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Double sales of the same property

Can a person sell the same property to different purchasers - A so-called "double sale"?

On the purely pragmatic level, the answer to the question is – of course a person can (deliberately or negligently) purport to sell the same item twice. I may advertise my motor vehicle for sale, agree to sell it to A, and then while A is at the bank drawing the money to pay me, I may sell the motor vehicle to B.

But what are the legal consequences of my doing so? What is then the legal relationship between the three of us – myself as seller, A and B as unwitting double-purchasers?

Let us assume that the facts are not in dispute. In other words, I do not dispute that I sold the motor vehicle first to A, and thereafter to B.

it is easy to understand that the law is hardly likely to say that, because I had already sold the motor vehicle to A, the contract with B is invalid, with no legal consequences. That would be grossly unfair to B – after all, he entered into a contract with me and is entitled to hold me to it. One of the fundamental principles of our law, inherited from Roman law is – pacta sunt servanda – agreements are to be observed. My contract with B is no less binding than my contract with A.

Ownership does not pass simply by agreement

The starting point in analysing this scenario is the principle that, in our law, ownership in movable property does not pass simply by agreement. Where movable property is sold, ownership will pass from the seller to the purchaser where the three elements are present, namely (1) an agreement of sale; (2) payment of the price in the case of a cash sale, or the provision of credit in the case of a credit sale; (3) delivery of the goods in question to the purchaser.

So, in the scenario outlined above, ownership in the motor vehicle has not passed from myself, as seller, to A, as purchaser, because he has not yet paid for it, and it has also not yet been delivered to him. (The same holds true for B.) In other words, at this point in time, I am still the owner of the motor vehicle. All that A and B have are contractual rights against me.

As seller, I have an obligation to deliver the motor vehicle to the purchaser, in other words, to make it available to the purchaser to remove it. Naturally, I can’t deliver the motor vehicle to A and also to B. And whichever of them can’t get delivery is going to sue me for breach of contract.

Let us assume that B pays me and I hand over (deliver) the motor vehicle to him. A few minutes later, A returns from the bank, tenders the money to me, and I tell him, “Sorry, I have already sold and delivered the motor vehicle to B.”

A will be justifiably annoyed. “I bought the motor vehicle first,” he will insist. There is no doubt that he can sue me for damages for failing to deliver it to him. But assume that A doesn’t want damages – he wants the motor vehicle. Is he entitled, in law, to require B to hand it over to him?

The doctrine of notice

Our law has a simple and logical solution to such double sales by applying the so-called “doctrine of notice” which says as follows: if, at the time when B took delivery of the motor vehicle, he knew that it had been previously sold to A, then B must hand over the motor vehicle to A.

But if B took delivery of the motor vehicle, not knowing of the prior sale to A, then B can keep the motor vehicle, and A’s only remedy is to sue the seller for damages for breach of contract.

These principles were recently affirmed by the Supreme Court of Appeal in Francis Leslie Bowring NO v Vrededorp Properties CC [2007] SCA 80 (RSA) not yet reported.

Strategic lessons

If you wish to purchase movable property, you would be wise to ensure (with your attorney’s assistance) that the deal is done on terms whereby ownership passes immediately to you.

If, thereafter, the seller professes to sell the property to someone else, and perhaps even delivers it to that person, your position is secure. As owner, you are entitled to retake possession of that property, and you can institute legal proceedings to enforce this right, even if the second purchaser has, in good faith, handed over money to the seller.

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