Nemo dat quod non habet
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Nemo dat quod non habet, literally meaning "no one can give what they do not have", is a legal rule, sometimes called the nemo dat rule, that states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title. It is equivalent to the civil (continental) Nemo plus iuris ad alium transferre potest quam ipse habet rule, which means "one cannot transfer to another more rights than they have". The rule usually stays valid even if the purchaser does not know that the seller has no right to claim ownership of the object of the transaction (a bona fide purchaser); however, in many cases, more than one innocent party is involved, making judgment difficult for courts and leading to numerous exceptions to the general rule that aim to give a degree of protection to bona fide purchasers and original owners. The possession of the good of title will be with the original owner.
In American law, a bona fide purchaser who unknowingly purchases and subsequently sells stolen goods will, at common law, be held liable in trover for the full market value of those goods as of the date of conversion. Since the true owner retains legal title, the seller is liable even in a chain of successive bona fide purchasers (i.e., the true owner can successfully sue the fifth bona fide purchaser in trover). However, the problem of successive bona fide purchasers can be remedied: If the jurisdiction recognises an implied warranty that the seller has title to the property (such as under Article 2 of the Uniform Commercial Code (UCC)), then the bona fide purchaser can sue the seller for breach of that implied warranty. Courts of equity traditionally also recognise various other exceptions, likely giving rise to the idea embodied in the modern UCC.
This rule is exemplified in circumstances like the Holocaust reconciliation movement, where property, such as works of art, stolen or confiscated by the Nazis was returned to the families of the original owners. Anyone who purchased the art or thought they had ownership was denied any rights over the litigious property due to the nemo dat rule.
As mentioned earlier, the nemo dat rule has numerous exceptions. Legal tender, for example, does not adhere to the rule in certain circumstances. For example, if a rogue buys goods from a bona fide merchant, then that merchant will not have to return the bills to the true owner because holding the rule to be otherwise would disrupt the economy and prevent the free flow of goods. The same may be true of other "negotiable" instruments like cheques. If Alice, a thief, steals a cheque from Bob and sells it to innocent Charlie, then Charlie is entitled to deal with the cheque, and Bob cannot claim it back from Charlie (though the name appearing on the cheque may affect the validity of such a transfer).
Another matter is the transfer of other legal rights normally granted by ownership. In 2011, a US District judge ruled that a woman who had purchased a stolen laptop could sue a device tracking company for invasion of privacy stemming from recording software installed on the laptop to facilitate its recovery after being stolen. This ruling demonstrated that bona fide purchasers are entitled to some rights by virtue of possession alone, or that nemo dat is superseded by the bona fide purchaser's right to privacy.
When dealing with real property, most American jurisdictions have codified recording statutes that will enable subsequent purchasers to divest title from the party with common law title if they qualify for protection under the recording statute. Three varieties of recording statutes exist: 1) race statutes, 2) notice statutes, and 3) race-notice statutes.
A race statute will divest common law title from a person with superior title if the subsequent purchaser recorded their deed prior to the person with superior title. A notice statute will divest common law title from a person with superior title if the subsequent purchaser had no notice (either actual or constructive – otherwise known as bona fide) of the true owner's title. A race-notice statute requires a subsequent purchaser to be bona fide and record first.
The original owner can obtain protection against the former owner through the doctrine of estoppel (see also, s 21(1) of the Sale of Goods Act 1979 "unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell"). Methods of the estoppel can be by words, by conduct, or by negligence.
Estoppel by words, or representation by the original owner through words that he is the true owner or has the owner's authority to sell:
- Henderson & Co v Williams  1 QB 521
- Shaw v Commissioner of Metropolitan Police  1 WLR 1332, following Henderson
Estoppel by conduct:
- Farquharson Bros v C King & Co Ltd  AC 325
- Mercantile Bank of India Ltd v Central Bank of India  AC 287, upholding Farquharson
- Central Newbury Car Auctions Ltd v Unity Finance Ltd  1 QB 371
Mistake about identity:
- Shogun Finance Ltd v Hudson  UKHL 62
Sales in open markets
However, after the growth in the UK of car boot sales led to opportunities for rogues to "fence" stolen property, the Sale of Goods (Amendment) Act 1994 abolished the "market overt" exception to the nemo dat rule in 1995.
In the case of Bruton v London Quadrant Housing Trust  1 AC 406, Lord Hoffman created an exception to the rule in relation to the granting of a leasehold estate in land. It is possible, though this is controversial, for a mere licensee to create a tenancy if the hallmarks of a tenancy are present. This means that the holder of a lesser right (i.e. the licensee, which is not an estate in land) can create a larger right, an estate even.
As in the United States, banknotes in Scotland are an exception to the rule. This issue arose in the 1749 case of Crawfurd v The Royal Bank, where title to a banknote issued by the Bank of Scotland that had gone missing in the post and found in the possession of the Royal Bank of Scotland was disputed.
- Zetter, Kim (31 August 2011). "Couple can sue laptop-tracking company for spying on sex chats". Ars Technica. Retrieved 5 May 2021.
- William Blackstone (1753), Commentaries on the Laws of England, Book 2, Chapter XXX "Of title by gift, grant, and contract": "But property may also in some cases be transferred by sale, though the vendor hath none at all in the goods; for it is expedient that the buyer, by taking proper precautions, may at all events be secure of his purchase; otherwise all commerce between man and man must soon be at an end. And therefore the general rule of law is, that all sales and contracts of any thing vendible, in fairs or markets overt, (that is, open,) shall not only be good between the parties, but also be binding on all those that have any right or property therein."
- "Sale of Goods (Amendment) Act 1994", legislation.gov.uk, The National Archives, 3 November 1994, 1994 c. 32, retrieved 5 May 2021
- Kenneth Reid (1 May 2013), "Banknotes and their Vindication in Eighteenth-Century Scotland"