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Are you a supplier? Do you have a Retention of Title Clause?


It is a familiar tale where a supplier transfers goods to a buyer and then the buyer fails to make payment.  If the buyer subsequently becomes insolvent there is very little recourse. The advantage of a Retention of Title Clause (sometimes referred to as a ROT) is that it enables a supplier to reclaim the goods and take priority over secured and unsecured creditors.

 

A well drafted ROT clause will enable the supplier to enter the buyer’s premises, without committing trespass, and repossess the goods.  If goods are supplied to the same buyer on a regular basis then careful consideration should be given to ensure that the clause extends to all of the good supplied.  What often happen is that is a variety of invoices are outstanding .  If one of the invoices is paid then the legal title relating to the ‘paid goods’ passes on to the buyer.  This can cause difficulties because the supplier can lose some of its protection, be paid on a drip feed basis which in turn affects its own cash flow, and it can affect its ability to possess the goods.

 

There will be other factors to take into consideration such as the trading relationship between the parties, who pays for the insurance of the goods once delivered, where will they be stored and whether the goods can they be moved to another site, who is responsible if the goods are damaged or stolen.  A good ROT of title clause will seek to deal with these types of issues. 

 

If you require any further information please contact Claire Bentick in our Dispute Resolution Team or a review of your Terms and Conditions of Business please speak to Louise Adams in our Business Services Department.

 

Added: 08 Feb 2018 10:32


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