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Why is a Retention of Title (ROT) clause essential?

Wine producers and distributors usually supply wine to their customers on credit terms – customarily 60 to 90 days.  If the customer gets into financial difficulty, and a liquidator or administrator is appointed, the supplier will be an unsecured creditor.  Whatever’s left in the pot when the insolvency procedures are completed will be shared between the unsecured creditors, pro rata to the amounts owed to them.  They rarely get more than a few pence in the pound, more often nothing at all.

Having to write off a debt in these circumstances can be extremely damaging.  A business can only stand so much bad debt before it, too, will have to call in the liquidator.

How ROT reduces the risk

If the supplier has made sure that the relevant sale contract included a properly worded retention of title (ROT) clause, it will have a chance of recovering the wine supplied, or its value.  Where ROT applies, the liquidator will either have to return, or pay for, any stock:

(a) which has not been paid for, and

(b) which is still in the customer’s possession or control when the liquidator is appointed.

Furthermore, depending on the wording of the clause and the factual circumstances, it may also be possible to claim the return of other stock supplied which is still in the customer’s possession, even if it has been paid for.

Except where otherwise stated, all information given and any legal opinions expressed on this website assume that English law applies.  See Conditions of use.