ABSTRACT
The contract of sale is a mutual contract whereby the seller promises to deliver goods and the purchaser in return promises to pay the purchase price. In practical terms the purchaser is often unable to pay the purchase price to the seller unless he has had the opportunity to sell the goods to his customers or perhaps to incorporate them in a manufacturing process and then sell on the new product to customers which will generate proceeds out of which the buyer will pay the original seller. The purpose of a retention of title clause is to secure the position of the seller where delivery of goods has taken place without payment having been made. If the parties have agreed on retention of ownership according to section 455 of the German Civil Code this contractual stipulation is presumed to mean that the passing of the title in the goods from the seller to the purchaser is subject to a condition precedent, namely, that the purchase price is fully paid by the purchaser. Only if this requirement is met is title transferred from the seller to the buyer. Retention of title is in Germany the most important means of securing the position of a person who delivers goods to another where payment is deferred. In terms of scope, its main area of operation is in the field of sales contracts but is by no means restricted to this type of contract. For instance, a contract for work and materials can contain a retention of title clause too because, though it involves the supply of skill and labour, it also results in a transfer of goods which can be made the subject of a retention of ownership by the parties concerned.
