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Comparative observations

On the rather simple facts of case 4, the jurisdictions under consideration produce no less than seven different approaches. The last two, pursued by the Nordic systems, also produce a difference in result.

Pursuant to German, Greek, Austrian, Italian, English, Irish and Scots law, the buyer’s entitlement to resell the jackets gives him the power to transfer ownership directly from the seller to the sub-purchasers. The sub-purchasers receive title to the goods without having to rely on the rules of bona fide acquisition. So long as the goods remain in the hands of the first buyer, retention of title remains unaffected and thus enables the seller to vindicate the goods irrespective of whether the buyer is insolvent. One minor difference emerges between German, Greek and Austrian law on the one hand, and Italian, English, Irish and Scots law on the other hand, at the academic level. Within the first three systems the entitlement is construed as a power of disposal (a limited real right, separable from ownership), whereas under the latter jurisdictions the entitlement follows the rules on mandate.

As in case 2, it will be noted that the dividing lines do not correspond to the differences in the regimes relating to the transfer of ownership. In this first group we find abstract, tradition and consensual systems side by side, not only reaching the same result but also adopting the same method of analysis.

Dutch law, although it reaches the same result as the systems just mentioned, differs from the above analysis in so far as the resale is regarded as fulfilment of a suspensive condition for the transfer of ownership between the seller and the first buyer. Therefore the buyer transfers title in the goods as owner, not merely as someone with an entitlement to dispose. So long as the goods remain in the hands of the first buyer, the title retained by the seller remains unaffected also under Dutch law.

Portuguese law presents yet another solution: the sub-purchasers merely receive what may be called an expectancy. They will acquire full title only when the first buyer pays the price to the seller. This is so, irrespective of whether the sub-purchasers acted on a good faith belief in the buyer’s ownership, since Portuguese law has not adopted the principle of bona fide acquisition from non-owners. However, on the facts of case 4, where no sub-sale has yet taken place, the result is the same as under the aforementioned jurisdictions: A’s retention of title remains

unaffected, thus enabling him to vindicate the jackets from the insolvency estate.

A fourth way to resolve the case is adopted by French and Belgian law. The buyer’s authorisation to resell is regarded as legally irrelevant, so long as it does not form part of a consignment agreement in the strict sense. Thus, the sub-purchasers will only acquire ownership according to the rules on bona fide acquisition. Yet, since the goods are still in the hands of the buyers, the result does not differ from that reached by the systems mentioned so far.

A fifth solution is adopted by South African law, according to which the entitlement to resell the jackets is legally irrelevant. It does not confer upon B the power to transfer good title to his customers, nor does it estop A from vindicating the resold jackets. Nevertheless, upon the facts of case 4, where the jackets are not yet resold, the result does not differ from the previous solutions: A can vindicate the goods from B’s insolvency administrator.

A sixth solution, and a slightly different result, is reached in Danish law. A reservation of title may be accepted if the goods are sold and transferred to the buyer with an entitlement to resell them before payment. But such an arrangement is valid only if framed as a credit consignment, which means that the buyer (consignee) must be under an obligation to make ready settlement and the seller (consignor) must closely supervise the process of settlement. A right for the buyer (consignee) to return unsold goods might help to uphold the reservation but it is certainly not indispensable. If a contract takes the form of a sale with retention of title and entitlement to resell but the contract does not conform to the relatively strict requirements of a consignment contract, the reservation of title will be void.

A seventh solution, and a materially different result, is adopted by Swedish and Finnish law. Here a retention of title is invalid when coupled with a power for the buyer to resell on his own account prior to payment, i.e. when the buyer bears the risk that the goods cannot be resold. A retains a right of separation in the remaining stock only if the retailer is entitled to return goods for which he cannot find a customer. A transaction such as the one contemplated in case 4 can only take one of the following two forms: (1) it can be a commission agreement, which means that B sells the goods as an undisclosed agent on the producer’s (A’s) account, or (2) the parties may agree that B buys the goods when he has found a customer whereafter he resells the goods on his

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own account (often called consignment, although this term sometimes is used also for commission).

The rationale of this approach, set out by the Swedish report, is shared by the other two Nordic jurisdictions. So far as the possibility to take a security right in the proceeds is concerned, their point of view resembles that of other European jurisdictions which do not allow such security rights except if they are registered or publicised (see e.g. English report, cases 5 and 6). In respect of proceeds clauses there is in fact a danger of conflict between the seller’s security and those of banks, either under an enterprise charge or a security assignment of claims. The flood of German court decisions on conflicts between sellers’ proceeds clauses and banks’ rights under security assignments illustrates this danger.25 However, the striking feature of the Danish, Swedish and Finnish solutions lies in the strict stance which these systems adopt in respect of unsold goods that are still in the possession of the buyer under retention of title. The transaction cannot, at this point, be regarded as a fraud against the third-party creditors of the buyer in any additional way than a normal retention of title, as the Swedish report also identifies, nor does it appear convincing, at least from the point of view of a German observer, to deprive the seller of the simple title retention if he cannot also get a security right in the claims arising out of sub-sales.

25 See most recently BGH 8 Dec. 1998, JZ 1998, 404 (note Kieninger).