The dominant type of distribution arrangement, especially in the motor vehicle trade, has the features described above. These arrangements often, however, include features of consignment or commission agreements and retention of title, with the consequence that it is not always easy to say whether the agreement is one or the other.144

If the goods sold by A had been lorries, buses or similar kinds of equipment, it would also have been possible to use a form of charge (registered mortgage). This charge would have protected A against B’s creditors, as well as against the sub-purchasers. The use of this kind of charge is, however, rather inconvenient in distribution arrangements and it is rare for it to be used in such a context.

Cars, as well as other motor vehicles, are also potentially subject to an enterprise charge. The same applies to claims against B’s customers and monies paid by the customers of B. The main problem in using an enterprise charge is that it secures priority over only half the value of the personal property, i.e. other than immovables, belonging to the enterprise. Enterprise charges are, however, fairly commonly used as a part of the security arrangements in distribution contracts between a producer or importer and a distributor, in addition to being used to secure long-term bank loans. Nevertheless, the enterprise charge is usually regarded as a secondary form of security.

There is also always the possibility of establishing a charge over the claims. The main difficulties are that the sub-purchasers must be informed of this agreement and that the distributor, most probably, must not be permitted to collect the monies. An assignment of the proceeds of sale to C1--C5 would give rise to the same kind of problems. Such arrangements would offer protection to A, however, in that, if the sub-purchasers had paid B after notification, they would be obliged to pay the monies once again to A.

Comparative observations

Part (a)

In contrast to the previous case, the goods have now been sold to the customers. Except for Portuguese and South African law, all systems under consideration conclude that C1--C5 have acquired ownership in the cars free of any rights of the first seller (A). According to German,

144 See KKO 1994:145.

344 s e c u r i t y r i g h t s i n m o v a b l e p r o p e r t y

Austrian, Greek, Dutch, English, Irish and Scots law, a buyer who is entitled to resell the goods can validly transfer ownership to his customers irrespective of the rules on bona fide acquisition. However, if the contract between A and B lacked such an entitlement, the customers could still receive unencumbered ownership if they were in bona fides. In France, Belgium and Spain, bona fide acquisition would be the only way by which the customers could receive title since the entitlement to resell the goods is regarded as irrelevant. In Italy, an entitlement to resell would probably not be irrelevant but it is not usually included in the contract of sale between A and B since the parties are not able to grant A a security right in the proceeds. Under Danish law, it is not necessary to rely upon bona fide acquisition nor an entitlement to resell. Since the entitlement to resell the goods invalidates the reservation of title (see case 4), B disposes of the cars as owner. Under Finnish law, however, only a sale in the ordinary course of business would pass ownership to the sub-buyer irrespective of his good faith. The entitlement to resell the goods merely invalidates the retention of title as against B’s insolvency creditors but not as against B’s purchasers in mala fide.

In Portugal, the seller under retention of title can only transfer an expectancy with the consequence that the second buyer can only become owner when the first buyer pays the purchase price. Therefore, the solution in Portugal to part (a) is different from the majority: the seller’s ownership survives the resale. It should be noted, however, that in the special case of cars reservation of title must be registered in order to be effective vis-à-vis third parties.

The questionnaire did not seek to analyse the differences in respect of bona fide acquisition in any greater detail. So a few words on this topic should suffice.145 With the exception of South Africa and Denmark, all jurisdictions protect the purchaser who in good faith and for value buys goods in a normal commercial situation not giving rise to doubts about the seller’s ownership. However, the theoretical foundations are quite different. In German and Greek law, the decisive aspect is the transferor’s possession of the goods; this forms the basis of the acquirer’s belief that the transferor is the owner of the goods. In contrast, the French rule that possession equals ownership (article 2279 C.civ.) emphasises the acquirer’s possession: someone who has in good faith received possession of a movable is protected against the rei vindicatio

145 For a comparative overview see Thorn, Der Mobiliarerwerb vom Nichtberechtigten 45 ff.