Folkes v King

Facts

• The plaintiff owned a motor car and delivered it to a mercantile agent for sale.
• He instructed the agent not to sell below a stated minimum price.
• The agent had, from the time he obtained possession, a fraudulent intention to sell and misappropriate the proceeds.
• He sold the car to the defendant at a figure below the authorised minimum.
• The defendant bought in good faith and without notice of any want of authority.
• The agent misapplied the proceeds. The owner sued the buyer for the car.

Issue

1. Whether a sale by a mercantile agent below the authorised price, where possession had been obtained with a fraudulent intention, passed a good title to a buyer in good faith.

Held

• The Court of Appeal held that the buyer obtained a good title. The statutory protection turns on the owner having consented to possession by the mercantile agent, which he had. It is immaterial that the agent harboured a fraudulent intention when he obtained possession, since consent to possession was nonetheless given and the goods did not come to him by theft. Nor did the breach of the price limitation matter: that was a restriction between owner and agent, and the sale remained one made in the ordinary course of the agent's business, so a buyer without notice was protected.

Ratio Decidendi

The exception protecting a buyer from a mercantile agent rests on the owner's voluntary act in entrusting possession to a person who deals in such goods. Once that risk is assumed, internal limitations on the agent's authority and his private dishonesty are matters between owner and agent, and cannot be visited on an honest buyer.