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CA Foundation · Business Laws · The Sale of Goods Act, 1930

Kishore, who obtained a mobile phone from owner Arun under a voidable contract induced by Kishore's fraud, sells it for fair value to Sameer, who buys in good faith without knowing of the fraud. Before the sale, Arun had not rescinded the contract. Arun now demands the phone from Sameer. What is the position?

Sameer gets good title. The seller held under a voidable contract that had not been rescinded at the time of sale, and Sameer bought in good faith, for value and without notice of the fraud, so Arun cannot recover the phone from him.

  1. AArun can recover the phone, because a seller cannot give a better title than he has
  2. BArun can recover the phone, because fraud makes every later sale void
  3. CSameer gets good title, because the contract was not rescinded before the sale and he bought in good faith and with no noticeCorrect
  4. DSameer gets good title only if he proves that Arun was negligent

Explanation

A person whose title is voidable, and whose contract has not been rescinded when he sells, passes good title to a buyer who acts in good faith, gives value and has no notice of the defect. All conditions are met, so Sameer is protected. The nemo dat rule is the general rule, but this is a statutory exception.

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