Title Conflicts in Relation to Goods
The general position is that a person cannot give title unless he has title; only the “true” owner may dispose of the goods. This is expressed in the Latin phrase Nemo Dat Quod Non Habet; no person may give what he does not have. There are a number of long-established exceptions to the so-called “Nemo Dat” rule.
A person in possession of goods may assert title to them against all third parties, except those with a better title to the goods concerned. This reflects the principle of relativity in property law, which applies to both land/buildings and goods. Conflicts regarding the ownership of goods and related issues are discussed in other articles. This article deals with certain exceptions to the general principles applicable to the sale and transfer of goods.
There are a number of cases in which a transfer made by a person other than the owner, may pass title, which holds good against all parties, including the “true” owner. Most of these instances are provided for by statute. Some exceptions are apparent exceptions only, being based on agency principles which deem a person to be the agent of another in particular circumstances.
Power to give Title
At common law, there are a number of powers of sale, by which a person may give a better title than that which he holds.
- a sheriff has power of sale, subject to Sheriff and Court Officers legislationa A sale by a Sheriff or County Registrar of seized goods, to a person acting in good faith, gives good title
- a pledgee has power of sale (subject to Pawnbrokers Acts);
- agents of necessity; which in modern times of mass communication will arise in very rare and limited circumstances, may have the power of sale, where the owner cannot be communicated with, and it is necessary to dispose of goods due to perishability or some such factor;
- an unpaid seller of goods under the Sale of Goods Act;
- a sale of goods on foot of a commercial landlord’s distress to the extent that it is not unconstitutional;
- a trustee in bankruptcy and liquidators;
- a warehouseman in relation to imported goods under Merchant Shipping Act;
- an innkeeper in the exercise of a lien under Hotel Proprietors Act;
- pawnbrokers pursuant to be Pawnbrokers Act,
- the ancient right of distress whereby a landlord may take the goods of a tenant in satisfaction of rent, to the extent that it still valid under the Constitution, provides by old statute, for good title for a purchaser on their sale.
A court order may be made in respect of perishable goods or which may be likely to injure from keeping or which for any other just or sufficient cause, it might be desirable to sell at once.
Currency (coins and notes) circulate freely. The acquisition of coins and notes in good faith and for value gives good title. The transfer or circulation destroys the title of the previous owner and creates a new title. The principles of movable property and the origin of title are wholly inapplicable.
The transferee must take the coins or notes in good faith, for value without notice of defect in the transferor’s title. Accordingly, stolen coins and notes are recoverable. Tracing may be allowed in certain narrow circumstances, law and in equity. See the separate chapter in relation to tracing.
Most money is now constituted by accounts representing ultimately, sums owed to the accont holder by the bank concerned. There are provisions in payments legislation which effectively makes payments made in good faith without notice of defects, irreversible so that the notional “transfer” of funds through the clearance system is analogous to payment in notes or coins.
The same principle applies to negotiable instruments. In the case of negotiable instruments, such as cheques and bills of exchange, there are special protections for bona fide transferees. They may take better title than the transferor, subject to conditions.
Bearer negotiable instruments have a similar status as coins or currency.
Historically, notes were drawn on banks. Bank notes no longer circulate in the Republic of Ireland and notes are drawn on the Central Bank. They have not been redeemable in gold or other specie metal for many decades.
There is an anomalous rule which provides that the sale of goods in a so-called market overt to a purchaser in good faith and without notice of a defect in title, passes good title. The rule is more limited than first appears. It applies to established public markets where this principle applies in accordance with custom.
The market overt exception reproduces the common law rule. The legislation does not affect the law relating to the sale of horses. The exception covers a relatively narrow categories of long-established markets. The market must be an open, public and legally constituted market by grant / charter, prescription or statute.
The sale itself must be in a place to which the public has access. The goods must be of a type sold in the particular market in accordance with its customs. It must be in accordance with the usage of the market. The sale must happen during daylight hours; between sunrise and sunset. The exception applies to sales and not to gifts. The sale may be by trader or non-trader, subject to the usage of the market.The exception does not apply to stolen goods.
Mercantile Agent I
Where a “mercantile agent” has possession of goods or title documents of the goods with the consent of the owner, a sale, pledge or other transfer of the goods made by him in the ordinary course of his business as such, is valid. This is provided that the buyer or transferee acted in good faith and was not, at that time, aware of the absence of authority.
A “mercantile” agent is an agent having in the ordinary course of his business, authority to sell the goods, to consign them for sale, to buy the goods or raise money on the security of the goods. A mercantile agent must act as agent, and not on his own behalf. His agency must allow him to dispose of the goods and grant them by way of security. It is sufficient that his business involves either the sale or mortgaging of the goods for commercial return.
Where a mercantile agent has, with the consent of the owner, been in possession of goods or of the documents of title to goods, any sale, pledge, or other disposition, which would have been valid if the consent had continued, shall be valid notwithstanding the determination of the consent. The person taking under the disposition must not at the time thereof, have notice that the consent has been determined.
Mercantile Agent II
Where a mercantile agent has obtained possession of any documents of title to goods by reason of his being or having been, with the consent of the owner, in possession of the goods represented thereby, or of any other documents of title to the goods, his possession of the documents is deemed to be given with the consent of the owner.
Whether or not the person is a mercantile agent is a question of fact. The agent need not be a mercantile agent as his occupation. He may be a mercantile agent in respect of particular goods when acting for a single principal. Entrusting goods with a person for sale does not by itself, necessarily make the person a mercantile agent. He must be put into possession as a mercantile agent for the purpose of sale.
The mercantile agent must be in business as an agent. The expression includes, for example, an auctioneer or broker who is entrusted with goods for sale. He must act in the course of a business. The goods must be in his possession as a mercantile agent. This must be with the consent of the owner.
Mercantile Agent III
The goods must be given to the mercantile agent in that capacity, for the purpose of sale, pledge or other dealing. It is not enough that the agent’s role is to seek offers subject to approval by the owner/principal.
The mercantile agent must have authority to sell, mortgage or otherwise dispose of the goods. A mortgage includes any pledge or lien or any contract to give such a pledge or lien. The agent must operate not only in the ordinary course of his business but in business hours at a proper place of business and in the ordinary way of his business.
If the goods are entrusted for a different purpose, there may not be sufficient consent on the part of the owner. It is not enough that the agent obtains possession of the goods for a reason disconnected from his role as an agent. For example, the exception does not apply where the owner takes a car to a garage for repairs, which happens also to deal in cars.
However, it seems enough that the owner consents to the goods being in possession of the agent for a purpose that is in some way or other connected with his business as a mercantile agent. For example, it need not be for sale but may be for obtaining offers only.
Mercantile Agent : Documents of Title
Documents of title are defined to include any bill of lading, dock warrant, warehouse keeper’s certificate, warrant or order for delivery of the goods or other document used in the ordinary course of business as proof of the possession or control of the goods or authorising or purporting to authorise either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented. Registration books of cars were not documents of title for this purpose.
The owner is presumed to give consent in the absence of evidence to the contrary. The sale must be in the ordinary course of business. This may require, for example, that a registration book or certificate, which is usual for that types of goods, be furnished, notwithstanding the documents are not documents of title. It has been held that the sale of a motor vehicle without its registration book or certificate is not a sale in the ordinary course of business by a mercantile agent.
The transfer of title may be invalidated by a number of factors which are described in the sections on contract law. In most cases, the transaction is voidable. In some cases, the transaction is void because there has been no contract, such as where there was no intention to contract with the person concerned at all.
Where the transaction is voidable, it cannot be avoided as against a bona fide purchaser for value who acquires the movable/chattel without notice before notice of rescission is given. In contrast, where the transaction is void, it is invalid and can be avoided at any time thereafter. This would apply, for example, to stolen property, where no title transfers at all.
The Sale of Goods Act provides that when the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided that he buys them in good faith and without notice of the seller’s defective title.
Void Transactions Fraud and Theft
Notwithstanding any enactment to the contrary, where goods have been obtained by fraud or other wrongful means not amounting to larceny, the property in such goods do not re-vest in the person who was the owner of the goods, or his personal representative, by reason only of the conviction of the offender.
Where goods have been stolen, and the offender is prosecuted to conviction, the property in the goods so stolen re-vests in the person who was the owner of the goods, or his personal representative, notwithstanding any intermediate dealing with them, whether by sale in market overt or otherwise.
Where the identity of the counterparty is critical, the courts have held that there is no intention to contract at all. As a consequence, the sale is wholly void. This means that a transaction may be avoided even as against a bona fide buyer for value. The cases on induced mistaken identity are controversial, and it is argued that the contract should be voidable and not void.
References and Sources
Modern law of personal property in England and Ireland 1989 Bell
Consumer Law Rights & Regulation 014 Donnelly & White
Commercial Law White 2012 2nd ed
Commercial & Economic Law in Ireland 2011 White
Commercial Law 2015 Forde 3rd ed
Irish Commercial Precedents (Looseleaf)
Commercial & Consumer Law: Annotated Statutes 2000 O’Reilly
Personal Property Law: Text and Materials 2000 Sarah Worthington
Personal Property Law (Clarendon Law Series) 2015 Michael Bridge
The Law of Personal Property 2017 Professor Michael Bridge and Prof. Louise Gullifer
The Principles of Personal Property Law 2017 Duncan Sheehan
Crossley Vaines on Personal Property 1967 by J C Vaines
The Law of Bills of Sale 2017 James Weir
Palmer on Bailment 2009 Norman Palmer
The Reform of UK Personal Property Security Law: Comparative Perspectives 2012 John de Lacy
The Law of Personal Property Security 2007 Hugh Beale and Michael BridgeCases