Passing of Property, Nemo Dat & the Unpaid Seller — Contract II (Special Contracts) Notes

Transfer of Title by a Non-owner (Nemo Dat)

A thief cannot make you the owner of a stolen watch — he had no title to give. That is the ancient rule nemo dat quod non habet. But commerce needs innocent buyers to be safe, so the Act carves out several situations where even a non-owner can pass a good title to a bona fide buyer. Those exceptions are the whole question.

What is the nemo dat rule?

The general rule (s.27): no one can give a better title than he himself has — nemo dat quod non habet [no one gives what he does not have]. If the seller has no title (or a defective one), the buyer generally gets none, however honest and however much he paid. This protects the true owner.

But the Act balances this against protecting the innocent buyer with exceptions — where a non-owner can pass a good title:

Sale by a mercantile agent (s.27 proviso). A mercantile agent, in possession of goods/documents of title with the owner’s consent, selling in the ordinary course of business, passes a good title to a bona fide buyer without notice.
Sale by one of several joint owners (s.28). Where one of several joint owners has sole possession by permission of the others, a bona fide buyer without notice gets a good title.
Sale under a voidable title (s.29). Where the seller has a voidable title (e.g. obtained by fraud) that has not been rescinded at the time of sale, a buyer who buys in good faith and without notice gets a good title.
Seller in possession after sale (s.30(1)). A seller who continues in possession after selling can pass a good title by a second sale/pledge to a bona fide buyer without notice.
Buyer in possession before property passes (s.30(2)). A buyer who obtains possession with the seller’s consent can pass a good title to a bona fide sub-buyer without notice.
Estoppel (s.27). Where the true owner by his conduct is precluded (estopped) from denying the seller’s authority to sell.
Sale by an unpaid seller (s.54) exercising the right of resale, and sales under statutory powers (pawnee, finder, etc.).

🧩 WORKED EXAMPLE — sale under a voidable title

Facts. A obtains a car from B by fraud (a voidable contract). Before B rescinds, A sells the car to C, who buys in good faith for value and without notice of the fraud. B then discovers the fraud and claims the car from C.

Rule. Under s.29, where the seller has a voidable title not yet rescinded, a good-faith buyer without notice gets a good title.

Apply. A’s title was voidable (not void), B had not rescinded before the sale, and C bought bona fide without notice.

Conclusion. C gets a good title; B cannot recover the car from C. Contrast: if A had obtained the car by a void contract or by theft, C would get no title.

Section 27, Sale of Goods Act 1930: “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 …”

In Simple Terms: Normally a non-owner cannot pass ownership (nemo dat). But the Act protects innocent buyers in special cases — mercantile agents (s.27), joint owners in sole possession (s.28), voidable-title sellers not yet rescinded (s.29), and sellers/buyers in possession (s.30) — where a good-faith buyer without notice gets a good title.

flowchart TD
    A["Nemo dat s.27<br/>(no better title than seller)"]
    A --> B["Exceptions - good title passes"]
    B --> C["Mercantile agent s.27"]
    B --> D["Joint owner in sole possession s.28"]
    B --> E["Voidable title not rescinded s.29"]
    B --> F["Seller/buyer in possession s.30"]
    B --> G["Estoppel"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D,E,F,G box;

Case Laws

Cundy v. Lindsay (1878) — where the contract is void (mistake as to identity), no title passes even to a bona fide buyer (contrast voidable).
Phillips v. Brooks (1919) — a voidable title (fraud) not yet rescinded passes a good title to a bona fide buyer (s.29).
Folkes v. King (1923) — a mercantile agent in possession can pass a good title within the s.27 exception.

Passing of Property; Sale or Return; Perishing

“When did it become mine?” is the single most important question in the Sale of Goods Act, because ownership drags risk along with it (s.26). If the rice burns before it became yours, the seller bears the loss; after, you do. The Act lays down clear timing rules.

When does property pass?

The governing principle (s.19): property passes when the parties intend it to pass, gathered from the terms, conduct and circumstances. Where intention is not clear, the Act supplies rules.

Specific/ascertained goods (ss.20–22):

s.20 — in an unconditional contract for specific goods in a deliverable state, property passes when the contract is made, regardless of the time of payment or delivery.
s.21 — if the seller must do something to put the goods in a deliverable state, property passes only when that is done and the buyer has notice.
s.22 — if the seller must weigh, measure or test the specific goods to ascertain the price, property passes only when that is done and the buyer has notice.

Unascertained/future goods (s.23): property passes only when goods answering the description and in a deliverable state are unconditionally appropriated to the contract (by one party with the other’s assent). Delivery to a carrier is such appropriation (s.23(2)).

Sale or return (s.24): where goods are delivered “on sale or return” (or on approval), property passes to the buyer when he:

signifies approval or acceptance; or
does any act adopting the transaction (e.g. pledges or resells the goods); or
retains the goods beyond the fixed time (or a reasonable time) without notice of rejection.

Perishing of goods (ss.6–8):

s.6 — where specific goods have, without the seller’s knowledge, perished at the time the contract is made, the contract is void.
s.7 — in an agreement to sell specific goods, if the goods perish before the risk passes without fault, the agreement is avoided.
s.8 — where goods perish after the agreement but before property/risk passes, the agreement is avoided.

🧩 WORKED EXAMPLE — goods on sale or return, then pledged

Facts. S delivers a ring to R “on sale or return”. Before approving or rejecting, R pledges the ring to a pawnbroker for a loan. S seeks to recover the ring from the pawnbroker.

Rule. Under s.24, property passes to the buyer when he does any act adopting the transaction; pledging the goods is such an act.

Apply. R pledged the ring — an act adopting the transaction — so property passed to R, and R could give a good title/pledge.

Conclusion. Property had passed to R; S cannot recover the ring from the pawnbroker (S’s remedy is against R for the price).

Section 24, Sale of Goods Act 1930: “When goods are delivered to the buyer on approval or ‘on sale or return’ … the property therein passes to the buyer — (a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (b) if he does not signify his approval … but retains the goods without giving notice of rejection … on the expiration of [the fixed or a reasonable] time.”

In Simple Terms: Property passes when the parties intend; failing that, for specific goods in a deliverable state it passes at the contract (s.20); for unascertained goods, on unconditional appropriation (s.23). On “sale or return”, it passes when the buyer approves, adopts the deal (e.g. pledges), or keeps the goods too long (s.24). If specific goods have already perished, the contract is void (s.6).

flowchart TD
    A["Passing of property s.19<br/>(intention)"]
    A --> B["Specific goods: s.20 (deliverable),<br/>s.21 (put in state), s.22 (weigh/measure)"]
    A --> C["Unascertained: appropriation s.23"]
    A --> D["Sale or return s.24:<br/>approve / adopt / retain too long"]
    A --> E["Perishing: void s.6 / avoided s.7-8"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D,E box;

Case Laws

Kirkham v. Attenborough (1897) — pledging goods held “on sale or return” is an act adopting the transaction; property passes (s.24).
Badische Anilin v. Basle Chemical Works (1898) — appropriation and delivery to a carrier passes property in unascertained goods (s.23).

Rights of an Unpaid Seller

A seller who has parted with goods but not been paid is in a dangerous spot — especially if the buyer goes insolvent. The Act arms him with a ladder of self-help remedies over the goods themselves — hold them, stop them in transit, resell them — plus personal claims against the buyer.

Who is an unpaid seller, and what are his rights?

Who is an unpaid seller (s.45). A seller is “unpaid” when (a) the whole of the price has not been paid or tendered, or (b) a bill of exchange or other negotiable instrument was received as conditional payment and the condition has not been fulfilled (e.g. the cheque is dishonoured). “Seller” includes an agent of the seller in that position.

Rights against the goods (even though property has passed to the buyer):

Right of lien (ss.47–49). To retain possession of the goods until payment, where he is in possession — available where the goods were sold without stipulation as to credit, or the credit term has expired, or the buyer is insolvent. The lien is lost by delivery to a carrier without reserving disposal, by the buyer/his agent lawfully obtaining possession, or by waiver (s.49).
Right of stoppage in transit (ss.50–52). Where the buyer becomes insolvent, to resume possession of goods that are in transit (out of the seller’s hands but not yet with the buyer), and retain them until paid (Topic 8).
Right of resale (s.54). To resell the goods (a) where they are perishable, or (b) where the seller gives notice of his intention to resell and the buyer does not pay within a reasonable time. On such resale the seller may recover damages for any loss, and keep any profit; a resale (even without a reserved right) passes a good title to the new buyer.

Rights against the buyer personally:

Suit for the price (s.55). Where property has passed and the buyer wrongfully neglects/refuses to pay, the seller may sue for the price.
Suit for damages for non-acceptance (s.56). Where the buyer wrongfully refuses to accept and pay, the seller may sue for damages.
Repudiation before due date (s.60) and interest (s.61).

🧩 WORKED EXAMPLE — unpaid seller’s ladder of rights

Facts. S sells goods to B on credit and delivers them to a railway carrier for carriage to B. Before the goods reach B, B becomes insolvent and has paid nothing.

Rule. An unpaid seller (s.45) whose buyer is insolvent may stop the goods in transit (s.50) and resume possession until paid; if lien/stoppage applies he may resell (s.54).

Apply. S is unpaid, B is insolvent, and the goods are still in transit (with the carrier, not yet with B).

Conclusion. S may exercise stoppage in transit, retake the goods, and (on notice) resell them, recovering damages for any loss.

Section 45(1), Sale of Goods Act 1930: “The seller of goods is deemed to be an ‘unpaid seller’ … (a) when the whole of the price has not been paid or tendered; (b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.”

In Simple Terms: An unpaid seller is one not fully paid (or whose cheque bounced). Against the goods he has a lien (hold them, ss.47–49), stoppage in transit if the buyer is insolvent (ss.50–52), and resale (s.54). Against the buyer he can sue for the price (s.55) or for damages (s.56).

flowchart TD
    A["Unpaid seller s.45"]
    A --> B["Against the goods"]
    B --> B1["Lien ss.47-49"]
    B --> B2["Stoppage in transit ss.50-52"]
    B --> B3["Resale s.54"]
    A --> C["Against the buyer"]
    C --> C1["Suit for price s.55"]
    C --> C2["Damages for non-acceptance s.56"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,B1,B2,B3,C1,C2 box;

Case Laws

Bloxam v. Sanders (1825) — an unpaid seller in possession may retain the goods until paid (basis of the seller’s lien).
Miles v. Gorton (1834) — the unpaid seller’s lien continues while he keeps possession, even after property has passed to the buyer.

Stoppage in Transit

The goods have left the seller’s warehouse but not yet reached the buyer — they are “in the air”, in the carrier’s hands. If the buyer goes insolvent at exactly this moment, the seller has one last chance to grab the goods back before they vanish into the insolvent’s estate. That is stoppage in transit.

What is the right of stoppage in transit?

Stoppage in transit is the unpaid seller’s right, when the buyer becomes insolvent, to resume possession of the goods while they are in transit, and to retain them until the price is paid or tendered (s.50).

Conditions for exercise:

the seller must be unpaid (s.45);
the buyer must be insolvent (unable to pay debts as they fall due — s.2(8));
the goods must be in transit — i.e. out of the seller’s possession but not yet in the buyer’s (s.51).

When transit ends (s.51) — the right is lost when:

the buyer or his agent takes delivery before the destination;
the goods reach the destination and the carrier acknowledges to the buyer that he holds them for the buyer;
the carrier wrongfully refuses to deliver to the buyer.

How it is exercised (s.52): by the seller taking actual possession of the goods, or by giving notice of his claim to the carrier or bailee in possession, who must then redeliver to (or per the directions of) the seller (the seller bearing the expenses).

Note: stoppage in transit only suspends delivery until payment; it does not by itself rescind the sale (s.53). A sub-sale by the buyer does not defeat the right unless the seller assented, or a document of title has been transferred to a bona fide transferee for value.

🧩 WORKED EXAMPLE — stopping goods in transit

Facts. S despatches goods by carrier to B, unpaid. While the goods are still with the carrier, B is adjudged insolvent. S telegraphs the carrier claiming the goods.

Rule. Under ss.50–52, an unpaid seller may, on the buyer’s insolvency, stop goods in transit by notice to the carrier, who must then hold/redeliver them to the seller.

Apply. S is unpaid, B is insolvent, the goods are still in transit, and S gave notice to the carrier.

Conclusion. The carrier must redeliver the goods to S; S may retain them until paid.

Section 50, Sale of Goods Act 1930: “Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price.”

In Simple Terms: If the buyer becomes insolvent while the goods are still travelling (with the carrier, not yet delivered), the unpaid seller can stop them and take them back until he is paid — by seizing them or giving notice to the carrier. The right ends once the buyer gets delivery.

flowchart TD
    A["Stoppage in transit s.50"]
    A --> B["Conditions"]
    B --> B1["Seller unpaid"]
    B --> B2["Buyer insolvent"]
    B --> B3["Goods in transit"]
    A --> C["Ends s.51: buyer takes delivery /<br/>carrier acknowledges for buyer"]
    A --> D["Exercise s.52: possession or notice"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D,B1,B2,B3 box;

Case Laws

Booth Steamship Co. v. Cargo Fleet Iron Co. (1916) — the transit continues until the goods reach the buyer or his agent; stoppage is available meanwhile.
Schotsmans v. Lancashire & Yorkshire Rly (1867) — transit ends when the buyer takes possession; the right is then lost.

Delivery, Performance and Remedies for Breach

A contract of sale is only half done at the promise — the goods must be delivered and accepted. Two everyday disputes dominate the exam: what happens when the seller sends the wrong quantity (too much), and what happens when the buyer sits on his hands and lets the goods spoil. The answers are in the delivery and performance rules.

What are the rules of delivery, performance and remedies?

Duties of seller and buyer (s.31). It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the contract. Delivery and payment are concurrent conditions (s.32) unless otherwise agreed.

Delivery of the wrong quantity (s.37):

Short delivery (s.37(1)): if the seller delivers less than contracted, the buyer may reject; if he accepts, he pays at the contract rate.
Excess delivery (s.37(2)): if the seller delivers more than contracted, the buyer may (a) accept the contract quantity and reject the rest, or (b) reject the whole; if he accepts the whole, he pays at the contract rate. He is not bound to accept the excess.
Mixed goods (s.37(3)): if the seller delivers the contracted goods mixed with goods of a different description, the buyer may accept the conforming goods and reject the rest, or reject the whole.

Buyer’s duty to take delivery (s.44). When the seller is ready and willing to deliver and requests the buyer to take delivery, and the buyer does not within a reasonable time take delivery, the buyer is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and for a reasonable charge for the care and custody of the goods.

Acceptance (s.42). The buyer is deemed to have accepted the goods when he intimates acceptance, or does an act inconsistent with the seller’s ownership, or retains the goods beyond a reasonable time without rejecting.

Auction sale (s.64): each lot is prima facie a separate contract; the sale is complete on the fall of the hammer; the seller may notify a reserve price; and the seller may reserve a right to bid but secret bidding by or for the seller (puffing), where not notified, makes the sale voidable at the buyer’s option.

Remedies for breach:

Seller’s remedies: suit for price (s.55), damages for non-acceptance (s.56).
Buyer’s remedies: damages for non-delivery (s.57); specific performance for specific/ascertained goods (s.58); remedy for breach of warranty (s.59); damages for anticipatory breach (s.60); interest (s.61).

🧩 WORKED EXAMPLE — excess delivery

Facts. S agrees to supply 100 barrels of groundnut oil to B but despatches 120 barrels. B refuses to take any, saying S has supplied in excess. Advise S.

Rule. Under s.37(2), on excess delivery the buyer may accept the contract quantity and reject the rest, or reject the whole; he is not bound to accept the excess.

Apply. S sent 20 barrels more than the contract; B is within his rights to reject the excess, and may even reject the whole consignment.

Conclusion. B is entitled to reject; S should have delivered exactly 100. S’s remedy is to re-tender the correct quantity, not to force the excess on B.

🧩 WORKED EXAMPLE — buyer delaying delivery

Facts. B agrees to take 20 tons of apple juice on a fixed date. S readies the juice and asks B to take delivery, but B delays; the juice becomes putrid.

Rule. Under s.44, a buyer who neglects to take delivery within a reasonable time is liable for loss caused by his neglect and for reasonable custody charges.

Apply. S was ready and willing; B’s delay caused the spoilage.

Conclusion. B is liable to S for the loss (and custody charges); the loss falls on B.

Section 37(2), Sale of Goods Act 1930: “Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate.”

In Simple Terms: The seller must deliver and the buyer must accept and pay (s.31). On excess delivery the buyer may reject the extra or the whole (s.37) — he need not accept more than he ordered. If the buyer delays taking delivery and the goods spoil, the loss is his (s.44). Auction sales complete on the fall of the hammer (s.64), and each side has statutory remedies (ss.55–61) on breach.

flowchart TD
    A["Delivery & performance"]
    A --> B["Seller delivers, buyer accepts s.31-32"]
    A --> C["Wrong quantity s.37<br/>(excess: reject extra or whole)"]
    A --> D["Buyer's duty to take delivery s.44"]
    A --> E["Auction sale s.64<br/>(fall of hammer)"]
    A --> F["Remedies ss.55-61"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D,E,F box;

Case Laws

Behrend & Co. v. Produce Brokers Co. (1920) — delivery of the wrong quantity; the buyer’s right to accept the contract quantity and reject the rest (s.37).
Demby Hamilton v. Barden (1949) — where the buyer’s delay in taking delivery causes the goods to deteriorate, the risk/loss falls on the buyer (s.26 proviso; s.44 duty to take delivery).

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