Business Laws · The Sale of Goods Act, 1930

Unpaid Seller and Rights Against Goods: CA Foundation Business Laws

Updated 4 October 2026 · Fact-checked

An unpaid seller is a seller who has not received the whole price, or whose negotiable instrument was dishonoured. Against the goods, the seller has three rights: lien while in possession, stoppage in transit if the buyer is insolvent, and resale as the Act limits it. Identify the facts, match the right, then conclude.

Understand Unpaid Seller and Rights Against Goods

A seller who delivers goods but is not paid needs protection. The Sale of Goods Act, 1930 gives this protection through the unpaid seller rules. They matter because ownership may already have passed to the buyer, yet the seller still holds the goods or can still reach them.

Under Section 45, a seller is an unpaid seller in two cases. First, when the whole price has not been paid or tendered. Second, when a bill of exchange or other negotiable instrument was received as conditional payment and the condition failed, for example because the instrument was dishonoured. The term also covers a person in the seller's position, such as an agent to whom the bill of lading has been endorsed, or a consignor or agent who has paid or is directly responsible for the price.

Section 46 gives the unpaid seller three rights against the goods, even if the property has passed to the buyer: a lien while he is in possession, stoppage in transit if the buyer becomes insolvent and the seller has parted with possession, and a right of resale as limited by the Act. If the property has not passed, the seller has a right of withholding delivery that is similar to and co-extensive with lien and stoppage in transit.

The simplest way to remember the difference: lien works when the goods are still with the seller. Stoppage in transit works when the goods have left the seller but have not reached the buyer, and only if the buyer is insolvent. Resale is what the seller may do if the buyer still does not pay.

This page covers rights against the goods. Rights against the buyer personally, such as a suit for the price or for damages, are in the separate topic on remedies for breach of contract of sale.

Key rules to remember

Unpaid seller (Section 45): Whole price not paid or tendered, OR negotiable instrument received as conditional payment and dishonoured; Includes an agent of the seller to whom the bill of lading is endorsed, or a consignor or agent who has paid or is directly responsible for the price.
Rights against the goods (Section 46): Lien + Stoppage in transit + Resale (as limited by the Act); Available even if the property has passed to the buyer. If property has not passed, a right of withholding delivery exists, similar to and co-extensive with these rights.
When lien can be exercised (Section 47): Seller in possession AND (no credit stipulated OR credit term expired OR buyer insolvent); The seller may retain the goods until payment or tender of the price. He can do so even if he holds the goods as agent or bailee for the buyer.
Termination of lien (Section 49): Delivery to carrier without reserving right of disposal; buyer or agent lawfully obtains possession; waiver; A decree for the price alone does not end the lien.
Part delivery (Section 48): Lien on the remainder unless part delivery shows an agreement to waive the lien; Part delivery does not by itself end the lien on the rest.
Stoppage in transit (Section 50): Buyer insolvent + seller has parted with possession + goods in course of transit; The seller may resume possession and retain the goods until payment or tender of the price.
How stoppage is effected (Section 52): Take actual possession OR give notice of claim to the carrier or bailee (or his principal); If notice goes to the principal, it must allow time, by reasonable diligence, to reach the servant or agent before delivery. The seller bears the re-delivery expenses.
Sub-sale or pledge by buyer (Section 53): Seller's rights are not affected unless the seller assented; exception for a document of title transferred in good faith for consideration; If the document is transferred by sale, the seller's lien or stoppage is defeated. If by pledge, the right is exercisable only subject to the transferee's rights.
Resale (Section 54): Goods perishable OR notice of intention to resell given, buyer fails to pay within a reasonable time, then seller may resell and claim damages; Without notice, the seller cannot recover damages and the buyer gets any profit. With notice, the buyer gets no profit. A resale gives the new buyer good title against the original buyer.

How to solve Unpaid Seller and Rights Against Goods questions

Use this order for any problem or theory question on unpaid seller. It keeps your answer in the provision, facts, conclusion structure.

1Check whether the seller is an unpaid seller under Section 45: is any price unpaid, or was a cheque or bill dishonoured?
2Note where the goods are: with the seller, with a carrier or bailee, or with the buyer.
3If the goods are with the seller, test lien under Section 47: no credit, credit expired, or buyer insolvent. Then check for termination under Section 49 and part delivery under Section 48.
4If the goods are with a carrier, test stoppage in transit: is the buyer insolvent, and are the goods still in transit? State how it is effected under Section 52.
5Check for a sub-sale or pledge by the buyer under Section 53 and whether the seller assented or a document of title passed in good faith.
6If the seller wants to resell, check Section 54: is the contract rescinded, was notice given, and who gets any profit or loss?
7Write the conclusion in one line: which right applies, whether it is valid, and what the seller can do next.

Quickest way: Location of goods and buyer's solvency

When to use it: Use when you have a short fact-based question and little time. Two facts decide most answers.

Ask first: where are the goods? With seller means lien. With carrier means stoppage in transit. With buyer means both rights are usually gone.
Ask second: is the buyer insolvent? Stoppage in transit needs insolvency. Lien needs it only if credit was given and has not expired.
Ask third: has the seller delivered to a carrier without reserving the right of disposal? If yes, lien ends, but stoppage may still be available.
Write section numbers next to each point in your answer, then give the conclusion in one line.

Common mistakes in Unpaid Seller and Rights Against Goods

Saying stoppage in transit is available whenever the buyer does not pay.
Students confuse non-payment with insolvency.
Fix: Stoppage in transit under Section 50 needs the buyer to become insolvent. Mere default is not enough.
Thinking the seller loses lien once the property passes to the buyer.
Students link lien with ownership.
Fix: Section 46 gives the rights even though the property has passed. Lien depends on possession and non-payment, not ownership.
Saying lien ends after a decree for the price.
Students think the remedy has been used up.
Fix: Under Section 49(2), the seller does not lose his lien only because he obtained a decree for the price.
Believing a rescinded contract follows every lien or stoppage.
Students assume taking back goods cancels the sale.
Fix: Under Section 54(1), the contract is not rescinded by the mere exercise of lien or stoppage. It is rescinded if the seller expressly reserved a right of resale and resells on default.
Ignoring the notice requirement before resale.
Students remember only that resale is allowed.
Fix: Without notice of intention to resell, the seller cannot recover damages and the original buyer gets any profit. The new buyer still gets good title.
Treating part delivery as ending the lien on the whole.
Students over-read the delivery rule.
Fix: Under Section 48, the seller can exercise lien on the remainder unless the circumstances show an agreement to waive it.

Worked examples

Example 1

A sells 100 bags of rice to B on credit for 30 days. After 10 days, A hears B has become insolvent. The rice is still in A's warehouse. Can A refuse to deliver? Would your answer change if the credit term had not expired and B were solvent?

Show the solution

Provision: Under Section 47(1)(c), an unpaid seller in possession may retain the goods until payment or tender of the price where the buyer becomes insolvent. Section 45 makes A an unpaid seller as the price is unpaid.
Facts: B is insolvent and the rice is still in A's possession.
Application: Even though credit has not expired, A can exercise lien because B is insolvent.
Variation: If B were solvent and the credit term had not expired, none of the Section 47 cases would apply, so A would have no lien and must deliver.

Answer: Yes. A can retain the rice under Section 47(1)(c) because B is insolvent and A is in possession. If B were solvent and the credit term had not expired, A would have no lien.

Example 2

X in Mumbai sells goods to Y in Delhi for ₹2,00,000 and hands them to a transporter, without reserving the right of disposal. While the goods are on the way, X learns that Y has become insolvent. Advise X. Can he stop the goods?

Show the solution

Provision: Section 49(1)(a) ends lien when goods are delivered to a carrier without reserving the right of disposal. So X has lost lien.
Check stoppage: Under Section 50, if the buyer becomes insolvent, the unpaid seller who has parted with possession may stop the goods while they are in transit.
Facts: Y is insolvent, the price is unpaid, and the goods are still with the transporter.
Method: Under Section 52, X can stop the goods by taking actual possession or by giving notice of his claim to the transporter. The transporter must re-deliver according to X's directions, and X bears the expenses.
Consequence: Under Section 54(1), the contract is not rescinded merely by stoppage. X may retain the goods until payment or tender of the price.

Answer: X has lost lien but can exercise the right of stoppage in transit. He should give notice to the transporter or take possession. He bears the re-delivery cost and may retain the goods until the price is paid or tendered.

Exam tips

Always begin with Section 45 to establish that the seller is unpaid. Examiners give marks for this first step.
For lien versus stoppage questions, write one line for each: possession, trigger, and end of right. Then compare.
Write section numbers only where you are sure. The ones on this page match the Act text.
In resale problems, always mention notice, because it decides who gets profit and who can claim damages.
Give a one-line conclusion after your reasoning. A clear conclusion earns marks even if the reasoning is brief.

Practice questions from The Sale of Goods Act, 1930

Unpaid Seller and Rights Against Goods: frequently asked questions

What is the difference between lien and stoppage in transit?

Lien is the right to retain goods while they remain in the seller's possession. Stoppage in transit is the right to resume possession of goods already handed to a carrier, and it applies only when the buyer becomes insolvent.

Who is an unpaid seller under the Sale of Goods Act?

Under Section 45, a seller is unpaid when the whole price has not been paid or tendered. He is also unpaid when a negotiable instrument was taken as conditional payment and was dishonoured. An agent or consignor who is directly responsible for the price can also qualify.

Can an unpaid seller resell the goods?

Yes, as limited by the Act. Under Section 54, if the goods are perishable or the seller gave notice of intention to resell and the buyer does not pay in a reasonable time, he may resell and claim damages for loss. Without notice, he cannot recover damages and the buyer gets any profit.

When does an unpaid seller lose his lien?

Under Section 49, he loses it by delivering the goods to a carrier without reserving the right of disposal, when the buyer or his agent lawfully obtains possession, or by waiver. Obtaining a decree for the price does not end the lien.