It only seems fair, after all. If you haven’t been paid for goods supplied to a customer then why shouldn’t you just go round and get them back?
What if you’ve been doing some electrical, plumbing or building work for a customer? You may have bought materials or equipment. So why not go back to site and remove the boiler or lighting equipment you’ve installed - at least you’ll get some of your money back if you can sell them to someone else.
Unfortunately, the legal situation here is determined by the Sale of Goods Act 1979, and the default position (unless there’s a contract between the parties to alter this) is that ownership or “title” to the goods passes to the customer upon delivery.
The goods no longer belong to you.
If you take matters into your own hands and pitch up to remove the goods you’ve supplied you may find yourself facing charges for theft, trespass and perhaps even (in the case of removing goods that have been assembled into something else, even by you) criminal damage.
It is possible to change this situation by including a special section in your contract with the customer, a Retention of Title clause. Adding a section into your Terms and Conditions can move the moment that ownership transfers to the customer from the point of delivery to the time payment is made in full.
It’s important to think through the practicalities of actually reclaiming the goods. If the goods are perishable or can spoil, then their value might be impaired and a retention of title clause could be of little value. It’s also important that your goods are easily identifiable. Clear labelling is likely to be helpful but if the customer has unpacked your goods could they be distinguished from goods from a different supplier? The contract might need to give you a right of entry to the location where the goods are held.
Get good legal advice on how to draft the clauses to suit your business.
Even with all this, reclaiming the goods might not be possible. If they have been assembled or processed into another product then it may not be possible to remove them.
Building works are especially complex because most standard form contracts provide for the title to pass to the employer once materials are included in a payment certificate issued to the main contractor. A retention of title clause may give a subcontractor priority over the employer so long as the employer has been informed of the clause prior to delivery. Once materials become 'fixtures' by being installed in place, title passes to the employer irrespective of a retention of title clause unless the subcontractor has made an agreement directly with the employer.
So a retention of title clause can be helpful in some circumstances, but can be difficult to enforce in practice. It’s far better to try to avoid getting into this position in the first place.
Best practice credit control includes vetting customers before offering credit, and continuously keeping tabs on the health of their business, proactive contact before invoices fall due and persistent chasing of overdue invoices. Consider using a commercial debt recovery service such as CreditXS to escalate invoices soon after they become overdue.
If a customer pays late, you can reduce or remove credit limits. You can put a customer on stop until bills are settled. These measures will reduce the risk of getting caught by a bad debt and limit the losses if you do.
For smaller businesses that cannot justify hiring a credit controller, you can now access professional credit control as an outsourced service.
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