A title retention clause is a provision in a contract that allows a supplier to retain ownership of goods until the buyer fulfills certain conditions, typically the payment of the purchase price. This clause is designed to protect the supplier by providing security in case the buyer defaults or becomes insolvent. It is also referred to as a Romalpa clause or a reservation of title clause.
Title retention clauses are commonly used in commercial contracts, particularly in transactions involving the sale of goods on credit. They are prevalent in various legal areas, including contract law and commercial law. Such clauses help suppliers manage risk by ensuring that they maintain ownership of the goods until they receive payment. Users can often manage these agreements using legal templates available through services like US Legal Forms.
Here are a couple of examples of abatement:
For instance, a furniture supplier may include a title retention clause in a sales agreement stating that ownership of the furniture remains with the supplier until the buyer pays the full amount. If the buyer fails to pay, the supplier can reclaim the furniture.
(hypothetical example) A construction company may use a title retention clause when supplying materials to a contractor, ensuring they retain ownership until the contractor pays for the materials.
| State | Key Differences |
|---|---|
| California | Enforces title retention clauses but requires clear documentation. |
| New York | Allows retention clauses but may require additional disclosures to buyers. |
| Texas | Recognizes title retention clauses but imposes strict compliance with state laws. |
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Security Interest | A legal claim on collateral that has been pledged, often in a loan agreement. | A security interest may involve more formal registration and can apply to various types of collateral, whereas a title retention clause specifically pertains to ownership of goods until payment. |
| Lease Agreement | A contract where one party pays for the use of an asset owned by another party. | In a lease, ownership remains with the lessor, while in a title retention clause, ownership is retained by the supplier until payment is made. |
If you are a supplier considering a title retention clause, ensure that it is clearly outlined in your contract. If you are a buyer, read the terms carefully to understand your obligations. Users can explore US Legal Forms for templates that can help draft these clauses effectively. If the situation is complex, seeking professional legal advice may be beneficial.
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The supplier can reclaim the goods since ownership has not transferred until payment is made.