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Can a supplier reclaim their stock if it hasn't yet been paid for?

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Can a supplier reclaim their stock if it hasn't yet been paid for?

Reviewed: 5th June 2015

The answer is yes, possibly.  It will depend on whether there was a Retention of Title clause in the contract you signed with your supplier when you bought the goods.  If there was no retention of title clause in your contract then the goods become yours (or your company’s) once you’ve received them and the supplier can’t reclaim them.  If you’re late paying, then they’ll have to find alternatives ways to try and recover the money you owe them. 

However, having a retention of title clause in the terms and conditions means that even though the stock has been delivered to you, your supplier still owns those goods until you have paid for them.  If the goods belong to the supplier then they can claim them back.  Even if you haven’t signed a formal contract, if your supplier can prove that you were aware of their terms and conditions before agreeing to purchase the goods, for example if you’ve done business with them before and have signed their purchase contracts in the past, then the clause may still be enforceable. 

Under some clauses, suppliers can even enter your premises to take back their stock, so it’s important that you check what your original contract says.  Once inside, the supplier will have to identify their own stock, for example by serial numbers or by the packaging if it hasn’t yet been opened, but if they can’t prove that the stock is theirs, then they can’t take it away. 

There are various forms of retention of title clauses including these “simple” clauses that apply to the goods supplied under that particular contract, “all monies” clauses whereby the supplier has ownership of all the goods they’ve supplied to you until you’ve paid for them all – this includes goods supplied under the contract and any other goods supplied by them, regardless of how the debt occurred.  There is also a “proceeds of sale” clause that gives the supplier the right to any proceeds if you’ve sold the stock.  There are other more complex clauses too, but it’s worth noting that generally speaking, the more complex and extensive a clause is, the harder it is for the supplier to enforce it.  

The retention of title clause should still remain in place even if your company goes into liquidation or insolvency and the supplier will need to speak to the insolvency practitioner handling the case about reclaiming their stock.  If there isn’t a retention of title clause in place, then the supplier will be treated the same as any other ordinary creditor.

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