I have previously discussed how hard work is not necessarily finished for those the agricultural sector once the crop, livestock or product is sold. Unfortunately there are many instance where the problems are just beginning, as there may be issues in recovering money owed for the crop, livestock or product.
A starting point for providing some protection was making sure any agreement was put into writing and having the contract contain some essential terms. These will deal with matters like making sure the parties to the contract are identified, the payment terms are clear and what happens If a party defaults. One of those elements was making sure the contract deals with the time when ownership of the product passes to the buyer of the goods.
This seems straightforward but can be complicated. The starting point is to ensure the contract has a retention of title clause in it. This is a clause where the title in the goods is said not to pass the purchaser until a certain event happens, which is typically upon payment for the goods.
It is important for any such clause to properly identify and describe the goods for which title is being retained. Where someone can run into problems is when it comes to the more practical issues of trying to utilise or enforce a retention of title clause.
One such issue might be in a situation where the goods are placed in a shed with other similar goods, for example bales of hay, that are not able to otherwise be identified as belonging to certain suppliers. When the retention of the title clause is drafted, some thought should be given to whether it would be beneficial to include a term that places an obligation on the purchaser to keep the goods separate and clearly identify that those are your goods.
Another common problem is where those goods are mingled with the goods of others, such as grapes being crushed and mixed in with other grapes for wine. In that situation, consideration needs to be given to including clauses in the contract that provide for title being retained in the co-mingled product. This will typically be to the percentage interest in that product, rather than to the product as a whole – if the grapes supplied constituted 30 per cent of the juice that went into the wine, the interest would be in 30pc of the wine.
Even with a clause of this nature, there can be problems with enforcing it – it is very much dependent on the extend to which the goods have been converted into other product and how readily identifiable the good is as part of that product. It can also be problematic where the goods have been on-sold to others who have no notice of the clause, as in that instance the title in the goods have passed. This is where registration on the Personal Properties Security Register becomes relevant, but that's an article for another day.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
