Retention of Title Clauses
Written by Rehana Ali on 21 November 2012« Return to Reading Room
What is an ROT clause?
A retention of title clause in a commercial contract for the sale of goods is (as the name suggests) a means by which the seller of certain goods retains ownership over goods. This right is afforded to the seller by virtue of section 17 and 19 of the Sale of Goods Act 1979.
The whole point of the seller retaining title to the goods before the buyer has paid for them is that if the worst happened and the buyer became insolvent, the seller would be able to simply reclaim the goods and therefore have priority over all the other debtors of the buyer.
A ROT clause is therefore a means of security for a supplier of goods that regularly sells goods on credit as is commonplace in most commercial transactions today. A point to note is that the goods are recoverable as long as they remain identifiable.
The position is not always so strait foreword as there are (depending on the circumstances) potential problems such as goods being mixed with other goods in a manufacturing process, thereby losing their original identity resulting in them becoming unidentifiable and non-recoverable or the goods being sold on to an innocent third party.
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