Businesses that supply goods to other entities should revisit
their policies about registration on the Personal Properties
Securities Register (PPSR) or risk losing their
claims to goods if their customers become insolvent.
Many businesses supply goods on terms and conditions that
provide for future orders of goods to be made by purchase order and
include retention of title clauses. Some liquidators and receivers
are taking the view that if businesses supply under these
the standard terms, together with each purchase order, form a
separate contract on the date of the purchase order or the date the
purchase order is accepted by the supplier
each contract creates a new security interest
therefore goods supplied after 30 January 2012 are not covered
by the transitional provisions
businesses need to register their interests for
each supply in order to protect their interests in
if businesses do not register for each supply after 30 January
2012, they are unsecured creditors for those supplies.
The liquidator or receiver then typically offers to settle the
supplier's claim for some percentage of the value of the unpaid
goods supplied after 30 January 2012.
This is a technical argument that appears to be inconsistent
with the legislation's objects and would be cumbersome if in
fact it were correct, but until there is some case law, the matter
is uncertain. This uncertainty means that suppliers face an
undesirable situation of having to either litigate to protect their
claims or settle them on a commercial basis.
Until there is case law that clarifies the situation, businesses
should review their supply terms and reconsider their registration
strategies, particularly for orders of significant value.
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guide to the subject matter. Specialist advice should be sought
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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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