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LPC Law Notes International Commercial Law Notes

Retention Of Title Rot Clause Notes

Updated Retention Of Title Rot Clause Notes

International Commercial Law Notes

International Commercial Law

Approximately 179 pages

A collection of the best notes for new University of Law module 'International Commercial Law' the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

In short, these are what we believe to be the strongest set of International Commercial Law notes available...

The following is a more accessible plain text extract of the PDF sample above, taken from our International Commercial Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

  • No harmonising international code; determined by local legislation;

  • Closest we get is EU directive on Combating Late Payment in Commercial Transactions;

  • Generally vague; freedom for states as to how they deal with them;

  • Remember Practicalities;

    • Value of goods – distance – perishable (may be unusable when recovered) – made to specification.

Main Variations in Jurisdictions
  • All Monies Clauses;

    • Enforceable in most jurisdictions;

    • Qualifications;

      • Germany: restrictions in standard form contracts – cannot secure > 120% of the debt

  • Mixed Goods Clauses;

    • Do not work in some jurisdictions;

    • Some proportionate; e.g. Germany, Spain, Italy, Holland, France.

  • Processed Goods

    • UK & France – cannot claim ownership of goods subject to manufacturing process and therefore identity lost.

    • Germany – seller can become co-owner of end product.

    • Spain – seller can become sole owner if bad faith involved.

  • Proceeds of Sale

    • UK: fails.

    • Germany: possible but not if sub-buyer acts in ignorance of the arrangement.

  • Universal Commercial Code;

    • Enacted by 50 US states;

    • Uses the term ‘security interests’;

    • S.2-401; any retention is… limited in effect to a reservation of a security interest’.

  • Enforceability

    • Enforceable against buyer; seller has a preferential right to the goods compared to buyer.

    • To be enforceable against third parites (e.g. liquidators) it must be perfected;

      • Notifying third parties – file financial statement at various local & state recording offices.

  • Mixed Goods

    • The rights attached to security interest can remain in place;

    • If competing suppliers claim interest they are entitled to the proportion of the goods relating to the value of the material that they supplied.

  • Separate Contract

    • Standard procedure for these clauses to be contained in a separate contract called a Security Agreement.

  • Decided by contracting parties;

  • In absence of ROT clause title passes;

    • Ascertain Goods: when contract formed

    • Unascertained Goods: when goods become ascertained.

  • Hire Purchase Legislation;

    • Title remains with seller until purchase price remained in full;

    • Does not apply to straigthtforward sale of goods.

  • Chapter III, Section IV, Code of Commercial Law

    • Clauses must be in writing but need not be signed –may be included in T&Cs;

    • Clause must be clear and written in larger text than the rest of the contract.

  • Enforceability

    • Only enforceable if goods still identifiable;

    • If manufactured – may well be lost.

  • Limitation

    • Must claim goods within 3 months otherwise rights lost;

    • This cannot be extended.

  • Section 449 German Civil Code;

    • ‘If seller of moveable property has retained title until payment… it is to be presumed that transfer of title takes place subject to condition precedent of payment in full.’

    • Three main types of ROT Clause;

      • Simple Clause:

        • Property does not pass until payment received in full.

      • Prolonged/Continued Clause;

        • Advance assignment of rights clause (provision for re-sale of rights by buyer )

        • Processing Clause (Seller may extend right to process)

        • Transmitted ROT (buyer agrees to pass on ROT by retaining original seller’s title against sub-buyer.

      • Extended Clause;

        • Title does not pass to buyer until purchase price paid and buyer has met all other responsibilities;

        • E.g. all monies clause – all other obligations met.

  • ROT is an available remedy even if not included in contract;

  • Article 1145 Civil Code;

    • Recovery of goods within 30 days if non-payment;

    • Parties may extend provision if they wish.

New Zealand
  • Personal Property Securities Act;

    • ROT clauses must be recorded in an electronic centralised register;

    • Protects goods yet to be supplied;

    • Must be agreed in writing to be effective.

  • To be valid vs. 3rd partis must be registered in Public Register of Title & Documents;

  • If done, seller may recover goods from sub-buyers;

  • But registration is very inconvenient;

  • Sub-buyers tend to demand evidence of registration before releasing goods.

  • Seller with ROT has two options;

    • Fulfilment: demand payment and if not met, they will be seized and publicly sold.

    • Declare Contract Resolved: demand return of goods – if buyer has paid 40% of price they get a 30 day extension period.

Retention of Title ROT



Why it matters?

  • Insolvency;

  • Risk;

  • Seller’s Action for Price only possible where ownership has passed.

TB 58
Define: Lien

A right which entitles a party to hold on to assets in his possession pending payment of a debt owed. It can arise in the following ways:

  • Equity

  • From the operation of law (a legal or common law lien).

  • Bargained for, or extended, as a matter of contract (a contractual lien).

  • Created by statute (a statutory lien).

It does not confer on the lien holder an automatic right to sell the assets.

Transfer of Ownership s.18
  • Specific/Ascertained Goods: identifiable at time of contract

    • S.17 – passes when parties intend it to pass.

  • Unascertained Goods

    • s.16 – property cannot pass until goods ascertained

Default Provisions s.18

  • Ascertained/Specific Goods;

    • Rule 1: unconditional contracts for sale of specific goods in deliverable state: property passes when contract made.

    • Rule 2: conditional contract where goods exist but buyer bound to do something to put goods into deliverable state: property passes when done and notice given to buyer.

    • Rule 3: conditional contracts where goods in deliverable state but seller must weigh/test/measure to ascertain price: as Rule 2.

    • Rule 4: goods delivered on approval or sale and return. Property passes when buyer approves or retains beyond fixed time.

  • Unascertained/Future Goods

    • Rule 5: unascertained goods;

      • i. goods unconditionally appropriated to the contract and the other assents;

      • seller delivers goods and buyer assents.

Retention of Title s.19

  • Seller may reserve right of...

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