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?

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

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