11. ROT clauses

Question 1

ROT clause

Answer 1

S&B express intention that property in the goods will not pass until certain conditions are fulfilled or certain events happen

MUST be before property has passed (part of sale of contract)

s. 19(1)
- enforcement advantage if B = insolvent

Question 2

Clough Mill v Martin

Answer 2

CLASSIC ROT CLAUSE

• NOT a charge (B never had the property) so no need to register
• S can recover unused yarn

OBITER (because S only claimed unused) - re: clause for “retaining title” in product

• parties can agree ownership of goods is with S but difficult to see this as ROT
• goods are new assets
• S gets a windfall
• GOFF: possible to do (FOC) but unlikely parties will agree
• DONALDSON MR (what is a product):
  PRODUCT= not identifiable, new product (clause will be attempt at charge)
  NOT PRODUCT = IDENTIFIABLE and SEPERATE (ROT)

Question 3

Borden (UK) v Scottish Timber

Answer 3

If goods used it becomes irreversibly part of the new product and therefore ceases to exist
- goods cease to exist so S’s title ceases to exist

NO ROT
CAN’T RETAIN TITLE IN PRODUCT BECAUSE NEVER HAD PROEPRTY IN IT

S can create an interest but that can arise only through

1. CT
2. Equitable Charge
3. Transfer of ownership

Question 4

Aluminium v Romalpa

Answer 4

DUTCH LAW = fiduciary transfer of asset (no such thing in UK law)

• ch.13 was to secure seller in event of insolvency
• B found to act for S as bailee and fiduciary
• S had right to proceeds because of this interpretation

IN UK LAW only fiduciary if agent (or trustee)

THIS CASE DOES NOT MEAN S CAN RETAIN TITLE FROM PROCEEDS

• not normally find fiduciary relationship
• agency construction gives rise to uncommercial consequences
• subsequent cases find this to be an attempt to charge (need register)

Question 5

Pfieffer Weinhellerei

Answer 5

S claimed ROT to proceeds

• not ROT
• attempt to create security right
• must be registered to be valid

Question 6

ROMALPA APPLICATION

Answer 6

APPLY it if it looks like an agency/creating F duties
In Romalpa
- B had to store S’s goods seperatly
- B is buying it as a F to sell for S (Rather than buying goods to sell)
- possession obtained on behalf of S
- possession = bailment and fiduciary

Question 7

GENERAL RULES

Answer 7

ROT TO GOODS = FINE
ROT TO PRODUCT = NOT FINE
ROT TO PROCEEDS = NOT FINE

Question 8

Henry Lennox v Puttick

Answer 8

S claimed proceeds of sale

• no F duty can be implied from terms of agreement between the parties
• S DOES NOT have a direct claim
• not all bailees or agents are fiduciaries in selling goods

Question 9

Re Peachdart

Answer 9

ROT clause in proceeds

• interpreted as a charge
• not registered = void

Question 10

Armour v Thyssen

Answer 10

ROT clause in goods = valid and enforceable

- ROT until debts paid looks like security but it is a legitimate ROT not a right over b’s property

Question 11

caterpillar v Holt

Answer 11

GOODS SUB-SOLD
action for price can only be brought under s.49 in SOG context

• here ROT clause
• no property passed to B
• no s.49 claim (B not liable for price)

IF ROT, and period of credit expires, and B still owes S, S does not have an action for price

PROBLEM:

• clause ambiguous, courts should have looked at commercial content but instead applied agent construction
• HL said B sold on behalf of S

Question 12

PST Energy v OW Bunkers

Answer 12

GOODS CONSUMED
ROT clause but goods don’t exist anymore!

HELD: NOT SOG CONTRACT UNDER S.2(1)

• agreement = single contract to pay price for all bunkers sold not later than 60 days after delivery whatever happens in the meantime
• not a mixed contract (i.e. SOG for not consumed, not SOG for consumed)
• looks like SOG but taken out of SOG

OBITER: if SOG contract, price might be payable even if property has not passed
- s.49 is not complete code