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Future Interest Property Law

Posted on March 13, 2008
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Nemo Dat Rule and Exceptions

Nemo Dat Rule:
•    I cannot give better title than I have
•    Under the general rule, if A gives/sells to B and A did not have good title, B cannot acquire god title – even if both A and B were innocent/truly thought A had good title

•    Under Nemo Dat Rule, B may be sued in conversion [Hollins v. Fowler], or if proper demand is made and rejected, in detinue [Clayton v. LeRoy]

X          ——————–       T            ———————    B
True Owner                                          Thief                                                  Buys from T

X can sue B because B has no title even though may be morally innocent.  (Except for the “Exceptions”)

•    Rule is codifies in the Nova Scotia Sale of Goods Act (p. 227)

•    In certain circumstances, the law does not apply the nemo dat rule,  and B can acquire good title, although A’s title was defective
•    Note: To take advantage of exceptions, at the time of transfer, B must be bona fide purchaser for value without notice – even if other criteria met, B will not take good title if B knew/ought to have known that A did not have good title/authority to sell or if B took as gift

Exceptions:
1)    Money
•    clearest exception to Nemo Dat - “Money doesn’t stink”
•    The very act of circulation of $ destroys the title of the former owner
•    if B accepted money from A (who had stolen it) in return for something, and had no knowledge of the theft, then B acquires good title to the money and can pass good title on to C

2)    Negotiable Instruments (commercial paper that symbolizes a promise to pay, i.e. a cheque/promissory note)
•    exception:  If A forged  that cheque or A lacks the legal capacity  to own the cheque, then back to general rule

3)    Sale under voidable title
•    To understand this exception must first understand the difference between a void contract (one that is void from the start → one party entered into contract under a fundamental error/mistake that “goes to the root of the contract” Cundy case pg. 228), and a voidable contract (one that is induced by fraud.  Party that has been wronged has option of ending/voiding contract.  But until this is done it is still a valid contract)
•    A acquires watch from O (owner) under contract that is void from beginning – there is no contract, A does not acquire any title.  A sells watch to B.  A had no title and the nemo dat rule is applied – B acquires no title
•    A acquires watch from O (owner) under voidable contract.  Until/unless O ends the contract, A has voidable title.  If A sells watch to B, before O has ended the contract, B (of bona fide…) acquires good title.  Voidable title in the hands of A becomes good title in the hands of B – A did pass on better title than A had.

4)    Sale by Mercantile Agent (codified in the Nova Scotia Factor’s Act. p. 230)
•    A mercantile agent is one who sells on behalf of another (consignment)
•    Where B (bona fide etc…) buys item from a Factor (A), if certain criteria are met, B will acquire good title, even though A did not have authority to sell (A is not protected)
•    Criteria:
•    Factor must be in possession with consent of owner (doesn’t need owner’s permission to sell)
•    Agent must be acting in the ordinary course of business

5)    Market Overt
•    In English Common Law, there were designated open markets in which things could be bought/sold without worrying about the nemo dat rule

6)    Statutory Provisions

1.    Gifts Inter Vivos - Choses in Possession

•    Gifts are the transfer of personal property

•    2 possible ways to effect a gift:
1)    By deed of gift
- drawing up a legal document of gist; signed and sealed
2)    Parole Gift
- A gift by word
- 2 types:
-Gift Inter Vivos (a gift made while giver is alive meant to take effect in lifetime; it’s irrevocable)
-Gift Donatio Mortis Causa (gift given while alive but doesn’t take effect until after death)
•    Can give gifts of:
-choses in possession
-choses in action

•    Requirements for a Gift Inter Vivos:
-donor’s intention to give
-delivery (actual transfer of possession)
-acceptance (by donee)

•    Delivery is a good requirement because giver gets time to reflect, especially on spontaneous gifts
•    Donee has burden of proof to demonstrate that a gift took place

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