Transfer of Title: Meaning, Laws, Exceptions & Examples | Sale of Goods Act 1930

Nemo Dat Quod Non Habet

“Nemo dat quod non habet” is a Latin maxim which means that “no one can give what they do not have”. In context of contract of sale it means that a seller cannot convey a better title than that of his own. This principle emphasizes that a person cannot transfer ownership of a property or right unless they themselves possess it.

This rule is embodied under Section 27 of the Sale of Goods Act, 1930 which states 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.

However various exceptions to this rule has been recognized.

Exceptions to the Rule:

1. Sale Under the Implied Authority of Owner (Sale by Estoppel)

   When the owner of goods, by his act or omission, makes the buyer to believe that seller of those goods has a right to sell them, subsequently he cannot deny the existence of such a right in seller (even though the seller did not actually have right to sell them).

   For example, A sells B Goods to C in B’s presence and B did not objected to it then later on he cannot dispute A’s authority to sell the goods.

2. Sale by a Mercantile Agent

According to Section 2 (9), A mercantile agent is one who is having in the customary course of business as such agent authority either to sell the goods, or to consign them for the purpose of sale, or to buy goods, or to raise money on the security of the goods.

For example, broker or auctioneer is a mercantile agent.

Sale by mercantile agent even without express authority of owner of goods is valid provided the following conditions are satisfied :

1. Possession of goods with consent of owner and in his capacity as a mercantile agent


• The mercantile agent should come into in possession of goods with the consent of owner. If he had obtained possession by theft, Extortion etc., he cannot convey a good title. Also, if he is in possession in any other capacity then that of a mercantile agent, he cannot convey a good title. For example, if A lends his bike to B for few days, and B who happens to be an auctioneer, sale it by auction, the buyer will not acquire a good title to them because seller did not get the possession in his capacity as an agent but as a friend or a bailee.


2. While selling goods he must have been acting in the ordinary course of business


• The mercantile agent must sell goods in a proper way, say, during business hours, at a proper place and in the usual way of his normal business.
• If an auctioneer sells the goods without an auction the buyer will not get a good title.


3. The buyer of goods must have acted in good faith without having any notice that such a mercantile agent did not have an authority to sell.

3. Sale by One of the Joint Owners (Section 28)

If one of the several joint owners is in sole possession of goods with the permission of other co-owners, a sale by him convey a good title to buyer who buys in good faith and has no notice of the fact that such a joint owner has no authority to sell.

4. Sale by Person in Possession of Goods Under Voidable Contract (Section 29)

When the seller of goods has obtained possession thereof under a voidable contract, 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.

5. Sale Be the Seller in Possession of Goods After Sale

If a seller having sold the goods is still in possession of goods or of the documents of title to them, the delivery or transfer of goods or documents of title under any sale, pledge, etc. by seller will convey a good title to the buyer provided the buyer acted in good faith and has no notice of previous sale.

For example, A sells goods to B who is yet to take the delivery of goods. Meanwhile A subsequently sells the same goods to C, who buys them in good faith and without notice of the sale to B. C gets a good title to the goods.

6. Sale by the Buyer in Possession Before Sale

Where the buyer is in possession of goods with the consent of seller but the property in them has not passed to him, any sale, pledge, etc., made by the buyer in possession to any person will convey a good title to transferee provided the person receiving goods was acting in good faith and without any notice as regard any lien or other right of the original seller in respect of those goods.

For example, A wants to buy a second hand car from B. B allows A to keep the car for three days to determine its suitability. During this time, B sells the car to C, who is unaware of A’s rights and purchases it in good faith. C obtains a valid title to the car.

7. Re-Sale by an Unpaid Seller [Section 54(3)]

When an unpaid seller had exercised his right of lien or stoppage in transit and resells the goods, the buyer acquires good title thereto as against the original owner, notwithstanding that no notice of the resale has been given to the original buyer.

 

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