Commercial Law Exam with two essays - one on the nemo demo dat rules and another on section 18 of the Sale of Goods Act (SGA) - and also a problem question on various principles under the SGA. The grades and feedback for each question are at the end of the document.
The nemo dat rule (NDR) provides that sellers (S) can only sell goods if they are the owner or have the right to
sell them, protecting true owners (TO) of goods and maintaining their ownership. Whereas innocent
purchasers (IP) are protected by NDR’s exceptions of which this this essay contends that despite theoretical
clarity, their practical application is complex, rendering both TO and IP uncertain of ultimate ownership. It will
explore the exception of sale by mercantile agent (MA) to illustrate clarity in ownership before highlighting their
practical complexity through estoppel and voidable title. For brevity, no other exemptions will be considered.
Then this essay will conclude by evaluating whether exceptions to NDR are clear or complex to apply.
Sale by MA
An exception that provides clarity to ultimate ownership is a sale by MA (Factors Act 1889). Subject to
common law provisions, if IP buys goods from an agent who appears to have the authority to sell, TO is
bound, and IP acquires good title (Lloyds and Scotting Finance v Williamson [1965]). While additional
conditions exist, such as the goods being in the possession of the agent with TO’s consent (Pearson v Rose
& Young Ltd [1951]) and simultaneous payment for the transfer of property (Shaw v CPM [1987]), these
rules still sufficiently determine ownership. This is because this exception clearly protects TO by requiring their
consent for sale and provides clear presumptions that favor IP’s ownership when the agent is in possession of
the goods and unless evidence proves otherwise. Therefore, applying these rules straightforwardly allows for
the clear determination of ultimate ownership.
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, Estoppel
Prima facie, estoppel provides certainty to ultimate ownership as S21(1) SGA states it applies when TO acts in
a way that makes it seem S has the authority to sell the goods. Subsequently, it’s theoretically clear that title
passes to IP while TO is estopped from claiming the sale was not authorised because of estoppel. However, a
practical application reveals estoppel’s uncertainty because it’s difficult to determine without unequivocal
evidence IP was misled by relying on a representation (Farquharson Brothers v King [1902]). This scope
was further narrowed in Mercantile Bank Of India v Central Bank Of India [1938], resulting in Lord Wright
emphasising that very few estoppel cases have succeeded which confirms that estoppel is an unreliable
exception for protection for IP. This conclusion is supported by how estoppel by negligence is near impossible
to establish due to complexities in not only illustrating a duty of care but subsequently establishing breach and
causation (Mercantile Credit v Hamblin [1965]). Thus, given the complicated rules hindering the
establishment of estoppel and judicial reluctance where it may apply, this exception fails to provide clarity on
absolute ownership and is so exclusive in application it’s near redundant.
Voidable title
Uncertainty is particularly illustrated by voidable title, which enables a contract to be avoided due to fraud,
misrepresentation, mistake, non-disclosure, duress, or undue influence. Per S23 SGA, IP can acquire perfect
title to goods even if S had an imperfect title only if the IP bought the goods in good faith and without
knowledge of S’s defect in title (Whitehorn Bros v Davison [1911]). Theoretically, this exception clearly
prioritises IP rights over TO in fraud cases based on the timing of TO’s rescission (Foster, 2004). However, in
practice, application is complex. Not only must the original transaction transfer a voidable title to S,
distinguishing between TO’s intent to transfer property or possession, but the exception does not apply if the
contract is void, only if it is voidable. This is a marginal distinction (Shogun Finance v Hudson [2003]) that
has attracted criticism and calls for reform, such as abolishing the distinction between contracts voidable for
fraud and those void for mistake (Twelfth Report). Due to such uncertainties, both IP and TO claims may be
detrimentally affected based on the transaction’s classification, regardless of fault or equity. Therefore, despite
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