SALES OF GOODS

By :
AZNUR IQLIL HANNAH BINTI AZNAN
(2023858634)

GROUP :
NBH2F

For :
Ms. NORLIYANA ABDUL MANAF

BUSINESS LAW / LAW416

Question:
“Section 27 of the Sale of Goods Act 1957 provides that “... where goods are sold by a
person who is not the owner, the buyer acquires no better title to the goods than the
seller had ...”
Explain the above provision and its exceptions..” (20 marks)

SOGA 1957 is widely known as the Sales of Goods Act, and it is a large-scale legislation
system that exists in different countries with some variations. However, its major function is
to control the flow of goods in the marketplace for the benefit of the small trader with the
view of protecting the small trader and buyer from the exploitative tendencies of the large
trader.
Firstly, Section 27 of the Sale of Goods Act 1957 deals with nemo dat quod non habet (also
known as the nemo dat rule), meaning no one passes a better title than the holder possesses.
This section applies where goods are sold by a person who is not the owner of the particular
goods.
Under the provision of Section 27 and as pursuant to the nemo dat rule, any purchase of good
made from someone who has no ownership right to the good also denies the buyer of any
ownership title to such good. This is based on the argument that one cannot transfer to
another more rights than they have. The provision of Section 27 helps to protect the right of
ownership to the title of any stolen or lost goods.
There are however some exceptions to the provision of Section 27 discussed above as well as
the nemo dat rule. Where a sale of goods falls under an exception to the above provision and
rule, the true owner of the goods loses the title, and the innocent third party who purchases
the goods owned the title. The exceptions to the provision of Section 27 and nemo dat rule
which are

• Estoppel
• Sale by merchantile agent
• Sale by one of joint owners
• Sale under a voidable after sell
• Sale by a buyer in possesion
Estoppel
The owner of a good can appoint a person to hold his goods for various reasons. In this
situation, if the person who holds the goods sells the goods to a buyer in front of the owner
and the owner shows his consent to sell by his conduct, the title to the goods will be
transferred and the buyer is considered to have achieved a good title under the law.
This exception is provided under the last sentence in Section 27 “…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 SOGA 1957 holds that where goods are sold by
a person (without title). Still, 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.

Eastern Distributors v Goldring (1957) 2 QB 600

Fact : Murphy, the owner of a van, allowed another, a car salesman to represent to the
Plaintiff (hire purchase company) that he (the salesman) was the owner and could sell the
vehicle.
Plaintiff relied to the representation to purchase the van from salesman. Meanwhile, owner
sold the van to the Defendant. Plaintiff claimed to reposses the vehicle
Held : Plaintiff has a good title to the van as Murphy has permitted the salesman to act as the
owner and was therefore, estopped from denying the seller’s authority to sell.
Sale by mercantile agent
The second part of Section 27 of SOGA 1957 provides that if goods or the documents of the
goods are in the possession of a mercantile agent with the consent of the true owner, and if
the agent sells those goods when acting in the ordinary course of business, the sale will be
valid.
The transaction however must be made with a bona fide buyer who purchases the goods in
good faith and without noticing that the agent has no authority to sell the goods. SOGA 1957
defined a mercantile agent as an agent having in the course of business as such agent
authority to sell goods, or to consign goods for purposes of sale, or to buy goods, or to raise
money on the security of goods.

Folkes v King
Folkes entrusted his car to A, a mercantile agent, for sale with a minimum price requirement
of £575. A subsequently sold the car to King for £340, who bought it in good faith and
without knowledge of any restrictions. Later, A disappeared with the proceeds.Folkes then
claimed against the Kin.
Held : Since all the requirement are satisfied, the king gets a good life.
Sale by one of joint owners
More than one person may be the joint owner of the same goods. In the case where one of the
owners who holds possession of the goods decides to sell it to a buyer without prior consent
of the owner joint owners, the title of the goods will be transferred and the buyer will acquire
good title to the goods. This exception is provided under the provision of Section 28 of
SOGA 1957 which provides that “if one of several joint owners of goods has the 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”.
For example, in the event where Bakar, Badrul, and Bakri bought a lorry jointly, they became
the co-owners of the lorry. Bakar was given the responsibility to look after the lorry and have
possession of the lorry. If Bakar sells the lorry to Haikal without the consent of both Badrul
and Bakri, the title of the lorry will be transferred to Haikal and Haikal will be the new owner
of the lorry provided that Haikal has acted in good faith and is the bona fide buyer who does
not notice that Bakar has no authority to sell the lorry
Sale under voidable title
For any sale of goods, a contract between the seller and the buyer represents an
essential element in establishing such a sale. The contract of sale can be categorized
into three types under the law which are valid, void, and voidable contracts. If the
contract of sale is caused by coercion, fraud, misrepresentation, or undue influence, it
will be treated as voidable contract and it may be rescinded by the victim. Any title
which has been acquired by a voidable contract will be voidable and it may be canceled
by the injured party. Although the title may be cancelled it may further be transferred
if the goods are sold before cancellation of the contract. This is provided under the
provision of Section 29 of SOGA 1957 which states that “where the seller of goods
has obtained possession thereof under a contract voidable under section 19 or 20 of
the Contracts Act 1950, 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”.

The issue of sale under a voidable contract was raised in the case of Car and
Universal Finance Co Ltd v Caldwell. In this case, the seller Caldwell sold his car to
Norris and received a cheque as part payment. The cheque was dishonored when it
was presented to the bank the day after the sale was made. He immediately
informed the police and the Automobile Association of the fraudulent transaction and
requested for tracing the car. Three days after the sale was made, Norris sold the car to
a third party. Then the third party sold it to the fourth party, who sold it to fifth party, who
sold it to the plaintiff, Car and Universal Finance Co Ltd.

In this case, one of the issues to be tried was whether the defendant's conduct and
representations amounted to a rescission of the contract of sale. It was held that the contract
was voidable because of the fraudulent misrepresentation of Norris and the owner, Caldwell,
had done everything he could in the circumstances to avoid the contract. It had been
avoided before the sale to the third party and therefore, no title was transferred to
them and the owner could reclaim the car
Disposition by seller in possession after sale

The fifth exception to the nemo dat rule is disposition by seller in possession after
sale. Dispossession by a seller in possession after sale may arise under two
circumstances:

i. where a seller holds the possession of the sold goods and then, deliberately
sells them on to another person or;
ii. where a seller receives back the possession of the sold goods for some
purposes such as repair, and then sells them on to another person

This exception is addressed under Section 30(1) of the SOGA 1957 which provides
that in the event where a person who has previously sold a goods but continues to be
in possession of the goods or the documents of title to the goods after the sale,
proceeded to sell the goods to a third party who purchased the goods in good faith and
without notice of the previous sale, the sale of goods to the third party shall have the
same effect as if the person making the sale were expressly authorized by the owner
of the goods to make the same. Where this section is applied and the second buyer
acts in good faith and has no knowledge of the previous sale of the goods, he will
receive a full title of the goods and the first buyer’s title will be extinguished.
Disposition by buyer in possession after sale

When a buyer agrees to buy goods with the seller and takes possession of the goods or
the papers of title with the consent of the seller, he may transfer a good title to a third
buyer acting in good faith. In this circumstance, if the buyer in the first transaction
does not acquire a good title, he may pass a good title to a third owner. This is
pursuant to the provision of Section 30(2) of the SOGA 1957 which provided that
“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”.
For this exception to be established, the first buyer must be in possession of
the goods or papers of title to the goods at the time of the sale to the second buyer.
While it is noted that the consent of the seller for the possession of the goods taken by
the first buyer which may be obtained by fraud or other vitiating factors, but such
vitiating factor will not vitiate the consent and the removal of the consent will have no
effect on the second buyer unless he in fact knows about it