You have just bought a car in New South Wales. You are driving home, feeling pretty good about yourself, when all of a sudden someone waves you down. You stop the car to find out what they want. The person tells you that they are in fact the owner of the car and they want it back. It turns out you bought the car from a rogue, who has now disappeared. What do you do?

The general rule

The general rule is straightforward: a person cannot sell what they do not own. So, if you buy goods from someone who does not own them, you generally do not become the owner of the goods. However, the law recognises a number of exceptions to this rule. These exceptions reflect some of the practicalities involved in buying and selling goods and aim to prevent uncertainty in commercial transactions.

Basic requirements

To rely on these exceptions, a buyer will be expected to have acted in good faith and without notice. This means that the buyer was not aware that the person selling them the goods was not actually the owner. If you were aware of this when you bought the car, it is unlikely that you’ll be able to keep it by relying on one of exceptions to the general rule discussed below.

The exceptions

If you’re planning to keep the car, hopefully one of the following exceptions will apply to you:

  • Authority and consent. If the person who sold you the car has the authority or consent of the actual owner to sell it to you, it is as good as if the owner sold the car to you personally. There would be far too much uncertainty if people could back out of deals that they had authorised others to perform on their behalf.
  • Mercantile agents. Sometimes an owner authorises a person to deal with their goods, but not to sell them. In those cases, the person does not have actual authority to sell the goods. But if the owner has entrusted the person with possession of the goods as a “mercantile agent”, the sale of the goods will be effective even if the agent exceeds their authority. A mercantile agent is a person who, in the ordinary course of business, has authority to buy or sell goods. So, if the owner of a Ferrari asks a car dealer to display the car, but not to sell it, a person who buys the car from the dealer may still become the owner.
  • The sale may also be effective if the owner has somehow represented to the buyer that the person selling the goods was entitled to do so. These representations may be made through the owner’s conduct and may sometimes even occur by omission, where the owner has failed to take reasonable steps to notify a buyer that the seller does not own the goods.
  • Bad title. In some circumstances, a person has title to goods, but that title is bad and the true owner can claim the goods back. If the owner has not claimed the goods back before the goods are sold to a new buyer, the new buyer will become the owner.
  • Where a person is in possession of goods and sells them to a buyer, the buyer generally becomes the owner. So this exception won’t apply if you purchased the car from someone online and that person never had possession of the car.

Conclusion

When buying goods, it is always best to make sure the person selling them is actually entitled to do so. If you have been asked to return goods that you have purchased, you should talk to a lawyer about your options. At LegalVision, we can help you understand whether you are entitled to keep the goods, so give us a call on 1300 544 755.

This article is based on the law that applies in New South Wales. LegalVision can also assist you if your issue relates to another jurisdiction. Contact us at 1300 544 755.

Thomas Kaldor

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