8 Exceptions to Nemo Dat Quod Non Habet Rule

As a corporate lawyer, it is pertinent to know the various exceptions to Nemo dat quod non habet rule. The reason is because, in the course of your career, you will come across cases that require an in depth knowledge of those exceptions for anyone to handle. For instance, when you are called upon to advise a client on a dispute where there is a transfer of property or transfer of title from one person to another, it is probably impossible to give any valid information without knowing the exceptions to Nemo dat rule according to the Sale of Goods Act of 1893.

Nemo dat rule and its exceptions
Nemo dat rule and its exceptions

In this article, i will be discussing the divergent exceptions to Nemo dat quod non habet rule. If you are hearing this Latin maxim for the first time, don’t panic, this article is also going to explain everything about the Nemo dat quod non habet rule. I enjoin you to read this article painstakingly as I tide you over. So, what is the meaning of Nemo dat quod non habet?

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Meaning of Nemo dat quod non habet

Nemo dat quod non habet is a common law rule which states that “No one can give better title than he himself has.” This common law rule has also been corroborated in the case of Cole v North Western Bank (1875) L.R 10 C.P 354 at 362. Section 22 of the Sales of Goods Law (1893) also explains the rule of Nemo dat quod non habet.

That section states that, “Subject to the provisions of this law, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner the buyer acquires no better title to the goods than the seller had unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.”

exceptions to nemo dat quod non habet rule
exceptions to nemo dat quod non habet rule

Now that you know what the rule of Nemo dat quod non habet is, let us quickly look at some of the exceptions to this rule.

Exceptions to the Nemo dat quod non habet rule

Below are the exceptions to the Nemo dat Rule. In the instances below, the Nemo dat quod non habet rule will not apply:

Sale under the authority of the owner:

This is one of the most acceptable exceptions to the nemo dat quod non habet rule. The court will always hold that a buyer has good title if the above is proved. According to common law, a seller can transfer good title if he sells with the authority or consent of the owner.

In this situation, it will be taken that the seller sells as the agent of the owner. By judicial interpretation, an agent does not warrant the title of the principal. He only warrants that he knows no defect in the principal’s title.

Misleading conduct of the seller:

Another exception to Nemo dat quod non habet rule is provided for in section 22 of the Sales of Goods Act. This section posit that the owner of goods cannot challenge the sale if, by his conduct, he has represented the seller as having the authority to sell. This is a form of estoppel. In Henderson & Co. v Williams (1895)1 KB. 521, M who had some goods in the defendant’s warehouse instructed them to hold the goods to the order of F. F negotiated the goods to the plaintiff.

Before the delivery, M discovered F’s fraudulent intention and instructed the defendants not to deliver the goods to the plaintiffs. It was held that the plaintiff were entitled to damages for conversion because property had passed to them. The above case clearly explains where the misleading conduct of a seller can indirectly pass good title to a buyer.

Sale by a mercantile agent:

A mercantile agent means an agent having in the customary course of his 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.

The law is that a mercantile agent who is in possession of goods or document of title to the goods with the consent of the owner can pass a good title if the sale or disposition is in his normal course of business provided that the buyer buys in good faith. This is apparently another exception to Nemo dat quod non habet rule.

In Eastern Distributors Ltd v Goldring (1957) 2 Q.B. 600, M transferred the documents of title to his van to C who represented to a finance company that he was the owner of the car and that M was willing to take it on hire purchase. It was held that M was by his conduct precluded from denying C’s authority to sell.

Sale under any Special Common Law or Statutory Power of Sale:

It is also an exception to nemo dat rule where there is a contract of sale under any special common law or statutory power of sale or under the order of a court of competent jurisdiction.

A sale of goods of a judgment debtor will come under this provision. Such a sale confers a good title. Thus, where goods of a judgment debtor are seized and sold by the shariff before any adverse claim is made, the sale confers a good title. In the Nigerian case of Mbanugo v UAC (1961) All NLR 775, a lorry in the possession of a judgement debtor was sold by the bailiff at a public auction. It was held that the buyer acquired a good title.

Sale in a market overt:

Where goods are sold in a market overt, according to the usage of the market, the rule of Nemo dat quod non habet will not apply. Thus, 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.

In Lee v Bayes (1856) 2QB 314, the phrase “Overt market” was defined as a public and legally constituted market. The court has also stated this in Bishop Gates Motors Finance Corporation v Transport Brakes Ltd. In this case, it was shown that private sale of car was within the custom and usage of the market. So, before this can stand as an exception to the Nemo dat rule, it must within the custom and usage of the market.

exceptions to the nemo dat quod non habet rule
exceptions to the nemo dat quod non habet rule

Sales under a voidable title:

A sale under a voidable title where the title has not been avoided, will confer a good title. Section 24 of the Sales of Goods Act provides that where 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 he buys them in good faith and without notice of the defect in the seller’s title.

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Sale by a seller in possession of goods:

Another exception to the nemo dat quod non habet rule is where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof or under any agreement for sale, pledge or other disposition thereof to any person receiving the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same.

This also applies to cases where the seller has sold goods but has remained in possession of the goods or title documents. The law allows him to pass a good title because, in effect, he is the apparent owner of those goods. This was corroborated in the English case of Pacific Motors Auction v Motor Credits (1965) A.C 867.

Sale by a buyer in possession of goods:

Another apparent exception to the Nemo dat quod non habet rule is where there is a sale by a buyer in possession.

In this situation, where a person, having bought or agreed to buy goods, obtains with the consent of the seller, possession of the goods or the documents of the title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge or other disposition thereof or under any agreement for sale, pledge or other disposition thereof of any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.

It is pertinent to note that the person in possession must be person who has bought or agreed to buy the goods.

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By way of conclusion, i must state that the exceptions to nemo dat rule explained in this article are common law exceptions. The Sales of Goods Act (1893) is the relevant law from which all these exceptions were drawn. Nonetheless, it should be noted that not all jurisdictions will accept the above exceptions to be applicable to the Nemo dat quod non habet rule.

Before using the content of this article, it is important to know whether it is applicable in your jurisdiction. In Nigeria for instance, these exceptions are applicable because the sales of goods act of 1893 has been ratified and domesticated in many states of the federation.

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