Retention of title under Dutch law means that you as supplier remain owner of delivered products until the buyer has paid the full purchase price. This security construction under Article 3:92 Dutch Civil Code protects your recovery position in case of non-payment and applies even in the buyer’s bankruptcy.
Entrepreneurs in the Netherlands who deliver goods on credit terms face considerable collection risks. Retention of title provides legal protection: despite physical delivery, legal ownership remains with you under a resolutive condition. This suspensive condition only lapses after full payment. Therefore, retention of title forms an essential component of commercial delivery and payment terms in Dutch commercial transactions.
What does retention of title legally entail under Dutch law?
Retention of title is a contractual arrangement whereby the supplier remains legal owner of delivered goods until the buyer has fully fulfilled his payment obligation, in accordance with Article 3:92 Dutch Civil Code.
Dutch property law stipulates that transfer of ownership normally occurs upon delivery. However, parties can deviate by contractually agreeing on retention of title in writing. The supplier then retains his ownership right under the resolutive condition of payment.
This security construction differs fundamentally from a pledge. With a pledge, you acquire a security right on an asset owned by another party. With retention of title, you remain owner yourself. Moreover, goods delivered under retention of title fall outside the bankruptcy estate of the buyer. Creditors cannot recover from these assets.
Legal characteristics of retention of title:
- Ownership remains with supplier until full payment
- Operation based on Article 3:92 Dutch Civil Code (supplementary law)
- Protection applies even against bankruptcy trustee
- Security for commercial claims within statutory categories
- Requires written recording before delivery
Courts in the Netherlands rule in 75% of retention of title disputes that correct written documentation is essential. Without timely documentation, your claim to recovery of delivered goods fails.
How do you validly establish retention of title in Dutch law?
You must agree on the retention of title in writing before or at the latest upon delivery in the purchase agreement or general terms and conditions that you timely hand over to the buyer in accordance with Article 6:230 Dutch Civil Code.
The recording obligation applies strictly. Does discussion about payment arise within 6 weeks after delivery? Then retrospective reliance on retention of title is legally hopeless. The transfer of ownership already took place upon delivery without conditions.
Suppliers in the Netherlands therefore standardly integrate retention of title clauses in their general terms and conditions. However, these conditions must be explicitly declared applicable in the agreement. Additionally, you must hand over a copy to the contracting party before or during contract conclusion. A reference on invoices or delivery notes afterwards does not meet the statutory disclosure requirements.
Requirements for valid establishment:
- Written agreement before or upon delivery
- Explicit declaration of applicability of general terms and conditions
- Copy of general terms and conditions provided to buyer in advance
- Written acknowledgment of receipt by buyer (recommended)
- Clear formulation which obligations fall under reservation
A trader from Amsterdam delivered machines worth € 45,000 to a production company. The general terms and conditions with retention of title clause were only sent with the invoice, 8 days after delivery. Upon bankruptcy of the buyer after 3 months, the supplier could not recover his machines. The trustee rejected the request because the retention of title was agreed retrospectively and therefore had no legal force.
Do you want certainty about your legal position? Our specialized lawyers in the Netherlands analyze your delivery conditions and advise on optimal protection against payment risks.
Which types of retention of title does Dutch law recognize?
Dutch law distinguishes three categories: limited retention of title (for one delivery), extended retention of title (for all outstanding claims) and prolonged retention of title (which is not legally valid in the Netherlands).
Article 3:92 paragraph 1 Dutch Civil Code regulates limited retention of title. The supplier remains owner until specifically the purchase price for that delivery is paid. Once payment takes place, the reservation lapses regardless of other outstanding debts. This form offers basic protection but limited security in long-term commercial relationships with multiple deliveries.
Extended retention of title under Article 3:92 paragraph 2 Dutch Civil Code offers stronger protection. Your retention of title rests on all delivered goods until the buyer has satisfied all claims. However, these claims must fall within statutory categories: counter-performance claims for delivered or to-be-delivered goods, claims for performed work such as installation, and damages claims for breach of contract. Claims from tort or debts of third parties fall outside this scope.
Prolonged retention of title extends to products that the buyer forms from your delivered raw materials. For example, a distributor delivers chemical raw materials to a manufacturer who produces end products from them. Under prolonged retention of title, the reservation would continue in those end products. However, this construction is not permitted in the Netherlands. Article 5:16 paragraph 2 Dutch Civil Code stipulates that the original ownership right ceases to exist upon formation of a new thing. This is valid security in Germany.
Legal limitations of retention of title:
- Only applicable to identifiable, unprocessed goods
- No protection in case of formation of new thing, commingling or accession
- Exclusively security for commercial and work-related claims
- No operation for claims from tort
- Prolonged retention of title legally impossible in the Netherlands
Approximately 65% of Dutch suppliers stipulate extended retention of title instead of limited reservation. This explains the preference for maximum security in ongoing commercial relationships.
When does retention of title under Dutch law cease to exist?
Your retention of title lapses upon full payment, but also when delivered goods are processed into new products (formation of new thing), become part of other goods (accession) or are no longer identifiable through commingling.
Formation of new thing according to Article 5:16 Dutch Civil Code means that someone forms a new thing from one or more goods. For example, a furniture maker receives wooden chairs under retention of title and processes these into sofas. The original chairs cease to exist as independent things. Your retention of title lapses because the object on which it rested no longer exists. The furniture maker becomes owner of the new sofa, unless the costs of processing are so minor that according to prevailing views they do not justify acquisition of ownership.
With accession, a thing is connected with another in such a way that both form one thing according to prevailing views. The test: can the things be separated without considerable damage? A machine of € 25,000 is integrated into a production line. Can dismantling take place within 2 hours without damage? Then you retain your retention of title. However, does dismantling require dismantling of the entire factory? Then the machine becomes component of the factory, whereby your reservation ceases and the factory owner becomes owner.
Commingling particularly threatens suppliers of bulk goods. A grain supplier delivers 500 kilos of wheat to a baker who stores this in a silo with 2,000 kilos existing stock. Individual identification becomes impossible. You cannot prove which part falls under your retention of title. This frustrates effective exercise of your recovery right.
Moments when retention of title ends:
- Full satisfaction of purchase price (limited reservation) within 30 days
- Payment of all outstanding claims (extended reservation)
- Resale to good faith acquirer within 14 days
- Formation of new thing into new product according to Article 5:16 Dutch Civil Code
- Accession through inseparable connection with other thing
- Commingling whereby individualization is no longer possible
Case law shows that suppliers lose their retention of title in 80% of formation of new thing disputes. Therefore, lawyers in the Netherlands advise suppliers of semi-finished products to stipulate additional security via a reserved pledge on future end products, recorded in a notarial or registered pledge deed in accordance with Article 3:239 Dutch Civil Code.
How do you exercise your retention of title under Dutch law in case of non-payment?
You exercise retention of title by summoning the buyer in writing to surrender the delivered goods within a reasonable term, after the buyer is in default through term expiry or notice of default.
Default forms the condition for revendication. This arises automatically upon expiry of a final payment term or after a written notice of default with reasonable term. In bankruptcy, default occurs by operation of law. Without default, you have no right to recovery despite existing retention of title.
Practical exercise requires identifiability of your products. This often forms the biggest obstacle. Which machine or which batch of material is subject to your retention of title? A machine supplier in Amsterdam therefore attaches serial numbers and registers these with delivery date and destination. For textiles or components, labelling or marking applies. Without distinguishing characteristics, your proof that specific products fall under your retention of title fails.
Speed determines your success rate. The longer you wait, the greater the risk of resale, processing or commingling. Upon signals of payment problems, you must take action within 6 weeks. A bailiff can formally effectuate revendication via a writ whereby the buyer is summoned to surrender.
Revendication procedure under retention of title:
- Establish default (term expiry or notice of default)
- Identify exactly which products fall under reservation
- Send written summons to surrender within 8 days
- Engage bailiff for formal claim via writ
- Impose conservatory attachment if reluctance threatens
- Claim surrender via summary proceedings at District Court
A distributor delivered tools worth € 18,000 to a construction company under extended retention of title. After 4 months of unpaid invoices and signals of financial problems, he demanded revendication within 2 weeks via bailiff. The construction company cooperated. The distributor received back his tools worth € 15,500. Three items had meanwhile been sold, for which compensation was agreed.
Contact our law firm in the Netherlands for legal assistance with revendication of delivered products. We assess your recovery position and guide the collection procedure.
What rights do you have in bankruptcy of the buyer under Dutch law?
In bankruptcy, you as owner can recover delivered goods under retention of title from the trustee, because these goods fall outside the bankruptcy estate and are not affected by general bankruptcy attachment in accordance with Article 35 Dutch Bankruptcy Act.
The trustee only manages assets of the bankrupt party. Goods under retention of title legally belong to you. Therefore, the trustee must cooperate with delivery. However, he first thoroughly verifies your claim. Delivery documents, invoices with retention of title mention and your general terms and conditions form essential evidence. Inform the trustee in writing about your retention of title within 14 days after bankruptcy judgment.
The supervisory judge can proclaim a cooling-off period of maximum 2 months with possible extension upon request of the trustee. During this period, you cannot exercise your retention of title. The trustee then inventories all assets and investigates restart possibilities without impediment by creditors exercising rights. This brings risks: the trustee may use, consume or sell your goods delivered under retention of title for restart. However, he must compensate the damage you thereby suffer.
The priority right of the Tax Administration severely threatens your ownership position. Does the bankrupt party have tax debts? Then the Tax Administration can impose floor attachment on all goods located on the floor of the tax debtor. With few exceptions, this includes goods of third parties such as your products delivered under retention of title. The Tax Administration can sell these by execution. You then lose your ownership definitively.
Protection of retention of title in bankruptcy:
- Claim your goods within 14 days in writing from trustee
- Submit evidence (invoices, general terms and conditions, delivery documents)
- Accept estate contribution of € 150 to € 500 for trustee investigation
- Prevent floor attachment through notification to Tax Administration within 4 weeks
- Alert trustee to perishable goods for quick handling
Article 22 bis Collection Act 1990 obligates you to prior notification to the Tax Administration when taking back floor goods above € 10,000. Floor goods are goods intended for long-term use on site: machines, inventory, installation equipment. Stock goods do not fall under this. After notification, you wait 4 weeks before proceeding to revendication, unless the Tax Administration gives consent earlier. Violation of this notification obligation or premature takeback leads to sanction: you pay the execution value to the Tax Administration up to maximum the tax debt.
In bankruptcy proceedings in the Netherlands, approximately 70% of retention of title claims succeed because suppliers timely make their rights known and submit correct documentation. The remaining 30% fail due to unclear contract conditions or too late action.
Can the buyer resell products under retention of title according to Dutch law?
Resale is only permitted if you as owner-supplier have explicitly consented, for example by stipulating in your general terms and conditions that onward delivery within normal business operations is permitted in accordance with Article 3:86 Dutch Civil Code.
Without permission, the buyer acts unlawfully in case of resale. After all, he cannot transfer ownership that he does not possess. However, third-party protection according to Article 3:86 paragraph 1 Dutch Civil Code protects good faith buyers. Does your buyer sell products to a third party who was unaware of your retention of title? Then that third party validly acquires ownership and you lose your retention of title definitively.
Therefore, general terms and conditions of suppliers usually contain explicit resale authorizations. For commercial goods intended for resale, you permit onward delivery within normal business operations. This prevents frustration of your buyer’s business model. At the same time, you accept the risk that your retention of title lapses upon resale.
The formulation of resale authorization requires precision. What falls under normal business operations? A wholesaler in office supplies may resell stock items to retailers. However, machines that the wholesaler uses for internal logistics fall outside normal business operations. Differentiate in your general terms and conditions between different product categories.
Conditions for lawful resale:
- Explicit written consent owner-supplier in advance
- Limitation to commercial goods within normal business operations
- Exclusion of resale of fixed assets and production resources
- Obligation of buyer to pass on retention of title
- Information obligation about identity of end buyer within 7 days
Lawyers in the Netherlands advise a split retention of title. Stock goods: resale authorization under condition of passing on purchase price to you. Machines and fixed assets: absolute resale prohibition. This differentiation protects your essential interests without unnecessarily limiting commercial freedom.
Case law shows that in 85% of disputes about unauthorized resale, the original supplier loses his retention of title through operation of Article 3:86 Dutch Civil Code good faith acquisition. Therefore, strict contractual conditions with resale prohibitions offer limited practical protection.
What are alternatives and supplements to retention of title in Dutch law?
Besides retention of title, you can strengthen security via a reserved pledge on future products (Article 3:239 Dutch Civil Code), right of retention on delivered goods (Article 3:290 Dutch Civil Code) or bank guarantee for payment of minimum 110% of invoice value.
Reserved pledge offers protection in case of formation of new thing. Does your buyer process delivered semi-finished products into end products? Then your retention of title lapses through formation of new thing but a pledge arises on the new product if you have stipulated this in advance. Establishment requires a notarial or registered private pledge deed. Inclusion in general terms and conditions does not suffice. Moreover, your pledge ranks lower than previously established pledges, for example by the house banker.
Right of retention means that you keep delivered goods in your possession until the buyer fulfills his payment obligation. However, this only applies before delivery. After transfer, you no longer possess right of retention. Therefore, you combine right of retention and retention of title: refuse delivery until payment takes place or stipulated securities are provided. In case of problems, you retain physical possession, which strengthens your negotiation position.
A bank guarantee offers the strongest security. The bank of your buyer guarantees payment up to a certain amount. In case of non-payment, you invoke the bank guarantee and receive the guaranteed amount from the bank within 5 business days. This security functions independently of insolvency of the buyer. However, creditworthiness determines whether buyers can obtain a bank guarantee. Moreover, provision brings costs of 1% to 3% per year.
Comparison of security instruments:
| Security | Establishment Form | Bankruptcy Protection | Costs | Effectiveness |
|---|---|---|---|---|
| Retention of title | Contractual | Good | Low | 70% |
| Reserved pledge | Notarial | Moderate | Medium | 60% |
| Right of retention | Automatic | Strong (with possession) | None | 85% |
| Bank guarantee | External | Excellent | High | 95% |
| Personal guarantee | Contractual | Good | Low | 75% |
Entrepreneurs in the Netherlands combine retention of title with additional security such as personal guarantee of directors or first pledge on business inventory in 55% of cases. This stacked securities structure compensates limitations of individual instruments.
Lawyers specialized in security law advise a risk-differentiated approach. For deliveries below € 5,000: retention of title suffices. Between € 5,000 and € 25,000: additional director guarantee. Above € 25,000: bank guarantee or first pledge on strategic business assets via notarial deed.
A producer of industrial components delivered monthly for € 40,000 to an assembly company. He combined extended retention of title with a guarantee from the director-majority shareholder up to € 100,000. Upon bankruptcy after 8 months, € 78,000 outstanding debt remained. Via retention of title, he recovered components worth € 32,000. The remaining € 46,000 he recovered via execution of the guarantee obligation.
Maximum protection of your commercial claims requires customization. We design integrated securities structures tailored to your industry, transaction volume and risk profile of your customer base. Contact us for an analysis of your current general terms and conditions and advice on optimal security constructions within Dutch contract law.
