Reservation Of Title Clause May Create Payment Problems

Wilson manufactured and sold generator sets and spare parts worldwide. Its customers included Holt which re-sold the goods to its subsidiary in Nigeria. Wilson's standard terms applied to the sales. They included the following "no set-off", retention of title and no-agency clauses (with italics showing relevant phrases considered by the court):-

Buyer shall not apply any set-off to the price of Seller's products...... Notwithstanding delivery ... title shall not pass to Buyer until Seller has received payment in full for the products and all other goods or services agreed to be sold ... Until such time as title passes the Buyer shall hold the products as Seller's fiduciary agent ... Prior to title passing the Buyer shall be entitled to re-sell or use the products in the ordinary course of business and shall account to the Seller for the proceeds of sale ... Nothing herein shall be deemed to create an agency,... or fiduciary relationship between the parties. Holt was permitted extended credit. When it failed to pay invoices, a repayment plan was agreed. Holt failed to meet the repayment terms with the result that Wilson brought proceedings for the price of the goods, claiming US $12.6m. Holt sought to counter claim more than US $53m for breach of Holt's exclusive distributor rights in Nigeria.

The High Court gave judgment for Wilson. The key points for decision by the Court of Appeal were:-

whether property had passed to Holt when it on-sold the goods. This was relevant in relation to the next point about Section 49 of the SGA. whether an action under Section 49 is the only way a seller can bring an action for the price, or whether the Section is permissive only. The Section provides that where property in goods has passed to the buyer, the seller may maintain an action against him for the price of the goods. (It also provides that an action may be maintained where a price is payable on a specified date). If a Section 49 is the only time an action can be brought, no action can be bought if property has not passed. whether the set-off clause applied to prevent Holt from raising its counterclaim. Holt argued that the set-off only applied to legal set-off and not to transactional or equitable set-off. The Court of Appeal held as follows:-

  1. Retention of title. Here the judges diverged. They agreed that it all depended on the wording of the particular clause, but disagreed over the effect of the wording.

    Lord Justices Patten and Floyd...

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