CT 2.9 – SALE OF GOODS: SELLER’S REMEDIES
Generally, the type of remedy depends on the nature of the breach and the circumstances of the case.
Remedies shall be divided into;
- Seller’s remedies.
- Remedy against the goods (real remedy). Which include right of lien, stoppage in transit, withholding delivery, limited right of resale- Section 39.
- Remedy against the buyer (personal remedy).
- Buyer’s remedies.
SELLER’S REMEDIES: The seller must be an unpaid seller. By Section 38, a seller is unpaid when the whole price of the contract has not been paid or tendered. Or where a conditional payment (like cheque) tendered has not been honoured.
Against the goods. (Provided under Section 39 of the Sale of Goods Act)
- Right of lien: A lien is a right to retain goods until the price of the goods have been paid or tendered. This right usually arises where goods are sold on credit and the terms of credit have expired or the buyer has become insolvent. By Section 43, the right of lien would be lost where, 1. The seller has delivered the goods to a carrier for delivery to the buyer without reserving right of disposal. 2. The buyer lawfully obtains possession of the goods. 3. Waiver (by agreement or concord with the buyer. The exercise of this right does NOT terminate the contract because the seller has mere possessory right over the goods.
- Withholding delivery: Where property has not passed to the buyer, the seller can withhold delivery but if property has already passed to the buyer, the seller may be liable in conversion or detinue for holding the buyer’s goods.
- Stoppage in transit/transitu: by Section 44, this right is exercised when: 1. The unpaid seller has parted with possession of the goods. 2. The goods are still in transit. 3. The buyer has become insolvent. Section 45 has certain rules governing transit.
- Transit commences from the time the seller delivers the goods to a carrier for transmission to the buyer till the buyer takes delivery of the goods.
- Duration of Transit: Transit comes to an end when the buyer or his agent obtains possession of the goods. If the buyer rejects it then transit continues even if the seller refuses to take delivery of the goods.
- Where the carrier wrongfully refuses to deliver the goods to the buyer, the transit is deemed to come to an end.
- Where part has been delivered, the remainder of goods undelivered may be stopped in transit. Except the delivery showed the intention to give up full possession of the goods.
Stoppage in transit may be effected by obtaining physical possession of the goods or where the seller gives notice of his claim to the carrier. This right is not affected by any sale or pledge on the part of the buyer unless the seller assents to it or a document of title has been transferred to an innocent purchaser in such case he has to pay the third party if he wants to exercise his right. Section 47.
- Limited right of resale: From the interpretation of Section 48, resale is only exercisable where:
- The goods are of a perishable nature.
- Where the unpaid seller gives notice to the buyer about his intention to resell and the buyer does not tender payment within a reasonable time.
- Where the seller reserves the right of resale if the buyer makes a default.
Where a smart buyer finds out that the goods have been sold without fulfilling these conditions, he can say that the seller sold as his agent. He may then sue for the price subject to what he owes the seller.
Against the buyer.
- Action for price of the goods: When the property has passed to the buyer and he wrongfully refuses to pay. Or where he refuses to pay on the agreed date (whether the property has passed or not)-Section 49. Note however that where the payment is by Credit card, the seller cannot sue the buyer. He should rather go to the credit card company and resolve the differences and then the credit card company would settle with the buyer. Section 49(2) provides for a situation where the seller can repudiate the contract and sue for the price. This is really problematic as you cannot eat your cake and have it.
In Hyundai Heavy Industries V Papadopoulos, the court held that the obligation to pay is not affected by subsequent termination of the contract. Thus entitling the plaintiff to the contract price notwithstanding that he does not have to deliver. However, in Johnson V Agnew (although a land case), the court held that once the contract has been repudiated, the parties are discharged of their obligations under the contract. Thus the seller cannot sue for the price. It has however been argued that the Hyundai case should be restricted to cases of contracts for manufacture with sale. As the plaintiffs would have to be compensated for the work done and money and time spent.
- Damages for Non-acceptance: where property has not passed or where property has passed and the buyer refuses to take delivery. Section 50 provides that the measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach. This adopts the principle laid down in Hadley V Baxendale.
Section 50 also gives guidelines for determining the measure of damages. Which is prima facie, the difference between the contract price and the market price at the time when the goods ought to have been accepted/the time of refusal to accept. In W.L Thompson V Robinsons Gunmakers the court defined an available market as a place where the seller can dispose the goods to mitigate his losses. In Charter V Sullivan, the court held that where demand exceeded supply, the seller could mitigate his losses by a resale, the buyer in this case lost no profit because he simply sold to the next customer.
The assumption being that (because the buyer refused to accept the goods) the seller was forced to sell at a lower price. Where the resale price is higher than the profit, the court would still construe the market price and the seller is not expected to account for profit.
Note that where property has not passed, the seller is expected to mitigate his losses. But where property has passed to the buyer, the seller cannot mitigate any loss in respect of goods which are no longer his. He should just seek damages for the breach of the contract.