Even if the buyer defaults on the payment of an item, according to the provisions of the Sales Act, the seller does not have the option to cancel the purchase and demand the return of the item once the item has been physically handed over to the buyer. A special exception to this, however, applies in the situation where the seller has taken a reservation of title.
A retention of title is a clause that can be included in a purchase agreement for the sale of any (movable) item, including for example a car, a boat, a house or something else entirely. A sale with retention of title implies that the buyer only owns the goods when the conditions in the purchase agreement have been met. In other words, the purpose of the retention of title is that the seller can take back the sold item if it turns out that the buyer subsequently does not comply with the purchase agreement. Even if the buyer owes money to other creditors, the retention of title also ensures that the creditors do not thereby get their receivables back in the sold item.
Form requirements:
There are a number of conditions that must be met before the retention of title is valid. In this connection, a distinction is made between consumer and business purchases.
Consumer purchase means a purchase that a consumer makes from a trader. The following conditions apply here:
- The retention of title must be included in a signed purchase contract, where it is clearly stated which goods are subject to retention of title. The requirement for clarity implies that the seller cannot, as a rule, reserve the right of ownership of the goods by a provision in his general terms and conditions of business and delivery.
- The retention of title must be agreed upon at the latest when the sold item is handed over. A stamp on the invoice after handing over the goods to the buyer is therefore not sufficient.
- The total purchase price must exceed DKK 2,000. Here is understood the sum of a payment and the total costs in connection with the credit purchase.
- A fixed installment plan must be agreed upon. The retention of title cannot therefore take place in accordance with an agreement with a variable loan amount.
- The seller must pay at least 20% of the cash price at the latest when the goods are handed over. Here is understood the price for which the item could have been purchased against cash payment from the seller.
Business purchases are purchases where both buyer and seller act as part of their business.
The conditions for a valid retention of title are largely the same as in consumer purchases, but where there is no requirement that the seller must be in full payment for at least 20% of the cash price at the latest upon handing over the goods.
In addition to the conditions listed above, a so-called “security deed” can also be attached to the item. The security deed is the action (deed) that is carried out to ensure that the seller’s right is protected against the buyer’s creditors or contract purchasers regarding the sold item.
As a general rule, no security deed is attached to a retention of title, whether it is a consumer or business purchase. A significant exception to this, however, is in particular motor vehicles, where the retention of title must be registered in the vehicle register in order to obtain protection against the buyer’s creditors and contract purchasers.
The repossession:
If it can subsequently be established that the buyer unfortunately does not fulfill the conditions of the purchase contract, including in particular the payment, the seller can request the return of the sold item with the help of the bailiff, if the conditions stated above are met.
When calculating his receivables in the bailiff’s court, the seller can include:
- The unpaid part of the claim less credit costs for the unused part of the credit period
- default interest, and
- necessary costs of the repossession, including collection costs, court fees and other court costs awarded by the bailiff
If the buyer pays the overdue services, arrears interest and any costs before the item sold has been taken back, the seller cannot take the item back.
If you want help in connection with the purchase and sale of goods with retention of title, our office is available to provide advice. We help you, regardless of whether you are a buyer, seller or a third party.
By lawyer Dennis Brixen Brandt
