Voidable Titles and Sellers Still in Possession
In our last post, we looked at the nemo dat rule—the principle that no one can transfer better ownership than they themselves have. We also saw the exception of estoppel, where the true owner’s conduct prevents them from denying the seller’s authority.
But estoppel is only one exception.
Today we’ll explore two more important exceptions:
These rules show how the law balances the protection of ownership with the need to keep commercial transactions safe.
Part 1: Sales Under a Voidable Title
Not all fraudulent or misleading contracts are completely void. Some are only voidable, which means that title passes unless the victim takes steps to cancel the contract.
The rule (Section 23 of the Sale of Goods Act):
If a seller has a voidable title and resells before the contract is cancelled, the new buyer—if acting in good faith and without notice—gets good title.
Example
Imagine a company receives an order for high-value computer processors from “Techline Ltd,” a business that looks legitimate on paper. Trusting the documents, the company ships the processors.
Later, it turns out “Techline Ltd” was a fake business created by a fraudster. Before the fraud is discovered, the processors are resold to another electronics retailer who buys them in good faith.
Because the contract with the fraudster was voidable (not void), and the original seller hadn’t yet rescinded it, the innocent retailer acquires good title and keeps the processors.
Why Timing Matters
Now imagine another case: a car dealership discovers that a customer paid with a stolen identity. Instead of waiting, the dealership immediately informs the police and the car registry that the contract is cancelled.
If the fraudster then tries to resell the car, the innocent second buyer may not get good title—because the dealership acted quickly enough to rescind before the resale.
Takeaway: speed is everything. Victims of fraud must act fast to protect their ownership.
Part 2: Sales by a Seller Still in Possession
Another situation arises when a seller has already sold goods to Buyer A, but still physically controls them. The seller then makes a second sale to Buyer B.
The rule (Section 24 SGA):
If Buyer B buys in good faith, without knowing about the first sale, Buyer B gets good title—even though Buyer A was the first purchaser.
Example
A wine distributor sells a shipment of rare bottles to Restaurant A. The deal is complete, but the bottles remain stored in the distributor’s warehouse.
Before delivering them, the distributor—desperate for cash—sells the same bottles to Restaurant B, which pays in good faith and knows nothing of the earlier deal.
Under Section 24, Restaurant B becomes the legal owner. Restaurant A is left with only a claim for breach of contract against the distributor.
Possession Beyond Physical Custody
Possession isn’t just about having the goods in your hands. If the goods are in a warehouse under the seller’s instructions, the law still treats the seller as “in possession.”
For instance, if the distributor tells the warehouse to keep the wine “under my account” while secretly reselling it, that counts as possession under the Act.
Why These Exceptions Exist
Both rules—voidable title and seller in possession—are designed to protect honest buyers who act in good faith.
They keep commerce flowing by preventing every transaction from being constantly uncertain.
But they also remind us that:
The law, in short, walks a fine line: it respects ownership, but it also ensures that markets remain trustworthy.
What happens when a seller has a voidable title and resells goods before the contract is cancelled?
The new buyer, if acting in good faith and without notice, acquires good title
The new buyer automatically has no rights and cannot claim the goods
Ownership always reverts to the first buyer automatically
Why does timing matter in cases of voidable title?
Because the original owner must act quickly to rescind the contract to prevent the new buyer from getting good title
Timing doesn’t matter; the voidable title automatically cancels after 30 days
Timing only matters if the buyer pays a premium price
What happens if a seller still in possession resells goods to an innocent buyer?
Buyer B acquires good title if acting in good faith and unaware of the first sale
The first buyer always keeps the goods, regardless of possession
Both buyers share ownership of the goods automatically
Does physical possession matter for the seller in these rules?
No, possession includes goods under the seller’s control, such as in a warehouse, not just in hand
Yes, physical possession is required for the seller to retain rights
Possession only matters if the goods are high value
