Retention of Title clauses are a useful tool for suppliers of goods who extend a line of credit to their customers. However, there are a number of issues that require consideration before it is possible to determine whether a clause is valid and enforceable.
Our team is equipped to provide you with the information required to successfully incorporate a Retention of Title clause into a B2B or B2C contract, as well as assist in enforcing its clauses to ensure your business is not at a financial loss.
Drafting a Retention of Title Clause
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.
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 are valid, and have been incorporated into the supply contract. This involves considering the way in which the contract between the parties was formed and the terms that applied to that contract.
Once the right of Retention Title has been established, the drafting of the clause needs to be considered. A common Retention of Title clause will be drafted to prevent legal ownership of goods from passing until “all monies” due to the supplier have been paid by the buyer. It is thus necessary to examine the supplier’s accounts to show whether there are 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, i.e. the “degree of annexation”.
How We Can Help
Retention of Title clauses are common standard term of supply contracts, and we have a wealth of experience in drafting suitable Retention of Title clauses that protect your goods and your business, as well as advising both insolvency practitioners and suppliers on the validity of Retention of Title claims.
In addition, our experience in dealing with the enforcement of these clauses means we are ideally placed to achieve the recovery of goods for non-payment where necessary.
Contact Us for Help
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 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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