Name: Pratham Pratap Mohanty

Roll No.: 1806

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 Answer 1:
(b) The above statement is false. As the Holder in due course means any person who for
consideration became the possessor of a promissory note, bill of exchange or cheque, if
payable to the bearer or the payee or endorsee thereof, if payable to the order before the
amount mentioned in it became payable, and without having sufficient cause to believe that
any defect existed in the title of the person from who he derived his title. Further, in Section 9
of the Negotiable Instruments Act, the phrase in good faith and for value has been split up
into four elements all of which must concur to make a holder in due course. They are:
(1) The holder must have taken the instrument for value.
(2) He must have obtained the instrument before maturity.
(3) The instrument must be complete and regular on its face.
(4) He must have taken the instrument in good faith and without notice of any defect either in
the instrument or in the title of the person negotiating it to him.
Therefore, holder must take the instrument in good faith, without any negligence. A
reasonable degree of care and diligence is to be exercised by him to hold his right good.
(c) The above statement is true. As the phrase ‘carrier without luggage’ means to be free from
unnecessary weight, which restricts the circulation of the instrument. The instrument must
use the least possible number of words, and must convey all necessary information for it’s
validity, which would make the contract certain and precise. A negotiable instrument must be
free from those things which would impede its circulation.
(d) In the present scenario, D cannot sue on the promissory note. It is an essential
requirement, that to be a Holder in Due Course, D must have taken the instrument in good
faith and without notice of any defect either in the instrument or in the title of the person
negotiating it to him [Sec. 9].
Answer 2:
Lord J. Denning, duly noted the above phrase during the hearing of the case Bishopgate
Motor Finance Corporation Ltd v Transport Brakes Ltd1, where he expressed the principle of
nemo dat. The legal rule ‘Nemo dat quod non habet’ literally means ‘no one gives what he
doesn’t have’. It is equivalent to the civil rule Nemo plus iuris ad alium transferre potest
quam ipse habet which translates to ‘one cannot transfer to another more rights than he has’.
The rule is associated with the transfer of possession of a property in law. The Sale of Goods
Act, 1930 (hereinafter SOGA) and the Indian Contract Act, 1872 are associated with
underlying provisions of this rule. 
In Greenwood v. Bennett (2003), the Court held that the plaintiff was the owner of the car and
since Searle did not have a title over the car, he could not transfer the title to Harper.

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1949 1 KB 322

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Section 27 of the SOGA is concerned with the rule of transfer of possession. It states that the
sale of goods by a person who is not the owner, without the provision of authority and
consent by the owner would leave the buyer with equal rights as the seller. In India in the
case of Life Insurance Corporation  vs United Bank Of India Ltd. And Anr. court held that
Under the Indian Law, an actionable claim is no doubt transferable but it is transferable only
by the person who has a title to the property in respect of which the claim lies. 
EXCEPTIONS
1. Transfer of title by estoppel
Section 27 of the SOGA also legally enforces the estopell by stating that no one besides the
owner has the authority to transfer the title of goods except when the owner himself by his
conduct fails to deny to the seller’s incapability to sell the goods. 
In the case of Eastern Distributors Ltd v. Goldring (1957), it was held that the original
owner, by signing the agreement, represented that the car dealer was the owner of the van. In
doing so, he was estopped from asserting his ownership of the van.
2. Estoppel by an act or an omission
An owner can perform estoppel by either acting in a way which he was not supposed to or by
omitting to perform a legal obligation. In the case of Mercantile Bank v. Central Bank (1935),
it was held that the failure of the respondent to impress their stamp on the railway receipts did
not create legal estoppel since it was not the duty of the respondent to do so. Therefore, the
appellant’s title would not be prioritised over that of the respondent.
3. Estoppel by negligence
Estoppel arises due to the negligence of the owner when he negligently persuades the buyer
into believing that the seller is the owner of the goods and has the authority to transfer the
title of the goods. In Conventary Shepherd & Co v. Great Eastern Rly.Co the court held that
the fact that the goods mentioned in the order were held on behalf of the assignor someone
who puts documents of this nature into circulation owes a duty to those into whose hands
they may come.
4. Sale by the mercantile agent
Section 27 of SOGA states that when a mercantile agent is in the possession of goods or
documents of title to the goods with the consent of the owner of such goods, any sale of the
concerned goods made by him whilst acting in the course of his mercantile agency would
have equal enforceability as if it were expressly authorized by the owner himself.
5. Sale by Joint Owners
Section 28 of the SOGA states that when there are several joint owners of goods and the
goods are in possession of one of them with the consent of co-owners; if he sells the goods to
someone, the title of ownership will be transferred to the buyer if he buys them from the joint
owner in good faith and at the time of purchase, he was unaware that the seller was not under
the authority to sell the same to him.

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 6. Sale by a person under voidable contract
Section 29 of the SOGA states that if a contract belongs to any of the categories highlighted
under two sections (Sec. 19 & 19A) of ICA and the goods were delivered to the buyer before
the aggrieved party interrupted the contract, then the title of the buyer over the goods would
remain. However, it will only continue to exist if the buyer acts in good faith, without the
knowledge of the defect of the seller’s title. The same was upheld in the case of Phillips v.
Brooks  (1919).
7. Sale by the seller in possession
Section 30(1) of the SOGA states that if a seller, who has already sold the goods to a buyer,
continues to be in possession of the goods or the documents of the title of the goods and
transfers the title of the goods or delivers them selling them either himself or by appointing a
mercantile agent, the recipient of such title or delivery under any sale, pledge or other
disposition, who receives the same in good faith and without the knowledge of the previous
sale of goods would be conferred with the same rights as if the seller was the authorized
owner of the goods and was capable of making such sale.
8. Sale by the buyer in possession
Section 30(2) of the SOGA states that when a buyer has bought or has agreed to buy goods
from the seller and has obtained the possession of those goods or the documents of title to
those goods with regards to the sale, pledge or other forms of disposition after taking the
consent of the seller, in the event of him selling the goods to another buyer, the new buyer
would be conferred with the same rights as if the goods were transferred to him by the
original owner of the goods without any regards to the existence of a lien if there existed any.
The Nemo dat principle would not hold good.
9. Resale by an unpaid seller
According to Section 54(3) of the SOGA, when a seller who has not been paid by the buyer,
despite exercising his right of lien and putting a halt on the sale of the goods, he acquires a
good title against the buyer and becomes entitled to re-sell the goods to another buyer. The
new buyer would be protected by law and the old buyer would not be entitled to possess the
goods. The seller does not have a duty to inform the old buyer about the re-sell too.

These are some of the exceptions and there exists other exceptions too under the Contracts
Law.