Retention of title clause

The retention-of-title clause stipulates that the seller retains ownership of the delivered goods until the purchase price has been paid in full. It must be set forth in writing, no later than at the time of delivery (for example, in the Terms and Conditions accepted by the customer).

Example

A supplier delivers machinery worth €40,000. The customer is placed in receivership before making payment. Thanks to the clause, the supplier can reclaim the machinery still on the customer’s premises.

Why It’s Important

It is a simple and inexpensive way to protect against unpaid bills, especially when selling tangible goods. However, strict deadlines must be met in order to enforce it.

For more information: Customer Risk Management.

See also: customer risk, litigation, accounts receivable.