Can a supplier retain ownership of goods?

Is it possible for our suppliers to retain ownership of goods until they receive payment?

The short answer to this is ‘yes’.  A supplier however will generally only want to rely on such an arrangement if the customer goes bust, and that is when complications can arise.

A supplier’s terms of trade can include a requirement that title remains with the supplier until the goods are paid for – notwithstanding that the supplier invoices the customer at the time of or shortly after delivery.  More complicated ‘all monies’ clauses often try to go further - creating some sort of lien over any goods supplied against unpaid invoices.

Before an administrator will return any goods, however, the supplier will need to prove:

• that the clause was incorporated into the contract from the outset, rather than being, for example, on the back of the invoice;
• that the goods on the customer’s premises relate to unpaid invoices, rather than ones that have been paid; and
• for the more sophisticated clauses in particular, the wording is effective in retaining title.

A word of warning: there is nothing which precludes the customer selling the goods on.  If this happens, there is no right to trace into the sales proceeds – which may have gone into an overdrawn bank account in any event.

Peter Whalley and Sandra Mundy are partners in the Corporate Restructuring team at James Cowper Kreston.  Visit www.jamescowper.co.uk for further information.