Add retention-of-title to client terms
Help a client that supplies goods on credit understand retention of title at a practical level, so the business keeps ownership of its stock until it is actually paid for it.
What this play helps you do
- Explain what a retention-of-title clause does in plain terms
- Identify which clients benefit from one
- Connect retention of title to PPSR registration
- Understand the limits of the clause if it stands alone
- Route the client to legal drafting and proper setup
7 min read
When to run this
Run this play with clients who deliver physical goods before they are paid — suppliers of stock, materials, equipment and consumables. Ordinarily, ownership of goods passes to the customer on delivery, so if that customer fails to pay and then collapses, the supplier has handed over its property for nothing. A retention-of-title clause changes the default: it states that the supplier keeps ownership of the goods until the customer has paid in full.
It is a foundational protection for goods-based businesses and belongs in the terms-of-trade conversation, but it deserves its own focus because so many suppliers assume delivery and ownership are the same thing.
The play (steps)
Help the client understand the protection and get it set up properly — drafting stays with a lawyer:
- Explain the principle. Retention of title means the goods remain the supplier's property until paid for, even after they have been delivered.
- Put it in the terms. The clause must sit in the terms of trade that the customer actually agrees to before goods are supplied.
- Pair it with the PPSR. On its own the clause may not defeat other creditors; registration on the PPSR is typically what makes the interest effective in an insolvency.
- Consider tracing. Where goods are on-sold or mixed, well-drafted clauses can address proceeds — this is technical and belongs with a lawyer.
- Refer for drafting. Have the clause professionally drafted and integrated with registration so it actually works when tested.
What good looks like
A goods supplier with proper retention-of-title protection has terms of trade that reserve ownership until payment, those terms genuinely agreed by customers before delivery, and a matching PPSR registration that gives the reserved interest real force. If a customer fails, the supplier can pursue the return of its unpaid goods or their value from a far stronger position than an unsecured creditor. The clause and the registration work as a pair, and someone keeps them current as the business changes.
What to say to the client
Surface the false assumption: “Right now, the moment you deliver, those goods belong to your customer even though they haven't paid you. A retention-of-title clause keeps them yours until the invoice is settled. Paired with a PPSR registration, it means that if your customer goes under, you're fighting to get your stock back — not writing it off.”
Be explicit that you are flagging the need, not drafting the clause. The wording and the registration are a job for a lawyer or PPSR specialist, and what you provide is general information rather than legal advice.
Common mistakes
The first mistake is assuming the clause works by itself — without PPSR registration it may fail against other secured creditors precisely when it is needed. The second is having the clause in terms the customer never actually agreed to, so it does not bind. The third is using generic wording that does not address on-sold or mixed goods, leaving gaps a lawyer would have closed. Retention of title is powerful, but only when drafted, agreed and registered properly.
Key takeaways
- Retention of title keeps goods the supplier's property until they are paid for.
- The clause must be in terms the customer agrees to before delivery.
- On its own it may not be enough — pair it with PPSR registration.
- Drafting and registration are specialist work; flag the need and refer.
FAQ
Which clients should have retention-of-title terms?
Any business that delivers physical goods on credit before being paid. The more stock a client routinely has out on account, the more the protection matters. Service-only businesses generally have a different set of risks.
Does the clause work without PPSR registration?
Often not against other secured creditors in an insolvency. Registration is typically what gives the reserved interest practical force. Treat the clause and the registration as inseparable, and get specialist advice on both.
Can an adviser draft a retention-of-title clause?
The wording has real legal consequences and should be drafted by a lawyer and integrated with PPSR registration. An adviser's role is to identify the need and ensure the client gets proper help. This is general information only.
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