Lecture 5/6. Liability of a seller without the right to sell
Key topics
- Implied terms under section 12 and common law
- Effect of breach of section 12(1)
Implied terms about title (s. 12 SOGA)
- (1)(…), there is an implied term on the part of the seller that in the case of a sale he has a right to
sell the goods, and in the case of an agreement to sell he will have such a right at the time when
the property is to pass. – ONLY PART RELEVANT TO THE EXAM
- (2)(…) there is also an implied term that—
(a)the goods are free, and will remain free until the time when the property is to pass, from any
charge or encumbrance not disclosed or known to the buyer before the contract is made, and
(b)the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by
the owner or other person entitled to the benefit of any charge (..)
- Breach of s. 12 (1): condition (right to repudiate & refund)
- Breach of s. 12 (2): implied warranties
terms implied by section 12(1) and at common law
Effect of breach of section 12(1)
Rowland v Divall [1923] 2 KB 500å
- <-steals ->T - sells -> Divall - sells -> Rowland - sells -> X
- April: Divall buys a car from T, a thief, who had stolen it from O, the owner
- May: Divall sells the car to Rowland for £334
- July: Rowland resells the car to X for £400
- September: police take possession of car on O’s behalf.
- Rowland refunds X £400, but Divall refuses to refund Rowland £334. Rowland sues Divall for £334
(i.e. a refund of the price)
- Judgment of Atkin L.J. in Rowland v Divall “It seems to me that in this case there has been a total
failure of consideration, that is to say that the buyer has not got any part of that for which he paid
the purchase money. He paid the money in order that he might get the property and he has not
got it. It is true that the seller delivered to him the de facto possession, but the seller had not got
the right to possession and consequently could not give it to the buyer. Therefore, the buyer,
during the time when he had the car in his actual possession, had no right to it, and was at all
times liable to the true owner for its conversion.
- There had been a breach of section 12 and the original owner could get the refund. the claimant
was not entitled to any compensation for the work carried out on the car.
- Now there is no doubt that what the buyer had a right to get was the property in the car, for the
Sale of Goods Act expressly provides that in every contract of sale there is an implied condition
that the seller has the right to sell; and the only difficulty that I have felt in this case arises out of
the wording of s.11, sub-s 1 (c), which says that “ Where a contract of sale is not severable, and
the buyer has accepted the
goods… the breach of any condition to be fulfilled by the seller can only be treated as a breach of
warranty and not as a ground for rejecting the goods and treating the contract as repudiated,
unless there is a term of the contract, express or implied, to that effect.” It is said that this case
falls within that provision, for the contract of sale was not severable and the buyer had accepted
the car. But I think that the answer is there can be no sale of goods that the seller does not have
the right to sell.
- The whole object of a sale is to transfer property from one person to another. And I think that in
every contract for the sale of goods there is an implied term to the effect that a breach of the
condition that the seller has the right to sell the goods may be treated as a ground for rejecting
the goods and repudiating the contract
notwithstanding the acceptance, within the meaning of the concluding words of sub-s, (c); or in
other words that the sub-section has no application to a breach of that particular condition. It
seems right in this case that there must be a right to reject, and also a right to sue for the price
paid as money had and received on failure of consideration, and further that there is no
obligation on the part of the buyer to return the car, for… the seller had no right to receive it.
, - Under those circumstances can it make any difference that the buyer has used the car before he
found out that there was a breach of condition. To my mind it makes no difference at all. The
buyer accepted the car on the representation of the seller that he had the right to sell it, and
inasmuch as the seller had no such right, he is not entitled to say that the buyer has enjoyed a
benefit under the contract. In fact, the buyer has not received any part of that which he
contracted to receive – namely the property and right to possession – and that being so, there
has been a total failure of consideration. The plaintiff is entitled to recover the 334l.which he
paid.”
- Academic comment on Atkin L.J.’s judgment
See: Battersby and Preston article: pp 273-274
- Cases subsequent to Rowland – confirmed the decision, breach of s12, no consideration = buyer
can claim the refund
Karflex v Poole [1933] 2 KB 251. K --- sells ---> Karflex ---HP---> Poole. Poole defaulted on his
first instalment of a hire purchase agreement. Thus, karflex started a claim against him for
the payment. It emerged karflex wasn’t the real owner and thus he wasn’t the owner of the
goods. As a result, poole could terminate his contract and ask for a refund.
Warman v Southern Counties Car Finance Cpn. Ltd [1949] 2 KB 576. O ---steals ---> T --- sells
---> S ---HP---> W. last buyer didn’t knw car was stolen. Used it for 7 moths. It then emerged s
didn’t have the ownership of the car. Q – did the title pass to S? Thus, S could claim his
money back and terminate the contract
Butterworth v Kingsway Motors Ltd [1954] 1 WLR 286
- O - HP-> A - sells -> B - sells -> C - sells -> K - sells -> B
- A took a car on hire purchase from the original owner. Then sells car to b, b to c, c to K and then K
to b. A then realised he didn’t have the right to sell the car as the car didn’t belong to him as all
the instalments hadn’t been paid for the hire purchase yet. The original owner claimed the return
of the car from B. subsequently they all went back in the chain to get compensation. Q – who has
the ownership, what happens to the chain members of this sales contract? Held – A received the
ownership and thus all the other people in the chain claimed ownership. A only had to pay
damages, didn’t return the goods. B didn’t receive the goods as they had terminated the contract
beore a had received the title.
- 3 January 1951, A takes car on hire purchase terms from O
- 1 August 1951, A sells the car to B for £1000, before she has paid all the instalments. A is
apparently unaware that she does not have the right to do this. A does not tell O about the sale,
but continues paying the instalments to O.
- 11 August 1951, B resells the car to C for £1015.
- 11 August 1951, C resells the car to K (Kingsway) for £1030.
- 30 August 1951, K resells to B (Butterworth) for £1275. Butterworth thereafter uses the car.
- July 1952, A discovers that she should not have sold the car and informs O.
- 15 July 1952, O writes to Butterworth, claiming the return of the car. At this point, the car is
worth £800.
- 16 July 1952, Butterworth’s solicitors write to Kingsway claiming the return of the purchase price.
- 25 July 1952, A pays O the final instalment under the hp agreement and the option fee. Title to
the car passes to A.
- Litigation
Butterworth (pl) --- Kingsway (def) ---C (3p) ---B (4p) ---A (5p
Barber v NWS Bank plc [1996] 1 WLR 641
- Implied warranties of freedom from undisclosed encumbrances and quiet possession
- See sections 12(2) and (3)
Niblett v Confectioners Materials Co Ltd [1921] 3 KB 387 CA
Microbeads v Vinhurst Road Markings Ltd. [1975] 1
WLR 218
The nemo dat rule (important for the exam)
- Nemo dat quod non habet (no one can sell what he does not have)
- See section 21 SOGA - Subject to this Act, where goods are sold by a person who is not their
owner, and who does not sell them under the authority or with the consent of the owner, the
Key topics
- Implied terms under section 12 and common law
- Effect of breach of section 12(1)
Implied terms about title (s. 12 SOGA)
- (1)(…), there is an implied term on the part of the seller that in the case of a sale he has a right to
sell the goods, and in the case of an agreement to sell he will have such a right at the time when
the property is to pass. – ONLY PART RELEVANT TO THE EXAM
- (2)(…) there is also an implied term that—
(a)the goods are free, and will remain free until the time when the property is to pass, from any
charge or encumbrance not disclosed or known to the buyer before the contract is made, and
(b)the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by
the owner or other person entitled to the benefit of any charge (..)
- Breach of s. 12 (1): condition (right to repudiate & refund)
- Breach of s. 12 (2): implied warranties
terms implied by section 12(1) and at common law
Effect of breach of section 12(1)
Rowland v Divall [1923] 2 KB 500å
- <-steals ->T - sells -> Divall - sells -> Rowland - sells -> X
- April: Divall buys a car from T, a thief, who had stolen it from O, the owner
- May: Divall sells the car to Rowland for £334
- July: Rowland resells the car to X for £400
- September: police take possession of car on O’s behalf.
- Rowland refunds X £400, but Divall refuses to refund Rowland £334. Rowland sues Divall for £334
(i.e. a refund of the price)
- Judgment of Atkin L.J. in Rowland v Divall “It seems to me that in this case there has been a total
failure of consideration, that is to say that the buyer has not got any part of that for which he paid
the purchase money. He paid the money in order that he might get the property and he has not
got it. It is true that the seller delivered to him the de facto possession, but the seller had not got
the right to possession and consequently could not give it to the buyer. Therefore, the buyer,
during the time when he had the car in his actual possession, had no right to it, and was at all
times liable to the true owner for its conversion.
- There had been a breach of section 12 and the original owner could get the refund. the claimant
was not entitled to any compensation for the work carried out on the car.
- Now there is no doubt that what the buyer had a right to get was the property in the car, for the
Sale of Goods Act expressly provides that in every contract of sale there is an implied condition
that the seller has the right to sell; and the only difficulty that I have felt in this case arises out of
the wording of s.11, sub-s 1 (c), which says that “ Where a contract of sale is not severable, and
the buyer has accepted the
goods… the breach of any condition to be fulfilled by the seller can only be treated as a breach of
warranty and not as a ground for rejecting the goods and treating the contract as repudiated,
unless there is a term of the contract, express or implied, to that effect.” It is said that this case
falls within that provision, for the contract of sale was not severable and the buyer had accepted
the car. But I think that the answer is there can be no sale of goods that the seller does not have
the right to sell.
- The whole object of a sale is to transfer property from one person to another. And I think that in
every contract for the sale of goods there is an implied term to the effect that a breach of the
condition that the seller has the right to sell the goods may be treated as a ground for rejecting
the goods and repudiating the contract
notwithstanding the acceptance, within the meaning of the concluding words of sub-s, (c); or in
other words that the sub-section has no application to a breach of that particular condition. It
seems right in this case that there must be a right to reject, and also a right to sue for the price
paid as money had and received on failure of consideration, and further that there is no
obligation on the part of the buyer to return the car, for… the seller had no right to receive it.
, - Under those circumstances can it make any difference that the buyer has used the car before he
found out that there was a breach of condition. To my mind it makes no difference at all. The
buyer accepted the car on the representation of the seller that he had the right to sell it, and
inasmuch as the seller had no such right, he is not entitled to say that the buyer has enjoyed a
benefit under the contract. In fact, the buyer has not received any part of that which he
contracted to receive – namely the property and right to possession – and that being so, there
has been a total failure of consideration. The plaintiff is entitled to recover the 334l.which he
paid.”
- Academic comment on Atkin L.J.’s judgment
See: Battersby and Preston article: pp 273-274
- Cases subsequent to Rowland – confirmed the decision, breach of s12, no consideration = buyer
can claim the refund
Karflex v Poole [1933] 2 KB 251. K --- sells ---> Karflex ---HP---> Poole. Poole defaulted on his
first instalment of a hire purchase agreement. Thus, karflex started a claim against him for
the payment. It emerged karflex wasn’t the real owner and thus he wasn’t the owner of the
goods. As a result, poole could terminate his contract and ask for a refund.
Warman v Southern Counties Car Finance Cpn. Ltd [1949] 2 KB 576. O ---steals ---> T --- sells
---> S ---HP---> W. last buyer didn’t knw car was stolen. Used it for 7 moths. It then emerged s
didn’t have the ownership of the car. Q – did the title pass to S? Thus, S could claim his
money back and terminate the contract
Butterworth v Kingsway Motors Ltd [1954] 1 WLR 286
- O - HP-> A - sells -> B - sells -> C - sells -> K - sells -> B
- A took a car on hire purchase from the original owner. Then sells car to b, b to c, c to K and then K
to b. A then realised he didn’t have the right to sell the car as the car didn’t belong to him as all
the instalments hadn’t been paid for the hire purchase yet. The original owner claimed the return
of the car from B. subsequently they all went back in the chain to get compensation. Q – who has
the ownership, what happens to the chain members of this sales contract? Held – A received the
ownership and thus all the other people in the chain claimed ownership. A only had to pay
damages, didn’t return the goods. B didn’t receive the goods as they had terminated the contract
beore a had received the title.
- 3 January 1951, A takes car on hire purchase terms from O
- 1 August 1951, A sells the car to B for £1000, before she has paid all the instalments. A is
apparently unaware that she does not have the right to do this. A does not tell O about the sale,
but continues paying the instalments to O.
- 11 August 1951, B resells the car to C for £1015.
- 11 August 1951, C resells the car to K (Kingsway) for £1030.
- 30 August 1951, K resells to B (Butterworth) for £1275. Butterworth thereafter uses the car.
- July 1952, A discovers that she should not have sold the car and informs O.
- 15 July 1952, O writes to Butterworth, claiming the return of the car. At this point, the car is
worth £800.
- 16 July 1952, Butterworth’s solicitors write to Kingsway claiming the return of the purchase price.
- 25 July 1952, A pays O the final instalment under the hp agreement and the option fee. Title to
the car passes to A.
- Litigation
Butterworth (pl) --- Kingsway (def) ---C (3p) ---B (4p) ---A (5p
Barber v NWS Bank plc [1996] 1 WLR 641
- Implied warranties of freedom from undisclosed encumbrances and quiet possession
- See sections 12(2) and (3)
Niblett v Confectioners Materials Co Ltd [1921] 3 KB 387 CA
Microbeads v Vinhurst Road Markings Ltd. [1975] 1
WLR 218
The nemo dat rule (important for the exam)
- Nemo dat quod non habet (no one can sell what he does not have)
- See section 21 SOGA - Subject to this Act, where goods are sold by a person who is not their
owner, and who does not sell them under the authority or with the consent of the owner, the
