§ 163. Agreement.
We have already considered the general theory of agreement as a title of right. It will be remembered that we used the term to include not merely contracts but all other bilateral acts in the law, that is to say, all expressions of the consenting wills of two or more persons directed to an alteration of their legal relations. Agreement in this wide sense is no less important in the law of property than in that of obligations.
As a title of proprietary rights in rem, agreement is of two kinds, namely assignment and grant. By the former, existing rights are transferred from one owner to another; by the latter, new rights are created by way of encumbrance upon the existing rights of the grantor. The grant of a lease of land is the creation by agreement, between grantor and grantee, of a leasehold vested in the latter and encumbering the freehold vested in the former. The assignment of a lease, on the other hand, is the transfer by agreement of a subsisting leasehold from the assignor to the assignee.
Agreement is either formal or informal. We have already sufficiently considered the significance of this formal element in general. There is, however, one formality known to the law of property which requires special notice, namely, the delivery of possession. That traditio was an essential element in the voluntary transfer of dominium was a fundamental principle of Roman law. Traditionibus et usucapionibus dominia rerum, non nudis pactis transferuntur.[[444]] So in English law, until the year 1845, land could in theory be conveyed in no other method than by the delivery of possession. No deed of conveyance was in itself of any effect. It is true that in practice this rule was for centuries evaded by taking advantage of that fictitious delivery of possession which was rendered possible by the Statute of Uses. But it is only by virtue of a modern statute,[[445]] passed in the year mentioned, that the ownership of land can in legal theory be transferred without the possession of it. In the case of chattels the common law itself succeeded, centuries ago, in cutting down to a very large extent the older principle. Chattels can be assigned by deed without delivery, and also by sale without delivery. But a gift of chattels requires to this day to be completed by the transfer of possession.[[446]]
In this requirement of traditio we may see a curious remnant of an earlier phase of thought. It is a relic of the times when the law attributed to the fact of possession a degree of importance which at the present day seems altogether disproportionate. Ownership seems to have been deemed little more than an accessory of possession. An owner who had ceased to possess had almost ceased to own, for he was deprived of his most important rights. A person who had not yet succeeded in obtaining possession was not an owner at all, however valid his claim to the possession may have been. The transfer of a thing was conceived as consisting essentially in the transfer of the possession of it. The transfer of rights, apart from the visible transfer of things, had not yet been thought of.
So far as the requirement of traditio is still justifiably retained by the law, it is to be regarded as a formality accessory to the agreement, and serving the same purposes as other formalities. It supplies evidence of the agreement, and it preserves for the parties a locus poenitentiae, lest they be prematurely bound by unconsidered consent.
It is a leading principle of law that the title of a grantee or assignee cannot be better than that of his grantor or assignor. Nemo plus juris ad alium transferre potest, quam ipse haberet.[[447]] No man can transfer or encumber a right which is not his. To this rule, however, there is a considerable number of important exceptions. The rule is ancient, and most of the exceptions are modern; and we may anticipate that the future course of legal development will show further derogations from the early principle. There are two conflicting interests in the matter. The older rule is devised for the security of established titles. Under its protection he who succeeds in obtaining a perfect title may sit down in peace and keep his property against all the world. The exceptions, on the contrary, are established in the interests of those who seek to acquire property, not of those who seek to keep it. The easier it is to acquire a title with safety, the more difficult it is to keep one in safety; and the law must make a compromise between these two adverse interests. The modern tendency is more and more to sacrifice the security of tenure given by the older rule, to the facilities for safe and speedy acquisition and disposition given by the exceptions to it.
These exceptions are of two kinds: (1) those due to the separation of legal from equitable ownership, and (2) those due to the separation of ownership from possession. We have seen already that when the legal ownership is in one man and the equitable in another, the legal owner is a trustee for the equitable. He holds the property on behalf of that other, and not for himself; and the obligation of this trusteeship is an encumbrance upon his title. Yet he may, none the less, give an unencumbered title to a third person, provided that that person gives value for what he gets, and has at the time no knowledge of the existence of the trust. This rule is known as the equitable doctrine of purchase for value without notice. No man who ignorantly and honestly purchases a defective legal title can be affected by any adverse equitable title vested in any one else. To this extent a legal owner can transfer to another more than he has himself, notwithstanding the maxim, Nemo dat quod non habet.
The second class of exceptions to the general principle includes the cases in which the possession of a thing is in one person and the ownership of it in another. Partly by the common law, and partly by various modern statutes, the possessor is in certain cases enabled to give a good title to one who deals with him in good faith believing him to be the owner. The law allows men in these cases to act on the presumption that the possessor of a thing is the owner of it; and he who honestly acts on this presumption will acquire a valid title in all events. The most notable example is the case of negotiable instruments. The possessor of a bank-note may have no title to it; he may have found it or stolen it; but he can give a good title to any one who takes it from him for value and in good faith. Similarly mercantile agents, in possession of goods belonging to their principals, can effectively transfer the ownership of them,[[448]] whether they are authorised thereto or not.[[449]]