Conventional method dictates that a purchase and sales agreement is carried out

between a buyer and a seller. In some situations, the act of sellers posing as the owner of a
good arises, as such these so called sellers are of no right to sell off a good which they do not
own. At this point in time, this is where the Latin legal maxim of “Nemo dat quod non habet1”
also known as the “nemo dat rule” comes into play. “Nemo dat quod non habet” is literally
defined as “No one can give what he/she has not got2” which means that nobody can transfer
the title of ownership for a good they do not own or have a right upon.

By virtue of the case of Bishopsgate Motor Finance Corp Ltd v Transport Brakes Ltd 3,
Lord Denning stated, “In the development of our law, two principles have striven for mastery.
One of them is the protection of property and no one can give a better title than he himself
possesses. The second one is the protection of commercial transactions where the person who
takes in good faith and for value without notice should get a good title. The first principle has
held sway for a long time, but it has been modified and simplified by the common law itself
and by statute in order to meet the needs of our own times.”

The statement by Lord Denning transcribed above has been adopted by the Sales of
Goods Act 1957 4(SOGA). Under S.27 of SOGA5, it is stated that goods which are sold by a
person who in person is not the owner and does not sell the goods under the jurisdiction of the
owner, the buyer acquires no ownership of the goods. This essentially means that ownership
of the goods sold cannot be transferred from the fraudulent seller to the buyer. For example, in
Malaysia, by virtue of the case of Lim Chui Lai v Zeno Ltd6 the respondent’s company entered
into an agreement with Ahmad a contractor, who in which secured a contract with the Petaling
Jaya Authority for construction of culverts. The agreement between the company and Ahmad
provides that the company is to provide the materials and to finance the contract in which was
done in due diligence. However, due to unforeseen circumstances, the Petaling Jaya Authority
cancelled their contract with Ahmad. Subsequently Ahmad sold the materials to the appellant.
It was held that Ahmad had no ownership over the materials, as such could not transfer the

1
'The Nemo Dat Quod Non Habet Rule' ([Link], 2 February 2018) <[Link]
law-essays/commercial-law/[Link]> accessed 10 April
2019
2
Durgesh Sinha D, 'Nemo Dat Quod Non Habet - Academike' (Academike, 7 December 2014)
<[Link] accessed 10 April 2019
3
Bishopsgate Motor Finance Corp Ltd v Transport Brakes Ltd [1949] 1 KB 322
4
Sales of Goods Act 1957
5
Sales of Goods Act 1957, s.27
6
Lim Chui Lai v Zeno Ltd [1964] 30 M.L.J. 314
ownership of the materials to the appellant. The appellant appealed to the judgement in which
was dismissed.7

The intention of the use of the nemo dat rule is to protect the rights of ownership and
interest of the owner if the goods were stolen from him/her. At the same time, the nemo dat
rule may sometimes be harsh on owners of goods as owners will always need to ensure the
creditworthiness of the seller before committing to transfer the title of ownership. If the said
due diligence is not acted upon, owners may lose their goods to a fraudulent seller, caveat
venditor8. Hence, the application of the nemo dat rule has its exceptions as to provide to various
differing situations.

The first exception to the nemo dat rule is estoppel which is governed under S.27 of
SOGA9 in which provides that the the use of the nemo dat rule is exempted when the owner of
the good through implied or expressed conduct provides authority to the seller to sell the said
goods. For example, in the case of Eastern Distributors v Goldring10, the claimant wanted to
acquire a car however he was unable to pay the deposit to the car dealer. So, the dealer offered
to buy his van. The claimant, thinking that the van will be sold back to him, signed the
agreement which was blank. The car dealer accepted the deal in conjunction to the buying of
the van but not the selling of the car to the claimant. The dealer then sold the van to a third
party. It was held that the claimant’s signing of the blank form estopped him from depriving
the dealer of his right to sell off the van. 11

Furthermore, the second exception to the nemo dat rule is when the seller is a mercantile
agent. By virtue of S.2 of SOGA12 a mercantile agent is defined as a person who possess agent
authority to sell goods or to deliver goods for the purpose of sale, or to buy goods or raise
money on the security of goods. S.27 of SOGA provides that a mercantile good is an agent in
which acquired the consent of the owner and possesses the goods or documents of title of goods
and that any sale made by a mercantile agent is valid as authorized by the owner, provided that
the buyer acts in good faith and at the time of the formation of the contract, the seller still has

7
Lee M, General Principles Of Malaysian Law (2nd edn, Oxford Fajar 2007) 579,580
8
'Caveat Venditor Law And Legal Definition | Uslegal, Inc.' ([Link])
<[Link] accessed 10 April 2019
9
Sales of Goods Act 1957, s27
10
Eastern Distributors v Goldring [1957]2 Q.B. 600
11
All Answers ltd, 'Sales by a Non-Owner | Property Law Essay' ([Link], 2 February 2018)
<[Link] accessed 11
April 2019
12
Sales of Goods Act 1957, s2
authority to sell the said goods. Hence, mercantile agents by principle are agents who have
authority to transfer the title of ownership from owner to buyer. By virtue of the case of
Commercial & Savings Bank of Somalia v Joo Seng Company13, the plaintiff was a bank in
Somalia and were pledgees of rice on board a ship heading for Singapore. Upon arrival the
charterers of the ship sold part of the rice to the defendant at half price without the permission
of the plaintiff. The plaintiff brought a claim against the defendant and it was held that the
sellers of the rice who were the charterers were carriers and not mercantile agents when they
sold the rice as such they had no authority to sell the goods and transfer the title of ownership
to the defendant.14

Besides that, the third exception to the nemo dat rule is when a good is sold by one of
the joint owners. It is provided under S.28 of SOGA 15that if one of the joint owners has the
sole possession of the goods by permission granted from the co-owners, the transfer of title of
ownership is valid to any person who buys it in good faith and at the time of the formation of
the contract is oblivious to the fact that the seller has no authority to sell the goods. To illustrate
this, Ali, Abu and Amar jointly own a personal computer, Amar was given the personal
computer for his use in University as Ali and Abu are already working. However, without the
permission of Ali and Abu, Amar sold the personal computer to Lee who in which was
oblivious to the fact that Amar did not have the authority to sell and bought it in good faith. As
such, the transfer of ownership is valid.16

The fourth exception is "sale under voidable title". Based on S.29 of SOGA 17stated
that, the person who sells the goods has obtained possession of that under S.19 or 20 of the
Contracts Act 1950 as a voidable contract. However, the contract has not been revoked during
the sale. The buyer will acquire good title to the goods provided. Then, he buys them with good
faith and he would not notice on the defect of the seller’s title. When the consent of the owner
is influenced by coercion, misrepresentation and undue influence then it is considered voidable
contract under S.19 and S.20 of the Contracts Act 1950. In the case of Incheh Noriah v. Shaik
Allie Bin Omar18r the court held that the gift should be set aside as the presumption of undue
influence which is raised by the relationship proved to have been existence between the parties

13
Commercial & Savings Bank of Somalia v Joo Seng Company [1989] 2 M.L.J. 200
14
Lee M, General Principles Of Malaysian Law (2nd edn, Oxford Fajar 2007) 582
15
Sales of Goods Act 1957, s28
16
Lee M, General Principles Of Malaysian Law (2nd edn, Oxford Fajar 2007) 585
17
Sales of Goods Act 1957, s29
18
Incheh Noriah v. Shaik Allie Bin Omar [1929] A.C 127: 1 M.C. 79
was not rebutted. For an example, Sita bought a television from Vinay by fraud. In this situation,
Sita is holding the possession under a voidable contract. Before the contract comes to an end
by Vinay, Sita sold the television to another person, Ravi, who purchase it in good faith and
with no notice of Sita’s defective title. In this case, Ravi gets a better title for the television
even Sita is having it under a voidable contract. In Shogun Finance v Hudson, 19the court refer
to the decisions made by the Court of Appeal in the case of Lewis v Avery and Ingram v Little20.
The judges held that the same rules should apply in both situations where contracts were made
face-to-face, at a distance or in writing. Thus, the laws and decision provided in the Lewis v
Avery and Ingram v Little is a good law.

The following exception is "sale by a seller in possession after sale". According to S.30
(I) of SOGA21 given that if a dealer who has separated with the title to the merchandise however
stays possessing the products or the documents of title can pass a good title to bona fide. The
next purchaser gets a good title though the first purchaser loses his and needs to guarantee
claim against the merchant. Foe an illustration, Ang sells some goods to Umar and promise
him to deliver the goods on the next day. However, before the delivery, Veena deliver the items
to Linda, who bought it with good faith with no notice of the prior sale to Umar. Linda will get
the good title to the goods. In the case of Pacific Motor Auctions Pte LTD V Motor Credits
LTD22, where the plaintiffs are the owner of some cars in the possession of the dealer. Under
a “floor plan agreement”, the dealer would retain the cars and sell them in the same way as it
sold other cars. When the plan was covered as it is sold, the plaintiff is account by the dealer
for the money received. If the plaintiff is in financial crisis, they will reject the authority to sell.
The court held that, any private arrangement that may made by the seller with the buyer whether
the seller remains as a bailee and trespasser or whether he possessed it lawfully or not that will
not maters. As long as he remains continuously possession of the goods that has been sold to
the buyer. In the case of Eastern Distributors Ltd. v. Goldring23, it was held that "continues in
possession" is continues in possession not as bailee but as a seller.

The sixth exception is "sale by a buyer in possession of goods".S.30(2) of SOGA

19
Shogun Finance v Hudson [2003] UKHL 62; [2004] 1 All ER Comm 332
20
Lewis v Avery and Ingram v Little [1971] 3 WLR 603
21
Sales of Goods Act 1957, s30
22
Pacific Motor Auctions Pte LTD V Motor Credits LTD [1965] A.C. 867
23
Eastern Distributors Ltd. v. Goldring [1957] 2 Q.B. 600
24
Sales of Goods Act 1957, s30(2)
merchandise and have acquired ownership of the merchandise or the document of title with the
consent of the dealer, can pass a good title to an innocent buyer under any sale or deal. For an
example, Vimal agreed to purchase some furniture from Rahman. The payment was to be made
in two instalments. Rahman delivered the furniture to Vimal. However, the ownership of the
same was to be transferred to him on the payment during the second instalment. Vimal sold the
furniture to Ali who bought it in good faith. Here, Vimal had the possession of the furniture
under an agreement to buy thus Ali has a good title in the furniture. In the case of Newton of
Wembley LTD v Williams25, the court held that the initial purchases had the possession with
the consent of the owner. Thus, he could pass the good title to the, B, who was in turn
transferred it to the defendant. Defendant has the rights to keep the car.

25
Newton of Wembley LTD v Williams [1965] 1 QB 560