Retention of Title
Retention of title clauses are generally used by suppliers of goods to ensure that their position is protected in respect of company’s that may go insolvent or situations where payment is not forthcoming.
By placing a retention of title clause in a contract for supply in the conditions of sale, a supplier hopes to retain ownership of the goods until such time as they have received payment from the customer.
To that end, where the supplier is not paid for the goods, then the supplier can either move to repossess the goods under the retention of title clause or in the alternative, attempt to sequester the proceeds of the sale of those goods.
The position is Ireland is that there are secure and insecure creditiors, and it is the usual way that insecure creditors would include supplier of goods. It is effectively a mechanism to ensure that the supplier moves up the pecking order when it comes to trying to get paid in the eventuality where a company has become insolvent.
The Sale of Goods Act provides under Section 91, a seller may “reserve the right of disposal of the goods until certain conditions are fulfilled”. The section goes on to say that “the property and the goods does not pass to the buyer until conditions imposed by the seller are fulfilled”.
As one would imagine, it is a much litigated area and the law is reasonably settled in the matter at this point.
What is critical in dealing with such matters is to first of all ensure that the contract when properly drafted, has the retention of title clause in it. Second of all, it is critical that the buyer is made aware of the retention of title clause and effectively the contracts should be drafted in such a way that there should be some acceptance by the buyer of the existence of the clause and the fact that he/she is willing to be bound by it.
It is always of particular note and concern, as to the exact nature of relationship between the parties. Where the parties are in a one off situation, it is much easier to control the retention of title clause aspect. A difficulty arises where people simply ring in and re-order. It becomes imperative that it is agreed between the parties that in such a scenario that the terms and conditions as set out in the original order apply to this follow on re-order.
Again, this is something that can be incorporated into the original contract for sale.
One of the big issues relating to retention of title clauses is where the goods that are supplied are going to be incorporated into another product. Traceability is an essential feature of potential title clauses and it must be possible to identify the goods distinctly and separately from something else.
A retention of title clause can be rendered null and void where the good s either fail to be identifiable anymore or where they are now identifiable but irretrievable.
It should also be noted that in respect of retention of title clauses, that a buyer who purchases the goods over which it is purported a retention of title clause exists, can take good ownership of the property provided that the goods are (a) paid for in full and (b), the buyer is a buyer in good faith i.e. the buyer was not aware of the existence of a retention of title clause and genuinely believed he was purchasing the goods from the actual owner of the property.
At Conways solicitors, we are in a unique position to advise in respect of these types of matters and can assist in the drafting of the necessary terms and conditions of a contract for sale to ensure that the position is as best protected as possible.
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