Terminology and Meaning
There are various Latin words and phrases used in the legal terminology. Almost everyone in the legal field comes to make use of Latin terms at some point. One such Latin maxim is nemo dat quod non habet, hereinafter referred to as the nemo dat rule, which relates to the concepts of ownership and possession of property and commercial goods. The maxim literally means ‘no one can give what he himself does not have’. The maxim is used to ascertain the rights of some property if in question.
The nemo dat rule is typically associated with the transfer of possession of a property. In layman’s words, if someone purports to give or sell some property but does not have a legal right or title to perform such transfer, then the transfer will not take place. Such a transfer cannot be enforced under law. In such a case, the transferor’s title is questionable, so he cannot transfer the property to another person.
A owns some property the ownership of which he transfers to B. Due to some mistake, he transfers the ownership of that same property to C also. In this case, B would be the rightful owner of the property because when A had the right to transfer, he transferred it to B. A’s title does not exist and B is the real owner.
The nemo dat rule thus stands for ‘first in time is first in right’.
Background of Nemo Dat Quod Non Habet
The maxim is said to have first appeared in a varied form in the Digest of Justinian, who gave credit to the Roman jurist Ulpian for the same. It is also called the derivation principle, which implies that the transferee’s rights must be derived from the rights of the transferor. Denning, LJ, mentioned the maxim in the case of Bishopsgate Motor Finance Corpn. Ltd. v. Transport Brakes Ltd. in the following way:
“In the development of our law, two principles have striven for mastery. The first is the protection of property: no one can give a better title than he himself possesses. The second is 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 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 times.”
In India, the nemo dat principle is enshrined under Section 27 of the Sales of Goods Act, 1930. Section 27 of the statute states:
Section 27: Sale by person not the owner – Subject to the provisions of this 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 conduct precluded from denying the seller’s authority to sell.
Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same, provided that the buyer act in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.
As a general rule, this section protects the interests of the actual owner if goods are sold by a person who is not the owner of those goods and the sale is not with the consent of the actual owner. In such a case, the buyer of those goods will not have a title any better than that of the seller’s. That means that since the seller’s title is also disputed, the buyer’s title will also be disputed.
The application of this section is well illustrated in the case of Greenwoods v. Bennett, where X, the actual owner of a car, gave it to Y for repairs. Y caused extensive damage to the car while making use of it. Y then sold the car to Z, a garage owner, without disclosing the title of the car to Z. Z spent extensively on the car to repair the damages and finally sold it to a finance company. The court held that the original owner of the car was X because Y did not have the title to transfer the car to Z. X was able to claim his car back but he had to compensate Z for the repairs done on the car.
What can be inferred is that although the nemo dat rule protects the true owner of the property, there may be cases where an innocent buyer of such a property sold by a defective title may suffer because of the dishonesty or mistake of another. It becomes a moral duty of the owner of such goods that he checks the person with whom he is entrusting the goods. It is difficult for buyers to ascertain the true owner of the goods, and if the goods are perishable then there may be no opportunity to even do so. Therefore, in order to relax the nemo dat principle, several exceptions to the rule were created under common law, which are in favour of such an innocent buyer who acquires goods without a mala fide intention and is unaware of the true owner of the goods.
Exceptions To The Nemo Dat Rule
There are a number of exceptions in the nemo dat rule, mentioned in the Indian Contract Act as well as the Sale of Goods Act.
1. Section 27 of the Act itself mentions two exceptions to the nemo dat rule. The first one is the transfer of title by estoppel. The rule of estoppel states that if a person asserts something or conducts himself in such a way that it leads another person to believe a certain thing or state of affairs, then the person who so asserted or conducted himself would not be allowed to deny that the particular state of affairs did not exist. He is simply estopped from denying the same. Under the nemo dat rule, if the actual owner of the goods leads the buyer to believe that a particular seller is the owner of his goods, he cannot deny the right to sale of the seller afterwards.
2. The second exception under Section 27 is sale by a mercantile agent, as mentioned under the provisio to the section. If an agent has the authority to sell the goods, he can do so because he has a good enough title on the goods.
3. Section 29 of the Act states the third exception:
Section 29 – Sale by one of joint owners – If one of several joint owners of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has not authority to sell.
If the goods in question are entitled to more than one owner then one of the co-owners with permission from the rest of the owners can dispose of the goods.
4. The fourth exception is given under Section 29 of the Act. According to the provisions of the Indian Contract Act, 1872, if a person’s consent to a contract has been obtained through fraud, coercion, misrepresentation or undue influence, then the contract is voidable at the option of that person. Thus, if a person obtains some goods under a voidable contract and sells them, the buyer of such goods will have a title to them.
5. Section 30 mentions further two exceptions to the nemo dat rule. One of them is sale by seller in possession of the goods. If the seller is still in possession of the goods after a sale and sells such goods to another person, such a buyer will have a good title if he was unaware of the previous sale. Clause (1) of Section 30 states:
Section 30 – Seller or buyer in possession after sale – (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 the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.
6. The second clause of Section 30 states:
Section 30 – Seller or buyer in possession after sale – (2) Where a person, having bought or agreed to buy goods, obtains with the consent of the seller, possession of the goods or 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 any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist.
If the buyer in possession of the goods has obtained them with the consent of the seller and sells them to another buyer, the second buyer will have a better title over the goods irrespective of any right of lien of the seller on the goods.
7. If an unpaid seller exercises his right of lien or stoppage in transit and resells the goods, the new buyer will acquire a better title to the goods as against the original buyer. This exception is mentioned under Section 54(3) of the Act.
8. According to Section 169 of the Indian Contract Act, 1872, a finder of goods may sell the goods after the owner of the goods cannot be found or the owner does not pay reasonable charges to such finder. The finder may sell the goods if they are of a perishable nature or if the reasonable charges amount to 2/3 of the value of the goods.
9. Section 176 of the Indian Contract states that if the pawnor defaults in payment of debt to the pawnee, the pawnee can either sue him or sell the goods after reasonable notice to the pawnor.
The Nemo dat quod non habet rule is a common law principle and has its provisions both in the of Sales Goods Act, 1930, and the Indian Contract Act, 1872. However, the application of this rule to Indian cases is not easy as it seems. The existence of a number of exceptions renders the application of this rule in its entirety almost impossible and leaves loopholes. Not only on transfers, but the rule is applicable on bailment and pledge also. Moreover, the adverse possession rule under the Limitation Act of 1963 lets a person transfer a greater title to himself. Lastly, the jurisprudential aspect of ownership and possession also need to be looked into because ultimately they shape the nemo dat rule.
 1902 AC 325 (326).
 (1973) 1 QB 195.
Also Read – What Are the Rights of An Unpaid Seller?
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