A seller of goods has various legal rights to the customer and the items. The buyer pledges to pay the agreed-upon sum when the seller delivers the products to them, under the Sale of Goods Act. The seller is under obligation to delvier the goods sold, and the buyer must pay the amount when its due. Sellers have rights against the buyers and act as remedies against breach of contract by buyers.This mutual commitment serves as the basis of the contract's obligation. The unpaid Seller has several rights against the items if the customer declines to make the payment for the goods. The term "lien right" refers to this. Let's take a closer look at the rights of an unpaid seller to goods and what a lien is.
A lien is the Seller's legal right to keep possession of the goods until the client has paid for them in full. According to Section 47 of the Sale of Goods Act, 1930, the right of lien means that an unpaid seller possessing the goods may keep them until the buyer pays for them.
Did you know?
The Seller of a product has the legal right to sue the buyer under section 45 of the sales of goods act if the payment is not made within the specified agreed timeframe.
Who is an Unpaid Seller?
As stated in Section 45 of the Sale of Goods Act, 1930, when the whole amount has still not been collected, and the Seller has an urgent right to take action for the payment, the Seller is said to be an unpaid seller.
When an initial payment is made using a bill of exchange or another negotiable instrument, the precondition is not satisfied because the device has been dishonoured or for another reason.
As a seller, such as an agent or consignor who has already paid the amount or is accountable for it, is likewise considered a seller.
The following situations give rise to lien rights:
- The vendor sold the products without any credit restriction.
- The products were sold with a credit agreement whose period is now over.
- The product's purchaser is now bankrupt. Even if the products were sold on credit and the credit period hasn't ended, the Seller can still enforce his right of lien in this situation.
Under Section 47, the unpaid Seller may utilise his lien privileges while still possessing the goods by serving as the buyer's agent or bailee. As long as the Seller is in charge of the items, he may utilise this possessory lien.
Also Read: What Is Business Structure & Learn How to Choose a Business Structure
Lien for Part Delivery of Goods:
An unpaid vendor may utilise his right of lien on the remaining items if he has only partially delivered the products. Only if there is no contract to the contrary releasing the Seller's lien in the event of partial delivery of the products; are the unpaid Seller's entitlements against the buyer relevant.
- Suppose the products have been given to a carrier for distribution to the purchaser without maintaining the right to dispose of the commodities. In that case, an unpaid seller loses his claim over the products.
- When the purchaser or his representative takes possession of the items legally.
- If the lien rights are waived.
According to Section 49, the unpaid Seller may still pursue his lien rights even if he has been granted the purchase price of the sold items.
Right of the Seller Against the Buyer in Stoppage of Goods in Transit:
In addition to the right of lien, the supplier of the goods may exercise the right to halt the items while they are en route. Until the customer pays, he may reclaim ownership of the items and keep them.
The Seller can exercise this right:
- Suppose the purchaser goes bankrupt while the items are being transported. The Seller may request that the transporter deliver the items back to him.
- The products are en route, and neither the Seller, the buyer, nor the buyer's representative, has possession of them. The items must be with the transporter as the middleman in this situation. This carrier cannot represent either the buyer or the vendor.
Also Read: List of Top 10 Creative Small Business Ideas | Khatabook
Duration of Transit
When the Seller gives items to the carrier for delivery to the customer or his representative, the period of transit begins. The products' transit comes to an end when:
- The buyer or his representative accepts delivery of the goods before they arrive at their destination.
- The transporter notifies the purchaser or his representative that the items have arrived at their location and are in his possession.
- It is not the end of the transport if the buyer rejects the items and the Seller refuses to accept them.
- If products are delivered to a vessel the buyer has chartered, it must be decided whether the commander serves as the products' agent or carrier.
- The transit is deemed to have ended if the carrier or consignee erroneously declines to hand over the product to the buyer or his representative.
- If only a few portions of the products are delivered, the unpaid Seller has the right to halt shipment of the remaining goods.
- And if there is no contract to transfer ownership of all the items, the remaining products' transit will stop.
Rights of an Unpaid Seller
Unpaid sellers have sold products to another individual but have not received full payment or payment in part. An unpaid seller is one who has acquired a negotiable document, such as a bill of exchange, that has been dishonoured, following section 45 of the Sale of Goods Act.
Rights Against the Goods
The vendor has the following rights over the products when the buyer has not paid in full or in part for the commodities provided to him.
1. Rights of lien
A lien is a legal right that is used to keep ownership of goods until the amount owed is settled. If the Seller of goods did not receive the payment and the request of the products has been passed to the buyer, but the items are still in the Seller's possession, the Seller does have the right to keep the goods.
The Seller is entitled to this right when the products were not sold on credit, when the client has gone bankrupt or when the money has not been received by the due date.
Termination of Lien
The lien of an unpaid seller expires under the following condition.
- When the vendor hands over the products to a carrier, they may be sent to the customer.
- When the Seller has discharged the goods from his lien.
2. Rights of Stopping of Goods in Transit
In the following situations, the vendor has the authority to stop the shipment of goods:
- The Seller must be unpaid.
- When the items are being transported.
The carrier may hold the goods-
- As the Seller's agent, since the Seller's lien covers the products, there is no transit in this instance.
- As the buyer's agent, since the buyer has taken possession in this situation, the Seller cannot assert his right to halt in transit.
- As an independent contractor, the products don't have to be in transit for the Seller to exercise the right of halting in this situation.
3. Rights of Resale
The authority to resell the goods belongs to the Seller who has not received payment. The principal rules are as follows:
- If the products are perishable, the unpaid vendor may resell them.
- When the unpaid Seller has secured custody of the items through a lien or a halt in shipping and has notified the buyer of his plan to resell after not being paid.
Also Read: Types of Business - Different Types of Businesses One Must Know
When the buyer fails to honour the maturity of any bills of exchange or other negotiable instruments approved by the Seller as a prerequisite, the Seller has either been paid in full or hasn't been paid at all. If the Seller had used his right of lien or halt in transit, he might resell the items in this scenario after giving the buyer notice, and the new buyer would have valid title to the commodities. In this situation, the vendor has the legal authority to file a lien against the buyer for failing to pay the requisite sum.
Follow Khatabook for the latest updates, new blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and account.