File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

Unpaid Seller's Lien: A Safeguard For Sellers In Sale Of Goods Act,1930

Who is a seller?

The term "seller" includes any person who is in the position of a seller, as, for instance, 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.[1] Who is an unpaid seller?

When a person sold goods and does not get full price of the goods or gets partially paid for them or when the conditions of a conditional payment, received as a bill of exchange, have not been fulfilled by the reason of dishonour of the bill of exchange or some other similar reason, then the seller is said to be an 'unpaid seller.'[2]

The seller remains unpaid as long as any portion of the sum is not paid to the seller be it a very small portion. A seller is only said to be paid if receives full amount of payment. When the whole of price has been tendered, and the seller refuses to accept such a tender, seller ceases to be an unpaid seller and loses his rights against the goods. An unpaid seller has two kinds of rights one is against the goods and other is against the buyer. There are three rights of unpaid seller

against the goods. Right of lien (possession), right of stoppage of product in transit and right of resale.

Right Of Lien

Lien means to "retain the possession of."[3] Lien is keeping the custody of respective goods or refusal to deliver it until the payment of agreed some of amount or consideration. Whenever the buyer is unable to pay the agreed some of money the seller might use the power of lien to keep the possession of goods. An unpaid seller can retain possession of goods until payment of price in the following cases:
  1. Where the goods have been sold without any stipulation as to credit, because in case of credit purchase, the seller must sell for consideration at a future date
  2. Where the goods have been sold on credit but the term of credit has expired
  3. Where the buyer becomes insolvent, In the case of the buyer's insolvency, the lien exists even though goods were offered on credit and the duration of credit has not expired till the time.
In Valpy. Gibson[4] Goods were sold and sent by the sellers at the request of the buyer to the shipping agents of the buyer, and were put on board a ship by those agents. Subsequently, they were re-landed and sent back to the sellers for the purpose of re-packing. While they were still in the possession of the sellers for that purpose, the buyer became insolvent.

Thereupon the sellers refused to deliver them to the buyer's trustee in bankruptcy except upon payment of the price. Held, that the sellers had lost their lien by delivering the goods to the shipping agents, and their refusal to deliver the goods to the trustee was wrongful. Lien can be exercised only for non-payment of the price and not for any other charges due against the buyer such as delivery charges or warehouse rent.[5] When seller has done delivery of some of the goods, he may exercise lien on remaining.

For exercising the right of lien, the seller must be in the actual possession of goods not necessarily as an owner. Hence, it is a possessory right. Unpaid seller can exercise lien even as an agent or bailee.[6]

The Right of Lien is indivisible in nature that is, the buyer cannot pay a certain proportionate amount of money and seek the ownership of that proportionate part of the goods. Right of lien cannot be exercised on the goods repossessed after sale. For example, when the buyer returns the goods for repair.

In Eduljee v. Caf´┐Ż John Bros[7]. the seller sold a second-hand refrigerator to a buyer for Rs. 120 and it was further agreed that the seller will put that in order at a cost of Rs. 320. The buyer took the delivery of the refrigerator and admitted that it was working satisfactorily. Subsequently, two of its parts were delivered to the seller for further repairs. The seller now refused to deliver it back claiming a lien on them until the amount originally due had been paid. It was held that once the delivery of the refrigerator had been made to the buyer, the right of lien had come to an end and the same could not be revived by the seller again by getting the possession of those goods.

Right Of Lien In Case Of Partial Delivery

Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien.[8] Even if the seller has made part delivery, the lien may be exercised on the goods remaining in possession.

However, if the part delivery has been made to show an intention to waive the lien, the right of lien cannot be exercised. In Hammond v. Anderson Out of the 1000 bags of wheat which were to be supplied by the seller to the buyer, 200 have already been delivered to the buyer, the seller may exercise his right of lien over the other 800 bags. If, however, the buyer gets the whole of the goods weighed but takes away only a part of them, the delivery of the part of goods in such a case would operate as delivery of the whole and the seller's right of lien over the remaining goods would come to an end.

Termination Of Right Of Lien

'Lien' means the right to retain the possession of goods until certain charges due in respect of them are paid. When the possession of the goods is lost lien is also deemed to be lost and it is said to be terminated hence termination of lien takes place when the seller wilfully through actions or words parts away with the goods or transfers the possession of the goods. He then can no longer exercise his rights of lien as provided under the section 46 of The Sale of Goods Act, 1930. In India, there are three conditions in which the right of lien is lost. These are:
  1. The unpaid seller's Right of Lien is lost over the goods when they are delivered to some person (a carrier or other bailee) for the purpose of transmission to the buyer without reserving the right of disposal of the goods [Section 49(1)(a)]
  2. The unpaid seller's Right of Lien is lost over the goods once the goods are delivered to the buyer or his agent and the buyer or his agent lawfully obtain the possession of the goods [Section 49(1)(b)]
  3. The unpaid seller's Right of Lien is also lost over the goods if he willingly waives his right [Section 49(1)(c)]. This waiver may be expressed or implied

Delivery To Carrier
The delivery of goods for transmission to the buyer functions as the delivery to the buyer. Therefore, by putting the goods in transmission, the right of lien of any unpaid seller is lost. Though if the seller can still exercise stoppage in transit, the same can be reserved and the seller is able to regain the possession then the rights of lien can be reserved as it was never given. If the seller takes back the goods from the carrier for any other purpose, the right of lien is not revived. A sell to B some objects of furniture and puts them into transit but when he realizes that B

has become bankrupt, he stops the goods in transit and takes them for his own usage. Later he claims price from the buyer, B. In this case, B is not bound to make any payment as the lien was not revived.

Delivery To Buyer
When the buyer or his agent lawfully obtains the possession of the goods then in that case, the goods are said to be delivered to the buyer and lien of the seller is lost or terminated. The word lawfully implies that the buyer has not obtained the possession without the consent of the buyer or for some specific purpose such as furnishing or ironing etc. If not done lawfully i.e., without the consent or without a lawful consent then in such a case the sellers right of lien is not affected.

Waiver
The unpaid seller's right can be disposed of by means of waiver. This can be accomplished by implication of law in any contract of sale with purpose to provide the benefit to the buyer. Such a waiver is also at the choice of the seller. A and B contract for the sale of a car.

They include in the terms of the contract that the right of lien will not be exercised by the seller in case payment is not made. The seller A is fully aware of inclusion of such a term in the contract and still waives of because B is his best friend and he wanted to do this to show his trust in him. Later B defaults in payment. In such a case he cannot claim his lien since he himself consented to the waiver.

Tender Of Price
When the buyer tenders for the price of the goods, the seller ceases to be unpaid and hence the sale is complete. He cannot refuse such a tender of the price. He cannot exercise his right of lien in such a case. Thus the voluntary refusal made by him to the price given by the buyer can later on not allow him to exercise his lien. But in case the goods are delivered in parts then the lien can be exercised on the remaining parts.

Conclusion
the right of lien is a crucial right of an unpaid seller it grants an unpaid seller the right to retain possession of the goods until the full payment of the purchase price is made. It protects sellers from default of payment and in case of default seller has the right to protect its interest by various measures.

The right of lien is one of the several rights available to an unpaid seller, which also includes the right of stoppage in transit and the right of resale. The exercise of the right of lien depends on the conditions specified in the Sale of Goods Act and the terms of the sale contract.

The right of lien provides a significant protection to the unpaid seller in commercial transactions. It enables the seller to safeguard their interests and ensure that they receive the full purchase price before releasing the goods to the buyer. Therefore, it is essential for both buyers and sellers to be aware of their respective rights and obligations to avoid any legal disputes. Overall, the right of lien is a vital aspect of sale of goods act, and its proper understanding and application can facilitate smooth and efficient transactions.

End-Notes:
  1. Section 45(2) sale of goods act, 1930
  2. Section 45 sale of goods act, 1930
  3. RSN Pillai, Bagavathi, Business Law, S Chand, 3rd edn 2010, p.262
  4. (1847) 4 CB 837, 72RR 740
  5. RSN Pillai, Bagavathi, Business Law, S Chand, 3rd edn 2010, p.262
  6. Section 47(2) sale of goods act, 1930
  7. (1944) Nag 37, AIR 1943 Nag 249
  8. Section 48, sale of goods act, 1930

Law Article in India

Ask A Lawyers

You May Like

Legal Question & Answers



Lawyers in India - Search By City

Copyright Filing
Online Copyright Registration


LawArticles

Increased Age For Girls Marriage

Titile

It is hoped that the Prohibition of Child Marriage (Amendment) Bill, 2021, which intends to inc...

How To File For Mutual Divorce In Delhi

Titile

How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

Facade of Social Media

Titile

One may very easily get absorbed in the lives of others as one scrolls through a Facebook news ...

Section 482 CrPc - Quashing Of FIR: Guid...

Titile

The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of t...

The Uniform Civil Code (UCC) in India: A...

Titile

The Uniform Civil Code (UCC) is a concept that proposes the unification of personal laws across...

Role Of Artificial Intelligence In Legal...

Titile

Artificial intelligence (AI) is revolutionizing various sectors of the economy, and the legal i...

Lawyers Registration
Lawyers Membership - Get Clients Online


File caveat In Supreme Court Instantly