Meaning of Unpaid Seller
Under the Indian Sale of Goods Act, 1930, an unpaid seller is one to whom the whole price of goods has not been paid or tendered. According to Section 45(1), a seller is considered “unpaid” when (a) the full price has not been paid, or (b) a bill of exchange or other negotiable instrument received as conditional payment has been dishonored. The law protects such sellers by granting them specific rights against the goods and against the buyer personally. This provision ensures fairness in trade by safeguarding sellers from losses due to non-payment.
Rights Against the Goods and Buyer
The unpaid seller enjoys two broad sets of rights. First, rights against the goods, as provided in Sections 46–52, which include the right of lien (retain goods until payment), right of stoppage in transit (stop goods before they reach the buyer), and right of resale (under certain conditions). Second, rights against the buyer personally, under Section 55–61, which include suing for the price, damages for non-acceptance, and interest. These provisions maintain the seller’s bargaining power and protect commercial interests.
Importance in Commercial Transactions
The concept of unpaid seller is vital in balancing the interests of both buyers and sellers. Without such protection, sellers would be at risk of unfair losses in case of default by the buyer. By allowing remedies such as lien and stoppage in transit, the Act ensures that sellers have a legal shield to recover or secure payment. This not only promotes fairness in transactions but also builds trust in commercial dealings.
Real-Life Example
Suppose A sells 100 bags of rice to B for ₹2,00,000. B accepts delivery but fails to pay the price. A is then an unpaid seller and can sue B for the price under Section 55. If goods are in transit and B becomes insolvent, A can stop the goods in transit and retain them until payment is made. This demonstrates how the law practically secures the seller’s rights in real-life scenarios.
Mnemonic to Remember – “LSS-BD”
To easily recall the rights of an unpaid seller, remember LSS-BD:
- L = Lien (retain goods till paid)
- S = Stoppage in transit
- S = Resale of goods
- B = Suit for price
- D = Damages & interest
Think of it as: “Unpaid Seller Locks Safe Security – Buyer Defaults.” This simple line will help you quickly recall the rights in exams.
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