434 s e c u r i t y r i g h t s i n m o va b l e p r o p e r t y

f i n l a n d

(a)The retention of title clause would be invalid as against the creditors of the buyer, because the buyer was entitled to resell the toasters before they were paid for. Two other features of the case would also result in the invalidity of the clause.42 First, retention of title may be used as a security for the purchase price of the transaction to which it relates and other claims of the seller closely connected to that particular sale. A clause binding several independent sales together, however, in the manner described in this case, is not valid against the creditors of the buyer.43 Secondly, a retention of title clause is valid against the creditors of the buyer only if the unpaid items can be individualised and reliably distinguished from items belonging to the buyer.44 This requirement applies also to circumstances where all the items in question are delivered by the same seller. If the unpaid-for toasters cannot reliably be distinguished from the toasters that have been paid for, then the seller, A, has no real right in the remaining toasters. The toasters belong to the insolvency estate and the seller, A, has no right to preferential payment out of the proceeds of their realisation.

(b)There does not seem to be any practicable means of general application by which A could obtain a better right.

(c)This kind of retention of title clause is not commonly used. This is because, first, the clause does not protect the seller against the other creditors of the buyer. Secondly, this kind of a clause is not valid even inter partes when used in either an instalment sales contract or a consumer credit sales contract.

Comparative observations

Part (a)

(i) Validity of all-sums clauses

All-sums clauses are principally regarded as valid in Germany, Spain, Portugal, England, Scotland and Ireland. The legal basis, however, differs.

42See Finnish report, case 4.

43In instalment sales, and in all consumer credit sales, this type of clause is invalid also as between the parties. See further e.g. Tuomisto, Omistuksenpidätys ja leasing 376 ff.

44See e.g. ibid., 316.

436 s e c u r i t y r i g h t s i n m o va b l e p r o p e r t y

(iii) All-sums clauses and commingling

All-sums clauses are not only designed to provide the seller with additional collateral and hence with additional security, they also aim to avoid the kind of practical and probative difficulties that are illustrated by case 9. The 500 toasters that have been delivered on 1 June have been commingled with toasters of the same kind and from the same supplier. In such a case, an all-sums clause has the additional function that the parties can derogate from the legal effects of commingling. If such clauses are held invalid, we are faced in case 9 with a problem: namely, that 1,000 toasters remain unpaid for and 1,000 toasters of the same kind and from the same supplier are found in B’s storage rooms, yet no-one knows whether B has resold the paid-for or the unpaid-for toasters. As the Austrian report points out, the question can be regarded as one of risk allocation: who is to bear the risk that the goods are not identifiable?

As to this question, the jurisdictions take different approaches. Austrian, South African, Swedish46 and Finnish law on the one hand allocate the risk to the seller. If A does not avoid commingling by putting the buyer under an obligation to store the goods separately, B will acquire ownership in all the goods irrespective of payment. Commingling, in other words, ends all rights of the seller under retention of title.

French law, on the other hand, lets the buyer -- or rather his creditors -- bear this risk. According to the 1994 amendment of article 121 Insolvency Act 1985 (now C. com, article L. 621-122), the seller can vindicate his unpaid-for goods so long as he finds either these or goods of the same kind and nature in the hands of the buyer irrespective of whether they might already have been paid for or might even have been supplied by another seller. This may rather be seen as more of a statutory exemption to the rules on commingling, rather than as a statutory extension of the retention of title into goods already paid for.

A midway solution is adopted by Dutch, Belgian and Greek law. Since practical problems are most likely to occur with contracts covering multiple deliveries of goods of the same kind, Dutch law, pragmatic as it generally is, simply makes a statutory exception from the general invalidity of all-sums clauses for such kinds of transactions. In Belgium, the predominant opinion advocates the same solution: if all goods are

46Although recent Swedish cases demonstrate that co-ownership may arise when the total quantity has never been lower than the quantity deposited by A and, further, that a commingling of minor importance may be disregarded.