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One of the ways in which sellers can protect their business against buyers that do not pay is to include a retention of title (ROT) clause in their terms and conditions of sale.
ROT clauses are often seen in suppliers’ terms and conditions, yet when they have to be enforced many sellers find that they cannot recover their goods.
Of course you might not actually want to. If you sell something that deteriorates (e.g. food) do you really want it back if the buyer doesn’t pay up?
Equally, if you sell, say, chemicals which immediately go into a large mixture to make something else then a clause in just unrealistic.
Getting the clause into the contract
Terms and conditions of sale will usually have clauses relating to the price that is paid for goods, interest for late payment, delivery, limiting liability and warranties. To be enforceable retention of title clauses must be in the contract between the parties.
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Putting them (or any contract terms) on the invoice only is much too late—see this previous article.
Potential problem areas
Apart from the basics above, problems can arise:
- From liquidators who will often argue the clauses do not apply or are invalid, often in cases when they are perfectly valid. Do not give up!
- If your items have become part of a larger item, e.g. car parts becoming a car. If your individual parts cannot be identified (or it’s unrealistic to do so) then it will not be worth pursuing.
- With bad drafting of the clause.
Beware, many of the appeal Court cases are very wealthy businesses trying to recover their goods when their absolutely top lawyers have not managed to get the wording absolutely correct: don’t try to do it yourself when it comes to drafting contracts and terms and conditions. |
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If you are thinking of buying prospect lists or other marketing data from a list broker or data bureau firstly ask to see their data protection policy. If they don’t have one you should be worried – not least because the data provided may be unreliable. If they have a policy make sure that they have obtained express consent from the people on their lists to provide that information to third parties (i.e. you) for marketing purposes.
