You are on page 1of 27

List of cases

1)Belsize Motor Supply Company v. Cox, [1914] 1 K.B. 244

2)Beverly Acceptances Ltd. v. Oakley, (1982) RTR 417.

3)Central Newbury Car Auctions v. Unity Finance Ltd., (1957) 1 QB 371.

4)Commonwealth Trust Ltd. v. Akotey, (1926) AC 72.

5)Coventry Shepard & Co. v. Great Eastern Railway Co., (1883) 11 QBD 776.

6)Debs v. Sibec Development Ltd., (1895) 1 QB 521.

7)DeGorter v. Attenborough, (1904) 21 T.L.R 19.

8)Du Jardin v. Beadman, (1952) 2 Q.B 712.

9)Farquharson v. J King & Co. Ltd., (1902) AC 325.

10)Heyman v. Flewker, (1863) 32 L.J.C.P 132.

11)Jerome v. Bentley, (1952) 2 All ER 114.

12)Lee v. Butler, [1893] 2 Q.B. 318 CA

13)Lloyds & Scottish Finance Ltd. v. Williamson, (1965) 1 WLR 404.

14)Lloyds and Scottish Ltd. v. Williamson, (1965) 1 WLR 404.

15)Lowther v. Harris, (1927) 1 K.B 393.

16)Mercantile Bank of India Ltd. v. Central Bank of India Ltd, (1938) AC 287.

17)National Employers Mutual General Insurance Association Ltd. v. Jones, [1990] 1 A.C. 24.
18)Oppenheimer v. Attenborough, (1908) 1 K.B. 221.

19)Pearson v. Rose, (1951)1 K.B 275.

20)Rameshwar vs. Tarasingh and Ors., MANU/RH/0090/1958.

Table of Statutes

1)The Factors Act, 1889

2)The Indian Contract Act, 1872

3)The Sale of Goods Act, 1893

4)The Sale of Goods Act, 1930

5)The Sale of Goods Act, 1979


Introduction

The Sale of Goods Act, 1979 defines a contract for the sale of goods as a contract by which the
seller transfers or agrees to transfer the property in goods to the buyer for a money consideration,
called the price. The Act provides that a sale may be made in writing (with or without seal),
orally or may be inferred from the conduct of the parties.1

To have a title to some item of property is to have some right to claim `ownership of it. In
English law title is always relative and, in a dispute over title, the `true owner of property may
well be irrelevant. Title is not easy to define, but the following are some characteristics that may
be useful.

Title is generally relative, not absolute. Person A may have a better title than person B,
and Cs title may be better than Bs. But none of these people has an absolute title, and in
theory there may be a person D somewhere with better title than any of them.

Title is always bound up with the notion of possession; in general, anyone who has
possession or control of something has some title, however weak.

A person with a stronger title will be able to recover in court either the item itself or the
value of the item. In turn, that persons title may be defeated by another person with a
stronger title.

In general, earlier possession of something confers a stronger title, unless the earlier
possessor disposes of the title. For example, if I steal a car from you, you have a better
title to the car because you possessed it before I did. You could take action against me to
recover the car, and this would be true even if you yourself had stolen it from someone
else. This is unlikely to happen in practice, of course. However, if buy the car from you
then you have disposed of your title, and my title is now as sound as yours was. In
1 Paul J Omar, Contracts for the Sale of Goods French and British Approaches,
International Company and Commercial Law Review, 1998.
summary, a court hearing over title concerns who has the better title, not who is the `real
owner of the property.

In general, the owner of the land on which some moveable object is disposed has a better
title to it than a non-owner, which accords with the view that earlier possession accords a
superior title. However, where the land is a place to which the public have access, and
some item is lost on the land, then the owner of the land may not have a stronger title
than someone who finds the item. If A and B both have better title to some property than
C, and C is in possession of it, then there is no reason in principle why A and B
cannot both-take action against C for recovery, and for C to be liable to both of them. If C
returns the item to B, what does he have to give to A? He will have to offer some other
form of compensation (usually money). Tort Law stipulates that B, who has been
`unjustly enriched by the transaction, must compensate C.

Actions for recovery of property by holders of superior title must be begun within
statutory time limits: 6 years for personal property and 12 years for real property.2

It is not unusual for personal property to be sold or pledged by someone who is not its owner. At
times the owner entrusts it to a friend or agent who betrays the owners trust by selling it to a
third party. At times it is stolen by someone who uses a suspecting or unsuspecting intermediary
to sell the property to unsuspecting members of the public. More frequently, personal property is
entrusted to commercial intermediaries who, although indebted to the owner, are empowered by
him to sell or pledge it to third parties.

Present day regulations governing a non-owners transfer of personal property protect bona fide
purchasers who acquire goods from lawful possessors in possession either as the owners agent
or as an independent merchant. The need to protect the bona fide purchaser who acquired from
an entrusted intermediary is justified by market economics. Unless buyers are assured that they
will not be deprived by an unknown owner or creditor of what they honestly acquired in the open
market, they will be afraid to buy. On the other hand, unless the entrusting owners expectations

2 Kevins English Law Glossary, < www.kevinboone.com/lawglos_title.html[1]>,


(1/04/2003).
of recovering the value of entrusted property are protected, they will hesitate to entrust their
property. These economic realities explain the apparent coexistence of the ancient Roman law
maxim Nemo dat quod non habet with the mercantilistic Bourjon principle of article 2279 of
the French Civil Code of 1800.3

Nemo dot quod non habet, if translated literally means no one can give what they do not have.
This may seem obvious to the point of being absurd but what it actually means in a legal context
is that no one can transfer a better title than the one they have. The principle of nemo dat quod
non habet applies in the following context; that is, title to property can be sold or otherwise
transferred, but the title is no stronger than the original title (with certain exceptions). For
example, if X buys a stolen car from Y, then X does not acquire a title that is stronger than the
thiefs title. Since this is weaker than the original owners title, X has a weaker title than the
original owner, and may be liable to him. This is unfortunate for X. In theory, X could recover
from Y (the thief), but in practice Y may not be around. From a legal standpoint, the co-existence
of the owners right of recovery and the bona fide purchasers protected possession is usually
explained by distinguishing between an owners entrustment to a non-owner seller and a theft by
the non-owner seller or by his transferor. The entrusting owner is assumed to have intended to
transfer lawful possession to the person or entity entrusted with his property, thereby legitimizing
the non-owners transfer to a third party. In contrast, the owner-victim of the theft is assumed not
to have intended to transfer lawful possession either to the thief or to the latters subsequent
transferees.

Research Methodology

Aims and Objectives

1)To explain the meaning of Nemo dat quod non habet

2)To look at the working of this principal in the context of the Sale of Goods Act

3)To examine the various exceptions to the Nemo dat quod non habet principle

3 Boris Kozolchyk, Transfer of Personal Property by a Non-owner: Its Future in light


of its Past, Tulane Law Review, June, 1987.
Scope and Limitations

The principle of Nemo dat quod non habet is a general one, but the scope of this project is
limited to studying it within the boundaries of Section 27 of the Sale of Goods Act, 1930.

Also, wherever Indian cases are unavailable, British cases have been used to explain the various
principles.

Mode of Citation

The researcher has used a uniform mode of citation as follows.

Author, Name of the Book/Article, (Editor, Edition, Publisher ,Place of Publication, Year of
Publication), Page no.

Author, Name of Article, <URL>, (date of visit).

Method of Writing

Researcher has followed a descriptive, analytical and comparative form of writing.

Research Questions

1)What does Nemo dat quod non habet mean in the legal context?

2)When is the Nemo dat quod non habet principle applied?

3)What are the various exceptions to the Nemo dat quod non habet principle?

Chapterisation

Chapter 1 This chapter gives and analyzes with the various statutory provisions in Indian and
English law that deal with the Nemo dat quod non habet principle.

Chapter 2 This chapter makes use of case law to explain the application of the Nemo dat quod
non habet principle
Chapter 3 This chapter makes use of case law to explain first exception to the Nemo dat quod
non habet provided in Section 27 of the Sale of Goods Act, 1930 viz. Estoppel

Chapter 4 This chapter makes use of case law to explain second exception to the Nemo dat
quod non habet provided in Section 27 of the Sale of Goods Act, 1930 viz Sale by a Mercantile
Agent.

Chapter 5 conclusion.

Sources of Data An exhaustive research was done secondary sources from books, articles and
over the internet. A comprehensive bibliography is provided at the end of this project.
Chapter 1

Statutory Provisions concerned with nemo dat quod non habet

The principle of Nemo dat quod non habet is laid down in both Indian and British Law. Section
21 of the British Sale of Goods Act is based on the Nemo dat quod non habet principle. It reads
as follows

S 21 Sale by person not the owner.

(1) Subject to this Act, where goods are sold by a person who is not their owner, and who
does not sell them under the authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller had, unless the owner of the goods is
by his conduct precluded from denying the sellers authority to sell.
Nothing in this Act affects:
a. the provisions of the Factors Acts or any enactment enabling the apparent owner of
goods to dispose of them as if he were their true owner;
b. the validity of any contract of sale under any special common law or statutory power
of sale or under the order of a court of competent jurisdiction.

Section 27 of the Indian Sale of Goods act is also based on the nemo dat principle. It reads as
follows.

S 27. Sale by person not the owner.

Subject to the provisions of this Act and of any other law for the time being in force, where
goods are sold by a person who is not the owner thereof and who does not sell them under the
authority or with the consent of the owner, the buyer acquires no better title to the goods than the
seller had, unless the owner of the goods is by his conduct precluded from denying the sellers
authority to sell:

Provided that, where a mercantile agent is, with the consent of the owner, in possession of the
goods or of a document of title to the goods, any sale made by him, when acting in the ordinary
course of business of a mercantile agent, shall be as valid as if he were expressly authorised by
the owner of the goods to make the same; provided that the buyer acts in good faith and has not
at the time of the contract of sale notice that the seller has not authority to sell.

The Nemo dat quod non habet principle is laid down clearly in the first paragraph of both the
above statutes. They however also provide that the principle will not apply, (i.e the buyer will
receive a good title) if the owner,

a) Consents to and authorises the sale

b) By his conduct authorises the sale. This part of the statute thus lays down a provision by
which the principle of estoppel may be used as an exception to the Nemo dat quod non
habet principle.

The subsequent part of both statutes allows for other exceptions to the Nemo dat quod non
habet principle. The English legislation says that nothing in the concerned statute affects the
provisions of the Factors Act or any other legislation which allows the apparent owner to dispose
of the goods, giving the buyer a good title in the process.

Sect 2 (1) of the Factors Act, 1889 reads as follows.

1) Where a mercantile agent is, with the consent of the owner, in possession of goods or of the
documents of title to goods, any sale, pledge, or other disposition of the goods, made by him
when acting in the ordinary course of business of a mercantile agent, shall, subject to the
provisions of this Act, be as valid as if he were expressly authorized by the owner of the goods to
make the same; provided that the person taking under the disposition acts in good faith, and has
not at the time of the disposition notice that the person making the disposition has not authority
to make the same.
The above section reads almost the same as the second paragraph of Section 27 of the Indian
Sale of Goods Act. Thus as far as statutory provisions go, Indian Law seems to follow English
Law almost in its entirety.

Chapter 2

Case Law supporting the Nemo dat quod non habet principle

A case which was decided clearly on the basis of the Nemo dat quod non habet principle is the
English case of National Employers Mutual General Insurance Association
Ltd. v. Jones.4 The facts of the case are as follows.

Thieves stole H.s car and purported to sell it to L., who sold it to T. The car was sold by T. to A.
Ltd. and that company subsequently sold it to M. Ltd., which sold it to the defendant. Both the
companies and the defendant bought the car in good faith and without notice of H.s title. The
plaintiffs, H.s insurers, bought out her interest in the car and asked the defendant to return it.
The defendant refused and the plaintiffs brought proceedings claiming, inter alia, delivery up of
the car or, alternatively, its value. The defendant resisted the claim on the basis that he had
acquired good title to the car by virtue of section 9 of the Factors Act 1889.5

It was held that notwithstanding that he may have bought it in good faith, a person does not
acquire title to an object stolen from its rightful owner and that neither the Factors Act 1889 nor
the Sale of Goods Act 1979 operated so as to divest title from a person from whom goods had
been stolen. The bona fide purchaser was not able to override the true owners title when the true

4 [1990] 1 A.C. 24.

5 Where a person, having bought or agreed to buy goods, obtains with the consent
of the seller possession of the goods . . . the delivery or transfer, by that person or
by a mercantile agent acting for him, of the goods . . . under any sale, pledge, or
other disposition thereof . . . to any person receiving the same in good faith and
without notice of any lien or other right of the original seller in respect of the goods,
shall have the same effect as if the person making the delivery or transfer were a
mercantile agent in possession of the goods . . . with the consent of the
owner had ceased to have possession of the goods because they had been stolen and thus
the Nemo dat quod non habet principle held good as a result of which the original owner held the
strongest title and thus the right to recover the car.

The above decision is a good one and I concur entirely with the decision. I would also like to add
that in my view, in case of theft, under no circumstances should any subsequent buyer get a
better title than the original owner.

In the case of Belsize Motor Supply Company v. Cox,6 Belsize Motor Supply Company, by an
agreement in writing let it to certain hirers for twenty-four calendar months. On the signing of
the agreement the hirers were to pay, and did pay, on account of hire in advance, and each
subsequent payment was to be made in advance on specified dates. The hirers were not to relet,
sell, or part with the vehicle without the consent in writing of the owners. If the hirers should on
or before the expiration of the twenty-four calendar months be desirous of purchasing the vehicle
they could do so by making the amount of hire paid equal to the amount of 424 pounds 11
shillings and 6 pence. If the hirers did certain things, of which parting with the possession of the
vehicle without the owners consent in writing was one, it was made lawful for the owners and
they were authorized to take possession of the vehicle and terminate the agreement. During the
currency of this agreement, there being a sum due and unpaid on account of hire, the hirers,
without the consent of the owners, pledged the vehicle to a pledgee who took it in good faith and
without notice of the owners rights. Subsequently the owners, hearing of the pledge, demanded
the vehicle from the pledgee, who refused to restore it. At the date of this demand and refusal
there was a sum of 58 pounds 9 shillings due and unpaid on account of hire.

In an action by the owners against the pledge, it was held, that the effect of the agreement was
that, having paid twenty-four installments, the hirers had an option either to become purchasers
of the vehicle or to return it and claim back the 50 pounds paid in advance, and that the
agreement did not impose upon them an obligation to purchase the vehicle; that consequently the
hirers were not persons having agreed to buy the vehicle within the meaning of s. 25(2), 7 of the
Sale of Goods Act, 1893, and that the pledgee took no better title than the hirers had. Held, also,
that the pledgee had an interest in the vehicle, and that therefore the measure of damages was not
6 [1914] 1 K.B. 244.
the full value of the vehicle but was only the value of the owners interest therein, i.e., the
amount of hire and purchase money remaining unpaid.

The above mentioned case was distinguished from the case of Lee v. Butler8 on the grounds that
in the present case there was no agreement to buy, there was simply an option given to the hirer
of the vehicle to buy the vehicle.9

A good Indian case where the principle of Nemo dat quod non habet was applied is the case
of Rameshwar vs. Tarasingh and Ors.10 Goverdhandas was the owner of a lorry. Tarasing
brought his suit on the allegation that he had purchased the said lorry from Goverdhandas for a
sum of Rs. 2000/- .

Tarasingh was compelled to bring the suit because Rameshwar had launched a criminal
complaint against defendant Goverdhandas. It is important to mention here that respondent
Goverdhandas had made a mortgage of certain immovable property of his and also the lorry in
question to defendant appellant Rameshwar. Thereafter Goverdhandas obtained possession of the
lorry from Rameshwar under a rent-note. The rent note was also registered. As already stated
above, Tarasingh purchased the lorry from Goverdhandas in July, 1949. Rameshwar had also
taken part in settling the deal with respect to the lorry in favor of Tarasingh for Rs. 2000/-. In this
7 Where a person having agreed to buy goods obtains, with the consent of the
seller, possession of the goods the delivery or transfer by that person of the
goods under any pledge to a person receiving the same in good faith and
without notice of any lien or other right of the original seller in respect of the goods
shall have the same effect as if the person making the delivery or transfer were a
mercantile agent in possession of the goods with the consent of the.

8 [1893] 2 Q.B. 318 CA

9 The facts of Lee v. Butler are as follows. L., being in possession of furniture under
a hire and purchase agreement made with the plaintiff, sold and delivered the
furniture, before the last payment had accrued due or been paid, to the defendant,
who received it in good faith and without notice that the plaintiff had any right in
respect of it. Held, that the sale and delivery to the defendant was within the
provisions of Section 9 of the Factors Act, and therefore.

10 MANU/RH/0090/1958
connection it was further stated that the license for the lorry was at the time of the purchase in
the name of defendant Goverdhandass, the insurance policy was also in his name and the petrol
coupons also used to be issued to him, and, therefore, the plaintiff was satisfied that the
defendant Goverdhandas was the owner of the lorry and, therefore, the purchase was made from
him. As the lorry had in connection with Rameshwars complaint been attached by the criminal
court on 19-8-1949, Tarasingh respondent brought the suit.

The main pleas which call for mention are that this defendant was a prior mortgagee of the lorry
and that defendant Goverdhandas had only obtained possession of it under a rent-note, and, had,
therefore, no right to sell the lorry. It was held that Tarasingh could succeed in getting the
declaration he seeks, namely, that he is the owner of the lorry as he had purchased it from
Goverdhandas subsequent to the latters mortgaging the lorry to Rameshwar. Thus the principle
of Nemo dat quod non habet applied and Rameshwar has a better title to the lorry than Tarasingh.
Chapter 3

Exceptions to the Nemo dat quod non habet Principle: Estoppel

Both Indian and English legislature provide that the buyer can get a good title if the owner is by
his conduct precluded from denying the sellers right to sell. This lays the ground for the
principle of personal estoppel to be used as an exception to the Nemo dat quod non
habetrule.11The statute, however, does not specify when the owner is by his conduct precluded
from denying the sellers right to sell. As a result of this we are forced to rely on the common law
doctrine of estoppel.12

This means that if the owner of the goods so conducts himself, when another person deals as an
owner with those goods, as to lead a third party to believe that the person dealing with the goods
has authority to sell then the true owner is estopped by his conduct from impeaching the
disposition made.13 The estoppel can arise in situations when the true owner by words or conduct
willfully causes another to alter his position and to induce him to act on that behalf as well as in
situations where the true owner stands by negligently or culpably and allows another to contract
11 S. Venkataraman, T.S VenkateshaIyers Indian Sale of Goods Act & Indian
Partnership Act, (4th Edition, Asia Law House, Hyderbad, 1984), P. 75

12 P.S Atiyah, Sale of Goods, (8th Edition, Pitman Publishers, New Delhi, 1995

13 Supra note 11.


on the faith and understanding as if the seller has the authority to sell, or is the owner or has
apparent title to the goods.14

The reasoning behind allowing estoppel as an exception to the Nemo dat quod non habet
principle is that when there is a conflict between two innocent parties ( which is the case in most
conflicts pertaining to the Nemo dat quod non habet principle), he who has enabled a wrong to
be done must be the sufferer. With reference to the Nemo dat quod non habet principle, though
the above rule has generally been followed, it has been qualified by limitations put on the word
enabled so that it is read more like some act of the owner which has misled the innocent
purchaser.

I will first deal with cases where the owner is estopped as a result of a positive action on his part.
In this case there is no need to show fraud, an intent to deceive or negligence as a foundation for
the estoppel. The only requirements are that it must be voluntary. 15In the case of Debs v. Sibec
Development Ltd16, it was held that if a person was induced by violence or duress or coerced in
any way into making a representation then this would constitute a plea of non estfactum and he
cannot be held to have made a representation even if an innocent third party relied on it.

The positive action made by the party may be in the form of words or in the form of conduct.

The case of Henderson & Co. v. Williams17 is a good example of a case where there was
estoppel by words. The owner of goods (Grey & Co.) lying at a warehouse was induced by the
fraud of one W. Fletcher (henceforth referred to as F.) to instruct the warehouseman (in the form
of a telegram) to transfer the goods to the order of F., and the goods were accordingly placed at
F.s disposal. F. then sold the goods to an innocent purchaser, who, before paying the price,
14 H.S Pathak, Mulla on the Sale of Goods Act & The Indian Partnership Act, (9th
Edition, N.M Tripathi Pvt. Ltd., Mumbai, 1992), P.64.

15 Supra note 12, P. 347.

16 Cf. P.S Atiyah, Sale of Goods, (8th Edition, Pitman Publishers, New Delhi, 1995),
P. 347.

17 (1895) 1 QB 521.
obtained a statement from the warehouseman that he held the goods at the purchasers order. On
the discovery of Fs fraud, Grey & Co. instructed the warehouseman not to deliver the goods to
the plaintiffs but to themselves. The defendants accordingly refused to deliver the goods to the
purchaser. The purchasers then proceeded against the warehouseman for the delivery of the
goods. It was held that the warehouseman, as a result of his representations to the purchaser (in
the form of the two letters), was estopped from impeaching his title, that the refusal to deliver
was a conversion, and that the measure of damages was the market value of the goods at the date
of the refusal.18

The above case is between the warehouseman and the purchasers, but it is my contention that
even if the case was between the original owners (Grey & Co.) and the purchasers the result
would have been the same as Grey & Co. would also have been estopped from denying the
sellers right to sell as a result of their representation (made by sending a telegram to the
warehouseman to transfer the concerned goods to F).

An important case dealing with estoppel by conduct is Farquharson v. J King & Co. Ltd.19In
this case the plaintiffs were timber merchants who owned timber housed with a dock company.
The plaintiff clerk had authority to send delivery orders to the dock company, but the clerk had
no authority to sell the timber himself. The clerk fraudulently transferred some timber to himself
under an assumed name and gave the dock company instructions accordingly. He then sold the
timber to the defendants under his assumed name and instructed the dock company to deliver the
goods to their order. The plaintiffs having discovered the clerks fraud brought an action for
conversion. The House of Lords held that the defense of estoppel failed because the defendants
had not acted on any representation made by the plaintiffs concerning the authority of the clerk.

18 As can be seen in this case, situations like this put the warehousemen in a very
uncomfortable position as if they had delivered the goods to the plaintiff they would
have been liable to Grey & Co. for disobeying their orders. The proper behavior for a
warehouseman was laid down in Rogers v. Lambert (1891) 1 QB 318. The proper
course of action for the warehouseman would be to take interpleader proceedings,
under which he disclaims title himself, and leaves the court to sort out the claims of
the contending parties.

19 (1902) AC 325.
Even the dock company would not have needed, or been able to plead estoppel. As lord Halsbury
pointed out they would be not liable simply because they had done nothing more than obey their
principals instructions. As can be seen from this case it is very difficult to lay down what kind of
conduct would be necessary to invoke the doctrine of estoppel.

It is however abundantly clear that simply allowing another person to have possession of goods
is not by itself enough to bring into operation the doctrine of estoppel. The Privy Council
however made a decision to the contrary of the above statement in the case of Commonwealth
Trust Ltd. v. Akotey.20 It was however almost virtually overruled by the Privy Council itself in
the case of Mercantile Bank of India Ltd. v. Central Bank of India Ltd.21 In this case a
merchant (say X) pledged railway receipts which in this case were documents of title, with the
Central Bank for an advance. In accordance with the usual practice the Bank then returned them
to X to enable him to obtain clearance of the goods, but then X fraudently pledged them with the
Mercantile Bank in return for an advance from them. It was held that there was no estoppel
because the possession of the railway receipts no more conveyed a representation that the
merchant (X) were entitled to dispose of the property than actual possession of the goods
themselves would have done.22Thus if estoppel by conduct is to be invoked there must be some
act which positively misleads the third party beyond merely allowing a non-owner to have
possession. This was laid down in the case of Jerome v. Bentley.23 The facts of this case are as
follows. The plaintiff, who was a general dealer, entrusted a diamond ring to T. who undertook to
try to sell the ring for the plaintiff, in his own name or in the name of the plaintiff, and, if it was
sold, to pay him GBP 550 for it, retaining any surplus for himself. T. was to keep the ring for this
purpose for seven days from December 30, 1946; if it was not then sold T. was to return it to the
plaintiff. After the expiry of those seven days, T. signed a declaration that he himself was the
owner of the ring and sold it to the defendants. T. subsequently pleaded guilty to a charge of

20 (1926) AC 72.

21 (1938) AC 287.

22 As per Lord Wright.

23 (1952) 2 All ER 114.


larceny as a bailee. The plaintiff claimed the return of the ring or its value. It was held, that after
the expiry of the seven days time limit T. had no authority to deal with it in any way except for
the purpose of safe custody; no one represented T. to the defendants as the plaintiffs agent with
authority to sell the ring; the defendants treated T. as the owner of the ring; T. was a thief who
had stolen the plaintiffs property, and the plaintiff had not enabled T to do so, since the
plaintiff had done nothing to mislead the defendants.

In the case of Central Newbury Car Auctions v. Unity Finance Ltd.,24 it was held that mere
possession of the registration book or certificate of a car by a nonowner does not constitute a
representation by the owner that is sufficient to invoke the doctrine of estoppel.

In the case of Lloyds and Scottish Ltd. v. Williamson,25the plaintiff entrusted his car to a dealer
and authorized him to sell at or above a certain price. The dealer sold the car above this price but
the price was not paid in cash but set-off against a debt owed by the dealer to a friend of the
buyer. For this reason, the sale was outside the ordinary course of business but it was held that
this was immaterial. Since the owner knew that the seller might very well sell as a principle and
not as an agent and had authorized him to do so, it made no difference how he sold the goods.
The important principle that was thus laid down in this case is that a distinction is to be made
between a representation that the seller has authority sell the goods as an agent, and a
representation that the seller is himself the owner. In the second case it is immaterial that the
seller sells outside the ordinary course of business.26

In cases of estoppel by negligence a representation is made through an omission. Negligence on


the part of the owner, in order to constitute conduct precluding him from denying the sellers
authority to sell, must be more than mere negligence in the management of his own affairs and
must amount to disregard of his obligations towards the buyer.27
24 (1957) 1 QB 371.

25 (1965) 1 WLR 404.

26 Supra note 12, P. 351.

27 Supra note 14. P. 64.


The clearest case on this topic would be Coventry Shepard & Co. v. Great Eastern Railway
Co.28 In this case the defendants had negligently issued two delivery orders relating to the same
load of goods. The person to whom they were issued was thereby able to represent to the
plaintiffs (to whom he pledged the goods) that the goods were in fact available when they had
been disposed off. The plaintiffs were awarded damages and the defendants were held to be
estopped by negligence.

In order for estoppel by negligence to be applicable it is an important point that the duty that the
individual fails to perform must be a legal obligation.29 The already mentioned case
of Mercantile Bank of India Ltd. v. Central Bank of India Ltd can be studied in this aspect.The
fact is that the first bank was indeed negligent in returning the receipts without first stamping
them with their stamp of pledge but the Privy Council held that this was not a legal obligation
and hence the claim of the first bank could not by estopped.

Chapter 4

Exceptions to the Nemo dat Principle: Sale by Mercantile Agent

The term mercantile agent is defined in both British and Indian law as a mercantile agent having
in customary course of his business as such agent authority either to sell goods or to consign
goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.30

28 (1883) 11 QBD 776.

29 Avtar Singh, Principles of the Law of Sale of Goods & Hire Purchase, (3rd
Edition, Eastern Book Company, Lucknow, 1985) P. 156.
In the case of Heyman v. Flewker,31it was held that the term mercantile agent does not include
a mere servant or caretaker, or one who has possession of goods for carriage, safe custody, or
otherwise as an independent contracting party but only includes persons whose employment
corresponds to that of some kind of known commercial agent like an auctioneer or a broker.32

In Lowther v. Harris,33 it was held that a person may be a mercantile agent even if he is acting
only for a single principle but he must be more than a mere servant or employee. 34The facts of
the case are as follows. The plaintiff, wishing to sell furniture together with certain tapestry
known as the Aubusson tapestry, stored it in a house and engaged one Prior, an art dealer who
had an antique shop near by, to sell it for him on commission. Prior lived in the house and
brought customers to see the tapestry. Customers dealt with Prior only and knew nothing of the
plaintiff, but Prior had no authority to complete a sale without plaintiffs sanction. Prior falsely
represented to the plaintiff that he had sold the tapestry to one W. for 525l. and so obtained
plaintiffs consent to the removal of the tapestry for sale and delivery to W. Prior then sold it to
defendant in fraud of the plaintiff for 250l. The defendant acted in good faith in the usual course
of business, and had no notice of the plaintiffs title.

It was held, that Prior was a mercantile agent and not a mere servant or shopman; that a
mercantile agency under the Factors Act, 1889, may exist although the agent, as here, is acting
for one principal only and has no general occupation as agent; that Prior was not in possession of
the tapestry in virtue of his residence in the house, but that he came into possession of it as
mercantile agent, when he was allowed to take it away under color of the alleged sale to W., even
though the plaintiffs sanction was obtained by fraud; that the sale to the defendant took place in
the ordinary course of Priors business as a mercantile agent within the meaning of the Factors
Act, 1889, and that the defendant was therefore not liable for conversion.
30 Section 26, Sale of Goods Act, 1979 (British), Section 2(9), Sale of Goods Act,
1930 (Indian).

31 (1863) 32 L.J.C.P 132.

32 Supra note 14, P. 66.

33 (1927) 1 K.B 393.


In order for this exception to be used, it is necessary that the mercantile agent must actually be in
possession of the goods at the time of sale, pledge or other disposition. In Beverly Acceptances
Ltd. v. Oakley,34one O pledged two Rolls-Royce cars to the defendant G for a large loan. The
cars were parked in Gs locked compound but O borrowed the keys of the compound to show the
cars to a buyer, telling G that it was a matter to do with insurance. Later, O sold the cars to the
buyer and gave him a bill of sale. It was held that even if G was to be taken to be the owner of
the car and even if O was a mercantile agent, and even if O had been allowed temporary
possession when he was lent the keys of the compound, still the buyer was not protected as the
sale to the buyer had taken place at a time when any temporary possession obtained by G had
long disappeared, and the exception only applies where the mercantile agent is in possession,
not where he once has been in possession.35

A mercantile agent is considered to be in possession of the goods even if he obtains possession


by means of fraud. This can be clearly seen in the already discussed case of Lowther v. Harris.

To validate a sale by a mercantile agent under this section he must be in possession of the goods
or of the documents of title to the goods with the consent of the owner. A point of debate would
be that if the agent obtained the goods by means of fraud then he could not be said to have
possession with the consent of the owner. This was settled in the case of Pearson v. Rose.36The
facts of the case are as follows. The plaintiff, the owner of a motor car, gave to a motor car
dealer, admittedly a mercantile agent; possession of his car to see what offers could be obtained
for the sale of it when a new car, which he had ordered through the agent, should be delivered to
him. The car was thus left with the agent provisionally in his capacity as a salesman. Later in the
day, the agent, who had decided to sell the car and misappropriate the proceeds, when in
conversation with the plaintiff, had in his hands the registration book of the car. He thereupon
induced the plaintiff to leave in haste on a bogus errand, so that the plaintiff forgot that he had
left the custody of the registration book in the hands of the agent who thus obtained possession

34 Supra note 12, P. 361

35 (1982) RTR 417.

36 Supra note 12, P. 362


of the book by a trick. On the same day the agent sold the car with its registration book to a
person who bought it in good faith.

It was held that, as the ostensible authority which would enable a person to sell a second-hand
motor car in the ordinary course of business arose from his possession of the registration book,
the sale of a second-hand motor car, without its registration book would not be in the ordinary
course of business; and that accordingly, the goods in the present case sold within the meaning
of s. 2.(1), of the Factors Act, 1889, were the car, together with its registration book; but that,
since the registration book was not in the possession of the agent with the consent of the owner,
the purchaser, by virtue of that sub-section, obtained no good title to the car. It was however also
clearly mentioned in the judgment that on the basis that the agent obtained possession of the car
by larceny by a trick, the agent having an animus furandi at the moment when he received
possession of it, nevertheless he was in possession of the car with the consent of the owner,
within the meaning of the sub-section.

The above dicta was applied in Du Jardin v. Beadman,37 where it was held that though goods
were obtained by larceny by a trick, they were nonetheless in the possession of the buyer with
the consent of the seller.38

The next important point with regards to this exception is that in order for it to be used the
mercantile agent should have obtained and sold the goods while acting in the ordinary course of
business. This means that if goods are entrusted to a mercantile agent for a purpose unconnected
with his business and he proceeds to sell the goods, then the buyer will not be protected by this
exception.

In the case of Oppenheimer v. Attenborough,39it was held that the phrase acting in the ordinary
course of business of a mercantile agent means acting in such a way as a mercantile agent in the
ordinary course of business as a mercantile agent would act, that is to say, within business hours,
37 (1951)1 K.B 275

38 (1952) 2 Q.B 712

39 Supra note 12, P. 362.


at a proper place of business, and in other respects in the ordinary way in which a mercantile
agent would act, so that there is nothing to lead the pledge to suppose that anything is done
wrong, or to give notice that the disposition is one which the mercantile agent had not authority
for.

In the case of Lloyds & Scottish Finance Ltd. v. Williamson,40 it was held that if a mercantile
agent sold goods on terms that the price is not paid directly to him but rather to one of his
creditors, this would be outside the course of ordinary business. 41Further, in the case of
DeGorter v. Attenborough,42 it was held that where a mercantile agent employed a friend of his
to pledge goods for him, it was held not to be in the ordinary course of business.43

The final requirement for this exception to be used is that the buyer must have acted in good faith
and had no notice of any want of authority in his vendor.44 The onus is on the buyer to prove that
he acted in good faith when making the purchase.

Other Exceptions to the Nemo dat Principle

Other exceptions to the Nemo dat quod non habet principle can be found in subsequent sections
of the Sale of Goods Act, 1930 listed below

Section 28. Sale by one of joint owners:

40 (1908) 1 K.B. 221.

41 (1965) 1 WLR 404.

42 Supra note 12, P. 365.

43 (1904) 21 T.L.R 19.

44 Supra note 14, P. 68.


If one of several joint owners of goods has the sole possession of them by permission of the co
owners, the property in the goods is transferred to any person who buys them of such joint owner
in good faith and has not at the time of the contract of sale notice that the seller has not authority
to sell.

Section 29. Sale by person in possession under voidable contract.

When the seller of goods has obtained possession thereof under a contract voidable under section
19 or section 19A of the Indian Contract Act, 1872, but the contract has not been rescinded at the
time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith
and without notice of the sellers defect of title.

Section 30. Seller or buyer in possession after sale

(1) Where a person, having sold goods, continues or is in possession of the goods or of the
documents of title to the goods, the delivery or transfer by that person or by a mercantile agent
acting for him of the goods or documents of title under any sale, pledge or other disposition
thereof to any person receiving the same in good faith and without notice of the previous sale
shall have the same effect as if the person making the delivery or transfer were expressly
authorised by the owner of the goods to make the same.

(2) Where a person, having bought or agreed to buy goods, obtains, with the consent of the seller,
possession of the goods or the documents of title to the goods, the delivery or transfer by that
person or by a mercantile agent acting for him, of the goods or documents of title under any sale,
pledge or other disposition thereof to any person receiving the same in good faith and without
notice of any lien or other right of the original seller in respect of the goods shall have effect as if
such lien or right did not exist.
Chapter 5

Conclusion

Nemo dat quod non habet is a principle of law that lays down the rule that no one can transfer a
better title to another than the one they possess. This principle is a universal one which may be
applied to various fields of law like Sale of Goods, Transfer of Property and so on.

With relation to Sale of Goods, the principle is codified in Section 27 of the Sale of Goods Act,
1930. Thus by invoking the principle of Nemo dat quod non habet the original owner of goods
may recover the goods from an innocent third party who has bought the goods from by one who
has a weaker title than the owner (as the innocent buyer will only receive a title as strong as the
seller, which would be weaker than the title of the original owner). However the statute also
provides for many exceptions to the general principle. Section 27, itself provides that in a sale,
one may transfer a better title than one has if

1) One has the express authority of the owner.

2) The owner is precluded by his conduct from denying the sellers right to sell (which means that
the owner can be estopped and thus the seller transfers a better title than he had).

3) The sale is made by a mercantile agent who sells the goods of which he has possession with
the consent of the owner, acting in the ordinary course of business of a mercantile agent even if
the owner does not consent to the sale.
Thus by laying down the principle of Nemo dat quod non habet , in a statute which also includes
exceptions, the legislators have tried to achieve a balance between protecting the rights of the
original owner and protecting the rights of the innocent buyer.

Bibliography

Articles

1) Paul J Omar, Contracts for the Sale of Goods French and British
Approaches, International Company and Commercial Law Review, 1998.

2) Boris Kozolchyk, Transfer of Personal Property by a Non-owner: Its Future in light of its
Past, Tulane Law Review, June, 1987.

Books

1) A. Baviera, Sales, (UP Law Centre, Phillipines, 1981).

2) Avtar Singh, Principles of the Law of Sale of Goods & Hire Purchase, (3 rd Edition,
Eastern Book Company, Lucknow, 1985).

3) H.S Pathak, Mulla on the Sale of Goods Act & The Indian Partnership Act, (9 th Edition,
N.M Tripathi Pvt. Ltd., Mumbai, 1992).

4) P.S Atiyah, Sale of Goods, (8th Edition, Pitman Publishers, New Delhi, 1995).

5) S. Venkataraman, T.S VenkateshaIyers Indian Sale of Goods Act & Indian Partnership
Act, (4th Edition, Asia Law House, Hyderbad, 1984).
Websites

1) Kevins English Law Glossary, <www.kevinboone.com/lawglos_title.html[1]>,


(1/04/2003).

2) Manupatra, <www.manupatra.com[2]>.

3) Westlaw, <www.westlawinternational.com[3]>