The she does not have. However, in

The common law principle of nemo dat
established in Wistler v Foster1
is a cornerstone of commercial law and strives to protect the interest of an
owner in title in conflict. The rule basically states that
no one can give what he or she does not have. However, in certain circumstances the strict
application of this rule would lead to harsh and unfair results. Therefore, in
order to maintain the balance between the original owner and the innocent
purchaser, the law has provided for various modifications to the nemo dat
principle which have been made by statute and common law in the form of
exceptions. Except one of the exceptions to the nemo date rule applies, the
outcome of the rule is that an owner is entitled to recover possession of the
goods from a person who is wrongfully in possession of them. The owner may take
the goods from the other person, or bring an action to recover the goods and/or
damages2. Furthermore,
any person who has wrongfully turned the goods either to their own use or
to the use of another will be liable in damages for wrongful interference

This essay therefore aims to assess
the degree of certainty in some of the exceptions in light of modern commercial
transactions. Furthermore, the essay goes on to criticize aspects
of the rule and its exceptions and proposes methods of reform to resolve these criticisms.

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Where a seller disposes of
goods with a void title, but the title has not been voided before the sale, the
law confers a valid title in the goods to the buyer. This exception allows an
innocent purchaser to acquire good title in the property from the voidable
title of a seller. The courts have adopted a rigid approach to ascertaining the
effect of a mistake of identity on the title of the property. The outcome of
such inquiry will distinguish between a void and voidable title. In Shogun Finance Ltd v Hudson5
the courts affirmed the face to face presumption in Phillips v Brooks6 which
established that a mistake would render the contract voidable and following
Cundy v Lindsay7 a
mistaken identity in a written agreement would result in the contract being
avoided. However, the courts are not consistent in the application of this
This can be seen in Shogun Finance where despite the fact that the agreement
was made inter praesentes the presumption was rebutted based on the parole
evidence rule.9 This
causes uncertainty because the law is not predictable. The debatable nature of
the distinction is evident in the sense that current means of communication
such as instant messaging and emails10
might be inapplicable to communication in commercial transactions today. MacMillan
criticising this distinction stated that there is no justifiable reason why
such distinction should amount to anomalies in the enforceability of the
Therefore the distinction should be removed thereby making all contracts
voidable in cases of a mistaken identity. This would make the law in this area

Another criticism of this area of law
is that the distinction is founded on contractualism. Lord Hobhouse stated that
the narrow interpretation of the contract was ‘fundamental to the mercantile
law of this country; the bargain is the document; the certainty of the contract
depends on it’.12 The
focus on the contract is unfair because the innocent purchaser’s ownership
right is determined by the conduct of the rogue and the original owner, which
is an agreement which he has no control over.13 The contractualist approach
should be abandoned to enable the courts reach a just outcome by taking the
innocent purchaser into consideration. However, that might be too rigid because
the courts should have the discretion to render a contract void in extreme
cases.14 Lord Devlin in Ingram suggested a
solution to the potential injustice caused judgements like Shogun Finance. He
proposed the apportionment of loss between the parties in a proportion that is
fair based on the circumstances.15
Though this might not reflect certainty it is a good way of balancing the
liability of both parties who are neither to blame. This may provide a more
just outcome in cases where the courts are reluctant to allow the true owner to
deprive the innocent purchaser of his whole claim.16 The current approach of the
judges places certainty over fairness. It has been argued that contractual
certainty should not be achieved at the expense of justice.

The law in respect to avoidance of
the title by the original owner causes uncertainty. In Car & Universal Finance Co Ltd v Caldwell17
it was held that notice to the police was sufficient to avoid the contract. This
decision is problematic because the rights of the innocent purchaser is
dependent on notice to a stranger who was not privy to the contract. If
rescission is not communicated to the middle man, the innocent purchaser might
be unaware that the contract has been avoided and so he cannot make a well-informed
decision on his purchase. It is suggested that notice should be given to the
middle man instead. Also the fact that the operation of the defence is highly
dependent on the time of avoidance by the owner is problematic because there is
no basis for making void the title of an innocent third party who purchased the
property in good faith after rescission had occurred.18



Good title shall be transferred to a
bona fide purchaser from a seller in possession of goods after sale. The
uncertainty in this area of law stems from the interpretation of the words ‘delivery’20 and
‘continues in possession’ in the statute. In Pacific Motor Auctions Pty Ltd v Manor Credits21, the courts held that the
phrase ‘continues in possession’ does not refer to the capacity in which the
goods are held. The law’s focus on physical possession causes uncertainty in
commercial transactions because it does not recognise the change in legal title
that takes place after a sale.  It is
proposed that after a sale the seller should only hold the goods as a bailee so
that he cannot pass good title to subsequent purchasers. Therefore, a seller
who has made constructive delivery should not be able to pass good title on to
subsequent purchaser. However, the decision in Pacific contradicts the clear
wording of the statute which requires possession to be by a seller.

In Michael Gerson (Leasing) Ltd v Wilkinson22
the court held that constructive delivery would suffice. The reasoning of the
courts is inconsistent with the wording and rationale of the statute23
because constructive delivery defeats the purpose of the delivery requirement. This
decision is problematic because constructive delivery does not break the
sellers continued possession of the goods and so a seller is able to pass good
title to subsequent purchasers. This causes uncertainty in commercial
transactions because first purchasers are susceptible to unexpected risks in
relation to goods owed by them but are subject to sale and leaseback agreements.24
The harshness of this decision has been justified on the ground that the first
purchaser ought to bear the risk because it is expected that a seller who has continuous possession owns
the goods.25 In
Michael Gerson the court also held that the exact point at which attornment in
a constructive delivery takes place is irrelevant. This causes uncertainty because
without knowing the time of delivery traders would not know the exact moment proprietary
rights have been passed or divested.26



This exception allows a bona fide
purchaser to obtain good title from a buyer who has not himself a title to the
property. The act makes reference to the buyer having ‘bought’ the goods. This causes
confusion because a person having bought goods has good title to pass on to
subsequent purchasers without resorting to this nemo dat exception. The defence
however covers situations where the owner retains an interest in the property.
An example will be where there is a retention of title clause in the contract
of sale. This exception does not adequately protect purchasers of goods with such
an encumbrance and this is highlighted in the case of Re Highway Foods International Ltd, Mills v Harris.29 In
this case despite the fact possession was authorised this was vitiated by the
retention of title clause over the goods. This causes subsequent purchasers in long
chain transactions with retention clauses to acquire defective titles because the
original owner has the right to repossess the goods if payment has not been
made by the middleman.30
This causes uncertainty because due to the large number of people in the
transaction chain it is difficult for innocent third-party purchasers to
investigate or know about the effect of such clauses.

 In Newtons
of Wembley ltd v Williams31 the
court held that for the defence to be operative the disposition had to be in
the ordinary course of business of a mercantile agent.32
The reasoning of the courts has been criticised as having the effect of greatly
limiting the scope of the exception33
because it may be difficult to establish that the sale was made in the ordinary
course of business. This interpretation is contrary to the wording of the
statute and intention of parliament thereby causing incoherence and uncertainty
in the law. In light of the reasoning in Newton, it appears that section 9 FA
and section 2(1) FA are overlapping provisions. Both exceptions require the
consent of the owner for possession. This was addressed in National Employers’ Mutual General Insurance Association Ltd v Jones34
where the court held that possession by theft will not be consent. The law in
this area promotes certainty by reinforcing the nemo dat rule. However, it can
be said that the outcome is unfair because a bona fide purchaser will be
deprived of title even though they had no way of knowing if consent was
actually obtained.35
Therefore in a chain of transactions subsequent bona fide purchasers do not
have secure titles upon purchase.

The mercantile agent exception
confers good title on a bona fide purchaser who bought the goods from a
mercantile agent. Possession of the goods must be in the capacity of a
mercantile agent at the time the third party purchases the goods.36
This creates uncertainty in commercial transactions because it is unlikely that
an innocent purchaser will know the capacity in which the seller possessed the
goods. For example, a sale by a seller who possesses the goods under a hire
purchase or a sale or lease back agreement would not be in the ordinary course
of business.



In Bishopsgate Motor Finance Corp. Ltd v Transport Brakes Ltd38  Lord Denning said, ‘the person who takes in
good faith and for value without notice should get a good title’. The doctrine
of good faith plays a vital role in the SOGA because it is a recurrent
requirement in most of the exceptions to the nemo dat rule. However, the
definition provided in the act in section 61(3) has been criticised as vague
and unhelpful. The focus of the courts is on honesty which is a very subjective
concept. Therefore, the application of the good faith test would result in
different outcomes thereby causing incoherence and uncertainty in the law. There
are also evidential difficulties in proving good faith and this can be seen in G E Capital Bank V Rushton39
where the court was unable to ascertain if the purchaser was aware that the
sale was significantly below ordinary trade value or if he thought that he
purchased the property at a discounted rate because the evidence available was
far from clear. Though good faith strives to achieve fairness between the
parties, the need for predictability in commercial transactions negates its
existence in commercial law.

For a bona fide purchaser to obtain
title he must be acting in good faith without notice. Timing is of utmost importance
in commercial transactions, due to this actual notice is required.40
An area of uncertainty in this area of the law is the effect of an absence of
registration documents. In Heap v
Motorists Advisory Agency41
it was stated that though lack of registration documents is not evidence of bad
faith it should impute the purchasers with notice because the purpose of
registration is to enable people identify ownership of the car.42
With respect to the uncertainties caused by the doctrines of good faith and
notice in vehicle purchases, it has been suggested that the registration
document should become a document of title inclusive of the owner’s details
which would notify third party purchasers of other claims to the title.43
This would introduce an objective standard of honesty because a failure to
inquire about the registration documents would signal a deliberate act to avoid
notice thus establishing bad faith.44
This proposal would eliminate the uncertainty associated with good faith and
notice in the sale of second hand vehicles.



It is a long-confirmed
exception to the nemo dat rule, that “where goods are sold in market overt in
relation to the usage of the market, the buyer acquires a good title to the
goods as long as he purchases them in good faith and without notice of any
defect or desire of title on the part of the seller”45.
Historically, this exception persuaded sales to take place in acknowledged markets
by allowing the transmission of legitimate and good title in goods with defective
title. If the buyer was a bona fide buyer without notice of the bad title and
purchased the goods in a market overt, the bona fide buyer would get the goods
free or without charge from any prior defect in title.46 The effect of
a sale in market overt was to provide the purchaser with a ”perfect” or ‘flawless’
new title against the whole world while all the other nemo dat exceptions
confer only a good title to an extent or a partially good title.47
Some scholars are not in favor of this exception. For example, Davenport and
Ross argue that ‘it is an exception which can be politely characterized as an
obsolescence. More accurately it can be characterized as an ugly medieval
relic, the only benefit of which is to assist in the sale of stolen goods’. 48
 and If truth be told, the rules of
medieval markets have no place in the law to-day.49 However, notwithstanding,
it is still being used today, for better or worse. 




This exception has been criticized as
being obsolete, anachronistic and abnormal in its application and as unsuitable
in a present-day commercial context.50 It
has been further suggested that it operates as a ‘thieves’ charter’ because it
is the only exception to the nemo dat rule that permits title in stolen goods
to pass to an innocent third-party purchaser51.
Sealy & Hooley argues that the rule had “attracted criticism because it
facilitated, and perhaps even encouraged, trafficking in stolen goods.”52 I
support the notion to revoke the market overt exception as proposed by the
Sales Law Review Group. However, the main question we are dealing with is
whether or not a brand new and more advanced law should be provided to
supersede it as Professor Howells however argues that the, “abolition of
the market overt rule by itself would only amount to a partial solution to the
problems which are encountered in this area of the law”.53 Professor
has proposed replacing the market overt rule with a new principle that where an
owner has entrusted the goods to, or acquiesced in their possession by, another
person, a disposition by that person would pass good title to innocent


A second issue relates to the burden
of proof of good faith and lack of notice which is placed on the third-party
buyer. The nemo dat exceptions require that the purchaser must act in good
faith and without notice of the seller’s defect in title. However, in court it
is the original owner (the plaintiff) who has to disprove that he third party
buyer acted in good faith without notice of title.55  It is highly unfair that this burden
be put on the plaintiff. The UK Law Reform Committee recommended the reversal
of this burden of proof by harmonizing it, though its recommendation has never
been implemented.56



The case law on this distinction has
been and remains confused and overly technical.57.
A recommendation would be to simplify section 23 of the Sale of Goods Act by
abolishing the distinction between void and voidable. The abolition of this
distinction would ensure that an original owner who has dealt with a rogue
would bear this risk, rather than innocent third-party purchasers. Lord Devlin
criticized this distinction, in his view the only question is which of the two,
A or C, will bear the loss caused by B’s act.58  The Twelfth Report59
also recommended that the distinction between void and voidable contracts be
abolished for the purposes of C’s title. This recommendation, however, was not
adopted in the 1979 Sale of Goods Act.


?A final criticism of the statutory framework concerns the
fact that similar, though not identical, exceptions to the nemo dat rule at section 25 of the 1893 Act
co-exist in a separate statute, namely sections 8 and 9 of the Factors Act
1889. This “virtual duplication”60
has been rightly questioned in the view of the Review Group, and they suggest
that there is a strong case for the consolidation of these overlapping rules in
sale of goods legislation.61


From the above, It can be argued that
the exceptions to the nemo dat rule are over complicated, lack an underlying
and unifying rationale, and overlap in ways that are inconsistent and
incoherent62.  Atiyah, for example, describes the
statutory provisions in this area as ‘complex and confused63. Thus, there
have been suggestions that the nemo dat rule and the various exceptions to it
should be repealed and replaced by a single, more coherent principle.64

Aside from being archaic, another
general criticism put forward relates to the ‘all or nothing’ nature of the
rule and exceptions. With the rule and its exceptions there will always be one
‘winner’ and one ‘loser’ even though theoretically both parties are ‘innocent65. In Ingram v
Little, Devlin L.J. proposed that the loss “should be divided between them in
such circumstances” (where both parties are innocent).


To conclude, The uncertainty in the
exceptions to the Nemo Dat rule is generated from misguided interpretations of
the law by the courts coupled with the incoherent and conflicting nature of the
wording in the statute. The courts in a bid to achieve certainty have developed
some rigid and strained principles. In
light of the arguments above a reform of the law is needed. Therefore, the
rights of parties should not be determined by such uncertain and technical and
incoherent legal principles. It is
proposed that notwithstanding the need for certainty in commercial transactions
the law should be more flexible in some areas to cater to modern day
transactions and so that a fair balance can be achieved between competing
interests in title conflicts.



1 (1863) 143 ER 441

2 Principles of Commercial Law. Ian Turley. Cavendish
Principles Series. Second Edition. 2001. Cavendish Publishing (Australia). At
pg. 106.

3 Principles of Commercial Law. Ian Turley. Cavendish
Principles Series. Second Edition. 2001. Cavendish Publishing (Australia). At
pg. 106.

4 SOGA 1979, s 23

5 2003 UKHL 62,
2004 1 AC 919

6 1919 2 KB 243

7 Cundy v
Lindsay  (1878) 3 App Cas 459 (HL)                                                                           

8 See Ingram v
Little 1961 1 QB 31 (CA)

9 Shogun Finance  (n 3) (Lord Hobhouse 51

10 Christopher Hare,
‘Identity Mistakes: A Missed Opportunity?’ 2004 MLR 993

11 Catherine
MacMillan, ‘Mistake as to Identity
Clarified?’ 2004 LQR 369, 372

12 Shogun Finance (n
1) (Lord Hobhouse) 49

13 Sean Thomas. ‘Mistake of Identity’: A comparative
Analysis’ 2008 LMLQ 188

14 Andrew Phang,
Pey-Woan Lee, ‘Mistaken identity in the
House of Lords’ 2004 CJL 24, 26

15 Ingram v Little
(n 6) (Lord Denning) 73-74

16 Angela Foster, ‘Sale By a Non-Owner: Striking a Fair Balance Between the Rights
of the True Owner and a Buyer in Good Faith’ 2004 COV 1, 12

17 1965 1 QB 525

18 William Swadling
‘Rescission, Property, and the Common
Law’ 2005 LQR 123, 128

19 SOGA, s 24;
Factors Act 1889, s 8

20 See cases:
Gamer’s Motor Centre (Newcastle) Ltd v Natwest Wholesale Australia Ltd (1987)
163 CLR 236; Nicholson v Harper 1895 2 Ch 415

21 1965 AC 867

22 2001 OB 514

23Louise Merrett, ‘The importance of delivery and possession in
the passing of title’ CLJ 2008 376, 395

24 Janet Ulph ‘Sale and Lease-Back Agreements in a World of
Title Relativity’ 2001 MLR 481, 481.

25 Nikki McKay, ‘Seller In Possession – Constructive Delivery
of Goods On Site’ 2000 L.J 122, 122.

26 Ulph (n 22) 487.

27 SOGA, s 25; FA
1889, s 9

28 FA, S 2(1)

29 1995 1 BCLC
209; 1995 BCC 271

30 Sean Thomas, ‘The
Role of Authorization in Title Conflicts Involving Retention of Title Clauses:
Some American Lessons’,
2014 CLWR 29.

31 1965 1 QB 560

32 Ibid 580

33 Ewan McKendrick
(ed), Goode on Commercial Law
(Penguin Group 2010)

34 1990 1 AC 24

35 Foster (n 14) 10

36  Pearson
v Rose & Rose 1951 1 KB 275 (CA) 288

37 SOGA 61(3); s 2(1)
FA 1889

38 1949 1 KB 322

39 2006 1 WLR 899

40 Worcester Works
Finance v Cooden Engineering Co 1972 1 QB 210, 218 (Lord Denning MR)

41 1923 1 KB 577

42 ibid (Lush J) 591

43 Iwan R Davies, ‘Registration documents and certification of title of
motor vehicles’ 2001 JBL 489,  499

44 ibid 505

45 Section 22, Sale of Goods Act 1893.

46 Resolution of Rival Claims to Ownership – Or is it? ExpressO

47 The importance of delivery and possession in the
passing of title. Louise Merrett. Cambridge Law Journal, 67(2), July 2008, at
pg. 378.

48 Market Overt. Brian Davenport Q.C and Anthony RI Journal
of Cultural Property (1993), 2 : pp 25-46 at pg.25.

49 Market Overt. Brian Davenport Q.C and Anthony RI Journal
of Cultural Property (1993), 2 : pp 25-46 at pg.40

50 Smith,
‘Valediction to Market Overt’, 1997 Am. J. Legal Hist. 225

51 Smith,
‘Valediction to Market Overt’, 1997 Am. J. Legal Hist. 226

52 Appraising the Market Overt Exception,

53 G Howells, Consumer
Contract Legislation-Understanding the New Law, 1995 at p32.

54 A Review of Security Interests in Property”,


55 It was held in
Whitehorn Bros v Davison 1911 1 KB 463. that, under section 23, it is for the
original owner to prove that the purchaser did not act in good faith and
without notice.


57 Shogun Finance v Hudson 2003 UKHL 62.

58 Ingram v.
Little 1961 1 Q.B. 31

59 Law Reform
Committee, Twelfth Report, Transfer of Title to Chattels, April 1966.

60 Section 25 (1) of
the Sale of Goods Act 1893: The Reluctance to Create a Mercantile Agency, L. A.
Rutherford,  The Cambridge Law Journal,
Vol. 38, No. 2 (Nov., 1979), pp. 346-360 

61 Their repeal was proposed in the Diamond Review of Security
Interests in Property and has also been recommended by Bridge, ‘Do we need a
new Sale of Goods Act?’, op. cit., para. 2.27.

62 Twelfth Report of the Law Reform Committee, Transfer
of Title to Chattels,  2958 (1966),  Report on the Legislation Governing The Sale
of Goods and Supply of Services, November 2011. At pg. 251

63 Atiyah, The Sale of Goods, Longman,11th edition,
2005. At pg. 401.

64 For example, Diamond. 1989. Review of Security
Interests in Property, (UK Department of Trade and Industry

65 Sales Law Review Group, Report on the Legislation
Governing The Sale of Goods and Supply of Services, November 2011. At pg. 251