Are your retention of title provisions effective?

When it comes to business relationships, delayed payment terms are a given. From two weeks to 90 days, chances are that a gap between sending an invoice and receiving payment is going to exist. But what happens if in-between accepting goods and processing payment, a customer goes into some form of insolvency? For suppliers, this can wreak cash flow havoc and may even throw their own business into financial difficulties. The goods have left the building, but payment hasn’t been received. And without effective retention of title provisions in place, it probably never will. 

So what can your business do to avoid getting all caught up in the mess of an insolvent customer?

The key is to protect your dealings with watertight retention of title clauses that allow you to maintain ownership of goods supplied, until pre-set conditions are met. In the case of a customer going into insolvency, an effective retention of title provision would ensure that your goods don’t fall into the collateral damage category. Instead, if you act quickly they should be passed back to your business, and could be resold at a later date.

Essentially, retention of title provisions serve as a form of security against the customer. In the event of insolvency, the supplier should be able to recover the goods that they supplied (unless they’ve already been used of course).

So how do retention of title clauses work? Basically, there are two types of provisions.

  • Simple clause

The first is a simple clause, and covers only goods that have been pre-defined on certain invoices.

  • All monies clause

The second is an all monies clause, and is a little more complicated. Under an all monies provision, a supplier enjoys protection across all goods and invoices.

The dangers of retention of title provisions

Without effective retention of title provisions in place, businesses run the risk of losing working capital, simply because a supplier has encountered financial difficulty.

Elements of watertight ROT clauses

Businesses are often under the illusion that they will retain title in the case of insolvency, yet in reality their claims often don’t hold up.

So what makes for a watertight retention of title clause?

  • When reclaiming goods under a retention of title claim, suppliers must be able to identify exactly what property is theirs. So, without the presence of serial numbers, marks and other indicators, claims sometimes fall short. 
  • It’s not enough for suppliers to simply state on an invoice that goods will remain their property until payment is processed in full. From a legal perspective this is a post-contractual term, and won’t hold up in court.
  • Generally speaking, opting for an all monies clause is the most effective way to cover your business’s back.
  • Retention of title clauses should always be directly incorporated into the official ‘terms of business’ agreement and this should be signed by the customer.

Every year, thousands of businesses across the UK go bankrupt. If you’re tied up in their downfall, you inadvertently put your own business at risk. For more information on protecting your business and your goods with effective retention of title clauses, please feel free to contact one of our directors on 0800 955 3595 for a no obligation, confidential chat. Or alternatively, drop us an email at

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