The value of the goods hand to hand is not always possible in the mercantile transaction. So, the question of unpaid seller arises, but it arises mainly under credit sale. A seller becomes unpaid seller when he fails to get the whole payment from the buyer in time or when the bank dishonors the negotiable instrument received by him for payment.

The Contract Act, 2056 has not defined the term unpaid seller. Section 45(2) of Indian Sale of goods Act, 1930 has defined the term as "the seller is deemed to be unpaid seller; a. when the whole of the price has not been paid for or tendered, or b. when a conditional payment was made by a bill of exchange or other negotiable instrument, and the instrument has been dishonored". Thus the seller becomes unpaid seller as soon as he does not get cash value for his goods from the buyer within the prescribed time in the contract.

Characteristics of Unpaid Seller

 The Characteristics of unpaid seller are as follows:

  • The seller must not have yet got the price of the goods as prescribed in the contract.
  • The seller must not have got the price either the wholly or partly.
  • The seller must not have received the payment due to dishonor of negotiable instruments. e.g Cheque, Bill of Exchange, Promissory note etc. from bank or other related party.
  • When the whole or partial price is not paid on the due date or in time.

Rights of Unpaid Seller

 A seller who fails to get cash value for his goods from the buyer in time is said to be an unpaid seller. Such unpaid seller has some rights which are as follow:


  • Right against the goods:

An unpaid seller has the following rights against the goods.


  • Rights of lien: The unpaid seller has the right to hold the goods and keep them until the price paid.
  • Rights of stoppage of goods in transit: When the buyer becomes insolvent or unable to pay, the unpaid seller can stop the goods on the way or transit.
  • Right of resale: On the situation of insolvent or unable to payment of buyer unpaid seller can resale the goods.
  • Rights against the buyer:

An unpaid seller has the following rights against the buyer.


  • Right to suit for price: When goods are passed to the buyer but the latter buyer does not pay the price at the prescribed time, unpaid seller can sue against the buyer for the price.
  • Right to suit for damages or non performance of contract: When the buyer wrongfully neglects to receive or refuses to accept the agreed goods, the seller may demand the damage by filing a suit.
  • Right to suit for special damages and interest: The unpaid seller can demand special damage or interest on the price of the goods from the buyer by filing a suit.