Unpaid Seller

An unpaid seller is one who has not been paid or tendered the whole of the price or one who receives a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

The term seller includes any person who is the position of a seller, for example, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has him self paid or is directly responsible for the price. A seller who has been partly paid is also considered as an unpaid seller for part unpaid. Therefore unpaid seller is one who (1) has not received the whole of the price; (2) he has received payment in the form of bill of exchange or negotiable instrument which is dishonored.

Rights of an unpaid Seller:

The rights of an unpaid seller can be studied under two heads:

1) when the property in the goods has passed to the buyer
2) When the property in the goods has not passed to the buyer

Section 46(1) lays down that not withstanding 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 to re-sale

Section 46 (2) lays down that where the property in the 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. In short, the rights of an unpaid seller are:

Right of Lien:

Meaning of lien: Right of lien means right to retain the possession of the goods or properly until the claim is paid or satisfied. A lien, therefore, is a right of any one person to retain that, which is his possession, belonging to another, until certain demands of a person in possession are satisfied. Possession is essential to create a right of lien. It must be rightful and continuous. Lien may arise by: (1) statute; (2) express or implied contract; and (3) in ordinary course of dealings.

Lien of two kinds:

a) General lien and b) Particular or Specific lien

General lien mans the right to retain the goods until all the claims of the holder are satisfied. It is a right of retention of goods not only towards the demands arising out of the article in possession but for general balance of account in favor of the holder.

Particular lien means the right to retain the particular goods until claims arising on those goods are satisfied. Particular lien is attached to specific good for the unpaid price or claim thereof.

Right of lien as applicable to unpaid seller: The unpaid seller of goods, who is in possession of them is entitled to retain possession of them until payment or tender of the price in he following cases:
1) where the goods have been sold without any stipulation as to credit
2) Where the goods have been sold on credit and the term of credit has expired. Theerfor6e, during currency of credit right cannot be exercised.
3) Where the buyer becomes insolvent and the seller is in possession of the goods.