Rule of “Nemo dat quod non habet” a latin maxim and a legal rule sometimes called the nemo dat rule meaning “no one gives what they do not have.” It states “the purchase of a possession from someone who has not adequate ownership of goods or property” and he cannot transfer the ownership of those goods or property to another person, which means it denies the purchase of ownership title.
S.27 to S.30 of the Sale of Goods Act, 1930 specifies these laws. It is equivalent to the civil rule “Nemo plus iuris ad alium transferre potest quam ipse habet” which translates to “one cannot transfer to another more rights than he has.” But why can a person not transfer a greater title to another person? To answer this question first we have to understand the jurisprudence roots of nemo dat rule which is in concepts of “possession and ownership.”
Possession: It has two elements to be satisfied: “animus possidendi and corpus possessionis.”
Animus Possidendi: It is derived from two Latin words, Animus which means “intention” and possidendi means “possession.” The bare meaning of Animus Possidendi is “intention to possess.” Such possession does not need to be absolute. It should be exclusive or exclude others from interfering with his right of possession which is defined in the “conscious intention.”
In the case law of N.N. Majumdar v. State, it was held that “corpus without animus is ineffective.” In respect to the animus, the points are “it is not necessary that the animus must be the rightful owner, and maybe wrongful as well, like in the case of a thief who is in possession of stolen goods.” The “animus need not be absolute.” For instance, a person still has legal possession over land even though others possess a right of way over that land. The “test of exclusion of others establishes whether the animus is legal or not.” For example, A tailor given to stitch a dress “does not have the intention to exclude the owner from using it or taking it back.”
Corpus Possessionis: It is derived from the Latin word, which means “a body of what is occupied.” The objective element is possession of a goods in such a way that it expresses the intentions of the possessor to ‘the exclusive use of thing.’ It can be examined by involving the two relations in it – relation of the possessor to other persons and the thing he possesses.
Possession can be of two types – de facto (possession in fact)and de jure (possession in law).
For example, it can be a landlord and a tenant. The possession in fact is that the tenant is the resident of the property and the possession in law is that legally the property belongs to or in possession with the landlord (as mere physical possession does not suffice the purpose of de jure).
Ownership: It is the state or a fact of “exclusive rights and control over property.” In the exceptional circumstances of the nemo dat rule, “the owner of an object or property” is allowed to transfer the title to the other person.
The essentials of a ownership such as the: indefinite user’s right to possess and use the property, the right to dispose of the property during his lifetime, right to possess the thing he owns even not having the actual possession that time due to lending of a property, the owner has certain rights associated with ownership (lease, rent to other person), the owner has a right to destroy or alienate the property and lastly the right to exhaust the thing in the event of using it if such is nature of the thing.
A person who fulfils these essential functions of ownership is “regarded as the owner of the property.” Additionally, “these conditions would establish the presence of de jure possession” since the owner has the legal right to the possession and “de facto possession of the property can be subjective as in if the owner is not in physical possession of the thing at the particular time.”
VARIOUS EXCEPTIONS TO THE RULE ADDING ILLUSTRATIONS:
Transfer of Title by Doctrine of Estoppel [S.27]: Estoppel “means a person who by his conduct or act leads another person to believe that a certain state of affairs existed, would be estopped (impossible) to deny that such state of affairs did not exist.”
Sometimes the principle of estop or make it impossible for the owner to deny the “seller’s right to sell goods and the innocent buyer may have a ‘good title’ in spite of the want of authority of the seller.”
For this exception should fulfil the certain conditions that: the true owner owed “a duty of care to the seller, the true owner’s conduct was negligent and the consequence of a breach of a duty of care on the buyer being inducted into purchasing the goods.”
S.27 of the Act clearly states that “no besides the owner has the authority to transfer the title of goods except when the owner himself fails to deny the seller incapability to sell the goods.” As in “the case of Eastern Distributors Ltd v. Goldring”, it was “held that the original owner, by signing the agreements, represented that the car dealer was the owner of the van.” In doing so the title was transferred to the finance company under estoppel, and the original owner “was estopped from asserting his ownership of the van.” Hence, now the transfer of the ownership cannot be passed back to the original owner as the terms of a hire purchase prohibit the transfer of estoppel unless all the installments had been paid. Likewise estoppel arises from act or omission which should be a “legal obligation and from negligence but not mere negligence it should be regarded to the person.”
Sale by a Mercantile Agent [S.27]: An exception to the nemo dat rule, consider where mercantile agent is in possession of goods or documents, with “the consent of the owner.” Such an agent can sell the goods “when acting in the ordinary course of business” of a mercantile agent. The “sale shall be valid provided that the buyer acts in good faith and has no reason to believe that the seller don’t have the right to sell the goods.” The transfer of title or document is valid in such circumstances.
As in “the case of Folkes v King”, the plaintiff delivered his car to a mercantile agent for not less than 575 pounds. However, the mercantile agent sold it to the defendant for 140 pounds and misappropriated the amount. The court held that the buyer (defendant had a good title over the car because “the plaintiff had authorized the mercantile agent to act on his behalf while conducting the sale.”
Sale by one of the Joint owners [S.28]: If “the person who has the sole possession of the goods, sells the goods and the property is transferred to the buyer.” This is provided that “the buyer acts in good faith and has no reason to believe that the seller does not have the right to sell the goods.” For example, A, C, E are three friends who buy a 65 inch television to watch upcoming football world cup matches. They without any accord keep the T.V at C’s home. Once the world cup is over the television is still at his house. One day C, colleague G visits him and he sells the T.V to him. He buys in the good faith and has no notice of the fact that it was purchased jointly. In this case she holds a good title in television.
Sale by a person in possession under a voidable contract [S.29]:
In concise, it is the sale by a person which is a voidable contract under S.19 (coercion, fraud or misrepresentation) and S.19A (induced by undue influence) of the Indian Contract Act. Furthermore, S.29 of the Sales of Goods Act states that if any one of the two categories under ICA were performed, and “the goods were delivered to the buyer before the aggrieved party interrupted the contract, then the title of the goods over the goods would remain.”
But “it will only continue to exist if the buyer acts in good faith, without the knowledge of the defect of the seller’s title.”
As in the case of “Phillips v Brooks” a fraudulent person presented himself as “a respectable person and obtained the valuable ring from the shop and then he pledged the ring to someone else.” Thus, “the fraud was founded and issues arose whether the pawnee (buyer) is entitled to retain the ring or not.” The court held that the pawnee had a good title over the ring since he purchased it in good faith without being aware of the “seller defective title.”
Other exceptions to the nemo dat rule are: Sale by “the seller in possession” [S.30(1)], Sale by “the buyer in possession” [S.30(2)] and “Resale by an unpaid seller” [S.54(3)].
Exceptions under Indian Contract Act, 1872:
Sale by finder of goods [S.169]: It is an exception because the finder of lost goods has a mere de facto possession of the thing. If the finder of a goods does not find an owner in a reasonable diligence time. He normally would not have the authority to sell the goods but in this certain case, the law gives him power to do so. As by selling the goods, he will transfer a greater title (two-third of the value).
Sale by pawnee [S.176]: It is a situation where the pawnee has the right to recover the loss caused to him through right to sue him or “sell the goods before the pawnee after giving reasonable notice of sale to the pawner.” He has the power to transfer the title greater than his under nemo dat rule.
As in the case of “Phillips v Brooks”, a fraudulent person presented himself as “a respectable person and obtained the valuable ring from the shop and then he pledged the ring to someone else”. Thus, “the fraud was founded and issues arose whether the pawnee (buyer) is entitled to retain the ring or not”. The court held that the pawnee had a good title over the ring since he purchased it in good faith without being aware of the “seller defective title”.