Commercial Transactions

Much of the focus of competition and consumer law focuses on protecting buyers from unscrupulous sellers (generally larger companies where there is an imbalance of bargaining power). However, sellers also need protection from the misbehaviour of some buyers; for example, in situations involving commercial parties where a buyer wrongfully withholds payment or repudiates the contract for sale of goods. The law provides certain remedies for sellers unfortunate enough to find themselves in these positions, including the right to sue for damages for breach of contract, the right to withhold delivery of goods, the right to stop goods as they are in transit and the right to resell goods to another (presumably more reliable) buyer. Much of the law in this area comes from the Sale of Goods Act 1923 (NSW) (“SOGA”), which sets out sellers’ remedies.

A. Damages

Where a buyer has legal property to the goods but is wrongly refusing to pay the seller, sellers’ remedies may include damages under s 50(1) of the SOGA. Damages can be pursued if the contract for sale stipulates payment is to be made at a particular time regardless of who has legal title to the goods and the buyer fails to make payment. Where the buyer wrongfully refuses to accept the goods, the seller may also seek damages for any detriment suffered as a result of the buyer’s rejection or repudiation of the contract.

B. Retention of Goods

In some circumstances sellers’ remedies can include exercising a lien over the goods under s 42 of the SOGA. The seller retains possession of the goods until they receive payment as stipulated. The seller can in some cases also exercise this option even if they have already delivered part of the goods but have yet to deliver the balance through s 43. If legal title in the goods has not yet passed to the buyer, the seller may also simply withhold delivery until payment is received under s 41(2).

C. Stoppage In Transit

Section 45 allows the seller to stop the goods “in transitu” and retain them until they receive payment where a buyer has become insolvent, the seller no longer has possession of the goods and the goods are in transit (have been shipped). The SOGA compels the carrier to return the goods to the seller upon receiving notice under s 47. However, the seller may not be able to exercise this right if the buyer, despite not paying, has already on-sold title to the goods to an innocent third party per s 48.

D. Resale

Where a buyer has not paid for the goods and the seller is still in lawful possession, the buyer may, under s 49 of the SOGA, disregard the contract for sale with the defaulting buyer and find another buyer. This can occur where the goods are of a perishable nature (e.g. fruit), where the seller gives notice to the buyer that the goods will be resold if payment is not made, or where the contract for sale expressly contains such a term. If the seller does resell the goods and suffers a loss on the initial contract with the defaulting buyer, the seller can sue the first buyer for damages incurred as a result of their non-payment.

Much emphasis is placed on the rights of buyers to both consumer and commercial contracts, but it is not to be forgotten that sellers also possess rights and are able to pursue a multitude of remedies if they are wronged.

To find out more about Commercial Transactions check out our Resources Centre. If you need any further advice about the issues in this article, please get in touch today!

This article was authorised by Warwick Heeson.

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