This article was originally written for and featured in Womanswear Buyer and Childrenswear Buyer.
It’s that time of the year. As a brand owner you are wondering whether you will be paid by retailers or if they are simply intending to trade through Christmas before going bust.
Whilst taking a long time to pay an invoice may be a sign of a well run company which is prudently managing cash flow, a brand owner cannot be sure that nothing is amiss. Certainly sudden delays in making payments should set alarm bells ringing.
If this occurs the brand owner should reach for its standard terms and conditions of sale (T&Cs”). But have the T&Cs been properly made part of the contract with the retailer? Lawyers are often amazed as to the large incidence of clients failing to do so.
If the T&Cs are not made part of the contract with the retailer, the fact that they were drafted by the best law firm in the country will be irrelevant. They will simply be unenforceable.
As such the brand owner should make sure that at the very onset of a commercial relationship the retailer signs a copy of them. Alternatively it is acceptable if the brand owner can show that they were brought to the retailer’s attention although this mat be an evidential issue.
Either way, the brand owner should make clear reference to the T&Cs on order forms, confirmations, delivery notes, and invoices.
If the T&Cs have been properly incorporated, do they contain a retention of title clause?
In particular does the clause:
However, often retention of title clauses try to extend protection to the proceeds of sale when a brand owner’s goods are onwardly sold. Unless extreme care is taken over the drafting and the correct procedures are followed, this provision may be void unless registered at Companies House. Not only that, but the inclusion of an invalid proceeds of sale provision may void the rest of the retention of title clause!
Often a knee jerk reaction of insolvency practitioners will be to reject claims that are lodged with them. Brand owners should not be afraid to fight their corner and take legal advice as to the validity of the claim.
Equally, the retailer’s directors may not always be able to hide behind the corporate veil of a limited liability company. If they have traded past the point where the company could not have avoided insolvency or made personal promises, they may be personally liable for the company’s debts.
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