FEDERAL UNIVERSITY OYE – EKITI
FACULTY OF LAW
DEPARTMET: LAW
NAME: IBIDUN OLUWATOBI OLUWADARASIMI
MATRIC NUMBER:
LAW/2020/1046
LEVEL: 400
COURSE CODE: LPT 306
COURSE TITLE: COMMERCIAL LAW II
LECTURER IN CHARGE: DR. L.P BOLARINWA
QUETION: WRITE EXHASTIVELY WITH THE
SUPPORT OF JUDICIALAND STATUTORY
AUTHORITIES AND EXCEPTIONS TO THE PRINCIPLES
OF NEMO DAT QUOD NON HABET AS IT RELATES TO
HIRE PURCHASE AGREEMENTS
JULY, 2024
INTRODUCTION
The principle of “nemo dat quod non habet,” which translates to “no
one gives what they do not have,” is a foundational concept in property law.
It implies that a person cannot transfer a better title to goods than they
themselves possess. However, this principle has several exceptions,
particularly in the context of hire purchase agreements. These exceptions are
designed to balance the interests of innocent third parties and the protection
of property rights. Here, we will explore these exceptions, supported by
judicial and statutory authorities, and relate them specifically to hire
purchase agreements.
Exceptions to Nemo Dat Quod Non Habet in Hire Purchase Agreements
Estoppel:The case of Central Newbury Car Auctions Ltd v Unity
Finance Ltd (1957) illustrates the principle of estoppel. If the owner
of goods, by their conduct, leads a third party to believe that the
person in possession of the goods has the authority to sell them, the
owner may be estopped from denying the seller’s authority.
Application to Hire Purchase: In hire purchase agreements, if the
owner (the finance company) allows the hirer to appear as the owner
of the goods, and a third party buys the goods in good faith, the
finance company may be estopped from claiming ownership against
the third party.
Sale by a Mercantile Agent: Under the Sale of Goods Act 1979
(UK), specifically section 2(1) of the Factors Act 1889, a mercantile
agent in possession of goods with the owner’s consent can pass good
title to a third party acting in good faith and without notice of the lack
of authority. In Folkes v King (1923), it was held that a mercantile
agent in possession of a motor vehicle could transfer a valid title to a
third party.
Application to Hire Purchase: If a hirer, who is in possession of
goods under a hire purchase agreement, is deemed to be a mercantile
agent, they can transfer good title to a bona fide purchaser.
Sale under Voidable Title: Section 23 of the Sale of Goods Act
1979 states that if the seller of goods has a voidable title, but the title
2
has not been voided at the time of sale, the buyer acquires good title
provided they buy in good faith and without notice of the defect.
Application to Hire Purchase: If the hire purchase agreement is
voidable (e.g., due to misrepresentation or fraud by the hirer), and the
hirer sells the goods before the agreement is rescinded, the buyer can
acquire a good title, provided they acted in good faith.
Seller in Possession after Sale: Section 24 of the Sale of Goods Act
1979 allows a seller in possession of goods after sale to transfer good
title to a third party acting in good faith. In Pacific Motor Auctions
Pty Ltd v Motor Credits (Hire Finance) Ltd (1965), it was held that
a seller who remained in possession after the sale could pass good title
to a third party. Application to Hire Purchase: If the hirer sells the
goods while still in possession (even after the hire purchase agreement
should have been terminated), a third party purchasing in good faith
can obtain good title.
Buyer in Possession after Sale: Section 25 of the Sale of Goods Act
1979 provides that a buyer in possession of goods, with the consent of
the seller, can pass good title to a third party acting in good faith. In
Four Point Garage Ltd v Carter (1985), it was held that a buyer
who obtained possession with the seller’s consent could pass good
title to an innocent third party. If the hirer under a hire purchase
agreement is considered a buyer in possession and sells the goods to
an innocent third party, the third party can obtain a good title.
Sale by Court Order: Goods sold under a court order or by a person
authorized by law to sell them can confer good title to the buyer. This
is supported by various statutory provisions such as the Sale of Goods
Act. If goods under a hire purchase agreement are sold pursuant to a
court order, the purchaser obtains a good title free from any claims by
the original owner or finance company.
Conclusion
The principle of nemo dat quod non habet is subject to several well-
established exceptions, particularly in the context of hire purchase
agreements. These exceptions, grounded in both statutory and judicial
authorities, recognize the need to protect innocent third parties who purchase
goods in good faith. Through doctrines like estoppel, statutory provisions on
3
sales by mercantile agents, and rules on voidable titles, the law strikes a
balance between protecting property rights and ensuring commercial
certainty and fairness in transactions.