Rights and Remedies of Parties to a Sale of Goods Contract

Rights and Remedies of an Unpaid Seller and Buyer

Who is an unpaid seller? An unpaid seller is a seller of goods whose price has not been paid or who has received a bill of exchange or a negotiable instrument that has been dishonored . In Glunn v Bolckow, Vaughan and Co  Lord Justice Mellish opined that if the bill is dishonored before delivery has been made then the vendor’s lien revives.

Notwithstanding that property had passed to the buyer, the unpaid seller of goods has by implication of law a lien on the goods. This is the right to retain them for the price while he is in possession. The seller exercises the lien when the goods have been sold without any stipulation as to credit, where the goods have been sold on credit but the credit terms have expired and where the buyer becomes insolvent . The seller can exercise this right notwithstanding that he is in possession of the goods as a bailee, agent or custodier of the buyer .

Lien after Part delivery

Where the unpaid seller has made part delivery he may exercise the right of lien on the remainder unless the part delivery has been made under circumstances that indicate an agreement to waive lien.

Termination of Lien

The unpaid seller loses his lien when he delivers his goods to a carrier or other bailee or custodier for the purposes of transmission to the buyer . The unpaid seller loses his lien when the buyer lawfully obtains possession of the goods and by waiver. It is to be noted that the right of suit does not extinguish the right of lien. They subsist together  

What about Part payment?

The acceptance and receipt by the seller or his authorized agent of a deposit or part of the price amounts to a sale on credit terms in respect of which he is not entitled to the remedies of an unpaid seller as he is not an unpaid seller as per Section 29(1)

Stoppage in Transitu

The General rule is that when a person sells his goods, they sell them on the credit of the buyer. If they deliver the goods property is altered. However, where delivery is distant from seller to buyer the contract is ambulatory and the buyer may stop the goods in transit. This right avails only if the buyer becomes insolvent. The seller should give notice to the carrier and take possession of goods. If the carrier refuses then he is liable however seller must elect to sue either the carrier for damages or the buyer for the price but not both. 

Right to Resell Goods

This gives the seller an opportunity to mitigate probable loss. Resale amounts to rescission of the contract. The seller can resale but not with prejudice to the right of damages . The seller may resale; when the goods are perishable, where the right of resale is reserved in the contract and where notice of resale has been given to the buyer and he has failed to tender the price within a reasonable time.

Suit for Damages

Where the property has not passed to the buyer and the buyer refuse to accept and pay for the goods Section 50 of the Sale of Goods Act entitles the seller to maintain an action against him for damages for non-acceptance.

In the absence of loss, breach per se does not attract any legal sanctions against original buyer. Damages as a remedy of common law are only intended to make good loss suffered by a party aggrieved by breach and not merely a penalty for breach. 

Suit for Recovery of Price without More

Section 49 states that where property has passed to the buyer and he neglects to pay for them. The buyer can sue for the recovery of price only.

Rights and Remedies of a Buyer

Action for Damages

Failure to deliver, belated delivery, and delivery at a place not agreed upon and delivery of goods of less quality results in loss to the buyer and as such it entitles the buyer to compensation. The action for damages lies against the loss directly and naturally resulting from the ordinary course of events from the seller’s breach of contract.

Where the seller does no deliver the goods the buyer might elect to treat the contract as repudiated but where the buyer had made payment then he or she is entitled to an action to recover the amount paid together with interest at the discretion of the court. 

Specific Performance

When the seller doesn’t deliver, the buyer may sue for an order of specific performance to compel the seller to honor his part where goods sold are specific and ascertained. It is to be noted that this is a discretionary remedy that is not granted when damages are adequate unless the goods in question are of a specific or unique value in nature.

Suit for Damages

Not all breaches in a contract go to its root. The consequence of the breach depends on the overall effect. Where there is a breach of warranty by the seller, the buyer may sue for damages but is not entitled to reject the goods and treat the contract as repudiated.

Rescission 

This occurs where a breach of a condition is fundamental to and destroys the main object of the contract for example when the seller delivers different goods than the one’s agreed upon. Edwin Peel analogizes such a situation to be an instance where one orders peas but is instead delivered beans. The buyer is entitled to reject the goods and treat the contract as repudiated.

The buyer will not be able to reject the goods if; he elects to treat he breach as a breach of warranty, if the contract is not severable and buyer has accepted goods, its best in this instance to stick to damages and in conclusion if the goods are specific and property has passed to buyer (also stick to damages).

Action for Damages in Conversion

When property has passed to the buyer and the seller refuses to surrender possession thereof, the buyer may maintain an action for damages in tort for conversion or detinue.