This document is an analysis of Section 54 of the Indian Sale of Goods Act of 1930 regarding the rights of an unpaid seller. It discusses the seller's rights to lien, stoppage in transit, and resale of goods. It analyzes when the seller can lawfully resell the goods, such as when the goods are perishable or the buyer does not pay within a reasonable time after the seller provides notice of intent to resell. It also discusses when resale would be considered improper and the remedies available to the buyer in that case. Overall, the document provides an in-depth examination of an unpaid seller's rights under Indian law to retain, stop or resell non-payment goods.

1. INDIAN SALE OF GOODS ACT
1930
Submitted to:
Dr. Hari Parmeshwar
School of Management (BML University)
Prepared By
SANJAY KUMAR GUJAR

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ACKNOWLEDGMENT
I would like to thanks respected Dr. HariParmeshwar for giving us such a golden opportunity to show
my skills through this project. This project is a result of an extensive research,study, hard work and
labor that has been put into to make it worth reading. I wish to acknowledge that in completing this
project I had the full support of my friends, parents as well as my teacher.

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TABLE OF CONTENTS
1) Introduction…………………………………………………………………………. 3
2) Chapter 1: Section 54 of Sales of Goods Act,1930………………………………… 4
3) Chapter 1.1: Unpaid seller’s right to resell………………………………………….. 4
4) Chapter 1.2: Seller’s right to resell…………………………………………………...6
5) Chapter 1.3: Lawful Resale by the Seller…………………………………………….6
6) Chapter 1.4: Improper resale by the Seller………………………………………… 7
7) Chapter 1.5: Reasonable Time………………………………………………………. 7
8) Chapter 1.6: Critical Analysis……………………………………………………… 7
9) Chapter 2.0: Consideration…………………………….…………………………… .8
10) Chapter 2.1: Good Faith…………………………….…………………………… ..8
11) Chapter 3: Conclusion…………………………………………………………… 9
12) Chapter 4: Bibliography…………………………………………………………… 10

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INTRODUCTION
UNPAID SELLER
An unpaid seller is one who not been paid or tendered the whole of the price or one who
receives a bill of exchange or other negotiable instruments as conditional payment and the condition
on which it was received has not been fulfilled by reasons of the dishonour of the instrument or
otherwise. The term seller includes any person who is in the position of a seller, for example, an agent
of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has him paid
or is directly responsible for the price. A seller who has been partly paid is also considered as an
unpaid seller for part unpaid. Therefore,unpaid seller is one who
(i) has not received the whole of the price;
(ii) (ii) he has received payment in the form of bill of exchange or negotiable instrument
which is dishonored.
(1) When the whole of the price has not been paid or tendered.
(2) When a negotiable instrument or a bill of exchange has been received as conditional
payment and the condition in which it was received has not been fulfilled by reason of the
dishonor of the instrument or otherwise. The seller remains as unpaid seller as long as any
portion of the price, however small, remains unpaid. Where the whole of price has been
tendered, and the seller refused to accept such a tender, seller ceases to be an unpaid
seller. In such a case the seller loses all high right against the goods. If there is a period of
credit, then the seller is not unpaid until the price become due. Against if there is a
condition attached to payment it must be fulfilled.
The unpaid seller’s right can be exercised by an agent of the seller to whom the bill of
leading has been endorsed, or a consignor or an agent who has himself paid, or is directly responsible
for the price.
OBJECTIVES
 The first main objective of it would be to emphasize on the operation of an unpaid seller’s right
for resale of goods.
 The project would secondly deal with the rationale and justiblity effect of sub-sale or pledge by
buyer.
 The important principals and heads would be explained with the help of relevant case laws.
These would be the basic principles of Rights of unpaid seller against the goods as mentioned
and explained in the Sales Of Goods Act,1930.

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CHAPTER 1: SECTION 54 OF SALES OF GOODS ACT,1930
Sale not generally rescinded by lien or stoppage in transit. -
(1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by
an unpaid seller of his right of lien or stoppage in transit.
(2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right
of lien or stoppage in transit gives notices to the buyer of his intentions to re-sell, the unpaid seller
may, if the buyer does not within a reasonable time pay or tender the price, resell the goods within a
reasonable time and recover from the original buyer damages for any loss occasioned by his breach of
contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such
notices are not given, the unpaid seller shall not be entitled to recover such damages and the buyer
shall be entitled to the profit, if any, on the re-sale.
(3) Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods,
the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of
the re-sale has been given to the original buyer.
(4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and
on, the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but
without prejudice to any claim which the seller may have for damages.
CHAPTER 1.1: RIGHTS OF AN UNPAID SELLER
The rights of an unpaid seller can be studied under two heads:
1.) When the property in goods has been passed to the buyer.
2.) When the property in goods has not been passed to the buyer.Section 46 (1) lays down that
notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of the
goods, as such has by implication of law.
(a) A lien on the goods for the price he is in possession of them;
(b) in case of insolvency of the buyer , a right of stopping the goods in transit after he has parted with
the possession of them.
(c)a right of re-sale.
RIGHTS AGAINST THE GOODS WHERE THE PROPERTY IN THE GOODS HAS PASSED TO
THE BUYER.

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i. Right of Lien -- 'Lien is the right to retain possession of goods until certain charges in respect
thereof are paid. An unpaid seller who is in possession of the goods is entitled to retain them
until payment of the price, where --
a) The goods have been sold without any stipulation s to credit;
b) The goods have been sold on credit, but the term of credit has expired or
c) The buyer becomes insolvent.
Where the goods have been sold on credit, the right of lien shall remain suspended over the period of
credit and shall revive on the expiry of that period.
The right of lien is linked with possession of the goods and not with the title. It is not affected even if
the seller has transferred the documents of title till he remains in possession of the goods. However,if
the buyer has further transferred the documents of title to a bona fide purchaser the seller's lien is
defeated.
ii. Right of Stoppage in transit --The right of stoppage of goods in transit, arises to an unpaid
seller after he has parted with the possession of the goods. The seller has the right to resume
possession of the goods while they are in the course of transit and to retain them until
payment or tender of the price.
The right of stoppage in transit is available to an unpaid seller, when the buyer becomes insolvent and
the goods are in transit.
The buyer is said to be 'insolvent' when he has ceased to pay his debts in the ordinary course of
business, or cannot pay his debts as they become due whether he has committed an act of insolvency
or not.
iii. Right of Resale -- The rights of lien and stoppage in transit, would not have been of much
value if he seller had no right to resell the goods, because the seller cannot continue to hold
the goods indefinitely. Section 54 provides an unpaid seller with a limited right to resell the
goods.
An unpaid seller may resell the goods --
1. When the goods are of perishable nature, without giving any notice to the buyer, of the resale.
2. In case of other goods, when after giving a notice to the buyer of his intention to resell the
goods, the buyer does not pay the price within a reasonable time; and
3. Where the seller has expressly reserved the right of resale in the contract. No notice to the
buyer is required in that case.

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CHAPTER 1.2: THE SELLER’S RIGHT TO RESELL
The Supreme Court, in PSNS Ambalavana Chettiar n Co.n Ors v. Express Newspapera Ltd, Bombay,
has said that the statutory power for resale under s 54(2) arises if the property in the goods has passed
to the buyer, subject to the lien of the unpaid seller. Where the property in the goods has not passed to
the buyer, the seller has no right of resale. The seller can claim as damages the difference between the
contract price and the amount realised on resale of the goods where he has the right of resale under
this section. The unpaid seller, though in the possession of the goods, does not have the right merely
because he is unpaid, to resume a complete right of property, so as to diverse totally the buyer’s right
of property in the goods.
On the other hand, it has always been recognised that his right is something more than the mere right
to retain position until he is paid, that is to say, it exceeds a mere lien, and is a right to interfere not
only with the buyer’s right of possession but also his right of property in the goods. The
circumstances in which the seller may resell and in the method of dealing with the position when the
resale is lawful and when it is improper, Section 54(2) cannot be invoked if notice of intention to
resell is not served.
CHAPTER 1.3: LAWFUL RESALE BY THE SELLER
In proving that the seller may, within the reasonable time, sell the perishable goods the Act follows
the Common Law and by enacting that he may in any case resell after reasonable notice, if the buyer
continues in default it adopts the suggestion made by the privy council in 1866. The right of resale is
exercised by the seller on his own behalf and not as an agent of the buyer when notice is given. The
buyer is then not entitled for the profits of resale though he may be liable for damages. The position is
different when no notice is given and the buyer is entitled for the profits of the resale and not liable
for the damages.
The fact that the buyer is liable to make good difference between the contract price and the price
realised on the resale is the logical consequence of the rule that the original sale is not rescinded but
the resale; and perhaps in enacting that if the resale results in a profit the buyer shall not be entitled to
the surplus, the Act is slightly less logical than Lord Blackburn, who suggested that the surplua should
belong to the buyer. This point is not expressly dealt with by the English Act,but it was in Gallagher
v Shilcock decided that in such a case the buyer is entitled to recover the surplus. As a result, the seller
will not be accountable to the buyer for any profit above the original contract price drived from resale.
This position was made explicit in s 54(2).

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CHAPTER 1.4: IMPROPER RESALE BY THE SELLER
At common law if the seller resold without justification, even though the buyer was at default at the
time of the sale, he was liable to be sued in an action of trover:and the measure of damages was
normally the full value of the goods. In case of resale of this kind, however, the courts determined that
the buyer could only recover the value of the goods less the unpaid purchase price, i.e., the actual loss
that he had suffered.
CHAPTER 1.5: REASONABLE TIME
The provision as to reasonable time, which is a question of fact,must of course be observed. Thus, it
was held that a resale was not valid where it was hurried on an unusual manner without
Advertisement. Again if a seller, elects to resell, he must do so within a reasonable time from the date
on which the contract was finally repudiated by the buyer as undue hardship might otherwise be
caused to the buyer, for a seller may with deliberate intention of causing loss to the buyer, delay the
the resale until the market has fallen, and then resale the property, causing the buyer loss which might
not have sustained had the resale taken place within a reasonable time from the date of the breach.
CHAPTER 1.6: CRITICAL ANALYSIS
When the unpaid seller has exercised his rights of lien on his retaining the possession of the goods or
resumes possession of the goods by exercising his rights of stoppage intra n sit upon insolvency of the
buyer, he can re-sell the goods under the following circumstances:
(1) Where the goods are of perishable nature;
(2) Where the seller gives notice to the buyers of his intension to re-sell the goods (no notice is
necessary in case of perishable goods) and buyer does not pay or tender with in a reasonable time
after the notice;
(3) Where the seller has expressly reserved his rights of re sale in case the buyer makes default. The
seller can hold the buyer responsible for loss suffered due it breach of contract .if on resale the unpaid
seller receives any profits and his had to given notice to the buyer of re-sale the unpaid seller so
entitled to retain the profits. However,when the unpaid seller has not given notice to the buyer, then
his is loses his right to recover damages from the buyers and also had trod pay the profits to the
buyers arising from re-sale. It’s however in a resale there is loss to the seller he can claim it from

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the buyer as damages for the breach of contract. No notice is necessary where the seller has expressly
reserved the rights of re-sale in the case of the price is not paid. The purchaser from the unpaid seller
gets an absolute and goods title to the goods as against the original buyer, even if the seller had filed
to give notice to the buyers of his intension of re-sale. The goods once again become the property of
the seller and the unpaid seller affects afresh sale as on original owner of the goods. The damages
which the seller can claim are the different between the contract price and the market price as the date
of the breach.
According to the 8th
Report ofthe LawCommission OfIndia, it has been suggested that the
following be inserted as sub-section(5) in section 54:
“ The seller is bound to exercise reasonable care and judgement in making a resale and subject to
this requirement he may make a resale eitherby public or private sale.”
This suggestion appears to be based on section 60(5) of the Uniform Sales Act of the United States
referred to earlier. The principle contained in this suggested sub-section has already been applied by
Indian decisions and not in our view implicit on section 54.
CHAPTER 2 CONSIDERATION
As regards the Consideration, the proviso includes the case of a transfer of the bill of lading to a
second buyer where the sale is on credit and the term of credit has not expired, for a solvent buyer’s
promise is certainly a valuable consideration, and insolvency is not to presumed.
CHAPTER 2.1: GOOD FAITH
Good Faith in this context means absence of notice of such circumstances as render the bill of lading
not fairly and honestly assignable, eg, that the buyer is insolvent. Knowledge that the goods are still
unpaid for does not constitute bad faith.

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CHAPTER 3: CONCLUSION
When delivery is made by the seller, and acceptances made by the buyer,the contract of sale is
complete in so far as executing the sale is concerned, but there may be nevertheless, outstanding
rights in either party. The right to enforce payment by the seller, where payment was not a condition
precedent to passing the title, and the right in the buyer to hold the seller for delay in delivering the
goods, where there is no express waiver of damage shown by the buyer, or where the circumstances of
acceptance do not show an intention to waive damages of delay by accepting the goods. An
acceptance under compulsion, would not thereby waive damages suffered by reason of delay.
Acceptance of the goods does not ordinarily conclude the buyer, as to a warranty made in reference to
the goods, but if by the terms of the contract of sale acceptance is to conclude the buyer on this point,
the contract governs. The contract may also properly provide that notice be given to the seller of any
defects in the goods sold, within a reasonable time and the effect of the retention of the goods beyond
that time, without notice or complaint, would be to derive the purchaser of relief.

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CHAPTER 4: BIBLIOGRAPHY
BOOKS:
1) Pollock and Mulla: The Sales of Goods Act,LexisNexis, New Delhi, 2008.
2) G.C.V. Subba Rao: Law of Contract, S.Gogia & Co., Hyderabad 1995.
WEBSITES:
i. www.businessdictionary.com
ii. agency.uslegal.com
iii. www.merriamwebster.com
iv. www.kayandanderson.com
v. www.lawcommissionofindia.gov.in