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How does a Retention of Title Clause Work?

The object of a retention of title clause (sometimes referred to as a Romalpa clause) is to give the seller of goods priority over secured and unsecured creditors of the buyer if the buyer fails to pay for the goods because it is insolvent, or for some other reason which may be specified in the clause.

The clause may be used in its basic form which provides that title to the goods is retained by the seller until it has received full payment for the goods.  This can be supplemented by other clauses, including:

  • A right for the seller to enter the buyer’s premises in order to repossess the goods so that the seller will not commit a trespass when doing so.
  • An obligation on the part of the buyer to store the seller’s goods separately from goods belonging to third parties, to mark them as the seller’s property and to allow the seller access to the buyer’s premises to verify that this has been done. This will enable the seller more easily to identify its own goods if a repossession of the goods becomes necessary.
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