Keenan and Riches’BUSINESS LAW

Chapter 10Contracts for the supply of goods and services

his actual authority, if the agent was acting within the
scope of his apparent or ostensible authority and the
buyer was unaware of the agent’s lack of authority.
Section 21(2) expressly preserves the rules contained
in the Factors Act 1889 which enables the apparent
owner of goods to dispose of them as if he were their
true owner. A factor is an independent mercantile agent
who buys and sells goods on behalf of other people, but
does so in his own name. A factor can pass good title to
a buyer if the following conditions are met:

■the goods being sold were in the possession of the
factor with the consent of the true owner;
■the factor, in selling the goods, was acting in the ordi-
nary course of business; and
■the buyer was unaware of any lack of authority on the
part of the factor.

Sale under a common law or statutory
power (s 21(2))

Certain persons have the power under common law
or statute to sell goods that belong to another. A pawn-
broker, for example, has the right to sell goods which
have been pledged with him, where the loan has not
been repaid. The purchaser will acquire a good title to
the goods.

Sale by a person with a voidable title
(s 23)

A person may obtain possession of goods under a con-
tract which is void (e.g. for mistake). A void contract is,
in fact, no contract at all. A purchaser in these circum-
stances does not acquire title to the goods and, therefore,
cannot pass good title on to anyone else. The original
owner will be able to maintain an action in the tort of
conversion to recover the goods or their value from a
third party who bought them in good faith. This is what
happened in Cundyv Lindsay(1878). A person may also
acquire goods under a contract which is voidable (e.g.
for misrepresentation). In this case, the contract is valid
unless and until it is avoided. Section 23 provides that
where goods are resold before the contract has been
avoided, the buyer acquires a good title to them provided
he buys them in good faith and without notice of the
seller’s defect of title (see Lewisv Averay(1971)). If the
original owner acts quickly to rescind the contract and
then the goods are resold, the seller may be prevented

from passing a good title to a purchaser (but see New-

tons of Wembley Ltdv Williams(1964) below).

Sale by a seller in possession of

the goods (s 24)

Where a seller sells goods but remains in possession of

them, or any documents of title relating to them, any

resale to a second buyer who actually takes physical

delivery of the goods or the documents of title will pass

a good title to the second buyer. The disappointed first

buyer may sue the seller for non-delivery of the goods.

The remedies of a buyer will be considered later in this

chapter.

Resale by a buyer in possession of

the goods with the consent of the

seller (s 25)

Section 25 provides:

where a person who has bought or agreed to buy goods

obtains possession of the goods with the consent of the

seller, any resale to a person who takes the goods in good

faith and without notice of the rights of the original

seller, has the same effect as if the person making the

delivery or transfer were a mercantile agent in possession

of the goods...with the consent of the owner.

This exception to the nemo datrule can be illustrated

by the following case.

313

Newtons of Wembley Ltdv Williams(1964)

The claimants sold a car to a rogue, who paid for it by

a cheque which was later dishonoured. The claimants

took immediate steps to rescind their contract with the

rogue (by informing the police). Some time later, the

rogue resold the car in Warren Street in London, a well-

established street market in used cars. The buyer then

sold the car to the defendant. The Court of Appeal held

that the defendant acquired a good title to the car. When

the rogue sold the car in Warren Street, he was a buyer

in possession with the owner’s consent, and he acted in

the same way as a mercantile agent (or dealer) would

have done. He passed a good title to the purchaser, who

in turn passed title to the defendant.

Section 25 does not operate so as to make good a

defective title, i.e. where the goods are stolen.