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retention of title clause is not effective as against other creditors. The same is probably so in cases where the seller must have been taken to understand that the buyer will use the raw material, whether he or she is entitled to do so or not. The curtains would, therefore, be regarded as belonging to B and the creditors of B could execute against the curtains.

The relationship between the value of the material and the value added would certainly be of some relevance in deciding whether a ‘new item’ was made out of the raw material. The value ratio would not, however, be the only relevant factor. On the contrary, the ‘common view of the trade and business’ would probably count for more. In the present case, it seems tolerably clear that the curtains would be regarded as new items in this sense.

(c)If an essential economic risk in the manufacturing activities was borne by A, the rules concerning commission could possibly apply. This would mean that, first of all, B would not be obliged to pay for the raw material. This kind of arrangement would be conceivable if the curtains produced using the cloth were meant to be sold on behalf of A. In that case, the new products could be regarded as belonging to A, and B would be entitled only to some kind of reward for undertaking the manufacturing process. This kind of arrangement is not very common.

(d)The rules applied in the event of insolvency would be the same as the rules applied to executions against B’s property on behalf of an unsecured creditor.

Comparative observations

Part (a)

If raw material is sold under retention of title and subsequently transformed into new products, the first issue that has to be dealt with is the question of ownership, or, in terms that may sound more adequate to Swedish and Finnish lawyers: how does the jurisdiction resolve the conflict between the owner of the material and the manufacturer? This issue is a general one and is not necessarily tied to the law on retention of title, although today, retention of title may be the most practical application of these rules.

Surprisingly, a majority of twelve out of sixteen jurisdictions conclude that B will own the curtains even though the value of B’s work is less

than that of the material. Greek, Spanish and Portuguese law reach the opposite conclusion. Austrian law is the only system which grants shares to the manufacturer and the owner of the material: they become co-owners according to their respective contributions.

If we look at the criteria that decide the question of ownership, we can distinguish two main factors: the creation of a new thing and the value ratio between material and work.

In English, Irish, Scots, South African and Belgian law, the only, or at least main, question that matters is whether a new thing has been created. That being the case, English, Scots and South African law conclude that ownership in the product is vested in the manufacturer -- irrespective of the ratio between the value of the material and that of the manufacturing process and no matter who has borne the risk of the manufacturing. The position seems to be less clear in Ireland, where the burden of risk may be a factor in deciding the question of ownership. In Belgium, the position is largely the same as in England and Scotland except when the value of the manufacturing process is only marginal. In that event, Belgian law would accord ownership of the products to the owner of the material, while the manufacturer will only have a personal claim for compensation. Dutch law comes close to Belgian law, as it also focuses on the question whether a new thing has been created and provides a separate rule in favour of the owner of the material if the value of the manufacturing process is only marginal. However, there is a major difference between Dutch law and the other jurisdictions mentioned in this paragraph, in so far as the Dutch Supreme Court considers the question of risk-bearing as essential in deciding for whom a new thing has been created.

In German, Greek, Spanish, Portuguese and Italian law, the value ratio is either the only factor that decides the question of ownership or it is at least one important factor, but whereas in Germany and Italy preference is given to the manufacturer unless the value of the material is materially higher than that of the work, Greek law takes the opposite position. In Spain and Portugal, neither the owner of the material nor the manufacturer is generally preferred. Leaving aside the question of good faith which is another factor in Spanish and Portuguese law, ownership is granted to that person whose contribution has been more valuable.

Sweden and Finland cannot be said clearly to belong to either of the two groups. Both criteria, the value ratio and the creation of a new thing, are taken into consideration with perhaps the latter carrying more weight.

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A second question concerns the effect that an express or implied entitlement to use the goods in a manufacturing process would have on (simple) retention of title. As with the entitlement to resell (see cases 4 and 5), Swedish and Finnish law take the rather strict position that the entitlement renders the reservation of ownership invalid ab initio and not only from the beginning of the manufacturing process. This last position also appears to be taken by Danish law.

Part (b)

The question of ownership also decides part (b). To the extent that the buyer has become owner, B’s creditors can execute against the newly produced items. If A is granted ownership over the products the opposite is so.

Part (c)

Only German and Greek law give effect to a retention of title clause that extends to the newly produced goods. There is a slight dogmatic difference between the jurisdictions in so far as the predominant opinion in Germany, especially of the courts, allows the parties to derogate from the rules on specificatio, whereas in Greece, the products clause is regarded as a security transfer of ownership of the new products. In Germany, this last solution represents only the view of a minority in legal literature.

Derogation from the rules on specificatio is also considered possible in Scotland and -- with reservations -- in Italy and South Africa, but there is no established business practice.

An extension of retention of title into products or a derogation from the rules on specificatio would in most jurisdictions be regarded as a charge over goods otherwise not belonging to the seller. This is clearly the view taken by English and Irish courts in the aftermath of Romalpa. The same analysis applies according to Dutch law, which in its new Civil Code has completely abolished security transfer of ownership (article 3:84 (3) BW). In all three jurisdictions, a registered charge over future movables would be the only method by which the seller could take a real right in the products. Spanish law, on the other hand, although it also knows a registered charge, does not permit the future products to be charged in advance since it strictly requires the charged

goods to be capable of identification at the moment in which the transaction is concluded.

Within French and Belgian law, the same reason, i.e. that the seller is attempting to gain a non-possessory security right in goods belonging to the buyer, may be put forward as an explanation of why the insolvency legislation of these countries puts an end to retention of title as soon as the goods are no longer present ‘in nature’. Any right of the seller in the products would amount to a non-possessory security right and therefore violate general principles of French and Belgian property law. This position is also advanced by Austrian doctrine which likewise considers any rights of the seller as ineffective if they go beyond those given to him pursuant to the rules on specificatio.

In a number of countries (Austria, France, Italy, Denmark, Sweden and Finland), in an attempt to meet the obvious economic need to grant the seller of raw materials a right in the end products, use is made of a contractual agreement which purports to make the seller the manufacturer of such products. However, the commercial practicability of such arrangements is severely limited by the basic requirement that the seller must effectively bear the risks of the manufacturing process and the subsale. In none of the countries named have such arrangements become a common feature in business practice.

Part (d)

In none of the jurisdictions under consideration do the answers to parts

(a) to (c) change in the event of B’s insolvency.