Date: 10th February, 2021
by Ambica Sharma, VIPS, Dwarka
A seller is under an obligation to deliver the goods sold and the buyer is under an obligation to pay the requisite amount or quid pro quo under the contract of sale. This is a reciprocal promise defined as under Section 2(f) of the Indian Contract Act, 1872.
When a buyer refuses or fails to pay the requisite amount to the seller, the unpaid seller has certain rights.
These remedies can be against:
According to Section 45(1) of Sale of Goods Act, 1930, the seller is considered as an unpaid seller when:
When the whole price has not been paid and the seller has an immediate right of action for the price.
When Bills of Exchange or other negotiable instrument has been received as conditional payment, and the pre-requisite condition has not been fulfilled by reason of the dishonour of the instrument or otherwise. For instance, X sold some goods to Y for $50 and received a cheque. When it was presented for payment, it was dishonoured. X is an unpaid seller.
Seller also includes a person who is in a position of a seller i.e. agent, who had himself paid or is responsible for the price.
RIGHTS AGAINST BUYER
Suit for the price
When the buyer has wrongfully neglected or refused to pay as per the terms and conditions of the contract, the seller may sue him as per the Section 55(1) because once the property has been passed the buyer is bound to pay the price.
Suit for damages
In case there is a wrongful refusal on the part of the buyer for acceptance of goods and payment of money, the seller can sue him for damages of non-acceptance as per Section 56.
In the case of M. Lachia Shetty V. Coffee Board (AIR 1981 SC 162), a dealer who bid at an auction of coffee, the offer was accepted, but he refused to carry out the contract, consequently, coffee was re-auctioned at next best bidding price and the dealer who refused to perform the contract had to pay the difference as loss to the board.
Suit for interest
As stated under Section 61, where there is a specific agreement between buyer and seller with regards to interest on the price of goods from the date on which payment becomes due, the seller may recover interest from a buyer. But if no such agreement then, the seller may charge interest from the day he notifies the buyer.
Repudiation of the contract before the due date
According to Section 60, the rule of anticipatory breach of contract applies, wherein, if buyer renounces the contract before the date of delivery, the seller can consider the contract as withdrawn and can sue for damages of the breach.
RIGHTS AGAINST GOODS
Lien is a right which seller can exercise if the buyer fails to pay the price of goods, under this right seller can retain the possession of goods as an agent or bailee for the buyer. The seller can retain his possession as per Section 47 under the following circumstances:
In case the buyer is insolvent.
When the term of goods sold on credit is expired.
Goods sold without any stipulation as to credit.
When the goods have been transferred to carrier or bailee for the purpose of transmission to the buyer, who has become insolvent, the seller has the right to stop the goods in transit in order to protect himself against any loss that may arise due to insolvency. Under Section 50, there are four requirements for stopping the goods in transit:
Property should have passed to the buyer.
Property should be in the course of transit.
Exercising the right of lien or stoppage does not withdraw the agreement but reselling of goods does.
The unpaid seller can exercise this right under following conditions and circumstances-
1- Seller before reselling the goods needs to send a notice to the buyer.
2- If there is any loss in the resale of goods he can claim the loss from the buyer.
3- Seller gives fair ownership to the buyer after the resale. It does not matter if a notice of resale is given or not to the defaulted buyer.
4- Sometimes the seller reserves exclusive right to resale the goods if the buyer makes a default in payment, in such cases the buyer cannot ask for profit on resale.
For instance, R V Ward V. Bignall ( 1 QB 534), there was a contract of sale of two cars, vanguard and zodiac for 850$. The buyer deposited 25$ but afterwards did not pay the price despite a reasonable notice. The seller then tried to resell but could only find a vanguard for 359$. He then claimed damages for 475$ representing the balance of price and 22$ as advertising expenses. Court held that once the seller resells the goods the contract is annulled and he cannot claim the money but he can ask for advertising expenses and a shortfall in the price of the vanguard.