Can a Contract Between Companies be a Bill of Sale?


A recent case in the Court of Appeal has considered whether a company that was owed money was entitled to seize assets from another company until their debt was paid. The question for the Court was whether the clause in the contract that enabled seizure of assets could constitute a 'bill of sale'. A bill of sale allows a creditor to take possession of the assets of another who owes them money, if they have not honoured their debts.  Unlike a charge or mortgage, it is not necessary for the money that is owed to have any connection with the items seized. A bill of sale must be properly registered to have effect.
Online Catering Limited (Online) operated a series of fleet vehicles for delivery of food and drink. The case was brought on the basis that Metropolitan Fleet Services (Metropolitan), which repaired their fleet vehicles, had taken possession of two of their vans and refused to return them. Metropolitan said that they were entitled to do this because they had carried out repairs on Online's vans to the value of £11,772.62 but had not been paid for this work.
The contract for services between the two parties included a clause that stated that Metropolitan was entitled to seize Online’s vehicles and their contents and sell them to satisfy any debt owed to them for more than three months. The debt in question had been outstanding for more than six months. In court, a representative of Metropolitan admitted that they did not intend to sell the vehicles, but merely sought to put pressure on Online to settle the debt.
Authorities on bills of sale stretch back to the Bills of Sale Act 1878. The Court of Appeal considered numerous cases and determined that while there was no question that Online owed Metropolitan money, the contract clause could not be a bill of sale because Parliament did not intend for bills of sale to apply to companies.
The Court dismissed the appeal and noted that while neither company had treated the other honourably, Metropolitan had been entitled to seize the vehicles.

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