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Retention Of Title Notes

LPC Law Notes > Commercial and IP Notes

This is an extract of our Retention Of Title document, which we sell as part of our Commercial and IP Notes collection written by the top tier of Cambridge And Oxilp And College Of Law students.

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Elective: Commercial & IP

Commercial Law Retention of Title

Purpose / objective:
? To give the seller priority over secured and unsecured creditors of the buyer if the buyer fails to pa the goods because he is insolvent.
? S.19 SGA: seller is able to reserve title by listing conditions to be met before title passes.
? RT is not intended to be a charge. If it does constitute a charge it will be VOID if unregistered
[S.870 CA 2006]. The different forms of retention of title clauses:

1. Basic form;

2. All monies clause

3. Proceeds of sale clause

4. Mixed goods clause

The Basic form:
? Title of goods will be retained by the seller until it has received full payment for the goods.
? Legal AND beneficial title will be retained [if drafted correctly]
? Supplementary rights which are necessary to draft in: a) right for seller to enter premises and possess goods b) Buyer's obligation to store goods separately c) Buyer's obligation to mark the goods at seller's property d) Buyer's obligation to allow seller onto premises in the event of repossession e) A list of insolvency related TRIGGER events that will allow seller to demand payment and to repossess if payment is not received. f) If goods become attached to buyer's premises [e.g. heavy plant and machinery] -prohibit buye from annexing them to the premises without seller's consent. [If this is not done - consent of owner [i.e. the buyer / landlord] will be needed to repossess which is bad for seller]

All monies clause
? Seller reserves ownership until the buyer has paid for ALL goods supplies by the seller to the buye Title passes when buyer had paid ALL money owning to the seller.
? Clough Mill v Martin 1984: all monies clause was accepted [obiter ONLY - so not strong authority]
? Armour v Thyssen 1990: Scottish jurisdiction said all monies clause was not a charge and was legally effective. [Persuasive only]
? It potentially creates a charge by the buyer in favor of the seller -void against a liquidator /
administrator / creditor unless registered at Companies House.
? Not a realistic option
? Create as a SEPARATE CLAUSE [so basic clause is not void also] with a severance provision in contract.

Proceeds of sale clause
? Goods are not paid for but are sold to a third party. The seller can assert rights in the proceeds of th sale in order to get money from the buyer. 1

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