Lloyd's Maritime and Commercial Law Quarterly

Professor Francis D Rose

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THE INTERPRETATION OF RETENTION OF TITLE CLAUSES: SOME DIFFICULTIES

Louise Gullifer*

In the recent Court of Appeal decision in Wilson v Holt, the majority interpreted a retention of title clause in a sale of goods contract as creating an agency relationship between the buyer and seller, so that the buyer sub-sold the goods as agent of the seller. This meant that property in the goods never passed to the buyer, and the seller could not bring an action for the price. This paper argues that the agency construction is wrong, as it gives rise to many uncommercial consequences, leads to uncertainty and potentially upsets the balance of interests between financiers of small and medium-sized enterprises. It contends that the case of Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd, used to support many uncommercial interpretations of retention of title clauses, is fundamentally flawed and should be put to rest. Finally, it is argued that the view of the Court of Appeal in Wilson v Holt that s.49 of the Sale of Goods Act 1979 includes the only two circumstances in which a seller can sue for the price is unsatisfactory, and that the section should be reinterpreted or, ideally, reformed.

I. INTRODUCTION

It is extremely common for credit sales of goods to be on retention of title (“ROT”) terms; and, although each contract must be construed on its particular wording, the courts have, up to now, had a reasonably consistent pattern of interpretation based on commercial sense. ROT clauses are used to provide the unpaid seller with security (broadly defined) in the event of the buyer’s insolvency. Courts have been prepared to uphold clauses relating to the actual goods supplied under the contract as merely postponing the passing of property under the contract. However, they have repeatedly refused to imply a term that the goods are sold on the seller’s account, giving rise to a duty to account and an interest on the part of the seller in the proceeds of sale. Further, if the contract itself makes such provision, the seller’s interest has been characterised as a registrable charge. Despite this, sellers still

* Professor of Commercial Law, University of Oxford; Fellow and Tutor in Law, Harris Manchester College, Oxford.

The following abbreviations are used:

Benjamin: MG Bridge (ed.), Benjamin’s Sale of Goods, 8th edn (Sweet & Maxwell, London, 2010);

Bowstead & Reynolds: P Watts and FMB Reynolds, Bowstead & Reynolds on Agency, 19th edn (Sweet & Maxwell, London, 2010);

Bridge: M Bridge, The Sale of Goods, 3rd edn (Oxford University Press, Oxford, 2014);

ROT: retention of title;

SGA: Sale of Goods Act 1979.

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