9. Payment of money: transfer of ownership?

Ownership of money can exist, but only in relation to banknotes and coins. These are treated as movable tangible objects the ownership of which can be transferred in the property law sense of the word.²⁵ Money in a bank account, on the other hand, forms an obligation between the bank, who is the debtor and the client who is the creditor. When the client orders his bank to “transfer” € 1,000 to the account of the client’s creditor, the client’s account will be debited and the payee’s account will be credited with the sum of € 1,000. This should not be seen as a transfer of ownership or the assignment of part of the client’s claim on the bank.

When the contract obliging one party to make a payment is void or has been avoided and the payment was in cash, the payment itself, that is, the transfer of the banknotes or coins, may be void as well, depending on the transfer system. The payment is regarded as a legal act of transfer of property. As a result, the coins and banknotes may be revindicated, provided they have not been mixed with other monies so as to make them unidentifiable.²⁶ The problem for the payor in these cases is that usually the monies will be so mixed: only in rare exceptions will the money be kept separate or will the numbers of the banknotes be registe­red. Normally the buyer will have lost ownership of the money because of the principle of specificity.²⁷ He has to rely on a personal claim ex unjustified enrichment.

Nowadays payments are often made by “transferring” money from one bank account to the other. Here Dutch,²⁸ German, French²⁹ and English law³⁰ do not regard the payment as a transfer of ownership: money in a bank account is not regarded as an asset capable of being owned. Strictly speaking no one owns the money in his bank account: it is merely a personal claim of the client against his bank. This becomes evident when the bank is declared insolvent. The account holder, the bank’s client, will be unable to revindicate the money on his bank account from the insolvent bank or the bank’s liquidator in insolvency. So, the creditor of a money claim will rank as an unsecured creditor.

10. Bona fide acquisition

The relevant jurisdictions, French, German, Dutch and English law, do not agree about whether or not third party protection is regarded as original or rather derivative acquisition. In French law third party protection is seen as original acquisition. The principal article on third party protection (art. 2279 c. civ.) is part of a section in the civil code entitled “de quelques prescriptions particulières” (about some special cases of prescription). It is often described as a form of acquisitive prescription without a prescription period (instantaneous prescription).³¹

In Dutch law, on the other hand, acquisition in good faith is regarded as a true transfer, a derivative form of acquisition. Art. 3:86 BW, protecting the acquirer in good faith explicitly provides that despite the fact that the transferor has no right to dispose the transfer is valid under the conditions mentioned in the article. Apart from the transferor having the right to dispose of the asset, all other requirements for a valid transfer should be met. Although the non-owner is the transferor ownership does not pass from him to the third party. The transferor has never been the owner, yet the law enables him to pass ownership from the true owner to the third party. The disposition performed by the non-owner passes ownership of the thing directly from the owner to the third party. In German law the answer to the question whether the acquisition in good faith is derivative or original is controversial.³²

To my own view it should be regarded as a transfer, a derivative acquisition, if the acquisition underlies all common requirements for a valid transfer. In German and Dutch law the provisions on the protection of bona fide third parties protect only against the transferor not having the right to dispose; they do not protect against other defects in the transfer. If certain formalities have to be performed in order to transfer ownership these formalities are also mandatory if the transferor has no right to dispose of the asset.

If in a causal transfer system the contract of sale underlying the transfer is void or is avoided, the transfer cannot be valid. If third party acquisition were original, it would lead to the strange result that the transferee would acquire ownership despite the sales contract being void. A transfer by an owner based on a void contract would not pass ownership but a transfer by a non-owner would.

Another example is the protection against real rights burdening the thing acquired. If the buyer of a thing knows that the thing is burdened with a right of pledge, but he does not know that the thing does not belong to the seller, he may acquire ownership but burdened with a right of pledge. He does not deserve protection against the pledge which he knew existed. If the acquisition were original, the pledge would inevitably lapse and the bona fide purchaser would acquire the thing free from any pre-existing rights.