Business/commercial law questions and answers

  • Explain the remedies available to an unpaid seller against:
    • The goods; (6 marks)
    • The buyer under the Sale of Goods Act.
  • In relation to the Sale of Goods Act, explain the circumstances when:
    • A buyer may reject the goods and repudiate the contract (6 marks)
    • The buyer may lose the right to reject the goods.

ANSWER

Right of lien or retention of goods:
This is the right of unpaid seller in possession of the buyers goods to retain them as security for the price. This lien is possessory in character. It is exercisable the unpaid seller over any goods in his possession. It is exercisable even where the seller holds the goods as the buyers agent. Under section 4 (1) of the Sale of Goods Act, the lien is exercisable in the following circumstances.
• If the buyer becomes insolvent
• If the goods have not been sold on credit
• If the goods have been sold on credit but the term of credit has expired.
Right of stoppage in transitee
This is the right of unpaid seller who has already parted with possession of the goods to resume such possession as long as the goods are in the course of transit. Under section 44 of the Act, the right of stoppage in transit is only exercisable if the buyer becomes insolvent.

Under section 46 (1), the right of stoppage is exercible either by:
• Taking possession of the goods
• Giving notice of the seller claim to the carrier or his principal

Once notice is given, the carrier must redeliver the goods in accordance with the seller‟s directions but at the sellers expense.

The unpaid seller right of stoppage in transit is defeated in the following circumstances:-

• If the buyer or his agent intercepts the goods before their arrival at the appointed destination.
• If after arrival the carrier notifies the buyer or his agents that his is holding the goods on his behalf.
• If after the carrier wrongfully neglects or refuses to deliver the goods to the buyer or his agent.

Right of resale

Under section 47 and 48 of the Sale of Goods Act, the unpaid seller has the right to resell the goods in his possession to recover the amount payable. He passes a good title to the buyer in the following circumstances.

  • Where the right to resell is expressly reserved in the event of the buyers
  • If the goods are of a perishable nature
  • If the seller notifies the buyer his intention to resell the goods but the buyer does not pay or tender the price within a reasonable time.

Right to withhold delivery

Under sect 49(2) where property in the goods has not passed to the buyer, the seller is entitled to withhold their delivery.

  • Remedies against the buyer

·         Action for price

Under section 49 of the Act, an unpaid seller has the right to maintain an action against the buyer for the price of the goods in the following circumstances.

  • Where the property in the goods has passed to the buyer who wrongfully neglects or refuses to pay the price
  • Where the price is payable on a specified day but the buyer neglects or refuses to do so. An action for price is a suit for a liquidated sum of money due to the seller in respect of the goods

·    Damages for non-acceptance

Under section 50 (1) of the Act, if the buyer wrongfully neglects or refuses to accept or pay for the goods, the seller may maintain an action against him in damages for non-acceptance. The amount recoverable is the estimated loss directly and naturally resulting from the buyer breach of contract.

(I) The buyer can reject the goods for breach of a condition to be performed the seller for example.

    • If the seller delivers more goods than the quantity contracted for
    • If the seller delivers less goods than the quantity contracted for
    • If the seller delivers instalments contrary to the terms of the contract
    • If the seller delivers goods mixed with those of a different description

In such circumstances, the buyer incurs no liability and any price paid is irrecoverable. The buyer may lose the right to reject the goods:

  • If he has accepted the goods and given something in earnest to bind the contract
  • If the duration if any prescribed the contract has lapsed
  • If no duration is prescribed the contract but reasonable time has lapsed



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