Check your retention of title clause

Retention of title clauses within a company’s terms and conditions aim to ensure that a company can retain ownership over the goods that they supply until payment is received for them.

The clauses can exist in a company’s terms and conditions for many years without being called upon.  Often, the first time that businesses become aware that their retention of title clauses are ineffective is when their claim is refused by an insolvency practitioner.  Here are three areas to review.

1.  Is the customer aware of the terms?  Most commonly, the company cannot prove that its retention of title clause was accepted by the customer as part of the contract.  To prevent this, companies should ensure that their terms of business are notified before the goods are delivered to the customer.  These can be within a quotation, a contractual document signed by the customer or for a simple claim an invoice delivered prior to the goods.

2.  Have the terms been superseded?  Companies should ensure that their terms and conditions have not been supplanted by a subsequent document from the customer such as a purchase order.

3.  Do the terms cover the goods held by the customer?  Companies should make sure that their clause is wide-ranging enough to ensure that they retain title to any of their goods held by the customer. It can be frustrating if the clause only links a customer’s debt to specific goods supplied under a single invoice as it can be difficult to prove that the goods held by the customer relate to that particular invoice.

An effective retention of title clause combined with good procedures can help preserve substantial assets belonging to the company and is well worth a review at this time.

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