D F Mount Ltd v Jay and Jay (Provisions) Co Ltd
Rule established
Where a buyer in possession of goods or documents of title with the seller's consent transfers the document to a person who takes it in good faith and for value, that transferee obtains a good title. The unpaid seller's lien and right of stoppage in transit are defeated as against him.
Facts
- The defendant sellers held a quantity of tinned peaches stored at a wharf.
- They sold the goods to a dealer who was known to them to be short of funds.
- The dealer told the sellers he could pay only out of the proceeds of a resale of the goods.
- The sellers gave the dealer a delivery order addressed to the wharfingers.
- The dealer resold the goods to the plaintiffs and gave them a delivery order.
- The plaintiffs took the delivery order in good faith and paid for the goods.
Issue
- Whether the sub-buyer who took a delivery order in good faith and for value obtained a title good against the original sellers, so as to defeat their claim to retain the goods for the unpaid price.
Held
- The plaintiffs succeeded. The dealer was a buyer who had obtained the documents of title with the sellers' consent, and the sellers had assented to his dealing with the goods by resale, indeed they had contemplated exactly that. His transfer of the delivery order to the plaintiffs, who took in good faith and for value, conferred a good title. The sellers' rights against the goods could not be asserted against the plaintiffs.
Ratio Decidendi
The rule protecting a buyer in possession is an exception to the principle that no one can give a better title than he has, and it rests on the seller's own conduct in parting with possession of the goods or their documents. Where the seller has consented to that possession and has assented to a resale, he has enabled the buyer to appear to the world as free to deal. The loss must fall on the party who created the appearance, not on the innocent transferee who relied on it.
How to use it in an exam
- Authority for S.30(2) of the Sale of Goods Act 1930: a buyer who has obtained possession of the goods or documents of title with the seller's consent may pass a good title to a transferee in good faith and without notice of the seller's lien or other right.
- Also authority for the proviso to S.53(1): where a document of title has been lawfully transferred to a buyer and he transfers it by way of sale to a person taking in good faith and for value, the unpaid seller's right of lien or stoppage in transit is defeated.
- Contrast the position where the sub-transfer is by way of pledge rather than sale: there the seller's right of stoppage may still be exercised subject to the pledgee's rights.
- Fits into the nemo dat exceptions alongside estoppel, sale by a mercantile agent (S.27), sale by one of several joint owners (S.28), sale under a voidable title (S.29), and sale by a seller in possession after sale (S.30(1)).
- The practical lesson for a problem answer: an unpaid seller should not release documents of title before payment, because rights against the goods are worth far more than a personal claim against an insolvent buyer.
Source
Source: [1960] 1 QB 159; [1959] 3 All ER 307; leading authority on defeat of the unpaid seller's rights by transfer of a document of title to a bona fide transferee; CITATION NOT CONFIRMED from a free source; check against the Queen's Bench reports before exam use
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.