advances are made on the security of such documents, the transaction comes, as we shall see, within the provisions of the Factors Act. But as there can still arise cases which are not within that Act, or the other Acts just referred to, it is still necessary in those cases to bear in mind the difference between a bill of lading on the one hand and those documents on the other; for in such cases while the transfer of a bill of lading is equivalent for most purposes to delivery of the goods, the transfer of a dock warrant or delivery order has no such effect. 66 The reason for this difference has been explained thus: -“ A cargo at sea while in the hands of the carrier is necessarily incapable of physical delivery. During this period of transit and voyage, the bill of lading by the law merchant is universally recognised as its symbol, and the indorsement and delivery of "the bill of lading operates as a symbolical delivery of the cargo. Property in the goods passes by such indorsement and delivery of "the bill of lading, whenever it is the intention of the parties that the property should pass, just as under similar circumstances the property would pass by an actual delivery of the goods." But when the goods are on land, there is no reason why the person who receives a delivery order or dock warrant should not at once lodge it with the bailee, and so take actual or constructive possession of the goods. There is, therefore, a very sufficient reason why the custom of merchants should make the transfer of the bill of lading equivalent for most purposes to an actual delivery of possession of the goods, and yet not give such an effect to the transfer of a delivery order or dock warrant.† In cases not governed by the Factors Act, or the Sale of Goods Act, or certain Private Acts of Parliament, this difference, it has been seen, still holds good, and in such cases, therefore, the indorsee of a bill of lading is deemed for most purposes to be in possession of the goods, whereas the indorsee of one of the other documents is not. Consequences of the Difference. Now let me draw your attention to some of the consequences of this difference. Although possession does not, of course, decide the question of ownership, a possessor is, as a general rule, presumed to be absolute owner until the contrary is shown. Possession, therefore, is often a matter of importance and gives rise to special rights and consequences. * Per Bowen, L. J., in Sanders v. Maclean (1883), 11 Q.B.D. at 341. Consequences of the Difference. 39 Under section 4 (1) of the Sale of Goods Act, 1893, which reproduces the 17th section of the Statute of Frauds, a contract for "the sale of any goods of the value of ten pounds or upwards shall not be enforceable by action unless the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment, or "unless some note or memorandum in writing of the contract be "made and signed by the party to be charged or his agent in that "" behalf." If, then, goods of the value of more than £10 are ordered verbally, the question often arises: Has the buyer accepted and actually received them? If he has accepted a bill of lading for them, being in actual receipt of the bill of lading, he is deemed to have actually received the goods, and they have passed out of the possession of the seller.* If, on the other hand, he has merely accepted a warehouseman's warrant for them, he is not deemed to have actually received the goods, and they have not passed out of the possession of the seller.† If then the buyer afterwards repudiates the contract, and is sued by the seller, the buyer, if he has accepted a bill of lading, cannot successfully plead the Statute of Frauds or rather section 4 of the Sale of Goods Act-for he is deemed to be in actual possession of the goods; but if he has only accepted a warrant, he can successfully plead that section, for he is not deemed to be in actual possession of them. Let me point out another consequence of this difference between these two classes of document. So long as the goods are in the seller's possession, he has a lien on them for their price. If, therefore, he indorses a bill of lading to the buyer, as the goods are thereby taken out of the possession of the seller, he has lost his lien. It is true that if the buyer becomes insolvent he will still have a right of stopping the goods in transitu, but that right, as we shall see later on, is quite different from his right of lien. On the other hand, if the seller indorses a dock warrant or delivery order, or warehouse-keeper's certificate to the buyer, until something more takes place-viz., until the warehouseman actually delivers the goods, or consents to hold them for the buyer-they are, as a general rule, deemed still to remain in the possession of the seller, and he therefore retains his lien for the price.§ * Currie v. Anderson (1860), 2 Ellis & Ellis' Reports, 592. See Sale of Goods Act, 1893, s. 39 (1) (a). This rule is not invariable. For example, by the usage of the iron trade warrants for goods deliverable f.o.b. to A, or his assigns, by indorsement thereon, pass to a holder for value free from any seller's lien: Merchant Banking Co. of London v. Phænix Bessemer Steel Co. (1877), 5 Ch. D., 205. Another important consequence of the difference between these various documents arises in cases of bankruptcy. If the seller becomes bankrupt, the question whether the goods are divisible among his creditors, will depend mainly upon whether they were in his possession, order or disposition, under such circumstances that he was the reputed owner. This question will be discussed at length in my next Lecture, when it will be seen that its solution depends upon the kind of document which before the commencement of his bankruptcy the bankrupt has transferred or delivered to the holder.t * Now in drawing attention to some of the consequences of the difference between these various documents, most of the illustrations I have given are cases arising between buyer and seller. Directly you get a stage further, and a third party is introduced, this difference often ceases to operate; for example, if the seller continues after the sale in possession of any of such documents, and sells or pledges them to a person receiving them in good faith and without notice of the previous sale; or, if the buyer obtains with the seller's consent possession of such documents, and sells or pledges them to a person receiving them in good faith and without notice of any lien or other right of the original seller; or, if the sale or pledge of such documents is made by a mercantile agent in the ordinary course of business; then the transaction is governed by the Factors Act, and the difference between the different kinds of document disappears, for they are all documents of title for the purposes of that Act. It is only in some cases, therefore for instance, if advances be made on the pledge of such documents by an agent who is not a mercantile agent as defined by that Act, or by a man who becomes bankrupt that the difference between these various documents will have practical consequences to a banker making advances on such security; but as such cases not unfrequently arise it is necessary not to ignore the principles on which they turn. Private Acts of Parliament of Dock Companies and Warehousemen. One word more before passing away from this subject. I have referred to the legal principles which must prevail in cases not governed by the Factors Act, 1889, the Sale of Goods Act, 1893, and certain Private Acts of Parliament. Now these Private Acts have been passed of late years at the instance of certain Dock * See Bankruptcy, Act, 1883, s 44, (iii). † See Answers to Questions 10, 11 and 12, Lecture III, post, pp. 55-62. Nemo dat quod non habet. 41 Companies or firms of warehousemen enabling them to issue transferable certificates and warrants for the delivery of goods entitling the person named or the last indorsee to the goods specified therein. Some of these Acts provide that "the goods so specified "shall for all purposes be deemed to be his property ";* while other Acts provide that such person "shall have the same right to the possession and property of such goods as if they were de"posited in his own warehouse." I will not trouble you with the precise effect of these enactments beyond pointing out that they seem to go much further than the provisions of the Factors Act, and that before advising on any case of advances made on the security of any warehouse-keeper's certificate or delivery warrant and not falling within the Factors Act, it would be necessary to ascertain whether the particular Dock Company or firm of warehousemen had obtained such a Private Act of Parliament or not. Negotiability of Dock Warrants, etc. One question with regard to the documents we have been considering remains to be answered:-Are they negotiable instruments? We have seen that in cases not governed by the Factors Act or one of the other Acts to which I have been referring, these documents are not regarded as documents of title at all, and in such cases it is clear that they are not negotiable either in the strict, or even in the wide, sense of the term. How far when the case is governed by the Factors Act, they are rendered negotiable by that Act will be considered presently. General Rule of Law as to Transfer of Title to Goods. Before coming to the provisions of the Factors Act, let me say a few words as to the general rules of our law with respect to the title to goods, and the circumstances under which possession will confer title. The general rule of our law is that no one can transfer a better title than he himself possesses. According to the law maxim, Nemo dat quod non habet. To quote the words of Mr. Justice Blackburn: At common law, a person in possession of goods "could not confer on another, either by sale or by pledge, any * See e.g. The London and St. Katharine Docks Act, 1864, 27 and 28 Vict., c. clxxviii, ss. 106, 108. See Mr. A. T. Carter's Article on Dock Warrants, etc., Law Quarterly Review, 1892, Vol. 8, pp. 301, 303-304. 66 "better title to the goods than he himself had. To this general rule "there was an exception of sales in market overt, and an apparent exception where the person in possession had a title defeasible on account of fraud. But the general rule was that, to make either a sale or a pledge valid against the owner of the goods "sold or pledged, it must be shown that the seller or pledger had authority from the owner to sell or pledge, as the case might be. "If the owner of the goods had so acted as to clothe the seller or pledger with apparent authority to sell or pledge, he was at common "law precluded, as against those who were induced bonâ fide to act "on the faith of that apparent authority, from denying that he "had given such an authority, and the result as to them was the same as if he had really given it. But there was no such preclusion as against those who had notice that the real authority was limited."* 66 You will at once see the importance of considering this general rule of law that no one can transfer a better title than he himself possesses, and the necessity for ascertaining what are at the present day the exceptions to it; in other words, what are the circumstances under which the owner of goods will be deemed to have so acted as to clothe the seller or pledger with binding authority to sell or pledge; for until this is known it is unsafe to advance money on any such pledge, unless you know that the pledger either is in fact the owner, or has been actually authorized by the owner to pledge. In the year 1743, the principle was laid down that though a factor had power to sell and thereby bind his principal, yet he could not bind or affect the property of the goods by pledging them as a security for his own debt; † and for many years this principle, although contrary to the law of all the other commercial nations of Europe, and although some eminent Judges expressed their disapproval of it, was acted on in our Courts. A hundred years ago, therefore, if a factor to secure his own debt pledged the goods of his principal to a pledgee who took them in good faith and without knowing that the borrower was not the true owner, the latter could recover them from the pledgee without repaying the loan. History of the Factors Acts. In 1823 an agitation was set on foot by London merchants, bankers, and brokers, with the view of obtaining an immediate * Cole v. North Western Bank (1875). L.R. 10 C.P. at 362-363. |