Whilst Retention of Title
is permitted, it is seldom properly incorporated
into a contract and when a Seller needs
to rely upon it, it is often found that
an insolvency practitioner or liquidator
is able to avoid returning goods that
have not been paid for, either because
the Sellers Terms and Conditions and/
or the Retention of Title clauses have
not been properly incorporated into the
contract, or because the Sellers goods
cannot be identified as such.
Putting Terms of Business,
including a Retention of Title clause
onto the back of a Sellers invoice is
often insufficient to incorporate them
into the contract.
A Sellers Terms and Conditions,
including Retention of Title clause need
to be brought to the attention of the
Buyer, either before the contract is concluded,
or at the time that it is concluded. Putting
Terms and Conditions on the back of the
invoice often brings them to the Buyers
attention only after the contract has
been concluded.
Terms and Conditions of
Sale must be brought to the Buyers attention
before the contract is entered into or
placed on some form or Order or Acknowledgement
of Order form.
Having established the
mechanism of incorporating the terms into
the contract, the next important thing
is content. A properly drafted Retention
of Title clause ought to incorporate the
following main provisions: -
1. They
should state "legal title" in
the goods shall not pass until the Seller
has received payment in full both of the
price, and all of the goods sold by the
Seller to the Buyer for which payment
is due.
2. The
Buyer shall hold the goods as the Sellers
fiduciary and bailee and keep the goods
separate from those of the Buyer and identified
as the Sellers property.
3. The
Seller should have the right to examine
the goods in storage at any time during
normal business hours.
4. The
Buyer should have the right to resell
or use the goods in the ordinary course
of business, but should account to the
Seller for the proceeds of sale.
5. The
Buyer should be licensed to process the
goods in his possession, but the product
of the process shall become the property
of the Seller.
6. The
proceeds of sale should be kept separate
from the Buyers money and should not be
paid into any overdrawn bank account.
7. The
Seller should be entitled at any time
to require the Buyer to deliver up the
goods and the Seller should reserve the
right to enter upon any premises where
the goods are stored and repossess them.
8. The
Buyer should be required to insure the
goods to their full replacement value
against "all risks". The interest
of the Seller should be noted on the policy.
9. The
Buyer should not be entitled to pledge
or charge the goods in any way.
10. If
the Buyer sells the goods, the Seller
shall have the right to trace into the
proceeds of sale.
11. The
Seller should retain title to the goods
where the goods are used in the manufacture
of a product and where the goods can be
removed without causing damage to the
goods or other components.
12. The
Buyers right to possession shall cease
in the event of bankruptcy or insolvency.
13. The
Seller shall be entitled to maintain an
action for the price not withstanding
that title has not passed to the Buyer.
14. A
"severability" clause should
be included to be able to sever any clauses
deemed to be unreasonable or unenforceable.
In the event of the insolvency
of the Buyer, if you wish to recover the
goods, it is absolutely essential that
you act speedily.
Notify the insolvency
practitioner immediately and provide the
following information: -
1. State
how much is owed and provide a detailed
statement.
2. State
the description and quantity of the goods,
which are the subject of the claim.
3. Supply
copies of customer's orders, acknowledgement
of orders, delivery notes and invoices.
4. Supply
a copy of the terms of sale, which includes
the Retention of Title clause.
5. Provide
information as to when the terms were
supplied to the Buyer, including the name
of the person to whom the copy of the
terms were supplied.
6. Supply
copies of any evidence of the customer
accepting the terms.
7. Provide
at the time or as soon as possible afterwards:
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