Purpose[ edit ] The main purpose of retention of title "ROT" clauses is to ensure that where goods are supplied on credit, if the buyer subsequently goes into bankruptcythe seller can repossess the goods. They are often seen as a natural extension of the credit economy; where suppliers are expected to sell goods on credit, there is a reasonable expectation that if they are not paid they should be able to repossess the goods. Nonetheless, in a number of jurisdictions, insolvency regimes or credit arrangement regimes prevent title retention clauses from being enforced where doing so would upset administration of the regime. It has consequentially been noted that "the practical outcome of a series of later cases has put it beyond doubt that 'extended' title reservation clauses will not work.
Introduction 1 What is retention of title? A retention of title clause is sometimes known as a Romalpa clause or as a reservation of title clause.
Under the Sale of Goods Actwhere there is a contract for the sale of specific goods, the supplier can retain his right to ownership of those goods even though they have been delivered to the purchaser as long as all parties to the contract agree to this provision.
For example, if it is stated in the contract, the supplier may retain the title to the goods until full payment is received. To be valid, it is imperative that the retention of title clause is incorporated into the contract which exists at the time of supply see paragraph The simplest type of clause has the sole intention of allowing the supplier to retain ownership of the goods until the purchaser makes full payment for those particular goods.
This is where the supplier retains ownership of the goods until all debts have been paid or any other obligation is met. The remaining types of clauses are sometimes collectively called multi-purpose clauses.
Generally, they are used where the supplier seeks to retain ownership of the goods delivered until the full purchase price for those goods has been paid.
If the insolvent sells the goods or has them manufactured into some other property, the original supplier may acquire ownership of part of the resulting property or proceeds of the sale, but that would depend upon the existence of a fiduciary relationship which does not arise under a contract for sale unless there is a specific agreement by the parties to the contract creating one or a registered charge in the case of companies.
It is possible for a supplier to combine several types of clause, so that if the official receiver decides that one part of the clause is invalid, the supplier may still be entitled to recover the goods under another element of the clause.
In addition, their comments should be sought on when the supplier informed the insolvent of the clause, whether the insolvent accepted the clause and details of the goods supplied. By checking the main documents purchase invoices, delivery notes, etc. Where the bankrupt or company officers have not surrendered to the proceedings, the OR should examine any available contractual documentation, such as purchase invoices, etc.
When considering insurance, the OR should remember that the risk passes with ownership of the goods unless there is a contrary agreement between the parties so that, with the exception of any Public Liability risk, there is generally no need for the official receiver to insure the goods.
If in any doubt regarding third party property, please refer the matter to the examiner. The questionnaire is intended to assist the official receiver and so can be amended to establish the appropriate facts required within each case. The questionnaire asks for specific information regarding the goods claimed under a clause in the contract and for documentary evidence in support of the claim.
It should be accompanied by a letter explaining that it would be useful if all the documentation and information requested could be supplied so that a comprehensive summary of the claim is available. To obtain a prompt response it may be desirable to give the supplier a fixed time in which to respond, but at the same time, it should not be assumed that no response means that the supplier has no claim.
The OR must be certain that the clause is valid before allowing the supplier to remove goods or receive the proceeds of their sale. Similarly, the official receiver must be certain that the claim is invalid before allowing the disposal of the goods. Although the goods must be returned to the supplier as quickly as possible, the supplier must pay any costs incurred by the OR in relation to the seizure.
Any claims for retention of title should be brought to the attention of the Examiner, you should only proceed once you have been issued with detailed instructions. However, the clause may still be valid even if it was introduced after the contract was made as long as the insolvent agreed to it being part of the contract terms.
The clause will be effectively incorporated into the contract if: The methods used by suppliers to inform the insolvent of their terms of business will vary. The terms may have been notified by the supplier before trading began by inclusion in a quotation, acknowledgement of an order, catalogue or price list.
Regardless of the method used to enter into the contract any subsequent changes to that contract may be made in writing or orally but must be agreed to by both parties.
Most retention of title clauses relate to raw materials, stock in trade or livestock. The best method of identification is where the goods are marked with the name of the supplier or where their serial numbers are quoted on any unpaid invoices.Definition of retention of title: Legal rule that sold and delivered merchandise remains the property of the seller until the buyer pays the purchase price in full.
Dictionary Term of the Day Articles Subjects BusinessDictionary Business . Retention clause This is probably the most obvious starting point but suppliers need to ensure that both legal and beneficial title to the goods are retained until they are paid for.
Retaining title to either one on its own will not be sufficient.
A retention of title clause (also called a Romalpa clause in some jurisdictions) is a provision in a contract for the sale of goods that the title to the goods remains vested in the seller until certain obligations (usually payment of the purchase price) are fulfilled by the buyer.
Sep 11, · A retention of title (ROT) clause is a provision in a contract for the sale of goods which means that the seller retains legal ownership of the goods until certain obligations are fulfilled by the buyer – usually payment of the purchase price.
Before the Personal Property and Security Act (‘PPSA’) came into effect, if a company was placed in liquidation or receivership, suppliers of goods had significant rights if the terms of sale included an effective retention of title clause.
It is quite clear that with the retention of title clause (i.e. ‘The ownership of the material to be delivered by AIV (the plaintiffs) will only be transferred to purchaser when he has met all that is owning to AIV, no matter on what grounds.’), the plaintiff are the owners of the remaining unsold aluminium foil held by the receiver, and that they are entitled to an .