Week 3 - Transfer of goods / 3rd party protection

Ways to acquire ownership?

1. Original acquisition = new property right comes into existance

2. Derivative acquisition = property right does not start fresh, but it is derived directly from a previous owner

How do legal systems structure transfers?

3 core elements involved:

1. Right of disposal

2. Legal basis

3. Delivery

right of disposal

legal authority to transfer ownership over a good

what is the general rule and the exception to right of disposal

• general rule = usually the owner holds the right of disposal

• exception =

  • non-owners with right of disposal

  • a person who does not own the property can sometimes be granted the legal power to transfer ownership

example of a non-owner with right of disposal

• bankrupcy trustee

• is not owner of debtors assets

• but holds the authority to dispose of them

causa traditionis

legal basis

3 elements required for transfer and how they differ in jurisdictions

• depending on the jurisdiction 2 or 3 of these elements are required for a valid transfer

• right of disposal is generally essential

Dutch law which elements required for transfer (+art)

• art. 3:84 DCC

1. Legal title

2. Delivery

3. Right to dispose

Distinctions in transfer systems

1. Consensual system vs tradition system

2. Abstract system vs casual system

consensual system

• ownership passes at the very moment the contract of sale is concluded

• solo consensu rule = no physical delivery required to move ownership

example of consensual system

France

France requirements for transfer of ownership (+art)

• art. 1196(1) FCC

1. Legal basis

2. Right to dispose

Tradition system

• obligation or contract alone does not transfer ownership

• ownership transfers when delivery (traditio) is carried out

example of tradition system

• NL

• Germany

Germany transfer of ownership requirements (+art)

• §929 BGB

1. Right of disposal

2. Delivery

why is no legal basis required in Germany transfer of ownership?

• because Germany uses an abstract system

• underlying sales contract is kept separate from actual property transfer

Convergence between consensual and traditional systems

• In theory, consensual systems move ownership by contract alone

• In practice, to protect third parties, consensual systems (like France) make possession the decisive factor whenever third-party rights conflict (double sale)

• Thus, functional outcomes across consensual and traditional systems are nearly identical = the good-faith buyer who takes possession first wins

explain the double sale problem and how it relates to convergence of consensual and traditional systems

Scenario:

Imagine Seller S sells a specific movable asset to Buyer B1 on Monday

S does not deliver it

On Tuesday, S sells the exact same good to Buyer B2 and delivers physical possession to B2 (who is in good faith)

following strict consensual theory

• ownership passess with conclusion of contract

• hence B1 becomes the owner on Monday, and S does not have the right of disposal to sell the good to B2

• B1 should easily win and take the painting back from B2

In practice

• good faith buyer who has possession first gains ownership

2 successive buyers french law

• art. 1198(1) FCC

• 2 successive buyers purchase same good

• buyer who takes physical possession first in good faith is preferred

• even if their contract was concluded second

casual system and contract avoidance

• requires a valid legal ground (causa traditionis)

• if underlying contract is null or avoided, the transfer is invalidated

• ownership remains with the original party

abstract system and contract avoidance

• legal transfer of property is strictly separated and independent from underlying sales contract

• ownership regardless of contract defects

• avoiding contract does not revert ownership

• personal claim for unjustified enrichment

are consensual systems casual and/or abstract?

• consensual systems are inherently casual

• because a consensual system transfers ownership through contract

• if there is no valid contract = there is no transfer of ownership

are traditional systems casual and/or abstract

• traditional systems can be both casual and abstract

• traditional casual = if validity of transfer depends on contract

• traditional abstract = if transfer is valid regardless of contract defects

what type of system is NL

• traditional + causal = if validity of transfer depends on contract

• art. 3:84 DCC = delivery + valid title

• if title fails the ownership does not pass

What type of system is Germany

• abstract + traditional = if transfer is valid regardless of contract defects

• §929 BGB = german law separates the obligation contract and property transfer

• even if no valid underlying sales contract, transfer remaians intact

• avoiding sales contract does not automatically revert ownership to seller

• instead re-transfer based on unjustified enrichment

what are the exceptions to German abstract system

• narrow exception where defects affect both contract and the transfer

• fraud and duress

• abstraction rules are default law (ius dispositivum) = parties can contractually agree to make their transfer casual

what type of system is france?

• casual + consensual

possession

physical control, distinct from legal right of ownership

why is possession important?

• serves as requirement for delivery of movables

• creates presumption of ownership

• forms the basis for acquisitive prescription

acquisitive prescription

if someone holds continuous possession of property for long enough, the law eventually turns that physical state into legal ownership

types of possession

1. direct possession

2. Indirect possession

direct possession

person has immediate, actual physical power over object

indirect possession

person exercises control over an object through another person who has direct custody

types of possessors in the DCFR

1. owner-possessor

2. limited right possessor

3. possession agent

owner-possessor

• art. VIII - 1:206

• person who has physical control over a good with intention of holding an exercising control over it as an owner

limited right possessor

• art. VIII - 1:207

• person who exercises physical control over a good based on specific limited property right or contractual right

possession agent

• art. VIII - 1:208

• person who maintains physical control over a thing strictly on behalf of + subject to direct control / instruction of another person

delivery in DCFR

art. VIII - 2:104

delivery alternatives in DCFR

art. VIII - 2:105

transfer without delivery in DCFR

art. VIII - 2:101

which principle does right of disposal rest on

• nemo dat principle

• no one can transfer a greater right than they have themselves

transfer of ownership without right to dispose DCFR

• art. VIII - 3:101 good faith requirements

• 3rd party protection to safeguard good faith buyers