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Sales by a Non-Owner

Info: 2142 words (9 pages) Essay
Published: 14th Aug 2019

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Jurisdiction / Tag(s): UK Law

Does the present law relating to sales by a non-owner strike a fair balance between the interests of the original owner of goods and someone who in good faith has bought them from a non-owner who had no authority to sell them?

As argued by Bradgate, it is the essence of the capitalist economy that property should be freely alienable ande circulate within an economy. Disputes of title for immovable property arise comparatively rarely due to the static nature of land as well as the land title being recorded in documentary form. This is not though to say that land titles with regards to immovable property never exist, see for instance CASE, equity’s darling, the bona fide purchaser for value without notice. An inevitable consequence of this ease of alienability in a capitalist society permitting private ownership and trade is the inevitably arising disputes of title. Such disputes are more likely to arise in relation to moveable property as the high volume of dealings in goods as well as the need for alienability of property to be as free as possible means that it is not possible to document the recording of title. In most cases the buyer must take it for granted buy the sellers mere possesion of the goods that he holds title. The tension therefore in the law, as mooted by Denning LJ, is to reconcile the conflicting interests of the seller and the protection of the buyer.

Disputes may arise in a number of ways, for instance if Mr X steals Mr Y’s prized laptop and sells it on ebay to Mr Z (which is then discovered by Mr Y) who should keep the laptop? Another very common example of a dispute of title involves lease cars; If a lease company lease a car to Mr X who, after forging the logbook, sells the car to Mr A who is then entitled to keep the car? Conflicts may equally arise in the instance of a pawn shop for instance, where Mr A, in need of money, gives a violin (stolen) from Mr B to the pawnbroker, Mr C, as security for a loan.

In each of the above cases therefore there exists existing claims to title from a number of innocent parties who theoretically, pursuant to section 12 of the Sale of Goods Act 1979, may claim against the immediate seller for the price paid for the good and damages. In reality, taking into account the seller may often be an insolvent trader, or someone even more dubious such as a fraudster or a thief who has no doubt vanished it is unlikely that the price paid, let alone damages may be retrieved from the seller. When the purchase price cannot be retrieved from the immediate seller this means that in the end one party must always be the loser, the person who it was stolen from, the trader who honestly purchased the good or even an innocent consumer. It has been suggested, notably by Lord Denning in Ingram v Little, that any loss incurred should be equally divided between all the innocent parties, taking into account any fault or misprudence of either of the parties.

Who should keep the goods where a dispute of title arises is guaranteed by the common law concept of nemo dat quod non habet (no one [can] give what one does not have)as contained in section 21(1) of the Sale of Goods Act 1979 which states “subject to this Act, where goods are sold by a person who is not their owner, 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”. Section 21(1) therefore by implication includes a number of exceptions to the nemo dat quod non habet rule, namely those of agency (where the seller is acting in a procurist capacity or on the consent of the owner) and in such cases where the owner of the goods, by his conduct is precluded from denying the sellers authority to sell (estopell)

The first exception to the rule, which comes in a number of varieties, is to be found in the last sentence of section 21(1) ‘unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell’. The common law rule of estoppel, as embodied in both the 1893 and 1979 Sale of Goods Acts holds that where goods are sold by a person (without title) but the owner is by his conduct unable to deny the seller’s authority to sell, the effect is to transfer a real title to the buyer, rendering the owner unable to retrieve the goods from a bona fide purchaser for value without notice.

Estoppel arises where the owner of a good is, by virtue of his conduct precluded from denying the sellers authority to sell, for instance the owner of the good will be estopped in the case that he gives the impression that the seller is his agent with apparaent authority to sell the good meaning the buyer will receive good title to the good. Such a case was for instance Eastern Distributors Ltd v Goldring. The claimant wished to purchase a Chrysler car from a car dealer but was unable to pay the deposit. The dealer then offered to buy the claimant’s Bedford van with the idea that both cars would then be sold back to the plaintiff on hire purchase terms. The claimant then foolishly signed the hire purchase agreemrnt form in blank and forwarded the forms to the dealer who subsequently rejected the proposal in respect of the Chrysler but accepted the deal on the Bedford van in any case (which has remained in his posession), notwithstanding the fact that he could only deal with the Bedford in conjunction with the purchase of the Chrysler. The dealer subsequently sold the Bedford. It was held that the claimant’s signing of the hire purhcase form in blank had the effect of estopping him from denying the dealer’s right to sell the van and therefore he was estopped from forcing the return of his van.

In Shaw and Another v Metropolitan Police Commissioner the claimant, wishing to sell his car, permitted a dealer who promised to sell the car to hold possession. The owner furthermore gave the dealer a transfer notifacation form signed in blank. The claimant had clearly made a representation to the dealer that he should sell the car and therefore would have been estopped from claiming return of the car under section 21 or 25 of the Sale of Goods Act 1979 had the contract between the owner and the dealer not stated that title was only to pass at such time as the car was sold, thus rendering the contract a contract to sell the car as opposed to a contract of sale.

Another form of estoppel is estoppel by negligence which may arise in such a circumstance as where the owner negligntly fails to disclose information to the buyer (in such case as he owes a duty of care), ergo, impliedly representing that the seller posesses the right to sell the goods. Case law therefore establishes that a person who has been careless with one of their possessions to the point of recklessness and leaves it unattended my recover it even from someone having purchased it in good faith.

In Central Newbury Car Auctions for instance the seller purchased a car by means of hire purchase from the owner. The owner subsequently allowed the seller to drive away with the car (including the log book) before the HP agreement was finalised. The log book crucuially stated that the person named did not necessarily hold title to the car. The court held that by entrusting the car to the seller, together with a document which clearly stated that it did not prove legal ownership, the owners made no representation entitling the seller to deal with the car as his own therefore estopping them from asserting title. The decision in Central Newbury car auctions clearly goes against all sense of reason and meant, due to the car’s owner’s gross negligence that the buyer was left out of pocket.

As per the rules of Tort law negligence in order for there to be estoppel by negligence there first needs to be a duty of care. In Moorgate Mercantile a car dealer (who was a member of the central register in which 98% of all HP (hire purchase) agreements were recorded) was offered a car for sale by M. The dealer undertook a search of the central register and , having found it was not registered as being the subject of a HP agreement, brought the car. In fact the car was the subject of

a HP agreement but the finance company involved had failed to register the agreement. Subsequently, when M defaulted on HP installments, the finance company brought an action against the dealer for damages for conversion. The dealer, in his defence, claimed that the finance company, by failing to have registered the HP agreement with the central register, were estopped from claiming damages for conversion and that they were guilty of negligence in their failure to register the agreement. The House of Lords held, even though both the dealer and the finance company were members of the central register the dealer owed the finance company no duty of care meaning the finance company was estopped. A duty of care to avoid economic loss by negligence will only be imposed where there has been an assumption of responsibility by the defendant sauch as to create a special relationship between himself and the claimant. The Moorgate decision therefore signals that the law gives owners, reckless beyond measure with their property, a green light to inflict harmful conduct upon others.

A major exception to the nemo dat quod non habet rule is the role played by agents. Section 22(1)(a) of the Sale of Goods Act specifically makes clear that, as per common law rules, persons buying goods from the owner’s agent will receive good title to the good providing the transaction was within the agents acutal or apparent authority. An agent will often be classified as a Mercantile agent, able to bind his principal by disposition of the principles property pursuant to the the Factors Act 1889 (expressly retained by S.21(2)(a)the Sale of Goods Act 1979). A person dealing with a factor will more often then not therefore be unaware that he is infact dealing with a Mercantile agent and not the owner of the goods.

2) Special Powers s.21(2)(b)

  • Sale under a voidable title ” s.23
  • Mercantile Agency- s.21(2)(a) Factors Act, 1889, ss. 1, 2(1), (2) and (4) See cases: Lowther v. Harris [1972] 1 K.B. 275 (CA) “

Staffs Motor Guarantee Ltd v. British Wagon Co. Ltd [1934] 2 K.B. 305 (KBD)

Pearson v. Rose & Young, Ltd. [1951] 1 K.B. 275 (CA) ”

Oppenheimer v. Attenborough [1908] 1 K.B. 221 (CA) ”

Stadium Finance v. Robbins [1962] 2 Q.B. 664 (CA) ”

National Employers Mutual General Insurance Assoc Ltd. v. Jones [1988] 2 All E.R. 425 (HL)

  • (6) Buyer or seller in possession after sale Ss. 24, 25, 26 Factors Act, 1889, s. 8, 9
  • (i) Difference between ss. 24 and 25 and the Factors Act 1889, ss. 8 and 9? Newtons of Wembley, Ltd. v. Williams [1965] 1 Q.B. 560 (CA)
  • (ii) “continues or is in possession” – s. 24? Eastern Distributors, Ltd. v. Goldring [1957] 2 Q.B. 600 (CA) Staffs Motor Guarantee Ltd v. British Wagon Co. Ltd. [1934] 2 K.B. 305 (KBD) Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [1965] A.C. 867 (PC) “「 Worcester Works Finance Ltd. v. Cooden Engineering Ltd. [1972] 1 Q.B. 210 (CA)
  • (iii) “delivery or transfer” – ss. 24 and 25? Nicholson v. Harper [1895] 2 Ch. 415 “「 Forsythe International(U.K.) Ltd. v. Silverglobe Shipping Co. Ltd. and Petroglobe International Ltd., The Saetta [1993] 2 Lloyd’s Rep. 268 (Q.B.D.) Michael Gerson (Leasing) Ltd. v. Wilkinson [2001] Q.B. 514
  • (iv) “bought or agreed to buy” – s. 25? Lee v. Butler [1893] 2 Q.B. 318 (CA) McEntire v. Crossley Bros. [1895] A.C. 457 (HL) “「 Helby v. Matthews [1895] A.C. 471 (HL) Shaw v. Commissioner of Police of the Metropolis (Natalegawa, claimant) [1987] 1 W.L.R. 1332; [1987] 3 All E.R. 405 (CA) (v) Consent of the seller “「 Dujardin v. Beadman Bros. Ltd. [1952] 2 Q.B. 712 (QBD) Newtons of Wembley, Ltd. v. Williams [1965] 1 Q.B. 560 (CA) Four Point Garage, Ltd. v. Carter [1985] 3 All E.R. 12 (QBD)
  • (vi) Possession of the buyer Four Point Garage, Ltd. v. Carter [1985] 3 All E.R. 12 (QBD)
  • (vii) Who is “the owner”in s. 25? National Employers Mutual General Insurance Assoc. Ltd. v. Jones [1988] 2 W.L.R. 952; [1988] 2 All E.R. 425 (HL)

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