Retention of Title Claims – Administrations

Retention of Title Claim Solicitors

What is a retention of title clause?

A retention of title clause is a clause included in many contracts for the supply of goods where customers are given credit on goods. It enables the supplier to retain ownership in the goods until full payment has been made by the customer for the goods, even after they have been delivered.

These clauses are important for suppliers as the insolvency of a customer can have a major effect on the supplier’s business. If a customer fails to pay for the goods, the supplier has the right to reclaim possession of the goods under this clause.

Why can this clause be helpful if a customer becomes insolvent?

If a company enters into liquidation, for example, the supplier has a course of action to reclaim possession of the goods. Otherwise, the supplier would rank as an unsecured creditor and will probably only receive a percentage, if any, of the money owed.

What is the impact of administration upon a claim under a retention of title clause?

Pursuant to the Insolvency Act 1986, where an administration order is in force, suppliers are unable to repossess the goods based on a retention of title claim, unless the court orders it or the administrative receiver consents.

This is a big limitation to the use of a retention of title clause, and should be borne in mind by suppliers.