Page 129 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 8. When there is a contract for the sale of ……………………goods, property in the goods is
not transferred to the buyer unless and until the goods are ascertained

5.5 Transfer of Title by Non-owners

Section 27 lays down a general rule as to transfer of title, that is, it is only the owner of goods
who can transfer a good title. No one can give a better title than what he himself has. This rule
is expressed by the maxim, ‘memo dat quod non habet’ which means that no one can give what he
himself has not. If the seller, therefore, has no title, or he has defective title, the buyer’s title will
be equally wanting or defective, as the case may be, though he has purchased in good faith and
for value. Section 27 in this regard says that “subject to the provisions of the Act and of any other
law at the time in force, where goods are sold by a person, who is not the owner thereof and who
does not sell under the authority or with the consent of the owner, the buyer acquires no better
title to the goods than what the seller had, unless the owner is precluded by his conduct from
denying the seller’s authority to sell.”

Examples:
1. Akash, the hirer of goods under a hire purchase agreement, sells them to Bhim.
Bhim, though a bona fide purchaser, does not acquire the property in the goods. At
the most he acquires such an interest as the hirer had.
2. Prakash finds a ring and sells it to Bhanu who purchases it for value and in good
faith. The true owner, Tara, can recover the ring from Bhanu, for Prakash having no
title could pass none the better.

Exceptions to the general rule: To the above general rule there are certain exceptional circumstances
under which even a non-owner may confer a good title on the transferee. These exceptions are
laid down by Ss.27-30 and are as follows:

1. Sale by a mercantile agent: Section 2(9) defines a mercantile agent as 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.
If a mercantile agent, who is in possession of either the goods or documents of title to the
goods, with the consent of the owner, sells the goods, in the ordinary course of business as
a mercantile agent, the buyer gets a good title to the goods provided he buys them in good
faith and for value. Thus a person who, in good faith, buys goods from a factor or an
auctioneer will get a good title to them, even though the seller has exceeded the authority,
or authority has been revoked by the true owner before sale.

Examples:

(a) A mercantile agent obtained some diamonds from the true owner falsely pretending
that he had a customer who wanted to purchase them and he afterwards fraudulently
pledges the goods to secure an advance for himself. The true owner would be bound
by pledge.
(b) A motor car agent sells the car at a price below that authorised by the owner and
misappropriates the proceeds. The innocent purchaser would get a good title.
2. Sale by a joint owner: Where one of several joint owners of goods has the sole possession
thereof, with the consent of the others, any purchaser from such person, for value without
notice at that time, of the seller’s want of authority to sell, acquires a good title thereto

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