A retention of title clause creates an important remedy for a supplier who has supplied items for which they have not yet received payment, allowing the supplier the right to recover the goods at any time whilst payment is outstanding.
Importantly, if title to the goods does not pass to the buyer, the supplier cannot enforce its proprietary rights to the property in the event that the buyer enters an insolvency procedure.
For more information on retention of title claims, call our team of professional solicitors today on 0333 323 5292. Alternatively, you can fill in our online form and we will get in touch with you.
How do you determine of a retention of title clause is valid?
There are a number of issues which require consideration before it is possible to determine whether a Retention of Title clause is valid and enforceable. A summary of the main issues is as follows:
- The clause will ordinarily be contained in the supplier’s trading terms and conditions however, it is still necessary to show that these terms and conditions applied to the supply contract. This involves considering the way in which the contract between the parties was formed, and the terms which applied to that contract.
- Once it is established the clause applied, the drafting of the clause is considered. A common retention of title clause will be drafted to prevent to the goods supplied from passing until “all monies” due to the supplier have been paid by the buyer. Accordingly, it is necessary to examine the supplier’s accounts to show whether there any outstanding monies due from the buyer which will prevent title from passing to the buyer. Over the course of trading, there may be periods when all monies have been paid by the buyer, only for there to be future indebtedness. Depending on the drafting of the clause, title to the goods supplied prior to the period of the zero indebtedness may have passed to the buyer.
- If the clause has been incorporated and is operative, it is necessary to consider whether it is enforceable. For example, it will be necessary to show that the items are identifiable by the Supplier and, depending on the facts, it may also be necessary to show that the items have been supplied under a particular (unpaid) invoice.
- Finally, a title retention claim can be lost by reason of the item supplied being used in a broader manufacture process (for example, where one ingredient is added to others in an industrial catering recipe, creating a wholly unique final product). In these circumstances, it will be necessary to consider the extent to which the item can be retrieved: the “degree of annexation”.
Retention of title clauses are common standard term of supply contracts, and we have a wealth of experience in advising both insolvency practitioners and suppliers on the validity of retention of title claims. In addition, our experience in dealing with the enforcement of the clauses enables us to advise on their proper drafting and on suppliers’ practices in respect of contract formation.
Contact the experts
With offices in Leeds, Sheffield and York, we can offer our services either on a face-to-face basis, by post or email. If you would like to discuss any of these issues with us, please contact any of our lawyers by calling 0333 323 5292. Alternatively, send us an email or fill in our online form and we will get in touch with you.
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At last it is all at an end, and we are happy with the outcome. We would like to thank you and the team for giving control back to our lives, god knows where we would be, also for your professionalism and counselling to guide us through this horrendous ordeal we do thank you, it was worth every penny.David Haywood, Former Minority Shareholder in Haywood and Padgett Limited