Romalpa Clause (Retention Of Title) In New Zealand Contracts

General information only - not legal advice. If you sell goods on credit (or even just give customers a few days to pay), you've probably had that uneasy thought: what happens if they don't pay, or they go under, but the goods are already with them?

That's exactly the problem a Romalpa clause (also called a retention of title clause) is designed to help with.

In simple terms, a Romalpa clause is a contract term that says you keep ownership of the goods until you're paid. It's a practical, commercial tool used by suppliers, wholesalers, manufacturers, and anyone supplying stock or materials to customers on payment terms.

But here's the catch: in New Zealand, having a Romalpa clause in your paperwork is often not enough on its own. Because of New Zealand's secured transactions system under the Personal Property Securities Act 1999 (PPSA), you usually need to take extra steps if you want that clause to properly protect you - especially if your customer becomes insolvent.

Below, we'll break down what a Romalpa clause is, when it matters, how it interacts with the PPSA, and what you can do to set your contracts up properly from day one.

What Is A Romalpa Clause (Retention Of Title Clause)?

A Romalpa clause is a contract provision that aims to protect a supplier by stating that:

• title (ownership) in the goods remains with the supplier, and
• the customer only becomes the owner once full payment is made (sometimes including interest and other amounts owing).

From a business owner's perspective, this is about cashflow risk management. If you're delivering goods before you're paid, you're effectively extending credit - and that's great for customer relationships, but it can expose you if something goes wrong.

Why Is It Called A "Romalpa" Clause?

"Romalpa" comes from an older UK case that popularised retention of title clauses. In everyday NZ contracting, you'll usually see it described as retention of title or "ROT".

Where Do Romalpa Clauses Usually Appear?

You'll commonly include a Romalpa clause in your terms of trade, your supply documentation, or a broader customer agreement. It's most common where goods are delivered before payment clears, including:

• wholesale supply (retailers buying stock)
• construction materials supply
• manufacturing inputs and components
• equipment supply (non-hire arrangements)
• online sales where customers have account terms

It can also come up in "mixed" arrangements where you supply goods plus installation or services - though you may need to think carefully about how the clause applies once goods are incorporated into something else (more on that below).

When Does A Romalpa Clause Matter Most For Small Businesses?

A Romalpa clause matters most when two things are true:

• you supply goods before you receive payment, and
• you want a clear legal pathway to recover the goods or protect your position if payment doesn't arrive.

In practice, this often comes up in these common "small business pain points":

1) Customers Who Are Slow To Pay (Or Stop Paying)

If a customer drags their feet on payment, a strong retention of title clause can give you leverage to demand payment or, where legally permitted, recover the goods.

2) Customers Who Become Insolvent

This is where retention of title is really tested. If your customer goes into liquidation or receivership, you're typically competing with:

• secured creditors (e.g. banks)
• other suppliers
• the liquidator's duties to collect and distribute assets

A Romalpa clause can help, but in New Zealand it often needs to be backed by PPSA registration if you want real priority - and the timing and type of registration can be critical.

3) Customers Who On-Sell Your Goods

If your customer buys stock from you and then sells it to the public, the goods can move quickly. Depending on how your clause is written, you may also be trying to protect:

• the physical goods (before they're on-sold), and/or
• the proceeds of sale (the money your customer receives from selling your goods).

Proceeds clauses can be useful, but they're also an area where you want clear drafting and a solid PPSA strategy (and you should be cautious about relying on "trust" wording without advice, because outcomes can be fact-specific).

How Does A Romalpa Clause Work Under The PPSA In New Zealand?

This is the part many businesses miss: under the Personal Property Securities Act 1999 (PPSA), a retention of title arrangement is usually treated as a type of security interest.

That means you're not just relying on "we still own it" as a simple ownership concept. The law may treat you as a secured creditor - but only if you do the secured creditor steps properly.

Retention Of Title Often Creates A "Security Interest"

Under the PPSA, if you supply goods and retain title until payment, you've typically created a security interest in those goods to secure payment. This matters because:

• security interests can be perfected (usually by registration), and
• priority disputes are often decided by the PPSA's priority rules - commonly (but not always) by who perfected first, and whether any special priority rules apply.

If you don't register, you can end up in a painful situation where:

• your customer becomes insolvent, and
• another creditor with a perfected security interest (often the bank) has priority over the same goods, even though you included retention of title wording.

Why PPSR Registration Matters

To protect your position, you'll usually register your security interest on the Personal Property Securities Register (PPSR). Registration can help you:

• establish priority over competing creditors
• strengthen your ability to reclaim goods if the customer defaults
• reduce the risk of being treated as an unsecured creditor in an insolvency

It's also important to know that some supplies may qualify as a purchase money security interest (PMSI) under the PPSA, which can (if done correctly) give you "super-priority" over earlier-registered security interests - but only if you meet the strict PPSA requirements (including correct timing and other conditions).

This is also why it's worth thinking about whether your retention of title clause is effectively doing the job of a General Security Agreement (GSA) in a limited way, and whether you need broader security rights beyond retention of title for specific transactions.

What If The Goods Get Mixed, Used, Or Installed?

This is a big practical issue. In the real world, goods don't always sit neatly in a warehouse waiting to be reclaimed.

If goods are:

• consumed (e.g. ingredients, fuel, packaging)
• incorporated into other goods (e.g. parts used in manufacturing)
• installed into a building or asset (e.g. construction materials)

?then reclaiming them may be difficult or impossible in practice, even if your contract says you retain title.

That's why many suppliers include clauses dealing with:

• identification and segregation of goods
• rights to enter premises to recover goods (with appropriate limits)
• proceeds of sale (if goods are on-sold)
• risk passing to the buyer even if title hasn't passed (so insurance is dealt with)

Because these scenarios can get technical quickly (and because "entry/recovery" rights must still be exercised lawfully and safely in practice), it's worth having your Terms Of Trade drafted for your actual supply chain (not a generic template that assumes the goods stay untouched).

What Should A Romalpa Clause Include (And What Are The Common Mistakes)?

A good Romalpa clause is rarely just one sentence. If you want it to be enforceable and commercially useful, it should be part of a broader set of well-structured supply terms.

As a starting point, your retention of title clause (and surrounding terms) should usually address the following.

Key Elements To Consider Including

• When title passes: usually when you receive full payment (and clarify if "full payment" includes interest, fees, and other amounts owing).
• Risk and insurance: risk may pass on delivery even if title doesn't, so you're not carrying the risk of loss while unpaid.
• Storage and identification obligations: requirements for the buyer to store goods separately, label them, and keep them identifiable.
• No on-sale / conditional on-sale: or permission to on-sell only in the ordinary course of business, depending on your model.
• Proceeds of sale: whether and how proceeds are dealt with (this area needs careful legal drafting, and the PPSA position can be nuanced).
• Default triggers: what counts as default (non-payment, insolvency events, appointment of receiver/liquidator, etc.).
• Repossession rights: what you can do on default, including practical steps and limits (and that any recovery steps must be lawful in the circumstances).
• PPSA wording: consent to registration, and buyer obligations to assist with perfection/registration steps.

Common Mistakes We See

• Only using invoice wording: putting "title remains with supplier until paid" at the bottom of an invoice is often too late (the contract may already be formed) and too thin to handle real disputes.
• No clear contract formation process: if your customer never agreed to your terms, enforcing the clause can be an uphill battle. Getting the basics right around what makes a contract legally binding is critical.
• Not registering on the PPSR: this is the big one - without registration (and, where relevant, correct PMSI timing), you may lose priority in insolvency.
• Overreaching repossession rights: clauses that are too aggressive (or unrealistic) can create disputes or be hard to enforce in practice.
• Not matching the clause to your business model: wholesalers, manufacturers, and businesses supplying installed goods have different risks and need different wording.

A retention of title clause works best when it sits within a properly drafted supply arrangement, like a tailored Supply Agreement or terms of trade that reflect how you actually deliver, invoice, and manage credit.

What Do You Do If A Customer Doesn't Pay And You Have A Romalpa Clause?

When a customer doesn't pay, it's tempting to jump straight to "we'll just take the goods back." In reality, you'll want to take a measured approach that protects your legal position and avoids escalating things unnecessarily.

Step 1: Check The Paper Trail

Before you do anything else, confirm:

• which document forms the contract (signed agreement, accepted quote, online terms, credit application, etc.)
• that your terms (including the Romalpa clause) were provided before supply and accepted
• the payment terms, due dates, and what counts as default

If you're not confident your contract formation process is tight, it may be worth getting a Contract Review so you know where you stand before you take action.

Step 2: Confirm Your PPSA Position

Ask yourself:

• Did we register on the PPSR?
• Is the registration accurate (correct debtor name/identifier, collateral description, timing)?
• If this is a PMSI scenario, did we meet the specific PPSA timing and notice requirements (where applicable)?

PPSA errors can be costly, particularly if your customer is in financial trouble.

Step 3: Communicate Clearly (And Keep It Commercial)

Often the fastest, cheapest outcome is still commercial negotiation - especially if the customer is a good customer having a temporary cashflow squeeze.

A clear written demand that refers to the debt, your contractual rights, and next steps can be enough to get payment moving.

Step 4: Consider Recovery Options

Depending on the situation, your options may include:

• negotiating a repayment plan (and updating terms going forward)
• suspending further supply until payment is made
• enforcing repossession rights (where appropriate and lawful)
• pursuing formal debt recovery steps
• if insolvency is involved, engaging early with the liquidator/receiver and asserting your security interest

The right approach depends heavily on the facts (what you supplied, where it is, whether it's been on-sold, and whether other creditors are involved), so getting tailored advice early can save you from spending money on the wrong enforcement pathway.

How Can You Set Up Retention Of Title Properly From Day One?

The best time to fix your retention of title strategy is before the first unpaid invoice.

If you're a growing business extending credit to customers, here's a practical setup checklist.

A Simple Setup Checklist For Suppliers

• Use clear written terms that apply before supply (not just invoice fine print).
• Make acceptance obvious (signed credit application, checkbox acceptance online, signed quote, etc.).
• Include a well-drafted Romalpa clause suited to your goods and supply process.
• Register on the PPSR where required to perfect your security interest and protect priority (and consider whether PMSI rules apply to your supplies).
• Train your team on when to issue terms, how to onboard customers, and when to stop supply if accounts are overdue.
• Review your processes as you scale (new product lines, larger customers, longer payment terms, or increased credit exposure).

Don't Forget Your Other Legal Foundations

A Romalpa clause is powerful, but it's only one part of your risk management toolkit. Depending on your business, you may also need:

• clear credit and payment terms (including interest and recovery costs, where appropriate)
• limitations of liability and warranty terms
• product and service scope clarity (especially where goods and services are bundled)
• compliance with the Fair Trading Act 1986 (truthful marketing and representations) and the Consumer Guarantees Act 1993 (where you deal with consumers)

Putting these protections in place early makes it much easier to enforce your rights later, without damaging customer relationships or getting stuck in drawn-out disputes.

Key Takeaways

• A Romalpa clause (retention of title) is a contract term that aims to let you keep ownership of goods until you're paid, reducing the risk of unpaid supply.
• In New Zealand, retention of title commonly creates a security interest under the PPSA, so you often need to register on the PPSR to properly protect your position - especially if the customer becomes insolvent. Priority can depend on the PPSA's detailed rules (including PMSI requirements and timing), not just whether you have the clause.
• Romalpa clauses need to be drafted to match how your business operates, including whether goods are on-sold, mixed, installed, or consumed, and whether you want rights over proceeds of sale.
• Relying on invoice fine print is risky; your retention of title clause should sit inside properly implemented terms of trade or a tailored supply agreement that the customer accepts before supply.
• If a customer doesn't pay, you'll want to check your contract formation, confirm your PPSA registration position (including accuracy and timing), and choose an enforcement approach that's commercially sensible and legally sound.

General information only - not legal advice. If you'd like help drafting or updating your retention of title terms (including PPSA-friendly wording) or reviewing your supply contracts, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.