Armour v Thyssen Edelstahlwerke AG[1990] 3 AER 481
Citation:Armour v Thyssen Edelstahlwerke AG[1990] 3 AER 481
Rule of thumb:If a retention of title clause is put on goods, with the condition that the seller can get the goods back if the buyer does not pay, and minor changes are made to the goods, is the clause still enforceable? Yes, if the changes are only minor changes then the clause is still enforceable.
Background facts:
The facts of this case were that Armour bought steel from a German steel company. The contract was concluded in Germany and German law applied to it. The German put in a retention of title clause which stated that title only passed to Armour once he had paid fully for it, and he was a trustee in the meantime. Armout cut the steel into slices in the meantime, and then defaulted, so the German company sought to have the steel returned to them.
Parties argued:
Armour argued that by cutting the steel into slices he had created a new type of property.
Judgment:
The Court held that the Germany company were entitled to the steel back, as the retention of title clause sufficiently ensured this, and that the character of the steel had not changed sufficiently in order for a new form of property to have been created from it. It was also further confirmed that an appropriately drafted retention of title clause making the purchaser a trustee of the property until full payment also gave the original seller a priority over administrators/liquidators as well.
Ratio-decidendi:
‘a right in security is a right over property given by a debtor to a creditor whereby the latter in the event of the debtor’s failure, acquires priority over the property against the general body of creditors of the debtor...’ Lord Jauncey
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.