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It is vital that the terms and conditions of any business that supplies goods provides protection in the event that customers struggle to pay their bills, fall into financial decline or, worse, insolvency.  By ensuring that a Retention of Title Clause (ROT) is included in their terms and conditions, businesses can go some way to ensuring that even if they don’t get paid, they retain the right to possession of the goods that they supplied.

 

term

Reclaim control

The purpose of an ROT clause is to ensure that the supplier reserves the legal title to their goods until the goods are paid for by the customer. This means that in the event that a customer becomes insolvent, the supplier retains the contractual right to jump the queue of creditors and reclaim possession of their goods.

No ROT clause can replace doing proper checks on the customer before entering into a contract with them. It is better to get the comfort that your customer is financially viable to begin with, than to deal with problems further on down the line when things have gone wrong.

Drawing attention

A supplier must take all reasonable steps to bring a ROT clause to its customer’s attention before or at the time the contract is made.  It is therefore important that the terms and conditions containing the ROT clause are brought to the customer’s attention at an early stage and as many times as possible- on the back of quotes, order request forms etc.  It is no good attaching the terms to an invoice on delivering the goods as the moment that the contract was entered into will have passed.

Effective protection

In order to be as effective as possible a ROT clause should include:

  • an obligation on the buyer to store goods separately and to label them ;
  • a right for the supplier to enter the customer’s premises periodically to inspect the goods;
  • a list of events, including failure to pay on time, which would allow the supplier to demand payment and enter premises to repossess goods.

If you are in any doubt as to how effective your terms and conditions are, then you should seek legal advice.  For more information contact a member of our business team on 01623 663246.

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