Retention of Title (Proceeds of Sale) Clause
This Retention of Title and Proceeds of Sale Clause allows for a supplier of goods to transfer possession of goods which have not yet been paid for, for example goods supplied on credit, whilst ensuring that he retains legal and beneficial title in the goods until the buyer pays for them.
Whilst such a clause should not be used as a replacement for a credit checking system, it will provide an added layer of protection for the supplier in the event that the buyer fails to pay and is in danger of becoming bankrupt or insolvent.
This clause template allows the seller to enter the buyer’s premises for the purposes of inspecting or removing goods in which legal title has not yet passed (i.e. for which payment has not been made), and places an obligation on the buyer to ensure that the goods which are the subject of the clause are kept separately and are clearly identified as the goods of the seller. Further the clause allows the seller to claim the proceeds of any sub-sale of which the goods have been the subject. The seller should register the clause as a charge against the buyer company in order to protect its ability to recover proceeds if the buyer becomes insolvent.
Whilst the seller will benefit from the reservation of legal title in the goods, the buyer will still bear the risk in the goods and will be obliged to insure them against damage or loss.
This Retention of Title and Proceeds of Sale Clause is not suitable for situations where the buyer is likely to use the goods in a manufacturing process. For that situation the more complex enlarged clause allowing for the acquisition of title of resulting goods should be used.
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