Grand Master - , 2:21 am On 9 Sep 2017
As Lord Justice Denning stated in Bishopsgate Motor Finance Corpn 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 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."
The principle literally means 'you cannot give what you do not have'. In Law it operates to means no one can give a better title than he possesses. Thus a person who has no title to a thing cannot pass title to a third party, also a person whose title is defective, passes a defective title to a third party and no more. see section 21(1) of the Sale of Goods Act.
Let's take two scenarios; first, A borrows B his car for a joyride, instead of a joyride B sells the car to C. Since B has no title to the car, he passes no title to C, so A can sue C and recover his car from C as C has no title to it.
Second, let's assume that A sells his car to B, and B made part payment but defaults in paying the balance, and then B goes ahead to sell it to C. Since B's title is defective, he also passes a defective title to C.
what we are saying in essence is that a person can pass no better title than he himself possesses.
This rule may sometimes work injustice. If B approaches C that he wishes to sell his car, and C buys the car for N1.5m not knowing that the car actually belongs to A, and then A surfaces from out the blue and recovers the car from C. C is at loss as B must have probably absconded with the money.
For commercial convenience, statutes and case law have provided some relaxation to the application of the principle in commercial transactions. These are:
EXCEPTIONS TO THE RULE
1. SALE IN AN OVERT MARKET: This is perhaps the most valuable exception to the rule, it puts a stop to the high horse of the owner. This is provided for in section 22(1) of the Sale of Goods Act. According to the subsection, “where goods are sold in market overt, according to the usage of the market, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of any defect or want of title on the part of the seller.”
The term 'market overt' is of French origin and it literally means 'open market'. Thus, if B takes A's car to a public market and sell it to C according to the ordinary practice of the market, C acquires a good title and A cannot recover his car. However, for the rule to apply, C must have acted in good faith and bonafide (that is, he must not have been aware of B's lack of title).
This exception has been criticized on several grounds, some of its critics say it provides protection for buyers of stolen goods. This exception however no longer applies in the united Kingdom but still applies in Nigeria.
2. SALE BY MERCANTILE AGENT: These are professional agents having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods. see Sec 3 of the Factors Act.
According to section 27 of The Sale of Goods Act, where a mercantile agent in possession of goods with the owners consent sells the goods without authority, the buyer nonetheless acquires a good title. see JEROME v. BENTLEY
3. Estoppels: The closing words of the rule contained in Sec 27 are: 'Unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell the goods'. This gives rise to the operation of estoppels. Thus if A drives his car to B's (who is a car dealer) office, and deposits his title document with him, then B sells the car to C, A would be estopped from denying that C's title. This exception covers all cases where the owner's conduct is inequitable and raises the presumption that the seller had a right to sell. See EASTERN DISTRIBUTORS LTD v. GOLDRING
4. SALE BY SELLER IN POSSESION: By Virtue of Section 30(1), where a seller who after he has sold goods continue to remain in possession of the goods sells it to a third party, the third party acquires a good title regardless of the fact that the seller has no title to the goods anymore.
5. SALE BY BUYER IN POSSESSION: By virtue of section 30(2), where a buyer is in possession of goods and the documents of title with the seller's consent, if he sells or pledges or otherwise disposes of the goods, the buyers obtains a good title.
Read further: MOOREGATE MERCANTILE CO. v. TWITCHINGS
GREENWOOD v. BENNETT
BISHOPGATE MOTOR FIN. CORP. Ltd v. TRANSPORT BRAKES
I hope you enjoyed reading? If you did, kindly drop a comment