A reservation of title (ROT) clause is fairly common in credit sales relating to equipment, and other value goods. In its essence, it provides for the property on goods to remain upon the seller until buyer fulfils its payment obligation, as a sort of security. However, the control over the goods, together with the relevant risks of loss and damage pass to buyer upon delivery. Under the Italian law, the clause is known as patto di riservato dominio or riserva di proprietà, and it regulated by ss. 1523 ff. of the civil code.
Should the buyer do not pay the dues, seller may retake back the goods being obliged to return the portion of price already cashed, less a fair compensation for use, and possible damages.
In respect of the buyer’s creditors, the clause may be usefully opposed in order to avoid the risk they could enforce against the goods, provided it results from a written document undoubtedly made before the goods formal attachment (pignoramento)[1].
A special, though one of the most frequent cases of enforcement of a ROT clause is when buyer goes bankrupt. In this occurrence, a plain utilisation of clause is at risk, since the return of unpaid goods by a bankrupt buyer may negatively impact on the principle the creditors of the same rank must be treated on equal foot (par condicio creditorum).
In 1996, Silvio Cestari s.r.l. an Italian dealer of Nissan automobiles, were experiencing financial straits, and ultimately resolved to return, upon request, some 105 unsold cars to Nissan. Some months later, Cestari went bankrupt. Silvio Cestari’s curator so summoned Nissan to court, claiming Nissan unlawfully benefited from said return. On their part, Nissan successfully opposed that the return was made under a valid ROT clause, clearly stamped on each relevant invoice (not in the supply agreement, though). As for the certainty of the date when the reservation clause has been agreed upon, a key role was played by distribution agreement entered by the parties well before the supply, and subsequent return of the cars.
The first instance court’s decision[2] was upheld by the appellate court as well[3].
However, things changed before the Cassation court[4]. The judges noted in fact that a ROT clause present in the invoices only, was not enough. It should be agreed upon in the relevant sale contract.
N.B. This is now overruled by the Directive 2000/35/CE[5], but this was not applied in the Cestari case, since the events dated back before the directive entered in force (08/08/2002).
In conclusion, the Nissan clause possessed no valid prior date, and the cars ought to be returned back to Cestari.
Those who are interested in receiving (free) copy of the above-mentioned documentation, please write to newsletter@lexmill.com.
____________
[1] The criteria to attribute a date to a document such a reservation of title are particularly strict, since the law requires (s. 2704 c.c.) either evidence in public records, or an event that may prove anteriority beyond any doubt (think of the death of the person who signed the deed).
[2] Trib. Milan, decision 21/09/2000.
[3] C. App. Milan, decision 12/12/2003.
[4] Cass. (IT), decision no. 3990 of 19/02/2010, fall. Silvio Cestari srl v Nissan Italia spa.
[5] Directive 2000/35/CE “on combating late payment in commercial transactions”, which has been implemented in Italy via the legislative decree no. 231 of 09/10/2002.
