Safeguard goods in tough times, suppliers told

Apr 25, 2008

National law firm Shoosmiths, which has an office in Milton Keynes, says a threat of increased insolvencies means suppliers might not be paid for goods by customers.

So it is urging suppliers to consider including Retention of Title clauses in goods supply contracts.

These mean suppliers take precedence over other creditors if customers fail to pay for goods as the result of insolvency, and can recover goods that have not been paid for.

Shoosmiths associate and dispute resolution and litigation specialist Robert Syms (pictured) said there are two types of RoT clause:

Simple – claiming title to goods supplied, unpaid for and still in the possession of the customer.

Extended – enabling recovery of all monies, proceeds of sale or tracing goods into finished products, for example a component fitted to an engine.

Mr Syms added: “Under RoT clauses, customers may be obliged to ensure that suppliers’ goods are easily identifiable, either by stocking them separately from other goods, or by marking them as suppliers’ property.

“It must be understood, though, that if 500 of 1,000 supplied bolts remained unused by a customer, the supplier could only reclaim the remaining 500, and not the value of the original order.

“Otherwise, RoT clauses are invaluable in insolvency cases where suppliers might face little or no prospect of ever recovering their goods or monies to the value of those goods.

“And if predictions of a tough economic 2008 are correct, some suppliers may be grateful of an RoT safety net should any of their customers end up insolvent.”

Citing the yet-to-be-contested milk bottle marking ‘This bottle remains the property of the dairy’ Mr Syms said the simpler the ROT clause, the more effective it is likely to be.

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