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Where a supplier exercises a retention of title clause against a buyer of its goods, must the supplier account to the buyer for any difference between the value of the goods and the debt owed by the buyer to the supplier?

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Produced in partnership with Tim Herbert of Ignition Law
Published on LexisPSL on 14/07/2021

The following Commercial Q&A produced in partnership with Tim Herbert of Ignition Law provides comprehensive and up to date legal information covering:

  • Where a supplier exercises a retention of title clause against a buyer of its goods, must the supplier account to the buyer for any difference between the value of the goods and the debt owed by the buyer to the supplier?

Where a supplier exercises a retention of title clause against a buyer of its goods, must the supplier account to the buyer for any difference between the value of the goods and the debt owed by the buyer to the supplier?

With a standard retention of title clause, the above scenario provides no difficulties. If the buyer fails to pay, then the seller repossesses all of the goods. The buyer then does not have the goods. The seller has no right to sue for the price of the goods, because the title in the goods has not passed to the buyer.

So, the repossession of the goods sees the end of the contract between the parties (not least due to a total failure of consideration). If the seller resells the goods at a higher price, then the buyer cannot complain. Indeed, the buyer is probably saved an action for damages by the seller, as it may not have suffered any loss following the resale.

More difficulty occurs with a clause where the passing of title in the goods is not directly linked to the payment of the price, including where the price is payable on a 'day certain'—in which case, the seller still has a right to sue for the price even though title has not passed.

As an example, in Clough Mill v Martin, payment for the

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