Retention of Title
Also called: Reservation of Title · ROT Clause
A retention of title clause lets a seller keep legal ownership of goods until the buyer pays for them in full, even after the goods have been delivered. If the buyer fails to pay — or becomes insolvent — the seller can reclaim the goods rather than being treated as an unsecured creditor.
In more detail
Without this clause, ownership typically transfers on delivery regardless of whether payment has actually been received — leaving the seller as just another unsecured creditor if the buyer later fails to pay or enters insolvency, competing with everyone else the buyer owes money to.
The clause matters most in insolvency scenarios: a seller with valid retention of title can often reclaim identifiable, unsold goods directly, ahead of other creditors, rather than waiting in line for a fraction of what's owed.
Enforceability gets complicated once goods are mixed with other materials, resold, or incorporated into a different product — "all monies" retention of title clauses (covering all outstanding debts, not just the specific delivery) are more protective but also more heavily scrutinised by courts.
A parts supplier delivers components to a manufacturer under a retention of title clause. Before the manufacturer pays the invoice, it enters insolvency. Because title never passed, the supplier can reclaim the unused components rather than joining the queue of unsecured creditors.
The enforceability and practical effect of retention of title clauses — especially against a buyer's other creditors in insolvency — varies significantly by legal system and by how goods have been used or altered.
What our lawyers check
- Whether the clause is clearly drafted and likely enforceable under the governing law
- Whether it covers only the specific goods delivered, or all outstanding amounts owed
- What happens once goods are resold or incorporated into another product
- Practical steps required to actually reclaim goods if the clause is triggered
Contracts where this clause matters
Related terms
This definition is general information about commercial contracting practice, not legal advice. How a clause operates depends on the specific wording of your agreement and the law that governs it. For advice on your contract, have it reviewed by a lawyer.
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