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Nemo Dat Quod Non-Habet

The Sale of Goods Act of 1930 had a major impact on the contracts established with both buyers and sellers of goods because it established a number of new principles and rules to safeguard both buyer and seller's rights. Section 18 to 30 of the Sales of Goods Act specifically address the contract's effects on the transfer of property between the seller and the buyer. One of the principles is Nemo Dat Quod Non-Habet, which literally translates to no one gives what he does not have.

The Nemo dat quod non-Habet is important in determining the rights to ownership, possession, property, and commercial goods that are covered by contract law when it comes to title transfer. The usage of the Nemo Dat Quod Non-Habet rule in current laws, as well as exceptions to the rule, are the subject of this critical essay.

Nemo Dat Quod Non-Habet

Section 27 – Sale by person, not the owner – Subject to the provisions of this Act and of any other law for the time being in force, 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.

Where a mercantile agent has possession of the goods or a document of title to the goods with the consent of the owner, any sale made by him in the ordinary course of business of a mercantile agent shall be as valid as if he had been expressly authorized by the owner to make the sale, given that the buyer acts in good faith and has not received notice from the seller that he or she does not have authority to sell at the time of the contract of sale.

Basically, Section 27 attempts to protect the true owner's interests by stating that:
When goods are sold by someone who is not the owner and who does not sell them under the authority or even with the knowledge of the client, the buyer inherits no better ownership of the goods than the seller.

The case of Greenwood v Bennett[1]. In this case, the rightful owner of a Jaguar car (Bennett) assigned it for repairs to a man named Searle. Searle then took the car and used it for his own purposes, crashing it and causing significant damage. For £75 (pounds), Searle sold the car to Harper, who owned a garage. Harper had no idea that Searle was not the car's owner. Harper then invested £226 (pounds) on repairs before selling the car to a mortgage lender.

The court determined that the car belonged to Bennett because Searle did not have title and thus could not transfer it to Harper. Harper was unable to transfer title to the finance company for almost the same reason. Bennett was able to restore the car, but he also had to pay Harper for the stuff he's done to it.

The case of Life Insurance Corporation vs United Bank of India Ltd. And Anr[2], the Indian court held that while an actionable claim is transferable under Indian law, it can only be transferred by the person who owns the property on which the claim is based. And this is same in English law also.

No one gives what he does not have, according to Nemo rule, if the nominee has no right, title, or interest in the policy money, he cannot surrender the policy or assign any right, title, or interest in the policy money. The right of a nominee is merely a right to collect the proceeds of the policy in the eyes of the statute, and the right has been granted only to avoid the inconvenience of obtaining representation for the estate of the deceased policy-holder or a succession certificate.

Let’s look at exceptions to this rule:
  1. Title transfer by Estopple:
    A purchaser can obtain a good title if the owner of the goods is precluded from refusing the seller's authority to sell by his action, according to Section 27. When the owner is unable to refuse the seller's authority, estoppel against him occurs. The seller's representation that he or she has the authority to sell creates estoppel.

    Estoppel arises from one of the following:
    • An act or omission – but it must be a legal obligation.
    • negligence – but not just any negligence, but negligence in relation to the person.

      The case of K. M. Mohambaram v. Ram Narayan Brahmin[3].
      A was appointed as the bus owner's agent to operate the bus for hire. He left a signed letter to the District Magistrate requesting that G permit be granted to ‘A’. ‘A’ defrauded the bus owner by altering the letter and addressing it to the DSP, requesting him to transfer the registration in A’s name. ‘A’ did the same thing, selling the bus to a third party who had no knowledge of A's authority to sell. The buyer's title was challenged by the original bus owner. It was decided that ‘A’ could not have predicted that he would commit such forgery. He was not barred from contesting the buyer's title under Section 27 of the SOGA.
       
  2. The Sale by A Mercantile Agent – given under Section 27
    If a mercantile agent has the authority to sell goods and does so, there is no problem because, in general, an agent with the authority to sell can convey a good title. The issue starts when the mercantile operative deprives of the goods without authorization.

    Section 2(9) defines the term mercantile agent. A mercantile agent who has the authority to sell goods, consign goods for the purpose of sale, buy goods, or collect money on the security of goods in the ordinary course of business. In other words, a mercantile agent is someone who has goods or documents in their possession.

    In Folker v. King[4] case, the plaintiff gave his car to a mercantile agent with the intention of selling it for at least 575 pounds. The mercantile agent, on the other hand, misappropriated funds by selling them to the defendant for pounds 140. The defendant (a buyer) was found to have good title to the product in a plaintiff's action.

    The goods must be entrusted to the mercantile agent in his capacity as a mercantile agent; if the goods are entrusted to him in any other capacity, he will not be able to convey a good title. In the case of Staffs Motor Guarantee Ltd v. British Wagon Ltd, this was decided. Under a hire-purchase agreement, a used car dealer sold his lorry to a corporation and promptly returned it to the company.
     
  3. The Sale by joint owner – given under Section 28:
    If among the many joint owners of goods, gains sole possession of the goods with the consent of both co-owners, the property in the goods is transferred to anyone who buys them in good faith from that joint owner without knowing that the seller lacks authority to sell. If Section 28 had not existed, the consumer would have received only co-ownership titles and would have been a co-owner with another co-owner.. As a result, the clause is a legal exception – no one may offer what he does not possess.
     
  4. The Sale by A Person in Possession Under A Voidable Contract – under Section 29:
    Contract Act's Sections 19 and 19-An express that if a party agree to an agreement is procured through pressure, extortion, error, or unjustifiable impact, the agreement is voidable at the party's prudence. In the event that an individual gets ownership of products under an agreement that is voidable under segment 19 or 19 – An of the Contract Act and sells those merchandise before the agreement is forestalled by the gathering qualified for do as such, the purchaser of those products gets a decent title to them, as per segment 29. It is important, nonetheless, that such a purchaser bought the products in accordance with some basic honesty and without information on the vender's title deformity.
    In the case of Phillips v. Brooks (1919)[5]

    A fraud was committed when a person purchased a valuable ring with a worthless check while posing as a respectable individual. The ring was then pledged to another person. Following the discovery of the fraud, the question of whether the pawnee was entitled to keep the ring arose. The pawnee had a good title to the ring, according to the Court, because he was unaware of the seller's defective title and acted in good faith.
     
  5. The Sale by The Seller in Possession – under Section 30 (1):
    The seller is no longer able to deal with the goods once they have been sold and the buyer has taken possession of them. If he retains possession of goods and deals with them, the buyer will sue him for exchange.

    Sec 30 (1), on the other hand, states that if the seller who sold the goods is still in possession of the goods or the documents of title to them, the seller's or a Mercantile agent's delivery or transfer of the goods or the documents of title to them under any sale, promise, or another disposition thereof will convey a good title to the buyer. Assuming the buyer is acting in good faith and is unaware of the previous sale.

    In the case of Staffs Motor Guarantee Ltd v. British Wagon Co Ltd (1934)[6]
    A who was the lorry owner, sold his lorry to the defendant. Later, he bought the lorry on hire-purchase from the defendant and resold it to the plaintiff. The plaintiff did not have a good title to the lorry, according to the Court, because A had already sold it to the defendant, and when he sold it to the plaintiff, he did so as a bailee, not as a seller. As a result, the exception will not be enforced. If the defendant had sold the vehicle to the plaintiff, the plaintiff would have had a good title to the vehicle.
     
  6. The Sale by the Buyer in Possession – under Sec 30(2)
    This provision says that if a customer obtains possession of goods or the terms of the contract to them with the seller's consent, any sale, pledge, or other disposition of those goods to any person will convey good title without regard to any lien or other right of the original seller.
     
  7. Resale by An Unpaid Seller – under Sec 54(3):
    If an unpaid seller has practiced his right of lender or obstruction in transit and the buyer fails to pay him, he has the right to possess the goods after offering the purchaser notice, according to this section. When such a notion is not provided, the seller will not be able to recover any losses from the buyer if the goods sell for less than the contract price, nor will he be able to keep the value if the goods sell for more.
     
  8. The Sale by Finder of Goods – Sec 169, Indian Contract Act:
    The finder of goods often has the same liability as the bailee, according to Section 71 of the Indian Contract Act. He must treat the goods with reasonable care while they are in his custody and revert back them once the owner has been verified. Nevertheless, if the owner cannot be recognized with sufficient certainty or fails to pay the finder's legitimate fees, the finder may sell the goods, according to Section 169 of the ICA.
     
  9. The Sale by Pawnee – Sec 176 Of Indian Contract Act
    If the Pawnor fails to pay the debt, the Pawnee has the option to sue him or sell the goods pledged after giving the Pawnor reasonable notice of the sale.
     
Conclusion
The Nemo Dat principle in India is covered by the Indian Contract Act and the Sale of Goods Act. It is a well-known fact that no one can transfer a higher title than the one they currently hold, for the simple reason that they are not authorized to do so. The principle of Nemo Dat quod non-habet, which translates to no one can give what they don't have. It means that no one can transfer a better title than he himself has in the context of the sale of goods.

The principle is specifically addressed in sales of goods act between sections 27 and 32, and various exceptions were added to broaden the scope of the principle and make it more compatible with the agreement of sales of property and goods.

References
  • Kirume, M. (2021). Nemo dat quod non habet - Academike. Retrieved 29 April 2021, from https://www.lawctopus.com/academike/nemo-dat-quod-non-habet
  • (2021). Retrieved 29 April 2021, from https://legislative.gov.in/sites/default/files/A1930-3_0.pdf
End-Notes:
  1. 95 So. 159 (Ala. 1923)
  2. AIR 1970 Cal 513
  3. 158 Ind Cas 535, (1935) 69 MLJ 691
  4. 1923, 1 K.B 282
  5. 1919, 2 KB 243
  6. 1934, 2 KB 305

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