Seller’s Remedies

Seller’s Remedies

If the buyer refuses to accept the goods, the seller can sue for breach of contract.  This is generally the difference between the market price of the goods and the sale price.

If the title has not passed, the seller may be able to recover the goods by reason of his property rights under the civil law of detinue.  He may also have an unpaid vendor’s lien in respect of the unpaid purchase price, which entitles him to recover their goods.

The seller has a right under the Sale of Goods Act, to recover the price of the goods instead of compensation.  This is what is most commonly claimed. The court procedures for recovering the price of goods is simpler than those applicable to the recovery of damages.

The unpaid seller may sue alternatively, for damages. If there are special circumstances of which the buyer was aware, whereby the seller may suffer a greater loss than that which would be usual, the seller may find it worthwhile to seek damages by way of compensation for that loss.

The courts may award late interest on sums due, as and from the due date.  There is also a statutory right of compensation and interest for late payment.


Consequences of Breach of Contract

Where either the buyer or seller fails to perform his obligations under the sale contract, the other party will have rights and remedies, arising from the breach. The Act distinguishes between conditions and warranties.

A breach of a condition entitles the innocent party to terminate the contract and seek damages.  A breach of a warranty gives the affected party, a right of compensation only.  There may be a right to recoup monies paid on the basis of restitution where there has been a complete failure of consideration.

The acceptance by the buyer of the goods constitutes a waiver of the right to terminate the contract. This gives the buyer a right to damages (compensation) only. Having accepted the goods, he may not treat the contract as discharged. Where a contract for the sale of goods can be severed, acceptance of one instalment does preclude rejection of other instalments


Enforcement by the Seller

The buyer of goods is obliged to pay the price and accept the goods provided that they conform with the contract.  If the buyer indicates before delivery, that he does not intend to be bound by the contract, he repudiates it.  This allows the seller to accept the repudiation and terminate the contract.  He has no further obligations and he may sue for damages/compensation for his loss.

Some of the seller’s rights are against the buyer in his personal capacity.  Other rights may be asserted against the goods themselves.  A claim against the buyer is subject to the risk that the buyer may become insolvent. Where recourse may be had to the goods by the seller, he is protected against the risk of insolvency.


Right of Action for the Price or Non-acceptance

The right to take action to recover the price applies irrespective of whether the seller has suffered loss.  It is a separate legal action afforded by the Sale of Goods Act.  The seller may also sue for interest either under the terms of the contract or under the late payment legislation.

The right to sue for the price arises under the Sale of Goods Act when the property (title) has passed to the buyer, or if it has not passed, when it is due on a date which may be specified with certainty.  In this latter event, the date must be fixed or determinable by the contract.

Where the seller cannot sue for the price, he may sue for non-acceptance of the goods under the Sale of Goods Act. The Act creates a statutory right to claim damages (compensation) for non-acceptance of the goods.  The seller must prove that his loss has arisen from the buyer’s breach.  This is not a liquidated sum.  Therefore, the summary procedures in the court rules for the recovery of fixed sums (such as an uncontested debt) are not usually available.


Measure of Seller’s Loss I

In accordance with general principles, the seller is entitled to be put in the position in which he would have been in, if the contract had been performed.  Losses which are reasonably foreseeable at the time at which the contract was entered must be compensated for.

The price may fall due in advance of the passing of the property.  The terms of the sale contract will determine when the price falls due.  Where a buyer does not take delivery, delays in taking delivery or refuses to pay for the goods, the seller can sue for compensation.

The Sale of Goods Act provides that losses which arise directly and naturally in the ordinary course of events must be compensated.  The seller must take all reasonable steps to mitigate his loss.  This may include reselling the property in an available market.  The measure of compensation will normally be the difference between the sale price and the market price plus the expenses of sale.

Where a buyer refuses wrongly to accept the goods without rejecting them, the seller’s loss is that caused by the failure to take delivery together with reasonable charges for care and custody of the goods in the meantime.


Measure of Seller’s Loss II

The Sale of Goods Act provides that the loss is that directly and naturally arising in the ordinary course of events from the breach of contract.  Where there is a market the seller is entitled to the difference between the market price and the contract price, together with his expenses incurred as a result of the loss.  The expenses may be set off against the excess, where the market price exceeds the contract price.

Where there is no market, the compensation is based on the difference between the value of the goods and the contract price. Where the goods are resold to a third party at a profit, the seller may retain an entitlement to compensation.  This is because the seller may be able to fulfil both orders and receive the additional profits.


Measure of Loss and Available Market

The seller must mitigate his loss by trying to sell the goods in an available market. Where there is a market for the goods, the measure of compensation is the difference between the contract price and the market price at the date when the goods should have been accepted or were refused. Whether or not there is an available market, depends on the circumstances. There will be an available market only where there are alternative buyers, willing to buy, as where demand exceeds supply.

The availability of a market will depend on the nature of the goods and the distribution channels through which they pass. The fact that the seller succeeds in selling the goods, does not necessarily mean that there is an available market.

The available market determines the measure of compensation. The actual sale price of the goods does not matter, although it will tend to prove the market price.

Where there is no available market, the seller is entitled by way of compensation to the profit he would have made, if the buyer had purchased the goods.  As with a breach of contract generally, the seller must take steps to minimise his loss where the buyer refuses to perform.


Non-Acceptance by Buyer

The Sale of Goods Act provides that if the seller is ready, willing and able to deliver the goods and requests the buyer to take delivery, then if the buyer fails to do so within a reasonable time, the buyer is liable for losses caused by the failure to take delivery.  He must pay the seller’s reasonable charges for the care and custody of the goods.

The right to claim damages for failure to take delivery does not prejudice the right of compensation for the price. However, damages may not be recovered for the same loss twice and all connected claims must be taken in a single claim/set of proceedings.


Buyer Repudiates

Where a buyer makes it clear before the due date for performance of the contract, that he will not perform his obligations and the seller does not accept the repudiation, he cannot claim damages until the time for performance arrives.  If the buyer then performs and purchases the goods on the due date, the seller will have no right of compensation.

The seller need not mitigate his loss before the due date for performance has arrived.  If the seller accepts the buyer’s declaration not to perform the contract, he may terminate the contract and seek damages immediately.  The seller can sue for the price and reclaim ownership of the goods.


Time

Payment for and delivery of the goods are presumed to be concurrent obligations of the parties, in the absence of an agreement otherwise.

The time for delivery may be agreed as strict so that the buyer can reject the goods if they are not delivered at that time. In the absence of a fixed date, the goods must be delivered within a reasonable time.

The obligation to pay the price at a particular time is presumed not to be strict (not of the essence). The failure to pay after a reasonable time may be a fundamental breach

Time can be made of the essence, by giving notice after the breach of a further reasonable time for payment. Compensation for late payment is not usually awarded.  There is a statutory entitlement to interest, even if it is not provided in the contract.  The court also has a discretionary power to award interest.


Recovery by Title

The tort of detinue applies where a person withholds goods which are owned by another.  The courts may order the goods to be returned. Where the goods are not unique, the defendant may be obliged to pay compensation only.

A buyer or seller may be able to assert his ownership of goods instead of or in addition to seeking compensation for breach of contract.  This is important where the other party is insolvent.  If there is an entitlement to claim ownership of the goods, the rights of ownership prevail even when the other party has become insolvent.

The unpaid seller who has retained ownership, he will be able to recover the goods.  If ownership has passed to the buyer, his right is limited to a claim for the price due.  If the buyer is insolvent there may be little or no surplus assets available for distribution to unsecured creditors.


Proprietary Rights and Remedies of Seller

Where the buyer has both ownership/title and possession of goods the seller may not simply seize the goods for non-payment.  The position is otherwise if the seller has retained the title.  See the article about retention of title.

Where the goods have not yet physically passed to the seller and the title to them is retained, the seller can withhold delivery, stop the goods in transit, if necessary. He may resell the goods if the buyer does not pay the price or becomes insolvent. He must, however, be ready, willing and able to perform the contract. The lien may be exercised, notwithstanding that title has passed to the buyer. If, however, the seller has agreed to hold the goods on the buyer’s behalf, this may waive the lien

The seller’s lien is dependent on his retention of possession of the goods. It only subsists so long as possession is retained. The lien is lost once the seller entrusts the goods to the buyer or someone on his behalf. The lien entitles the seller to retain possession of goods and ultimately resell them, for non-payment.

The lien is available provided that the goods have not been sold on credit, or if they have, the credit period has expired or if the buyer has become insolvent.


Unpaid Vendor’s Lien

Notwithstanding that ownership of the goods may have passed (typically on making the contract) the seller has a lien, (i.e., a security right) for the price due until it has been paid.  There may be a contractual lien in place of the statutory lien.

Subject to the contract, the seller may be entitled to retain the goods until he has been paid, under the unpaid vendor’s lien, if the price is due and he is in possession of the goods.  If the buyer becomes insolvent, this entitles him to stop the goods in transit.

These rights apply where any part of the price remains unpaid and has not been tendered.  Payment by cheque is conditional until the cheque is honoured. The lien is lost if the price is tendered.  It may be lost by waiver.

The lien entitles the seller to retain the goods until payment. It entitles him to resell the good, even though the property has passed. The lien entitles the seller to retain possession of the goods.  The lien can be exercised once the due date for payment has passed.  The goods are therefore security.


Stoppage in Transit

There is a special right for the seller to stop goods in transit, where the buyer becomes insolvent.  He may retake possession of the goods and reassert the seller’s lien. Stoppage in transit entitles the seller to resume possession of the goods if the buyer becomes insolvent before delivery.  The carrier can be required to return the goods and hold them to the seller’s order and direction.

The right can be exercised, only if the buyer becomes insolvent.  It cannot be exercised because of non-payment alone.  Often the carrier itself will have a lien for what is due to it, including for the cost of delivering the goods back to the seller.

Once again, it does not matter that property has passed to the buyer. The right of stoppage terminates once transit is completed. Transit ends when the buyer or his agent obtain delivery of the goods. The right is exercised by giving notice to the carrier.

The right to resell arises where the goods are perishable or where the seller gives notice of the intent to sell and the buyer fails within a reasonable time to pay the price or where the contract specifically makes other provision. On resale, the original contract is presumptively terminated.


Exercising Rights

If the buyer becomes insolvent, the unpaid vendor’s lien can be exercised irrespective of the due date for payment. A person is insolvent in this case when he ceases to pay his debts, rather than on an adjudication of bankruptcy or liquidation.

It is necessary that the seller is in possession of the goods to exercise the lien.  He cannot seize them from the buyer or a third party.

The seller is entitled to resell the goods under the terms of the lien.  He may have a right to do so under the sale contract.  An unpaid seller in possession of goods under the statutory right, i.e., without specific contractual right, can exercise lien.  He can do so immediately if the goods are perishable.

In other cases, he may notify the buyer that the price must be paid within a reasonable time, and if it is not so paid he can exercise the power of sale.  Once the power is exercised, the contract is rescinded and the property re-vests in the seller.

The right to the lien and right to stop in transit terminate, once the buyer or his representative takes delivery of the goods.

The unpaid vendor’s lien presupposes that title to the goods has not been retained. If the seller has retained title, he is entitled to the goods based on his property rights.  The unpaid vendor’s lien does not arise and is not necessary if the borrower has retained the title.  If the title has been retained, the seller’s property rights can be exercised after the buyer has taken possession of the goods.


References and Sources

Irish Texts

Brian Doolan, A Casebook on Irish Business Law (1989)

Henry Ellis, Modern Irish Commercial and Consumer Law (2004)

Michael Forde, Commercial Law, 3rd Edition (2005)

Linehan, Irish Business and Commercial Law (1995)

McCormack, Reservation of Title 1990 (1994)

Patrick O’Reilly (ed.), Commercial and Consumer Law  (Statutes) (2000)

Sean Quinn (ed.), Statutes Revised on Commercial Law, 1695-1913 (1994)

Fidelma White, Commercial Law (2003) (2nd Ed 2012)

Fidelma White, Commercial and Economic Law In Ireland (2011)

Vincent Grogan, Thelma King and Edward J. Donelan, Sale of Goods and Supply of Services: A Guide to the Legislation (Law Society of Ireland, 1983)

Paul Anthony McDermott, Contract Law (Butterworths, Dublin, 2001)

2011 Report of the Sales Law Review Group,

UK texts

Atiyah and Adam’s Sale of Goods 13th Ed (2016)

Bridge, Benjamin’s Sale of Goods 9th Ed (2015);

Bridge, The Sale of Goods 3rd Ed (2014)

Blackstones’ Statutes Commercial and Consumer Law 2017

Goode on Commercial Law 5th Ed 2017

Legislation

Sale of Goods Act 1893

Sale of Goods and Supply of Services Act 1980

Electronic Commerce Act 2000

Criminal Justice (Theft and Fraud Offences) Act 2001 (50/2001)

International Carriage of Goods by Road Act 1990 (13/1990)

European Union (Consumer Information, Cancellation and Other Rights) Regulations 2013 (S.I. No. 484 of 2013)

European Communities (Certain Aspects of the Sale of Consumer Goods and Associated Guarantees) Regulations 2003 (S.I. No. 11 of 2003)