Question

#business law##accounting#

Creative Computing Ltd buys $32,000 of silicon chips from Chekhov Components Ltd and $8,000 of screens from Baxter Production Limited to be used in assembling computers. Both firms sell their products subject to romalpa clauses and register their interests on the PPSR. Due to a glut of cheap imports, the market for computers is oversupplied, and Creative fails to pay both Chekhov and Baxter. The computers for which the silicon chips and screens were used now only have a market value of $24,000.

What can be recovered by Chekhov and Baxter? Explain your reasoning referring to relevant provisions in the PPSA.

Answer 1

Romalpa Clause i.e Retention of title provides a security in form of title in case the goods are sold on credit basis. In this case Chekhov Components Ltd and Baxter Production Limited have the Legal and beneficial titles of the goods supplied by them until Creative Computing Ltd Pays them in Full.

As per the Clauses, This Provides a Protection to the supplier in case buyer is not able pay for the goods as he is in the danger of becoming insolvent.

Both Suppliers have the right to enter the Premises of Creative for the Purpose of inspecting the goods to ensure they are in proper condition. They also have the right to remove the goods as payment has not been done yet and it’s also the duty of the buyer to keep such goods separately so that they can be identified easily.

SO if Creative is unable to pay, Chekhov and baxter can take back their goods to recover the money