Sale of Goods - Chapter 6 - Transfer of Title

There has always been differences between the legal and mercantile view; the law has emphasized the rights of the true owner of goods and has been reluctant to deprive him of them unless he was in some way responsible for his own loss, while the merchant has sought to protect the honest buyer of goods, or lender of money upon them, who deals with the person in possession of goods.

Section 27 speaks about the sale by that person who is not the real owner of the property. He sells the property without getting the authority from the owner to do so. There is no consent either given by the owner. In such circumstances, the buyer acquires no better title to the goods than the seller had. Section says in detail as follows-

"Subject to the provisions of this Act and of any other law for the time being in force, 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:

Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorized by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell."

2. Buyer is without Title when Sale is by a Person who is not the Owner of the Title

Q. Explain the meaning of—Buyer is without title when sale is by a person who is not the owner of the title."

The buyer doesn't get the title if the goods have been sold by a finder or a thief.

In the case; Farquharson Bros. v. King & Co., (1902) AC 325 (335-36), the judges said-"if a person leaves a watch or a ring on a seat in the park or on a table at a cafe and it ultimately gets into the hands of a bona fide purchaser, it is no answer to the true owner to say that it was his carelessness and nothing else, that it enabled the finder to pass it off as his own."

Other examples:

(a)Delivery of goods by A, on sale or return to B, upon the condition that they are to remain the property of A until the price is paid. B sells them to C without paying A for them. C purchases in good faith and without notice of A's title. Here, A can recover the goods or their value from C; Edwards v. Vaughan, (1910) 26 TLR 545 (CA).

(b)A stolen horse was sold at a public auction, the fact of theft being known neither to the auctioneer nor to the buyer; Leo v. Bayes, (1856) 18 CB 599: 107 RR 424.

(c)A, the bus owner appointed B to ply his bus for hire. Then A handed over B a letter which was to be delivered to the magistrate to obtain a permit for hiring the bus. B fraudulently altered the letter into one addressed to the District Superintendent of Police requesting him to transfer the bus in his own (B's) name. After this, he sold the bus to stranger. Here, the buyer does not obtain any title against the real owner; Mohambaram v. Ram Narayan, (1935) 69 MLJ 691: 158 IC 535: MANU/TN/0077/1935 : AIR 1935 Mad 850.

(d)A sold goods to the plaintiff, but was allowed to keep possession of them upon payment of a weekly rent, and an undertaking to deliver them up on demand. He subsequently sold them to the defendant. He thereby determined the bailment of the goods to him, and the defendant, though he bought in good faith, acquired no title against the plaintiff; Cooper v. Willomatt, (1845) 1 CB 672: 68 RR 798.

In all the abovementioned cases the buyer could not get a good title.

3. Nemo Dat Quod Non Habet

Q. Explain the maxim nemo dat quod non habet

This is a Latin maxim which means that no one can transfer a better title than he himself has. In the case; Bishopsgate Motor Finance Corpn. Ltd. v. Transport Brakes Ltd., 1902 AC 325 (326). Denning LJ, has defined the position of the modern law as follows:

"In the development of our law, two principles have striven for mastery. The first is 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 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 times."

Through legislation, mercantile law has been strengthened so that it may give a good title to a buyer who buys in good faith and without notice of their want of title.

Provisions in sections 27, 28 and 30, regarding transfer of good title-

(a)Those who having sold goods continue or are in possession of the goods or of the document of title to the goods. [Section 30(1)]

(b)Those who having bought or agreed to buy goods obtain, with the consent of the seller, possession of the goods or documents of title to the goods. [Section 30(2)].

(c)Mercantile agents acting in the ordinary course of business of a mercantile agent who have, with the consent of the owner, possession of the goods or the documents of title to the goods, (Section 27).

(d)Part owners who, with the permission of the co-owners, are in the possession of the goods.

4. Estoppel

Q. What do you mean by estoppel in the sale of goods? Explain with the help of relevant cases.

Section 27 concludes with the remark that the purchaser may get a good title if:

"The owner of the goods is by his conduct precluded from denying the seller's authority to sell".

Estoppel means when the owner is not permitted to deny the seller's authority.

For example if a son sells the goods belonging to his father in his presence, he made no objection and he (father) was not subsequently permitted to deny his son's authority to sell and the sale was binding on him. In fact, estoppel arises from a representation that the seller has the authority to sell. And when that representation is innocently acted upon by the buyer, it becomes too late to deny the seller's authority. Representation may arise from words or declarations or it may arise from an act or omission.

In the case; Mercantile Bank of India Ltd. v. Central Bank of India Ltd., 1938 AC 287, it was emphasized that the duty must be a legal obligation. Here, certain railway receipts were pledged by a firm of merchants with a bank for borrowing loan. After that they took back the receipts for clearing the goods and storing them in the bank's warehouse. But after taking the paper from the bank, they repledged the receipts with another bank for another loan. When it came to the light, the second bank contended that the first bank should not have returned the receipts without the impression upon them their stamp of pledge. Since the first bank omitted to carry out a legal obligation of impression upon the stamp on pledge and their omission to do so enabled the merchants to repledge the receipts with the second bank for loan. Therefore, the first bank should be estopped from denying the validity of the second pledge. But the Privy Council held that the duty to impress the stamp of pledge was not a legal duty. It was a duty of commercial origin and its omission did not create a legal estoppel and, therefore, the title of the second bank on the railway receipts was subject to that of the first bank.

· Estoppel by Negligence

Carelessness may not create an estoppel. In the case; Heap v. Motorists Advisory Agency Ltd., (1883) 11 QBB 776. Heap allowed his car to be taken away by one North to show it to a potential customer. But, in fact there was no customer. After using the car for few weeks, North then sold it to the Motorists Advisory Agency. Heap then claimed the car from the Agency. The Agency claimed estoppel against Heap.

But, the Court held that Heap was entitled to take back his car. The Court said-"He was not so careful as he should have been in his own interest but that does not mean that he was negligent in the sense that he broke some duty that he owed to the defendants".

Lush J., observed in this case-

"Negligence, in order to give rise to a defence under this section.....must be more than mere carelessness on the part of a person in the conduct of his own affairs, and must amount to a disregard of his own obligations towards the person who is setting up the defence".

Sir Rupert Cross¹ has given his observation for estoppel by negligence as follows-

"There is, however, a type of estoppel, often called estoppel by negligence in which the party in whose favour it operates is the victim

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1. Sir Rupert Cross on Evidence, 4th Edn., p. 304.

of the fraud of some third person facilitated by the careless breach of duty of the other party. An example is provided by; Coventry Shepherd & Co. v. Great Eastern Rly. Co., 304 (4th Edn.), (Sir Rupert Cross on Evidence). In that case the defendants carelessly issued two delivery orders relating to the same consignment of goods, thus enabling the person to whom they were issued to obtain an advance from the plaintiff, and the defendants were held to be estopped as against him from denying the fact that the goods mentioned in the order were held on behalf of the assignor. Someone who puts documents of this nature into circulation owes a duty to those into whose hands they may come."

5. Sale by Mercantile Agent

A buyer of goods from a mercantile agent acquires good title if the conditions laid down in section 27 (1st Proviso) are satisfied.

"Where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title of the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell".

In the case; Folkes v. King, (1923) 1 KB 292 CA, the plaintiff entrusted his car to a mercantile agent for sale with a stated price and not below that. He sold it to X below that price and misappropriated the proceeds. X resold the car to the defendant. But, the plaintiff could not recover it from the defendant. X got a good title from the mercantile agent and he conveyed a good title to the defendant.

5.1 Mercantile Agent

Q. Define `mercantile agent'.

The conditions subject to which the rule operates may now be discussed. The first essential is that the sale must be by a 'mercantile agent'. The expression is given in section 2(9) as-

"Mercantile Agent" means a mercantile agent having in the customary course of 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."

In the case; Lowther v. Harris, (1927) 2 KB 393: (1926) All ER Rep 352, the plaintiff engaged Prior, a shopkeeper, to act for him in the disposal of some tapestry. Prior obtained possession of the goods by fraud and sold them to a bona fide purchaser. Prior, misappropriated the sale proceeds. Then, the plaintiff sued the purchaser. It was held that the purchaser acquired a good title. Wright J., observed as-

The first question is whether Prior was mercantile agent........, that is, an agent doing a business in buying and selling, or both having in the customary course of his business as such authority to sell goods. I hold that he was..........it was contended that Prior was a mere servant or a shopman and had no independent status such as was essential to constitute a mercantile agent. It was held under the earlier Acts that the agent must not be a mere servant or shopman. I think this is still law under the present Act. In my opinion, B. Prior, who had his own shops and who gave receipts and took cheques in his own registered business name and earned commissions was not a mere servant, but an agent.....It is also contended that even if he were an agent he was acting as such for one principal only, the plaintiff, and the Factor Act acquires a general occupation as agent. This, I think, is erroneous. The contrary was decided under the old Acts in; Hayman v. Flewker, (1863) 32 LJCP 132, and I think the same is the law under the present Act."

5.2 In Possession as Mercantile Agent

In the case; Staffs Motor Guarantee Ltd. v. British Wagon Co. Ltd., (1934) 2 KB 305: (1934) All ER Rep 322, it was held that the mercantile agent should be in possession of the goods and if goods are entrusted to him in any other capacity, he cannot convey a good title.

Here, a dealer who was dealing in used cars, sold his lorry to a company and then immediately took it back from the company under a hire-purchase agreement. He then resold the lorry to another company, which claimed that it had good title to the lorry which he had purchased from a mercantile agent in good faith.

The court refused to sustain this claim. The lorry had been handed back to the dealer not as an agent but as a hirer and therefore, as its bailee. Mackinnon J.,-

Because one happens to trust his goods to a man who is in other respects a mercantile agent but with whom he is dealing, not as a mercantile agent, but in a different capacity. I do not think it is open to a third party who buys the goods from that man to say that they were in his possession as a mercantile agent..........

5.3 With Owner's Consent

The goods should be in the possession of the mercantile agent 'with the consent of the owner'.

As Scrutton LJ. put it; Folkes v. R., (1923) 1 KB 282 (305), this requirement is satisfied when it is shown that the true owner did intentionally deposit in the hands of the mercantile agent the goods in question". When this is the fact then it is redundant that the consent was obtained by fraud or tricks or other methods which render the consent voidable."

5.4 Must sell while acting as Mercantile Agent

The mercantile agent must sell the goods 'when acting in the ordinary course of business of a mercantile agent, Bukley LJ., observed in the case; Oppenheimer v. Attenborough & Son, (1908) 1 KB 221: (1904) All Rep 1016, as-"acting in such a way as a mercantile agent in the ordinary course of business as a mercantile agent would act; that is to say, within business hours, at a proper place of business, and in other respects in the ordinary way in which a mercantile agent would act, so that there is nothing to lead the other party to suppose that anything wrong is being done."

5.5 Good faith and without Notice

It is also necessary that the buyer must act in good faith and should not have notice that the seller has no authority to sell. We can understand it easily with the help of the case; Oppenheimer v. Fraze and Wyatt, (1907) 2 KB 50 CA, where a firm purchased certain goods from a mercantile agent, who within the knowledge of one of the partners, though not of the others, had obtained possession of the goods by larceny by a trick. It was held that the requirement of good faith was not satisfied and, therefore, the firm did not acquire a good title.

In another case; Evan v. Truman, (1963) 2 All ER 547 (550), Lord Tenterden explained the meaning of 'notice' as follows:

"A person may have knowledge of a fact either by direct communication or by being aware of the circumstances which must lead a reasonable man applying his mind to them and judging from them, to the conclusion that the fact is so. Knowledge acquired in either of these ways is enough. To exclude a party from the benefit of this provision of the statute, a slight suspicion will not do."

6. Sale by one of Joint Owners

Section 28 of the Sale of Goods Act speaks about the sale of goods by one of the joint owners. It says as-

"If one of several joint owners of goods has sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell."

In fact, this section in effect reproduces section 108 exception 2 of the Contract Act. In this section the term 'permission' has been used as in the section 108 of the Contract Act and it does not appear that the question has yet arisen whether 'permission' has the same meaning as 'consent' and if not, what the difference is and what its legal effect may be.

7. Sale by Person in Possession under Voidable Contract

Section 29 reads as follows-

"When the seller of goods has obtained possession thereof under a contract voidable under section 19 or section 19A of the Indian Contract Act, 1872, but the contract has not been rescinded 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 seller's defect of title."

We will try to explain this section with the help of some cases under following heads:

7.1 Seller under Voidable Title

Q. What do you mean by sale by person who is in possession of goods under voidable contract?

This section enables a seller to give a better title to buyer than he himself has. Although, he is not in possession of the goods by the free consent of the owner. The seller in possession of goods under a voidable contract may transfer the ownership thereof, he cannot do so after the contract is rescinded by the owner we may study here the case of; Car & Universal Finance Co. v. Caldwell, (1963) 2 All ER 547 (550), which establishes the principles very well-

Facts-Mr. Caldwell, defendant in this case was a resident of Bosham, he owned Jaguar Car, on Saturday 9th January, 1960, he gave a classified in a local newspaper for sale of his car for a price of œ 975. Two persons came to him and approached him to sell his car to them, they gave cash œ 10 and a cheque for remaining amount. Although Mr. Caldwell was reluctant to part with his car but he acceded to their request and gave away his car on 12th January. They also left a Hillman car of much less value. Next day i.e. on 13th January, Caldwell presented the cheque to the Midland Bank Ltd. 114, London Road, Brighton, it was signed as-For and behalf of Dunn's Transport, W Forster, F Norris (names of the duo who had purchased the car). But, the Manager of the Bank declined to honour the cheque, saying that they had a similar previous case and asked Mr. Caldwell to go to the Soreham police. The police showed a photograph of a wanted man in some case and Mr. Caldwell recognized him as one of the duo. The police had a warrant to arrest Rowley (Norris) on 20th January, the car was found when it was being driven by

Mr. Brian Charles Allen, Director, of a motor car dealers-Motobella Co. Ltd. (so-called Norris had sold the car to Motobella Co. Ltd.)

On 29th January, 1960, the defendant's solicitors demanded from Motobella Co. Ltd. to return the car to the defendant but the Motobella contended to have a good title. In the meantime, Rowley alias Norris was arrested who pleaded guilty of obtaining cars by false pretences. The Motobella Co. defended in their pleadings that they had purchased it in good faith and it was theirs.

Trial-When the case came up for trial in 1962, it was not defended by Motobella Co. Ltd. and the defendant got the judgment in his favour. When the defendant sought to take the possession of the car, another company, Car and Universal Finance Company Ltd. claimed that the car belonged to them.

The car seems to have been transferred to a Finance house called G and C Finance Corpn. Ltd by Motobella and in due course, it was further transferred to another finance company Car and Universal Finance Co. Ltd., the plaintiffs.

Issues-Now the question arises-Whether this car belongs to defendant, the original owner or does it belong to the plaintiffs, who have purchased it in good faith and without noticing anything amiss about it?

The car was first obtained from the defendant by fraud by means of a worthless cheque. It was a case of procuring goods by false pretences. When the car passed from Caldwell to Norris and Foster on 12th January, 1960, it was voidable due to fraud. So, it was open to the defendant to avoid it provided that he did so before a third person bought it in good faith and without notice of a defect in the title. The important question here is whether the defendant did succeed in avoiding the sale by presenting the cheque to the Bank and approaching the police before Norris alias Rowley sold it to Motobella Co. Ltd. The plea on behalf of the plaintiffs was put forward by their counsel that a man from whom goods have been obtained by false pretence cannot avoid the transaction unless he does an act which unequivocally shows his election to avoid it and communicate it to the other party of the contract. The avoidance does not takes place until it is communicated. In this case, defendant went to the Bank and approached the police. So the avoidance did not take place. It did not take place until the defendant discovered Norris and Foster and communicated his election to them. Counsel for the plaintiffs conceded that it was avoided till January 29, 1960, but by that time, he said, Motobella Co. Ltd. had sold it to G&C Finance Corp. Ltd., who had acquired a good title:

In support of this supposed requirement of communication, counsel for the plaintiffs referred me particularly to the judgment of Lord Blackburn in; Scarf v. Jardine, (1862) 7 AC 345: 51 LJQB 612, where Lord Blackburn says that a man does not elect to avoid a contract simply because in his own mind he decides to avoid it or even makes a note in his own book about it. An election, he indicated is not completed until he 'has communicated it to the other side in such a way as to lead the opposite party to believe that he has made that choice. Then, he has completed his election and can go no further.'

Counsel for the plaintiffs also referred me to a passage in Benjamin on Sale, which appears in the 2nd Edn., in 1873 by Mr Benjamin, and it is also in the present edition, the 8th Edn., at p 441. It says:

The rescission is the legal consequence of his election to reject it, and takes date from the time at which he announces this election to the opposite party.'

Those passages do seem to support counsel for the plaintiffs' contention that the defendant's acts on the morning of January 13 did not amount to an election to avoid the contract, because they were not communicated to the opposite party. I quite appreciate the force of that argument, but I am afraid that I cannot accept it. In point of principle, it seems to me that a seller can avoid a contract by an unequivocal act of election which demonstrates clearly that he elects to rescind it and no longer to be bound by it. It is sufficient if he asserts his intention to rescind 'in the plainest and most open manner competent to' him. I take those words from the speech of Lord Hatherley LC, in; Reese River Silver Mining Co Ltd v. Smith., (1869) LR WHL 64; 39 LJ Ch 849. Lord Hatherley goes on to give communication as one of the ways in which an election can be demonstrated: but not, I think, in such a way as to make it essential, so as to make it a sine qua non. I would ask this simple question: How is a man in the position of defendant ever to be able to rescind the contract when a fraudulent person absconds as Norris did here? If his right to rescind is to be a real right, when the rogue absconds, it must be sufficient if he does all that he can in the circumstances unequivocally to make it known. It is not sufficient for him, of course, to keep it in his own mind or write down a note in his own private sitting room; but conduct such as we has here, namely, telling the bank, the police and the AA, 'Find this car if you possibly can. Get it back. It is mine', seems to me an unequivocal act of rescission.

If you take comparable cases of election, none of them requires communication as an essential prerequisite. Take forfeiture, which Lord Blackburn took as his guide. If a lessor elects to determine a lease for forfeiture, it is sufficient for him to issue a writ for possession. The forfeiture dates from the issue of the writ, not from the time it is served. Or if the lessor does an act which, if done by a stranger, would be a trespass, it is an entry. The forfeiture dates from the time of the re-entry, even though the lessee is away and does not know anything about it. Next take ratification. Where a person has a right to ratify an unauthorized act made professedly on his behalf by an agent, any unequivocal act of affirmation is sufficient. Again, take repudiation. If a contract is repudiated by a party and the other has a right to elect whether to accept it or not, any unequivocal act clearly evidencing his election is sufficient. Take finally the affirmation of a contract. Counsel for the defendant referred me to; Re Hop and Malt Exchange and Warehouse Co. Ex p Briggs, 1866 R1 Eg 483: 35 LJ Ch 320: 14 LT 39, where it was held that an affirmation by instructing a broker to resell (which was an unequivocal act) was held to be sufficient affirmation even though not communicated.

I hold, therefore, that, where a seller of goods has a right to avoid the contract for fraud, he sufficiently exercises his election if he at once or discovering the fraud, takes all possible steps to regain the goods even though he cannot find the rogue or communicate with him. That is what the defendant did here by going to the police and asking them to get the car back. I, therefore, hold that, on January 13, the contract of sale to these rogues was avoided and the defendant then became the owner of the car again. It was only after he avoided it (so that it was once again his property) that these rogues purported to sell it to Motobella Co Ltd and then Motobella Co Ltd purported to sell it to G & C Finance Corp Ltd. Those sale were ineffective to pass the property because it had already re-vested in the defendant.

7.2 Goods must be Obtained in Pursuance of a Contract

The possession of goods may be procured in pursuance of the contract. If there is a contract of sale of some goods between A and B, but C fraudulently representing to A either that he is authorized by B to take delivery of the goods on B's behalf or that he is entitled to delivery as a sub-purchaser from B, obtains possession of the goods, he acquires and can give no title whatever, for the goods are delivered to him not in pursuance of but despite, the contract.

The difficulty occurs in a particularly acute form in cases in which the whole transaction is carried out between the parties face to face and there is an apparent contract and possession is obtained under it, but the seller thinks that he is dealing with A when in fact he is dealing with B. Lord Haldane has laid down in the case; Lake v. Simmons, (1927) AC 487 (501-02), as follows-

Jurists have laid down, as I think rightly, the test to be applied as to whether there is such a mistake as to the party as is fatal to there being any contract at all, or as to whether there is an intention to contract with a de facto physical individual, which constitutes a contract that may be induced by misrepresentation so as to be voidable but not void. It depends on a distinction to be looked for in what has really happened. Pothier (Traite des obligations, section 19) lays down the principle thus, in a passage adopted by Fry J in; Smith v. Wheatcroft, (1878) 9 Ch D 230 (233). Does error in regard to the person with whom I contract destroy the consent and annul the agreement? I think that this question ought to be decided by a distinction. Whenever the consideration of the person with whom I am willing to contract enters as an element into the contract which I am willing to make, error with regard to the person destroys my consent and consequently annuls the contract. On the contrary, when the consideration of the person with whom I thought I was contracting does not enter at all into the contract, and I should have been equally willing to make the contract with any person whatever as with him with whom I thought I was contracting, the contract ought to stand.' In the careful judgment delivered by him in; Phillips v. Brooks, (1919) 2 KB 243, Horridge J., decided that the alternative view secondly stated by Pothier applied to the case he was dealing with. A fraudulent person had entered a jeweller's shop and looked at and selected certain jewels, which the jeweller was prepared to sell to him individually as a casual customer who had entered his shop. All that remained to be subsequently arranged was payment of the price. The unknown customer, who drew a cheque pretending to be someone else, and signed it in a well-known name, was allowed in exchange for the cheque to take away one of the jewels, of which he disposed of subsequently. Horridge J. found, as a fact, that though the jeweller believed the person to whom he handed the jewel was the person he pretended to be, yet he intended to sell to the person, whoever he was, who came into the shop and paid the price, and that the misrepresentation was only as to payment. There was therefore consensus with the person identified by sight and hearing, although the title to delivery was voidable as having been induced by misrepresentation. In the other type of case referred to by Pothier, where the belief of the contracting seller depends wholly on identity of character or capacity, that is, as Mr. Justice Holmes says at the beginning of the ninth lecture in his book on the common law, no contract, because there is really only one party.

Under this section, the onus is on the person to prove absence of good faith and notice who wants to invalidate the transaction.

8. Seller or Buyer in Possession after Sale

Section 30 speaks about the possession of goods in the hands of sellers or buyer after sale. We can see the provisions of this section as follows-

"1. 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 to any person receiving the same in good faith and without notice of the previous sale shall have 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.

2. 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 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 to 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 effect as if such lien or right did not exist."

8.1 Seller in Possession after Sale [Section 30(1)]

Q. Explain the conditions as mendtioned under section 30(1).

If a seller after selling the goods, still keeps the goods with himself and sells them over again to another person then the buyer gets a good title provided the conditions of section 30(1) are satisfied.

So, the first requirement of the exception is that the seller should continue to be in possession of the goods after having sold them. In the case; Staffs Motor Guarantee Ltd. v. British Wagon Co. Ltd., (1934) 2 KB 305, the owner of a lorry sold it to the defendants and took it back on hire-purchase. Further, he resold it to the plaintiffs. Here, the buyer could not get a good title because the seller was not in possession "as seller" but as a bailee under a hire-purchase agreement.

But, in the case; Pacific Motor Auctions Pvt. Ltd. v. Motor Credits (Hire Finance) Ltd., (1965) 2 All ER 105 (PC): (1965) 2 WLR 881, the Privy Council criticized the theory that the seller should remain in possession "as seller" and not in an altered capacity like "bailee".

The facts of this case were as M. Co. purchased from a motor dealer a number of cars and allowed them to remain in the showroom of the dealer for the purposes of display and sale to customers on hire-purchase. Subsequently M. Co. terminated the dealer's authority to sell. The same day, the dealer sold them to a bona fide buyer. It was held that the buyer had a good title.

Lord Pearce gave his observation as-

"Where a vendor retains uninterrupted physical possession of the goods, why should an unknown agreement, which substitutes a bailment for ownership, disentitle the innocent purchaser to protection from a danger which is just as great as that from which the section is admittedly intended to protect him. There is, therefore the strongest reason for supposing that the words 'continues......in possession' were intended to refer to the continuity of physical possession regardless of any private transaction between the seller and purchaser which might affect the legal title under which the possession was held."

In the case; City Fur Manufacturing Co. v. Fureenbond (Brokers) London Ltd., (1937) 1 All ER 799, A purchased a quantity of skins from a broker. The goods were lying in the broker's house due to delay in payment. A sold them to the plaintiffs who gave A a bill of exchange to enable him to pay the broker and to arrange delivery to the plaintiff. Instead A pledged the goods with the defendant. It was held that the defendant have acquired a good title.

It was further held that the seller should be in personal possession of the goods. It is sufficient that the goods are at his disposal even if they are in the custody of a warehouse keeper.

8.2 Buyer in Possession before Sale [Section 30(2)]

Section 30(2) deals with a condition where a buyer has goods in his possession before the formalities of sale have been completed. In other words we can say that if a person has purchased or has agreed to purchase certain goods of which possession has been given over to him, but the seller still has some lien or right over the goods and in such condition if the buyer resells the goods, the second buyer will get a title free from the seller's right of lien.

Section 30(2)-

'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 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 to 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 effect as if such lien or right did not exist.'

A sale may be made by actual transfer of goods or by transfer of documents of title. As it was observed in the case; Capital and Counties Bank Ltd. v. Warriner, (1896) 12 TLR 216. In another case; Marten v. Whale, (1917) 2 KB 480, the plaintiff agreed to purchase a plot of land from one A in return for a car subject to the condition that his solicitor approved the title to land. A got the possession of the car even before anything was done regarding title of land. A sold the car to the defendant. It was held that the car was in the possession of a person who had agreed to buy it and therefore, the defendant acquired good title.

In the case; Newtons of Wembley Ltd. v. Williams, (1964) 3 All ER 332 CA, A sold a car to B, one of the terms of the sale was that property would not pass until the negotiated amount is paid or cheque honoured. The cheque given by B was dishonoured by the Bank. In the meantime, B sold the car to C in a second-hand car market and C further sold the car to another person. A, first owner had already rescinded the sale, when the cheque was dishonoured. But, it was held that the last buyer have obtained a good title.