This is a full exam answer, focusing on the exceptions and criticisms of Nemo dat. I memorised this essay and wrote it in my exam which I got a First Class grade. This essay can definitely help you in scoring, guaranteed.
Per Denning LJ in Bishopgates v Transport, the law aims to strike a
balance between protections of personal property and commercial
transactions. The current position of the law protects owner with proprietary
interest to retain property title per Whistler v Forster, as ‘the buyer acquires
no better goods title than the seller had’ (nemo dat). However, exceptions
have arisen to mitigate the rule’s unfairness and to protect innocent buyers per
Goode in “Commercial Law”. Yet, this has caused the law to be an arbitrary
and unpredictable mess that has grown up haphazardly and piecemeal as per
Crowther Committee on Consumer Credit 1971. Thus, this essay will evaluate
why the current law is so unsatisfactory and what reform can be brought.
Exceptions of Nemo Dat
Firstly, s.21 SOGA shows, the exception of estoppel works to prevent
owner from claiming ownership over items that have been wrongfully sold by
third party per Eastern v Goldring. Yet, Lord Wright in Mercantile Bank of
India stated, the courts are reluctant to adopt this exception, as seen in
Moorgate v Twitchings where undue respect was given to the owner at the
expense of buyers’ protections.
Concerning s.8 Factors Act (FA) 1889 (slightly reproduced by s24 SOGA),
seller’s possession and property are distinct. For s24 to apply, the goods must
‘continue in possession’ with the seller after the sale and buyer no.2 must
receive seller’s delivery or transfer of goods in good faith.
Additionally, buyer can be protected with the possession of goods
without actually having the title per s9 FA or s25 SOGA, provided the buyer has
bought and obtained seller’s consent; and buyer no2 must receive goods from
buyer no.1 in good faith.
S.25 goes further than the exception of s.23 where innocent buyer can
get goods title provided the owner has not taken steps to use the voidable title
to set the rogue aside; s25 gives good title even after seller’s avoidance per
Wembley v Williams.
Following s.2 FA, bona fide purchaser will receive goods title if the owner
has entrusted the possession of goods to someone as a mercantile agent. Such
, agents usually had general authority to sell on behalf of their principal per
Lloyds v Williamson.
Moreover, most of the provisions in Hire Purchase (HP) Act 1964 has
been replaced, except Part III, which is very narrow as it only allows bona fide
private purchaser to claim on a hp or conditional sale agreement which
involves only motor vehicle if the innocent buyer bought the car in good faith.
This is controversial, and its criticisms will be evaluated below.
Criticisms of the exceptions:
Many studies produced damning results that the exceptions are over
complicated, lacked of underlying rational, overlapped in ways which are
inconsistent with the outdated nemo dat rule (e.g. s.2, s.8 and s.9 FA are
overlapped with SOGA). For instance, Atiyah in “Sale of Goods” criticised the
statutory provisions are ‘complex and confused’; and Professor Baskind
describes the rule as ‘utterly bizarre’.
Moreover, the Sales Law Review Group also criticised the law to be ‘all
or nothing’ nature: balance can hardly be achieved, there must be ‘winner’ and
‘loser’, even if both parties are theoretically innocent. It is also highly unfair to
place the burden of proof on owner to disprove that the third party buyer
acted in good faith, as per Whitehorn v Davison under s.23.
Smith in “Valediction” criticised the market overt exception in s.22 as
being archaic and inappropriate. Goode in “Commercial Law” further criticised
it as a ‘thieves charter’ as it is the only exception which allows title in stolen
goods to pass to innocent third party. This was justified by Sealy and Hooley as
the rule ‘facilitated, and perhaps even encouraged trafficking in stolen goods’.
The Group also criticised s.25(2) as it is never easy to identify whether
the second buyer is dealing with the legal owner or a rogue, as s.25 allows
innocent buyer to acquire good title if the rogue can be proved to have acted
as a mercantile agent, per Wembley v Williams. S.25 has thus raised major
inconsistencies in the law. Besides, it is also difficult to determine whether a
contract is void or voidable (s23), as Shogun Finance has remained confused
and overly technical.
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