Although the idea behind red clauses is very simple, they are becoming more and more widespread. This has led to cases where such clauses have been redefined in order to create a burden on the goods rather than retain ownership. When a tax is levied, the buyer takes legal ownership of the goods, but the seller reserves the right to confiscate the goods and, as a rule, sell them to settle the buyer`s debts. This distinction may seem subtle, but it can create problems, given that a valid fee is subject to certain registration requirements. In addition, retention of title applies regardless of the legal nature of the contract in which it was incorporated. This means that it no longer applies only to a sales contract, but also to other contracts. The application of retention-of-title clauses (sometimes referred to as “Romalpa clauses”) under PPSA was recently investigated in the Victorian appeal case Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (in its capacity as joint and several liquidator of Swan Services Pty Ltd) (in Liq) [2015] VSCA 92. A simple retention of title clause within a sales contract essentially means that ownership remains in the hands of the supplier until full payment for the goods. There are also a number of other red clauses that can be used in appropriate circumstances. In any case, it is advisable to include in the general conditions of sale all your sales documents, such as.B. offers, order forms, construction contracts, etc. a retention of title clause.

and to have this signed by the buyer if he is a consumer. The main purpose of retention-of-title (“ROT”) clauses is to ensure that the seller can repossess the goods upon delivery of goods on credit, if the buyer subsequently goes bankrupt. They are often seen as a natural expansion of the credit industry; If suppliers are expected to sell goods on credit, it is reasonable to expect that, if they are not paid, they will be able to take back the goods. Nevertheless, insolvency or credit agreement regimes in a number of legal orders prevent the application of retention of title clauses if this would disrupt the administration of the regime. [1] Sellers and suppliers of movable property can resolve problems caused by customers who are poorly paid by a retention of title clause. This clause makes it possible to establish contractually that the ownership of a given material will not be called into question until the acquisition of third parties has paid the full price. 1. Perishable goods – a retention of title clause does not help if the goods in question are likely to perish before payment, for example. B flowers.

Interestingly, the new right of pledge has created a better legal framework for the retention-of-title clause, which puts each creditor in a stronger position, provided that a retention-of-title clause has been included. Retention of title clauses are imposed in the European Union by Article 9 of the Late Payment Directive[2] and sellers` red rights are recognised by Article 7 of the Insolvency Regulation. [3] Remember that the retention of title registration must be cancelled in whole or in part when the price of the goods is paid in whole or in part. 2. The retention of title clause is subject to the written form and must be made available to the buyer of the goods when the credit application is made. . . .