Q2-2016-COMMERCIAL TRANSACTIONS
Brian is in the business of buying and selling second hand motor vehicles. The vehicles are usually displayed at a large yard located along Langata Road in Nairobi. Brian also receives and Sells cars on behalf of individual owners at a commission. Such cars are also usually displayed at the same yard. At around 9.00 a.m. on 1st May 2015, Alice went to Brian's yard and saw a car which she wanted to buy. The owner of the car, Oscar had left it with Brian with instructions that Brian was to obtain "good offers" but that he (Brian) was not to accept any offers without first consulting with Oscar. Unfortunately, Oscar had, inadvertently left the car's logbook in the car's glove compartment. Using this document, and holding himself out to be Oscar, Brian sold Oscar's car to Alice. Alice paid the full purchase price in cash. She also obtained from Brian (who was pretending to be Oscar) the car's log book together with a duly executed transfer form. Alice did not, however, drive away the car on the day as she was travelling out of town. On the same day in the afternoon, Oscar came and took away his car, telling Brian that he had changed his mind and was no longer interested in selling it. Upon her return, Alice made several unsuccessful attempts to collect the car from Brian. She has now "unearthed the truth" but is not sure what to do.
Required:
Identify and discuss the legal issues raised by the above fact pattern. (10 marks)
The issues that arise from the facts are that;
Who is Brian in Law?
Brian is in the business of selling second hand vehicles for people at a commission. In law a factor is a mercantile agent that receives and sells goods at a commission. As such Brian is a factor.
Did Alice acquire good title?
The doctrine of Nemo Dat Quod Non Habet holds that no one acquires better title that what he or she can give. This was meant to curb the instances of thieves selling good title. Oscar left the car with Brian to sell but notify him before a sale for approval. Brian did not do this and sold the vehicle to Alice using the logbook and a duly executed transfer form. The failure to consult may vitiate the title being passed however the sale of Goods Act has various exceptions to the doctrine of Nemo dat quod non habet.
The exceptions are sale by an agent[1], sale by a mercantile agent without authority, sale under a voidable title[2], sale by a seller in possession to a 3rd party, sale by a court order or statutory power of sale[3], resale by an unpaid seller who exercises right of lien or retention or stoppage in transitu[4],estoppel (sale in a market overt)[5].
It is submitted that Brian was acting as a mercantile agent without authority as he did not notify the owner for approval as such this falls under the exceptions of the doctrine of Nemo dat quod non habet. As such Alice was a bonafide purchaser for value without notice. She bought the car in good faith, in cash and without notice of the fact of the Brian and Oscars agreement.
As such property and title to the car passed when Brian and Alice made an agreement and executed it. Therefore Brian must surrender the vehicle to Alice.
Further Alice exercising her rights it the matter goes to court will not be able t sue Brian and Oscar at the same time. Now that she has found out who the principal is she must elect to sue the agent or the principal but not both.
What are Oscar’s remedies?
Brian does not go home empty handed. A valuation of reasonable offers should be made and when made; Brian was Oscar’s agent, he was specifically mandated to receive good offers, communicate them to Oscar for approval and then sell the car. He breached the instructions given to him by his principal. As such if Oscar feels that the price at which the vehicle was sold is low he may sue the agent for the balance as against a reasonable offer from the valuation. An agent who breaches his scope of authority is liable to the principal or third party depending on the circumstances of the case.
Brian does not go home empty handed. A valuation of reasonable offers should be made and when made; Brian was Oscar’s agent, he was specifically mandated to receive good offers, communicate them to Oscar for approval and then sell the car. He breached the instructions given to him by his principal. As such if Oscar feels that the price at which the vehicle was sold is low he may sue the agent for the balance as against a reasonable offer from the valuation. An agent who breaches his scope of authority is liable to the principal or third party depending on the circumstances of the case.
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