Latest Legal News - Retention of Title Clauses (August 2010)

The Court of Appeal has recently held in Bulbinder Singh Sandhu (trading as Isher Fashions UK) v. Jet Star Retail Limited (trading as Mark One) (in administration) and others [2010] EWHC B17 (Mercantile) that an "all monies" retention of title clause was ineffective where goods were being sold in a retail environment i.e. where goods were being supplied to sell on to consumers.

A retention of title ("ROT") clause is a common contractual provision in supply arrangements which attempts to give suppliers priority over other creditors where a buyer fails to pay (due to insolvency or other specified reasons) for those goods. At a basic level, a ROT clause seeks to ensure that title is retained by the supplier until it has received payment for those goods. An "all monies" clause seeks to widen the ROT and to retain title until all monies owed to the supplier are paid.

In the Sandu case, there were provisions, in the terms and conditions which allowed the buyer to sell the stock (without outstanding monies being paid to the supplier) and to even do so in an insolvency situation.

ROT clauses are a vital provision for suppliers in trading situations. Whilst the above case has a clear impact during ongoing relationships, it is important to get it right from the start. The key point is ensuring that your terms and conditions (especially ROT clauses) that are incorporated into the relationship and that you win the "battle of the forms".

The commercial team at Butcher Burns LLP are experienced in handling the contract terms and conditions for variety of businesses both on-line and through more traditional formats. By consulting the team, we assist your business.

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