Sale of Goods Act
Unpaid Seller and Ordinary Seller Compared: When the Status Arises, the Rights It Carries, and How It Is Lost
Every seller may sue a defaulting buyer. Only an unpaid seller has rights against the goods themselves. That is the whole significance of the status defined in Section 45: a seller who is unpaid may keep the goods, stop them in transit if the buyer becomes insolvent, and in defined circumstances resell them. A seller who has been paid, or who has taken something in full satisfaction of the price, has none of that; he is an ordinary contracting party with ordinary contractual remedies.
What the status adds, and when it arises and ends
1. When a Seller Is Unpaid
Section 45, Sale of Goods Act, 1930 (1) 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 condition has not been fulfilled by reason of the dishonour of the instrument or otherwise. (2) The term seller includes any person in the position of a seller, such as 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. |
- Part payment is not payment. A seller paid all but a rupee of the price is an unpaid seller.
- Tender is as good as payment. A seller who refuses a valid tender of the whole price loses the status.
- A cheque is conditional payment. While it is uncleared the seller is unpaid, and if it is dishonoured the status revives with all its rights.
- Absolute payment is different. If the parties agreed that an instrument was taken in full satisfaction, the seller must sue on the instrument and has no rights against the goods.
2. What the Status Adds
Unpaid seller | A seller who has been paid | |
|---|---|---|
Rights against the goods | Lien, stoppage in transit, resale, ss. 46 to 54 | None |
If the buyer becomes insolvent | He may stop the goods in transit and keep them | He proves in the insolvency like any creditor |
If he still holds the goods | He may retain them until paid, s. 47 | He must deliver; retention would be a breach |
Personal remedies | Price, damages, interest, ss. 55 to 61 | The same, for any breach that remains |
How the status ends | On payment or tender of the whole price | It never arose |
3. Why the Act Singles Him Out
- Because the goods may already be the buyer's. Once property passes, the seller has no ownership to fall back on, so the Act gives him rights over another's goods as security.
- Because insolvency makes personal remedies worthless. A judgment against an insolvent buyer is of little use; possession of the goods is worth a great deal.
- Because the goods are usually the best security available, and the seller has not been paid for them.
- But the rights are limited. Lien and stoppage secure the price; they do not rescind the contract, and only resale under Section 54 turns the goods back into money.
4. The Position Stated Shortly
- A seller is unpaid while any part of the price remains unpaid or untendered.
- A negotiable instrument taken as conditional payment leaves him unpaid if it is dishonoured.
- Persons in the position of a seller share the status under Section 45(2).
- Only an unpaid seller has rights against the goods: lien, stoppage in transit and resale.
- An ordinary seller who has been paid has only such contractual remedies as any party has.
- The status ends on payment or tender of the whole price.