The Sale of Goods Act makes provision in one section (Ont. s. 26; U.K. s. 25) for two different cases of ostensible ownership, namely, that of a person remaining in possession of goods or of the documents of title after having sold the goods (sub-s. 1), and that of a person who having bought or agreed to buy goods obtains possession of the goods or of the documents of title (sub-s. 2). Under either sub-section the general principle is that the ostensible owner, that is, the person who is in possession of goods or documents in the circumstances mentioned, may give a good title to a third party who takes in good faith without notice.

In Ontario the principle of sub-s. 1 is reinforced by the Bills of Sale and Chattel Mortgages Act, and that of sub-s. 2 by the Conditional Sales Act, further mentioned below.

The section of the Sale of Goods Act now in question (Ont. s. 26; U.K. s. 25) provides:

26. - (1) Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same.

(2) Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.

(3) In this section the term "mercantile agent" shall mean a mercantile agent having, in the customary course of his business as such agent, authority either to sell goods or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.

The definition of "mercantile agent" is copied from the Factors Act, R.S.O. 1914, c. 137.

In the United Kingdom sub-s. 3 reads as follows:

25. - (3) In this section the term "mercantile agent" has the same meaning as in the Factors Acts. The definition of "mercantile agent" in the Factors Act 1889, is the same as that contained in the Ontario Factors Act, set out above.

In the United Kingdom the Factors Act, 1889, contains (in ss. 8 and 9) provisions identical with sub-ss. 1 and 2, with the addition of the words "or under any agreement for sale, pledge or other disposition thereof" after the words "other disposition thereof," in each case. In Ontario the corresponding provisions of the Factors Act have been repealed, as it seemed useless to have similar provisions on the same subject in two different statutes.

The words "having . . . agreed to buy" in sub-s. 2 have been the subject of several decisions. They do not cover the case, of a so-called buyer having a mere option to complete the purchase by payment of instalments of the purchase-money, but they do cover the case of a buyer who is under an obligation to complete the purchase.

Helby v. Matthews, [1895] A.C. 471; Belsize Motor Supply Co. v. Cox, [1914] 1 K.B. 244, and cases cited; Marten v. Whale, [1917] 2 K.B. 480.

In fulfilment of a contract for the sale of a certain quantity of copper the sellers forwarded to the buyers a bill of lading endorsed in blank for copper shipped on the defendant's ship, together with a draft for the price of the copper for acceptance. The buyer, who was insolvent, did not accept the draft, and delivered the bill of lading to the plaintiffs in fulfilment of a contract which he had, previously to obtaining possession of the bill of lading, made for the sale to them of copper, and they thereupon paid him the price of the copper. The plaintiffs took the bill of lading in good faith, and without notice of the rights of the original sellers in respect of the copper. The sellers stopped the copper in transitu. In an action by the plaintiffs against the defendant for nondelivery of the copper, it was held that the buyer having obtained possession of the bill of lading with the consent of the sellers, the transfer of it by him to the plaintiffs gave them a good title to the copper under sub-s. 2 of s. 25 [Ont. s. 26] of the Sale of Goods Act, and that the sellers had no right to stop it in transitu.

Cahn v. Pockett's Bristol Channel Steam Packet Co., [1899] 1 Q.B. 643. In the United States the principle of the decision in Cahn v. Pockett's Bristol Steam Packet Company is expressed in s. 20 of the Uniform Sales Act: see chapter 3, 38. The Uniform Sales Act, s. 25, is to the same effect as sub-s. 2 of the section of the Sale of Goods Act now under consideration (Ont. s. 26; U.K. s. 25), and also contains the following provision :

26. Where a person having sold goods continues in possession of the goods, or of negotiable documents of title to the goods, and such retention of possession is fraudulent in fact or is deemed fraudulent under any rule of law, a creditor or creditors of the seller may treat the sale as void. In Ontario the Sale of Goods Act provides:

58. - (2) Nothing in this Act shall affect enactments relating to conditional sales, bills of sale or chattel mortgages, or any enactment relating to the sale of goods which is not expressly repealed by this Act.

In the United Kingdom the corresponding provision (s. 61, sub-s. 3) omits the references to conditional sales and chattel mortgages.

In Ontario the Conditional Sales Act, R.S.O. 1914, c. 136, provides:

3. - (1) Where possession of goods is delivered to a purchaser, or a proposed purchaser or a hirer of them, in pursuance of a contract which provides that the ownership is to remain in the seller or hirer until the payment of the purchase price or consideration money or part of it, as against a subsequent purchaser or mortgagee claiming from or under the purchaser, proposed purchaser or hirer, without notice in good faith and for valuable consideration, such provision shall be invalid, and such purchaser, or proposed purchaser or hirer, shall be deemed the owner of the goods unless certain conditions are fulfilled, including the existence of a contract in writing, and, in most cases, the filing of a copy of the contract in the proper office within the time limited by the statute.

The Conditional Sales Act does not enlarge the common law rights of those who allow their goods out of their hands, but it prevents all who have not complied with its conditions from asserting certain common law rights.

Canadian Westinghouse Co. v. Murray Shoe Co., 1914, 31 O.L.R. 11, 20 D.L.R. 672; cf. Stock v. Meyers & Cook. 1919, 46 O.L.R. 420, 51 D.L.R. 328; Commercial Finance Corporation v. Stratford, 1920, 47 O.L.R. 392. Under the Bills of Sale and Chattel Mortgages Act, R.S.O. 1914, c. 135, if a person remains in possession of goods after having made a bill of sale or a chattel mortgage of them, or after having sold them or agreed to make a sale or mortgage of them, the mortgage or sale or agreement for mortgage or sale is null and void as against creditors of the mortgagor or seller, and against subsequent purchasers or mortgagees in good faith for valuable consideration, unless the mortgage or sale, or agreement for mortgage or sale, is evidenced by a written document, and unless this document, accompanied by certain affidavits prescribed by the statute, is registered in the proper office within the time limited by the statute.

The Bills of Sale and Chattel Mortgages Act further provides :

11. This Act shall extend to a mortgage or sale of goods and chattels which may not be the property of or in the possession, custody or control of the mortgagor or bargainor or any person on his behalf at the time of the making of the mortgage or sale, and notwithstanding that such goods or chattels may be intended to be delivered at some future time, or that the same may not at the time of the making of the mortgage or sale be actually procured or provided or fit or ready for delivery, or that some act may be required for the making or completing of such goods and chattels or rendering the same fit for delivery.

In all the provinces of Canada in which the Sale of Goods Act is in force there are statutes similar to the Conditional Sales Act and the Bills of Sale and Chattel Mortgages Act above mentioned. There exists, however, in these various provincial statutes a bewildering diversity which precludes any attempt to write a commentary on them here.