When can a buyer become the legal owner of goods,
notwithstanding that the seller is neither the owner of them, nor
sold them with the owner’s consent?
Should an innocent purchaser for value without notice of the defect
in title suffer due to the dishonesty of the seller?
Property and Title
Property – this term is used when referring to the nature of the seller’s obligations to the buyer in
respect of the ownership of the goods and to the exact time when ownership is transferred to the
buyer under a contract of sale.
So, we speak of has property been transferred? When is property to be transferred?
Title – this term is used to consider the various circumstances in which a buyer may become the
owner of the goods, notwithstanding that the seller is neither the owner or them nor sold them
with the seller’s consent.
Here we ask, who is the owner? Example: Greenwood v Bennett & Others (1973)
Nemo dat quod non habet – is a Latin maxim which
translates as ‘no one gives who possesses not’.
It broadly provides that a seller can only transfer
to a buyer the ownership in the goods if he owns them
or has the right to sell them at the time of sale.
A seller who does not own the goods and who is not
authorised by the owner to sell them cannot usually
pass good title to an innocent buyer.
The nemo dat rule protects the true owner of the
goods at the expense of the innocent purchaser who
Bishopgate Motor Finance Corporation
Ltd v Transport Brakes Ltd
“In the development of our law, two principles have striven for mastery. The
first is for the protection of property: no one can give a better title than he
himself possesses. The second is for the protection of commercial transactions:
the person who takes in good faith and for value without notice should get a
good title. The first principle has held sway for a long time, but it has been
modified by the common law itself and by statute so as to meet the needs of our
own times” Lord Denninh
Section 21(1) SOGA, 1979
• Section 21(1): Subject to this Act, where goods are sold by a person who is not their owner, 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.
Exceptions to the nemo dat rule
SOGA, 1979 FACTORS ACT, 1889 HIRE PURCHASE ACT,
Section 21.1 – Estoppel
Section 23 – Voidable title not avoided
at the time of sale
Section 24 - Sale by seller in possession
Section 25 – Sale by buyer in possession
Section 47.1 – resale by buyer not in
possession but with seller’s assent
Sec 62.2 – Sale by agent with consent
Secs 1.1. and 2 –
Sale by a mercantile
Sec 8 – Sale by a
seller in possession
Sec 9 – Sale by a
buyer in possession
Sec 27 – Bona fide
private purchaser of
a motor vehicle from
a person in
possession under a
agreement or a
from a dealer
acting in the
entrusted to the
dealer by their
• Sale under a voidable title
• Sale by seller in possession after sale
• Sale by buyer in possession after sale
This doctrine is set out in section
21.1 of SOGA, 1979 – basically
stating that the owner of goods can
be precluded from denying the
seller’s authority to sell because of
the owner’s own conduct.
Shaw v Commissioner of Police of the
Metropolis (1987): Held: Owner’s
action in signing the letter and
transfer slip amounted to conduct
within the meaning of sec 21.1. He
was therefore estopped from denying
the swindler’s authority to sell. But
because the bankers draft was
dishonoured – Shaw also did not
obtain good title to the vehicle as
property in it had not passed to him.
Estoppel by representation
This is where the owner of
the goods by his words or
conduct represents to the
• that the seller is the true owner
of the goods
• or has his authority to sell the
Can also be further
• estoppel by words and
• estoppel by conduct
Farquharson + Eastern Distributors +
• Farquharson Brothers v King (1902): timber merchants who authorised Capon to sell the timber
to specific buyers. Capon, acts fraudulently selling to King. Held: Because F did not introduce
Capon to King, they could not be estopped from denying Capon’s authority to sell. Capon had no
authority to sell to King. His authority was limited to selective buyers he could not transfer good
title to King and F was entitled to recover from King the value of the timber.
• Eastern Distributors Ltd v Goldring (1957). Held: when approaching the plaintiff, Murphy
intentionally represented to them that the van was owned by Coker he was therefore estopped from
asserting ownership over it. The plaintiffs could recover the van from Goldring.
• Central Newbury Car Auctions Ltd v Unity Finance Ltd (1957) –it was held that the mere
handing over of a motor car together with its registration book does not, without more, constitute a
representation that the person in receipt of the goods is entitled to deal with the car as owner.
Estoppel by negligence
• Moorgate Mercantile Co Ltd v Twitching (1977) – a hirer hired a car from Moorgate who failed
to register the hire purchase transaction with a company called HPI. Registration was not
compulsory, but majority of transactions were registered to prevent fraud. The hirer sold the car to
Twitching. The problem here is that the hirer had not finished paying the instalments, he therefore
had no right to sell the car. Twitching contacted HPI to check if the car was registered and to check
if it had any outstanding balances. Since the car was not registered, Twitching noting that it was
free of encumbrances purchased it. Moorgate found out and sued. Twitching claimed estoppel by
negligence. Held: HL – estoppel did not apply- registration was not compulsory, Moorgate had no
duty that he breached.
2. Sale under a voidable title
• Rule 1 – if the seller’s title is void, the buyer gets no title at all.
• Rule 2 – if the seller’s title is voidable, the buyer may acquire the title.
• Ingram v Little (1961)
• Lewis v Averay (1972)
• Cundy v Lindsay (1878)
• Shogun Finance Ltd v Hudson
Face to face - unless the specific identity of the party is of some particular significance, the innocent party can be
presumed to have intended to deal with the person in front of them, so that any fraud as to their identity merely renders the
Distance - a contract concluded at a distance, especially one in writing, which by necessity identifies specifically who the
contracting parties are, the contract can be taken to have been intended between those parties alone, so that where a
fraudster forges the signature of one of the parties the result is that the contract is void.
• Car & Universal Finance Co Ltd v Caldwell (1965)
Helby v Matthews (1895)
• For section 25 to apply certain conditions need to be satisfied:
The third party must buy or agree to buy the goods from the buyer in possession
The sale cannot be a sale based on hire purchase or under a sale or return contract it has to be an
The third party will only be protected under sec 25 if the goods or documents of title were in the
possession of the first buyer (the buyer in possession) with the consent of the seller
There must be delivery or transfer of the goods or documents of title to the third party by the buyer in
possession under a sale pledge or other disposition
National Employers’ Mutual General
Insurance v Jones (1990)
• Held: The House of Lords held that the purpose and scope of the Factors Act 1889 was to protect
those dealing in good faith with mercantile agents to whom goods or documents of title had been
entrusted by the true owner to the extent that their rights overrode those of the true owner. The Act
was not, however, intended to enable a bona fide purchaser to override the true owner’s title where
the agent had been entrusted with the documents or goods by a thief or even a purchaser from a
thief. As a result, Jones had not acquired title to the car under s 9 and the insurance company was
therefore entitled to recover the value of the car from Jones.