Sale by Person in Possession under Voidable Contract is mentioned under Chapter
III of Sales of Goods Act, 1930, under Transfer of Title in Section 29. This
section is one of the exceptions to Transfer of Title. As there are certain
circumstances, where the title to the goods may be obtained under voidable
contract, and the seller does not have good title or better title or even the
title to the goods, then where should the buyer stand who was unaware about all
this and signed the deal in the good faith? In this research paper, we will be
able to understand what does the above-mentioned provision and section speak and
how does it apply to the various issues and the answer to the question raised
NATURE AND SCOPE
Now, firstly we will understand that what does Transfer of Title mean?
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.[i]
In simpler words section 27 deals with the sale by the person who is:
- Not the owner.
- Does not have the consent from the real owner to sell the goods.
- Has been not given any authority by the owner to sell the goods on his
or her behalf.
This concept is based on a legal maxim that is Nemo dat quod non habet which
states that, or which means that 'no one can give what he does not have'. That
means a person cannot sell title of the goods whom he himself does not own or
possess the title of. As it does no good to the buyer as the buyer cannot have
the better title to the goods as the seller do not have the better title to the
Let us understand this concept using an illustration mentioned below:
Suppose a person A steals a laptop from his office and sells it to his
colleague, named B. Now, as A is not the real owner of the laptop therefore B
will have no title of the laptop and will have to return it when asked by the
Sometimes, due to this provision, honest people suffer huge loss and therefore
to protect them from such loss certain exceptions are provided.
In most cases the buyer does not get any title of the goods obtained if the
seller was not the owner, but this rule has exception that is when the sale is
made by the person who is in possession of the goods under a voidable
In this research paper, we will be discussing about the same exception that is
sale by a person in possession under voidable contract.
Section 29 of the Sales of Goods Act, broadly speaks that when the seller of
goods has obtained possession thereof under a contract voidable under section 19
or section 19A of the Indian Contract Act, 1872 (9 of 1872), 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.[ii]
If a person, acquires possession of certain goods under a contract which is
voidable on grounds mentioned in section 19 and 19-A, of The Indian Contract Act
that are coercion, misrepresentation, fraud, or undue influence. And if the
person who has obtained those goods, sell the goods to some other third person
before the contract is terminated by the owner, then the buyer has all the
rights to acquire a good title of those goods.
Before proceeding further, it is essential for us to know some major terms and
What do you mean by voidable contract?
- In the above-mentioned section the goods obtained should be under voidable contract and not void.
When consent to an agreement is caused by coercion, fraud or misrepresentation,
the agreement is a contract voidable at the option of the party whose consent
was so caused. [iii]
There is an exception to this section that is when the fraud or
misrepresentation did not cause the consent to a contract of the party on whom
such fraud was practiced, or to whom such misrepresentation was made, does not
contribute to a contract voidable.
- No notice of rescission should be given.
A notice of rescission is a form given with the intention of terminating a
contract, provided that the contract in which the parties have entered, is a
- And the buyer should act in good faith.
Acting in good faith means that a person or party involved in the contract
should conduct himself or herself ethically or honestly during the agreement and
should act reasonably.
Let us understand the above-mentioned section in simpler way with the help of an
Suppose a person named X, fraudulently obtains a car from Y, and then sells it
to Z who buys the same in good faith. Now, Y has all the rights to hold the
contract void as his consent was taken by means of fraud. Now before he realizes
the fact that fraud has been done, X sells the car to Z. In this situation, Y
cannot ask Z to return the car as he did not void the contract before the sale
was made. And the Z will own the better or the good title as Y had even though
the seller that is, X has the defective title to the car.
The only possible limitations of the section could be that sometimes it can be
very difficult to identify that the buyer really bought the goods with good
faith and also, the owner sometimes realizes late that he or she has been
frauded by the seller and as a result cannot terminate the contract before the
sale and can suffer huge loss or it can be possible that the fraudulent party
could have disappeared.
One solution could be that provision could be added that the owner can avoid the
contract without even telling the fraudulent party or retaking the possession of
the goods but by immediately informing the police. The same was held by the
Court of Appeal of UK in Car and Universal Finance Co Ltd v Caldwell
So, by far we have learned is that there are always exceptions to every law and
so is with the Section 27 i.e., Transfer of Title and we have discussed one of
the exceptions in this research paper i.e., Section 29 Sale by person in
possession under voidable contract. The general rule states that no one can give
what he himself does not have or own. But there are certain situations which act
as the exceptions to the general rule.
Taking into consideration one of them
that is, Sale by person in possession under voidable contract, where the buyer
owns better title even though the seller does not have better title to the
goods. Now, the sale by a person who is in possession of certain goods but does
not have a better title to them and has obtained such possession under voidable
contract i.e., through coercion, fraud or mis representation or any other
tactics and tries to sell those goods before the contract has been rescinded, in
such a case, the buyer gets the better title to the goods than the seller if he
had bought those goods in good faith and was not aware about the defective title
of the seller.
Section 27 tries to protect the rights of such an owner of the
goods whose goods are sold by the person who is not authorized, or the owner has
not given his consent for such sale. But Section 29 protects the rights or the
interest of the buyer who has bought those goods in good faith and was not aware
about the seller's defective title.
- Section 27, Sales of Goods Act, 1930
LAST VISITED 23rd September
- Section 19, Indian Contract Act, 1872
- Car and Universal Finance Co Ltd v. Caldwell,  1QB 525