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Transfer of Title – Meaning, Rule and Exceptions

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Meaning of Transfer of Title

In a contract of sale of goods, transfer of title means the transfer of ownership rights from the seller to the buyer.
The person who owns the goods has the title to them, and when that ownership is lawfully passed to another through a valid sale, it is called the transfer of title.

In other words, transfer of title refers to the legal transfer of property rights from the seller to the buyer.

Sections 27 to 30 of the Sale of Goods Act, 1930 deal with the rules relating to transfer of title.

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General Rule – Nemo Dat Quod Non Habet

The basic principle governing transfer of title is the Latin maxim “Nemo Dat Quod Non Habet”, which means “no one can give what he does not have.”

According to this rule:

• A seller cannot transfer a better title than he himself possesses.
• If the seller is not the owner, then the buyer does not acquire ownership, even if he buys in good faith.

Example:
If A steals a car from B and sells it to C, C does not become the owner of the car because A himself had no ownership to transfer. The true owner, B, can recover the car from C.

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Purpose of the Rule

1. To protect the rights of the true owner.
2. To prevent fraudulent sales and dishonest dealings.
3. To promote honesty and good faith in trade.

This rule is, however, subject to several statutory exceptions in order to protect innocent buyers who purchase goods in good faith.

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Exceptions to the Rule (Sections 27–30, Sale of Goods Act, 1930)

Although the general rule protects the true owner, the law recognizes certain circumstances where a person who is not the real owner can pass a valid title.
These are discussed below.

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1. Sale by a Mercantile Agent (Section 27)

When a mercantile agent (such as a broker, factor, or commission agent) is:

• In possession of goods or the documents of title with the owner’s consent, and
• Sells the goods in the ordinary course of business, and
• The buyer acts in good faith without knowing that the agent had no authority to sell,

then the buyer gets a valid title.

Case: Folkes v. King (1923)
A car dealer (agent) sold a car without the owner’s permission. The buyer purchased it in good faith. The court held that the buyer obtained a good title since the agent had possession with the owner’s consent.

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2. Sale by One of Several Joint Owners (Section 28)

If one joint owner of goods, with the consent of the other joint owners, has sole possession of the goods and sells them to a buyer acting in good faith, then the buyer gets a good title.

Example:
A and B jointly own a horse. With B’s consent, A keeps possession and sells it to C, who buys it honestly. C gets a valid title.

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3. Sale by a Person in Possession Under a Voidable Contract (Section 29)

If a person has obtained goods under a voidable contract (for example, by fraud, coercion, or misrepresentation), but the contract has not been rescinded at the time of sale, and the buyer acts in good faith, the buyer obtains a good title.

Case: Phillips v. Brooks (1919)
A fraudster bought jewelry under a false name and sold it before the fraud was discovered. The buyer purchased in good faith. The court held that the buyer acquired a good title since the contract was voidable and had not yet been rescinded.

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4. Sale by a Seller in Possession After Sale (Section 30(1))

When a seller, after selling goods, continues to possess them and sells them again to another buyer, the second buyer who acts in good faith and without notice of the previous sale gets a good title.

Case: Staffordshire Finance Ltd. v. British Wagon Co. (1961)
The seller, after selling wagons to Company A, remained in possession and resold them to Company B. Company B bought them in good faith. The court held that B obtained a good title under Section 30(1).

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5. Sale by a Buyer in Possession After Agreement to Buy (Section 30(2))

If a buyer, having possession of goods with the seller’s consent, and having agreed to buy them, resells them to another person who purchases in good faith, that person gets a good title, even if the original seller has not been fully paid.

Case: Eastern Distributors Ltd. v. Goldring (1957)
A buyer of a vehicle, who had possession under an agreement to buy, sold it to a third party. The third party acted in good faith. The court held that the third party obtained a good title under Section 30(2).

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6. Sale by Estoppel

If the true owner, by his conduct or actions, leads the buyer to believe that the seller has authority to sell, then the owner is estopped (prevented) from denying the seller’s authority later.

Case: Pickard v. Sears (1837)
The true owner’s conduct made it appear that another person owned the goods. The buyer relied on this and purchased in good faith. The court held that the true owner was estopped from denying the seller’s authority.

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7. Sale by Finder of Goods

Under Section 169 of the Indian Contract Act, 1872, a finder of goods may sell them in certain circumstances:

• When the true owner cannot be found with reasonable diligence;
• When the owner refuses to pay lawful charges of the finder;
• When the goods are perishable or the sale is necessary to preserve their value.

In such cases, the buyer gets a good title.

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8. Sale by Official Receiver, Pawnee, or under Statutory Power

If goods are sold by:

• An official receiver or liquidator in insolvency,
• A pawnee under Section 176 of the Indian Contract Act, 1872, or
• Any person authorized by law or court order,

then the buyer obtains a good title, even though the seller is not the true owner.

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Important Case Law Summary

Case Name	Principle / Exception	Result
Folkes v. King (1923)	Sale by mercantile agent	Buyer got good title
Phillips v. Brooks (1919)	Sale under voidable contract	Buyer got good title
Staffordshire Finance Ltd. v. British Wagon Co. (1961)	Seller in possession after sale	Buyer got good title
Eastern Distributors Ltd. v. Goldring (1957)	Buyer in possession after agreement to buy	Buyer got good title
Pickard v. Sears (1837)	Sale by estoppel	Buyer got good title

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Conclusion

The general rule of transfer of title, “Nemo dat quod non habet”, safeguards the rights of the true owner. However, the law provides several exceptions to protect innocent buyers who purchase goods in good faith without knowledge of the seller’s lack of authority.

Thus, the Sale of Goods Act, 1930, balances the rights of the true owner and the protection of honest purchasers. This ensures both fairness and smooth commercial transactions in the marketplace.

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Rule of Caveat Emptor and Transfer of Title – Case Law Analysis

1. Ward v. Hobbs (1878) 4 AC 13

Facts:
The defendant sold pigs in an open market to the plaintiff. The pigs were infected with a contagious disease, but the seller did not inform the buyer. The buyer later suffered loss due to infection spreading to his farm.

Issue:
Whether the seller was liable for not disclosing the defect in the pigs?

Judgment:
The court held that the rule of caveat emptor (let the buyer beware) applied. The seller was not bound to disclose the defect unless he actively concealed it or made a false representation.

Legal Principle:
The buyer has to take care to inspect and ensure the goods are fit for his purpose. The seller is not liable if the defect was discoverable by ordinary inspection.

Relevance:
This case establishes that under the rule of caveat emptor, the buyer must use reasonable care before purchasing goods. The seller is not liable for defects that are not concealed.

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2. Jones v. Bright (1829) 5 Bing 533

Facts:
The buyer purchased canvas from the seller to use for ship sails. After some use, the canvas became unfit and perished quickly.

Issue:
Whether the buyer could claim damages for unfit goods even though the seller did not guarantee fitness?

Judgment:
The court held the seller liable because he knew the purpose for which the goods were bought and still supplied defective goods.

Legal Principle:
This case created an exception to the rule of caveat emptor — if the buyer relies on the seller’s skill or judgment, and the goods are unfit for that purpose, the seller is liable under Section 16(1) of the Sale of Goods Act, 1930.

Relevance:
It shows that when the seller knows the intended purpose, the buyer is protected even under caveat emptor.

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3. Priest v. Last (1903) 2 KB 148

Facts:
A buyer purchased a hot water bottle from a chemist. The bottle burst during normal use and injured the buyer.

Issue:
Was the seller liable for selling a defective product?

Judgment:
Yes. The court held that since the buyer had relied on the seller’s skill and the article was unfit for its ordinary purpose, the seller was liable.

Legal Principle:
This case further strengthened the implied condition of fitness for purpose.

Relevance:
Supports the exception to caveat emptor — seller’s responsibility when buyer relies on seller’s skill.

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4. Rowland v. Divall (1923) 2 KB 500

Facts:
The buyer purchased a car from the seller. Later it was found that the seller had no ownership — the car was stolen property.

Issue:
Could the buyer recover the full price even after using the car for some time?

Judgment:
Yes. The court held that there was a total failure of consideration because the seller had no title to sell the car.

Legal Principle:
Under Section 27 of the Sale of Goods Act, 1930, only the owner of the goods can transfer a valid title. If the seller is not the owner and the buyer buys in good faith, the buyer does not get a valid title unless an exception applies.

Relevance:
This case is key for transfer of title — a buyer cannot get a better title than the seller possesses, except under certain exceptions (like estoppel, sale by mercantile agent, etc.).

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5. Cundy v. Lindsay (1878) 3 App Cas 459

Facts:
A fraudster pretended to be a well-known firm and ordered goods from the plaintiffs. The plaintiffs delivered the goods. The fraudster sold the goods to an innocent third party.

Issue:
Whether the innocent buyer obtained ownership of the goods?

Judgment:
The court held that since the contract between the original seller and the fraudster was void ab initio (no consent), the title never passed. The third party did not get any valid ownership.

Legal Principle:
When a contract is void due to fraud or mistake, the title does not pass from seller to buyer.

Relevance:
It reinforces the principle of nemo dat quod non habet — no one can give what he does not have.

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6. Exceptions under Transfer of Title (Section 27–30, Sale of Goods Act, 1930):

• Sale by a Mercantile Agent (Section 27)
  If the mercantile agent sells goods in the ordinary course of business, the buyer gets a good title even if the agent acts without the owner’s consent.

• Sale by One of Joint Owners (Section 28)
  If one joint owner has possession with consent and sells to a bona fide buyer, the buyer gets a good title.

• Sale by Estoppel (Section 27)
  If the owner’s conduct leads the buyer to believe the seller has authority, the buyer gets good title.

• Sale under Voidable Contract (Section 29)
  If the contract is voidable but not rescinded, and goods are sold to a good-faith buyer, title passes.

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Summary

Concept	Legal Principle	Case Law	Outcome
Caveat Emptor	Buyer must beware	Ward v. Hobbs	Seller not liable
Exception – Fitness for Purpose	Seller liable if buyer relies on skill	Jones v. Bright; Priest v. Last	Seller liable
Transfer of Title	No one can transfer better title	Rowland v. Divall; Cundy v. Lindsay	Buyer doesn’t get title
Exceptions to Nemo Dat	Mercantile agent, estoppel, etc.	Sections 27–30 SOGA	Buyer gets good title

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