All NotesCivil LawSale of Goods Act

Sale of Goods Act

The Unpaid Seller under Sections 45 and 46 of the Sale of Goods Act, 1930: When a Seller Is Unpaid, Conditional Payment by Negotiable Instrument, and the Rights Against the Goods and Against the Buyer

A seller who has not been paid has two kinds of protection. He can sue the buyer, for the price or for damages, like any creditor. And, uniquely, the Act gives him rights against the goods themselves: to keep them, to stop them in transit if the buyer is insolvent, and in some cases to resell them. These real rights matter most when the buyer is insolvent, because they let the seller look to the goods instead of proving as an unsecured creditor. Section 45 says who is an unpaid seller, and Section 46 lists his rights, which the following sections develop.

1. Who Is an Unpaid Seller: Section 45

Section 45, Sale of Goods Act, 1930

(1) The seller of goods is deemed to be an unpaid seller within the meaning of this Act: (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 condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.

(2) In this Chapter, 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.

  • The whole price. A seller who has received part of the price is still unpaid. Tender of the whole price, even if refused, ends his status as unpaid seller.
  • Conditional payment. A cheque or bill of exchange is ordinarily taken as conditional payment, discharging the price only if honoured. If it is dishonoured, the seller is unpaid again, with all his rights restored.
  • Absolute payment. If the parties agree that the instrument is taken in full satisfaction, regardless of whether it is honoured, the seller is no longer unpaid and must sue on the instrument.
  • Persons in the position of a seller. An agent who has paid for the goods on behalf of his principal, or to whom the bill of lading has been endorsed, has the same rights against the goods as the seller himself.

When a seller is unpaid, his rights against the goods, and his rights against the buyer

2. The Rights of the Unpaid Seller: Section 46

Section 46, Sale of Goods Act, 1930

(1) Subject to the provisions of this Act and of any law for the time being in force, 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 price 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 as limited by this Act.

(2) 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.

3. Where Property Has Passed, and Where It Has Not

  1. Property has passed. The goods belong to the buyer, yet the seller has, by implication of law, a lien while he holds them, a right of stoppage in transit if the buyer is insolvent, and a limited right of resale. These are rights over another's property, which is why the Act must confer them expressly.
  2. Property has not passed. The seller still owns the goods, so he can simply keep them. Section 46(2) confirms a right of withholding delivery co-extensive with lien and stoppage, so that he is no worse off than a seller whose buyer already owns the goods.
  3. Rights against the buyer personally exist in either case: a suit for the price under Section 55, damages for non-acceptance under Section 56, remedies for anticipatory breach under Section 60, and interest and special damages under Section 61.

📖 R. V. Ward Ltd. v. Bignall, [1967] 1 QB 534 (CA)

Facts: A seller agreed to sell two cars for a single price. Property passed on the contract, but the buyer refused to pay or take the cars. After notice, the seller resold one of them for less, failed to sell the other, and sued for the balance of the whole price.

Held: The Court of Appeal held that by reselling, the unpaid seller had rescinded the contract, so that property in both cars revested in him. He could not then claim the price, but only damages for non-acceptance, measured by his actual loss, giving credit for the car he still had.

Ratio: An unpaid seller who exercises his right of resale rescinds the contract; property revests in him and his claim against the buyer becomes one for damages, not for the price.

4. The Position Stated Shortly

  1. Section 45: a seller is unpaid until the whole price is paid or tendered, or while a negotiable instrument taken as conditional payment is dishonoured.
  2. Part payment leaves the seller unpaid; a cheque is ordinarily conditional payment.
  3. Persons in the position of a seller, such as an agent who has paid the price, share the seller's rights.
  4. Section 46(1): even where property has passed, the unpaid seller has a lien, a right of stoppage in transit on the buyer's insolvency, and a limited right of resale.
  5. Section 46(2): where property has not passed, he has a co-extensive right of withholding delivery.
  6. He also has personal remedies against the buyer under Sections 55, 56, 60 and 61.
  7. Ward v. Bignall: resale rescinds the contract, and the claim becomes one for damages.