The Sale of Goods Act, 1930 governs the rights and duties of both sellers and buyers in a sale transaction. Two important aspects under this Act are the rights of an unpaid seller and the rights of a buyer.
This article explains these rights clearly and simply for UGC NET Commerce preparation.
Who is an Unpaid Seller?
An unpaid seller is one:
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To whom the whole price has not been paid, or
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Who has received a negotiable instrument (like a cheque) as payment, but it has been dishonored.
Example:
A sells goods worth ₹10,000 to B. B issues a cheque, but the cheque bounces. A is now an unpaid seller.
Rights of an Unpaid Seller
The rights of an unpaid seller are divided into two categories:
a. Rights Against the Goods
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Right of Lien
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The seller can keep possession of the goods until the full price is paid.
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Applicable when goods are still with the seller.
Example:
A refuses to hand over a laptop to B until full payment is received. -
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Right of Stoppage in Transit
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If goods are in transit and the buyer becomes insolvent, the seller can stop the goods and regain possession.
Example:
A sends goods by courier. On learning that B has become bankrupt, A can instruct the courier to return the goods. -
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Right of Resale
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The seller can resell the goods under certain conditions, especially if the goods are perishable or if the buyer fails to pay even after notice.
Example:
A sells fresh fruits to B. B delays payment. A resells the fruits to another customer. -
b. Rights Against the Buyer Personally
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Suit for Price
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The seller can sue the buyer to recover the agreed price.
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Suit for Damages for Non-Acceptance
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If the buyer wrongfully refuses to accept the goods, the seller can claim compensation for loss.
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Suit for Cancellation of Contract
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If the buyer repudiates the contract before the due date, the seller may treat the contract as canceled and claim damages.
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Rights of the Buyer
The buyer also enjoys several rights under the Sale of Goods Act, 1930:
a. Right to Have Delivery
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The buyer has the right to demand delivery of goods as per the terms of the contract.
Example:
If A agrees to deliver 50 chairs on 1st July but delays, B can insist on prompt delivery.
b. Right to Reject Goods
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If goods delivered are not according to the contract (wrong quantity, quality, or description), the buyer can reject them.
Example:
If B orders cotton fabric but receives polyester, B can reject the goods.
c. Right to Sue for Damages
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The buyer can claim damages if the seller breaches the contract.
Example:
If A fails to deliver goods on time, causing loss to B, B can sue for compensation.
d. Right to Sue for Specific Performance
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In case of unique goods (like rare artwork), the buyer can demand the specific goods be delivered instead of just claiming damages.
e. Right to Repudiate Contract
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If the seller delivers goods late or breaches a fundamental condition of the contract, the buyer can cancel the contract.
Quick Recap
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Unpaid Seller’s Right of Lien:
A keeps the sold machine in his warehouse until B pays the full amount. -
Buyer’s Right to Reject:
A sends broken furniture to B. B refuses to accept the goods.
Conclusion
The Sale of Goods Act, 1930 carefully balances the interests of both sellers and buyers.
An unpaid seller has rights to protect against loss of payment, while the buyer has rights to ensure delivery of goods as agreed.
Understanding these rights is essential for managing business transactions legally and efficiently.