5.5 Transfer of Property and Title

Donoghue v Stevenson [1932]

Facts: A manufacturer of ginger beer had sold to a retailer ginger bear in a opaque bottle. The retailer resold it to Donoghue who treated her friend to its contents. The ginger beer bottle also contained the decomposed remains of a snail which had found its way into the bottle at the factory. Donoghue alleged that she became seriously ill in consequence and sued the manufacturer for negligence.

Issue: Plaintiff was entitled to claim damages against the manufacturer in negligence. Any person who manufactures products in such a way that there is no reasonable possibility of intermediate examination before they reach the ultimate consumer, and who knows that the absence of reasonable care on their part will result in an injury to the customer’s life or property, owes a duty to the consumer to take reasonable care.

5.4.1 Doctrine of Caveat Emptor

 The doctrine of Caveat Emptor is an integral part of sale of goods. It translates to “let the buyer beware”.  Caveat Emptor is the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.  Buyers have only themselves to blame if they fail to make careful inspection of the goods before they purchase them.  The buyer could not recover damages from the seller for defects on the property that rendered the property unfit for ordinary purposes.  There are a few exceptions in the application of the Caveat Emptor: o When there is no reasonable opportunity for inspection; and o When the buyer has to rely on the special knowledge or expert judgement of the seller.

5.5 TRANSFER OF PROPERTY AND TITLE

 As general rule, when a person takes goods (e.g. a buyer), he or she gets only the same rights to the goods as the person from whom he or she took them (e.g. seller)  This rule is expressed in the Latin maxim nemo dat quod non habet. The rule is set out in Section 27 SOGA 1957.  This provision means that if goods are bought from a person who is not the owner, and who does not sell them under the owner’s authority, the buyer does not acquire any title.  Thus the rightful owner of goods is entitled to recover his or her goods from those who have no title to them.  But there are exceptions to the nemo dat quod non habet rule. They are as follows:

Estoppels Sale by mercantile agent Sale by 1 of joint owners

Sale under a voidable title

Sale by a seller in possession after sale Sale by a buyer in possession

5.5.1 Estoppels

 Where the owner by his conduct, makes it appear to the buyer that the person who sells the goods has authority to do so, and then buyer relies on that conduct, the buyer obtains a good title because the owner is precluded by his conduct from denying the seller’s authority to sell under Section 267 SOGA 1957.  E.g.: Amir tells Vishnu in the presence of Rowland (the actual owner of the laptop) the he (Amir) is the owner of the laptop. Upon hearing the statement, Rowland kept silent. Later on, Amir sells the laptop to Vishnu. Vishnu will get good title to the laptop, as Rowland will be stopped from denying the position the he projected to Vishnu by his conduct of keeping silent.

5.5.2 Sale by A Mercantile Agent

 A Mercantile agent is a person whose ordinary business is to sell goods, or consign them for sale, or to buy goods, or to raise money on the security of goods.  According to Section 27 SOGA 1957, where a mercantile agent is, with consent of the owner, in possession of the goods or of a document of title to the goods, any sale by him when acting in the ordinary course of business of a mercantile agent shall be valid as if he were expressly authorized by the owner of the goods to make the same.  However, buyer must have acted in good faith and, at the time of the contract of sale, would have had no notice that the seller had no authority to sell.

Folkes v King [1923]

Facts: Folkes left his car with a mercantile agent and told him not to sell it below a certain price. The agent sold the car for less than the minimum price to King who purchased the car in good faith and for valuable consideration, without any notice of any fraud. The agent then disappeared with the money. Folks sued to recover his car from King.

Held: As the mercantile agent was in possession of the car with the consent of the owner for the purpose of sale, and as the sale had been in the ordinary course of the agent’s business, the purchaser received good title. Folks therefore could not recover the car from King.

5.5.3 Sale by One of Joint Owner

 Goods may be owned by one or more than one person.  Section 28 SOGA 1957 provides that if one of the owners of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to the buyer who buy with good faith and has no notice that the seller has no authority to sell.  E.g.: Mira and Aini jointly purchased a laptop. The laptop then was kept by Aini with the consent of Mira. After several months, Aini sell the laptop to Sofea who bought with good faith and have no knowledge that Aini did not have the authority to sell the laptop. According to Section 28 SOGA 1957, Sofea will get a good title of the laptop.

5.5.4 Sale under a Voidable Title

 According to Section 29 SOGA 1957, where the seller of goods has obtained possession thereof under a contract of sale voidable under Section 19 or 20

Contract 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.  A contract is voidable under Section 19 or 20 Contract 1950 when consent of the original owner is caused by coercion, fraud, misrepresentation or undue influence.  E.g.: Vick purchases a motorcycle from Ruben by fraud. Hence, in this situation, Vick is holding the possession under a voidable contract. Before the contract is put to an end by Ruben, Vick sold the motorcycle to Sammy, who bought it in good faith and without any notice of Vick’s defective title. In this case, Sammy gets a better title to the motorcycle even if Vick was holding it under a voidable contract.