Short notes on the Effect of Re-sale of Unpaid Seller

1. Where on re-sale there is a profit, the seller is entitled to retain it.

2. On the other hand if there is a loss, the seller can recover his loss from the buyer.

3. The second buyer will get good title to the goods irrespective of the fact whether notice of re­sale was given or not.

4. By re-sale, the original contract is not rescinded, as such, a reference to arbitration can still be made.

5. Right of re-sale does not bar other remedies.

(b) Rights of an unpaid seller when property in the goods has not passed.

(i) Right to withhold delivery:

When the property in the goods has not passed to the buyer, an unpaid seller can withhold delivery of goods. This right is similar to and coextensive with his rights of lien and stoppage in transit which are exercised when the property in the goods has passed.

(ii) Right of stoppage in transit.

As already discussed: Effect of sub-sale or pledge by the buyer on the right of lien-or stoppage in transit (Sec. 53)

According to Sec. 53(1), the seller’s right of lien or stoppage in transit is not affected by any sale, pledge or other disposition of the goods by the buyer, unless the seller has assented to it.

Exceptions :

However, if a document title to the goods, e.g., bill of lading has been issued or lawfully transferred to the buyer and the buyer transfers the document to a bona fide purchaser for value who take it in good faith, then –

1. If such transfer by the buyer is a sale, i.e., absolute transfer of property in the goods, the seller’s right is completely defeated.

Example:

A sold goods to B and sent the bill of lading to B. B before making payment of the goods, transferred the bill of lading to C in consideration of purchasing C’s house. Thereafter, B became insolvent. A’s right to stop goods is defeated and C has a good title to the goods.

2. If such transfer is a pledge, i.e., some interest in the goods is transferred, the seller’s right is not completely defeated but is only subject to such right.

Example:

A sold certain goods to B and transferred bill of lading to him. B without paying for goods, pledges the bill with C for Rs. 4,000. Thereafter, B became insolvent. A can get the bill of lading subject to paying a sum of Rs. 4,000 to C.

(I) Rights of unpaid seller against the buyers personally (Sees. 55 to 61) :

So far we have discussed the rights of an unpaid seller against the goods. Besides, there are certain rights which are available against the buyer personally. Such rights are in the nature of jus in personam, i.e., rights in personam. These rights are as follows:

(1) Suit for Price :

(a) Where property has passed [Sec. 55 (1)]:

Where under a contract of sale, the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuse to pay for the goods, the seller may sue him for the price of the goods.

(b) Where property in the goods has not passed:

As a rule, where property in the goods has not passed, the seller cannot file a suit for price. His remedy is by way of damages. However, Sec. 55(2) provides that where under the contract of sale, price is payable on a certain day, irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract.

2. Suit for damages for non-acceptance (Sec. 56):

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non- acceptance. The measure of damages, however, is given in Sec. 73 of the Indian Contract Act.

3. Right to repudiate contract before the due date (Sec. 60):

Where either party to a contract repudiates the contract before the date of delivery, the other party may either treat the contract as subsisting or wait till the date of delivery. The seller may treat the contract as rescinded and sue for damages for the breach.

4. Suit for interest:

As a rule, interest is not payable, unless otherwise agreed. As such interest may be recovered only when there is a specific agreement is this respect. In case there is no such agreement, the seller may give notice to the buyer of his intention to charge interest on the price when it becomes payable from the day, as indicated in the above notice.

Again, where the price is to be paid on a particular day, interest will be payable from that day. However, where no date was fixed for payment and no demand was made, no interest is allowed.