How To Recover Goods That Haven’t Been Paid For

Last updated: 29 July 2020

Estimated reading time: 6 minutes

Businesses are facing a whole host of different challenges and now more so than ever, you may have found yourself in a situation where you have supplied goods to another business that have not been paid for. This guide looks at suggested courses of action if this has happened to you, and considerations to be mindful of, so that you can attempt to recover your goods with the support of a business dispute solicitor and put processes in place to try and avoid such situations arising again in future.

Jump to:

  1. Investigate: why haven’t you received payment?
  2. Can you rely on a retention of title clause?
    1. What is the point of a retention of title clause?
  3. Check your trading terms
    1. How can you prove that your customer was aware of the retention of title clause?
    2. What are the different types of retention of title clauses that can be used?
    3. What if you don’t have a retention of title clause in your contract?
  4. Identifying and recovering goods
    1. What if the goods you supplied have entered the production process?
    2. What if the goods you supplied are perishable?
  5. What are your rights when reclaiming goods?
  6. What action should you take if the buyer is in financial trouble?
  7. Communicating with liquidators

Investigate: why haven’t you received payment?

The very first thing you should establish is the reason behind the lack of payment, so that you are fully aware of the situation you are faced with and can take the appropriate action accordingly – and seek legal advice depending on what you discover, if necessary in the circumstances.

If you are faced with a wall of silence from your customer after the time for which an invoice is payable has expired, then alarm bells may start to ring – particularly if your working relationship is historically good, in cases where you have traded with the business in question before.

If you are not receiving a satisfactory (or any) response from the company’s Accounts Department or senior management as to why the invoice remains unpaid, it may be time to start thinking about whether you can recover your goods. This will of course depend on the nature of the goods, i.e. whether they are still physically in a form that could actually be recovered.

Can you rely on a retention of title clause?

A retention of title clause is a mechanism which may entitle you to recover the unpaid for goods. Essentially, it is a contractual clause which has the effect of legal ownership of the goods remaining yours (as the supplier) until the items are paid for in full. In theory, this usually means that you have the right to remove them from your customer’s premises if your invoice has not been settled.

What is the point of a retention of title clause?

The benefit of including such a clause in your commercial contracts is primarily to protect you, in circumstances where the goods aren’t paid for or your customer becomes insolvent. In the event of insolvency, the existence of such a clause may well give you a degree of priority over the company’s unsecured creditors and therefore a better chance of getting a return.

Check your trading terms

It is important for you to be aware of the fact that, in order for any retention of title clause to be effective, your customer must be aware of its existence. Adding a clause of this nature to your general trading terms and conditions is strongly recommended, and you are obliged to bring the term’s existence to a customer’s attention prior to the commencement of your business relationship with them. In other words, it must be a level playing field where both you and they are aware of the clause’s presence in your trading terms.

How can you prove that your customer was aware of the retention of title clause?

It is recommended best practice to have all of your contractual arrangements in writing. Insofar as the retention of title clause is concerned, it is suggested that you ask the customer to provide a signature or at the very least, an email or letter bearing their business details, clearly setting out that the clause is acknowledged and agreed to.

What are the different types of retention of title clauses that can be used?

It is strongly advised that you seek legal advice from expert commercial solicitors to assist with drafting the right type of retention of title clause for the bespoke needs of your business. Below is a summary of the main types of clauses which can be used, by way of an overview:

  • Simple: A simple retention of title clause provides for the legal and beneficial title to the goods in question remaining yours until they are paid for in full. If they are not paid for in full, you are entitled to recover them from your customer. On a note of caution, this is only effective if the customer adheres to their duty of care to ensure that the goods remain in the same condition as when they were sold to them, which can be tricky to enforce.
  • All Monies: The wording of this clause should clearly stipulate that title to the goods is retained by you until all payments due to you are made in full. This applies not only to the goods you wish to recover, but also to any other goods you have supplied to your customer. Absolutely everything supplied by you must be paid for before legal ownership passes to them.
  • Proceeds of Sale: The effect of this type of clause is that the proceeds of any sale would be set aside to be held against the retention of title clause. Such clauses are notoriously complicated and difficult to enforce.

Other, more complex types of retention of title clauses do exist (for example, a mixed goods clause); but as a rule of thumb, the more complicated the clause is, the more difficult it is to enforce.

What if you don’t have a retention of title clause in your contract?

In this instance, legal title for the goods passes to the customer upon delivery. Enforcement upon non-payment then becomes much more difficult.

Identifying and recovering goods

To recover your goods from a customer, it is vital that you are able to properly identify them. Suggested practical tips are to ensure that, prior to supply, you mark the goods themselves with something easily identifiable; for example, a barcode/serial number, so that you can identify them easily in the event that recovery becomes necessary.

What if the goods you supplied have entered the production process?

Unfortunately, once goods enter the production process, the effectiveness of any retention of title clause generally falls away as unenforceable.

What if the goods you supplied are perishable?

Logically speaking, once the period for payment for perishable goods has expired, they will almost certainly be rendered unrecoverable due to spoiling. A retention of title clause in these circumstances are of limited effectiveness as a result.

What are your rights when reclaiming goods?

Some retention of title clauses permit you to enter your customer’s premises as part of the recovery process – depending on the nature of the goods, the practicalities of this may be more straightforward in some industries than others. It is advisable to seek assistance from a solicitor in order to ensure that any clause relating to entering the place where the customer has stored the goods you supplied is carefully drafted.

What action should you take if the buyer is in financial trouble?

If you become aware that the customer is seriously struggling to the point that they are taking steps towards insolvency, it is imperative that you make contact with the company’s liquidator (the appointed insolvency practitioner) and seek legal assistance as soon as possible.

Communicating with liquidators

When making contact with the company’s liquidator, you should be ready to provide them with the following information so as to maximise your chances of a recovery:

  • A copy of the contractual agreement/terms and conditions which contains the retention of title clause, along with the evidence you obtained to prove that the customer was aware of and agreed to it.
  • Confirmation that you intend to enforce the clause; making it clear that the goods are not to be sold on as part of the liquidation process without your consent.

There are unfortunately no guarantees that the liquidator will not challenge the clause. If they do, you will join any other unsecured creditors of the company.

The need to take steps to try and safeguard your business against being unable to recover goods that remain unpaid for is of paramount importance. Getting the right retention of title clause drafted and inserted into your trading terms is key; along with properly labelling goods prior to dispatch and highlighting the clause’s existence to your customer. Our team of skilled business dispute specialists can help you with both the enforcement of the right retention of title clause for your company’s requirements.

What next?

Get expert legal advice from our team of business dispute solicitors. Get in touch with us on 0800 689 1700, email us at enquiries@hjsolicitors.co.uk or fill out the short form below with your enquiry.

  • Your data will only be used by Harper James Solicitors. We will never sell your data and promise to keep it secure. You can find further information in our privacy policy.

  • This field is for validation purposes and should be left unchanged.
  • This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

A national law firm

We mainly work remotely, so we can work with you wherever you are. But we can arrange face-to-face meeting at our offices or a location of your choosing.

Our commercial lawyers are based in or close to major cities across the UK, providing expert legal advice to clients both locally and nationally.

Floor 2, Cavendish House, 39-41 Waterloo Street, Birmingham, B2 5PP
Stirling House, Cambridge Innovation Park, Denny End Road, Waterbeach, Cambridge, CB25 9QE
10 Fitzroy Square, London, W1T 5HP
13th Floor, Piccadilly Plaza, Manchester, M1 4BT
Harwell Innovation Centre, 173 Curie Avenue, Harwell, Oxfordshire, OX11 0QG
2-5 Velocity Tower, 1 St Mary’s Square, Sheffield, S1 4LP

Our other locations

Immeuble Danica B, 21, avenue Georges Pompidou, Lyon Cedex 03, Lyon, 69486