Briefing

Key issues in metals trading contracts: Standardisation and retention of title clauses

The importance of metals in the EV market has now led to a greater focus on standardised contracts. The lack of standardisation in the metals market has long been a challenge and we regularly see issues arising out of metals trading contracts, which have the potential to be resolved through contract standardisation. One such issue is in relation to the use of retention of title (ROT) clauses.

In recent years, there have been significant developments in the way in which metals are traded. This has been heavily driven by the electric vehicles (EV) market and the consequent heightened interest in metals relevant to the EV market, such as lithium, cobalt and nickel for batteries, and copper and aluminium for electrical wiring and vehicle charging infrastructure. The EV market has grown rapidly in recent years and continues to expand, with electric vehicles forecast to account for more than 40% of total car sales by 2030¹.

In this context, we are starting to see a move toward market standardisation in metals trading contracts. Whilst there have previously been reasons in favour of contract standardisation (such as high-profile metals-related frauds), the importance of metals in the EV market has now led to a greater focus on standardised contracts, with the ultimate aim of producing terms that are widely recognised within the metals market.

The lack of standardisation in the metals market has long been an issue. This is in stark contrast to other commodity markets, such as oil, LNG and coal, where there is a degree of standardisation across GTCs or standard contracts generally used in those markets.

We regularly see issues arising out of metals trading contracts, which have the potential to be resolved through contract standardisation. One such issue is in relation to the use of retention-of-title (ROT) clauses.

What is a retention of title clause?

A ROT clause is a contractual provision that attempts to allow a seller to retain title to (i.e., legal ownership of) the goods that it has delivered to a buyer, typically until the buyer has paid for those goods in full. ROT clauses are also referred to as “Romalpa” clauses². The aim is to provide some security to the seller until payment has been received.

What are the challenges created by retention of title clauses?

ROT clauses are more common in metals trading contracts than contracts relating to other commodities, such as LNG or coal, where their use has declined, primarily because of difficulties around enforcing them. Some of the difficulties relating to enforcement of these clauses in the context of metals trading include:

Commingling: If there is commingling of the delivered material with other goods, typically when the material is processed, the identity of the delivered material (and therefore any retention of title to it) might be lost. This is a common issue in metals trading. A typical ROT clause might state that “All goods or documents delivered under this contract remain the property of the Seller and are to be held in trust by the Buyer until receipt by the Seller of full contractual payments”. Such basic ROT clauses are unlikely to allow a seller to retain any title to a finished product which incorporates the delivered material. Over the years, we have therefore seen heavy negotiation and amendment of ROT clauses, in an effort by sellers to effectively retain title to the material supplied, as it goes through processing by the buyer (so-called “mixed goods” clauses).
Registration: A mixed goods clause can give rise to a further challenge, as it may create a charge over any new product made from the processing of the original material, which may be void if not properly registered³. The issue of recharacterisation as a security instrument requiring registration can also occur when using “all monies” or “proceeds of sale” language – see below.
All monies and proceeds of sale clauses: An all monies clause allows a seller to retain title in the delivered material until the buyer has paid for any and all goods supplied to it by that seller, whilst a proceeds of sale clause seeks to give a seller rights to the proceeds of any on-sale of the delivered material by the buyer. The inclusion of a proceeds of sale clause presents a challenge in trying to trace the material and related proceeds, as the buyer may be considered the seller’s agent for the purpose of any on-sale of the goods. This relationship can give rise to further considerations of liability which the seller might then have to the on-sale buyer.
Insolvency: If the buyer goes into administration, there are difficulties around whether the seller can take any steps in respect of the delivered material without either the administrator’s consent or the court’s permission⁴. This may restrict the seller’s reliance on the ROT clause.
Incorporation: If the ROT clause is not properly incorporated into the contract, it cannot be enforced by the seller. We often see situations where the negotiation of a contract does not quite conclude, and certain matters are left incomplete. This can arise in particular where the ROT clause is included within a set of general terms and conditions which are not properly incorporated into the contract.
Location of goods: The ROT clause will need to be enforced at the place where the goods are physically located following delivery to the buyer. It is therefore important to consider in advance whether the local law applicable to that place permits the enforcement of ROT clauses. If not, then the seller cannot rely on its right to retain title.
Action for the price: Under section 49 of the Sale of Goods Act 1979, where a buyer breaches the contract, the seller can claim against the buyer for the price of the goods. This requires title in the goods to have passed to the buyer or for the price to be payable on “a day certain”. A ROT clause can prevent title passing to the buyer, meaning that a seller might be unable to claim for the price of delivered goods under section 49. It is therefore important to consider including in the contract an obligation on the buyer to pay for the goods on a fixed date, regardless of the delivery date, to retain this right to claim.

HFW comment

If a seller negotiating a metals trading contract wants to include a ROT clause so as to retain its title in the delivered material, it must give careful consideration to how that clause is drafted, and precisely what it hopes to achieve. There are many potential pitfalls to address, as demonstrated above, and it is essential that any ROT clause is carefully drafted to suit the particular requirements of a given seller or contract. This necessitates a thorough review of case law relating to ROT clauses at the time of drafting or negotiating a contract, as a change in case law can render specific variations of ROT clauses ineffective.

Standardisation of metals trading contracts may help to resolve some of the issues and uncertainty around relying on ROT clauses. If a standard ROT clause is produced for metals trading contracts, then parties can have greater certainty as to how that clause will operate. This should also result in wider market recognition, and therefore a broader understanding of how ROT clauses are intended to operate and when it is appropriate and effective to use them.

Footnotes

International Energy Agency, Global EV Outlook 2025 (Global EV Outlook 2025)
Romalpa clauses are so named after the well-known case of Aluminium Industrie Vaassen B.V. v Romalpa Aluminium Ltd [1976] 1 W.L.R. 676, in which it was found that the seller could trace the goods it had delivered to the buyer following its insolvency.
Borden (U.K.) Ltd. v Scottish Timber Products Ltd [1979] 3 W.L.R. 672
Insolvency Act 1986, Schedule B1, paragraph 43