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The importance of retaining ownership in Property until you have been paid

One of the most important concepts in the law of property is that of "ownership". In law, the owner of a thing has, in effect, a noose around the thing itself. If he loses it or it is stolen, he can recover it wherever he finds it.

Thus, for example, if the owner finds someone in possession of that thing, he is entitled to demand that it be handed over to him. If the possessor had bought the property in question, in good faith, from someone else, that possessor is nonetheless obliged to hand it over to the owner and cannot demand that the owner pay him compensation. In this situation, the possessor must claim damages from the person who sold him the property.

A MERE CLAIM FOR DAMAGES MAY BE WORTHLESS

By contrast, where a person has lost his ownership in property, he may have a claim for damages (financial compensation) if the circumstances are such that his legal rights have been infringed, but he has lost the legal “noose” around the property. A claim for damages is worthless if the debtor cannot be traced or has no money.

It follows from these principles that when you enter into a business deal in which you are to transfer the ownership of property, it is wise to ensure that the contract makes clear that you retain ownership in the property until you have been paid for it in full. Then, if the deal goes sour, you can claim the property back and do not have to be content with a (possibly worthless) claim for damages.

In a commercial transaction in which you are handing over property, it is therefore important to ensure – if at all possible – that you retain ownership in that property until you have been paid for it in full. Once you have lost ownership, all you have is a claim for financial compensation – and the other party may not have the means to pay you.

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