Business Laws and Management · Elements of Law relating to Sale of Goods

Unpaid Seller's Rights and Remedies under Sale of Goods Act

Updated 11 October 2026 · Fact-checked

An unpaid seller is a seller who has not received the full price. Under Section 46 of the Sale of Goods Act, 1930, he has three rights against the goods: lien, stoppage in transit on the buyer's insolvency, and limited resale. Solve questions by checking possession, insolvency, credit terms and notice.

Understand Performance, Unpaid Seller's Rights and Remedies

A contract of sale has two basic duties. Section 31 says the seller must deliver the goods and the buyer must accept and pay for them, as the contract says. When either side fails, the other gets remedies.

A seller who has not been paid is an unpaid seller. The law gives him protection even if ownership (property) has already passed to the buyer. Section 46(1) lists three rights by implication of law: a lien while he still has the goods, stoppage in transit after he has parted with possession if the buyer becomes insolvent, and a right of resale as limited by the Act. If property has not passed, Section 46(2) gives him a right of withholding delivery, which works like lien and stoppage.

Think of lien as the right to hold on to the goods. Section 47 allows it in three cases: goods sold with no credit stipulation, goods sold on credit where the credit term has expired, and the buyer becoming insolvent. Stoppage in transit (Section 50) applies when the goods have left the seller's hands and are still travelling with a carrier, and the buyer turns insolvent. The seller may take them back and keep them until the price is paid or tendered.

The buyer also has duties. Under Section 44, if the seller is ready and willing to deliver and asks the buyer to take delivery, and the buyer does not do so within a reasonable time, the buyer is liable for the loss caused and a reasonable charge for care and custody of the goods. If the refusal amounts to repudiation of the contract, the seller's other rights remain.

Finally, Section 66 is a savings clause. It protects rights and liabilities that arose before the Act began, enactments on sale of goods not expressly repealed, and rules of law not inconsistent with the Act. Insolvency rules on sale contracts continue to apply. The contract-of-sale provisions do not apply to a transaction that is in the form of a sale but is meant to work as a mortgage, pledge, charge or other security.

Key formulas to remember

Section 31: duties: Seller delivers + Buyer accepts and pays, as per the contract; These are the basic performance duties.
Section 46(1): rights of unpaid seller against goods: Lien + Stoppage in transit + Resale (as limited by the Act); Available even if property has passed to the buyer.
Section 46(2): property not passed: Right of withholding delivery ≈ lien + stoppage; It is in addition to the seller's other remedies.
Section 47: lien cases: (a) no credit stipulation; (b) credit term expired; (c) buyer insolvent; Seller must be in possession. He may use it even as agent or bailee for the buyer.
Section 48: part delivery: Lien on the remainder unless part delivery shows waiver; Part delivery does not by itself end the lien.
Sections 50 and 52: stoppage in transit: Buyer insolvent + seller has parted with possession + goods in transit; Exercised by taking actual possession or by giving notice to the carrier or bailee. Re-delivery expenses are borne by the seller.
Section 54: resale: Perishable goods or notice of intention to resell, buyer fails to pay in reasonable time → seller may resell and claim damages for loss; Without notice, the seller cannot recover such damages and the buyer is entitled to any profit on resale.
Section 54(3) and (4): Resale gives the new buyer good title; express reserved right of resale on default rescinds the original contract; Under 54(4), the seller can still claim damages.
Section 53: sub-sale by buyer: Lien or stoppage not affected unless seller assented; Exception: document of title transferred in good faith for consideration by sale defeats the right; by pledge, the right is subject to the transferee's rights.
Section 58: specific performance: Court may direct specific performance for specific or ascertained goods; Granted at the Court's discretion, on the plaintiff's application.

How to solve Performance, Unpaid Seller's Rights and Remedies questions

Use this order for any scenario question on unpaid seller's rights.

1Confirm the person is an unpaid seller: has the full price been paid or tendered?
2Note whether property has passed. Rights under Section 46(1) exist either way, and Section 46(2) covers the case where it has not passed.
3Check who holds the goods now: the seller (lien) or a carrier on the way (stoppage in transit).
4For lien, match the facts to Section 47: no credit term, expired credit, or buyer insolvent.
5For stoppage in transit, look for insolvency of the buyer. Without it, the right does not arise.
6Check for a sub-sale or pledge by the buyer and whether the seller assented (Section 53).
7If resale is asked, check perishable goods or notice of intention to resell (Section 54).
8If the buyer refuses to take delivery, apply Section 44: the buyer is liable for the loss caused and a reasonable charge for care and custody. Do not confuse this with Section 58. Specific performance under Section 58 is a buyer's remedy against a seller who fails to deliver specific or ascertained goods. It is not an unpaid seller's remedy.

Quickest way: Possession-and-insolvency shortcut

When to use it: Use this for one-mark MCQs in Paper 4 where facts are short.

Goods still with seller? Think lien and test the three cases in Section 47.
Goods with a carrier? Think stoppage and look for buyer's insolvency.
Goods already resold? Think Section 54 and look for notice.
Buyer refused delivery? Think Section 44: loss plus care and custody charges.
Buyer suing because the seller will not deliver specific or ascertained goods? Think Section 58 specific performance. It is the buyer's remedy, not the unpaid seller's.
Option mentions mortgage or pledge disguised as sale? Think Section 66(3).

Common mistakes in Performance, Unpaid Seller's Rights and Remedies

Saying lien is lost once property passes to the buyer.
Students mix up ownership with possession.
Fix: Section 46(1) says the rights exist even if property has passed. Lien depends on the seller's possession.
Allowing stoppage in transit whenever the buyer simply delays payment.
Students forget the insolvency condition.
Fix: Under Section 50, stoppage needs the buyer's insolvency and the goods to be in transit.
Believing resale always cancels the contract.
Section 54 has several different situations.
Fix: Under Section 54(1), lien or stoppage alone does not rescind the contract. Rescission follows under 54(4) when the seller expressly reserved a right of resale on default and resells.
Thinking part delivery ends the lien.
Students read part delivery as full surrender.
Fix: Under Section 48, lien continues on the remainder unless the circumstances show an agreement to waive it.
Ignoring the notice requirement when the seller wants damages after resale.
Students remember only the right to resell.
Fix: Without notice of intention to resell (and where goods are not perishable), the seller cannot recover damages and the buyer is entitled to any profit.
Applying the Act's sale provisions to a disguised loan.
Students overlook Section 66(3).
Fix: Provisions on contracts of sale do not apply to a transaction intended to operate as mortgage, pledge, charge or other security.

Worked examples

Example 1

Ravi Traders sells 200 bags of rice to Mehta Stores on credit for 30 days. Property passes at once. Before the 30 days end, Mehta Stores becomes insolvent. The rice is still in Ravi's godown. What right does Ravi have? A) Lien B) Stoppage in transit C) Specific performance by buyer D) Nothing, as property has passed

Show the solution

Property has passed, but Section 46(1) still gives rights to an unpaid seller.
The goods are in Ravi's possession, so the relevant right is lien, not stoppage.
Section 47(1)(c) allows lien where the buyer becomes insolvent, even though the credit term has not expired.
So option A is correct. B needs goods already out of the seller's possession, and D ignores Section 46(1).

Answer: A) Lien

Example 2

Write a short answer: When can an unpaid seller resell goods after exercising lien or stoppage in transit, and what can he recover?

Show the solution

Exercising lien or stoppage does not by itself rescind the contract (Section 54(1)).
The seller may resell if the goods are perishable, or if he has given the buyer notice of his intention to resell and the buyer does not pay or tender the price within a reasonable time.
The resale must be made within a reasonable time.
The seller can then recover from the original buyer damages for any loss caused by the breach. The buyer cannot claim any profit made on resale.
If notice was not given, the seller cannot recover such damages and the buyer is entitled to the profit.
The new buyer gets a good title even if the original buyer was not told of the resale (Section 54(3)).

Answer: The seller may resell perishable goods, or non-perishable goods after notice of intention to resell, if the buyer does not pay in reasonable time. He recovers damages for loss; without notice he cannot, and the buyer keeps any profit.

Exam tips

In MCQs, first look for the word insolvent. It decides stoppage in transit and one lien case.
Remember lien is about possession, stoppage is about transit, and resale is about notice.
Learn the three cases in Section 47 as a short list: no credit, credit expired, insolvency.
Read the options for traps such as property passed means no rights. This is wrong under Section 46(1).
For written answers, quote the section number and then apply it to the facts in two or three lines.

Practice questions from Elements of Law relating to Sale of Goods

Performance, Unpaid Seller's Rights and Remedies in other exams

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

Performance, Unpaid Seller's Rights and Remedies: frequently asked questions

Who is an unpaid seller?

He is a seller who has not received the full price for the goods. The rights in Section 46 are given to such a seller. They can be used even after property has passed to the buyer.

What is the difference between lien and stoppage in transit?

Lien is the right to retain goods while the seller still has possession. Stoppage in transit is the right to take back goods from a carrier after the seller has parted with possession, when the buyer becomes insolvent.

How is stoppage in transit exercised?

Under Section 52, the seller either takes actual possession of the goods or gives notice of his claim to the carrier or other bailee. The carrier must then re-deliver as the seller directs, and the seller bears the cost of re-delivery.

What does Section 66 of the Sale of Goods Act say?

It saves rights, liabilities, proceedings and things done before the Act began, enactments on sale of goods not expressly repealed, and rules of law not inconsistent with the Act. It also keeps insolvency rules applicable and excludes disguised security transactions such as a mortgage or pledge from the sale provisions.