Use it Or Lose It: Use Of Retention Of Title Clauses In Sale of Goods Contracts

Originally published on 25th November 2009.

In these uncertain economic times, sellers often find themselves concerned about receiving payment for goods sold. More and more businesses are suffering cash flow problems often as a result of their own customers becoming insolvent. Demanding payment up front is simply not a commercial reality for most businesses. Businesses can find themselves living in fear of one of their larger purchasers reneging on payment due to a lack of cash flow or insolvency. The knock-on effects of such an occurrence may be devastating to the seller. One option a seller should consider to is the incorporation of a retention of title clause in the contract for sale. By including a retention of title clause, the seller would be proposing to retain ownership of the goods until it has received full payment. In this way the seller would obtain priority over secured and unsecured creditors of the buyer if the buyer fails to pay for the goods because it is insolvent or for some other reason. Drafting contractual retention of title clauses is a...