The rule of ‘Nemo dat quod non-habet’ means that ‘no one gives what they do not have.’ This rule is sometimes also referred to as the rule of Nemo Dat. The general rule in the Sales of Goods Act, 1930 is also only that owner of the good can sell the goods or transfer the possession or ownership of that good to the buyer/any other person who is not having any title over the good.
The presence of this rule of law states that Sale by a person, in the correct scenario, except the owner.—With respect to the law mentioned in Act and/or of any other law for the time being in force, in which commodity/ies are sold by a person except the owner without the consent or authority of the owner, the buyer has no place for any better title of the purchased commodity than what was existed with the seller, except in the situation where the owner of the goods has exhibited through conduct the seller’s authority to sell.
In the case of a mercantile agent, the agent should have the consent of the owner, should be in possession of the goods or document mentioned his authority of selling the good, any sale made by the agent in the ordinary course of business of a mercantile agent be considered valid as of sold by the owner only if the agent was expressly authorized by the owner of the goods to sell the same; conditional that the buyer at the time of contract didn’t have the time to perform due diligence and even if did he acted in good faith.
According to this Section, it is concerned with the transfer of possession, the rule is that no one can give the better title to a buyer other than the owner of the good. If the ownership of the goods in the matter is clear and good with the seller the buyer of the goodwill also have the same title to the goods bought thereof. While if the title or the ownership is not clear, limited, or defective with the seller of the goods, the buyer will also have the same limited title to the goods, even if the buyer has been acted in good faith and paid a fair sum of money for purchasing the goods.
The doctrine which we are taking into has its origin in Latin. This means that the “buyer obtains no better title than the seller.” If the seller has the limited title the buyer will also be accounted for to same and nothing more than that. The above situation illustrates that- if X sells stolen goods to Y, as X does not have ownership of those goods Y will also not possess any ownership title over those goods, even though Y had paid a fair price and bought the goods in good faith.
The above is the general rule of the doctrine whereas there exist some exceptions to this general rule where if a buyer in good faith and by paying fair price buys goods from such any person except the owner of the goods, would also have good title over the goods bought thereof.
The exceptions are as follows:
- Transfer of title by estoppel – Sec 27.
Normally, the owner of the good can question the ownership title that the buyer has on the ground that the seller didn’t have the authority and right to sell the goods. Whereas chances are there that this rule occasionally may be applied against the owner and in such cases the owner will not be in a position to deny the ownership to the buyer. The last lines of Sec. 27 states that ‘Except in the situation where the owner of the goods has exhibited through conduct the seller’s authority to sell.’
The rule, when used against the owner here the owner by their conduct or act or omission, makes the buyer believe that the seller is the real owner of the goods and has absolute right to sell the goods and induces the buyer to buy them so later on owner cannot deny the existence of such rights with the seller. Due to the rule of estoppel acting against the owner, the owner will not be able to establish that seller did not have the right to sell.
The buyer gets the title of selling the goods when the owner –
- The owner not acting anything while present at the time of sale;
- Moreover, assisting in the sale;
- By allowing the transfer of ownership to another person while having the intention of same;
- If the owner acted to induce the buyer to buy.
In the case of Eastern Distributors Ltd v. Goldring,[1] the van owner had a wish to buy a car for which he approached a car dealer, but the van owner didn’t have the money to pay. Both of them made a plan that would be suitable for both of them and planned to deceive the finance company. They signed a document making the dealer the owner of the van and that the owner wanted to have the van on hire- purchase basis. The dealer then transferred the ownership of the car to the finance company, which gave it on a hire-purchase basis. On finding ownership fraudulent the company enquired about the same.
As the owner and car dealer have signed the agreement it made the car dealer the original owner of the van and stopped the owner from taking any ownership title of the van.
- Sale by a mercantile agent – Sec 27.
According to the section if the mercantile agent has the possession of the goods and good title with the consent of the owner of the goods, then in such case any sale of the goods done by the agent during their mercantile agency is equally authoritative as done by the owner. The problem arises when the agent does not have the authority to dispose of the goods.
For the application of the above provision, there must be compliance with the below situations –
- The seller is the mercantile agent as per Sec 2(9),
- The title or possession of the goods are passed by the owner or with their consent, while in the capacity of mercantile agent,
- The sale of the good is done by agents in their capacity of a mercantile agent only,
- The buyer must have been acted in good faith believing the agent to be the true owner of the goods.
In the case of Folks v. King,[2] the owner gave possession of his car to the agent and entrusted him to sell the same not less than the reserved price. The agent sold the car at a price much lower than the reserved price to a buyer having good faith. Later the owner wanted the car back but it was held that since the buyer purchased the good from the mercantile agent who had a good title, and the buyer while purchasing acted in good faith so the buyer will also have the good title.
- Sale by one of the joint owners – Sec. 28.
According to the law if there is one good that has several co-owners and the possession of the goods is with one co-owner with the consent of other co-owners, then if that co-owner sells the goods to the buyer the buyer will have full and good title over the goods provided that buyer has acted in good faith and has paid the fair price of the good.
For an instance, if A and B are co-owners of goods and B has the possession of the goods to which C has given the consent, B sells the goods to a buyer who acts in good faith. Then the buyer will have a good title over the goods.
- Sale by a person in possession under a voidable contract
As per law, if the consent of any of the parties to contract is taken by coercion, fraud, misrepresentation, or undue influence in such cases the contract is voidable from the side of the party whose consent is so obtained. Under Sec. 29 of SOGA if a person has obtained the possession of goods under the contract which is voidable and then sells the same goods to other parties before the contract is avoided by the other parties, then the buyer will have the possession and good title over such good again provided that buyer has acted under good faith, without noticing the defect in the seller. But on the contrary, in a right scenario where the other party has rescinded the contract with the seller, the buyer holds a defective title over the goods.
For example, if X buys goods by coercion from Y and before Y could rescind the contract, X sells the goods to Z who acted in good faith. In this case, Z will hold absolutely good title over the goods.
Author(s) Name: Shubhangi Agrawal (Hidayatullah National Law University, Raipur)
References:
[1] Eastern Distributors Ltd v. Goldring, (1957) 2 QB 600.
[2] Folks v. King, [1923] 1 K. B. 282.
