Exceptions to the rule of ‘Nemo dat quod non habet’

The general is that only the owner of the goods can transfer a goods title. No one can give a better title than what he himself has. This is expressed in the Latin word ‘Nemo dat quod non habet’. Subject to 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.

Some exceptions to the above rule are provided, as discussed below.

1. Sale by a person not the owner (or) title by estoppel: (section 27) where the true owner by his conduct, act (or) omission leads the buyer to believe that the seller has the authority to sell and induces the buyer to buy the goods, he shall be estopped from denying the fact of want of authority of the seller. The buyer in such a case gets a better title than that of the seller.

2. Sale by mercantile agent: (section 27) A sale by the mercantile agent shall pass a valid title to the buyer even though such sale is not made as per the directions of the seller if the following conditions are satisfied.

a) The sale is made by a mercantile agent in the capacity of mercantile agent.

b) The goods came into his possession with the consent of the seller.

c) The sale is made by the mercantile agent acting in the ordinary course of business

d) The buyer buys the goods in good faith and for consideration.

3. Sale by one of several joint owners: (Section 28) A sale by one of the joint owners shall pass a valid title to the buyer even though such sale is not made with the consent of the other joint owners if the following conditions are satisfied:-

a) The goods are in the sole possession of the joint owner.

b) The goods came into his possession with the consent of other joint owners.

c) The buyer buys the goods in good faith and for consideration.

4. Sale by a person in possession under a voidable contract: (section 29) A re-sale of goods by a buyer shall pass a valid title to the new buyer if the following conditions are satisfied:-

a) A person buys the goods under a voidable contract.

b) Such a buyer resells the goods to a new buyer.

c) At the time of re-sale, the voidable contract has not been rescinded by the original seller.

d) The new buyer buys the goods in good faith of want of authority of the seller. The buyer in such a case shall get a better title than that of the seller.

5. Sale by a seller in possession of goods after the sale: (section 30(1)) A seller, who has possession of the goods already sold by him, may re-sell such goods to the new buyer, and the new buyer shall have a valid title to such goods if the following conditions are satisfied:-

a) The ownership of goods has been passed to the buyer.

b) The seller continues to be in possession of goods, even after their sale.

c) The seller re-sells the goods to the new buyer.

d) The new buyer buys the goods in good faith (i.e.., the new buyer had no knowledge of the fact that the goods being sold by the seller have already been sold to some other buyer) and consideration.

6. Sale by the buyer in possession of goods: (section 30(2)) Where a person having bought (or) agreed to buy goods, obtains, with the consent of the seller, possession of the goods (or) document of title to the goods, the delivery (or) transfer by such person (or) a mercantile agent acting for such person, of the goods (or) documents, will be valid and effective, provided the person receiving the same, acted bonafide and without notice of the seller’s lien if any.

7. Sale by an unpaid seller: (Section 54 (3) where an unpaid seller who has exercised his right of lien (or) stoppage in transit re-sells the goods, the buyer acquires a good title to the goods as against the original buyer.

8. Exceptions under other Acts:-

a) Sale by a finder of lost goods.

b) Sale by a Pawnee (or) pledge.

c) Sale by an official receiver (or) assignee (or) liquidator of companies.

d) Sale by Bank/ FI under Securitization Act, 2002.

e) Holder in due course under Negotiable instruments Act, 1887.