Do you supply products where payment is only made afterwards? You run the risk that the buyer goes bankrupt and the invoice has not yet been paid. The products are no longer in your possession as supplier and it is doubtful whether you will ever get your money back. One way to mitigate this risk is to deliver under retention of title.
What is a retention of title?
A retention of title means that the product subject to the retention of title remains the property of the supplier until the buyer has fulfilled his obligations under the purchase agreement. This means that ownership of the product is transferred only when the buyer has paid the purchase price of that product.
How do you negotiate a retention of title?
To claim retention of title, the parties must have agreed to it. This can be done in the following ways:
- In the agreement: include an ownership retention clause here.
- In your general conditions: make sure that the applicable general conditions have been declared applicable to the agreement and that they have been made known to the buyer in a timely manner.
A valid retention of title rests on the products delivered pursuant to the contract in which the retention of title was agreed upon.
Please note that a valid retention of title can only be agreed for:
- claims relating to the consideration (payment of the purchase price) for the products supplied;
- claims for associated work, such as installation work;
- compensation claims due to a deficiency.
You can also agree a retention of title for future claims, but only if they fall within the above categories.
Note that if you use the retention of title for other claims, the clause is void. In that case, only the clause is void. The validity of the rest of the agreement is not affected. So formulate the retention of title clause carefully!
What happens in bankruptcy?
If your buyer goes bankrupt while the purchase price of the products delivered under retention of title has not yet been paid, this has limited consequences for you as a supplier. This is because these products remain the property of the supplier. They are not affected by the general bankruptcy attachment and fall outside the estate. The products delivered under retention of title can be claimed by you from the trustee.
If the products are claimed from the receiver, he will investigate whether the products were delivered under retention of title. In addition, he will check, among other things, whether the products delivered are identifiable. If the products are not identifiable, it may be difficult to assign the delivered products. This is the case, for example, if several identical products are stored with the buyer Tip: mark the products with serial numbers or other unique characteristics so that they can be identified afterwards.
Under circumstances, retention of title may expire. This can occur if the products delivered have been mixed into a new product. For example, if the flour delivered under retention of title has been used to make bread. In that case, the supplier of the flour cannot claim the bread made with it.
If the product is mixed with the same type of product from another supplier, it may be jointly owned by the two suppliers, depending on the circumstances of the case. In that case, they can claim joint ownership.
Arrange it well
A properly drafted retention of title is essential to protect your position as a supplier. In doubt about the correct wording or application? If so, please feel free to contact us.
