Section 54 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 54 explains what an unpaid seller can do after exercising his lien or stopping goods in transit. The mere exercise of those rights does not cancel the sale. But if the goods are perishable, or the seller gives notice of intention to re-sell and the buyer does not pay within a reasonable time, the seller may re-sell and claim damages; whether the buyer shares in any profit turns on the notice. This article follows the text of the Act consulted (latest amendment shown: Act 28 of 1993); amendments after that should be checked in the official text.
A contract of sale is not rescinded by the mere exercise of lien or stoppage in transit. If the goods are perishable, or the seller gives notice of his intention to re-sell and the buyer does not pay or tender the price within a reasonable time, the seller may re-sell within a reasonable time and recover damages for loss, and the buyer has no claim to profit. Without the notice, the seller cannot recover such damages and the buyer is entitled to the profit. The new buyer gets a good title against the original buyer. Where the seller expressly reserved a right of re-sale on default and re-sells, the original contract is rescinded, without prejudice to a claim for damages.
Section 54(1): lien or stoppage does not by itself rescind the sale
"Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit." The key word is "mere". Holding the goods under section 47 or stopping them under section 50 does not end the contract, and the seller's next step is usually a written recovery notice stating the price due and any intention to re-sell. See our articles on the seller's lien and on stoppage in transit. The right of re-sale is listed in section 46(1)(c) "as limited by this Act"; see our article on the rights of an unpaid seller.
Section 54(2): re-sale, damages and profit
The sub-section has two halves.
First half: when the seller may re-sell. "Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale."
Conditions, as printed:
- either the goods are of a perishable nature, or the unpaid seller, having exercised lien or stoppage, gives notice to the buyer of his intention to re-sell;
- the buyer does not, within a reasonable time, pay or tender the price; and
- the seller re-sells within a reasonable time.
Results: the seller "recover from the original buyer damages for any loss occasioned by his breach of contract", and the buyer "shall not be entitled to any profit which may occur on the re-sale".
Second half: if the notice is not given. "If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale."
So the notice has two consequences. With it, the seller may claim damages and keeps any profit. Without it, he loses the damages claim and any profit goes to the buyer. The Act does not say what form the notice takes, how long before the re-sale it must be given, or how the loss is measured. For compensation principles in the general law of contract, see our article on section 73 of the Indian Contract Act, 1872. Reasonable time is a question of fact under section 63.
A point of reading: the second half speaks of "such notice", which refers back to the notice of intention to re-sell. The text does not say expressly whether that notice is also needed for perishable goods, and a seller who wants certainty should give it.
Example (our own, not from the Act): Rane Fruit Co. has stopped a consignment of 3 tonnes of mangoes that Jain Stores has not paid for. Rane Fruit Co. gives written notice to Jain Stores of its intention to re-sell and, when the price is not paid or tendered within a reasonable time, re-sells within a reasonable time at a lower price. Under sub-section (2), it may recover damages for its loss from Jain Stores. If it had made a profit on the re-sale, Jain Stores would not be entitled to it. Had no notice been given, the position would be reversed: no damages for Rane Fruit Co., and any profit for Jain Stores.
A seller about to re-sell should put the price, the reasonable time allowed and the intention to re-sell in writing first.
Section 54(3): the new buyer's title
"Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer."
The sub-section gives the new buyer a "good title" as against the original buyer. The words "notwithstanding that no notice of the re-sale has been given" show that the absence of notice (which affects damages and profit under sub-section (2)) does not affect the new buyer's title. For the wider rules on who can pass title, see our article on sale by a person who is not the owner.
Section 54(4): an express right of re-sale on default
"Where the seller expressly reserves a 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 thereby rescinded, but without prejudice to any claim which the seller may have for damages."
Three points: the right must be "expressly" reserved; the trigger is the buyer's default; and on re-sale the original contract "is thereby rescinded". The seller's claim for damages is preserved. Unlike sub-section (2), this sub-section does not mention notice. The text is silent on whether notice is required here.
The four sub-sections together
| Sub-section | Situation | Result |
|---|---|---|
| (1) | Mere exercise of lien or stoppage | Contract not rescinded |
| (2), notice given or perishable goods | Buyer fails to pay or tender within a reasonable time; seller re-sells within a reasonable time | Damages for loss; buyer gets no profit |
| (2), notice not given | Re-sale | No such damages; buyer entitled to profit |
| (3) | Re-sale after lien or stoppage | New buyer acquires good title against original buyer, even without notice |
| (4) | Express reservation of right of re-sale on default | Contract rescinded on re-sale; damages claim preserved |
Practical points
Give written notice before re-selling, because the money consequences in sub-section (2) turn on it; record the reasonable time allowed; write any re-sale right into the contract, since sub-section (4) needs it to be "expressly" reserved; and keep re-sale records as evidence of the loss.
Need help before re-selling goods the buyer has not paid for?
The notice you send decides whether you can claim damages and who keeps any profit. We can draft the recovery notice that states the price due and your intention to re-sell, and advise on the next step if the buyer does not pay.
Key takeaways
- Exercising lien or stoppage in transit does not by itself rescind the contract of sale.
- Where the goods are perishable, or the seller gives notice of intention to re-sell, and the buyer does not pay or tender in a reasonable time, the seller may re-sell and claim damages; the buyer gets no profit.
- If the notice is not given, the seller cannot recover such damages and the buyer is entitled to the profit.
- The new buyer acquires a good title against the original buyer, even without notice of the re-sale.
- An expressly reserved right of re-sale on default rescinds the contract on re-sale, without prejudice to damages.
Read next
- Section 46 of the Sale of Goods Act, 1930: rights of an unpaid seller
- Section 55 of the Sale of Goods Act, 1930: suit for the price
- Sections 56-57 of the Sale of Goods Act, 1930: damages for non-acceptance and non-delivery
- Section 75 of the Indian Contract Act, 1872: compensation to party rightfully rescinding contract
Disclaimer: Based on the consolidated text of the Sale of Goods Act, 1930 consulted on 2 October 2026, whose latest amendment shown is Act 28 of 1993. It explains the words of the statute only; later amendments and the way courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.