What do you understand by Transfer of Title?

The foundation of "Transfer of Title" is a well-established common law maxim. ‘Nemo Dat Quod Non Habet’ (Section 27): This Latin maxim literally translates to "no one can give what he does not have."

In the context of sales, it means that a seller cannot transfer a better title to goods than they themselves possess. If the seller has no title, or a defective title, the buyer will acquire no title, or a similarly defective title, even if the buyer purchased in good faith and for value.

Section 27 - Sale by Person Not the Owner:

This section codifies the Nemo Dat Quod Non Habet rule. It means if you buy goods from someone who isn't the owner and isn't authorized by the owner, you don't become the rightful owner. The true owner can reclaim their goods from you.

Illustration: X steals Y's laptop and sells it to Z. Even if Z buys the laptop for a fair price and believes X is the owner, Z does not acquire good title. Y, the true owner, can demand the laptop back from Z. Z's only recourse is to sue X for the price paid.

What are the Exceptions to ‘Nemo Dat Quod Non Habet’?

The strict application of the Nemo Dat rule can be harsh on innocent buyers. Therefore, the Act and other laws have carved out several important exceptions where a buyer can acquire good title even from a seller who is not the true owner or has a defective title. These exceptions are crucial for facilitating commerce and protecting bona fide purchasers.

1. Sale by Estoppel (Proviso to Section 27):

This applies when the true owner, through their words, conduct, or even silence (if there was a duty to speak), represents or allows it to be represented that the seller has the authority to sell the goods. If a buyer acts on this representation in good faith, the true owner is "estopped" (prevented) from later denying the seller's authority and claiming their goods back.

• Illustration: A, the owner of a watch, allows B, a watch dealer, to display his watch in B's shop window with a price tag, knowing that customers would assume B has the right to sell it. If B sells the watch to C, who buys in good faith, A is estopped from denying B's authority, and C gets good title.
• Case: While not Indian, Henderson & Co. v. Williams [1895] 1 QB 521 is a classic example. If an owner provides "indicia of title" (documents or evidence suggesting ownership) to someone, enabling them to represent themselves as the owner, and an innocent third party acts on that, estoppel may apply.

2. Sale by a Mercantile Agent (Proviso to Section 27, read with Section 2(9)):

o Mercantile Agent [Section 2(9)]: "a mercantile agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods."

Conditions for Exception: A sale by a mercantile agent passes good title if:

• • The seller is a mercantile agent.
• • They are in possession of the goods or documents of title with the owner's consent.
• • They sell the goods in the ordinary course of their business as a mercantile agent.
• • The buyer acts in good faith and without notice that the seller lacks authority.

Explanation: This protects innocent buyers who deal with professional agents entrusted with goods.

Illustration: A gives his car to B, a car broker, to find a buyer. B, in the usual course of his brokerage business, sells the car to C, who buys it genuinely believing B has the authority. C gets good title. It's irrelevant if B misappropriates the money.

3. Sale by One of Joint Owners (Section 28):

If co-owners agree to let one of them have exclusive possession of the jointly owned goods, and that person sells them to an innocent buyer, the buyer gets good title.

Illustration: A, B, and C jointly own a valuable sculpture. They agree that A will keep it at his house for display. If A sells the sculpture to D, who doesn't know about B and C's joint ownership and buys in good faith, D gets good title.

4. Sale by Person in Possession Under Voidable Contract (Section 29):

This is a crucial exception. If a person obtains goods through a contract that is voidable (e.g., due to fraud, misrepresentation, coercion, undue influence) but not yet rescinded by the original owner, and then sells those goods to an innocent third party, that third party gets good title. The original owner's only remedy is against the fraudulent party.

Note: This does not apply if the original contract was void ab initio (e.g., in a case of mutual mistake as to identity, or stolen goods), as a void contract means no title ever passed to the seller.

Case: Phillips v. Brooks Ltd. (1919) 2 KB 243

• Facts: A rogue, impersonating a reputable person, induced a jeweller (Phillips) to sell him pearls and a ring, paying with a worthless cheque. Before the cheque bounced and the fraud was discovered, the rogue pledged the ring with a pawnbroker (Brooks Ltd.).
• Held: The contract between Phillips and the rogue was merely voidable for fraud. Since the pawnbroker acquired the ring before Phillips rescinded the contract, the pawnbroker obtained good title.

5. Sale by Seller in Possession After Sale (Section 30(1)):

If a seller sells goods but, for whatever reason, remains in possession of those goods (e.g., the buyer asked them to hold it for a few days), and then the seller fraudulently resells the same goods to a second innocent buyer, the second buyer acquires good title. This protects the innocent second buyer who relies on the seller's apparent possession.

Illustration: A sells his furniture to B, but B asks A to store it for a week until B's new house is ready. During that week, A fraudulently sells the same furniture to C, who is unaware of the previous sale to B. C takes delivery in good faith. C gets good title. B's remedy is against A.

6. Sale by Buyer in Possession Before Property Passes (Section 30(2)):

This applies when a buyer, who has possession of goods with the seller's consent but has not yet become the owner (e.g., goods on approval, or under a conditional sale where ownership transfers on final payment), sells or pledges those goods to an innocent third party. The third party acquires good title.

• Note: This section generally does not apply to true hire-purchase agreements where the hirer merely has an "option to buy" and has not "bought or agreed to buy." In a hire-purchase, the hirer is usually only a bailee until the final installment and exercise of the option, and thus cannot pass good title unless other exceptions apply. The Hire-Purchase Act, 1972 was repealed, but the common law position that a hirer is not a buyer "who has agreed to buy" largely remains, meaning S.30(2) typically doesn't apply to a pure hire-purchase scenario.
• Illustration: A delivers a washing machine to B on a "sale or return" basis. Before B decides to buy it, B sells the machine to C, who buys in good faith without knowing of A's claim. C gets good title. A's remedy is against B.

7. Sale by an Unpaid Seller (Section 54(3)):

This is a specific power given to an unpaid seller. If they have exercised their rights of lien (holding the goods) or stoppage in transit, they can resell the goods. The new buyer gets good title, protecting them.

• o Unpaid Seller [Section 45(1)]: A seller to whom the whole of the price has not been paid or tendered, or where a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition has not been fulfilled by reason of the dishonour of the instrument or otherwise.