Case 4 - Jackets for resale

Summary

(Simple retention of title – entitlement to resell)

A produces men's clothing and sells it to retailers. B, who runs a chain of fashion shops, buys 1,000 winter jackets for the coming season. The contract grants to B a period of sixty days before payment has to be made. It also contains a clause whereby A reserves title to the jackets until payment in full, but also permits B to resell the jackets in the ordinary course of business.

Before B has paid for the jackets in full, he goes bankrupt. As the winter season has not yet started, no jacket has yet been sold.

Question

What are A's rights in respect of the jackets?

Discussions

GERMANY

The solution to case 4 is the same as the solution to case 3. A can vindicate the jackets as his property (§ 47 InsO). They do not form part of the insolvency estate. The entitlement to resell the jackets does not in any way affect the validity of the retention of title clause. On the contrary, such a right is usually provided for because it enables B to transfer ownership to his customers without having to rely upon the rules of bona fide acquisition.