What is the definition of subject to reservation of title in accounting terms.?

Answer 1

Reservation of title

a) Our deliverables remain our property up to payment of all our outstanding bills - irrespective of the reason and in particular also payments arising from previous mutual transactions. In the case of open accounts the reserved title serves as collateral for our balance claims. We reserve the right to decide which payments on account can be credited to which parts of the overall debts.

b) If the delivered good is associated with another movable good in such a way as to be seen as a substantial part of a new good, the client shall already now transfer the pro-rata co-ownership of the new good to us. The client exercises possession of the new good on our behalf.

c) The client may -- unless he has defaulted on payment of the purchase price -- resell our deliverable in the context of proper business on reservation of title against payment of cash or bill of exchange. As long as the goods subject to reservation of title remain with the client, he shall store them on our behalf with the due care and diligence of a prudent businessman.

d) If the client sells the goods subject to reservation of title, he herewith transfers the total claims arising from reselling the goods subject to reservation of title; in the case of prior treatment or processing and/or combination with other goods not in our possession, he transfers the claims in the amount of the value of the processed good subject to reservation of title. If the good is sold for a lump sum, the client herewith transfers his purchase price claim in the amount of the value of the good subject to reservation of title that is the subject matter of this purchase contract.

e) The client shall be obliged to notify the third-party debtor upon our request of the transfer indicating the amount of our claim. He is obliged to provide us with any information and materials required to assert our rights. If the value of the claims transferred to us exceeds our outstanding overall claim against the client by more than 20%, we shall be obliged at the client's request to re-transfer the part that is in excess.

f) The client must not pledge, assign or transfer as a security either our goods subject to reservation of title or our rights or other instructions affecting our rights. The client shall notify us without delay of any influence of third parties -- including action concerning goods subject to reservation of title, any claims transferred by us or any rights as substantiated in the preceding paragraphs -- submitting any documentation which may be necessitated by intervention. Any and all costs of an intervention on our part shall be borne by the client.

g) In the case of a default in payment we shall have the right to decide whether to assert the reservation of title while rescinding the contract or retaining it. Unless the reservation of title is explicitly asserted while rescinding the contract, it shall not be deemed a rescission.

h) We shall have the right - upon exercising the return clause as defined in Item 9 of this agreement - to sell the purchase object by private contract setting it off against the purchase price claim. In this case the client is entitled to name potential buyers. In addition, we are obliged to notify the client prior to the conclusion of a purchase contract with a third party, disclosing to him the purchase price; the client then has the option to name a better potential buyer within seven days; a binding offer has to be submitted to us within this period. The deliverable shall be sold to the highest bidder