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In the light of recent economic meltdown, Non payment of goods supplied can ascent a huge risk for various business. Since most of the suppliers of goods frequently supply goods on credit for the buyers, it is essential to take certain measures that will limit the exposure to the risk of non-payment by the buyer in distressed and solvent situations1. Hence, sellers as unsecured creditors frequently incorporate clauses such as reservation of title clauses. The idea behind reservation of title clauses is that it displaces the usual operation of law by assenting in the contract that the title to the goods will not pass at the time the contract is made but when the good have been paid for2. While the idea behind reservation of title clauses is very simple and clear, some of the clauses are of considerable complexity. In this essay, I will begin with explaining reservation of title clauses. Then, a brief overview of the different types of clauses, focusing on Proceeds of sale, particularly, where the buyer uses the goods supplied by the seller to manufacture goods, which could prompt the risk of products being unidentifiable and in this manner, may confine the seller’s right to obtain the title of the goods.
According to ss 17(1) of the Sales of Goods Act 1979, the basic position in contracts for the sale of goods is that the title passes from the buyer to the seller when the parties intend it to pass 3. Nonetheless, this usual operation can be excluded by the parties, which can be achieved by incorporating a Reservation of title clause into the contract. Reservation of title clauses, sometimes referred to as Romalpa Clauses, is a provision, which is enclosed in a contract for the sale of goods, which, specifies that the title to the goods will remain vested in the seller, until certain conditions have been satisfied by the buyer, regardless of whether the goods have been delivered to the buyer 4. This can be seen in the case of Aluminium industrie Vaasen BV v