Commercial Contracts: Retention of Title Clauses

Goods sold in the UK are subject to the Sale of Goods Act 1979 (the Act).

Under ss 17 and 19 of the Sale of Goods Act 1979, a seller can retain his rights to the goods he is selling in a sale of goods contract. The idea is that the seller can recover his own goods until they are paid for. It is an essential requirement that the goods remain identifiable. There are a number of clauses which are relevant to retain title to goods:
A 'tracing clause' allows the seller to trace into the proceeds of sale received by the seller. The buyer must have paid the money into a seperate bank account in order for the money to remian identifiable.
An 'insurance clause' obliges the buyer to insure the goods and wil help the seller if the goods are damaged or destroyed. It is useful to provide that the buyer would hold the proceeds of any insurance claim on trust for the seller, as this will help the seller if the buyer becomes insolvent.
A clause allowing the seller to enter, seize and resell the goods- a retention of title clause would be of little value if the seller could not enter the buyers premises and actually retain the goods physically.
A clause reserving the legal title in the goods- it is essential that the retention of title clause should reserve legal title.

A seller should be prudent not to deal with buyers who may not pay and take pratical steps to minimise the possibility of losing money if the buyer does not pay- e.g. credit checks / debt factoring / credit risk insurance / providing for interest.

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