Why are stolen goods that are sold to a bona fide purchaser returned to the original...

Why are stolen goods that are sold to a bona fide purchaser returned to the original owner, but goods that are obtained by fraud that are sold to bona fide purchasers stay with the purchasers? Explain and justify the difference.

Expert Solution

A fundamental principle of common law is that an person can not transfer a better title than she has, and a buyer may obtain no better title than the seller's. A thief has no title in stolen goods, and a person who buys from the thief won't get title.

A bona fide buyer is a person who has purchased property for sale without warning of any defects in the seller's title. If a seller suggests to a buyer that it has ownership or authority to sell a specific item, then the seller is prevented (stopped) from refusing these representations if the buyer resells the property for sale to a bona fide buyer without knowledge of the rights of the true owner. Such an estoppel did not apply in common law when an owner took an item of that form of goods to a dealer for services or repairs and the dealer sold the chattel unjustly. Nevertheless, under these situations the bona fide buyer is now covered by the Uniform Commercial Code (UCC).

A buyer who uses false claims to compel a sale acquires a voidable title from the seller. A voidable title is one that the seller can, at his option, vacate upon discovery of the buyer's fraud. The seller has the right to move a good title without notice of the outstanding equity to a bona fide buyer for the interest. The voidable title rule applies only in cases where the owner is compelled, as a result of fraud or deceit, to part with title, not merely with ownership.

Rahul Sunny answered 8 months ago

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