Fundamentals of Business Laws and Business Communication · Sale of Goods Act, 1930

Unpaid Seller and Rights Against Goods Explained

Updated 10 October 2026 · Fact-checked

An unpaid seller is a seller who has not received the full price, or who received a bill or negotiable instrument that was dishonoured. Against the goods, the seller can exercise lien, stoppage in transit and resale. Against the buyer personally, the seller can sue for price or damages.

Understand Unpaid Seller and Rights Against Goods

A seller who delivers goods and does not get paid is in a weak position. The Sale of Goods Act, 1930 gives such a seller some protection. This seller is called an unpaid seller.

A seller is unpaid when the whole price has not been paid or tendered, or when a bill of exchange or other negotiable instrument was received as conditional payment and has been dishonoured. Possession of the goods is not a condition of being an unpaid seller. The seller may still hold the goods or may have already parted with them. The term also covers an agent of the seller, such as a consignor or an agent who has paid the price himself.

The unpaid seller has two sets of rights. Rights against the goods are lien, stoppage in transit and resale. These work even if ownership has already passed to the buyer. Rights against the buyer personally are a suit for the price and a suit for damages for non-acceptance.

Lien means the right to keep the goods until the price is paid. It needs possession. Stoppage in transit applies after the seller has parted with possession: if the buyer becomes insolvent while the goods are with a carrier, the seller can take back possession. Resale is dealt with in Section 54. An unpaid seller may sell the goods to someone else in certain situations: when the goods are perishable, when the seller gave notice of intention to resell and the buyer still did not pay in a reasonable time, or when the contract expressly reserved the right of resale. The seller does not have to exercise lien or stoppage first before this right of resale arises.

Notice matters for the seller's claim against the original buyer. If the seller resells after notice, or the goods are perishable, the seller can recover any loss from the original buyer. If the seller resells non-perishable goods without giving notice, the seller cannot claim any loss from the buyer, and the buyer is entitled to any profit made on the resale.

The buyer also has remedies if the seller breaks the contract. The buyer can sue for damages for non-delivery, sue for specific performance of specific goods, sue for breach of warranty, or repudiate the contract for breach of a condition. For a breach of condition, the buyer may instead choose to treat it as a breach of warranty. The right to repudiate is lost once the buyer has accepted the goods (Section 13).

Key formulas to remember

Who is an unpaid seller: Unpaid seller = price not fully paid or tendered, or bill/cheque received as conditional payment dishonoured; Possession of the goods is not a condition. Includes an agent of the seller, such as a consignor or agent who has paid the price himself.
Right of lien: Lien = seller keeps possession until price is paid; Available when goods were sold without credit, when credit term has expired, or when the buyer becomes insolvent. Needs possession.
Loss of lien: Lien ends on: delivery to a carrier or other bailee for transmission to the buyer without reserving right of disposal, buyer or his agent lawfully obtaining possession, or waiver; Part delivery does not end lien on the rest, unless it shows an agreement to waive it.
Stoppage in transit: Conditions: seller unpaid + goods in transit + buyer insolvent; Seller resumes possession and keeps goods until the price is paid. Transit ends when the buyer or his agent takes delivery.
Right of resale: Resale (Section 54) by an unpaid seller, allowed if: goods perishable, or seller gives notice and buyer does not pay in reasonable time, or right of resale was expressly reserved; Prior exercise of lien or stoppage is not a precondition. On resale after notice, or where the goods are perishable, the seller can recover any loss from the original buyer. On resale of non-perishable goods without notice, the seller cannot claim loss from the buyer and the buyer takes any profit.
Rights against buyer personally: Suit for price (property passed, or price payable on a fixed day) | Suit for damages for non-acceptance; Damages are the estimated loss arising naturally from the buyer's breach.

How to solve Unpaid Seller and Rights Against Goods questions

Use this method for any question on the unpaid seller or the remedies for breach of a sale contract.

1Check if the person is an unpaid seller: is the price unpaid, or was the instrument dishonoured?
2Identify who has possession of the goods: seller, carrier or buyer.
3If the seller still holds the goods, think of lien. Check the conditions: no credit given, credit expired or buyer insolvent.
4If the goods are with a carrier and the buyer is insolvent, think of stoppage in transit.
5If the goods are perishable or notice was given and ignored, think of resale.
6If the seller wants money, not goods, think of a suit for price or damages.
7If the buyer is the one complaining, match the breach to a remedy: non-delivery, breach of warranty or breach of condition.
8Pick the option that fits the facts and does not mix up lien with stoppage.

Quickest way: Possession test

When to use it: Use this when an MCQ describes a seller who has not been paid and asks which right applies.

Ask: where are the goods now?
With the seller: lien.
With a carrier and the buyer is insolvent: stoppage in transit.
With the buyer: lien is lost and stoppage is not available. The seller's main remedies are a suit for price or damages.
If the goods are perishable or notice was given: resale is also possible.
Eliminate options that name a right which does not match the location of the goods.

Common mistakes in Unpaid Seller and Rights Against Goods

Thinking an unpaid seller loses all rights once ownership passes to the buyer.
Students link rights over goods with ownership.
Fix: Remember that lien, stoppage and resale can be used even after the property in the goods has passed to the buyer.
Applying stoppage in transit when the buyer is solvent.
Students forget the insolvency condition.
Fix: Stoppage needs three things: unpaid seller, goods in transit and insolvent buyer.
Using lien when goods are already with the carrier.
Lien and stoppage look alike because both delay delivery.
Fix: Lien needs the seller's possession. Stoppage applies after the seller has parted with possession.
Believing part delivery always ends lien on the balance.
Students over-generalise the rule.
Fix: Part delivery does not end lien on the rest unless the circumstances show the seller agreed to waive it.
Confusing a suit for price with a suit for damages.
Both are money claims.
Fix: Suit for price lies where property has passed or the price is payable on a fixed day. Damages are for non-acceptance when neither applies.
Treating the buyer's remedies as the seller's.
Questions on breach mix both sides.
Fix: Read who suffered the breach first. Then pick from the buyer's list or the seller's list.

Worked examples

Example 1

Ravi sells 100 bags of rice to Meena for ₹50,000 on cash terms. Meena has not paid, and the rice is still in Ravi's godown. Which right can Ravi use? (A) Stoppage in transit (B) Right of lien (C) Suit for specific performance by buyer (D) None

Show the solution

Ravi has not received the price, so he is an unpaid seller.
The sale was on cash terms, so no credit was given.
The goods are still in Ravi's possession, not with a carrier.
Lien needs possession by the seller, so it applies.
Stoppage in transit needs goods in transit, so it does not apply.

Answer: (B) Right of lien

Example 2

Anil in Delhi sells goods worth ₹2,00,000 to Bhavna in Pune and hands them to a transporter. Before the goods reach Pune, Anil learns that Bhavna has become insolvent and has paid nothing. What can Anil do?

Show the solution

Anil has not been paid, so he is an unpaid seller.
The goods are with a carrier, so they are in transit.
Bhavna is insolvent, so the third condition is met.
Anil is no longer in possession, so lien is not available.
Anil can therefore exercise the right of stoppage in transit and take back possession until the price is paid.

Answer: Anil can stop the goods in transit and retain them until the price is paid.

Exam tips

Most MCQs test the difference between lien and stoppage in transit. Decide by who holds the goods.
Remember that insolvency of the buyer is a condition for stoppage in transit.
Read whether the question asks about rights against goods or against the buyer personally.
For buyer remedies, match the breach: non-delivery gives damages, specific goods can give specific performance, breach of warranty gives damages.
Eliminate options that mix up the terms, such as stoppage used where goods are still at the seller's shop.

Practice questions from Sale of Goods Act, 1930

Unpaid Seller and Rights Against Goods in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Unpaid Seller and Rights Against Goods: frequently asked questions

Who is an unpaid seller?

A seller is unpaid when the whole price has not been paid or tendered, or when a bill of exchange or other negotiable instrument received as conditional payment is dishonoured. An agent of the seller can also be an unpaid seller.

What is the difference between lien and stoppage in transit?

Lien is the right to keep goods that are still in the seller's possession until the price is paid. Stoppage in transit is the right to regain possession of goods already handed to a carrier when the buyer becomes insolvent. The key difference is possession.

Can an unpaid seller resell the goods?

Yes, under Section 54. The cases are when the goods are perishable, when the seller gave notice of intention to resell and the buyer did not pay in a reasonable time, or when the right of resale was expressly reserved in the contract. The seller does not have to exercise lien or stoppage first. After notice, or for perishable goods, the seller can claim any loss from the original buyer. If non-perishable goods are resold without notice, the seller cannot claim loss and the buyer takes any profit.

What remedies does a buyer have for breach of contract by the seller?

The buyer can sue for damages for non-delivery and can sue for specific performance where the goods are specific. For breach of warranty, the buyer can claim damages or reduce the price. For breach of a condition, the buyer may repudiate the contract, or choose to treat it as a breach of warranty. The right to repudiate is lost once the buyer accepts the goods (Section 13).