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Exceptions to the rule of Nemo dat qui non habet

However, there are certain exceptions to this general rule. In these exceptional circumstances, the buyer gets a valid title even if the seller is not the absolute owner of the goods. As a matter of fact, these exceptions are necessary to protect the interest of the innocent buyers. These exceptions may be discussed under the following heads:

Sale by estoppel

When the owner of the goods, by his conduct or by his act, leads the buyer to believe that the seller (i.e. a person who is not the owner of the goods) has the authority to sell and induces the buyer to buy the goods, he shall be stopped from denying the fact that the seller had no right to sell the goods.

 

Example

Ajay tells Vijay In the hearing and presence of Raj (the actual owner of the goods) that he (Ajay) is the owner of certain goods. Later on, Ajay sells these goods to Vijay. Vijay will get a good title to the goods, as Raj will be stopped from denying the position that he projected to Vijay by his conduct of keeping silent.

Sale by a mercantile agent

Mercantile agent is an agent who deals in the buying and selling of the goods on behalf of his principal. In case of sale by mercantile agent, who is in possession of either the goods or document of title to the goods, with the consent of the owner, sells the goods in ordinary course of business then the buyer gets the better title of the goods, if the following conditions are satisfied:
  • The agent must be mercantile. A mercantile agent is one, who in the customary course of business, has authority to sell goods or consign the goods for the purpose of sale or buy goods or to raise money on the security of goods, Sec 2(9)
  • He must be in possession of the goods or documents of title to the goods with the consent of the owner
  • The sale is made by him in the ordinary course of business
  • The buyer should have acted in good faith and had no notice at the time of sale, that the seller (i.e. agent)had no authority to sell
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Sale by one of the joint owners

When the goods are sold by one of the several joint owners, the buyer shall get a better title, if the following conditions are satisfied:
  • The joint owner, who makes the sale, must be in the possession of the goods with permission of the other joint owners
  • The buyer should have acted in good faith and without the notice that the seller had no authority to sell
Example

Ashok and Kumar jointly purchased a car. The car was in the possession of Ashok with the consent of Kumar. Later on Ashok sold the car to an innocent purchaser. The purchaser will get a good title.

Sale by a person in possession of goods under a voidable contract

Sometimes, a person obtains the possession of the goods by coercion, undue influence, fraud or misrepresentation. In such cases, the contract is voidable at the option of the true owner i.e. the true owner can put an end to the contract.
 
However, the person in possession of the goods under such a contract can make a valid sale even if the possession so obtained is not by free consent. And the buyer gets a valid title only if the following conditions are satisfied:
  • The seller must have obtained the possession of the goods under a voidable contract and not under a void contract
  • The contract must not have been rescinded (i.e. put to an end) at the time of sale i.e., at the time of sale, the voidable contract should be in existence
  • The buyer must act in good faith, and he should not have any knowledge about the seller’s defective title
Example

Vinay purchases a refrigerator from Rohan by fraud. Here, Vinay is holding the possession under a voidable contract. Before the contract is put to an end by Rohan, Vinay sold the refrigerator to Sanjay, who bought it in good faith and without any notice of Vinay’s defective title. In this case, Sanjay gets a better title to the refrigerator even if Vinay was holding it under a voidable contract.

 

Note: It may be noted that if the voidable contract is put to an end before the sale is made, then the buyer will not get a valid title. The contract may be rescinded by giving a notice to the other party.

Sale by the seller in possession after sale

The buyer, after purchasing the goods, may leave them with the seller. In this case a seller, after having sold the goods continues to be in the possession of the goods or document of title to the goods re-sells these goods to new buyer, that new buyer shall get a better title, if the buyer had acted in good faith and without the notice of previous sale

 

Example

Amit sells certain goods to Sumit and promises to deliver the goods the next day. Before the delivery, Amit sells and delivers the goods to Vinit, who buys them in good faith and without the notice of the prior sale to Sumit. Vinit gets a good title to the goods.

Sale by a buyer in possession of the goods after agreement to sell

Where the buyer has agreed to buy the goods and with the consent of seller, has obtained possession of the goods or the document of title goods without being the owner of the goods, may resell or pledge the same goods to a other party, the other party or a pledgee shall get a valid title, free from the seller’s right, if he buys them in good faith and without any knowledge about the original seller’s right over the goods.

 

Example

Ram agreed to buy some furniture from Rahim. The payment of the price was to be made in two instalments. The furniture was, however, delivered to Ram. But the ownership of the same was to be transferred to him on the payment of the second installment. Ram sold the furniture to Robert who bought it in good faith. In this case, Ram had the possession of the furniture under an agreement to buy and thus Robert got a valid title to the furniture.

Sale by a finder of goods

Sometimes, the finder of lost goods sells the goods to a buyer. In such cases, the buyer gets a valid title to the goods if the finder sells the goods under the permitted circumstances. It may be noted that the finder may sell the goods only in the following circumstances:
  • When the owner cannot be found with reasonable diligence on the part of the finder
  • When the owner is found, but he refuses to pay the lawful charges of the finder
  • If the goods are in danger of perishing or of losing a greater part of their value
  • If the lawful charges of the finder, in respect of the goods amount to a minimum of two third of their value

Sale by a Pawnee or pledgee

Sometimes, the pawnor may make default in the repayment of the amount of loan borrowed from the Pawnee. In such cases, the Pawnee may sell the goods after giving a reasonable notice to the pawnor, and the buyer from such a pawnor gets a valid title to the goods.

Sale by an official appointed by the Court

Sometimes, the Courts may appoint a person (known as Receiver, Official Receiver, Official Assignee or Liquidator) to take the possession of the goods and authorize him to sell the same though he is not the owner of the goods. If any person buys these goods from such a person (i.e. Receiver, etc.), he gets a good title.




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