If you are negotiating a contract with a supplier of goods, one of the contract terms may include a retention of title clause. Depending on how the term is drafted, you may owe special obligations to the supplier upon receipt of the goods. Likewise, if you are selling goods to a customer, you can use retention of title clauses to improve your chances of repayment if your customer defaults. This article will explain the purpose of retention of title clauses, how they operate, and what this means for your business. <\/p>\n\n\n\n
As you may know, many businesses do not immediately pay their suppliers when they receive goods. Instead, customers rely on their credit with the supplier to pay them after taking control of the goods. <\/p>\n\n\n\n
You might be surprised to know that even if you do not immediately pay for goods in a commercial transaction<\/a>, you obtain the legal title to the goods at the point you take control of them. For example, you obtain legal title as soon as the supplier delivers the goods to your office or warehouse. <\/p>\n\n\n\n Despite the law\u2019s default position, you are free to negotiate an express provision into your contract that says otherwise. <\/p>\n\n\n\n You can create a contractual term that states you retain the legal title to the goods until you are repaid. This is called a basic form retention of title clause. The effect of this clause is that if your customer goes insolvent<\/a>, the goods you deliver to the customer do not form part of their assets. This means you have a legal right to reclaim the goods because you own the title to them. <\/p>\n\n\n\n If you sell your goods to a customer, you deliver them (and transfer legal title) on the presumption that you will be repaid. But if your customer goes insolvent, these goods would form part of their assets. Without a retention of title clause, you do not have a right to the goods themselves. Instead, you only have a general claim on the customer\u2019s assets. Hence, the liquidator can sell the goods and repay the customer\u2019s creditors. Alternatively, if you had retained title to the goods, you could reclaim the goods ahead of any other creditors<\/a> if your customer became insolvent.<\/p>\n <\/p>\n<\/div>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nRetention of Title <\/h2>\n\n\n\n