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Section 108: Sections 76 to 123 [Repealed by the Indian Sale of Goods Act, 1930]

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 107 All 266 Sections of Indian Contract Act Section 109

Legal Commentary & Landmark Judgments: Section 108

Historical Section 108 of the Indian Contract Act, 1872 established the fundamental common law maxim nemo dat quod non habet (no one can transfer a better title than he possesses) alongside statutory exceptions protecting bona fide purchasers dealing with mercantile agents, persons in possession under voidable contracts, or joint owners. Now codified in Sections 27 to 30 of the Sale of Goods Act, 1930, this provision remains the cornerstone of Indian commercial property law.

  • Paramount Rule of Nemo Dat: No buyer can acquire a better title to goods than the seller had, subject only to established statutory and equitable exceptions.
  • Mercantile Agent Exception: Where a mercantile agent is, with the consent of the owner, in possession of goods or documents of title, any sale made by him in the ordinary course of business binds the owner if the buyer acts in good faith and without notice.
  • Possession Under Voidable Contracts: A seller in possession under a voidable title can pass good title to an innocent third party prior to lawful rescission by the defrauded owner.
Key Landmark Precedents:
  • Folkes v. King [1923] 1 KB 282: Definitive authority on mercantile agency exceptions, holding that where an owner delivers a motor car to a mercantile agent for sale at a reserve price, and the agent sells it for less and misappropriates the proceeds, the bona fide purchaser acquires good title under the Factors Act / Section 108 equivalent.
  • Central National Bank Ltd. v. United Industrial Bank Ltd. AIR 1954 SC 181: The Supreme Court analyzed Section 108 of the Contract Act and Section 27 of the Sale of Goods Act, holding that possession obtained by theft or larceny cannot pass good title, whereas possession obtained by fraud under a voidable contract protects the subsequent innocent purchaser.
Courtroom Practice & Strategic Litigation Guidance:

When defending a purchaser against a true owner claiming conversion, establish that the seller was a recognized mercantile agent entrusted with possession of the goods or documents of title with the owner's initial consent, and that the purchase occurred in the ordinary course of business in good faith.

Section 107 All 266 Sections of Indian Contract Act Section 109