Case 3 - Machinery supplied to be used by the buyer

Summary

(Simple retention of title)

A sells a machine to B. The contract contains the following clause: ‘Title to the machine is reserved until the seller has received full payment.’ Before the price has been paid, C, who is an unsecured creditor of B, executes against the machine. In the alternative, B goes bankrupt. In either case, the machine is on B's premises.

Questions

1. (a) What is A's legal position?

2. (b) Is the clause stated above sufficient to be effective? Is there a more suitable or common wording?

3. (c) Do the parties have to agree on the insertion of a retention of title clause? Or could the seller stipulate one unilaterally?

4. (d) Is the point in time at which the parties agree that title should be reserved relevant?

5. (e) Do A's rights in respect of the machine depend on anything other than the inclusion of a reservation of title clause in the agreement: for example, compliance with certain formalities (e.g. agreement in writing, agreement having a ‘certain date’) or registration? Are such clauses efficacious if they are simply contained in the seller's general conditions of sale?