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Remedies

Subject: Commerce Lesson: Remedies Course Developer : Reena Marwah College, Department: University of Delhi

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Institute of Lifelong Learning, University of Delhi

Remedies Introduction
The Sale of Goods Act 1930 provides the remedies available to both the seller and the buyer in different possible circumstances. When a buyer and a seller has entered into a contract, each party is to perform the promise made to the other. If one of the parties does not perform one or more of the promises made, then there is breach of contract and the other party can have remedy for the breach. An Unpaid Seller The definition of unpaid seller is provided in section 45 of the Sale of Goods Act and it runs as follows the seller of the goods deemed to be an unpaid seller is: when the whole of the price has not been paid when a bill of exchange or other negotiable instrument has been received as conditional payment and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. Thus, a seller who has received only a part of the payment is an unpaid seller. However, a seller is not an unpaid seller if the buyer has tendered, i.e. offered to pay the price, and the seller has refused to accept the payment. In such a case, the seller will lose the rights of an unpaid seller. Illustration: Seema sold certain goods to Bindu for Rs.10,000. Bindu made the payment by cheque. Seema presented the cheque to the banker for payment but it got dishonoured as there was not enough money in the bank account of Bindu. Seema can return the cheque to Bindu and claim the payment as Seema is in the position of an unpaid seller. The seller must not refuse to accept the payment when tendered. If the price has been offered by the buyer but the seller wrongfully refuse to accept it, the seller is not considered as anunpaid seller. Illustration: Suresh sold certain quantity of jute to Jatin for Rs.5000. Jatin paid Rs.2500 and failed to pay the balance. In this case, Suresh is in position of an unpaid seller. The cost of the jute is Rs. 5,000, and until Jatin makes the entire payment, Suresh can claim the payment due to him Where the price has been paid to the seller by bill of exchange, cheque or promissory note, etc., the seller is not an unpaid seller. However if such bill of exchange, cheque, etc. is dishonoured, the seller becomes an unpaid seller.

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Remedies The Rights of An 'unpaid Seller'


The rights of anunpaid seller can be studied u nder two main heads: a) Rights against the goods and b) Rights against the buyer.

Rights of an unpaid seller against the goods: In some cases after the sale of goods the seller continues to have possession of the sold goods. At such times, an unpaid seller has certain rights against the goods. These can be further studied under two heads; a) Where the property of goods has passed to the buyer; and b) Where the property of goods has not passed to the buyer. Where the property of goods has passed to the buyer When the property in goods has passed to the buyer, there are three rights of an unpaid seller. These are: Right of Lien, Right of stoppage in transit Right of Re-sale These are discussed in detail below: o Right of Lien The Right of Lien means, the right to keep the possession of the goods until the charges or the price has been paid. This right is available to the unpaid seller where the goods have been transferred to the buyer. This is because lien depends on possession. Even if the seller has handed over the documents of title to the buyer, the lien is not affected. According to Section 47, the unpaid seller can exercise lien, only when the following conditions are satisfied: o where the goods have been sold without stipulation as to credit; or o where the goods have been sold on credit but the term of credit has expired; or o when the buyer has become insolvent. This Section implies that the unpaid seller can exercise his lien over the goods, even if he is in possession of such goods only as an agent for the buyer. It is to be noted that the right of lien will be only for the price of the goods and not for any other charges. If in such case where the unpaid seller has made only a part of the delivery of the goods he has the right of lien on the rest of the goods, unless such a part delivery has been made under an agreement to waive the lien [Section 48].

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Remedies
If under the contract the delivery of goods is to be made in installments the seller cannot stop the delivery of the rest of the installments in case the buyer defaults in making the payment for one installment. However, the seller can stop the delivery when the buyer becomes insolvent or the default by the buyer actually implies a cancellation of entire contract. Termination of Lien: The unpaid seller loses the right of lien as soon he fails to have the possession of goods. Under Section 49 of the Sale of Goods Act the unpaid seller of goods can lose his lien when he delivers it to a carrier or delivers to the buyer or by a waiver or when the buyer makes the payment. These are explained below: Delivery to Carrier: When the unpaid seller delivers the goods to carrier so that they may be taken to the buyer, the right of lien is lost. However, this should be done without the seller reserving the right of disposal. If the seller reserves the right of disposal then the seller will consider the carrier as his agent and the latter will have to act under the supervision of the seller. Case Law 1: Valpy vs. Gibson 1: The goods sold were delivered to the buyers shipping agents, who had put them on board a ship. However, the goods were returned to the sellers for repacking. While they were still with the sellers for this purpose, the buyer became insolvent and the sellers claimed to retain the goods in the exercise of right of lien because they were unpaid. However it was held that he could not do so as he lost their lien by delivery of goods to the shipping agent.

Case Law 2: Jain Mills & Elec. Store v. State of Orissa, 2: A sold 100 bags of cement to B and delivered them to the Railways for the purpose of transmission to the buyer B. A obtained the railway receipt in Bs name and sent the same to B to enable him to obtain the delivery of the goods from the Railways. While the bags of cement were in transit, the buyer (B) became insolvent, and the seller (A) was still unpaid. In this case, the sellers right of lien is lost as the goods are delivered to the carrier (Railways). However, he still has the right of stoppage in transit

Delivery to the Buyer: The unpaid seller loses the right of lien when the buyer or buyers agent obtains the possession of the goods in a legal manner. However, the lien continues in case the buyer takes possession of the goods without the permission of the seller. By Waiver of Lien: There can be an express or implied waiver of lien. When in a contract of sale it is specifically written that the seller does not have the right to retain possession until the payment of price, it is an express waiver. An implied waiver is when goods are sold on credit or if there is a sub-sale or if the seller uses the goods for himself or refuses to deliver them. Payment by the buyer: The seller will not be an unpaid seller when the buyer makes the payment for the goods. Here the seller

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[(1847) 4C.B. 837] AIR 1991, Orissa 117. 4


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Remedies
cannot term himself as an unpaid seller by refusing to accept the payment for the goods by the buyer.

Right of Stoppage in Transit


As stated earlier the lien is lost in the case where the seller no longer has the possession of goods. However, in certain situations an unpaid seller can have the right to continue with the possession of goods as long as they have not been delivered to the buyer and may also have the right over them till the buyer has made the payment. The seller has the right of stopping the goods and taking their possession from the carrier by exercising the right of stoppage in transit. This right of stoppage in transit is for goods only and for this right to be used by the seller, the following three conditions must be satisfied: The seller must be unpaid; The buyer must be insolvent; and The seller must have parted with the possession of goods and the buyer must not have acquired it, i.e., goods should be in transit (Section 50). The right of stoppage in transit is against goods only. The last requirement is a question of fact, but it is sometimes difficult to ascertain because much depends upon the capacity in which the carrier holds the goods. If the carrier holds goods as agent of the seller, goods are under the sellers lien. If he holds them as agent of the buyer, there is no transit because the buyer has acquired possession. It is only when a middleman holds the goods in his own name as a carrier that the goods are in transit. Transit does not mean that the goods should be actually moving. Illustration: Amar of Ahmedabad sold certain goods to Vikas of Delhi and delivered the goods to Chauhan, a common carrier for the purpose of transmission to Vikas. Before the goods could reach him, Vikas became insolvent. In this case Amar can stop the goods in transit by giving a notice to Chauhan.

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Remedies
Duration of Transit (Section 51): The goods are stopped to be in transit in the following situations: o When they are delivered to a carrier or to other agent for the purpose of delivery to the buyer, until the buyer or his agent takes the delivery of them from such carrier or the other bailee [Section 51(1)]. o If the buyer rejects the goods and the carrier or the other bailee continues to possess them, the transit continues, even if the seller has refused to receive them back [Section 51(4)]. o When goods are delivered to a ship chartered by the buyer, it depends on the circumstances of the case whether the goods are in the possession of the master as a carrier or as agent of the buyer. When the seller knows that he is delivering the goods to someone as a carrier, who is receiving them in the character, he delivers them with an implied right of stopping them so long as they remain in the possession of the carrier as a mere carrier [Section 51(4)]. o When part delivery has been made, the remainder of the goods may be stopped in transit, unless the delivery of a part of goods shows an intention to give up the possession of the whole of the goods [Section 51(7)]. When Transit comes to an End? Transit comes to an end and the seller loses the right to stop the goods in transit in the following cases: 1. Delivery to the buyer: When goods are delivered to the buyer or his agent, the transit comes to an end [Section 51(1)]. Where the buyer does not accept the goods, the transit does not end even if the goods have reached the place of destination. 2. Interception by the buyer: If the buyer or his agent in that behalf obtains delivery of goods before their arrival at the appointed destination, the transit comes to an end. [Section 51(2)]. The buyer or his agent may take delivery with or without the consent of the carrier. However, as far as the sellers right of stoppage is concerned, that comes to an end. 3. Acknowledgment to the buyer: If after arrival of the goods at the appointed destination, the carrier or the other bailee acknowledges to the buyer or his agent that he is now holding the goods on his behalf, the transit period ends. It is immaterial that the goods are still with the carrier or the buyer has indicated a further destination [Section 51(3)]. However, there must be a very clear acknowledgement to put an end to the original contract of carriage. (It should be noted that where the goods have to be carried by more than one carrier as part of the original contract, the transit continues till the goods arrive at their ultimate destination). 4. Delivery on ship chartered by buyer: Where the goods are delivered to a ship chartered by the buyer, and if the circumstances show that the carrier is acting as an agent of the buyer, then the transit comes to an end as soon as the goods are loaded on board the ship [Section 51(5)]. 5. Wrongful denial to deliver: Where the carrier or the other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end[Section 51(6)]. However, if that has been done rightfully, the transit may not end (e.g., on refusal by buyer to pay freight charges when their payment is a precondition to delivery).

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Remedies
6. When part delivery of goods is made to the buyer or his agent: If part delivery shows an agreement to give up possession of the whole of the goods, transit comes to an end. However, in general, delivery of a part is not equivalent to delivery of the whole and the seller can stop the remainder of the goods[Section 51(7)]. 7. How stoppage in transit can be undertaken: An unpaid seller can exercise the right of stoppage in transit either: a. By taking the possession of goods; or b. By giving due notice of his claim to the carrier or the other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of goods or his principal [Section 52(1)]. In case the notice is given to the principal, then to be effective and workable, it must be given at such time and in such circumstances that the principal, by the exercise of reasonable carefulness, may communicate it to his servant or agent to prevent a delivery to the buyer. When enough notice is given by the seller to the carrier to stop the goods, the carrier should re-deliver the goods or deliver them according to the sellers directions. The seller must pay the charges for re -delivery.

Differences between Right of Lien and Right of Stoppage in Transit


1. Right of Lien This right can be exercised when the goods are in actual possession of the seller. This can be exercised even when the buyer has the capacity to pay but does not pay. This comes to an end as soon as the goods are no longer in the possession of the seller. This right comes to an end when the goods are no longer in the possession of the seller. This right is exercised to retain possession of goods. Right of Stoppage in Transit This can be enforced so long as the goods are in the possession of the intermediary or carrier or agent between the seller and the buyer. This takes place when the buyer becomes insolvent. This comes to an end as soon as the goods are delivered to the buyer. This starts when the right of lien ends, and continues to hold till the delivery of goods to the buyer. This right is to regain (take back) the possession of the goods.

2.

3. 4. 5.

In case of sub-sale or pledge by buyer on unpaid sellers right of lien and stoppage in transit. The unpaid sellers right of lien or stoppage in transit is not affected by sale or disposal of goods by the buyer. However, in the following circumstances, the unpaid sellers right of lien and stoppage in transit cease to hold: A. Sellers consent: Where the buyer sells or disposes of goods with the consent of the seller, the seller is bound by it. However, a mere acknowledgement of the receipt of information from the sellers end is not considered sufficient unless the circumstances show that the seller intended to give up all rights against the goods [Section 53(1)]. B. Transfer of documents of title: When the seller has issued documents of title to the goods to the buyer and the buyer has sold or pledged the goods by transferring the documents of title, then in case of sale, the sellers right of lien and stoppage in transit cannot

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Remedies
be exercised. However, if the final sale was by way of pledge or other mortgage for value, the rights of unpaid seller become subject to the pledge. However, it is necessary that the transferee should act in good faith and for consideration(Section 53). If there is a transfer in the form of a pledge, the unpaid seller may require the pledgee to have the amount secured by the pledge fulfilled as far as possible, out of any other goods or securities of the buyer with the pledgee and available against the buyer[Section 53(2)]. Where a pledge takes place, the seller may exercise his rights by paying off the pledgee. If the pledgee possesses other securities against the one who has pledged, the unpaid seller can require him to satisfy his claim as far as possible, out of other securities. Where the pledgee needs to sell the goods, he has to hand over the surplus sale proceeds, if any, to the unpaid seller. Illustration: Amarender sold 200 tons of iron to Vikram. Amarender handed over the iron to a shipping company and sent the bills of lading to Vikram, who then obtained a loan from his friend Chauhan and pledged with him the bill of lading as security against which the loan would be repaid. While the goods were in transit, Vikram became insolvent and Amarender became the unpaid seller. In this case, the right of stoppage by Amarender will depend on the right of Chauhan, who is the pledgee. In fact, Chauhan will continue to have charge of the goods as the loan has to be recovered by him. In this illustration, assume that along with the bill of lading Vikram also pledges some securities with Chauhan. In such a situation, then Amarender can ask Chauhan to make good the amount due to him by selling the securities and then make Amarender liable for the balance amount.

Right of Re-sale
After discussing the right of lien and the right of stoppage in transit, the third important right is the right of resale. Section 54 indicates that the unpaid seller has the right of resale. When the seller uses his right of lien or stoppage in transit, the contract continues to remain in force and the buyer can claim delivery of goods by paying for the goods. The seller is not expected to wait indefinitely for the buyer to make the payment. However, just because the seller is unpaid, the property in the goods cannot pass to the unpaid seller again. The buyer has the right to the property, and he has the option to pay the price and take the delivery of goods at any time. Thus, under section 54, the seller has been given a limited right to resell the goods in certain circumstances. The seller has the right to resell the goods under the following circumstances. Where the goods are of perishable and will lose value in a short time. When the goods are of perishable nature, the unpaid seller can resell the goods, in such a situation where buyer fails to pay the price within a reasonable time. The term perishable implies not only physical deterioration but also commercially un-saleable. In case of perishable goods, the unpaid seller need not give any notice of resale. Where the unpaid seller has used his right of lien or of stoppage in transit and gives notice to the buyer of his decision to resell the goods. Where the unpaid seller who has exercised right of lien or

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Remedies
stoppage in transit gives notice to the buyer of his intention to resell, the unpaid seller may, if the buyer does not pay or tender the price within a reasonable time, resell the goods. In this case, (i.e. in the event of a resale) the unpaid seller can recover the difference of price between the price due from the buyer and that received by the resale. Any profit that arises on resale belongs to the seller because the resale is actually because of a breach of contract by the buyer. The law does not permit the buyer to benefit as a result of his own wrong. In case where no prior notice has been given, the seller cannot claim the damages from the original buyer. Notice of Resale Unless the goods are of perishable nature, the seller is expected to give a reasonable notice of resale to the buyer of his intention to resell the goods. What is reasonable notice is a question of fact depending upon the nature of goods, the distance between the parties and other circumstances of the case. The notice has been made compulsory for two reasons: The first reason is to allow the buyer to have an opportunity of fulfilling the contract by paying the price before such resale even at the last moment. Secondly, in case the buyer does not have the capacity or means to repay or does not pay, he can have the opportunity to see and confirm that on such resale the goods fetch a reasonable or good price. In case the resale is not properly conducted, the seller cannot keep any surplus or be entitled to sue the buyer if there is a deficiency. Here it must be understood that this does not prevent the subsequent buyer from getting a good title to the goods. If the notice of resale is not given, Section 54(2) also provides that, the unpaid seller shall not be entitled to recover the damages for breach and he has also to hand over the profit, if any, made on the resale to the buyer. Moreover, Section 54(3) also further provides that, where an unpaid seller who has exercised the right of lien or stoppage in transit resells the goods, the buyer acquires a goods title thereto as against the original buyer notwithstanding that no notice of resale has been given to the original buyer. Where the seller expressly reserves his right of resale. The seller can also resell goods when he has clearly reserved the right of resale in case where the buyer does not fulfill his part of the contract or pays the due amount. In such cases he is not required to give any notice to the buyer of his decision to resell. If the seller sells the goods, the original contract comes to an end but the seller can still claim damages from the buyer. In all the above cases where the seller resells the goods whether with or without notice, the buyer from him gets a good title thereto as against the original buyer. This is because the original buyer being in default, is not entitled to the possession of goods, and therefore cannot sue to recover the goods or their value.

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Remedies
Rights of an Unpaid Seller where the Ownership of the Goods has not passed to the Buyer. Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery. This right is similar to and goes along with the unpaid sellers righ t of lien and stoppage in transit where the property has passed to the buyer [Section 46(2)]. Seller has the right to hold back delivery of the goods until the price is paid even though the sale was on credit.

Rights against the buyer


In addition to the rights, which he has against the goods, the unpaid seller has the following remedies against the buyer. These rights are called rights in personam as these are available against the buyer personally: Suit for price. Where under a contract of sale the property in goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, seller may sue him for the price of the goods [Section 55(1)]. However sometimes, under a contract of sale the price is payable on a certain day whether the goods are delivered or not. In such cases if the buyer wrongfully neglects or refuses to pay the price, the seller may sue him for the price although the property in the goods may not have passed to the buyer and the goods may not have been appropriated to the contract [Section 55(2)]. Illustration: Rama sold 100 grams of silver to Shyama for Rs.2, 000/- The payment was to be made within two months of the sale. Shyam was unable to pay the price within the agreed period of two months. Here Rama can file a suit against Syama for the recovery of the price of silver.

Suit for damages for non-acceptance of the goods. Sometimes the seller is ready and comes forward to deliver the goods to the buyer. However the buyer wrongfully neglects or refuses to accepts the goods and pay for them. In this case, the seller may sue the buyer for damages for non-acceptance. Before the seller becomes entitled to sue for damages, there must be either a wrongful neglect or refusal on the part of the buyer to accept and pay for the goods (Section 56). Damages are decided in accordance with the principles laid down in Sections 73 and 74 of the Indian Contract Act. The following rules are applicable under such a case: o Where there is a ready market for the goods, the extent of damages is prima facie to be ascertained by the difference between the contract price and the market price at the date of the breach. The term available market means that goods can be sold freely because there is existing demand. o Where the goods do not have a ready market, the measure of damages will be the estimated loss directly and naturally arising, in the ordinary course of events, from the breach of contract. Therefore, the measure of damages

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will depend upon the facts present in each case. Case Law 3: Thompson Ltd. v. Robinson 3: R contracted to buy a Vanguard car from T Ltd. who was a car dealer. R refused to accept delivery. It was held that T Ltd. was entitled to damages for the loss of their bargain i.e. the profit they would have made as they had sold one car less than they otherwise would have sold. In case the seller is ready and willing to deliver the goods and requests the buyer to take delivery which the buyer does not do within a reasonable time, the seller may recover from the buyer (i) any loss occasioned by the buyers refusal or neglect to take delivery; and (ii) a reasonable charges for the case and custody of the goods. Suit for damages for repudiation of contract before the due date of delivery of goods. If the buyer cancels the contract before the due date of delivery of goods, the seller has two alternatives before him; he may immediately accept the breach and bring an action for damages or he may wait till the date of delivery. If he accepts the breach immediately, the contract is thereby cancelled and damages will be determined according to the price prevailing on the day of breach and the contract price. If the seller waits till the date of delivery, the contract is open for both the parties and the buyer has the option of performing the contract and also taking advantage of any additional circumstances that take place which would justify him in declining to complete the contract. (Section 60). Illustration: Hira agreed to sell to Mira 20 bags of jute at the rate of Rs. 100 per bag. According to the contract, the jute was delivered on 1 st January 2007. However, before this date, Mira informed Hira that she will not accept any jute from Hira. Since Mira refused, Hira sold the bags of jute to Jira at the rate of Rs. 90 prer bag; as this was the prevailing market price.In this case, Hira can file a suit against Mira for the recovery of damages of Rs. 10 per bag, as Hira had to suffer a loss to that extent.

Suit for interest and special damages. There is nothing in the Sale of Goods Act that can affect the right of the seller to recover interest or special damages in the situation where the law permits that interest or special damages may be recoverable. The Court may award interest at such rate as it thinks fit on the amount of the price to the seller in a suit filed by him for the amount of the price from the date of the tender of the goods or from the date on which the price was payable. If the seller delivers or sends the goods to the buyer and the buyer wrongfully refuses to accept and pay for them, Court may award interest on the price. If the price is payable on a certain day irrespective of delivery, interest will be calculated from that day, and if the goods are sold on credit, interest will be calculated from the date of expiry of the credit period (Section 61).

(1955) 22 W.L.R.185

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Remedies Buyer's Remedies Against Seller


If the seller is guilty of default, the buyer has the following remedies against the seller: Suit for damages for non-delivery of goods. In case the seller refuses to deliver the goods to the buyer, the buyer has the right to sue the seller for damages for non-delivery. The wrongful neglect or refusal to deliver the goods may arise in the following cases: (i) Where the buyer has prepaid the price partly or wholly and the goods are not delivered; or (ii) Where the seller has unjustifiably delayed the delivery of goods. If the goods are readily available in the market, the buyer is entitled to claim damages; these being the difference between the contract price and market price on the day of breach of contract. The buyer is in any case entitled to refund of the price, if already paid, in case of non-delivery. Where the buyer purchased goods for resale and the profit of sub-sale but also the damages he has paid to his buyer. In case there is no market for goods, the buyer may be allowed reimbursement for loss of profit, which may be calculated according to the price at which he contracted to resell the goods. The buyer is of course under a duty to lessen his loss by taking practical steps at the earliest possible.(Section 57). Suit for specific performance. Where there is a contract for the sale of specific or ascertained goods, and the seller refuses to deliver them, the Court may require him to deliver the goods in terms of the contract although he may be willing to pay damages instead of goods. The Court (subject to certain condition) allows this remedy. First, the contract must be for the sale for specific goods and secondly, the power of the Court to order specific performance is subject to provisions of the Specific Relief Act of 1963. It empowers the Court to order specific performance (at its judgment) where just payment of damages would not be an adequate remedy. Specific performance will be granted if goods are of special value or are unique e.g., a miniature painting or valuable antique etc. (Section 58). Suit for breach of warranty. In the event of a breach of warranty or where the buyer chooses or is forced to treat the breach of condition as a breach of warranty, the buyer cannot reject the goods. He can set up the breach of warranty in extinction or diminution of the price payable by him and if the loss suffered by him is more than the price, he may sue for damages (Section 59). Therefore, in case of breach of warranty the buyer has two remedies: (i) he may deduct from the price payable the loss suffered by him; or (ii) he may file a suit for damages where the loss is more than the price. If he has already paid the price, his only remedy is to bring an action for damages suffered by him due to the breach of warranty. The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty. Repudiation of contract before the due date. Where the seller repudiates the contract before the date of delivery, the buyer can (i) treat the contract as rescinded and bring an action for damages; or (ii) wait till the actual date of delivery. If the buyer chooses the first remedy, damages shall be assessed on the basis of the price prevailing on that date and contract price. In case of second alternative, the contract remains open for the benefit of both the parties. Not only the seller may later on, choose to perform the contract, but also the damages will be assessed according to the price prevailing on the day stipulated for delivery. If the buyer accepts repudiation of contract as immediate breach, he must minimize the loss caused thereby. If the seller cancels the contract the buyer is not required to wait till the due date. He can buy the goods immediately from the market and wait if the prices are rising and thereby claim damages for increased

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Remedies
price on the due date. The buyer must act in a reasonable way to mitigate the effects of breach (Section 60). Interest by way of damages. Sometimes, the buyer has already made the payment but the seller fails to deliver the goods. In such a case where the consideration for the payment has failed, the buyer can recover the money paid for the goods. He can also claim interest or special damages in any case where by law, interest or special damages may be recoverable. According to Section 61, in the absence of a contract that states otherwise, the Court may permit interest to be charged at such rate as it thinks reasonable on the amount of the price to the buyer in a suit by him for the refund of the price in a case of breach of contract on the part of the seller from the date on which the payment was made.

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Remedies Points to Remember


Introduction There can be breach of contract either by the seller or by the buyer. Thus, the main aspects covered in the lesson include (a) rights of the unpaid seller; and (b) rights of the buyer, in case there is a breach by the seller. Rights of the unpaid seller against goods. The rights of an unpaid seller against goods will be different depending upon the whether the property in goods has passed or not. Where the property has passed the unpaid seller has the following three rights. These are: Right of Lien. Right of Stoppage in Transit Right of Re-sale. Where the property of goods has not passed, the unpaid seller will have one right, i.e. to withhold the delivery of the goods. Unpaid Sellers Rights against the Buyer. The unpaid seller has the following rights against the buyer. These are: Suit for Price Suit for Damages Cancellation of the Contract Suit for Interest Remedies for the Buyer against the Seller. In case, the seller has defaulted, the buyer will have the following remedies against the seller: 1. Suit for Damages for non-delivery of goods. 2. Suit for Specific performance 3. Suit for Damages where there is a breach of warranty 4. Where the Contract is Cancelled before the due date by the Seller 5. Right of buyer to recover interest by way of damages

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Questions
1 2 3 4 5 6 7 8 When can a seller of goods be deemed to be an unpaid seller? What are his rights against the (a) goods; and (b) the buyer personally? Explain the nature of right of lien. When can the unpaid seller exercise the right of lien? Under what circumstances is the lien terminated? Discuss the rules regarding the duration of transit. When does it comes to end? What are the conditions required to be fulfilled for the exercise of the right of stoppage in transit? Can an unpaid seller exercise his right of lien or stoppage in transit on the goods transferred by way of sale or other disposition by the buyer? The right of stoppage in transit is an extension of an unpaid sellers right to lien. Comment. Distinguish between unpaid sellers right of lien and right of stoppage in transit. When can he resell the goods? What are the remedies available to the buyer in case of breach of a contract of sale by the seller?

Practical Problems: 1 Azad sells and consigns certain goods to Vikram for cash and sends the Railway Receipt to him. Bhasker becomes insolvent and while the goods are in transit he assigns the Railway Receipt to Madan, who does not know that Bhasker is insolvent. Azad wants to exercise the rights of stoppage in transit. Can he do so? Answer: No he cannot do so. The unpaid sellers right is defeated Section 53(i) Asharam sells and consigns certain goods to Kishor. Kishor assigns bill of lading for these goods to Hardeep to secure the sum of Rs.10,000 due from him to Hardeep. Kishore becomes insolvent. Can Asharam stop the goods in transit? Answer: Yes, he can stop the goods in transit, subject to right of Hardeep Section 53. Imran of Agra orders Hansraj of Delhi to supply certain goods. The stationmaster of Agra informs Imran about the arrival of goods but before Imran could receive the goods, he is declared insolvent. Hansraj wants to exercise his right of stoppage in transit. Can he do so? Answer: No. The right of stoppage cannot be exercised as the transit has ended Section 51. Mahesh sells and consigns certain goods to Naresh. Mahesh being still unpaid, Naresh becomes insolvent while the goods are in transit. Naresh assigns the bill of lading for cash to Arvind who knows that Naresh is insolvent while the goods are in transit. Naresh assigns the bill of lading for cash to Arvind who knows that N is insolvent. Can Mahesh stop the goods in transit? Answer: Yes, he can stop the goods in transit as Arvind has not acted in good faith.

5 Ramaswamy sold a quantity of rice to Shekhar, who made the payment by cheque which was dishonored on presentation. Ramaswamy gave a delivery

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Institute of Lifelong Learning, University of Delhi

Remedies
order to Shekhar for the rice and Shekher resold it to Chetan, who acted in good faith and for consideration by endorsing the delivery order to Chetan. Ramaswamy refuses to deliver goods to Chetan on the plea of non-payment of price. Advise Chetan. Answer: In this case, Chetan can get the goods from Ramaswamy on presentation of the delivery order Section 53.

References
Gogna P.P.S. (1999): A Text book of Mercantile Law, S.Chand & Co. Tulsian P.C. (2007): Business Law, Tata McGraw Hill, New Delhi. Websites: www.helplinelaw.com www.consumer-law.lawyers.com

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Institute of Lifelong Learning, University of Delhi