The Rule of ‘Nemo datquod non habet’

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The rule of ‘nemo dat quod non habet’ is a principle associated with Sale of Goods act, 1930, related to transfer of title discussed under Section 27 to 30 of the Act.

Introduction

In Bishopsgate Motor Finance Corpn. Ltd. v. Transport Brakes Ltd, Denning LJ laid down that “In the development of our law, two principles have striven for mastery. The first is 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 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 times.[1]

The first principle in ancient times is known as ‘nemo dat quod non habet’ which literally ‘no one gives what they do not have’; it states that if the seller is not the owner of the said good he cannot transfer a good title of the same to the buyer.

The general rule related to this maxim is discussed under Section 27 of Sale of Goods Act, which says that, when the goods are sold by the a person, who is not the owner of the goods or does not have the consent of the owner to sell the goods, the buyer does not get the better title of the goods than the seller had. For example, when a stolen good is sold to the buyer, he has the same title as the seller. This rule tries to protect the rights of true owner.

The same was discussed by the court of law in Greenwood v Bennett[2], Bennett was the owner of a car and for repair purposes entrusted it to Searle who crashed the car and sold it to Harper who doesn’t know about the ownership of the car; Harper spent on the repairs of the car and sold it to a finance company. Court held that since Searle did not have the title of the car he cannot sell it hence Harper didn’t get the better title of the same hence he cannot sell it off too. Bennett was able to recover the car.

However there are certain exceptions to this rule where nemo dat quod non habet does not apply.

Exceptions

  1. Estoppel

This exception is mentioned under Section 27 of the Act. Rule of estoppels means when someone by words or act or omission leads another person to believe something which is not true and denying the previously established affairs. Section 27 states that “unless the owner of goods is by his conduct precluded from denying the seller’s authority to sell”. In this case the innocent buyer will get the good title of the goods. Estoppels can be off two types i.e. by act or omission (legal) and by negligence (regard the person concerned).

  1. Sale by mercantile agent (proviso S.27)

When a buyer get goods from the mercantile agent, he acquires good title over the goods. In Folks v King[3], the plaintiff asked the mercantile agent to sell his car not below the stated price. He sold the car to X below that price and further misappropriates the amount. X further sold the car to the defendant. It was held that

plaintiff cannot recover the car from defendant, as X got a good title over the goods. Hence there are certain conditions which must be fulfilled i.e.

  • Sale must be done by a mercantile agent defined under Section 2(9) of Sale of Goods Act.
  • Goods must be in possession of the agent.
  • Sale of the goods must be done by the consent of the owner.
  • He must be selling while acting as a mercantile agent.
  • The buyer must be in the good faith and should not have noticed the capacity of the seller.
  1. Sale by Joint Owner (S.28)

As per Section 28 of the Sale of Goods Act, if one of joint owners of a good who has the possession of such good and with the consent of other joint owners, sells the same to someone then the buyer would get the good title of the goods, if he buys it in good faith and without notice of the seller’s defect of title. For example, there are four joint owners of cattle and one of them is in possession of them with the consent of other owners, if he sells the cattle then the buyer would get a good title over the cattle if he buys in good faith.

  1. Sale by a person under voidable contract (S.29)

Section 19 and 19A of the Indian Contract Act deals with the voidable contracts i.e. contract made with the use of fraud, coercion, misrepresentation and undue influence. Section 29 of the Sale of Goods Act states that if the seller of the goods has acquired them through above means and buyer purchases the goods before the aggrieved party had interrupted the contract, the buyer would get good title over the goods if he buys them in good faith and did not notice the defect in the seller’s title.

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In Phillips V. Brooks[4], X misrepresented himself as a famous celebrity and got a ring from the shopkeeper (plaintiff), before the plaintiff knows about this, X pledged the ring to the defendant. Court held that the pawnee has a good title over the goods since he fulfils all the above mentioned conditions.

  1. Sale by the seller in possession (S.30)

Section 30 states that when the seller has sold his goods to the buyer he transfers the ownership rights to the buyer and hence cannot further sell the same good to someone else as he does not have the right to do so. But under Section 30(1) there is an exception to this rule. If the seller is still in possession of the goods then he can sell them to another person and the person must be buying the same in good faith, he would get the good title over the goods.

In Staffs Motor Guarantee Ltd v. British Wagon Co Ltd[5], X, the lorry owner sold it to the defendant and later took it for hire and purchase purposes, and then resold it to the plaintiff. The court held that X cannot sell the lorry to the plaintiff as he does not have the possession of the same as a seller. Hence the exception cannot be enforced in this case.

  1. Sale by the buyer in possession

Where a person has bought or has agreed to buy certain goods of which possession has been given over to him, but the seller still has some lien or right over the goods, if the buyer resells the goods the second buyer will get a title free from the seller’s right of lien. It is an essential condition that the real owner must have the right to sell the goods. In this case nemo dat quod non habet principle won’t apply.

  1. Resale by an unpaid seller (S.54)

An unpaid seller who has despite exercised his rights of lien and put a halt on the sale of goods; becomes entitled to resell the goods to the another buyer and the new buyer will be protected by the law. The same is in case of perishable goods. However the only difference is that in the later scenario the seller must inform the buyer about the reselling of the goods.

  1. Sale by the finder of goods

As per Section 71 of the Indian contract Act, the finder of the good has the same responsibility as a bailee. However he can sell the goods in two conditions if the owner refuses to pay lawful charges to the finder i.e. when the goods are perishable in nature and when the lawful charges amounts to 2/3rd value of the goods.

  1. Sale by Pawnee

As per Section 176 of the Indian Contract Act, the pawnee has the right to sell the goods if the pawnor fails to make the payment of the debt on giving reasonable notice to sell. The buyer of such goods will be get good title over the goods.

Nemo dat principle is incorporated in the legal system of Indian under Indian Contract Act and Sale of Goods Act, which shows the significance of possession and ownership of goods.

[1] Bishopsgate Motor Finance Corpn. Ltd. v. Transport Brakes Ltd 1902 AC 325 (326).

[2] Greenwood v Bennett [1973] 1 QB 195

[3] Folks v King (1923) 1 K.B 282

[4] Phillips V. Brooks [1919] 2 KB 243

[5] Staffs Motor Guarantee Ltd v. British Wagon Co Ltd [1934] 2 KB 305.

This article has been written by Arya Sharma, currently pursuing B.A.,LL.B. from Hidayatullah National Law University, Raipur.

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