Lloyd's Maritime and Commercial Law Quarterly
THE OPERATION OF AN “ALL DEBTS” RESERVATION OF TITLE CLAUSE
Jonathan Mance*
The House of Lords in the Scottish appeal in Armour v. Thyssen Edelstahlwerke A.G.1 accepted the validity of an “all debts” reservation of title clause, allowing a seller to reserve title in goods agreed to be sold until payment—not just of the price of the particular goods but also of any other sums due under the same or any other contract between the parties. The House applied the Sale of Goods Act 1979, ss. 17 and 19(1).2 It rejected an argument that the reservation introduced an element of impermissible security which took the contract in whole or part outside the scope of the Act. The reasoning is applicable under English as under Scots law.3
This article considers how an “all debts” reservation of title clause may operate. The House mentioned that, in the English Court of Appeal case of Clough Mill Ltd. v. Martin,4 there had been “interesting discussions of the problems which might arise where the goods the subject-matter of the contract of sale had been partially paid for before being repossessed by the seller”.5 Like the Court of Appeal, the House did not find it necessary to form a concluded view as to the solution of these problems. But, in articles in 1980 and 1986 by Professor Gareth Jones and Sir William Goodhart, Q.C.,6 it was suggested that an “all debts” reservation of title clause must be self-defeating unless construed as creating a security.7
No difficulty arises in cases like Armour itself, where the indebtedness derives from failure to pay the whole of the price of the very goods agreed to be sold. The seller may treat the contract as determined either in circumstances falling within s. 48(3) or (4) of the Sale of Goods Act 1979 or otherwise at common law on account of the buyer’s repudiation.8 The seller then resells as owner, retaining the
* Q.C.
1. [1991] 2 A.C. 339.
2. Dealing respectively with the passing of property according to the parties’ intentions and the reservation of the right of disposal.
3. See Gerard McCormack, “Reservation of Title—The House of Lords speaks with a Scottish Accent” [1991] LMCLQ 154, 161.
4. [1985] 1 W.L.R. 111.
5. At p. 816G.
6. Their initial joint article, “The Infiltration of Equitable Doctrine into English Commercial Law” (1980) 43 M.L.R. 489, was followed by a further note “Clough Mill v. Martin—A comeback for Romalpa” by Sir William Goodhart, Q.C., in (1986) 49 M.L.R. 96. The view taken in these articles was supported by J. R. Bradgate, “Reservation of Title Ten Years On” [1987] Conv. 434, and was the object of a tentative rebuttal by Gerard McCormack, “All Liabilities—Reservation of Title Clauses and Company Charges” [1989] Conv. 92. See also Gerard McCormack, “Reservation of Title—The House of Lords speaks with a Scottish Accent” [1991] LMCLQ 154, 160.
7. Paradoxically, it would then almost certainly be invalidated by the Bills of Sale Acts 1878–1882 or the Scots common law prohibition on security without possession.
8. See the discussion in Benjamin’s Sale of Goods (3rd edn., 1987), paras. 1207–1217.
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