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A Retention of title clause is a clause in a sale contract that allows the seller to retain the ownership of the goods sold. These goods are not delivered to the buyer until the conditions of the sale contract are fully met. 
 
Retention of the title clause is also incorporated in construction contracts/ agreements. In such contracts, the clause allows a client/buyer to retain a certain amount while making payment to the contractor as security for the fulfilment of the conditions of the contract. 
 
The main purpose of the Retention of title clause is to protect the seller in cases where the seller goes into bankruptcy once the goods have been delivered to them. In such circumstances, the seller repossesses the goods they have delivered to the buyer. 
 
The retention of the title clause has two advantages for the seller: 
 
It allows a seller to reclaim possession of the goods in the event of nonpayment by the buyer. 
It places a seller of unpaid goods in the priority list of creditors over any secured or unsecured creditors in the event the buyer becomes insolvent. 
 
To be enforceable, the retention of the title clause should be properly worded, and the entire terms of the contract should be mentioned and incorporated in the sale/ construction contract. 
 
 
The retention of title clause has the following obligations for the buyer: 
 
Despite obtaining the possession of the goods, the title of the goods is not transferred to the buyer unless they have fulfilled the conditions of the contract i.e. made the full and final payment of the goods. Hence, they will have an obligation to store, insure and maintain goods, until they are paid. Once the buyer has paid for the goods, then the legal title will pass on to them and they will be released from these obligations and can do whatever they want to do with the goods. 
 
Drafting of retention of title clause is complex; therefore, one should be careful while drafting and certain pitfalls should be avoided. 
 
Some key features would include: 
 
1. Making sure that all terms and conditions are properly incorporated in the contract of sale; 
2. Ensuring the seller retains the title to the goods until goods are paid. 
3. Providing the seller with a right to enter the buyer’s premises to recover the goods; 
4. Placing certain obligations on the buyer about the care of the goods such as: 
a. An obligation to keep them separated and identifiable from other goods; 
b. An obligation to mark the goods as belonging to the seller; 
c. An obligation to ensure safety and security of the goods; 
 
For more information, please contact us on +44 (0) 121 442 5330. 
If you need help, our debt collection team can assist you anytime. 
 
 
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