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Suppliers urged to safeguard goods in tough trading climate

21 January 2008

Suppliers are being warned to protect their goods amid predictions of a tough trading climate in 2008.

National law firm Shoosmiths says a threat of increased insolvencies means suppliers might not be paid for goods by customers.

So it is urging suppliers to consider including Retention of Title (RoT) clauses in goods supply contracts.

These mean suppliers take precedence over other creditors if customers fail to pay for goods as the result of insolvency, and can recover goods that have not been paid for.

Shoosmiths associate and corporate commercial specialist Daryl Shorthose said there are two types of RoT clause:

“Under RoT clauses,” Shorthose added, “customers may be obliged to ensure that suppliers’ goods are easily identifiable, either by stocking them separately from other goods, or by marking them as suppliers’ property.

“It must be understood, though, that if 500 of 1,000 supplied bolts remained unused by a customer, the supplier could only reclaim the remaining 500, and not the value of the original order.

“Otherwise, RoT clauses are invaluable in insolvency cases where suppliers might face little or no prospect of ever recovering their goods or monies to the value of those goods.

“And if predictions of a tough economic 2008 are correct, some suppliers may be grateful of an RoT safety net should any of their customers end up insolvent.”

And – citing the yet-to-be-contested milk bottle marking This bottle remains the property of the dairy – Shorthose said the simpler the ROT clause, the more effective it is likely to be.

For further information please contact:
Name: Alastair Gray
Phone: 08700 864096
Email: alastair.gray@shoosmiths.co.uk

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