Incoterms_® and Commercial Contracts

1. What rules, if any, govern retention of title (RT) in your country? In the absence of rules, what are the principal mechanisms, if any, on which RT is based in your country?

The Greek legal order recognizes the freedom of the parties to a sale contract to arrange the sale in a way that, although the good sold is delivered to the buyer, ownership of the good remains with the seller until full payment of the price (condition precedent).

The parties are free to agree on the specific terms of such an agreement (Article 361 of the Greek Civil Code on freedom of contracts). Article 532 GCC (Retention of title clause) contains an interpretative rule, construing the RT clause as a condition precedent to the passing of title to the buyer, as follows:

“If a clause has been inserted in the sale contract, according to which the seller retains the ownership until the price is fully paid, in case of doubt it shall be deemed that transfer of title to the buyer shall occur upon fulfilment of the condition of full payment of the price, and that, in case the buyer delays payment, the seller is entitled to either claim payment or rescind the contract and exercise his rights as owner.”

In case the seller rescinds from the sale, he or she is obliged to pay back the part of the price already paid (Article 389 para. 2 together with Article 387 para. 2 GCC), unless there is a contractual clause to the contrary (Article 400 GCC); such clauses are treated as, and their validity and enforceability are subject to the provisions governing, penal clauses (Articles 404 et seq. GCC, in particular Article 409 on exorbitant penalties). On the other hand, the seller may be entitled to fair compensation (Article 387 para. 1 GCC).

RT is further regulated in the Bankruptcy Code, Article 35 (infra 6.d).

2. Please describe the characteristics and scope of your country’s RT rules

Rules on RT are not ius cogens. The parties may freely derogate from the provisions of the Civil Code in arranging their contractual relationship.

Rules on RT are of general application: They apply to any kind of deferral of the payment of the price; to any kind of goods, tangible and intangible, movable and immovable. There is no de minimis rule with regard to the amount of the payment delayed.

3. If RT is not regulated in your country, are there similar or commercially equivalent forms of security preserving seller’s rights to the goods?

On the basis of freedom of contract, the parties to a sale contract may arrange the sale so that,
[Page95:]
while the good sold is delivered to the buyer, ownership of same is passed to the buyer, but if full payment of the price is not timely made the title returns to the seller (condition subsequent).

Treatment of the RT clause as a condition precedent is practically fully prevailing in practice as to movable goods; while treatment of same as a condition subsequent is prevailing with regard to immovable property.

4. What is the relation of RT and passage of risk in your system? How may a seller protect its interest after the passage of risk?

By virtue of the express provision of Article 532 para. 2 GCC, in case of a sale with RT, “the buyer shall bear the risk of destruction by fortuitous event or deterioration as from the time of delivery of the good to him.” This is in line with the general provision of Article 522.

According to established case law, only the buyer, and not the seller, is entitled to damages against any third person that has caused the destruction or deterioration of the good sold, and only the buyer may be the beneficiary of an insurance policy against such or any other risk (already Areios Pagos¹ 809/1974, Nomiko Vima [Greek Law Journal] 23, 337). Contrary to the case of mortgage or pledge, where the mortgagee’s or pledgee’s, as the case may be, right extends to the insurance proceeds following the materialization of the insured risk and the destruction of the immovable or movable property insured (Articles 1287 and 1223 GCC, respectively), the seller who has retained title on the good sold does not have such an ex lege right. It follows that, in order for the seller to be protected, the seller has an interest (a) in having the buyer undertake the obligation to insure the good; and (b) in having the buyer assign to the seller the (future) buyer’s claim to the insurance proceeds in case of materialization of the risk.

5. What are formal requirements, if any, including timing, to perfect the seller’s right?

There is no formal requirement specific to the RT clause. It follows, on the one hand, that such a clause may conceivably even be oral, when agreed in relation to movable goods, although this never happens in practice for obvious evidentiary reasons; and, on the other hand, that a clause for the RT on immovable property must be inserted in the notarial deed incorporating the parties agreement on transfer of immovable property.

Article 10 of Act No. 2844/2000 provides the possibility for the parties to register with the public record of Article 3, their sale contracts containing an RT clause. Hardly any use has been made of this possibility in practice.

The RT clause, if laid down or construed as a condition precedent for the transfer of title, does not affect the perfection of the sale contract; the latter is itself perfect, as well as the rights and
[Page96:]
obligations arising therefrom. The clause affects the contract on transfer of ownership (Article 1033 GCC on immovable property; Article 1034 GCC on movable goods), being a condition for the transfer of ownership.

On the contrary, if laid down or construed as a condition subsequent, the fulfilment of which results in the automatic passing of the title back to the seller, such lato sensu RT clause affects both the agreement for the transfer of title and the sale contract itself.

6. Effectiveness

1. Does sale to a third party break RT? What if goods have been transformed or sold?

In the case of movable goods, if the buyer sells the good as its own to a second buyer, the latter, once having taken possession of the good, becomes owner thereof under the conditions of Article 1036 GCC, namely on the condition that he or she, at the time of delivery, did not know or grossly negligently ignored that the good was not owned by the (first) buyer (Athens Court of Appeal 2748/1982, Nomiko Vima 31, 511). The (initial) seller loses ownership and only has a claim of damages for loss of title. This is not possible in case of immovable property: under Article 206 GCC, should the condition precedent for the transfer of title not be met (and provided that it has been transcribed in the public books), ownership of the immovable property automatically returns to the seller, notwithstanding any further transfer by the buyer.

In case of movable goods as well, the seller loses ownership of the good sold under the condition of RT, if the buyer either (i) attaches it to an immovable owned by the buyer, so that the movable becomes a constituent part of the immovable and the buyer’s title to the immovable extends to the movable (Article 1057 GCC); or (ii) connects or amalgamates or merges it to a movable owned by the buyer, so that it becomes a constituent part of the buyer’s movable and the buyer’s title extends to the whole thing (Article 1058 para. 2 and Article 1059 GCC); or (iii) processes (by way, e.g. of writing, painting, printing, engraving, sculpting, etc.) and transforms it into a new movable good, in which case the buyer is the owner of the new object (Article 1061 GCC). The seller has only a claim of damages for loss of title. These provisions are not subject to contrary agreements by the parties, being ius cogens (Areios Pagos 25/1998, Nomiko Vima 47, 390), but do not apply to immovable property.

If yes, is there a possibility to transform the RT in case of a sale to a third party?

Upon delivery of the good, the buyer does not acquire ownership, but has a future right (Anwartschaftsrecht — droit en cours d’acquisition), which is transferable, as well as subject to attachment by the buyer’s creditors (such future right to be distinguished from the title on the good). This right can be sold, so that the (second) buyer takes possession of the good and ownership remains with the (initial) seller (continued retention).

It can also be agreed between seller and buyer that, should the buyer further sell the good with good title (supra 6.a.), all claims of the buyer arising out of the further sale of the good shall be
[Page97:]
automatically assigned to the (initial) seller (extended retention).

It must also be noted that, regarding movable goods, in the event that the seller has the good in its hands (e.g. the buyer entrusted it to the seller in order for the latter to operate maintenance works on it) and sells it to a third party in violation of the buyer’s future right, the third party becomes the owner of the good by operation of Article 1034 GCC, given that the seller is still the owner of the good. The buyer is entitled to damages against the seller for violation of its future right, as well as to reimbursement of the amount of the price already paid. This is not possible in case of immovable property: under Article 206 GCC, should the condition precedent for the transfer of title be met (and provided that it has been transcribed in the public books), ownership of the immovable property automatically passes to the buyer, notwithstanding any further transfer by the seller.

2. Enforcement of RT if delinquent buyer is not insolvent — What is the judicial procedure and what is its likely timeline?

The seller’s claims (to payment of price or to rescind the contract and vindicate the good sold) are alternatives: by exercising one of them, the seller waives the other. Furthermore, the parties may expressly agree that the seller shall only have either entitlement but not both (Areios Pagos 1562/2002, Helliniki Dikaiossyni 2004, 1055). In case the seller loses the title by operation of law, he or she has a claim of damages instead (supra 6 a.).

The RT clause is enforced, and the possession of the good is returned to the seller, following rescission of the contract, through the exercise by the seller of his or her rights as an owner, i.e. (i) through the vindicatory action (actio vindicationis rei) of Article 1094 GCC, or (ii) through the action over dispossession of Article 987 GCC, or (iii) through the exercise of the seller’s rights under the principles of unjust enrichment (Articles 904 et seq. GCC in conj. with Article 389 para. 2 GCC). A likely timeline for obtaining a final and enforceable judgment under legal bases (i) and (iii) is three to four years, whereas the action for dispossession can be brought under the special procedure of Articles 733 & 734 of the Greek Code of Civil Procedure that lasts no more than six to seven months.

3. What happens in case of conflict between RT and a buyer’s creditors’ rights, including carrier’s liens?

In case of attachment, in the buyer’s hands by the buyer’s creditors, of the good sold under RT, the seller can be protected through filing, against both the buyer and the buyer’s creditor, the “Third-party Objection” of Article 936 of the Greek Code of Civil Procedure.

Precedence between the seller’s title over the movable good sold and other creditors’ liens over the same goods is regulated by the principles of good faith (Article 1215 in conjunction with Article 1036 GCC): if the creditors knew or grossly negligently ignored the seller’s right in the movable good, then no lien or pledge is created over the movable good sold.

[Page98:]

4. Bankruptcy — interaction of RT (which is not contract law) and bankruptcy law

The fate of the rights of the seller in case of bankruptcy of the buyer is regulated by Articles 35, 29, and 37 of the Insolvency Code (InsC).

In accordance with Article 35 para. 2:

“If, before the declaration of bankruptcy, the debtor has purchased a movable good with retention of title by the seller and has taken possession of the good, the declaration of bankruptcy does not affect the rights of the seller arising out of the retention of title. The seller is entitled to set a deadline to the receiver, in order for the latter to exercise the right of option under Article 29.”

Then, in accordance with Article 29 para. 1:

“The receiver, under permission of the judge, is entitled to perform the pending contracts, substituting the group of creditors in the place of the debtor, and require performance by the co-contractor; in which case the latter becomes group creditor.”

Finally, again in accordance with Article 35 para. 2:

“If the receiver denies performance [or if he omits to answer within 10 days from the submission of his report to the group of creditors under Article 70], the seller has a right of detachment, without being obliged to rescind the sale contract. The seller is entitled to exercise this right [of detachment] only after the submission of the receiver’s report under Article 70.”

If the receiver does not opt for the performance of the contract and the seller exercises the right of detachment, Article 37 InsC provides for two alternatives, depending on whether the good is still in the possession of the receiver.

1. Goods still with buyer

If the goods are still with the buyer and the seller exercises his or her right of detachment, the receiver is obliged to pass possession of the good to the seller, under permission of the judge. If the receiver denies dispossession of the good, then the seller is entitled, by virtue of Article 37 para. 1 InsC, notwithstanding the commencement of the insolvency procedure to exercise his or her rights under Article 532 GCC.

2. Goods already sold by buyer

If the goods have already been further sold by the buyer, the seller is entitled, by virtue of Article 37 para. 2, to request the assignment of the claim held by the receiver against the further buyer, if such claim is still owed. Otherwise, if the price has already been paid by the further buyer and,
[Page99:]
in consequence, the monies cannot be detached from the assets of the insolvent buyer, the seller takes part in the insolvency procedure as creditor (Article 37 para. 3).

3. Time limits to declare title to receiver

It follows from Articles 35 and 29 InsC that the receiver may exercise his or her right of option within ten days from the date of submission of his report under Article 70, and the seller may exercise his or her right of detachment only after the same submission. In order to avoid the further sale of the good, the seller is advised to exercise his or her right as soon as possible.

4. Who pays storage, insurance and transport during discussions with receiver?

In the absence of any specific legal provision, all costs remain with the person having the goods in his or her possession, i.e. the receiver.

7. Model clause(s) — Drafting tips

NOTE: The following language is based on contractual provisions commonly seen in this country, but readers should always consult legal counsel before including an RT clause in a contract.

1.

2.

3.

OR

3.

---

---