Question: Is possession of my unpaid supplies 9/10’s of the law?
A customer of mine has not paid for goods that I supplied to him in May of this year. He has constantly promised payment of my invoice but has failed to do so. I have now heard that he (the debtor) owes many suppliers and will probably go into liquidation. I supplied him with 20 bathroom units and I know he still has most of them. Can you please tell me if I can pick up my units as he has not paid for them.
Reply:
Where goods are supplied to a customer, the passing of ownership, unless otherwise stated, is where both parties (customer and supplier) intend the passing of ownership to take place: usually at the delivery stage. However, the passing of ownership can be stipulated in the terms and conditions of sale at a point where full payment has been received: in the case of a cheque (check) this is when funds are deposited in the suppliers bank account.
The clause is worded in your terms and conditions of sale as follows 'Title to the invoiced goods will only pass to the buyer/customer when full payment of the invoice is received by the supplier.' It is also important that you inform the customer of your retention clause as early as possible in the transaction, and certainly before supplying the goods.
The reason for this is that the customer can hardly of agreed to a retention clause if they did not know about it until after they accepted the goods, and may have grounds for retaining possession of the goods in a litigation situation. To avoid this situation you should provide a copy of your trading terms at an early stage of the sale proceedings: this is also very good business practice.
If your goods can be easily identified, you can recover your goods on default of payment. If your goods are low value and low volume, or form a small internal part of a larger manufactured item built by your customer, you are unlikely to recover your goods due to identification of your goods or viability of such recovery action. For example, if your goods were ball bearings sold to a manufacturing company for insertion into roller skates, you would have very little chance of recovery unless the bearings were as delivered - easily identifiable, still boxed and removable.
Further, if your customer sold on the ball bearings to another company and then defaulted on payment, you could recover your goods (if still boxed etc.) from the third party as the customer cannot give a better title to the goods than they hold.
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