Rights Of An Unpaid Seller

Rights Of An Unpaid Seller

Credit sales have become a major element of the business environment. The underlying agreement is simple, a buyer proposes to delay the payment for the item being sold. This can be either a single delayed payment or through instalment payments. This doesn’t always go to plan. The buyer may prove unwilling or unable to pay for the goods. In such cases, both the buyer and the unpaid seller have rights and responsibilities. Our objective is to discuss the various rights of the unpaid seller in the transaction. The unpaid seller’s rights can be effected on the buyer or the goods and the seller has a choice in which rights they can pursue.

Rights against the buyer

There rights of an unpaid seller that can be exercised against the buyer of the goods. These amount to cancellation of the contract of sale, enforcement of the contract and/or demand of interest for the delayed payment. Let’s look at these rights of an unpaid seller in detail.

 

Suit for the price

The first right of an unpaid seller that can be exercised against a buyer is a suit for the purchase price. This entitles the seller to sue the buyer for the value of the items sold. This is so because the buyer would be in breach of a contract of sale, therefore the rights of the unpaid seller include a suit for the price of items in the contract.

 

Suit for damages

In addition to the right to sue for the price, the rights of the unpaid seller allow the seller to seek damages. This allows the seller to seek damages that may be added to the purchase price or supplementary to the price realised if the goods were to be resold in the market. Damages, in this case, are contractual damages and tend not to be punitive to the buyer but rather for the purpose of protecting the seller from loss due to the actions of the errant buyer.

 

Suit for interest

Another right of an unpaid seller is to demand interest on the unpaid amount. They can choose to levy interest on the unpaid amount to be paid together with the contractual amount. This interest can be calculated on a monthly basis and added to the outstanding amount. The unpaid seller is required to distinguish clearly to the buyer amounts levied for interest on the unpaid invoice.

 

Repudiation Of The Contract Before The Due Date

In the case, an agreement that stipulates the seller should pay in regular instalments another right of the unpaid seller is to repudiate the contract before the final due date. This means the unpaid seller is not required to wait until the due date of the last instalment to take action against the buyer. The unpaid seller may repudiate the contract and in such a case the courts would seek to return both parties to the position they were in before the contract.

 

Breach Of Warranty

Another right of an unpaid seller is to sue for breach of warranty. A warranty in a contract is a condition of a contract that if breached does not automatically amount to canceling the contract but allows the injured party to seek compensation for the breach. The unpaid seller can, therefore, seek damages under breach of warranty.

 

Anticipatory Breach

The rights of an unpaid seller include the ability to sue for anticipatory breach. The anticipatory breach is constituted when a seller can prove based on behaviour or information such as the financial position of the buyer that the buyer will breach the conditions or warranties of the contract. In this case, the seller may be allowed to cancel the contract and have parties returned to the positions they were in before the contract date.

 

Goods

In addition to the rights of an unpaid seller against a buyer, an unpaid seller is also granted rights against the goods. It’s important to note that these rights of an unpaid seller do not standalone. You will find that many actions that unpaid sellers take are in fact a combination of unpaid seller rights against goods and buyers.

 

Lien

Under this right of an unpaid seller, the seller is allowed to retain ownership and therefore control of the items being sold. This is an important right because it gives the unpaid seller control of the merchandise and therefore the right to pursue other courses of action with the goods. A simple example of this right of an unpaid seller in action is the repossession of an item in a credit contract. The seller is allowed to instruct for the repossession of the items because the ownership and control of goods rest with the unpaid seller.

 

Stoppage

In the case of a sale of moveable property, another right afforded to an unpaid seller against goods is to seek stoppage of transference of the goods if they have been forwarded to a carrier or bailer for delivery to the buyer. The unpaid seller’s right to stop goods in transit being delivered is consistent too with the unpaid sellers right to place a lien on the goods. The unpaid seller would exercise both rights, concurrently stopping transference and taking ownership of the goods.

 

Resale

The final right of an unpaid seller that can be exercised on the goods is a right of resale. It would be pointless to allow an unpaid seller the right to a lien or stoppage without allowing them to resell the goods. After taking ownership and possession of the goods the unpaid sellers right of resale ensures that they may proceed to do as they please with the goods. In the absence of this right, they would take ownership but not be allowed to exercise any action on the goods.

 

In summary, the rights of the unpaid can be grouped into rights they can exercise on the seller and rights they can exercise on the items in the sale contract. The rights are not standalone but work together to allow the seller to act to prevent loss on their part.

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