Retention of Title


1) What is retention of title? (amended March 2009)

A “retention of title” clause is a clause that allows the supplier to retain ownership over the goods supplied until such time as certain conditions are met, thus providing the supplier with a form of security against the buyer's default or insolvency. A retention of title clause is sometimes known as a Romalpa clause or as a reservation of title clause.

Under the Sale of Goods Act 1979, where there is a contract for the sale of specific goods, the supplier can retain his right to ownership of those goods even though they have been delivered to the purchaser as long as all parties to the contract agree to this provision. For example, if it is stated in the contract, the supplier may retain the title to the goods until full payment is received. When valid, the supplier’s claim to any unused goods will be binding against any trustee or liquidator subsequently appointed.

To be valid, it is imperative that the retention of title clause is incorporated into the contract which exists at the time of supply (see paragraph 11).


2) Types of clauses

The wording of the clause in a contract may vary considerably. The OR must examine the clause carefully to ascertain the extent of the supplier’s claim. As these matters can be highly technical in nature, they must only be dealt with in conjunction with an examiner/B1. The simplest type of clause has the sole intention of allowing the supplier to retain ownership of the goods until the purchaser makes full payment for those particular goods.

A second type of clause is known as “all sums” or “current account” clause. This is where the supplier retains ownership of the goods until all debts have been paid or any other obligation is met.

The remaining types of clauses are sometimes collectively called multi-purpose clauses. Generally, they are used where the supplier seeks to retain ownership of the goods delivered until the full purchase price for those goods has been paid. If the insolvent sells the goods or has them manufactured into some other property, the original supplier may acquire ownership of part of the resulting property or proceeds of the sale, but that would depend upon the existence of a fiduciary relationship (which does not arise under a contract for sale unless there is a specific agreement by the parties to the contract creating one) or a registered charge in the case of companies.

It is possible for a supplier to combine several types of clause, so that if the official receiver decides that one part of the clause is invalid, the supplier may still be entitled to recover the goods under another element of the clause.


3) Information from the bankrupt or directors

At an early stage in a case the official receiver should seek the views of the bankrupt, partners or director(s) as to whether any supplier has a valid claim to any goods or monies under the OR’s control. In addition, their comments should be sought on when the supplier informed the insolvent of the clause, whether the insolvent accepted the clause and details of the goods supplied. However, the ignorance of the bankrupt/directors as to the existence of a retention of title clause does not necessarily mean that the supplier does not have a valid clause. The OR may also seek the assistance of the bankrupt/partners/director(s) in identifying goods that are subject to a claim.

Examination of the insolvent's records should provide useful information about any retention of title claims. By checking the main documents (purchase invoices, delivery notes, etc.) in the insolvent's records, the OR may be in a position to dismiss a supplier’s claim without the need of entering into lengthy and detailed correspondence, perhaps on the basis that the clause has not been incorporated into the contract.

Where the bankrupt or company officers have not surrendered to the proceedings, the OR should examine any available contractual documentation, such as purchase invoices, etc. relating to the goods.


4) Speedy resolution of a supplier’s claim

Where the official receiver is notified of a retention of title claim to goods or monies under his/her control, it is important that attempts are made to resolve the matter as quickly as possible. It is not necessary to await the appointment of an IP as trustee/liquidator before deciding on the validity of a claim but the OR may wish to do so if, for example, the value of the goods is substantial and/or there are no difficulties involved with the storage of the items.


5) Insurance

The OR should ensure that any property subject to a claim is adequately protected. When considering insurance, the OR should remember that the risk passes with ownership of the goods unless there is a contrary agreement between the parties so that, with the exception of any Public Liability risk, there is generally no need for the official receiver to insure the goods. If in any doubt regarding third party property, please refer the matter to the examiner. For more information on insurance please refer to the Case Help Manual part “OR’s Insurance”.


6) Retention of title questionnaire

The OR may obtain the information required to resolve a retention of title claim by requesting the supplier to complete and return a questionnaire, which forms Appendix 1 of Technical Manual chapter 63, Retention of Title.

The questionnaire is intended to assist the official receiver and so can be amended to establish the appropriate facts required within each case. The questionnaire asks for specific information regarding the goods claimed under a clause in the contract and for documentary evidence in support of the claim. It should be accompanied by a letter explaining that it would be useful if all the documentation and information requested could be supplied so that a comprehensive summary of the claim is available.

To obtain a prompt response it may be desirable to give the supplier a fixed time in which to respond, but at the same time, it should not be assumed that no response means that the supplier has no claim.


7) Other evidence of retention of title clauses

If the official receiver’s enquiries do not reveal the existence of any retention of title clauses and he/she has no reason to suspect that one might exist, the OR can assume that the goods are the insolvent’s property and dispose of them accordingly.

Where a supplier contacts the official receiver to claim goods on the insolvent’s premises, he should be asked to substantiate his claim, the onus being on the supplier to prove that the contract contains a valid retention of title clause.

There are industries where  the use of retention of title clauses are customary, the clothing industry and the record industry, for example.


8) The official receiver’s role

It is important that the official receiver is completely satisfied on all aspects to a retention of title claim. The OR must be certain that the clause is valid before allowing the supplier to remove goods or receive the proceeds of their sale. Similarly, the official receiver must be certain that the claim is invalid before allowing the disposal of the goods.

Where the OR has seized items as the insolvent's property and subsequently becomes aware of a possible claim, the goods should not be sold before deciding upon the validity of the claim. If the OR were to sell goods subject to a clause, he/she could be liable for damages to the supplier.

Once the OR becomes aware of information confirming the validity of a retention of title claim, (which does not have to be provided by the supplier) he/she should contact the supplier and make arrangements for him/her to collect the goods. Although the goods must be returned to the supplier as quickly as possible, the supplier must pay any costs incurred by the OR in relation to the seizure.

If the OR becomes aware of a valid clause after the goods have been sold, he/she should pass the net proceeds of the sale to the supplier which would be the total amount to which the supplier is entitled in these circumstances.

Any claims for retention of title should be brought to the attention of the Examiner, you should only proceed once you have been issued with detailed instructions.


9) Matters to be considered in relation to a claim

Before accepting a claim from a supplier, the official receiver must be satisfied on each of the following:

  • That the wording of the clause includes the goods or monies being claimed;
  • That the clause has been incorporated into the contract;
  • That any goods claimed can conclusively be identified; and 
  • Where the clause is not an “all sums” clause, that the goods supplied relate to an unpaid invoice.


10) Extent of the clause

The OR should examine carefully the wording of the clause to ensure that the supplier retains legal title to the goods or that he is entitled to claim the sale proceeds of goods sold before the insolvency. A clause may actually go beyond permitting the supplier to recover any unused/unsold goods but this will usually involve the creation of a charge.


11) Incorporation of the clause

It is important for the OR to establish that the clause was notified to the insolvent before the supplier accepted the insolvent's offer, as under contract law, the offer made by one party has to be accepted by the other before there is a valid contract. However, the clause may still be valid even if it was introduced after the contract was made as long as the insolvent agreed to it being part of the contract terms. The clause will be effectively incorporated into the contract if:

  • it is in a contractual document signed by the insolvent; or
  • it is contained in any unsigned document containing contractual terms of which the insolvent knew but was not aware of their effect; or
  • it was in a document which the supplier had done all that was reasonably necessary to draw to insolvent's attention prior to entering into the contract.

The methods used by suppliers to inform the insolvent of their terms of business will vary. The terms may have been notified by the supplier before trading began by inclusion in a quotation, acknowledgement of an order, catalogue or price list. The clause will be valid if it was included on an invoice delivered to the insolvent prior to the goods, as the delivery of those goods being construed as the buyer's acceptance of the terms of the contract.

Regardless of the method used to enter into the contract any subsequent changes to that contract may be made in writing or orally but must be agreed to by both parties.


12) Identification of the goods

The goods being claimed under the retention of title clause must be identifiable and the OR must be fully satisfied that any items claimed are the actual goods supplied by the supplier claiming them. Most retention of title clauses relate to raw materials, stock in trade or livestock.

The best method of identification is where the goods are marked with the name of the supplier or where their serial numbers are quoted on any unpaid invoices. The supplier should be allowed access to the insolvent's premises to inspect the goods which he considers are subject to his claim. Of course, the supplier should not be allowed to remove any goods until the official receiver is satisfied that the claim is valid.

If a retention of title clause was drafted only to retain ownership of the goods until payment was made for them, goods such as any raw materials cease to be caught by it once the manufacturing process has begun, i.e. once the goods have lost their identity. For example, leather supplied in the production of handbags, once cut is deemed to have created a new product.

It may be possible for the supplier to retain title to the goods supplied even if they have been used in a manufacturing process provided they are still identifiable, in their original form and are easily removable. For instance, an engine supplied to be fitted to a generator does not lose its identity as an engine just because it is bolted to a generator. However it must be capable of removal without damaging the generator.


13) Goods or sale proceeds relating to an unpaid invoice

With the exception of 'all sums' clauses (see xiv below) the official receiver must be certain that any goods or sale proceeds subject to a claim relate to an invoice for which full payment has not been made. The OR may reject a claim where the supplier is unable to prove this. Where there has been regular business between the supplier and the insolvent, payments on account may have been made. The OR should apply the monies paid by the insolvent to discharge the invoices in date order, starting with the earliest invoice.

Where a claim relates to a partly paid invoice, the way in which the OR should proceed depends upon the terms of the contract and whether title has passed to the insolvent. If title has passed to the insolvent, the supplier will only be able to lodge a proof of debt in the insolvency for the amount owed. If title has not passed, the supplier should give credit for any part-payment by offsetting the amount paid against that which is owed to him by the insolvent. The supplier may even be able to claim for any damages for breach of contract if included in the agreement.


14) Additional matters for “all sums” clauses

An 'all sums' clause is where the supplier stipulates that title to the goods supplied under any contract with the insolvent will not pass until all sums due have been paid. Where such a clause is valid, the OR does need to ensure that the goods being claimed relate to an unpaid invoice, as the supplier may have a valid claim to any goods supplied by him that are still with the insolvent. The supplier will not be able to claim title to goods contracted for on a date prior to there being a nil or credit balance on the insolvent's account. The reason for this is because the title of those goods will have passed to the insolvent at the time that no monies were due to the supplier.

An 'all sums' clause may also require the creation of a legal charge, which may be valid even if it is not registered. Due to the technical nature of such clauses all claims should be dealt with by the Examiner.



  • A fiduciary relationship is one where the insolvent holds the goods and any proceeds of sale for the benefit of the supplier and must account to the supplier for any sale proceeds.
  • Any statement of affairs should show details of the assets which the bankrupt/partner/director consider are subject to a retention of title claim by suppliers.
  • Whenever a supplier’s claim to goods is rejected, the OR should ensure that the supplier is recorded as an unsecured creditor of the insolvent.
  • It is important that the OR provides full details of any goods released to suppliers under his/her authority, when handing over the estate to a trustee/liquidator

Where do I find out more?

The Technical Manual

Chapter 63 Retention of title

The Insolvency Act 1986

 Sections: 234(3) - seizure and disposal of property (company)

               234(4) - liability of office holder (company)

               287(4) - liability of official receiver (bankruptcy)

               304(3) - limit on liability (bankruptcy)

Sale of Goods Act 1979


Retention of Title Flowchart 



Any claims for retention of title should be brought to the attention of the Examiner, you should only proceed once you have been issued with precise and detailed instructions. 

  1. Receive instructions from the examiner to write to a supplier concerning information provided by the insolvent regarding a retention of title claim.
  2. If the examiner is not in possession of a copy of the clause, he/she may instruct you to write to the supplier requesting this. The examiner may also require the supplier to complete and return a retention of title questionnaire. A copy of this questionnaire appears in Appendix 1 of the Technical Manual, chapter 63. Any queries you have relating to this should be referred to the B1/examiner.
  3. Receive an enquiry from a supplier claiming to have a retention of title claim over goods. Refer the matter immediately to the examiner attaching any relevant information, such as the narrative statement and questionnaire. The examiner may ask you to contact the supplier to obtain more information as in step 2. above.
  4. Upon receipt of a copy of the clause from the supplier and/or return of the retention of title questionnaire, pass to the examiner for a decision on the validity of the clause.
  5. If the clause is not valid, notify the supplier of the official receiver's decision. Attach a proof of debt to the letter, if applicable. Allow 7 days for a response and then dispose of the goods in the usual manner. Ensure that the supplier is included in the list of creditors (CA31) and note LOIS screens (CA08) and (CA15) with action taken.
  6. If the clause is valid, contact the supplier to arrange collection of the goods as soon as possible. If appropriate, inform the supplier that the goods are not covered by the OR's insurance.
  7. If the clause is deemed valid after the goods have been sold, the supplier will be entitled to the proceeds of the sale. The examiner/AOR will decide on how much should be paid to the supplier from the insolvent's estate.
  8. When dealing with any of the above actions please ensure that full details are always recorded concisely on the office file and LOIS screens (CA08) and (CA15) so that when the case is ready for closing an audit trail can be easily followed.