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Retention Of Title Clause

When selling goods, the basic legal position is that all rights of the merchandise

passes to the purchaser at the time set in the sales agreement or when the item is actually delivered.

If you require a clause that proves ownership will not pass until predefined conditions are met then you can look into the 'retention of title' clause. This cause essentially lets you, the vendor; keep hold of ownership of the goods until all sums of money or other sum are made in full. You would preserve title of the goods until all sums outstanding are paid and would have the right to claim the profits from the resale of your goods or rights over new goods manufactured from the commodities you had supplied.

If you do not already have retention of title clause, then you can review your terms and conditions of business and draft an appropriate clause. It is important that it should be drafted specific to your business and your position in the supply chain as when the goods are sold on or processed by your customer and then sold on; it becomes trickier to trace the goods and protect the title.

In order for the clause to be effectual, the time when the clause is conversed to your purchaser is important. The buyer must be in agreement to the terms at or prior to the point of sale and this must be plainly acknowledged and explained. Most retention of title claims by suppliers against liquidators fail for the reason that the terms are placed on the back of the sales dispatch note which was supplied on first delivery. Make sure that your new customers sign the terms and conditions of sale before this occurs.


Ideally, you should be able to identify the goods in question, perhaps by way of serial numbers or identification plates or labels. If your customer goes out of business, then an administrator or liquidator may invite you to visit a site and identify your goods. It can also help if your terms and conditions require the buyer to store the goods separately if practical.

by: Paul Myers.
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