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Legal Interpretations of Nemo Dat Quod Non Habet

  • 7 Pages
  • Published On: 28-11-2023
Introduction

In a contract for the sale of any goods typically takes place in between two parties; one offering to sell and the other accepting the offer making for a legitimate sale. The rule of Nemo dat quod non habet comes into place where certain circumstances arise where the seller of a particular goods are not the authorized seller and therefore reserves no right to sell the product which puts the buyer in an uncertain position and thus the law needs to interpret the situation and clarify the position of the goods as the real owner or not. The literal meaning of the rule stands as ‘no one can possibly give what they do not have’ speaking on the power to sell of the seller. The seller or the transferor of the property has their rights limited to the title he reserves and nothing more. The seller particularly is responsible for transferring title of a property who is not the real owner of the said property yet sells the same with a title that is defective in nature over to another party. This rule had been in use for a long time and has served significant purpose in the commercial laws from a long time and is generally seen to be in usage in the Digest of Justinian where a Roman Jurist had proposed a view regarding this principle. The view was also understood in context with the “Derivation principle” which meant that if a property or goods is passed on to the transferee by the transferor, by the means of sale or a gift, the title of the transferor remains undisturbed and finds the transferee with the same rights over the goods.

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Section 21 of the Sale of Goods Act, 1979 govern this particular maxim which has been discussed in the case of Bishopsgate Motor Finance Corpn Ltd v Transport Brakes Ltd, wherein Lord Denning had secured two principles on the tile and the contract entered into by the buyer and the seller. This view has been highly relevant in the context of the modern property law and the inclusion of the rule in the Sale of Goods Act, 1979 had the primary motive to keep any fraudulent party at bay and Section 61(1) of the Act intends to keep the buyers protected who have innocently entered into the agreement and with the aid of the relationship of a principal and agent, such a sale entered into by the seller not possessing the authentic title to the property can exercise such a sale.

  1. Neo, D. (1994). Application of English Law Act 1993: Sale of Goods and "Nemo Dat". Singapore Journal of Legal Studies, 150-163. Retrieved January 9, 2021, from http://www.jstor.org/stable/24866693

In the case of Greenwood v. Bennet, the defendant was the rightful owner of a car which was given to another man by the name of Searle to conduct few repairs but Searle had misused the capacity under which the car was entrusted to him and used the car for his own beneficial purposes. He, the further damaged the car and later on sold the same car to another party by the name of Harper. In this situation, Harper is an innocent buyer who has no idea bout the authenticity of the ownership. Harper had repaired the car and spent a considerable amount of money to finally sell it to another company. The court held that Searle was not the rightful owner therefore the car originally belonged to Bennet thus Harper loses all credibility and the sale executed by him to the financial company becomes null making Bennet recover the car back but since the damaged car was repaired by Harper and he had no knowledge about the dispute in ownership and was merely an innocent buyer, he was compensated for the charges. This case exhibits that this rule does not definitely adjudicate a fair position for all the parties, especially the buyers are left in a much more complicated position. It also may so happen that the proprietor, in intentionally leaving behind the ownership of the merchandise, takes upon himself the danger that something may happen to the products. In case the merchandise product is perishable in nature, it becomes all the more mandatory to take due care of the product and release the proficiently.

In case of a personal property the position of owner is given predominance over the buyer since the value of any legal interest over a property will have a better chance of protection than any equitable interest and secondly the order of assignment gains a better position as opposed to the date. However, these positions will not appear in case of a sale of any goods rather is limited in the exercise of sale in a personal property. The concept of title governed under this law does not have clarity and the position of the rightful owner of a particular good as opposed to the “apparent owner’s” possession is to be weighed to identify the actual rights possessed by the buyer over the goods. However in case of a stolen good from the rightful owner through the seller to the buyer who in turn becomes the “apparent owner” of the goods, the actual owner still has a stronger position but the seller does not have a strong position in relation to the buyer who now holds the possessory title of the goods.

  1. Greenwood v. Bennett, 208 Ala. 680, 95 So. 159 (Ala. 1923)
  2. Sehgal, D. R , Ipleaders (2020 ) “ The rule of Nemo dat quod non habet” < https://blog.ipleaders.in/rule-nemo-dat-quod-non-habet/> accessed on 9th January, 2021
  3. Dearle v. Hall (1823) 3 Russ 1.
  4. Merrett, L. (2008). The Importance of Delivery and Possession in the Passing of Title. The Cambridge Law Journal, 67(2), 376-395. Retrieved January 9, 2021, from http://www.jstor.org/stable/25166410
Exceptions

The exceptions of this rule are embedded in both the Sale of Goods Act, 1979 as well as the Factors Act, 1889. However, this rule has been modified and adjusted with varied exceptions to eradicate the apparent strict application which does not favour the buyer at any cost and keeps them in a disadvantaged position in case any dispute were to arise. Therefore, the exceptions that have been included has made way for giving sufficient protection to the buyer if they have proceeded with the sale without the knowledge of the original ownership of the goods and the entire transaction have been carried on in good faith.

Mercantile Agent

In the case of an actual sale, if the buyer is certain that the seller is an authorized agent and performed the sale in full capacity, that leaves no scope for the agent to later deny his position. These mercantile agents were known as “Factors” on the request of the principal. If the position of the agent is transparent in that case this shall function as an exception to the established rule of Nemo dat, however, it must be ensured that the agent is acting sufficiently and within the powers conferred on him regarding the possession of the goods, the title of the goods, his action against such goods and the buyer is convinced and believes reasonably that the agent had acted within his full power and has sufficient authority to conduct the sale. Even in case of a mercantile agent acting on the powers that were not conferred on him by the owner of the goods, the buyer may consider it to believe reasonably that the authority of such an agent is authentic, then such a sale will still be effective in nature due to the power of the agent to sell.

  1. Ibid
  2. Rutherford, L., & Todd, I. (1979). Section 25 (1) of the Sale of Goods Act 1893: The Reluctance to Create a Mercantile Agency. The Cambridge Law Journal, 38(2), 346-360. Retrieved January 9, 2021, from http://www.jstor.org/stable/4506190
  3. Andrew Tettenborn. (1996). Reservation of Title. Nemo dat and Double Sale. The Cambridge Law Journal, 55(1), 26-28. Retrieved January 9, 2021, from http://www.jstor.org/stable/4508164

The owner of the good will be estopped in situations where the title gained by the purchaser through any middlemen who does not have the authorization to conduct such a sale but the true owner has shifted authority, enabling the authority to act legitimately.

Sale as under the possession of law

The case of Johnson v. Credit Lyonnais made way for the Sections 24 and 25 of the Sale of Goods Act, 1979 but such position was reversed through the Factors Amendment Act, 1877 in order to protect the owners possessing documents of title. It helped to function as the agent who had obtained such documents of title with prior consent and the further sale through those documents wouldn’t render the sale ineffective. Further, amendments in Section 8 of the Factors Act, 1889 secured the position of the third parties as not only was the documents protected, the goods under the possession of the seller were also protected after it has been delivered which can be constructive in nature as held in the case of Michael Gerson (Leasing) Ltd v Wilkinson

Voidable Title

In case of any voidable title of the goods entered into through a sale and if such a title has not been avoided by the parties, in that case there would lie no dispute with regards to the possession of the title. Thus, this will lead the buyer to have a good title over the property only if the buyer has acquired the property faithfully and under no pretense that the title of the goods were defected. It was held in the case of Cundy v. Lindsay There can be many reasons to a voidable title, therefore the authenticity of the title plays a major role but if the buyer is not aware and no party has raised any objection with the sale, such a sale will not be void.

Hire-Purchase Agreement

However, the Hire-Purchase Act was sufficient in many areas in providing protection to buyers of motor vehicles especially private buyers acting in accordance with some basic honesty who purchase the motor vehicles which have been let out on recruit buy without notice of the presence of the recruit such an arrangement. It was affirmed on account of Helby v Matthews, that an individual who has taken products on recruit buy is only a hirer and not somebody who has 'purchased or concurred' the merchandise, thus he can't give great title to somebody who purchases the merchandise from him by uprightness of s 25(1) of the Act. Thus, the main idea is that in a hire-purchase agreement, the purchaser may not necessarily buy the goods therefore, it cannot be passed of as a sale agreement. However, the person who is purchasing the product or the vehicle left under such a hire-purchase agreement, the purchaser shall be protected but not if such an agreement was formed under illegal terms.

  1. Johnson v. Credit Lyonnais Co. (1877), 3 C. P. D. 32
  2. Michael Gerson (Leasing) Ltd v Wilkinson [2000] EWCA Civ 250
  3. Supra 7
  4. 1 Cundy v. Lindsay 877–78) LR 3 App Cas 459
  5. Section 23, Sale of Goods Act, 1879

In the case of Mitchell v. Jones, the question of the seller remaining in the possession of goods were raised. After delivery, the seller is most definitely not in possession of goods but if the seller does recover the possession but in any other capacity, in that case such a possession will not be similar to the first capacity. Even though the requirement of Section 24 of the Sale of Goods Act, 1979 the concept of continuous physical possession of the goods but is such a requirement practical or not has been questioned. This practical difficulty may not hinder the sale if the continuous possession is interpreted and read as the possession to be constructive as well as continuous. The main exemptions pertaining to the rule is included in the Hire -Purchase Act, 1964 as well. The exception of ‘market Overt’ was a valid exception under the Sale of Goods Act, 1979 but as much as the buyer was buying the goods in good faith and reserving authentic title upon them, the goods were mostly stolen goods that were being dealt in. This elucidated the protection of such stone goods and therefore multiple changes were brought about in the legislations.

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BIBLIOGRAPHY
  1. Helby v Matthews (1985) AC 471
  2. Rutherford, L., & Todd, I. (1979). Section 25 (1) of the Sale of Goods Act 1893: The Reluctance to Create a Mercantile Agency. The Cambridge Law Journal, 38(2), 346-360. Retrieved January 9, 2021, from http://www.jstor.org/stable/4506190
  3. Section 27(2) –(5) of The Hire Purchase Act , 1964
  4. Mitchell v. Jones 1905 24 N.Z.L.R 932
Journals / Articles
  • Neo, D. (1994). Application of English Law Act 1993: Sale of Goods and "Nemo Dat". Singapore Journal of Legal Studies, 150-163. Retrieved January 9, 2021, from http://www.jstor.org/stable/24866693
  • Merrett, L. (2008). The Importance of Delivery and Possession in the Passing of Title. The Cambridge Law Journal, 67(2), 376-395. Retrieved January 9, 2021, from http://www.jstor.org/stable/25166410
  • Rutherford, L., & Todd, I. (1979). Section 25 (1) of the Sale of Goods Act 1893: The Reluctance to Create a Mercantile Agency. The Cambridge Law Journal, 38(2), 346-360. Retrieved January 9, 2021, from http://www.jstor.org/stable/4506190
  • Andrew Tettenborn. (1996). Reservation of Title. Nemo dat and Double Sale. The Cambridge Law Journal, 55(1), 26-28. Retrieved January 9, 2021, from http://www.jstor.org/stable/4508164
Websites
  • Sehgal, D. R , Ipleaders (2020 ) “ The rule of Nemo dat quod non habet” < https://blog.ipleaders.in/rule-nemo-dat-quod-non-habet/> accessed on 9th January, 2021
Cases
  • Helby v Matthews (1985) AC 471
  • Mitchell v. Jones 1905 24 N.Z.L.R 932
  • Greenwood v. Bennett, 208 Ala. 680, 95 So. 159 (Ala. 1923)
  • Dearle v. Hall (1823) 3 Russ 1.
  • Johnson v. Credit Lyonnais Co. (1877), 3 C. P. D. 32
  • Michael Gerson (Leasing) Ltd v Wilkinson [2000] EWCA Civ 250
  • Cundy v. Lindsay 877–78) LR 3 App Cas 459
Statutes
  • The Sale of Goods Act, 1979
  • The Factors Act, 1889
  • The Hire-Purchase Act, 1964

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