Topic 5 - The Nemo Dat Quod Non Habet Rule and Its Exceptions Flashcards
1
Q
What does the nemo dat quod non habet rule mean?
A
It means that no one can transfer better title to goods than they themselves possess
2
Q
Which statutory provision codifies the nemo dat principle?
A
Section 21 of the Sale of Goods Act 1979.
3
Q
What are the two competing policy objectives of the nemo dat rule?
A
Protection of property rights and ensuring certainty in commercial transactions. The latter tends to mean protecting the innocent buyer.
4
Q
Which case illustrates the difficulty in apportioning risk between the owner and the innocent buyer?
A
Lickbarrow v Mason (1787) – The party enabling the fraud should bear the loss.
5
Q
What is Lord Denning’s view on who should bear the loss in cases involving rogues?
A
The owner is ‘less innocent’ since they enabled the rogue to commit fraud (Lewis v Averay (1972)).
6
Q
What is an example of an owner consenting to a resale?
A
When goods are sold under a retention of title clause
7
Q
How does a retention of title clause affect ownership?
A
Ownership remains with the seller until full payment is made.
8
Q
What is the role of agency in passing good title?
A
An agent with actual or apparent authority can pass good title on behalf of the principal.
9
Q
What are the two types of actual authority?
A
Express authority and implied authority.
10
Q
Which case defined usual authority in agency law?
A
Hely-Hutchinson v Brayhead (1968).
11
Q
What is apparent authority in agency law?
A
Authority that a third party reasonably believes an agent has due to the principal’s representations.
12
Q
Which case established the doctrine of apparent authority?
A
Freeman v Buckhurst Park Properties (1964).
13
Q
What are the three elements of estoppel in agency law?
A
(i) Representation, (ii) reliance, and (iii) alteration of position (Rama Corporation v Proved Tin (1952)).
14
Q
Can an agent create apparent authority by their own representations?
A
No, the representation must come from the principal (First Energy v Hungarian International Bank (1993)).
15
Q
Which statute allows sales under court orders or statutory powers?
A
Section 21(2)(b), Sale of Goods Act 1979.
16
Q
What is estoppel as an exception to nemo dat?
A
When an owner, through conduct, is prevented from denying the seller’s authority to sell.
17
Q
Which case involved a car dealership misrepresenting ownership to a finance company?
A
Eastern Distributors v Goldring (1957).
18
Q
Does gross negligence by an owner alone create estoppel?
A
No (Farquharson Bros v King (1902)).
19
Q
What must a representation be for estoppel to apply?
A
It must be voluntary (Debs v Sibec Developments (1990)).
20
Q
Which statutory provision allows mercantile agents to pass good title?
A
Section 2(1), Factors Act 1889.
21
Q
What conditions must be met for a mercantile agent to pass title?
A
(i) The owner must consent to possession, (ii) the agent must act in the ordinary course of business, and (iii) the buyer must act in good faith.
22
Q
What happens if a mercantile agent obtains possession fraudulently?
A
The owner’s consent is voidable, but title may still pass (Folkes v King (1923)).
23
Q
Which case ruled that a car’s registration book was necessary for title to pass?
A
Pearson v Rose & Young (1951).
24
Q
When does a buyer acquire good title under a voidable title sale?
A
When the seller’s title has not been avoided before resale.
25
Which case held that fraud makes a contract voidable but not void?
Phillips v Brooks (1919).
26
What must an owner do to retain ownership after fraud?
Rescind the contract before resale (Car & Universal Finance v Caldwell (1965)).
27
What does Section 24 of the SGA 1979 state?
If a seller remains in possession of goods, they may pass title to an innocent third-party buyer.
28
Which case held that possession must be as a seller, not as a bailee?
Staffs Motor Guarantee v British Wagon (1934).
29
What does Section 25 of the SGA 1979 state?
A buyer in possession of goods with the owner's consent can pass title to an innocent third party.
30
Which case confirmed that Section 25 overrides common law nemo dat?
Newtons of Wembley v Williams (1965)
31
Why did the third party buyers (Shaw et al) in Shaw v Metropolitan Police Commissioner (1987) fail to receive good title?
Because the seller (London) was merely an agent of the owner, not a buyer (Edwards v Vaughan (1910)).
32
What does Section 27 of the Hire Purchase Act 1964 do?
It allows a hirer to pass good title to a private buyer in good faith.
33
Which case ruled that settling a debt is not a valid "sale" under Section 27?
VFS Financial Services v JF Plant Tyres (2013).
34
Can a trade or finance buyer acquire good title under Section 27?
No, only private buyers are protected (Stevenson v Beverley Bentinck (1976)).
35
What case first established that the loss should fall on the party who enabled the fraud?
Lickbarrow v Mason (1787).
36
Which case ruled that an innocent buyer is not always more deserving of sympathy?
Lewis v Averay (1972).
37
What principle did Lord Wright establish in Mercantile Bank of India v Central Bank of India (1938)?
The legal basis of estoppel is estoppel by representation.
38
What is the key distinction between an HP agreement and a conditional sale agreement?
An HP agreement allows termination before full payment, while a conditional sale agreement requires full payment (Lee v Butler (1893)).
39
Which case confirmed that a seller in possession can pass title to a second buyer, even after an HP agreement
Pacific Motor Auctions v Motor Credits (1965).
40
What does ‘disposition’ under Section 9, Factors Act 1889 include?
Sale, pledge, or other disposition (Shenstone & Co v Hilton (1894)).
41
Why did the fraudulent buyer in Newton’s of Wembley v Williams pass good title?
Because Section 9 overrides common law nemo dat.
42
Why does nemo dat not apply to stolen goods?
Because theft nullifies any legal title (National Employers Mutual v Jones (1990)).
43
Which case ruled that a motor dealer’s possession of a car’s registration book was essential for passing title?
Pearson v Rose & Young (1951).
44
What does ‘good faith’ mean under Section 27, Hire Purchase Act 1964?
It equates to honesty (Dodds v Yorkshire Bank Finance (1992)).
45
What is the key distinction between an owner parting with possession versus parting with ownership?
Denning LJ in Central Newbury Car Auctions v Unity Finance (1957) distinguished between mere possession (not enough for estoppel) and full ownership transfer.
46
What is the effect of a Romalpa clause on title transfer?
It retains ownership with the seller until full payment is made (Re Highway Foods International Ltd (1995)).
47
What is constructive delivery in the context of title transfer?
When physical possession remains unchanged, but the right to possession transfers to the buyer (Gerson v Wilkinson (2000)).
48
Which case ruled that a car without its registration book was not sold ‘in the ordinary course of business’?
Stadium Finance v Robbins (1962).
49
Can a stolen car be sold with good title under any exception to nemo dat?
No, because theft nullifies title (National Employers Mutual v Jones (1990)).
50
What was the ruling in Worcester Works Finance v Cooden Engineering (1972)?
The court applied Pacific Motors Auctions v Motor Credits (1965) to confirm that continued possession, not the role of "seller," determines the applicability of Section 24 SGA 1979.
51
What is the central issue in title conflicts involving unauthorized sellers?
Whether the original owner can reclaim the goods or whether the third-party buyer who received them can retain title, especially when the seller lacked ownership or authority
52
Can someone without authority ever confer good title to a third party?
Yes. In some cases, the law recognizes that unauthorized dispositions can bind the true owner, transferring either full or limited rights
53
What happens when an unauthorized disposition is ineffective?
The owner can recover the goods or their value, but may have to compensate a good faith possessor for improvements made to the goods
54
What are the two competing principles in title conflict cases?
1) Protection of property—no one can give better title than they have (nemo dat); and (2) protection of good faith purchasers—commercial certainty
55
What is the nemo dat rule?
A person cannot transfer better title to goods than they themselves possess. It's a foundational principle of common law, bolstered by s.21(1) SGA 1979.
56
Where did the nemo dat rule originate, and how has it evolved?
It originated in Roman law and was revived in medieval Europe. Civil law later shifted to protecting innocent purchasers to support commerce
57
Why might protecting innocent buyers be considered more realistic?
Because owners voluntarily parting with possession take some risk, and buyers can't realistically investigate title in chattel sales
58
How have English and civil law systems evolved regarding nemo dat?
English law has carved out statutory exceptions; civil law has added security protections. But English law remains less coherent
59
What does s 21(1) SGA 1979 say about unauthorized sales?
It upholds nemo dat but creates an exception where the true owner, by their conduct, is estopped from denying the seller’s authorit
60
What are the three traditional common law exceptions to the nemo dat rule?
1) Apparent or actual authority (agency), (2) Apparent ownership, and (3) Sale in market overt (now abolished).
61
Is “estoppel by negligence” recognized as an exception to nemo dat?
No. The House of Lords in Moorgate v Twitchings rejected the idea that an owner’s mere carelessness (e.g., failure to register a finance interest) can estop them from asserting title.
62
Can a rogue’s misrepresentation alone create estoppel against the owner?
No. The owner must have actively contributed to the rogue’s appearance of authority for estoppel to arise.
63
Under what condition does apparent authority enable a seller to transfer title?
When the owner’s conduct leads the buyer to reasonably believe the seller had authority, and a completed sale occurs.
64
Does apparent authority apply to incomplete transactions?
Not unless the buyer tenders full payment or otherwise completes the contract. Otherwise, estoppel won't arise. See Shaw v Metropolitan Police Commissioner (1987).
65
What must the owner have done to create “apparent authority”?
The owner must have taken active steps (e.g., giving goods, documents, or prior patterns of behavior) that led the buyer to assume the seller had authority.
66
What factors influence a finding of apparent authority?
The agent’s status, instructions, possession of goods or documents, conduct, and whether the buyer acted in good faith.
67
Why does using a mercantile agent increase the risk of estoppel?
Because appointing a professional agent implies trust, and the law protects third parties who rely on that apparent authority in trade
68
Does mere possession by a mercantile agent create apparent authority to sell?
No. If the agent is only holding the goods for, say, repair or storage, and not for sale, there’s no estoppel.
69
How do documents of title play into apparent authority?
Possession of documents may suggest authority, but only if they were given for purposes connected to disposition in the ordinary course of business
70
How does the law treat ad hoc agents when it comes to apparent authority?
Ad hoc agents (e.g. friends) are presumed to have only the authority given, so buyers must make inquiries—unless prior conduct implies broader authority
71
How does “apparent ownership” differ from “apparent authority”?
Apparent ownership arises when the true owner allows someone to appear as the owner, not just as an agent. Buyers can then rely on that appearance without worrying about limits to authority.
72
When will a third party gain title through apparent ownership?
When the owner allows the seller to appear as the true owner and the third party relies on this representation in good faith.
73
What can a third party assume when a seller is presented as owner?
That the seller has unlimited power to dispose of the goods, and thus the buyer gets good title—even if the seller acts against instructions.
74
What prompted statutory erosion of the nemo dat rule?
The expansion of commerce and credit in the 19th century created pressure to protect third parties and facilitate trade, leading to the Factors Acts and other statutory reforms.
75
What are some key statutes that modified nemo dat?
The Factors Acts (culminating in 1889), provisions on buyers/sellers in possession, and the Hire-Purchase Act 1964 .
76
When do statutory exceptions apply to override nemo dat?
Only where the original owner voluntarily parted with possession. A thief, for example, cannot trigger these exceptions
77
What was the “market overt” rule and what happened to it?
It allowed buyers to gain good title from public market purchases—even of stolen goods—but was heavily abused and abolished in 1995.
78
What does s 23 SGA 1979 say about voidable title?
If a person obtains goods under a voidable contract (e.g. by fraud) and resells them before rescission, a good faith buyer without notice of the defect in title can get good title.
79
What if the original seller has rescinded before the second sale?
Then the second buyer cannot get good title under s 23. But he may under another nemo dat exception, e.g. buyer in possession under s.9 Factors Act.
80
Can someone with voidable title pass good title multiple times?
Yes—each time the person transfers the goods before rescission, the third party can get good title if they act in good faith and without notice, i.e. a fourth party can enjoy the protection of s.23 SGA.
81
What does s 2 of the Factors Act 1889 allow a mercantile agent to do?
Sell, pledge, or otherwise dispose of goods while in possession with the owner’s consent, binding the owner if the transaction is in the ordinary course of business and the buyer acts in good faith.
82
What kinds of title can a mercantile agent transfer under s 2?
Either full ownership (e.g., by sale) or limited rights (e.g., pledge), depending on the nature of the transaction
83
What five conditions must be satisfied for s 2 to apply?
Agent is a mercantile agent,
Possesses goods with owner’s consent,
Makes a dispositive transaction,
Acts in ordinary course of business,
Buyer acts in good faith and without notice
84
What counts as “goods” or “documents of title” under the Factors Act?
Goods include merchandise; documents include warehouse receipts, bills of lading—but not car registration papers. In Stadium Finance v Robbins [1962] 3 WLR 453, the CA held (i) that a car without registration book or ignition key was still “goods” under s.2(1) FA 1889, but (ii) that a sale of a car without registration book or ignition key was not a sale ‘in the ordinary course of business’.
85
What qualifies as “possession” under the Act?
Both actual and constructive possession (e.g., control through warehouse or third-party agent) satisfy the requirement.
86
Who qualifies as a “mercantile agent”?
A person in the business of selling, buying, or consigning goods on behalf of others—even if acting in that role only once.
87
Can a mercantile agent possess goods indirectly (e.g., stored with someone else)?
Yes, as long as they control the goods and can dispose of them.
88
Does fraudulent consent still count as “consent” under the Act?
Yes. Even if consent was obtained by fraud, the law treats it as valid for the purpose of allowing title to pass under s 2, FA 1889.
89
Can consent cover both the goods and their title documents?
Yes. Possession of documents that arise from the goods (e.g. bill of lading) is treated as part of possession of the goods themselves.
90
What if the owner withdraws consent after granting it?
The agent’s sale may still bind the owner unless the third party is aware the consent has been revoked.
91
What must a mercantile agent do to create a valid second disposition under s 2, FA 1889?
Make a real dispositive transaction—not just an offer. The transaction must actually transfer or pledge the goods.
92
What does “ordinary course of business” mean under s 2?
Sale methods typical for the agent’s trade. Red flags like suspicious pricing, informal settings, or missing documentation may void the protection.
93
How is “good faith” defined under the Factors Act?
Honesty in fact. The buyer must also have no notice of the seller’s lack of authority.
94
What does s 8 of the Factors Act / s 24 SGA 1979 cover?
Situations where a seller remains in possession after a sale and then makes a second disposition. Title can pass if the second buyer receives the goods 'in good faith and without notice of the previous sale'.
95
What does s 9 of the Factors Act / s 25 SGA 1979 cover?
Cases where a buyer in possession with the seller’s consent resells or pledges goods , passing title to a third party receiving in good faith and without notice.
96
What is the key difference between s 8 (seller) and s 9 (buyer) exceptions?
Under s 8, the seller need not have consent from the first buyer; under s 9, the original seller must have consented to the buyer’s possession
97
How does Part III of the Hire-Purchase Act 1964 protect buyers?
It allows private purchasers of motor vehicles to acquire good title, even if the seller was only a hirer under HP or conditional sale—if they buy in good faith and without notice.
98
Who counts as a “private purchaser” under the HPA 1964?
A buyer not acting in the course of a trade or business, including individuals and non-dealer companies.
99
Can the original owner trace or reclaim proceeds from a wrongful sale?
Yes. The owner may trace into sale proceeds, sue for conversion, or recover goods if possible—subject to defences like improvements or statutory title.
100
