Commentary

Current Account Clauses

Part VII Loans
| Commentary

Current Account Clauses

| Commentary

Current Account Clauses

Title retention and 'all-liabilities' clauses

Clauses that attempt to reserve ownership of the goods supplied in the seller until all obligations owed to the seller by the buyer have been discharged, and not just those flowing from the contract of sale, are slightly more problematic. The argument is that withholding ownership until a long overdue debt has been paid is creating something over and above what was in existence when the clause was first incorporated, unless it simply replaces another security right already provided for. Thus it is more difficult to disguise as something other than the creation of a security interest. The reason for the use of 'all-liabilities' clauses is to circumvent problems of identification that arise if a buyer company has gone into liquidation receivership. Goods originally supplied by the seller are now in the buyer's warehouse. Some consignments have been paid for; others have not. The seller has a difficult task in identifying the goods actually unpaid for. Its task is easier when there are 'all-liabilities' reservation of title clauses in respect of all consignments, and it can therefore say to the buyer: 'You do not have title to any of the consignments in the warehouse because all of them have not been paid for.'

The House of Lords upheld the effectiveness of 'all-liabilities' retention of title clauses in the Scottish case Armour v Thyssen Edelstahlwerke AG.1 Lord Keith referred to s 17(1) of the Sale of Goods Act 1979, which provides that

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