Advise Goldcorp Ltd - Essay Example

?Advise Goldcorp Ltd. as to their prospects of successfully relying on their Retention of (RoT) clause to recover the goods d above and proceeds of sale In a world of huge and expanding businesses, everyone utilizes his right to protect his business and property. The Retention of Title (RoT) is one of such clauses in a business agreement that enable a seller of goods to protect his monitory and property interests; in case the goods purchasing company suffers bankruptcy. The RoT clause is an agreement that allows the seller of goods to hold ownership/retain title, of the goods until the occurrence of a specified/agreed event; that event being either the payment of supplied goods, or payment of all money owed1. By agreeing to the RoT clause the buyer of the product agrees that until payment of the purchased goods is made the company that is selling the goods holds ownership claim to the goods, and hence can exert that claim anytime it wants. This allows the selling company to protect its investment. During the insolvency proceedings, a RoT ensures return of owed money which otherwise is highly unlikely under the circumstances2. Goldcorp Ltd. has been in regular business with GT Jewelers. Both entered into doing business with each other by signing an agreement that also included a RoT clause, of which both parties were aware. After the GT Jewelers failed to remit payment for the months of September and October while Delivery had been made, Gold Corp Ltd. enforced a RoT to the GT Jewelers. Under the RoT, Gold Corp Ltd have claimed the ownership of: 1 kilo of gold in their vault, stamped with Goldcorp Ltd’s seals, A tank containing 2 kilos of melted gold bullion, 150 gold and diamond engagement rings worth ?5,000 each, and ?25,000 representing proceeds of sale of gold by GT Jewellers Ltd to another jewellery manufacturer. Gold Corp cannot rely heavily and positively on their RoT to claim their goods/money. The absence of certain clauses makes Gold Corp an unsecured creditor thus making the chances of receiving owed payment meak. The Rot fulfills the first most condition of being a valid contract since it was agreed upon by both parties before the business. There are scenarios which can either render the RoT ineffective or simply lead to its termination, the RoT does not consist of any clause signifying the conditions under which the RoT will be void or terminated, thus the RoT holds valid between the two companies3. Gold Corp Ltd has demanded 1 Kilo of gold, stamped with Gold Corp seal. The company can claim the gold under the clause (i-a) of the RoT. This is a separate goods storage clause which states that until full payment has been received by Gold Corp for all gold supplied to GT Jewellers by Gold Corp Ltd. to GT Jewellers and at whatever time: property in the goods shall remain in the Company and such goods must be marked as belonging to the company and stored separately. This clause allows the Gold Corp Ltd. to reclaim 1 Kilo of gold as they are still unsold and in the possession of the buyer, who under the RoT was obligated to store the goods separately from goods of other parties and in an identifiable position4 till payment had been made by GT Jewelers. Although since the RoT did not consists of an extended clause of ‘allowing the seller to have the right to access the premises of the buyer in order to determine whether the obligation is being complied with’5, there is no assurety that GT Jewelers actually complied with having stored the unsold good in an identifiable position. Gold Corp Ltd. has ascertained that they claim ownership of ‘a tank containing 2 kilos of melted gold bullion’. Under i-b of the RoT, which states that, if GT Jewellers converted the supplied gold into any new product either by including some other product in the mixture and in whatever proportions such conversion will be considered under the rights of Gold Corp and beneficially and legally ownership will reside in Gold Corp, Gold Corp has legal rights to claim the 2 kilos of melted gold bullion. The melting of the bullion will be regarded as its conversion, but since it is in an identifiable form and actually supplied by the supplier6. The clause i-b is the expanded RoT, which allows the seller to claim right of title even after the processing of the sold product7. Gold Corp has claimed ownership from the liquidator of ‘150 gold and diamond engagement rings worth ?5,000 each’. Under the clause i-b of the RoT, the Gold Corp Ltd can also ascertain right to claim goods that have undergone change; involving mixture with other goods in whatever proportion, as until the payment of dews such conversion would also be considered to be effected on part of the company, and the new products will be under the ownership of Gold Corp. Such a clause is referred to as a ‘mixed goods clause’, which allows Gold Corp to claim the right of products which might lose their identity by being converted into other products8, but even after being changed into a ring or any other product the gold is still identifiable and retrievable9. If the Gold in the rings and jewellery manufactured by GT Jewellers is not identifiable it will leave the whole RoT void and unenforceable10. The final claim that the Gold Corp have laid upon the GT Jewellers is of worth ?25,000, representing proceeds of sale of gold by GT Jewelers Ltd to another jewellery manufacturer. The clause i-c of the Rot states that GT Jewellers will have the liberty to sell the gold and any new products that are made from it in the ordinary course of business on the basis that the proceeds of sale shall belong to the Company. The ‘proceeds of sale clause11’ thus allowing the Gold Corp Ltd. to lay claim on the ?25,000 of sales generated through the sales of products which had been made by the gold supplied by Gold Corp. If the goods for which the RoT is being enforced are unidentifiable, then it becomes a charge, which makes GT Jewellers the owner of the products but leaves Gold Corp with the right to sell GT Jewellers property or in this case products to reimburse the due amount12. Since the Charge arose as a result of mutual consent of both parties thus Gold Corp holds the position of an unsecured creditor13 The RoT allows Gold Corp to file for claims negotiated in the clauses but since it does not consist of a clause permitting Gold Corp to actually enter the premises of GT Jewellers and seize the goods that are unpaid for14, Gold Corp cannot enter the premises to secure their goods, as entering the premise of GT Jewellers will make it trespassing on their premises and can lead to legal action against Gold Corp15. The RoT des not have a clause signifying that in case of bankruptcy all dues by the debtor become immediately payable to Gold Corp, leaving Gold Corp as an insecure creditor, thus reducing the chances that Gold Corp will be reimbursed when the business undergoes sales, as initially the payments of secured creditors will be made16. Over all Gold Corp RoT fulfills some requirements, but since the company is an unsecured creditor it does not have significant chances of receiving the dues owed by GT Jewellers. Bibliography AHERNS LAWERS, ‘Retention of Title Clauses When Goods Are Mixed’, Aherns Lawyers [web page] (2013) accessed 11 January 2013. MCGRATH, ELAINE, ‘How Well Does Your Retention of Title Clause Protect You?’, Reddy Charlton [Web Page] (2012) , accessed 11 January 2013. HERMES, EULER ‘Retention of Title, Deliver goods – but with conditions attached’, Euler Hermes [web page] (2012) , accessed 11 Jan. 2013. INSOLVENCY DIRECT, ‘Retention of Title’, Insolvency Direct [web page] (2007) , accessed 11 Jan. 2013. LAW DONUT, ‘Getting Your Goods Back If You Aren’t Paid’, Law Donut [web page] (2013) accessed 11 January 2013. OUT-LAW, ‘Retention of title clauses’, Out-law [web page] (2011) , accessed 11 Jan. 2013. UTZ, CLAYTON, ‘Reconstruction and Insolvency, Retention of Title Clauses’, Clayton Utz [Web Document] (2008), , accessed 11 January 2013. Read More