Navigating through the minefield of retention of title clauses

In an economic downturn all parties to construction and supply contracts must adopt strategies to minimise exposure to the risk of insolvency of their contract counterparties. This involves considering contractual safeguards, adopting contract administration procedures designed to minimise exposure to risk and the early identification of risk minimisation measures for both principals and subcontractors.

Important for a supplier will be the use of a retention of title clause (also known as a Romalpa clause) within its supply contract. However using these clauses effectively can be difficult as the law surrounding their use has often been described as either a 'maze or a minefield'. This update provides a snapshot of the critical issues to be considered and how to best address these when using the various types of retention of title clauses available.