Nemo dat quod non habet
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Nemo dat quod non habet, literally meaning "no one [can] give what one does not have" is a legal rule, sometimes called the nemo dat rule that states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title. This rule usually stays valid even if the purchaser does not know that the seller has no right to claim ownership of the object of the transaction (bona fide).
In American law, a bona fide purchaser who unknowingly purchases and subsequently sells stolen goods will, at common law, be held liable in trover for the full market value of those goods as of the date of conversion. Since the true owner retains legal title, this is true even in a chain of successive bona fide purchasers (ie, the true owner can successfully sue the fifth bona fide purchaser in trover). However, there is a remedy for successive bona fide purchasers. If the jurisdiction recognises an implied warranty that the seller has title to the property (Article 2 of the Uniform Commercial Code (UCC) in the United States), the bona fide purchaser can sue the seller for breach of that implied warranty. There are also other various exceptions traditionally recognised in courts of equity, which likely gave rise to the idea embodied in the modern UCC.
This rule is exemplified in circumstances such as the Holocaust reconciliation movement where property, such as works of art, that was stolen or confiscated by the Nazis is returned to the families of the original owners. Anyone who purchased the art or thought they had ownership are denied any rights over the litigious property due to the nemo dat rule.
There are numerous exceptions to the nemo dat rule. Legal tender, for example, does not adhere to the rule in certain circumstances. If a rogue buys goods from a bona fide merchant, that merchant will not have to return the bills to the true owner. To hold the rule to be otherwise would be disruptive to the economy and prevent the free flow of goods in an economy. The same may be true of other "negotiable" instruments, such as cheques. If a thief A steals a cheque from B and sells it to innocent C, C is entitled to deal with the cheque, and A cannot claim it back from C (though the name appearing on the cheque may affect the validity of such a transfer).
The original owner can obtain protection against the former owner through the doctrine of estoppel (see also, s.21(1) of the Sale of Goods Act 1979 '...unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell). Methods of the estoppel can be by words, by conduct, or by negligence.
Estoppel by words: Representation by a seller through words that he is the true owner or has the owner's authority to sell.
This is illustrated in the case of Henderson & Co v Williams [1895] 1 QB 521, followed by a more recent case Shaw v Commissioner of Metropolitan Police [1987] 1 WLR 1332.
Estoppel by conducts: Farquharson Bros v J King & Co Ltd [1902] AC 325; that decision was upheld in the case of Merchantile Bank of India Ltd v Central Bank of India [1938] AC 287. Central Newbury Car Auctions Ltd v Unity Finace Ltd [1957] 1 QB 371
