Rights of Unpaid Seller against Buyer | UGC NET Commerce Preparation Course PDF Download

In any contract, there is a mutual obligation. This applies to a sales contract as well, where both the buyer and the seller have responsibilities to fulfill. If the buyer fails to pay the seller, the seller becomes an unpaid seller. This status entitles the unpaid seller to certain rights against the buyer. Let's explore these rights.

Rights of an Unpaid Seller Against the Buyer

• Action for the Price: If the goods have already been transferred to the buyer but the buyer refuses to pay, the seller, now an unpaid seller, can initiate legal action to recover the price. If the sales contract specifies that payment is due at a later date regardless of delivery, and the buyer refuses to pay on that date, the seller can still sue for the payment. The delivery of the goods does not affect the seller's right to sue under these circumstances.
• Action for Damages for Non-Acceptance: If the buyer wrongfully refuses to accept the goods or make payment, the seller can claim damages for the loss incurred. The amount of damages is determined according to Section 73 of the Indian Contract Act, 1872, which outlines the rules for compensation. For example, if a seller agrees to sell 100 liters of milk to a buyer, and the buyer refuses to accept it without justification, causing the milk to spoil, the seller can seek damages for the loss.
• Repudiation of Contract Before Due Date: If a buyer repudiates the contract before the agreed delivery date, the seller can still seek damages for the breach. This situation is considered a rescinded contract and is governed by the Indian Contract Act under the concept of anticipatory breach of contract.
• Action for Interest: If there is a specific agreement on the interest rate between the seller and the buyer, the seller can sue for the interest amount due. If no specific terms are set, the court may still award interest at a rate deemed appropriate.

Remedies of Buyer Against the Seller

A seller, like the buyer, has the option to cancel the contract under certain conditions. If the seller breaches the contract, the buyer has various remedies available. Let’s explore some remedies provided by the Sales Act for the buyer:

• Damages for Non-Delivery: If the seller wrongfully or carelessly fails to deliver the goods, the buyer can claim damages for non-delivery. Under Section 57 of the Sale of Goods Act, if the seller’s wrongful actions (like non-delivery) cause losses, the buyer can seek compensation for these damages.
  For instance, if A agrees to sell B 10 pairs of shoes at 1000/- each, and B plans to sell them to C for 1100/- each, but A fails to deliver, B can sue A for non-delivery. B can claim the difference of 100/- per pair, totaling 1000/-.
• Suit for Specific Performance: If the seller breaches the contract, the buyer can request the court to enforce specific performance. This remedy is applicable only if the goods are specific or identified.
  For example, if A and B have a contract where A will sell B a valuable painting on a particular date and A refuses to sell on that date, B can petition the court to order A to deliver the painting at the agreed price.
• Suit for Breach of Warranty: If the seller breaches the warranty of the goods, the buyer has two options:
  • Set up the breach of warranty as a reason to reduce the price.
  • Sue the seller for the warranty breach.
• Repudiation of Contract: If the seller rejects the contract, the buyer is not obligated to wait for the contract date. The buyer can consider the contract canceled and seek damages immediately, which constitutes an anticipatory breach of contract.
• Sue for Interest: The Act clarifies that the right to recover interest or special damages as specified by the contract remains unaffected. If the contract doesn’t specify, the court may intervene to assist the aggrieved party.