Retention of Title The ROT Clause

This has got to be one of the most common misunderstood clauses and questions I get asked without a shadow of a doubt! So I thought I would shed some light on it: When can you claim your goods back and what is a VALID ROT clause?

In its simplest form it is a clause that allows the supplier/seller/vendor to retain title to goods until they are paid for, a form of security in the event of default or Insolvency. Though time and time again I see it used as a statement that is not valid.

As part of the Sale of Goods Act 1979 the seller retains title to goods sold and delivered as long as the purchaser has been made aware of the specific term within the contract, this can be within the terms and conditions but it must be agreed as with all terms before the goods are supplied, so for those (yes a lot of sub contractors just add some very basic wording on the invoice) that is not going to stand up if you have to rely on it.Just yet another reason why you need to use terms and conditions.

There are two main types of clause one retaining or reserving title over the specific goods relating to a delivery or invoice, in this instance the goods must be easily recognised by either stock numbers/bar codes/bespoke to order as being the exact ones delivered and not paid for, problems can arise when the purchaser may have sold on the goods out of sequence and those remaining in stock relate to invoices already paid, it is important to remember that when the goods are sold title passes to the purchaser regardless of whether you have been paid, though in some cases if they are sold to become part of something else the value may be such that the end purchaser may be willing with your debtors agreement to pay you if they are not n a position to, though there are rules around preference in Insolvency where monies might have to be paid back.

The second is an All Monies clause which helps eliminate the risk and reserves title to all goods sold in by you until all monies are paid. There is another type a Multi Purpose Clause which is more complex covering the yield or profit as obviously returned stock is face value the projected profit under standard ROT is lost.

If your debtor falls Insolvent the Administrator or Liquidator will ask on the proof of debt or statement of claim if you have a valid ROT claim if you advise them you do they will usually ask you to evidence it then either invite you to inspect and prove your claim and if they are satisfied allow you to retrieve your items at your own cost.

If your goods have become a part of something else and removal would cause damage ie you provided the plaster or paint you cannot reclaim them as to do so alters and damages what they are part of, when you paint a wall you cannot remove it from the wall. Likewise it is logical to assume that plaster once mixed and applied cannot be removed, though any unused tins of paint or bags of plaster/unused plaster board sheets that remain as the items supplied can be reclaimed. If you sold tyres and they are fitted to a van you can remove them without damage so can reclaim them.

Of course it may be that the debtor is overdue significantly beyond terms and you wish to invoke your ROT rights, that does not mean you can just walk in and take them, that would be trespass and theft (I know that's a mood point) you must give them notice of your intention and be given access in some cases your debtor may volunteer to return unused stock to reduce liability. If they have sold the goods on there are no goods you can claim against. Your ROT clause must be worded in such a way that you have the right to enter the premises to retrieve your goods in the event of none payment.

If when you sell the goods you knew they were to be sold on it is extremely unlikely you would be able to invoke your ROT claim. Likewise if you sell products with a shelf life such as food then it is likely to be out of date by the time you can attempt to invoke a claim.

ROT does not suit all business lines.

Also consider specifically in construction the goods are on the developers site or Main Contractors site if you are in a chain then they need to give consent for you to enter site to retrieve items and if the goods have become part of the development and removing them causes damage they could seek remedy from you for those damages and seek prosecution for trespass, this I see regularly when subbies have not been paid for labour sadly labour is not something that falls under a standard ROT claim.