NEMO DAT RULE

Commercial Law: Nemo Dat Rule

Commercial Law: Nemo Dat Rule

Introduction

The nemo dat rule literally meaning "no one [can] give what one does not have" is a legal rule in property law that states where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the approval of the owner, the purchaser requires no better title to the goods than the seller had. This law states that if a bona fide purchaser who unknowingly purchases and subsequently sells stolen goods will, at common law, be held liable in trover for the full market value of those goods as of the date of conversion. Since the proper owner retains legal title, this is true even in a chain of successive bona fide purchasers (ie, the true owner can successfully sue the fifth bona fide purchaser in trover) (Goode, Kronke, McKendrick & Wool, 2012, pp.6-190). In layman terms, it means that if you buy something that was potentially stolen, like a car, the legal owner of that car can take it back and sue you for possessing it and in addition to that you will not get the money you paid for the car back, unless you sue the person you bought it from. This critically examines how the courts have struck a balance between the two striving principles raised by the nemo dat principle and show a critical understanding of the exceptions to it.

Discussion

Nemo Dat Rule

The idea behind the nemo dat rule is the preservation of proprietary interest of the true owner. The common law has a long history of protection of proprietary rights and has always chosen to cooperate on the side of the proprietary right owner. This strong protection of proprietary rights in the nemo dat rule was induced by the Roman law during the thirteenth century. It was not until the eighteenth century that, because of the recognition of the idea of credit and also the evolution of trade and commerce was there a need to bring in some kind of legally recognized protection to bona fida purchasers of goods (Goode, 2004).

The nemo dat rule has two key principles are competing at law (Yan, 2011, p.111):

the protection of property; and

the protection of commercial transactions and in particular the person who takes in good faith.

The first is for the protection of property: no one can give a better title than he himself possesses. The second is the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle has held away for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our own times.”

The nemo dat rule is that the transferor of goods cannot pass a better title than he himself possesses. The rule represents the common law's traditional favour of the preservation of property ...