The Role of Authorization in Title Conflicts Involving Retention of Title Clauses: Some American Lessons

Abstract

This paper considers the lack of protection granted to purchasers of goods encumbered with retention of title clauses. In chains of transactions, disponees are only able to acquire such title that their immediate disponor had. The difficulties involved in determining the extent to which the title is encumbered is magnified as chains of transactions extend. English law fails to acknowledge the vital role of authorization in cases involving pre-existing but unknowable encumbrances. The failures of English law can be usefully contrasted with the situation in the USA. Under Article 9 of the Uniform Commercial Code, a security interest can pass with the goods upon disposition, yet if the disposition is authorized, the security interest will merely attach to the proceeds of the disposition. The final purchaser will be able to retain the goods. Although prima facie similar to English law, the American case law demonstrates that authorization plays a substantially more influential role, and reduces the risk to purchasers in comparison with English law.