Nemo dat rule - Lecture notes 6 PDF

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Week 6 Common law rule: Nemo Dat:  No one can give a better title than they themselves possess  A seller without title or authority to sell can only give possession.  Primary rule on nemo dat is in section 27 Goods Act: Exceptions to Nemo Dat to protect innocent third parties Goods Act s 27:  ...where goods are sold by a person who is not the owner and who does not sell them under 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.  Conflicting right of true owner and purchaser – right of ownership vs parties entering contract in good faith  The buyer must have acted in good faith and without notice, that is: 1. Did the buyer know or have clear notice of the defect in the title? Exceptions to nemo dat: 1. Precluding conduct (estoppel) (s 27) 2. Sale by mercantile agent (s 67) 3. Sale by person having voidable title (s 29) 4. Sale by seller or buyer in possession (ss 30 & 31) Burden of proof for exception of nemo dat – on person making the property claim against the true owner. Exception 1 – Precluding Conduct (s 27):  Owner's precluding conduct  Applies when the true owner has by conduct expressly or impliedly represented that the seller: 1. Is the true owner; or 2. Has authority to sell (like ostensible authority in agency)  Circumstances giving rise to estoppel – Traves p.260  Estoppel may arise in one of two ways: first, by reason of a representation by the true owner that the seller is the true owner or has authority to sell the goods on the owner’s behalf; or second, by negligence on the part of the true owner, which permits the seller to create an appearance of ownership. Estoppel by negligence – entrusting another with possession of goods or documents of title is not per se evidence of authority to sell and does not of itself preclude the true owner from asserting title against a bona fide purchaser. S 27 exception will apply if owner:  By negligence, shows precluding conduct.  A representation of authority to sell goods is made by a seller who is not the

true owner to a buyer, and the true owner owes a duty of care to the buyer, or to a class of persons which includes the buyer; and the true owner; or  Negligently fails to correct misrepresentation; or  negligently creates the means by which the seller was able to make the misrepresentation Exception to nemo dat – Mercantile Agent S 65 – A mercantile agent is an agent who has, in the customary course of his business, authority to either: 1. sell goods; or 2. consign goods for the purpose of sale; or 3. buy goods; or 4. raise money on the security of goods or documents of title  For this exception to apply, mercantile agent must have acted in the same manner as a mercantile agent would have acted had he or she been authorised. S 67: When a mercantile agent is:  entrusted as such with the possession of any goods or the documents of title to any goods;  any sale pledge or other disposition of the goods made by him in the ordinary course of business of a mercantile agent Conditions:  is valid as if he was expressly authorised by the owner of goods;  purchase must have acted in good faith and does have notice at the time of the disposition that the mercantile agent lacked authority (in other words, title will pass)

 Goods must be 'entrusted' to the mercantile agent 'as such' – Lowther v Harris (1962) 1 KB 393  Entrustment – Goods must have been given to the mercantile agent by the true owner or someone authorised by the true owner  Exception does not apply where agent received possession from a thief.  As such – goods must be entrusted for a purpose in some way connected with the agent's business as a mercantile agent.  Agent must act in ordinary course of business and buyer must act in good faith and have no actual notice.

Exception – s 29 Voidable Title  When the seller of goods has a voidable title to the goods 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 seller's defect of title.

Exception – s 30 Seller in Possession  A person (S) sells goods to buyer but continues in possession of them or of documents of title; and  S then disposes of the goods to a third party (TP) and the goods are delivered or documents of title are transferred to the TP by S or a mercantile agent acting for S; and  TP has no notice of the previous sale.  The delivery or transfer has the same effect as if the person making it had the express authority of the owner to do so. Exception – s 31 Buyer in Possession  Elements:  B must have bought or 'agreed to buy' goods;  B must obtain with consent of seller, possession of the goods or documents of title;  Property (i.e. ownership) has not passed to B  B – or mercantile agent acting for B – must deliver or transfer the goods or documents of title to a TP acting in good faith  Effect as if person delivering to TP were a mercantile agent entrusted with goods or documents. Delivery to purchaser – 'Delivery': is defined as 'voluntary transfer of possession from one person to another' – section 3 Goods Act Delivery at law may be:  actual (i.e. handing over the goods); or  constructive (i.e. transfer of control without transfer of actual possession) Is constructive delivery to the third party sufficient? Summary of nemo dat General Rule (section 27) – Seller cannot pass better title than he/she has. Exceptions to general rule:  Estoppel (s 27): 1. ...precluded by conduct from denying seller's authority.  Sale by mercantile agent (s 67)  Sale under voidable title (s 29)  Sale by seller or buyer in possession (ss 30-31) 1. S 30 (Seller) – S must continue in physical possession 2. S 31 (Buyer) – can be constructive delivery to TP.  Sale under power of sale or court order (s 26)

Goods Act Part 1 (Victoria) – Applies to all contracts for sale of goods (other than those to which the ACL applies). Implied terms are excludable (s 61).

 ACL confined to consumer transactions  GA concerned with business to business transactions Section 31. Application of Goods Act 1958 to contracts of supply:  (1) Sections 17, 18, 19(a) and (b) and 20 of the Goods Act 1958 do not apply to contracts of supply to which Division 1 of Part 3-2 of the ACL applies.

Contract re-cap  1.   

Distinguish: Terms Conditions Warranties Innominate

1. Puffs 2. Representations Excludability Part 1 Goods Act implied terms:  May be expressly excluded  Section 61 reserves right of parties to exclude 1. Tend to be construed to minimise exclusion 2. If well drafted, can exclude them all – e.g. “All conditions, warranties and liabilities implied by statute, common law or otherwise are excluded”.

Conditions & Warranties Goods Act (s 16):  Conditions: 1. If contract of sale contains condition on part of seller  Buyer may waive condition; or  Elect to treat breach as breach of warranty (rather than to rescind the contract)  Warranties: 1. Same meaning as at common law  Whether condition or warranty depends upon construction of the contract: s 16(2)  In some cases, breaches of condition must be treated as breaches of warranty: s 16(3)

Scope of Part 1 of the Goods Act  Implies certain conditions and warranties into all contracts made in Victoria for the sale of goods, as defined – no limit on price or kind of goods  Terms implied under Part 1 are excludable: 1. by express agreement 2. by past dealings 3. by usage if the usage is such as to bind both parties to the contract (s 61) Passing title (condition) GA s 16 – Right to Sell:  In the case of a sale: 1. implied condition that the seller has the right to sell the goods. (Strict liability)  In the case of an agreement to sell: 1. implied condition that the seller will have the right to sell at the time when property is to pass. Passing title: Title defined  Niblett v Confectioners Materials [1921] 3 KB 387 1. Confectioners Materials sold 3000 cases of condensed milk to Niblett. 1000 had labels “Nissly” on them. 2. Label “Nissly” breached Nestle's trademark. 3. Nestle threated to sue Niblett if “Nissly” milk sold. 4. Niblett not succesful in returning goods to Confectioners. 5. Niblett had to remove labels and sold at loss. HELD:  Breach of implied terms because Confectioners had no right to sell labelled condensed milk to Niblett.  Also in breach because Niblett did not have the right to full use and enjoyment of goods.

Feeding Title – Where: 1. Seller has no title when goods are sold, BUT 2. later acquires a good title 3. BEFORE buyer rescinds the contract.  If this happens, seller will not be in breach of s 17(a) GA Quiet possession (Warranty): GA s 17(b):  Seller warrants that the buyer's possession will not be disturbed by a third person exercising right over goods.

Free from encumbrances (Warranty): GA s 17(c):  Seller warrants that the goods are not subject to any charge or encumbrance in favour of a third party not declared or known to the buyer before or at the time of sale.

Goods as described (Condition) GA s 18:  Goods correspond with description  Where there is a contract for sale/supply of goods by description, there is an implied condition that the goods will correspond with that description. Steps in applying: 1. Only relevant if there is a sale or supply by description 2. What is the description of the goods? 3. Does it conform with the description?

Is it a sale by description?  Unascertained or future goods are of necessity sold by description  Specific goods may also be sold by description  Sale in a self-service store will constitute a sale by description provided goods are described in some way on the outside of the packaging or by sign, notice or label – Benjamin's Sale of Goods  There is no distinction between self-selection and a sale assistant handing over an article in response to a request. Identity v Quality  Description relates to identity, not quality (s 18 GA applies to identity)...