Retention of Title – check your terms of sale

Facts

F G Wilson supplied generators worth $12 million to John Holt Limited.  F G Wilson's terms of sale applied.  These contained a Retention of Title clause.  When John Holt failed to pay, F G Wilson sued for the price.  Due to an error in F G Wilson's terms and conditions of sale, there was no provision for payment to be made upon a specific, defined day.  This meant that the price did not become payable until ownership had passed to the buyer.

F G Wilson Engineering v John Holt [2014] 1WLR2365, BLM August 2014 Court of Appeal

Held

The Retention of Title clause (under which Wilson retained ownership until payment) stopped ownership from passing to John Holt and therefore stopped the price from falling due!

Commentary

Retention clauses are an invaluable provision in sale of goods transactions, preventing the purchaser from acquiring ownership of the goods (and the right to sell them on) until he has paid the price.  Unfortunately, standard conditions of sale must also include provision for payment to be due upon a set, defined date regardless of the passing of ownership, otherwise the seller can find himself in this trap.  The key phrase to use would be that payment was due on "a day certain irrespective of delivery".

For further information, help or advice please contact Rob Langley on 0191 211 7975.

NB: There was a silver lining in the cloud.  Because John Holt had wrongly sold the goods on to a third party, the Court found that in the alternative to paying the price, Holt had to account for the whole of the proceeds of the sub-sale.