Explain the concept of Nemo dat quod non habet and state the various exceptions to the general rule established by this concept.

The concept of Nemo dat quod non habet means that no one can convey a better title than what he has. If a person having no title to the goods sells them, e.g., a thief sells stolen property, it will not be a legal sale since purchaser will not have good ownership rights. Section 27 provides that “subject to the provisions of the 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.”

In a famous case, a judge observed, “If a person leaves a watch or a ring on a seat in the park or on a table at a cafe and it ultimately gets into the hands of a bonafide purchaser, it is no answer to the true owner to say that it was his carelessness and nothing else, that it enabled the finder to pass it off as his own.”

Exceptions to the Rule.

The general rule that “no one can give what he has not get” is subject to some exceptions. In following cases, the buyer gets a better title to the goods than what is possessed by the seller:

Sale by Mercantile Agent: According to Section 27 when a mercantile agent, who is in possession of the goods with the consent of the owner, sells goods to a buyer who buys them in good faith, the buyer gets a better title, even though the seller had no authority to sell, provided the following conditions are satisfied:

The person selling the goods must be a mercantile agent i.e., an agent having in the customary course of business as such agent authority either to sell goods or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods. Thus factors, brokers, auctioneers etc. are mercantile agents.

The mercantile agent should be in possession of goods or of documents of title to the goods in his capacity as mercantile agent. If the goods are held in some other capacity, he cannot convey abetter title. “Documents of title to goods” includes a bill of lading, dock warrant, warehouse-keeper’s certificate, wharfingers certificate, railway receipt, warrant or order for the delivery of goods.

The possession of the mercantile agent must be with the consent of the owner. The mercantile agent must sell in the ordinary course of business as mercantile agent. The buyer must act in good faith and the buyer should not have notice that the seller had no authority to sell.

Sale by a joint: owner According to Section 28, where one of several joint owners of the goods has the sale possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them from such joint owner in good faith without notice of the fact that the seller has no authority to sell.

Sale by person with voidable title: According to Section 29, “When the seller of goods has obtained possession thereof under a voidable contract and the contract has not been rescinded by 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.”

The application of this exception depends on following conditions:

  • The goods should have been obtained under a avoidable contract. If the possession of the goods is obtained under a void contract, the buyer does not get a good title.
  • The contract must not have been rescinded at the time of the sale.
  • The buyer should act in good faith and should not have notice of the seller’s defective title.

Sale of seller in possession of goods after sale: According to Section 30(1), where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same. For the application of this exception it is necessary that the seller should continue to be in possession of the goods after having sold them.

Sale by buyer in possession after sale: According to Section 30(2), where the buyer has bought or agreed to buy the goods, with the consent of the owner obtains possession of the goods or documents of title to the goods, but the seller still has some lien or right over the goods, if the buyer sells the goods to a second buyer, who buys them in good faith, the second buyer gets a better title.

Resale by an unpaid seller: According to Section 54(3), an unpaid seller of goods who has exercised his right of lien or stoppage in transit can, even though, the ownership in them has passed to the buyer, sell the goods and convey a better title to another the buyer though no notice of resale has been given to the original buyer.

Transfer of title by estoppel: According to Section 27, where the true owner by his conduct, or by an 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 estoppel from denying the fact of want of authority of the seller. Sometimes the doctrine of estoppel may estop or preclude the true owner from denying seller’s right to sell the goods and thus the buyer gets a good title.

Exceptions under other Acts: Other Acts also contain some provisions under which a non-owner may pass to the buyer a better title that he himself has. They are following:

Under Section 169 of the Indian Contract Act, a finder of the goods has the right to sell the goods under certain circumstances and the buyer will get a good title.

Under Section 176 of the Indian Contract Act, the pawnee or pledgee of the goods has the right to sell the goods pledged in case a default is made by the pawn or in fulfilling his promise, the buyer gets a good title.

In case of the insolvency of the person, all his property rests in the official receiver or assignee and he has a right to sell the property of the insolvent person.

Under the Negotiable Instruments Act, a holder in due course gets a better title than what his endorser had.

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