Do contracts transfer rights?
24 September 2023 — A law student had asked whether contracts transferred rights.
Disclaimer: This article is a reproduction of a Discord post I wrote in an informal capacity and thus will not have been fact-checked. Read this article with a critical lens (like you should with anything on the internet).
I think using a comparative example first is helpful. Under German law, the answer is clear: contracts don't transfer rights.
Under German law, a contract to give someone something (Verpflichtungsgeschäft)1 is entirely separate from the agreement which effects a change of ownership title (Verfügungsgeschäft). This is a fundamental principle of German property law, known as Trennungsprinzip (principle of separation).
The reason why I mention German law (which is a civil law jurisdiction) is because it is often used as a case study for the common law's contrary approach. The argument goes that common law contractual obligations to give an item cause the transfer of property rights. The two are linked — unlike German law, which explicitly separates the two.
This view is controversial because there are cases (at least in an English law context) where this view of contract transfers title/property rights is tested.
For example in Singh v Ali [1960]:
A sells B a truck.
A hands over B the truck.
B fails to obtain a haulage licence required under statute law. This means that the truck is still registered under A’s name.
B and A fall out.
A comes and takes the truck.
B successfully sues A for trespass to goods, despite the contract between A and B being void for illegality (you cannot sell a truck without the relevant permits under statute law).
If a contract did transfer rights, it would follow that there was no contract (because it was void). Accordingly, B would not have any rights to that lorry.
As a result, B should not have been able to successfully sue for trespass to goods because they didn't have property rights over it.
The fact that this case happened anyway suggests that there are cases that suggest these things are separate.
Academics that support the “contract transfer rights” theory often have responses to this (to the effect that these cases were wrongly decided). But this continues to be debated, at least in common law circles.
Yes, Germans really do love their long words.