Terms of supply – Retention of title in goods supplied
Jun 4, 2012
It is important that sellers have written business terms and efficient credit control procedures.
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It is important that sellers have written business terms and efficient credit control procedures.
Terms can include a retention of title clause designed to protect the seller by preventing title in the goods passing until the buyer has paid.
Such a clause can also put the seller in a better position than other creditors if the buyer becomes insolvent.
There can still be problems if the buyer sells on the goods and this sub-sale is expressly or impliedly (perhaps by prior conduct) authorised by the seller. If the goods are sold on to a purchaser without knowledge of the retention of title and for proper payment before the right to possession is exercised the seller will not be able to recover the goods as re-possessory rights will be extinguished.
Where the goods supplied are incorporated into another product (for example raw materials or components) it is unlikely that the court would allow re-possession. The goods have lost their original identity as a result of this transformation and retention of title does not survive.
A properly drafted retention of title clause is not a substitute for vetting customers and good credit control systems and such a clause can be challenged. However, it can be useful and should be part of your terms.
If you would like us to review your terms with you please contact us. We are happy to work on agreed fixed fees for such work.
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