Q&As

How does the restriction on ipso facto clauses under new section 233B, Insolvency Act 1986 affect a supplier’s contractual rights to repossession under a retention of title clause which might otherwise be triggered upon a customer insolvency event?

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Produced in partnership with Deanne Hamilton of Harrison Clark Rickerbys Limited
Published on LexisPSL on 22/07/2020

The following Commercial Q&A produced in partnership with Deanne Hamilton of Harrison Clark Rickerbys Limited provides comprehensive and up to date legal information covering:

  • How does the restriction on ipso facto clauses under new section 233B, Insolvency Act 1986 affect a supplier’s contractual rights to repossession under a retention of title clause which might otherwise be triggered upon a customer insolvency event?

How does the restriction on ipso facto clauses under new section 233B, Insolvency Act 1986 affect a supplier’s contractual rights to repossession under a retention of title clause which might otherwise be triggered upon a customer insolvency event?

This Q&A considers the restrictions on ipso facto clauses under section 233B of the Insolvency Act 1986 (IA 1986) and the impact on a supplier’s contractual rights to repossession under a retention of title clause which might otherwise be triggered upon a customer insolvency event.

The Corporate Insolvency and Governance Act 2020 (CIGA 2020), which received Royal Assent on 25 June 2020 and took effect on 26 June 2020, inserts a new section 233B into IA 1986 preventing suppliers from terminating contracts or supplies when a customer becomes insolvent (known as ipso factor clauses).

Ipso facto clauses are common place and are routinely included in commercial contracts enabling a supplier, upon the occurrence of an insolvency-related event, to terminate a contract. These clauses are usually coupled with retention of title clauses (ROT) and together they allow a supplier’s loss to be mitigated in the event of a customer’s insolvency. Ipso facto clauses allow termination of a contract or supply while ROT clauses allow suppliers to recover goods already supplied which the customer has not paid for, thereby allowing the goods to be sold to another party.

Before CIGA 2020, the

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