The rule that “a person cannot give a better title than he himself has” is expressed by the Latin maxim nemo dat quod non habet, meaning “no one gives what he does not have.”
The basic principle is that a person who does not own goods, and who has no authority from the owner to sell them, normally cannot transfer ownership to another person. For example, if A steals B's laptop and sells it to C, A has no valid title to the laptop. Consequently, even if C purchases it honestly and does not know that it was stolen, C ordinarily cannot obtain a better title than A possessed. The rule protects the property rights of the true owner.
There are, however, important exceptions, particularly under sale-of-goods law. Depending on the applicable jurisdiction, they commonly include:
- Estoppel: If the true owner's conduct causes the buyer reasonably to believe that the seller has authority to sell the goods, the owner may be prevented from later denying the seller's authority.
- Sale by a mercantile agent: A buyer may obtain good title where a mercantile agent possesses the goods with the owner's consent and sells them in the ordinary course of business to a purchaser acting in good faith without notice of the agent's lack of authority.
- Sale under a voidable title: If the seller obtained goods under a contract that is voidable rather than completely void, and the contract has not yet been rescinded, a good-faith purchaser without notice may acquire good title.
- Seller remaining in possession: If a seller sells goods but remains in possession and subsequently transfers them to an innocent purchaser, legislation may protect the later purchaser under specified conditions.
- Buyer in possession: A person who has bought or agreed to buy goods and obtains possession with the seller's consent may, in certain circumstances, transfer good title to an innocent third party even though the first buyer's own title is not yet complete.
- Sales made under statutory or legal authority: Certain sales conducted under authority of law—such as some sales by court officers or other legally authorized persons—can transfer title despite the seller not being the ordinary owner.
The purpose of these exceptions is to balance two competing interests. The nemo dat rule protects owners from losing their property without consent, while the exceptions protect innocent purchasers and promote confidence in commercial transactions.
Therefore, the general rule is that a seller cannot transfer greater ownership rights than the seller possesses, but the law recognizes specific situations in which an innocent buyer can nevertheless acquire a valid title. The exact exceptions depend on the sale-of-goods legislation applicable in the particular jurisdiction.