Introduction：A transaction is referred to the property in goods have transferred from sellers to buyers. During the period of trading, seller and buyers have different duties and rights respectively. The property in goods will influence the rights of sellers substantially. It is necessary to identify the disparity of rights before a transaction is proceeded. On the other hand, generally, the payment will be made after receiving the goods by the buyers regardless of the ways of delivery. In the following statement, the point will be the rights available to an unpaid seller against the goods under different circumstances.
Common scenarios
During a transaction, the property in goods has transferred from seller to buyer, which means that the risk against goods has also consigned to buyer. Whether the transaction adopts FOB or CIF, under this circumstance, the rights of unpaid seller against the goods can be concluded as followed:
Right of Lien
The lien is the right to retain possession of goods until the amount owed by buyer has paid. An unpaid seller, who is in possession of goods, is entitled to retain them until the payment is downed. As a matter of fact, the lien should be exercised under the circumstances where
goods have been sold without any stipulation to credit
goods have been sold on credit, but the term of credit has expired.
buyer becomes insolvent[1].
Selling the goods on credit, the right of lien shall remain suspended over the period of credit and shall revive on the expiry of that period. The right of lien is linked with possession of the goods and not with the title. It is not affected even if the seller has transferred the property of goods to the buyer. Some experts claimed that the seller’s lien has expired and the goods should have passed to buyers if the buyer has further transferred the property to another bona fide purchaser, which can be concluded to several reasons. First, the lien, is a right stipulated by law, which is created by the debt between seller and buyer. When the buyer sold the goods to another bona fide, the original lien has expired, and a new lien is created to original buyer who is seller now. Second, the possession of goods is the fundamental pre-condition of lien’s existence. When the goods has passed from original seller to original buyer, the seller has no goods so that no lien exist[2].
Right of stoppage in transit
The right of stoppage in transit arises to unpaid seller after the goods is on the way of delivery. The seller has the right to resume possession of the goods while they are in the course of transit and to retain them until payment or tender of the price. The unpaid seller is entitled to exercise the right of stoppage in transit when the buyer became insolvent. The buyer is said to be 'insolvent' when he has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they becomes due whether he has committed an act of insolvency or not. According to Contract Law, article 308 stated that the seller has the right to ask the carrier to stop transiting, return goods and change the destination or other receiver before the goods arrive at the original destination. However, the seller is responsible for the loss of carrier[3]. The statement is precise, whereas, there are some arguments about the nature of the right. First, some experts claimed that Contract Law give the right of stoppage in transit to seller to ask carrier to obey his instruction. Second, some experts claimed that the right of stoppage in transit is the expansion of lien, which is because stoppage in transit is exercised by seller to possess the goods again before the buyer receive the goods. Third, some experts claimed that the right of stoppage in transit should be a created right, which is attributed to the change of original contract between seller and carrier. In addition , this point is accepted by most experts[4].
Right of resale
The rights of lien and stoppage in transit, would not have been of much value if he seller had no right to resell the goods, because the seller cannot continue to hold the goods indefinitely. According to Sale of Good Act 1979, the unpaid seller has limited right to resell the goods. The right should be exercised under following circumstances. First, the unpaid seller can resell the goods without notifying the buyer when the goods are of perishable nature. Second, where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to re-sell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may re-sell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract. Third, where the seller expressly reserves the right of re-sale in case the buyer should make default, and on the buyer making default re-sells the goods, the original contract of sale is rescinded but without prejudice to any claim the seller may have for damages[5]. Here is an example. Company A and company B have concluded a contract on March 6 1992. The contract stipulated that company A sold 3600 units goods to company B and charge $45 CIF Huston Port, which must finished preparing shipping by May 31 1992 and cost $162000 totally. The payment should be done through trustee. However, Company B didn’t pay and repudiate the contract. Company A had delivered goods to destination after notifying company B. Company B didn’t take the goods and introduce some purchasers to company A. Company A sold the goods for $123000 eventually. Company A sued company B for the damage and gained the compensation[6]. Within the case, company B introduce some purchasers to company A, which can be regarded as company B agree that company A resale the goods.
Further analysis
Nevertheless, under some circumstances, the property in goods has not passed to buyer for the moment. During a transaction, CIP may be adopted. CIP means that the seller is responsible for the risk and fee before the buyer take the good. Under this circumstance, the property in the goods has not passed to the buyer. Including other situations, seller has several legal rights to protect himself when the property in the goods has not passed to buyer, which can be concluded as following:
Suit for price
According to Sale of Good Act 1979, under a contract of sale, the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in goods has not passed and the goods have not been appropriated to the contract. This article can ensure the price stipulated before, in case that buyer decrease the price according to fluctuation of market price. The buyer has not the property in the goods and do not burden the risk, which is the point that no right available to buyer to change the price.
Right of withholding delivery
When the property in the goods has not passed to the buyer, the unpaid seller has the right to withhold delivery of the goods, which is similar to and co-extensive with his rights of lien and stoppage in transit which he would have had if the property had passed. The distinguish between them is whether the property in the goods has passed or not.
Sue for damages for non-acceptance
When the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance. The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events, from the buyer's breach of contract. For example, company A and company B have concluded a contract on Nov 1996, which required that company B as a buyer come to XiaMen Port to accept the goods before Feb 1997. However, company B didn’t accept the goods until May 1997. Finally, company A sued company B for damage and gained the compensation[7].
Sue for damages for damages for repudiation of contract
Before the date of delivery, if the buyer repudiates the contract, The seller may treat the contact as rescinded and sue the buyer for damages. This is also known as 'damages for anticipatory breach'. The damages will be assessed according to the prices prevailing on the date of breach. For example, a buyer and a seller have concluded a contract, which stated that the goods will charge $400 per unit. However, the buyer reminded the seller of that the ship might not finish shipping within the period of contract and would like to repudiate the contract. After that, the seller sold the goods to other purchaser and suffered from loss. The court required the buyer to pay compensation for the loss eventually[8]. Within this case, the buyer repudiated the contract before the date of delivery, which means that the property in goods has not passed to buyer and the buyer is responsible for the loss of seller according to law.
Sue for interest
The seller may recover interest or special damages whereby law interest or special damages may be recoverable. This may be occur when the seller sue the buyer for damages and lawyer fee.
Conclusion
Within different regions, the different laws are applied. As for topic, the disparity would occur in different laws. However, it is necessary to identify the difference. With respect to unpaid seller’s rights, it is vital to distinguish the circumstances which available to specific rights, especially during the international business.
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[6] http://218.7.19.195: case 11
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[8] ?ArticleID=21458
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