22 August 2022

Selling Third Party's Ownership

Andersen in Egypt


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The sale of a third party's ownership is an act exercised on someone else's financial rights unlawfully; wherein an individual sells a specific movable /immovable property belonging to a third party...
Egypt Corporate/Commercial Law
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The sale of a third party's ownership is an act exercised on someone else's financial rights unlawfully; wherein an individual sells a specific movable /immovable property belonging to a third party without being an agent or guardian for him/her in return for monetary consideration, provided the availability of the contracted movables/ immovables at the time of the conclusion of the contract.

In general, a sale contract determines the scope of responsibility between its parties, an obligation arises solely on the contracting parties, without creating an obligation against third parties. Accordingly, the legislator may decide the permissibility of nullifying the sale contract of the third party's ownership due to lack of capacity.

Although there are many illegal ways a disposer can sell a third party's ownership or exploit them beyond the limits of the authority permitted by the asset's legal owner, if such legal owner approves this aforementioned sale, hence, the sale will be considered legal.

Generally, it is known that the registration of the sale contract transfers ownership to the buyer only if the seller is the actual owner of the asset in question, however, it should be noted that the legislator has allowed the buyer, to act in good faith, to rescind the contract in his/her favor if the seller fails to fulfill its obligation.

We refer herein to one of the cases initiated by our office, where the competent court ruled the validation of the sale on behalf of the legal owner that has been concluded by its assignee, therefore the sale falls within the scope of authority.

In this case, (A, A) had bought a property from (M, H), and then a dispute arose regarding the validity of the seller's title deed which was allegedly issued on the basis of a forged Power of Attorney, ultimately resulting in the seller's conviction. This prompted the buyer, acting in good faith, to try and settle the dispute amicably with the legal owner of the property, and both parties have reached an agreement according to which the legal owner approved the sales contracts issued by the seller in addition to an agreed financial settlement. As well, in such agreement, the legal owner has acknowledged that he will not expose the buyer to any compensatory and/or legal liability.

After the owner's agent signed the agreement contract (with a special power of attorney), the legal owner later returned and disputed the agent's sale and its enforceability towards him, stating that the agreement was unfair and the owner was being deceived by the agent.

Maher Milad Iskander, the buyer's lawyer, requested the dismissal of the case and also requested the validity of the sale conducted by the assignee to the buyer as the legal owner has approved the sale, thus making the sale valid and effective. This, in turn, nullifies the argument concerning the invalidity of the agreement, since the disposition falls within the scope of the assignee's authority.

Link to case

To conclude, this article aims to highlight that the legislator gives the legal owner the sole authority, to authorize the disposal of an asset, or to invalidate it. If the owner approves the sale, the contract becomes valid and if he does not approve it, the act will not be enforceable against him. Therefore, the invalidity or non-enforcement of the disposal is not a matter of public order but rather exists for the benefit of the stakeholder.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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