Hello everybody, welcome to my channel. This is Professor Ivneet. So today I am going to teach you a very important topic of business law that is unpaid seller. I have made a lot of videos on business law before this.
If you haven't seen those videos, then I will give the link in the i button above and in the description box below and in the pinned comments as well. So you can check it out. So without wasting any time, let's get started.
Who is an unpaid seller? Suppose if one person has sold something to another person So the seller becomes the buyer and the buyer becomes the buyer So when the thing is sold but the seller has not received the payment yet Means the seller has not received the full payment Or he is getting half payment but still half is left So the seller becomes the unpaid seller A person who has sold goods to another person but has not been paid for the goods means he has sold the goods but he has not received the payment for the goods or he has received a partial payment means he has received some part but some part is still there so he becomes an unpaid seller. Example is A purchased goods worth Rs. 20,000 from B.
A purchased goods worth Rs. 20,000 from B. Ownership has already been transferred to A. Means A has become the owner of the goods.
So sale has been done. So, B is the seller but A has not paid the entire amount of 20,000 or 15,000 but he has to pay 5,000 or 5,000. So, B will become the unpaid seller. Unpaid seller is defined in sale of goods act under section 45. An unpaid seller is one who has not been paid the price of goods he has supplied and has partially paid for the goods. He has not paid the price of goods he has supplied to the buyer or he has received partial payment.
Second, Here B will come, who has been given a negotiable instrument like a bill of exchange that has been dishonored. Negotiable instrument is a transferable instrument like a cheque or a bill of exchange. So what happens in this means they give you a cheque for payment.
You sold some goods to someone and that person gave you a cheque in the form of payment. And when you went to put the cheque in the bank and there was no money in the bank account, then the cheque or bill of exchange got dishonored. And that's what happened.
In that case also the seller becomes unpaid seller because he has not received his payment yet. It is immaterial whether the seller is directly involved in the transaction or he is acting through his agent. Immaterial means that there is no connection between the seller and the agent.
The transaction can be done by the seller and the agent can also do it. This is the definition of unpaid seller. Next is rights of an unpaid seller. Now the seller is unpaid. Now he has some rights.
Which rights are there? There are two rights of an unpaid seller. Right against the goods. What are the rights of goods against the buyer of goods?
And what are the rights of the buyer personally? We will discuss this one by one. First is rights against the goods. What are the rights of the buyer against the goods? What are the rights of These are given under section 46 When the buyer has not paid the full or partial price of the goods supplied to him, then the seller who has transferred the ownership of the goods to the buyer, he has the following rights If the buyer has not paid the seller fully or partially, then in that case, the seller has the rights of lien, right of stoppage of goods in transit and right of resale There are three types of rights First is right of lien.
This comes under section 47-49. Now what is lien? Lien is a right to retain possession of goods until the payment in respect of them is paid. Lien means to keep the thing with you until the payment is received.
Now here the word is possession. I tell you many times in every video that possession and ownership are two different things. There is a lot of difference between them. It is very important to understand this. My car is parked in my friend's house.
So here the car is mine. I am the owner. But who has the possession?
My friend has it. So there is a difference between these two. If my car is with me, then I have ownership and possession.
Right of lien we can exercise only if we have goods in possession. If goods are lost, we cannot exercise liens. This means keeping goods with us until the payment is cleared. According to section 47, If the seller of goods has not been paid, section 47 says that if the seller has not received the payment, the ownership of goods has been transferred.
But ownership has been transferred, means sale has been done. Sale we will say only when ownership has been transferred, so ownership has been transferred to the buyer. But the goods are in possession of the seller, but the goods are still with the seller. So the seller has the right to retain that good with him till he does not receive the money. The seller has a right in the following circumstances.
Now, when can a seller exercise lien? When the goods have not been sold on credit. If you have not sold the goods on credit, then only he can exercise lien.
Because if you have sold on credit, then how can you exercise lien? because you have given him time to pay after 2 months so he will not be an unpaid seller for 2 months he will remain a seller till 2 months when the payment has not been made on the promised date if the goods were sold on credit now the second case is that the goods should not be sold on loan second case is that if you have sold the goods on loan means you have promised to receive the payment after 2 months and you have not paid the loan In that case, when the payment has not been made on the promised date, suppose A told B to give me the goods today, I will pay for it after 2 months. Now A has bought the goods but the possession of the goods is still with the seller. And he said I will pay after 2 months.
So for 2 months the seller will not be unpaid. But even after 2 months if the buyer doesn't make the payment, the seller can retain the same goods until the payment is cleared. When the buyer has become an insolvent, insolvent means someone has lost his money.
Even if the buyer has become insolvent, he can exercise the goods when he knows that he won't get the payment. Next is termination of lien. Termination means termination. When will we say that the lien will be terminated?
The first main point is that as soon as the seller loses possession of the goods, means if the goods are lost, then he cannot exercise the lien. According to section 49, the lien of an unpaid seller terminates in the following circumstances. What are the circumstances?
When the sellers deliver the goods to a carrier for the purpose of transmission to the buyer. Carrier is like if you want to send goods from transport from one state to another state or from one city to another state. As soon as the seller gives goods to the carrier to be transmitted to the buyer, then the lien ends.
He can't write because the goods have gone from his hand. We can exercise the lien only when we have the possession of goods. So as soon as you give the carrier, the possession of goods goes, then the lien ends there.
When the buyer or his agent lawfully obtain the possession of goods, if the buyer himself takes the goods from you or his agent takes it lawfully, means legally, then also you cannot exercise the lien. When the seller has waived his lien on the goods, waived means he has withdrawn that I will not exercise the lien, then also in that case the lien gets over. Next is, next right is, now right of lien is gone because goods are gone from his hand.
Now which is the second right that the unpaid seller has? Second right is right of stoppage of goods in transit. This comes under section 50 to 52. Means he can stop goods in the way.
Stoppage means stopping goods in the way. According to section 50 says, when the seller has delivered the goods to a carrier for transmission to the buyer. If the seller has sent the goods to the carrier for transmission to the buyer.
The goods were given to the transport company to deliver to the buyer. So, the purchase ends there. Now, what is goods in transit? Means, goods are on the way, they have not reached the buyer.
If he receives information and if he gets information before reaching the buyer, that the buyer who has sent goods has become insolvent, means, his Diwali has passed, so now the seller has come to know that I am sending goods, but it is Diwali, it is insolvent, I will not get his payment. So, the seller has the right to call the carrier and stop the goods on the way and take back his possession. till the time the payment of goods is not clear. As soon as he brings the possession of goods, then he can exercise the right of lien.
The seller has a right of stoppage of goods in transit in the following circumstances When can he exercise this right? First is seller must be unpaid Seller must be unpaid If he has got payment then why he will exercise this right? When the buyer has become insolvent He has come to know that the buyer has become insolvent before the payment of goods Then he can keep the goods on the road When the goods are in transit He can keep the goods on the road only when the goods are on the road If they reach the buyer then the right of Exit Stoppage of goods in transit will be over.
The property must have passed from the seller to the buyer. Here property means ownership. Ownership should have passed automatically.
Because only then we will say that the seller is made. So this is very important. Next is duration of transit. Duration is time period. What is the time period of transit?
The goods are being transmitted from A seller to the buyer. The time period of the road is called duration. According to section 51, when the seller has delivered the goods to the carrier for the transmission to the buyer.
Section 51 says that if the seller has given the goods to the carrier, like any transport company or truck in which goods go, then it is called a carrier, it means to deliver goods to the buyer, until the goods are received by the buyer or his agent is duration of transit. So he gave the goods to the carrier and the goods carried by the truck. Until the goods reach the buyer, the time period when the goods are near the carrier, near the truck, that time period is called duration of transit.
The carrier may hold the goods. Now the carrier can hold the goods on anyone's behalf. If the carrier is the agent of the seller. Who is the agent of the seller?
The one who works on the behalf of a principal. Who works for someone. So if the transport company is the agent of the seller. Then in that case we will not call it transit.
We will say that transit is not happening. Because the goods are still in the possession of the seller. Why?
Because the transport company or the truck is the agent of the seller. So in that case transit is not happening. In that case, the seller will exercise the lien directly.
If the carrier is the buyer's agent, then in that case also there will be no transit. The seller cannot exercise the right of stoppage goods in transit because the buyer has acquired possession. Suppose A sold B goods of Rs. 10,000 and B said that he is the agent of transport.
The seller will exercise the right of The agent is the one who gets the goods. You do this and give the goods to him. As soon as you give the goods to him, it means that his carrier got it, his agent got it, means the buyer got it. This is considered.
So, here also, the stoppage of goods in transit cannot be done because the buyer has already got the goods. Even if he got it through his agent. Third point is that if you give the goods to an independent contractor, means there is another transport company which is neither the buyer's agent nor the seller's agent so in that case you can do this right exercise, right of stoppage in transit it is not necessarily that the goods should be actually moving it is not necessary that the goods are moving or not as soon as you have given that truck to the independent contractor so you can do this right exercise if you know that the buyer is insolvent so in the first two cases right of stoppage in transit is not there but in the third case it is there Next is the transit comes to an end in the following cases. Now when will we say that transit is over?
When will we say that the duration of transit is over? If the buyer or his agent obtains the delivery of goods before their arrival at the appointed destination. If the place where goods were to go. Before reaching there, the buyer or the agent of the goods will come and take the goods delivery.
So, the transit will be over there. So, this means that the seller cannot do the right of stoppage in transit exercise. If after the arrival of goods at the appointed destination, the carrier or the bailee acknowledges to the buyer or his agent that he holds them on his behalf.
If goods have reached the buyer's place, the carrier or the transport company has called the buyer or his agent that the goods have reached and we have held those goods on your behalf. If the carrier or the transport company has called the buyer or his agent that the goods have reached and we have held those goods on your behalf. In case the carrier or the other bailiff wrongfully refuses to deliver the goods to the buyer or his agent.
If the carrier wrongfully refuses to deliver the goods to the buyer or his agent, then the transit ends in that case too. Next right is right of resale. Resale means selling again. Once you have sold, that's why you are a seller.
So, resale also has a right under section 54. Now, what does section 54 say? It defines the general rules for resale of goods by the unpaid seller. Under what circumstances can an unpaid seller sell goods again? First is, the seller is unpaid and has not received any payment.
He has the possession of the goods. The unpaid seller may resell the goods if the goods are perishable. It is perishable if the goods get spoiled early like milk or other things that get spoiled in a few days. It is a product that has few preservatives and some things get spoiled. So, unpaid seller can sell goods to someone else if the goods are perishable.
Because if he doesn't sell goods, they will get spoiled. He won't get anything. He hasn't got payment from the seller before. So, he can sell goods to someone else if the goods are perishable. Next is when the unpaid seller has acquired the possession of goods by the virtue of lien or stoppage of goods in transit.
When the unpaid seller has acquired the possession of goods by the virtue of lien or stoppage of goods in transit. The buyer has received the goods possession from the buyer and has given notice to the buyer of his intention to resell the goods. The buyer has been told to pay the goods or else he will sell the goods to someone else.
And if the buyer does not pay the goods or even after taking the notice, the buyer does not pay the goods, then the unpaid seller has the right to sell the goods to someone else. Okay. The seller is also entitled to claim from the buyer any loss he may suffer in reselling the goods. If the seller has lost any goods in selling to someone else, then he can recover the loss from the previous buyer.
If the unpaid seller makes a profit by reselling the goods, then the seller will be able to recover the loss. and he gave a notice to the buyer that he will sell the goods to someone else and then he will make a payment but the buyer did not give any response and then he sold the goods to someone else again after giving a notice and he sold the goods at 15000 so he got a profit of 5000 so in that case the defaulting buyer who did not make a payment in the first bar he cannot claim that profit but if he gets a loss suppose he has to sell goods of 10000 to someone else at 8000 then he will take 2000 rupees from defaulting buyer but if he gets any profit then defaulting buyer will not get any profit because law never let any person who is defaulting to be in any benefit when the seller has expressly reserved the right of resale in case of the buyer makes default if the seller said while making the agreement that if you default in payment then I will sell it to someone else immediately if the seller has already reserved the right then in that case also which can resell goods. Next is when an unpaid seller plans to resell the goods, this line is very important that if the unpaid seller has planned to resell the goods again because he has not received the payment, he is obliged by law to give one lost opportunity. Law says that before selling the goods, give the last opportunity to the first buyer to inform him that I am going to sell it. You still have a chance to come and pay, otherwise I will sell it to someone else.
If the unpaid seller does not inform the buyer, but if the unpaid seller does not inform the buyer, then the buyer will be able to sell it. he will sell goods to someone else without informing the buyer and then he will face loss then he cannot later claim such loss from the defaulting buyer so later he cannot take loss from him as I told you earlier he sold goods in Rs.10,000 now he sold goods in Rs.8,000 to someone else so if he had given notice to the first buyer before selling goods in Rs.8,000 that come and pay or else I will sell goods to someone else so the loss of Rs.2,000 he has But if he sells it without giving notice then he will lose 2000. Then he cannot claim money from defaulting party. Next is right against the buyer of goods.
Now what are the rights of buyer against his personal? What we were reading was right against the goods. Now what are the rights of buyer against his personal? So, these are the suit for price, it can be case for price, damages, reputation of contract or for interest.
First is suit for price, it comes under section 55, what does it say? According to section 55, if the ownership of goods has been transferred to the buyer, if the ownership has already been transferred, this line is very important because we will say sale only if the ownership has been transferred, and he refuses to make the payment for the goods, the seller has a right to file a suit against the buyer. So, what is the case?
So, the buyer is not paying you. So, the seller has a right to sue the buyer in the court. According to section 55 subsection 2, if according to the terms of the contract of sale, the payment for the goods is to be made by a certain time or date by the buyer and the such payment has not been made.
The seller has a right to sue the buyer even if the ownership of the goods has been transferred to the latter. This is the same point. It is just that if you have fixed the date of payment of goods, that means the seller and buyer have fixed a particular date that this day the buyer will bring the payment and if the buyer does not bring the payment then the seller can file a case against him in the court. Next is suit for damages.
He will claim for his money. He can go to court and claim for 10,000. He can also sue for damages.
According to section 56, if the buyer refuses to accept the goods or defaults in making the payment, Buyer does not accept goods or defaults on payment with a malified intention. Malified means wrong intention. Wrong intention means the seller has a right to file a suit against the buyer for the damages.
So he will do it for the price of his goods and also claim for damages. Or if he sent goods and the buyer did not accept the goods, then the seller will have to send the goods to the transport company and the transport company will also have to pay for it. So he will lose the goods and the goods will come back.
So then he will claim the damages from the buyer. Measure of damages How will we measure the damages? This is given under Section 73 and 74 of Indian Contract Act. Please note that this is an Indian Contract Act and not a sale of goods.
So how will we measure? Where is an available market for the goods in question? Now the goods that are being sold to the buyer and seller, If the goods are readily available, the buyer gets it very quickly.
In that case, the damages will be the difference between the contract price and the market price at the date of breach. The breach is the breach. So, the day the agreement is broken, means the buyer has not received the payment, so the difference will be like I told you.
For example, if he sold goods worth Rs. 10,000 but he did not get the payment, so he sold it again at Rs. 8,000. So, the difference of Rs. 2000 is the damages if the goods are available. Means, the buyer gets it easily.
If there is no such market, the buyer gets it very easily, then what will be the amount of damages? It is the estimated loss. Means, the loss will be directly or naturally. The loss that he has incurred can be claimed by the buyer. Next is Repudiation of contract before due date.
Repudiation of Repudiate the contract before due date. It is mentioned in section 60. If the buyer repudates the contract before the due date for the delivery of goods. If the buyer cancels the contract before the due date. And if the seller does not accept the contract. Means the seller says that the agreement is done.
He does not accept it. And waits for the due date. That the due date will come and he will deliver.
He reserves the right to sue for the buyer for repudating the contract. But still. The seller can file a case on the date of delivery. The seller cannot wait for the delivery to be accepted.
Next is suit for interest. Now for interest also case file can be filed. According to section 61 the unpaid seller has a right to be paid interest by the buyer for any delay in making payment. Suppose buyer had to make payment in July and buyer didn't make payment in July then seller became unpaid seller. And then payment came in September, October.
August, September, October, three months after payment came, in this case, the seller will also take interest from him. And on what date will the interest be valid? Like, if you want to make payment on July, you have to make payment on 1st July, then you have got payment from 1st October.
So, August, September, So, the interest will be received from the seller in the month of 1st of the month. The interest will be calculated from the date of payment due. If the goods are sold on credit, the interest will run from the expiry of credit. So, the interest will be calculated from the date of expiry of credit.
If you have sold goods today and you have asked for payment on 1st October. But when 1st October came, the payment was not done. And when did that person make the payment? On 1st November.
Means after one month. So what was the due date? 1st October.
Earlier he had given that you After 1-2 months, you can pay the interest on 1st October. But if you pay the interest on 1st October and not on 1st October, then you will get interest on the interest after the time period. The interest will be calculated for 1 month only.
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