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Retention of title

A common concern of suppliers is how to recover goods which a buyer has not paid for.

Whilst it can be difficult to predict when such instances will occur, there are several practical steps that a supplier can take in order to reduce that risk.

Proper documentation of dealings between the parties is important. Whilst an oral contract can be binding, this can soon result in difficulties if the parties later disagree as to what they thought they had agreed. If the dispute is not settled and reaches court, a judge would have to try and determine which party’s evidence is the most credible. This is invariably an expensive, time-consuming and uncertain process.

A well-drafted supply of goods contract is therefore essential.

Of particular importance is the inclusion of a Retention of Title (RoT) clause. An RoT clause is designed to give the seller the ability to reclaim goods in the buyer’s possession in the event of non-payment. This is particularly important where a buyer becomes insolvent, as such clause affords the seller priority over secured and unsecured creditors of the buyer.

It can be advantageous for a seller to ensure that an RoT clause is applicable to all goods supplied by them and that the goods do not belong to the buyer until all invoices have been paid in full. This clause, known as an ‘all monies’ clause, is useful if there is a regular course of dealings between the parties where goods are supplied on more than one occasion.

Where the goods supplied are of a generic nature, an ROT clause should also provide that:

  1. the seller is entitled to enter the buyer’s premises to repossess the goods and the buyer required to give access
  2. the buyer should be obliged to store the seller’s goods separately and identify the belonging to the seller, and
  3. the buyer should allow the seller access to its premises to verify that the goods have been stored correctly.

It’s not uncommon for buyers to try and contract on their own terms and conditions, which are often less advantageous to the seller and may negate or limit the seller’s title to their goods. Care must be taken therefore to ensure that the buyer accepts the terms and conditions of the seller’s supply of goods contract. The alternative is a potentially costly argument as to which party’s terms prevail.

Difficulties can arise where the supplied goods lose their identity or can no longer be easily removed; with this in mind it may well be appropriate to consider practical steps you may be able to take to look to preserve the identity of the goods in question.

If you would like any more information or guidance, please get in touch with:

Stuart Lindley
Partner
T. 020 7227 6757
E. stuart.lindley@rlb-law.com

Disclaimer

This briefing is for guidance purposes only. RadcliffesLeBrasseur accept no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommend that appropriate legal advice be taken having regard to a client’s own particular circumstances.

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