Sale of Goods by a Non-Owner

by
Sale of Goods by a Non-Owner

SALE OF GOODS BY A NON-OWNER

INTRODUCTION

“Nemo dat quad non habet” is a Latin maxim which means no one can give what he has not got. This maxim is important in the sales of goods act because the general rule is that the seller sells only those goods of which he is an absolute owner and cannot transfer a better title to the buyer than what he himself has. But sometimes a person may sell the goods of which he is not the owner, then no better title can be passed to the buyer also.

Example: A stole goods from B. Later in the day he sold the goods to C. In this case because A is not the real owner of the goods, he cannot pass a better title to C and the true owner can take the goods back.

But if this maxim is enforced in a rigid manner, then it may cause loss or damage to the innocent buyers who genuinely believe that they are transferred good title to the goods and hence this is the reason that a number of exceptions have been provided to this rule. Some of them being:

  • Sale by a Mercantile Agent.
  • Sale by one of the joint owners.
  • Sale by Unpaid seller.
  • Sale by a person in possession under a voidable contract.
  • Sale by one who has already sold the goods but continues in possession thereof.
  • Sale by buyer obtaining possession before the property in goods has vested in him.

EXCEPTIONS

  1. SALE BY MERCANTILE AGENT:

A mercantile agent is a commercial agent who has authority either to sell goods, to consign goods for the purpose of sale, to buy goods, or to raise money on the security of goods on behalf of his principal[1]. A sale made by mercantile agent would pass a good title to the buyer in the following cases:

  • If the sale was made by him in the ordinary course of business and he is acting as a mercantile agent,
  • If the mercantile agent is in the possession of the goods with the consent of the owner.
  • The buyer purchased the goods in good faith and while purchasing those goods he did not realize, that the seller was having no authority to sell those particular set of goods.

Example: A was an agent to B. A was supposed to sell a property at a fixed price as set by B but A misappropriated the proceeds and sold it at a lower price to C. Here C will get a good title to the property even though the owner is not happy with the proceeds because such a sale was made by a mercantile agent and the buyer purchase the property in good faith.

  1. SALE BY ONE OF THE JOINT OWNERS:

Joint owners in simple terms can be understood as when two or more people share ownership of something. Now sale by one of the joint owners, can be explained as:

  • when one of the several joint owners has the sole possession of a good with the permission of others and if such a good is sold by such a joint owner, then a good title will be passed to the buyer.
  • The buyer will hold a good title because he was unaware that the seller has no authority to sell such good and purchased it in good faith.

Example: A & B are joint owners to a car. The car was in possession of B with the consent of A. But later B sold the car to C who buys it in good faith and not knowing that B is in no authority to sell that car. Here C will get the good title to the car.

  1. SALE BY UNPAID SELLER:

A person who has not received the full price of a good that he has sold or he has received a bill of exchange or any other negotiable instrument as a conditional payment and the payment is not fulfilled because of the dishonour of such instrument is said to be an unpaid seller.

Such unpaid seller has a right to resale the goods. Due, to the default of the buyer the seller has every right to sell it to someone else and transfer a good title to another buyer.

Example: A sold a TV to B. The cost of the TV was 85,000 rupees. While processing the payment A found out that the cheque provided by B was dishonoured. Here A became an unpaid seller. He issued a notice to B that he is going to resell the TV and he finally sold the TV to C. Here even though the sale is made by an unpaid seller, C will get a good title to the TV as against the original buyer.

  1. SALE BY A PERSON IN POSESSION UNDER A VOIDABLE CONTRACT:

If a seller has obtained the possession of goods through coercion, misrepresentation, fraud or through undue influence then it will form a voidable contract. A buyer will obtain a good title to the goods that is sold to him by such a seller provided that the contract had not been rescinded (cancelled) until the time of the sale. Hence, the main conditions under this are:

  • The contract must be voidable and must not be rescinded before the sale.
  • The buyer should purchase the goods in good faith.

Example: Z was coerced by Y to sign the papers of sale of his car in name of Y. Now this contract here is voidable. But before this contract could be terminated/rescinded, Y sold the car to X who purchased it in good faith. X gets good title to the car and Z cannot recover the car even if he wants to.

  1. SALE BY ONE WHO HAS ALREADY SOLD THE GOODS BUT CONTINUES IN POSSESSION THEREOF:

A good title is passed to a person under this exception when:

  • The seller has already sold the goods to someone else but is still in possession or has the document of title to those goods and he continues to sell the same products to any third person.
  • The third party that is the new buyer has received the delivery to the goods in good faith and is completely unaware of the past sale.
  • The buyer will attain a good title here even though it was sold to someone else earlier.

Example: C sold 100 bottles of groundnut oil to D. But because D was out of town the delivery was not made to him. Meanwhile, E came to the shop of C and asked for the same 100 bottles and offered a higher price for those. C immediately sold those to E. Here, E gets a good title because he purchased the goods in good faith and was unaware of the fact that those bottles were already sold to someone else.

  1. SALE BY BUYER OBTAINING POSSESSION BEFORE THE PROPERTY IN THE GOODS HAS VESTED IN HIM:

A good title is passed to a person under this exception when:

  • The buyer has obtained the possession of the goods with the consent of the seller, before the property in them has passed to him.
  • Such goods are sold, pledged or disposed off by such buyer to any third party.
  • Such third party has obtained the goods in good faith and without any interference of the original seller. Then in respect to those particular goods the third party will get a good title.

Example: A sold a music system to B, in exchange of the music system, B gave a bill of exchange to A. While B was in the possession of the same, he sold it to C. C purchased the music system in good faith and obtained the delivery of it without any notice of objection to a good title from the real owner. On the other hand, the bill of exchange was dishonoured and the payment of the price was not done by B. Now, here in this case C will have a good title to the goods and the real owner of the goods cannot deny such title.

CONCLUSION

To conclude the whole topic these exceptions are provided to protect the interests of the innocent buyers who purchase the goods in good faith. If these exceptions are not present and rigid rules are followed then many buyers will feel cheated and may become victims of fraudulent activities. Hence, the above-mentioned exceptions guard the rights of the buyers.

[1] https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100150837

Author: Gargi Mishra,
Amity Law School, Student of 3rd Year B.A.LLB(H)

Leave a Comment