seller stop or recover the goods before or after delivery.
Right of Lien
This right allows the seller to keep the goods until the buyer pays. If the seller still has the goods in hand or in a warehouse, they can refuse to give them until full payment. This right works only if the goods are not sold on credit.
Example
If a seller sells 100 phones and the buyer does not pay, the seller can hold the phones in their warehouse. This is called a lien.
Right of Stoppage in Transit
If the seller has already handed over the goods to a delivery company but the buyer has not yet received them, the seller can stop them midway. This right is called stoppage in transit. It can only be used if:
- The buyer becomes insolvent.
- Goods are still in transit and have not reached the buyer.
Example
If a buyer in Mumbai does not pay, and the goods come from Delhi, the seller can tell the delivery company to stop and return the goods.
Right of Resale
If the buyer does not pay after being given time, the seller can resell the goods to someone else. This right allows the seller to recover their losses. The seller does not need to ask the buyer for permission. But it works only if the seller gives proper notice and waits long enough for payment.
Important Points
- The seller must give notice before resale.
- If no notice is given, the seller must return the extra profit (if any) to the original buyer.
- If a loss happens in resale, the original buyer must pay.
These rights of the unpaid seller against goods help sellers avoid loss and take control over business risks.
Rights of Unpaid Seller Against the Buyer
Sometimes the goods cannot be stopped or taken back. In such cases, the seller can take action against the buyer directly. These are called the rights of the unpaid seller against the buyer. The seller can file a case to recover the money or cancel the contract.
Suit for Price
If the goods are delivered and the buyer does not pay, the seller can file a case in court. This is called a suit for price. It works only when:
- The price is fixed.
- Goods are delivered but not paid for.
This helps the seller legally recover the cost of goods.
Suit for Damages for Non-Acceptance
If the buyer refuses to accept the goods, the seller can sue for damages. This applies even if the goods are ready to deliver. The seller can claim money for losses because of the buyer’s refusal.
Example
If a buyer places a big order and later cancels it, the seller can claim loss of money, time, and resources.
Repudiation Before Due Date
If the buyer tells the seller they will not accept the goods in advance, the seller can cancel the contract. The seller can also sue for damages immediately.
Suit for Interest
Sometimes, the seller can also claim interest on the unpaid amount. This depends on what both parties agreed to in the contract. If no interest rate is fixed, the court decides a fair amount.
These rights of the unpaid seller against the buyer give power to the seller to protect their money and take legal steps for justice.
Explain the Rights of an Unpaid Seller
To explain the rights of an unpaid seller in easy terms, one must look at two parts: rights over goods and rights against the buyer. Both work together to give power and safety to the seller. When buyers break rules or don’t pay, sellers can hold the goods, stop delivery, resell the items, or even go to court.
Key Situations Where Rights Apply
In such cases, the seller can take quick action using the Sale of Goods Act rules. Sellers do not need to wait for a long time. The law supports sellers who face fraud or loss.
- The buyer does not pay on time.
- Goods are still in transit.
- The buyer cancels the order without reason.
- Cheque bounces or payment fails.
Importance of the Rights
These rights give a balance in business. If the seller had no rights, buyers could misuse the system. With these rights in place, both parties follow the rules, and business becomes fair. Indian courts also support these rights strongly.
Comparison between the two types of rights
| Rights Over Goods | Rights Against Buyer |
| Hold or stop goods | File a case in court |
| Reclaim from the transport company | Ask for damages |
| Resell the goods | Claim interest or cancel the contract |
These rights help sellers in India to handle buyers who delay or avoid payment.
Rights of Unpaid Sellers FAQs
1. What are the rights of the unpaid seller?
The unpaid seller has two major rights: rights of the unpaid seller against the goods and rights of the unpaid seller against the buyer. These rights help stop delivery, reselling goods, or suing the buyer.
2. What is the right of lien under the unpaid seller’s rights?
Right of lien lets the seller keep the goods until the buyer pays in full. If the goods are still in the seller’s control and the buyer delays payment, the seller can keep the goods.
3. Can the unpaid seller sue the buyer?
Yes, the seller can file a suit for the price or damages. This is part of the rights of an unpaid seller against the buyer, which helps recover money from defaulting buyers.
4. When can a seller stop goods in transit?
A seller can stop goods in transit if the buyer becomes insolvent and the goods have not yet been delivered. This right is part of the rights of the unpaid seller against the goods.
5. What is the difference between rights against goods and rights against the buyer?
Rights of the unpaid seller against the goods deal with stopping or reselling the goods. Rights of the unpaid seller against the buyer include legal actions like claiming the price or damages in court.
