Business Contracts

A retention of title provision has several effects. Firstly, Article 2367, paragraph 2 of the Civil Code stipulates that retained ownership constitutes a security ancillary to the debt for which it guarantees payment. The retention of title clause thus constitutes a security which suspends the transfer of ownership under the sales contract until the price has been paid in full, without affecting t …

Effect

A retention of title provision has several effects. Firstly, Article 2367, paragraph 2 of the Civil Code stipulates that retained ownership constitutes a security ancillary to the debt for which it guarantees payment. The retention of title clause thus constitutes a security which suspends the transfer of ownership under the sales contract until the price has been paid in full, without affecting the firm and definitive nature of the sale as soon as the parties have agreed on the object and the price . It does not, however, confer on the beneficiary a pre-emptive right in any distribution of proceeds of claims . Moreover, the fact that ownership of an asset has been retained as security by virtue of a retention of title clause contained in a sales contract does not preclude its confiscation .

If payment is not made in full by the due date, the creditor may, under Article 2371 of the Civil Code, demand the return of the property subject to the retention of title clause in order to recover the right to dispose of it, in which case the value of the property taken back will be deducted from the balance of the secured debt by way of payment. If this value is higher than the amount of the secured debt still due, the creditor owes the debtor a sum equal to the difference . Restitution may be made in kind in the hands of the debtor, or on the price subrogated to the resold goods . However, the Court of Cassation distinguishes between an action for restitution of goods sold with a retention of title clause and an action for rescission of the sale .

Article 2372 of the Civil Code, as amended by Ordinance No 2021-1192 of 15 September 2021, provides that, in the event of disposal or loss of the property, ownership may be applied to the price claim or insurance indemnity subrogated to the property. The sub-purchaser or the insurer can then raise against the creditor the exceptions inherent in the debt, as well as those arising from his relations with the debtor before he became aware of the deferral. In effect, the retention of title clause, which is attached to the claim of the sale price and used exclusively to guarantee its payment, constitutes a contractual subrogation, the effect of which is to vest not only the original claim, but also all its advantages and accessories  in the subrogated party. Previously, although the Court of Cassation had accepted, as article 2372 does, that the resale of a property sold with a retention of title clause, the full price of which has not been paid, operates, by effect of real subrogation, to transfer to the patrimony of the original seller the price or the part of the price unpaid by the sub-purchaser, it considered, on the contrary, that the latter could not set up against the sub-purchaser the exceptions which he could raise against his own seller .

Cass. com., 17 October 2018, LawLex202100006392JBJ, regarding a sale of slot machines and integrated gaming kits; CA Douai, 13 June 2013, LawLex202300008328JBJ.

Cass. com, 15 October 2013, LawLex202100003368JBJ.

Cass. crim., 28 February 2024, LawLex202400001835JBJ.

CA Douai, 13 June 2013, LawLex202300008328JBJ.

Cass. com, 20 June 1989, LawLex202100001734JBJ.

Cass. com. 23 January 2001, LawLex202100006413JBJ.

Cass. com. 15th March 1988, LawLex202100003369JBJ.

Cass. com. 18 January 2011, LawLex202100001728JBJ; 16 June 2009, LawLex202200002806JBJ; 5 June 2007, LawLex202100003667JBJ.

Business Contracts

143. Effect

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

143. Effect

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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