When an Administrator is appointed, it is
imperative that the supplier acts quickly in order to obtain
payment in priority to what may be a long list of
What Is A 'Retention Of Title' (ROT)
A ROT is intended to offer protection to a supplier by
retaining the supplier's title to the goods. This means
that even after delivery of the goods, ownership does not pass
to the purchaser until payment has been made.
What Is The Purpose Of ROT?
The purpose of ROT clauses is two fold. Firstly, it is
designed to prevent the assumption that title passes to the
buyer on delivery. Secondly, it is designed to allow the seller
to re-take possession of goods for which payment has not been
made. A ROT clause is typically useful when a buyer becomes
insolvent (eg a liquidator or administrator is appointed to the
If properly constructed ROT clauses may enable a seller to
recover, in priority to other unsecured and secured creditors,
goods to which a valid ROT claim attaches. The validity of a
ROT clause is often challenged and the law is not only
contentious but has been labelled by the Court as being "a
maze, if not a minefield".
What Are The Most Common Reasons For A ROT Clause To Be
Determined As Invalid?
Poorly Drafted Terms
Poorly worded clauses will fail for many reasons.
Typically, this includes ambiguity in its terms as the
supplier attempts to cover all possible scenarios or it
creates a charge that will fail if not registered with
Not Making The ROT Terms Part Of The Contract Of
The ROT clause becomes invalid if it is not
incorporated as a term before, or at the time of, execution
of the contract of sale. Simply issuing a notice of ROT on
the bottom of an invoice will often not suffice, as the
invoice is normally issued after the contract of sale is
negotiated. For this reason, the ROT clause should be
included in the sale agreement with the purchaser. However,
the Courts may hold that if invoices given over a
consistent period of trade contain a ROT clause, then at
some point in the trading relationship ROT would be
inferred as a term of the sale.
Inability To Identify Goods Subject To ROT
To claim ROT, the supplier needs to be able to
identify actual goods as those listed on the unpaid
invoices. This can be a real problem if goods are generic,
supplied by various suppliers or do not have a unique
identifier, such as a serial number. It is also a problem
if the goods are converted, or used as a component in the
manufacture of other products.
Entities trading in the supply of goods need to ensure that
their ROT clauses are validly worded, and likely to be upheld
should a purchaser become insolvent.
The Moore Stephens Corporate Recovery Team can assist you
assert your ROT rights.
1. Source: Hendy Lennox (Industrial Engines) Ltd v
Grahame Puttick Ltd  2 All ER 1952
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When determining if a DOCA is to be terminated, public interest can, and often will, outweigh any benefit to creditors.
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