The Court of Appeal in Caterpillar (NI) Limited v John Holt & Co (Liverpool) Limited  EWCA Civ 1232 highlighted the importance of careful drafting of retention of title clauses if the seller wishes to retain the right to claim for the price of goods delivered but not yet paid for.
Section 49 of the Sale of Goods Act 1979 requires that if a seller wishes to claim for the price of goods, the buyer must have failed to pay for the goods and either (i) the title to the goods has passed to the buyer; or (ii) the price of the goods was payable under the contract irrespective of whether title has passed. In Caterpillar the Court of Appeal held that the standard retention of title clause resulted in the contract falling foul of Section 49 of the Sale of Goods Act because title had not passed to the buyer and payment only became due to the seller once title had passed.
Sellers should heed this cautionary tale and take steps to reduce the risk that the seller loses the right to sue for the price of the goods under Section 49 of the Sale of Goods Act by ensuring that the contract contains a clear and unambiguous obligation to pay the purchase price regardless of when title passes to the buyer.
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