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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
by International Chamber of Commerce (ICC)
In Poland, RT is governed under the provisions of Articles 589-591 of the Polish Civil Code (CC) and under the provisions of Polish Bankruptcy Law.
Pursuant to Article 589 CC, “if a seller states that it retains the ownership of a movable thing sold up until the moment the purchase price has been paid, it is deemed, in case of any doubt, that the ownership of the thing has been transferred under a condition precedent.”
The effect of RT is as follows: (i) the sales contract is unconditional; but (ii) the title to the thing sold is transferred to the buyer on a deferred basis, until the full amount of the price has been paid. The transfer of title to the buyer occurs automatically (by operation of law) upon fulfilment of the above condition (i.e. upon payment the transfer is effected).
The parties to a sales contract can regulate the RT effect in a different way (Article 589 CC applies unless the parties agree otherwise).
RT is possible only in the case of movables. If title is retained under a real property sale contract, for the transfer of title to the real property to be effective, an additional unconditional contract needs to be concluded.
Pursuant to the provisions of Article 590 CC, in principle, RT does not require any special form (it can also be effected orally). However, where the thing sold is handed over to the buyer before the price has been paid, RT must be evidenced in writing. Similarly, if RT is to be effective against the buyer’s creditors, it is necessary for RT to be evidenced in writing with date certain (see below).
Contractual provision
RT is a contractual provision whose purpose is to secure the seller’s receivables on account of the buyer’s payment of the price.
Unanimous consent of the parties
GIven that RT is effective if both parties to the contract make unanimous declarations of will, RT cannot be validly established based solely on the seller’s declaration. For RT to be effective against the buyer’s creditors, RT must be made (evidenced) in writing with date certain (see below).[Page168:]
Buyer’s delay in payment of the price
The purpose of RT is to secure the receivables on account of payment of the price. Should the buyer fail to pay the price by the agreed deadline, the seller is entitled to choose one of two fundamental claims: it can either request that the price be paid or request the thing be returned to it. The decision to pursue one claim causes, in principle, the other to expire. If, in the enforcement of RT, the seller collects the thing from the buyer, it is tantamount to rescinding the sales contract.
Extended effectiveness
There are doubts as to whether RT is possible under the condition that the buyer effects payment of other receivables than the purchase price. A large number of legal commentators are of the view that such extended RT (based on the German concept of Erweiterter Eigentumsvorbehalt) is not acceptable. However, there are also those who claim the opposite, allowing the above legal structure. So far, the issue has not arisen in case law.
RT is governed by statutory regulations.
The CC provisions regulating RT do not include any specific provisions regarding passage of the risk to the buyer of accidental loss of or damage to the thing sold. Thus, the general provisions apply to the sales contract.
Pursuant to Article 548 § 1 CC, inter alia the risk of accidental loss of or damage to the thing sold transfers to the buyer once the thing is handed over to it. The parties however may regulate the moment of such transfer differently.
Consequently, even if the buyer has not yet acquired the title to the thing sold (due to the RT stipulated in the contract), the buyer incurs the risk of accidental loss of or damage to the thing upon collecting the thing from the seller (e.g. as a result of theft).
RT may be validly established as long as the title to the thing sold does not transfer to the buyer. RT cannot be established to operate retroactively.
In the case of identifiable (in specie) things, the conclusion of the sales contract itself results in[Page169:]the transfer of title to the buyer, unless the parties agree otherwise. In the case of generically identifiable (fungible) things or future things, valid transfer of title requires that the sales contract be concluded and additionally, that the things are handed over to the buyer.
No special form is required to establish RT. The buyer and the seller may agree RT in any form; however, for RT to be effective against the buyer’s creditors, it is necessary to evidence the RT in writing with date certain. RT can be stipulated (evidenced) either at the time of contract execution or subsequently, and the document does not need to be signed by both the parties. However, to avoid practical difficulties, the parties most often conclude the entire contract, including the RT clause, in a written form or in a written form with date certain.
If RT is included in the general terms and conditions of a contract used by a business, then this corresponds to the written form, providing such terms and conditions do apply to the relevant contract.
RT is effective against the buyer’s creditors if it has been evidenced in writing with date certain (Article 590 CC). A document carries date certain if the date of such document has been officially authenticated (e.g. by a notary public).
If RT is effective against the buyer’s creditors, then they cannot pursue enforcement against any movables that are subject to RT.
If RT is laid down in a master (framework) agreement, the individual (implementation) contracts should also be concluded with date certain, and if the individual (implementation) contracts are not concluded in writing, then orders, invoices, etc. need to be issued with date certain.
The RT’s effect is that despite the conclusion of a sales contract and (potentially) handing over the thing sold to the buyer, the title remains with the seller until the full price has been paid. Until that happens, the buyer does not become the owner of the thing and so is unable to dispose of it. However, should the buyer sell the thing and hand it over to a third party who acts in good faith, then the third party acquires the title to the thing upon taking possession (Article 169 CC). Consequently, the sale and handing over of the thing to a third party acting in good faith breaks the RT.
If the thing subject to RT is transformed, merged, or mixed, the general rules laid down to determine the owner of the title to a transformed thing produced by merging or transformation apply (Articles 191-193 CC). The seller’s title expires when the thing sold becomes a component of another thing or real property or when transformation (processing) produces a thing owned by the processor.[Page170:]
If yes, is there a possibility to transform the RT in case of a sale to a third party?
The CC does not provide for the transformation of RT if the thing is sold to a third party. Such concept is only available under Bankruptcy Law (see below).
Yet, legal commentators permit the so-called extended RT (in reference to the German solution). To this end, the parties can agree under the sales contract that if the thing subject to RT is sold on by the buyer to a third party, the thing sold is replaced by the buyer’s claim for payment of the price by such third party. Thus, this arrangement relies on the transfer to the seller of the buyer’s future claim against a third party (buyer of the thing sold on). However, in such a situation, a third party (the buyer of the thing sold on) acquires the title to the thing which is subject to RT. The seller merely obtains an equivalent in the form of a claim for payment of the price against a third party. This legal concept has not been confirmed in case law.
Should the buyer fail to pay the price, to recover the thing subject to RT, the seller brings a recovery action for the thing under Article 222 § 1 CC. The court proceedings (two instances) usually take 18 months to 3 years to complete from the time they are instituted to the delivery of the non-appealable judgment. Depending on the buyer’s conduct, additional time may be required to actually recover the thing under the enforcement proceedings.
In the course of recovery proceedings, the seller may file for injunctive relief consisting in the seizure of the thing.
Enforcement of receivables, i.e. enforcement of the price under the sales contract under court proceedings, is an alternative to the proceedings for recovery of the thing sold. In the case of actions for payment, court proceedings take between 18 months to 3 years to complete. It is possible to institute simplified procedures (order for payment proceedings or writ of payment proceedings), as part of which the court issues an order for payment, and if unchallenged by the debtor, the seller obtains the enforcement order which can provide the basis for recovery of a monetary receivable. These simplified procedures take some 2-4 months to complete. If the debtor challenges the order for payment, it is necessary to carry out full court proceedings.
If RT is effective towards the buyer’s creditors (i.e. has been evidenced in writing with date certain — please see comments above), the creditors cannot pursue enforcement proceedings against the items subject to RT.
If the buyer is already in possession of the thing subject to RT, the enforcement body can seize[Page171:]it. In such situation, the seller should bring an action to exclude items seized from enforcement (Article 841 § 1 Polish Code of Civil Procedure). If the seller fails to do so, and the thing is sold in the course of the enforcement proceedings, the seller irretrievably forfeits the title.
The statutory lien in favour of the carrier arises by operation of law, regardless of who holds the title to the goods carried. However, the carrier’s lien lasts only as long as the goods carried are in its possession.
An RT included in the sales contract remains valid in bankruptcy proceedings, as long as it is effective towards the buyer’s creditors, i.e. has been evidenced in writing with date certain (please see above). Otherwise, RT expires upon the declaration of bankruptcy (Article 101 Bankruptcy Law).
If RT is effective in bankruptcy, the seller to whom the established RT benefits, remains the owner of the thing and is entitled to:
There is a presumption that any assets held by the bankrupt are part of the bankruptcy estate. The receiver may release items subject to RT to the seller only if the bankrupt’s documentation indisputably demonstrates that they are not part of the bankruptcy estate.
If the receiver refuses to release items, the seller needs to file a motion for their exclusion from the bankruptcy estate. The motion is considered by the judge-commissioner within one month of its filing. In practice, the ruling on the motion may take longer (usually 3-6 months).
If the above motion for exclusion is dismissed, the seller may seek exclusion of the item from the bankruptcy estate by bringing an action against the receiver in the bankruptcy court. An injunctive relief preventing the item in dispute from being sold or encumbered can be issued as part of the proceedings.
As an alternative to the motion to exclude the item from the bankruptcy estate, the seller may file for the price payment claim to be included in the bankruptcy estate. If the claim for payment of the price is filed, the right to request exclusion of the item from the bankruptcy estate expires. The claim for payment of the price is not a preferential claim, neither does it enjoy priority of satisfaction.[Page172:]
If the buyer has sold the item prior to being declared bankrupt, the seller may seek release of the payment received by the buyer from a third party, as long as such payment is a separate item of the bankruptcy estate. In practice, filing such request is highly unlikely, as money is never a separate item of the bankruptcy estate. In light of that, the only option left for the seller is to file a price payment claim against the bankruptcy estate. In turn, if the purchase price has not been paid by the third party prior to filing the claim, then the right to that payment transfers by operation of law to the seller that filed the claim for release of the thing (Article 72 Bankruptcy Law).
If the thing is sold by the receiver, then such sale has in principle the effect of an enforcement sale, and the new buyer becomes the primary owner of the thing that is free from any encumbrances or third-party rights. If the receiver sells a thing subject to RT, then the seller may in each and every case request release of the mutual performance (selling price) obtained in exchange for the thing sold, regardless of whether or not the payment is a separate item from the bankruptcy estate. If the mutual performance (selling price) was not effected prior to filing the release request, the right to the mutual performance (selling price) transfers by operation of law to the seller that filed the claim for release of the thing (Article 72 Bankruptcy Law).
If the receiver sells things subject to RT, it can also become liable for damages to the seller entitled under RT (Article 160.2 Bankruptcy Law).
There are no statutory deadlines applicable to the seller by which it is required to declare its rights to the thing subject to RT to the receiver. In practice, to be able to actually recover control over things subject to RT, the motion for exclusion from the bankruptcy estate should be filed reasonably early, as the risk that things may be sold as part of the bankruptcy estate liquidation process increases with the passage of time.
If the seller moves for the thing to be excluded from the bankruptcy estate or for the mutual performance (selling price) to be released to it, it is required to bear the costs incurred by the bankrupt to maintain such asset or obtain mutual performance (Article 72 of the Bankruptcy Law).
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.
The buyer will acquire the ownership title to the goods sold once the full purchase price has been paid[Page173:](the RT).