Unpaid Seller

Unpaid Seller | Features of Unpaid Seller | Rights of Unpaid Seller | Duties of Unpaid Seller | Business Law

Those sellers who aren’t paid are unpaid sellers. The Seller of goods is deemed to be an unpaid seller when the Whole price hasn’t been paid; a conditional payment was made by bill of exchange, cheque and other negotiable instruments that have been dishonored. In short, when the seller doesn’t get cash value for his goods in time he becomes an unpaid seller. While in credit sale it takes time for the buyer Tor the payment of goods sold. In such cases, the seller isn’t called unpaid seller until the time-bound is crossed. Then after he 1s called unpaid seller.

For example, Krishna buys a motorbike from Hari on January 1, 2004, and promises to pay the cost of a motorbike on 31st  January 2004. In this example, up to 31st January 2004, Hari 1Sn t called unpaid seller then after he is called unpaid seller.

Features of Unpaid Seller

  • The whole or partial price is not paid on the due date by the buyer to the seller.
  • The buyer made payment in the form of a negotiable instrument (eg. cheque) and that negotiable instrument is dishonored.
  • Goods are sold on a cash basis and not paid by the buyer.
  • Goods are sold on a credit basis and not paid by the buyer within the stipulated time.
  • The seller must not refuse to accept the payment made by the buyer.

Rights of Unpaid Seller

1. Right to lien the goods until he receives the payment. An unpaid seller in possession of goods sold is entitled to exercise his lien on the goods in the following cases:

  • Where the goods have been sold without any stipulation as to credit
  • Where the goods have been sold on credit but the term of credit has expired.
  • Where the buyer becomes insolvent even though the period of credit may not have yet expired.

2. Right to terminate the contract of sale of goods after the cross reasonable time.

3. Before delivery of the goods to the buyer if seller knows that the buyer has become insolvent, he has the right to stop the goods in transit.

4. After the expiry of reasonable time the unpaid seller has the right to resell the goods to another.

5. He has the right to sue in court to recover the price and reasonable expenses in connection with a contract of sale of goods if the buyer refuses to pay even after the goods are delivered.

6. The right of resale is a very valuable right given to an unpaid seller. In the absence of this right the unpaid seller’s other rights against the goods namely “lien and “stoppage in transiť” would not have been of much use because these rights only entitled to retain the goods until paid by the buyer. If the buyer continues to remain in default then the unpaid sellers have the right to resale the goods. Unpaid seller has limited rights to resell the goods in the
following cases:

  • Where the goods are of a perishable nature.
  • Where such a right is expressly reserved in the contract in case the buyer should make a default continuously.
  • Where the seller has given notice to the buyer of his intention to resell and the buyer doesn’t’ t pay or tender the price within a reasonable time.

Duties of Unpaid Seller

  • To inform the buyer about the fact before he resells the same goods to another.
  • To claim reasonable and actual expenses from the buyer in case of buyer’s refusal. For example, as being an unpaid seller, if he/she suffers the loss of Rs. 500, the unpaid seller claim only Rs. 500,
  • The unpaid seller must get all the buying and selling activities on a good faith basis.
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