Retention of Title - Across the Border Protection

Retention of title clauses ought to offer a seller protection that he will retain ownership of goods (until they are either re-sold or used in any manufacturing process) until payment is received. Where parties trade on an international basis the same principles apply but great care has to be taken to ensure that the retention of title clause works both in the law of the buyer's country and of the law governing the contract. Although it may help if the contract is governed by a legal system that is supportive of ROT clauses ultimately recovery will depend on local rules. Clauses which provide basic protections ought to be enforceable in most countries although in some cases there could be a requirement that local formalities (like registration) may have to be observed.
A carefully drafted clause should still allow the parties to fulfil their commercial objectives - for example reselling or processing. However to achieve these objectives there may be perhaps a "reasonable" the risk that ROT clauses would not apply in some countries. The alternative is of course to adopt specific clauses for specific categories of countries. Although in each case the laws of the appropriate jurisdictions should be given consideration the general rule is that a clause which would be capable of general application would take account of the following matters:-

1. The clause should be kept as simple as possible and set out in writing. Possibly it should appear in bold text in the general business terms.

2. The seller should ensure that the clause becomes part of the contract. The seller should beware of having its general business terms only in post contractual documents like invoices and it should ensure that the buyer understands that the terms and conditions as set out in purchase orders do not apply.

3. The goods should be marked as belonging to the seller and the marking should match it to a specific order batch in order that where necessary the batch numbers can be marked up to an order or delivery note.

4. Where possible the buyer's premises should be inspected regularly to ensure that there is a compliance with the contract terms.

5. Financial health checks of the buyer should take place and where there is financial difficulty prompt action should be taken to recover the goods.

6. Consider other methods of protection such as credit checks and export insurance.

7. Be aware that the clause can be difficult to enforce in some countries and take professional advice as appropriate.

8. Require payment on delivery - but remember that in some countries (such as France and Italy) title can pass when you make the sale contract.

9. Beware of any requirement for specific registration in respect of certain goods - for example machinery or cars.