Business Laws and Ethics · Sale of Goods Act, 1930

Unpaid Seller: Rights and Remedies for Breach

Updated 10 October 2026 · Fact-checked

An unpaid seller is a seller who has not received the full price. Even after property passes, the seller has by law a lien on goods in his possession, a right to stop goods in transit if the buyer becomes insolvent, and a right of resale as limited by the Act. Identify the stage of the goods, then apply the matching right.

Understand Unpaid Seller and Remedies for Breach

A seller who has delivered goods but not been paid, or who still holds goods the buyer has not paid for, needs protection. The Sale of Goods Act, 1930 gives that protection through rights against the goods themselves. These rights exist by implication of law, even if the property in the goods has already passed to the buyer (Section 46(1)).

The three rights against the goods are: lien (retain possession), stoppage in transit (take the goods back while with a carrier) and resale. The key question is always where the goods are. If the seller still has them, think lien. If they are with a carrier on the way to the buyer, think stoppage in transit.

If the property has not passed to the buyer, the seller has, in addition to his other remedies, a right of withholding delivery that is similar to and co-extensive with lien and stoppage in transit (Section 46(2)).

Beyond the goods, the unpaid seller can also act against the buyer personally, for example by suing for the price or for damages for non-acceptance. Similarly, a buyer who suffers a breach by the seller has his own remedies, such as suing for damages. In the exam, always say who is claiming, what right is used and what the conditions are.

The parties can change these implied rights by express agreement, course of dealing or binding usage (Section 62). So a contract term can vary what the Act would otherwise give.

Key rules to remember

Unpaid seller's rights against the goods (S.46(1)): Lien + Stoppage in transit + Resale (as limited by the Act); These arise by implication of law, even if property has passed to the buyer.
Lien: when it can be used (S.47(1)): Seller in possession AND (no credit stipulated OR credit term expired OR buyer insolvent); The seller retains possession until payment or tender of the price. It can be exercised even if he holds the goods as agent or bailee for the buyer (S.47(2)).
Termination of lien (S.49(1)): Lost by: (a) delivery to carrier without reserving right of disposal; (b) buyer or his agent lawfully obtains possession; (c) waiver; A decree for the price does not by itself end the lien (S.49(2)).
Part delivery (S.48): Lien continues on the remainder; Unless the part delivery shows an agreement to waive the lien.
Stoppage in transit (S.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 (S.52): Take actual possession OR give notice of claim to carrier/bailee; The carrier must re-deliver as the seller directs, and the seller bears the expenses of re-delivery.
Effect of sub-sale or pledge by buyer (S.53): Seller's rights not affected unless seller assented; Exception: a document of title transferred in good faith and for consideration. If by sale, the seller's right is defeated. If by pledge, it is exercisable only subject to the transferee's rights.
Resale (S.54): Lien or stoppage does not rescind the contract. Resale is permitted if goods are perishable, OR if the seller gave notice of intention to resell and the buyer did not pay or tender the price within a reasonable time; If notice was given and the buyer did not pay within a reasonable time, the seller may resell within a reasonable time and recover any loss from the buyer, and the buyer gets no profit. If notice was not given, the seller cannot recover damages and the buyer gets any profit on the resale (S.54(2)).
Express reservation of resale (S.54(4)): Right reserved in contract + buyer defaults + seller resells = original contract rescinded; The seller's claim for damages is not affected.
Buyer's remedy for breach of warranty (S.59): No right to reject goods; may set up breach against price or sue for damages; Setting up breach against the price does not stop a later suit for further damage.

How to solve Unpaid Seller and Remedies for Breach questions

Use this order for any problem on the unpaid seller or remedies.

1Confirm the seller is unpaid: price not paid or tendered in full, or a bill or negotiable instrument dishonoured.
2Locate the goods: with the seller, with a carrier, or already with the buyer.
3If with the seller, test lien under Section 47: no credit term, credit expired, or buyer insolvent. Check whether any ground in Section 49 ends the lien.
4If with a carrier, test stoppage in transit: buyer must be insolvent and the seller must have parted with possession. State how it is done (actual possession or notice to carrier, Section 52).
5Check for a sub-sale or pledge by the buyer (Section 53) and whether a document of title went to a good faith transferee for consideration.
6If resale is proposed, check the Section 54 conditions: perishable goods, or notice of intention to resell followed by buyer's failure to pay within a reasonable time. Then work out who bears loss and who gets profit.
7Add the personal remedies against the buyer and any buyer's remedy asked for, and state the final conclusion in one line.

Quickest way: Where are the goods? test

When to use it: Use this for short case-law style questions and MCQs on which right is available.

Goods with the seller: lien.
Goods with a carrier and buyer insolvent: stoppage in transit.
Goods unsold and buyer in default: resale, if the goods are perishable, or after notice of intention to resell and the buyer's failure to pay within a reasonable time. Without notice, the seller cannot recover damages and the buyer gets any profit.
Goods already with the buyer: no right against the goods, so remedy is against the buyer (suit for price or damages).
Check for loss of the right: delivery to carrier without reserving disposal, buyer obtaining possession, waiver, or a good faith document of title transfer.

Common mistakes in Unpaid Seller and Remedies for Breach

Stating that the unpaid seller can stop goods in transit whenever the buyer fails to pay.
Students mix the conditions of lien and stoppage in transit.
Fix: Under Section 50 stoppage needs buyer's insolvency, and the goods must be in transit after the seller has parted with possession.
Saying the unpaid seller has no rights once property has passed.
Students link all seller rights to ownership.
Fix: Section 46(1) gives the rights notwithstanding that property has passed to the buyer.
Thinking lien or stoppage cancels the contract.
Retaining goods feels like ending the deal.
Fix: Under Section 54(1) the contract is not rescinded by the mere exercise of lien or stoppage.
Letting the seller keep resale profit or claim damages without giving notice.
Students forget the notice condition.
Fix: State the rule as Section 54(2) words it. The seller may resell where the goods are perishable, or where he has given notice of his intention to resell and the buyer does not pay or tender the price within a reasonable time. If such notice is not given, the seller cannot recover damages and the buyer is entitled to the profit, if any, on the resale. So in an answer, say that notice should be given before resale.
Saying a buyer can reject goods for any breach of warranty.
Students confuse warranty with condition.
Fix: For breach of warranty, Section 59 allows only reduction of price or damages, not rejection.
Saying lien ends because the seller got a court decree for the price.
Students assume a decree replaces other rights.
Fix: Section 49(2) says the lien is not lost by reason only of a decree for the price.

Worked examples

Example 1

Rohan Traders in Pune sold 200 bags of rice to Meena Stores on 30 days' credit. Goods are still in Rohan's godown. On day 10, Meena becomes insolvent. Can Rohan refuse delivery?

Show the solution

Rohan is an unpaid seller, as the price is not paid.
The goods are in his possession, so lien is the relevant right.
Under Section 47(1)(c), lien is available where the buyer becomes insolvent, even though the credit term has not expired.
None of the Section 49 grounds to lose the lien applies, since there is no delivery to a carrier, no buyer possession and no waiver.

Answer: Yes. Rohan can retain the goods until payment or tender of the price, because Meena has become insolvent.

Example 2

Anand Mills in Surat dispatched cloth by transport to Kiran Garments on credit. While the goods are with the carrier, Anand learns that Kiran has become insolvent. Advise Anand. Also, if Anand later wants to resell, what must he do?

Show the solution

Anand has parted with possession by delivering the goods to the carrier. His lien ends on that delivery unless he reserved the right of disposal (Section 49(1)(a)). The facts do not say, so Anand should not rely on lien. He relies on stoppage in transit instead.
Section 50 allows stoppage when the buyer becomes insolvent, the seller has parted with possession and the goods are in transit. Kiran is insolvent and the goods are with the carrier, so the conditions are met.
Anand can stop by taking actual possession or by giving notice of his claim to the carrier (Section 52(1)). The carrier must then re-deliver as Anand directs, and Anand bears the re-delivery expenses (Section 52(2)).
Stoppage does not rescind the contract (Section 54(1)).
For resale, the goods are not stated to be perishable, so Anand should give notice of his intention to resell. If Kiran does not pay or tender the price within a reasonable time, Anand may resell within a reasonable time and recover damages for any loss, but Kiran gets no profit (Section 54(2)).
If Anand resells, the new buyer gets a good title against Kiran even without notice to Kiran (Section 54(3)).

Answer: Anand can stop the cloth in transit under Section 50, by taking possession or by notice to the carrier, whether or not he reserved the right of disposal, because Kiran is insolvent and the goods are in transit. He should give notice of resale, wait a reasonable time for payment, then resell and claim any loss from Kiran.

Exam tips

Start every answer by naming the rights under Section 46 and say they exist even if property has passed.
Write a short lien versus stoppage comparison in the answer: possession with seller versus goods with carrier, and the insolvency condition for stoppage.
For MCQs, check the condition words: insolvent, in transit, notice, perishable.
Quote section numbers only for the ones you are sure of, such as 46, 47, 49, 50, 52, 53, 54 and 59, as given in the Act.
In case-style answers, finish with a one-line conclusion on what the seller or buyer can do.

Practice questions from Sale of Goods Act, 1930

Unpaid Seller and Remedies for Breach 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 Remedies for Breach: frequently asked questions

What is the difference between lien and stoppage in transit?

Lien is the right to retain goods that are still in the seller's possession. Stoppage in transit is the right to resume possession of goods already handed to a carrier, and it arises when the buyer becomes insolvent. Both are exercised until payment or tender of the price.

Does the contract end when the seller exercises lien or stoppage?

No. Section 54(1) says the contract is not rescinded by the mere exercise of lien or stoppage in transit. The contract ends on resale only in the way the section describes, such as where the seller expressly reserved a right of resale and resells on default.

When can an unpaid seller resell the goods?

He can resell if the goods are perishable, or if he gave the buyer notice of his intention to resell and the buyer did not pay or tender the price within a reasonable time. He may then recover any loss from the buyer but the buyer does not get any profit. Without notice, the buyer is entitled to the profit.

Can a buyer reject goods for breach of warranty?

No. Under Section 59, he may set up the breach against the price or sue for damages. He may still sue for further damage if he has suffered it.