TAMIL NADU NATIONAL LAW UNIVERSITY

(A State University established by Act no.9 of 2012)

Navalur kuttapattu , Srirangam (TK),Tiruchirappalli – 620 009 , Tamil Nadu

Scope and extent of Application of Nemo Dat in Contract of Sale

SUBJECT – LAW OF CONTRACTS-II
Submitted by:
Narayana.M
BA0180025
Course:-B.A., LL.B (HONS.)

Signature of the member:

Email ID: narayanam_ug18@tnnlu.ac.in

Submitted to:
Ms.Hemavathi S Shekhar
Assistant Professor
Tamil Nadu National Law University
Tiruchirappalli – 620027
Marks awarded-
Project:
Presentation and Viva Voce:
Total:

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 DECLERATION

I am NARAYANA M Pursuing B.A., LL.B (HONS.) 2nd YEAR, do hereby declare

that the project entitled “Scope and extent of Application of Nemo Dat in Contract of
Sale ” submitted to Tamil Nadu National Law University (TNNLU),Trichy , in partial
fulfillment of requirement of award of degree in undergraduate in law is a record of
original work done by us under the guidance of K.Govindarajan , Assistant Professor
of Law, TNNLU, and has not formed basis for award of any degree or diploma or
fellowship or any other title to any other candidate of any university.

TABLE OF CONTENTS

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1 : Introduction
1.1 Need for the study
1.2 Kinds of Special contracts and the object and scope
1.3 Relevance of Sales and Goods Act
1.4 Transfer of Title in Sales and Goods Act.
2 :Doctrine of Nemo-dat
2.1 Meaning of Nemo-Dat
2.2 Transfer of title
2.3 Nemo Dat in US and English Law.
2.4 Conclusion
3 Principles of Nemo- Dat
3.1 Sale by a person not owner- General Rule
3.2 Buyer gets no title when sale is by person not the owner
3.3 Exceptions
a. Estoppel
b. Sale By Mercantile Agent
c. Sale by a Joint Owner
d. Sale by person in possession under voidable contract
e. Seller and Buyer in possession in sale
3.4 Conclusion
4: Conclusion
Bibliography

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1.Introduction:
In general terms the contracts is said to be the legal binding between two parties by
oral or in the written form of agreement which done for purpose of exchange of goods
and services. When the parties are said to agree freely for whatever term of contract is
as called freedom of the contract, which doesn’t have any exception. The Contract is
governed by the Contract law , in India we do have law which is Indian Contract Act
1872. it is implied because no party must breach the contract or prevents from making
any default in the contract.
The Special Contracts is made with the particular and mostly certain legal relations
existing between two or more parties. The frequent kinds of these transactional
affairs of party has gone through development of rules which prescribes and prohibits
from implications and possibilities to have these kind of contracts.
1.1 Need for the study of special contracts:
The special contracts are made uniquely in the contacts and the contract which has the
special kind of relationship. In order to under stand it we must study the special
contacts which is beneficial cause the principles of special contract which it emphases
done on knowing and acknowledging the essentials of a valid contract and on the
existence of relation between contractual parties and further, principle of nemo - dat
in this project to be understood well, we must need to know special contracts.
1.2 Kinds of Special Contracts:
Indemnity: A Contract of indemnity is a direct involvement of two parties whereby
one party promises to save another from default. 
Guarantee: Guarantee is either oral or written. Generally it is the contract to perform
the promise made or discharge third party’s liability when default happens in contract
and this kind of contract is formed on basis of help in borrowing and lending money.
There are three parties in contract they are, Surety by whom the guarantee is
given Principal debtor who gives assurance . Creditor who gives the guarantee.
Bailment: The delivery of goods done person to another for specified purpose,during
contract and when the specified purpose is done, the goods must be returned or
disposed on the orders of the person who had delivered the goods.
Pledge: Pledge is form of bailment where delivery of goods from the pawnor to the
pawnee which is necessity. There must transfer of possession from one party to
another. The delivery must either be actual or constructive.

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Agent: An agent been employed to do an act for another person or to represent him on
behalf of another in dealings with third parties. The person who appoints agent or who
is represented by agent is called principal.
Contract of Sale: Contract of sale of goods when the seller agrees to transfer the
property of goods to buyer for certain price. The contract of sale between one party
and another.
1.3 Relevance of Sale of Goods Act:
The Sale of Goods Act is also a type of special contact which helps us to regulate
relationship between the buyer and the seller of the property and thus include the
transfer of the ownership of the property. It is a mercantile law which was enacted in
1930 which is derived from the Sale of Goods Act 1893. Before the Consumer
protection Act 1986, the Sale of goods Act protects the rights of the seller in the
contracts.

1.4 Transfer of title in Sale of Goods Act

According to the Sale of Goods Act the transfer of title is “ the person doesn’t give
another a better title which he possessed off”. it basically says that transfer of title by
the non owners of the property. It is explained in sections 27 - 30 which is of sale by
the non owners, one of the joint owner, person in the possession of title under the
voidable contract, possession after agreed to buy by the party and resale of goods
done by unpaid seller.

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2. Doctrine of Nemo- Dat
Generally the sale of good act take place between the person who buys and either the
person who posses the goods or done by authorised agent on behalf of him. However,
under some situations, a seller has intent to sell goods which he doesn’t have the
possession of good or not have the right to sell . Under such circumstances the law
enacted to find which of the party is innocent in the contract: the buyer or the original
person who possessed the goods. At this kind of situation the rule of nemo dat quod
non habet rule
applies. In these type of case involving the nemo dat rule, the seller (not owner) had
sold goods to third party and then being disappeared or become bankrupt so that the
two parties can’t seek remedy from the party. In the case either the original owner or
the third party must take the loss, the court must take the decision.
2.1 Meaning of Nemo- Dat:
“Nemo dat quod non habet rule” is generally explained as “no one can give what he
has not got” or “no one can give a better title than he has himself”. the person who
sell the goods which he doesn’t possess or doesn’t get the proper authority from the
owner of the goods, then he cannot transfer the title of the goods. In the section 27 of
the Sale of Goods Act it says that “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”1 it means
the person who doesn’t posses any title cannot pass a valid title to another on the good
which he sold.

2.2 Transfer of title:

In the Sale of the goods Act in the Section 27 it says “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
seller’s 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
1
Sale of Goods Act 1930.

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the contract of sale notice that the seller has not authority to sell” it clearly says that
the transfer of the title of the property doesn’t passed to the person who is not deemed
to be the owner and sold the good to the third party. If the original owner comes and
asks for his goods then the third party must give to the original owner as he does not
have the title to the good and there is exception to it as provided in the section.
When the seller has the consent of owner and authorised to sell the goods and by the
conduct of the owner which authorize the sale of good. But in the second case there is
exception which is principle of estopple is used here.
2.3 Nemo- Dat in US and English Law:
According American law, a buyer who unconsciously buys and thus sells taken
merchandise, at common law, be held liable in trove for the market estimation of
those products as of the date of transformation. Since the original owner holds lawful
title, the seller is at risk even in a chain of progressive buyers (i.e., the original owner
can effectively sue the fifth buyer in trover). Nonetheless, the issue of progressive
buyers can be remedied: If the jurisdiction perceives a suggested guarantee that the
seller has title to the property (Article 2 of the Uniform Commercial Code (UCC) in
the United States), at that point the buyer can sue the seller for break of that implied
guarantee. Courts of equity generally perceive different special cases, likely offering
ascend to the thought exemplified in the cutting edge UCC.

As referenced before, the nemo dat principle has various special cases. Lawful tender,
for instance, doesn't stick to the standard in specific conditions. For instance, on the
off chance that a rebel purchases merchandise from a owner, at that point that trader
won't need to restore the bills to the original owner since holding the standard to be
generally would upset the economy and counteract the free progression of products.
The same event be valid for other "negotiable" instruments like cheques.
Another issue is the exchange of other legitimate rights typically conceded by
proprietorship. In 2011, a US District judge decided that a lady who had acquired a
taken PC could sue a gadget following organization for attack of security originating
from account programming introduced on the PC to encourage its recuperation in the
wake of being stolen. This decision exhibited that true blue buyers are qualified for
certain rights by prudence of ownership alone, or that nemo dat is supplanted by the
buyer's right to the privacy. It is the position of American Law.
In English law, the Sale of Goods Act 1979,Section 21(1) gives the essential

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guideline, embodied by the adage nemo dat quod non habet: „no one can move a
superior title than he himself possesses‟. The Factors Act 1889, which gives three
significant special cases to the essential principle, is simply a solidification of past
enactment, with Factors Acts in 1877, 1842, and 1825 all expanding the underlying
Act of 1823.
Where Lord Justice Denning stated in case of Bishopsgate Motor Finance Corpn Ltd
v Transport Brakes Ltd it says “In the development of our law, two principles have
striven for mastery. The first is for the protection of property: no one can give a better
title than he himself possesses. The second is the protection of commercial
transactions: the person who takes in good faith and for value without notice should
get a good title. The first principle has held sway for a long time, but it has been
modified by the common law itself and by statute so as to meet the needs of our own
times.”2 and The statutory exception cases to the nemo dat guideline are contained in
the Factors Act 1889, the Sale of Goods Act 1979 and the Hire-Purchase Act 1964.
Until 1995 the Sale of Goods Act gave a exception case as the 'showcase obvious'
decide which gave that where the purchaser purchased the merchandise in market
plain in accordance with some basic honesty he was qualified for take great title to
them. Be that as it may, the standard was created when most merchandise were sold at
business sectors and private deals were negotiable as liable to include taken products.
In present day times the market obvious guideline wound up apparent as supporting
cheats and fences and has now been nullified.3

The primary statutory exception case to the nemo dat standard is given by section 23
of the Sale of Goods Act 1979. This gives where the merchant of merchandise has a
voidable title which has not been evaded at the hour of offer the purchaser will gain
great title to them. Other exception is provide by section 2 of the Factors Act 1889,
which states “Where a mercantile agent is, with the consent of the owner, in
possession of goods or of the documents of title to the 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

2
Nemo dat quod non habet <https://www.lawteacher.net/free-law-essays/commercial-law/the-nemo-
dat-quod-non-habet-rule-commercial-law-essay.php> accessed on 13 October 2019.
3
Nemo dat quod non habet <https://www.lawteacher.net/free-law-essays/commercial-law/the-nemo-
dat-quod-non-habet-rule-commercial-law-essay.php> accessed on 13 October 2019.

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were expressly authorised 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.”4 The English law has way more exceptions than the Indian law because of
various other statues provides and interfere in the rule of nemo dat.
3. Principle of Nemo -Dat:
The main principle of the Nemo dat is that the person who is not owner of the goods
can’ pass the ownership of the property and then the person who buys goods from the
seller can’t foresee the process. So if the original owner comes and claims the
property then who will suffer the loss. This question always arise so in further
document and what are the exceptions we have for nemo dat is discussed in detail.
3.1 Sale by person not owner -General Rule:
As the general rule, no person can sell goods and can’t give a good title until he his
the original owner or some one having his authority or consent e.g agent, and the rule
here is the same although the sale is accompanied by the transfer of a bill of landing,
delivery order, warrant or similar documents. Such documents are not considered as
negotiable instruments so as by their transfer to pass to the buyer a title superior to
that of a seller. A party however innocent maybe who buys the goods from the one
who is not owner obtains no property in them whatever it considers. The general rule
was stated by Willis J in that " no one can transfer a better title than he himself
possesses".
Later in law the development came, the legislature had to find balance between two
principles. The first one relates to protecting one’s own property. In order to protect
the owner’s property so that the owner can alone pass title, the first para of the section
has been enacted so that a person not an owner cannot pass any title. However in the
interest of trade and commerce and its development, it was necessary to permit sales
by authorised agents. This is secured by provisions which protects sale by commercial
agents. Sections 28 ,29 and 30 are grouped under second category.

3.2 Buyer gets no title when sale is by person is not owner:

Where the good is sold by a finder or a thief the buyer will not get the title, as a judge
observes “ If a person leaves a watch or a ring on a seat in the park or on the table at a
cafe and ultimately gets into the hands of a bonafide purchaser, it is no answer to the
4
Factors Act 1889.

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true owner to say that it was his carelessness and nothing else, that it enabled the
finder to pass it off as his own”.
The exception is the principle of protecting bonafide commercial transactions is given
effect to by engrafting a number of exceptions upon the above principle. After starting
the principle in general terms, section 27 and the following three sections that follow
it enumerate the situation in which in which nemo- dat doesn’t apply.
3.3 Exceptions:
A. Estoppel:
By the chance that the original owner holds on and enables a innocent purchaser to
pay over cash to a third person, who purports to right to sell an article, the original
owner will be estopped from denying the third person's entitlement to sell. Estoppel
applies in situations where the owner of the good demonstrate so that it gives the idea
seller to sell the products or have right to sell . As an outcome, the owner is then
anticipated (estopped) from denying the realities as he spoke to them to be. The third
person who buy at that point turns into the owner of the good.

The expressions of Sec. 27 are “ . . . unless the owner of the goods is by his conduct
precluded from denying the seller’s authority to sell” set out this special case. This is
minimized doctrine of estoppel. Nothing is said in the area with respect to when the
owner is by his direct blocked from denying the dealer's position to sell though just
giving the third person ownership of the products will not pass up to a portrayal that
the third person is the owner or has the right to sell the good
The Sec. 27 of Sales of Goods Act, 1930 applies to these two category of estoppel:

Estoppel by representation:
Estoppel by representation may emerge where the owner of the products has by his
words or direct spoke to the purchaser that the seller is the original owner of the
merchandise, or has his position to sell the merchandise. This class of estoppel is,
hence, in some cases sub-classified into estoppel by words and estoppel by conduct.

Estoppel by Negligence:
Estoppel by act negligence is the place the owner of merchandise, by explanation of
his negligence or careless inability to act, enables the dealer of the products to appear
to the purchaser as the original owner or as having the original owner's position to sell

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the products. For this sort of estoppel to emerge it should initially be demonstrated
that the owner of the merchandise had an obligation to fare thee well so as not to act
carelessly.
B. Sale by a mercantile agent:
The term ‘mercantile agent’ means that a mercantile agent has, during the time of his
business , such agent has authority to sell goods or to consign goods done for the
purpose to sell, or buying the goods, or raise money for security of goods. A
purchaser will get a goods title if he buys in goods faith from a mercantile agent who
is in possession either of the goods or documents to title of the good with consent of
the owner, and whoever sells the goods in the course of his business because the sale
will be valid only if it is expressed to sell by the owner. The Section 27 may apply,
different conditions should be fulfilled:
The agent who does the sale must be a merchantile agent 1 The merchantile agent
must be in possessed the goods.
1. Agent should be independent from the person for who he is works as agent (his
principal)
2. Agent should act in a business purpose (even if is on occasionally).
3. Agent should be in possessed the actual goods or documents to the title of goods
when he sells them to third party
4. Possession of goods must:
(i) should be with consent of owner.It established consent as even if the owner is
tricked by agent to give the possession of the goods.
(ii) have the capacity to be a mercantile agent and have the purpose to be connected
with business as a mercantile agent and for sale of good. Thus, possession of the
goods by a mercantile agent has a purpose.
(iii) possession of the good is from the present where he get the good and not in the
past.
5. The job of agent is to sell or to dispose the goods. A agreement to sell is not enough
6. The deals done by the mercantile agent must be in the course of business of
mercantile agents . This means the sale or dispose of goods:
(i) must be done in business hours; (ii) from business surroundings; and (iii) acting
like the third party would expect in place where mercantile agent wants to act like
him self .
7. The third person must get the goods in goods faith and without knowledge that the

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 mercantile agent has no authority to sell them. The burden of proof lies on the third
party. The test for goods faith which will be subjective and condition will be
satisfied when it is done honestly,irrespective of whether done negligently or not.
When the conditions are satisfied then seller can consult a goods title on the
purchaser. Unless all conditions are satisfied a non-owner can’t pass goods title to a
third person. At the end, mercantile agent can only pass that title which the person
should consented to him and having the goods or documents of title If that person
was not the owner of the goods then title will not be passed by the mercantile agent
to the purchaser. This is one exception to the nemo dat which refers only to a person
who acts as mercantile agent and satisfy all of its conditions.
C. Sale by Joint Owner:
“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.”5 is section 28 of Sale
of Good Act. The conditions for this exception are:
1. Person who is in possession of transferring the title must posses the goods jointly
with others.
2.With the permission of the other owners he must own the good solely.
3. The property possessed by the joint owner can be transferred to any other person
in the pursuance of sale.
4. The person must buy such property in good faith without knowledge that joint
owner, does not have right to sell.
This provision made to protect the buyer who buys in good faith and suffering from
illegal actions of one co-owner taken against the other co-owner.

D.Sale by person in possession under the voidable contract:

“When the seller of goods has obtained possession thereof under a contract voidable
under section19 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 seller’s defect of title”6
says section 29 of Sale of Goods Act.

5
Sale of Goods Act 1930.
6
Sale of Goods Act 1930.

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Circumstances when contract is voidable
In circumstances where a seller has a title that he may maintain a distance from are
the place he has acquired belonging of the goods by extortion or where an individual
induces another to sell his goods by means of pressure, undue influences , or
deception. In such circumstances the seller can pick, on the off chance that he so
wishes to avoid from the contract.
Process to avoid a contract that is voidable
The most apparent way to avoid a voidable contract in these condition is for the
person defrauded etc to inform the other person that the contract is doesn’t bind or by
express an intention to do and by taking all conceivable steps such as giving
information to police for the fraud.
E. 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.”7 says in the section 30 of Sale of Goods Act.
The given conditions must be done for this exception to be executed:

1. This defense is available by third person only if the goods and documents of title is
possessed by the buyer and the consent must be given by the seller. The seller must
have consented to the buyer first for giving him the possession of the goods or of the
documents of title.

7
Sale of Goods Act 1930.

13
2. The delivery should be made under a sale, pledge, or other disposition if it’s to
second buyer.

3. The exception applicable when transactions is done when the first buyer agrees to
buy goods. Does not apply if the person acquires the goods by hire purchase
(Helby v Matthews (1895)).Does not apply to contract which provide services or
where first buyer acquires the goods by ‘sale or return’ contract.

4. It works to defeat the title just of an owner who has depended to a purchaser the
ownership of his merchandise or documents of title. Assent just of the owner in regard
of such belonging is pivotal. (National Employers Mutual General Insurance
Association Ltd v Jones (1990)).

5. Once the second buyer get possessed of the goods then it is noted under ‘Sale by a
seller in possession after sale’ .The second buyer can escape with this exception and
if the buyer take good title as he take goods in good faith, without knowledge that the
first buyer has defect of title.

6. When selling or otherwise disposing of the goods, the first buyer must act in the
way a mercantile agent acting in the ordinary course of business of a mercantile
agent would act.
Any title passed under this exception is the same title as the original owner had. It
follows, therefore, that if the original owner himself had no title in the goods (for
example if he had stolen them) then s 25/s 9 will not pass any title to the innocent
buyer
7. When selling or generally discarding the merchandise, the principal purchaser must
act in the way mercantile agent acts in the normal course of business of a mercantile
agent would do.
Any title went under this exemption is a similar title as the first proprietor had. It
pursues, in this manner, that if the first proprietor himself had no title in the products
(for model in the event that he had taken them) at that point s 25/s 9 won't pass any
title to the purchaser who is not found to be guilty.
4. CONCLUSION:
Though the principle does the justice to the original owner of good it has many

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exception in the process of finding the good and to check wheather to whom the
goods belong to. The principle of Nemo dat quod non habet, the owner of goods may
recover goods from non guilt third person who has bought the goods from the person
who has no good title than 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”.

BIBILOGRAPHY

1. R Chakraborty: ‘Law of sale of goods and Partnership’, Orient Publishing

Company, First edition,2006.
2.Pollock and Mulla: ‘Sale of Goods Act, 2017’
3.Sales of Goods Act, 1930.

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