What collateral can a supplier invoke if its customer goes bankrupt? To be considered (among others) is retention of title, a reserved pledge and the right of reclamation. This contribution will discuss retention of title.
Retention of title does not arise automatically but must be expressly stipulated, which also applies to a reserved pledge.
Retention of title is defined as a presumption that transfer of title is subject to the condition precedent of payment of the purchase price. The scope of the retention of title of depends on the wording. A limited retention of title applies only to goods specified on the underlying invoice. A extended retention of title means that all goods may be repossessed, insofar as the goods are individualisable, obviously maximised to the outstanding amount. Under Dutch law, a lengthened retention of title (which comes to rest on newly formed items) is not legally valid.
Retention of title provides broader protection than the right of reclamation. It can be stipulated not only for the purchase price, but also for additional work and claims for damages, including interest and costs. Any further stipulation is null and void and is considered unwritten. For other claims, a (undisclosed) pledge can optionally be reserved.
In case of bankruptcy, the supplier will be able to reclaim its goods. The bankruptcy trustee will critically assess the supplier's claims to return the delivered goods. Thus, he will not honour a supplier's claims if the retention of title has not been validly agreed, for instance because the general terms and conditions are not applicable, or the wording of the clause prevents restitution.
Failure to respect a retention of title may lead to liability of the bankruptcy trustee.