Mercantile agent
Also called: Factor
Under Section 2(9) of the Sale of Goods Act, an agent having, in the customary course of business, authority to sell goods, consign them for sale, buy goods, or raise money on their security.
Explained
Section 2(9) of the Sale of Goods Act, 1930 defines a mercantile agent as a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods. The test is the customary course of his business, not the authority given in a particular transaction. The Explanation to Section 178 of the Indian Contract Act, 1872 adopts the same meaning.
The term matters because it marks an exception to the rule that no one can pass a better title than he has. The proviso to Section 27 of the Sale of Goods Act provides 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 is as valid as if he were expressly authorised by the owner, provided the buyer acts in good faith and has no notice, at the time of the contract, that the seller has no authority to sell.
Section 178 of the Contract Act applies the same rule to pledges. A pledge made by a mercantile agent in possession of goods or documents of title with the owner's consent, acting in the ordinary course of business of a mercantile agent, is as valid as if expressly authorised, provided the pawnee acts in good faith and without notice of the pawnor's want of authority. Section 178A deals separately with a pawnor in possession under a contract voidable under Section 19 or 19A.
The protected transferee must satisfy each condition: the agent is a mercantile agent, his possession is with the owner's consent, he acts in the ordinary course of business of a mercantile agent, and the buyer or pawnee is in good faith without notice. Examiners test these conditions and the relation of the rule to nemo dat quod non habet.
What the law says
(9) “mercantile agent” means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods;
Clause (9) defines mercantile agent
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.
Sale by a mercantile agent in possession with the owner's consent
Explanation.—In this section, the expressions “mercantile agent” and “documents of title” shall have the meanings assigned to them in the Indian Sale of Goods Act, 1930 (3 of 1930).
Pledge by mercantile agent
When the pawnor has obtained possession of the goods pledged by him under a contract voidable under section 19 or section 19A, but the contract has not been rescinded at the time of the pledge, the pawnee acquires a good title to the goods, provided he acts in good faith and without notice of the pawnor’s defect of title.]
Pledge by person in possession under voidable contract
Example
For example, O leaves his car with D, a dealer who customarily sells cars on commission, for D to show to buyers. D sells it in the ordinary course of his business to B, who pays in good faith without notice of any limit on D's authority. B gets good title against O under the proviso to Section 27.
For the exam
- Defined in Section 2(9) SGA; adopted by the Explanation to Section 178 Contract Act.
- Possession of goods or documents of title must be with the owner's consent.
- The agent must act in the ordinary course of business of a mercantile agent.
- The buyer or pawnee must act in good faith without notice of want of authority.
- An exception to nemo dat under the proviso to Section 27 SGA.
74 questions in the Law Maker question bank use this term. Practise Partnership and Sale of Goods Acts questions
Related terms
- Nemo dat quod non habetA person cannot transfer a better title than he himself has. In Indian law it is embodied in Section 27 of the Sale of Goods Act, 1930, subject to listed exceptions protecting good faith buyers.
- AgentA person employed to do any act for another, or to represent another in dealings with third persons; the person represented is the principal. Section 182 of the Indian Contract Act, 1872.
- PledgeThe bailment of goods as security for payment of a debt or performance of a promise (Section 172 of the Contract Act). The bailor is called the pawnor and the bailee the pawnee.
- SellerA person who sells or agrees to sell goods. Section 2(13) of the Sale of Goods Act, 1930. For the unpaid seller's rights, 'seller' also includes a person in the position of a seller (Section 45(2)).
- BuyerA person who buys or agrees to buy goods. Section 2(1) of the Sale of Goods Act, 1930; the buyer of immovable property has rights and duties under Section 55 of the TPA.
- GoodsUnder Section 2(7) of the Sale of Goods Act, 1930, every kind of movable property other than actionable claims and money, including stocks and shares, growing crops and things to be severed from land.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.