Section 27 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 27 opens the sub-chapter "Transfer of title". Its main rule is that where goods are sold by someone who is not the owner and who does not sell with the owner's authority or consent, the buyer acquires "no better title to the goods than the seller had". There are two exceptions: where the owner is, by his conduct, precluded from denying the seller's authority to sell, and, by the proviso, a sale by a mercantile agent in possession with the owner's consent.
Where goods are sold by a person who is not the owner and who does not sell under the authority or with the consent of the owner, the buyer acquires no better title than the seller had, unless the owner is by his conduct precluded from denying the seller's authority to sell. Proviso: a sale by a mercantile agent who is, with the owner's consent, in possession of the goods or a document of title, acting in the ordinary course of business, is as valid as if expressly authorised, provided the buyer acts in good faith and has no notice that the seller has no authority.
Reading note
This article follows the consolidated text of the Act consulted (latest amendment shown: Act 28 of 1993); later amendments should be checked in the official text. The rule is sometimes called by a Latin tag; the tag is not in the text and the rule is explained here from the words of the section. A "mercantile agent" is defined in section 2(9) and a "document of title to goods" in section 2(4); see our article on those definitions. Buyers and lenders who deal with sellers that do not own what they sell often need help when the title is challenged; our legal dispute resolution team handles those disputes.
The opening words
The section opens "Subject to the provisions of this Act and of any other law for the time being in force", so it is subject to the Act and to any other law in force. The text names no such law, and this article names none.
The main rule: no better title than the seller had
The facts that trigger the rule are:
- goods are sold by a person who is not the owner; and
- that person does not sell under the authority or with the consent of the owner.
The result: the buyer "acquires no better title to the goods than the seller had". Example (the writer's own, not printed in the Act): Rohit is given a laptop by Sana to deliver to a repair shop. Rohit sells the laptop to Dev, who pays. Rohit was not the owner and had neither authority nor consent to sell. Under section 27's main rule Dev acquires no better title than Rohit had.
First exception: the owner's conduct
The rule applies "unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell". The words "by his conduct" and "precluded from denying" are central. If the owner has behaved in a way that bars him from saying the seller had no authority, the buyer's position is better than the main rule gives. The text does not list the kinds of conduct; it states the test in those words. For the general law of a principal who induces a belief in the authority of an agent, see Sections 237-238 of the Indian Contract Act, 1872; under section 3 of this Act the unrepealed provisions of that Act continue to apply so far as they are not inconsistent.
Example (the writer's own): Anil Brothers leaves its stock in the showroom of Mehta Dealers, a business that sells similar goods, and allows a board to be put up saying "Mehta Dealers: sole sellers of Anil Brothers' range". Mehta sells a unit to Rekha. Anil Brothers' conduct may preclude it from denying Mehta's authority to sell, which is the exception the section describes.
The proviso: mercantile agent in possession
"Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has not authority to sell."
The conditions, taken together:
| Requirement | Text |
|---|---|
| Who sells | a mercantile agent (section 2(9)) |
| Possession | with the consent of the owner, in possession of the goods or of a document of title |
| Manner of sale | acting in the ordinary course of business of a mercantile agent |
| Buyer | acts in good faith and has no notice, at the time of the contract, that the seller has no authority to sell |
| Result | the sale is as valid as if the agent were expressly authorised by the owner |
All of these must be met.
Example (the writer's own): Kaveri Textiles hands its stock of sarees to Mohan Commission Agents, who regularly sell goods on commission for several traders. Mohan sells a lot to Hina Retail in the normal way. Hina Retail knows nothing about any limit on Mohan's authority. The sale is as valid as if Kaveri Textiles had expressly authorised it; had Hina Retail been told otherwise, the proviso would not apply.
For the Contract Act on agency, see agent and principal under Section 182 and how an agent's authority may be express or implied under Section 186.
Section 27 compared with its neighbours
| Section | Who sells | Buyer's position |
|---|---|---|
| 27 (main rule) | non-owner without authority or consent | no better title than the seller had |
| 27 (exception) | owner precluded by conduct from denying authority | the main rule does not apply |
| 27 (proviso) | mercantile agent in possession with the owner's consent | sale valid if in ordinary course and buyer in good faith without notice |
| 28 | one of several joint owners in sole possession by permission | property transferred to a good-faith buyer without notice |
| 29 | seller under a voidable contract not yet rescinded | good title to a good-faith buyer without notice |
| 30 | seller or buyer in possession after sale | later dispositions in good faith without notice take effect as if authorised |
Sections 28 to 30 are explained in Sections 28-29 and in the article on section 30.
Practical steps
- Check the seller's title before paying, and ask an agent for authority in writing.
- Keep records of what you were told at the time of the contract; notice of lack of authority defeats the proviso.
For owners, the lesson is not to hold out others as sellers unless authority is intended, and to put limits on an agent's authority in writing.
Need help with a title dispute over goods?
If you have bought goods and the real owner has turned up, or your goods were sold by someone you trusted, our team can advise you through legal dispute resolution on the position under the Act and on the next step.
Key takeaways
- Main rule: a buyer from a non-owner without authority or consent acquires no better title than the seller had.
- Exception: the owner is precluded by his conduct from denying the seller's authority.
- Proviso: a mercantile agent in possession with the owner's consent, selling in the ordinary course of business to a buyer in good faith without notice, gives a valid sale.
- Good faith and absence of notice at the time of the contract matter.
- The whole section is subject to the Act and any other law for the time being in force.
Read next
- Section 2 of the Sale of Goods Act, 1930: delivery, document of title, mercantile agent and insolvent
- Sections 28-29 of the Sale of Goods Act, 1930: sale by a joint owner and by a seller with voidable title
- Section 30 of the Sale of Goods Act, 1930: seller or buyer in possession after sale
- Section 182 of the Indian Contract Act, 1872: agent and principal defined
Disclaimer: Based on the consolidated text of the Sale of Goods Act, 1930 consulted on 2 October 2026, whose latest amendment shown is Act 28 of 1993. It explains the words of the statute only; later amendments and the way courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.