Retention of Title Clause template clause

    Updated: 22 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] – Retention of Title

    1. Title to all goods delivered or to be delivered by [Supplier] under this Agreement shall remain vested in [Supplier] until the Buyer has paid in full all amounts owed to [Supplier] under or in connection with this Agreement, including the purchase price, interest, and costs.

    2. Until title passes to the Buyer, the Buyer shall not pledge, mortgage, or otherwise encumber the delivered goods, except that the Buyer may use or process them in the ordinary course of its business.

    3. If the Buyer processes or commingles the delivered goods with other goods or materials to create a new asset, [Supplier] shall acquire co-ownership of the new asset in proportion to the invoice value of the goods it delivered relative to the total value of the new asset at the time of processing.

    4. If the Buyer fails to meet any payment obligation, or if [Supplier] has reasonable grounds to believe that such failure is imminent, [Supplier] shall be entitled to repossess the goods without prior notice or court order. The Buyer hereby grants [Supplier] irrevocable authorisation to enter the Buyer's premises for that purpose.

    5. The Buyer shall store the delivered goods separately, clearly identified as the property of [Supplier], insure them against fire, theft, and water damage from the moment of delivery, and grant [Supplier] access to the storage location on request.

    What does this clause mean?

    A retention of title clause (also called a Romalpa clause or reservation of property) means that legal ownership of delivered goods stays with the seller until the buyer pays the full purchase price. The buyer takes physical possession of the goods but does not acquire title until payment is complete.

    This is a practical credit-risk tool. If the buyer becomes insolvent before paying, the seller can recover its goods from the buyer's estate without competing with unsecured creditors. In many jurisdictions a valid retention of title clause allows the seller to reclaim unpaid goods from a liquidator, provided the goods are still identifiable.

    Paragraph 3 addresses the processing scenario. If the buyer incorporates the delivered goods into a finished product, the seller becomes a co-owner of that product in proportion to its contribution. Without this extension, the clause loses its effect once the goods are transformed. According to Weshare (2025), 95% of organisations lack full visibility into their contractual obligations, meaning many sellers are unaware which goods in a buyer's inventory remain subject to a retention of title claim.

    When should you use this clause?

    Retention of title clauses are standard in contracts for the sale of moveable goods on credit terms. Include them in supply agreements, purchase orders, and standard terms and conditions whenever you deliver goods before receiving full payment.

    The clause is particularly important when supplying to distributors, retailers, or manufacturers who hold inventory and may face liquidity pressure. It gives the seller a straightforward recovery mechanism without needing to compete with secured lenders in an insolvency proceeding.

    For the clause to be effective, it must be incorporated into the contract before or at the time of each delivery. A retention of title clause agreed after delivery will not be enforceable for goods already supplied. According to World Commerce & Contracting, businesses lose an average of 9.2% of annual revenue due to poor contract management, and failure to include retention of title language in routine supply contracts is a common and avoidable contributor to that figure.

    Customize these elements

    • 1Include retention of title language in your standard terms and conditions and reference it on every invoice to ensure it applies to each delivery
    • 2Add an extended retention of title clause covering proceeds of sale if your buyer is likely to resell the goods before paying you
    • 3Require the buyer to store goods separately and label them as your property so they can be identified on a site visit
    • 4Verify that the clause will be recognised and enforceable under the law of the buyer's jurisdiction for cross-border contracts
    • 5Combine with a pledge over the buyer's receivables from sub-sales for additional credit protection

    Sources

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