A sale by non-owner in business law occurs when goods are sold by a person who is not the owner without the owner’s permission.
A sale by non-owner in business law occurs when goods are sold by a person who is not the owner without the owner’s permission. Only the person who owns the title to a piece of property, whether that is personal property or real estate, can transfer the title to someone else.
Nemo dat quod non habet is a legal term that’s often abbreviated to nemo dat. It simply means no one can transfer what they don’t have. As such, a seller can only transfer ownership to a buyer if he possesses the right to do so. Nemo dat may apply if a seller sells stolen goods without the rights to them or a buyer purchases stolen goods.
Nemo Dat Exceptions
Nemo dat protects the rightful owner of a piece of property, precluding the innocent purchaser from maintaining ownership of the title. However, there are several exceptions to the rule. Each exception is contained in one of the following acts:
- The Sale of Goods Act 1979 (SGA)
- The Factors Act 1889 (FA)
- The Hire Purchase Act 1964 (HPA)
When any of these exceptions are enacted, the rightful owner of the property loses ownership of the title in favor of the purchaser. In essence, these exceptions protect the innocent purchaser.
Here’s an example of a scenario where the transfer of ownership to a non-owner may arise:
- Mr. Smith steals a piece of property and sells it to Mr. Jones.
- Then, Mr. Smith sells another piece of property to Mr. Murphy but retains possession of it while wrongfully selling it again to Mr. Napoli.
- Mr. Smith then passes the property to Mr. Jones in search of an offer for sale. Meanwhile, Mr. Jones goes on to sell the property without Mr. Smith’s authority and maintains the proceeds from the sale.
- Mr. Smith buys the piece of property on credit and resells it to Mr. Jones, with no intention of paying for the property.
This situation becomes tricky when you pause to consider why the two innocent parties should suffer at the hands of one deviant.