Retention of title is the clause by which a seller keeps ownership of goods delivered until the buyer has paid. It is the simplest and strongest security for a supplier, including in the buyer’s bankruptcy.
Legal basis
Article 3:92 of the Dutch Civil Code provides that a transfer subject to retention of title is treated as a transfer subject to the condition precedent of full payment. Paragraph 2 limits its scope: the reservation may cover claims arising from goods delivered or to be delivered and from work relating to them, and claims for failure in those obligations. A wider, all-embracing reservation for everything the buyer may ever owe is not valid under Dutch law, though it is under German law, which creates differences in cross-border supply. Article 3:92(3) leaves intact the power to resell in the ordinary course of business. Where goods are processed or intermingled, the reservation is lost under Articles 5:14 and following.
How it works in practice
The clause belongs in the general terms and must have been supplied in good time, or it is voidable. On the buyer’s bankruptcy the supplier contacts the trustee with a statement of unpaid invoices and the goods still present. Identification is then the problem: only goods that can be individualised and have not been processed can be reclaimed. Good records with batch numbers make the difference.
Where it goes wrong
Terms are stated only on the invoice, and therefore after the contract was concluded; the clause then does not apply. A second error is an extended reservation that is too wide under Dutch law. Third, reclaiming is left too late, by which time the goods have been resold or processed.
Related terms
Retention of title connects to the general terms and conditions, the right of retention and the buyer’s bankruptcy.
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