Also known as:reservations of title · retention of title · Romalpa clause
Written by attorneys · grounded in primary & secondary sources — see below
A seller's retention of title to goods after shipment or delivery to the buyer. The UCC limits this retention in effect to a security interest that secures the buyer's obligation to pay the price.
Sources & Authorities
How it applies
Common Examples
2
Seller Retains Title in Hardware Sale
Liberty Assurance sold specialized scanning hardware to Vertex Protection under a signed purchase agreement that reserved title until Vertex paid the full price. Liberty delivered and installed the hardware but retained the activation key and remote access. When Vertex entered receivership without completing payment, Liberty's retained title operated as a security interest that attached upon delivery and remained enforceable against the receiver without a separate authenticated security agreement or financing statement.
Consignor Interest Treated as Security
BFC Chemicals delivered goods to Smith-Douglass under a consignment arrangement that reserved title in BFC until the goods were sold or paid for. Smith-Douglass later filed bankruptcy and its trustee claimed the goods as estate property. The court treated BFC's reservation of title as creating a security interest subject to Article 9 rules rather than preserving outright ownership outside the secured transactions framework.
Put it into practice
Test Yourself
10
Practice Questions5
· 2 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Study Supplements
BFC Chemicals, Inc. v. Smith-Douglass, Inc.46 B.R. 1009, 40 UCC 1674 (E.D.N.C.1985)
Common questions
Frequently Asked
4
Does a reservation of title clause in a sales contract create an enforceable security interest under Article 9?+
Yes. The UCC converts a seller's reservation of title after delivery into a security interest arising under Article 2 that Article 9 governs. The purchase agreement itself supplies the necessary agreement, and the interest attaches upon identification and delivery of the goods.
Supporting sources
Is a separate authenticated security agreement required when title is reserved in a sale of goods?+
No. Section 9-110 provides that a security interest arising under Article 2 remains enforceable even if the ordinary requirements of Section 9-203(b)(3) are not met. The contract language reserving title satisfies the agreement element while the seller retains meaningful control.
Supporting sources
Must a seller who reserves title file a financing statement to perfect its interest?+
No. Section 9-110(2) relieves the seller of the filing requirement to perfect a security interest arising under the relevant Article 2 provisions. Perfection occurs upon attachment while the special rule remains in effect due to retained controls.
Supporting sources
How does reservation of title affect priority between the seller and a receiver or lien creditor?+
The seller's Article 2 security interest takes priority over the receiver's claim as a lien creditor when the interest is enforceable and perfected under the special rules. The receiver cannot treat the goods as unencumbered estate property.
Supporting sources
Real PropertyMortgages/security devices · Types of security devicesUBEIntermediate