Who owns the product?

In exporting, it is sometimes difficult to determine when ownership, ie. “title” in a product will transfer to the importer, especially without a formal agreement.

Generally, ownership should only transfer when the product is paid for in full. The problem we have is when exporters give credit terms to their importers and so the importer is in receipt of the product before they pay the full amount. The other thing to consider is that the product may be in transit for quite awhile before it is received by the importer. Incoterms dictate who bears the risk in a product but not who has title.

You will need to make sure when exporting that your agreement with your importer is very clear in relation to when title transfers to them. This will also be very closely tied in to your payment terms. You may for example stipulate that title will not transfer until payment is received in full and supplement this to say that delivery will not occur until payment is received in full, so then title transfers upon delivery which makes things very straight forward.

For those of you who cannot enjoy the luxury of cash on delivery, you should stipulate what you are able to do if for example, the importer has the product but then doesn’t pay you the full amount owing. Can you repossess the product? Can you force the importer to sell the product at a certain price and have that money immediately transferred to you?

The title clause in an agreement is sometimes a mere afterthought and part of the legalese at the end of agreements no one bothers to read or clarify. However, it is very important to know who owns what, especially when there are seas and thousands of kilometres separating the parties.

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Lynda Slavinskis is an outgoing, intuitive and commercially savvy lawyer. She has worked in-house at Sussan Corporation and Tattersall’s and now assists small and medium businesses with import, export, leases, franchising, employment and general business advice as principal solicitor of Lynda Slavinskis Lawyers & Consultants. Lynda is on the Victorian State Government’s Small Business Advisory Council.