*with unreserved apologies to Hamlet and Bill Shakespeare.
It is not exactly in the same league as the text of Hamlet’s soliloquy, and therefore we would all like to think that the wording of our sales contract is fairly straightforward. However, Hamlet tells us that life is full of contradictions. Contracts are no different. So, here’s a contractual paradox:
A seller not wanting to sell
What could be the reason for this apparent contradiction. The answer is in the boilerplate clauses. Here are two examples.
Scope. First of all, what exactly are you selling? A seller should ensure in the sales agreement that it is only selling the tangible object or device and not inadvertently disposing of the related IP rights. Many an unwitting engineering exporter has sold a single new machine to a “customer” only to find out that a few months later identical machines from an unknown source are suddenly flooding the market. IP clause: make sure that the sales agreement does not result in an unwanted sale or transfer of IP rights. Out of ignorance, don’t sell the IP and know-how with the product!
ROT. Secondly, when exactly are you selling? If we understand “selling” here to mean essentially the transfer of ownership (title to property), then the seller usually does not want to sell before payment has been received. Receipt of payment becomes a condition precedent to transfer of title. A sales contract therefore will often contain a retention of title (Eigentumsvorbehalt) clause. However, retention of title (ROT) clauses do not operate effectively when most needed: in cases of bankruptcy and insolvency. In addition, in the international context (e.g. U.S.) ROT clauses sometimes do not operate at all in the intended way. But boilerplate workarounds are available.
So, Mr Hamlet, for there to be a sale or not to be a sale, there is an answer!
Find out more at the webinar: