Installment sales and the seller's retention of title
A sale for a deferred or installment price is read from articles 534 and 574 of Civil Code No. 40 of 1951, together with the general rules on preparing a contract.
The seller's retention of title
If the sale is for a deferred price, the seller may retain title until the whole of the price has been received, even if the thing sold has already been delivered, under article 534, first paragraph. Delivery therefore does not necessarily mean that title has passed, if it has been agreed that title is retained until the price is received.
If the price is paid in installments, the parties may agree that the seller is to retain part of it as compensation for rescission of the sale if the installments are not all paid, and the court may nevertheless, according to the circumstances, reduce the agreed compensation in accordance with the rules on agreed compensation, under article 534, second paragraph. The rules on agreed compensation are set out on their page.
If all the installments are paid, title to the thing sold passes to the buyer from the time of the sale, unless there is an agreement to the contrary, under article 534, third paragraph. The rules in those three paragraphs apply even if the parties have styled the sale as hire, under article 534, fourth paragraph. The name used in the contract does not conceal the characterisation the text gives, if the true nature is a sale for a deferred price with retention of title.
Dividing the price, and accelerating it
A sale may be for a present or a deferred price that is known, and it may be stipulated that the price is to be divided into known installments payable on fixed dates; it may also be stipulated that if an installment is not paid on its date the whole of the price becomes due, under article 574, first paragraph. The period of the term and of the installment stated in the contract of sale is treated as running from the time of delivery, unless otherwise agreed, under article 574, second paragraph.
The draft is reviewed for these questions: is the price known? are the installment dates fixed? is acceleration stipulated upon a default? is title expressly retained? is the contract styled as hire when it is in truth a sale?
The office follows a reading from Baghdad, al-Yarmouk.
Legal basis and sources
Frequently asked questions
Does delivery of the thing sold pass title if the seller has retained it until the price is received?
Not necessarily. Article 534, first paragraph, allows the seller to retain title until the whole of the price has been received, even if delivery has taken place.
Do the rules on retention of title apply if the contract is styled as hire?
Yes. Under article 534, fourth paragraph, the preceding three paragraphs apply even if the parties have styled the sale as hire.
Related topics and articles
- 01Agreed compensation, and when it may be reducedAgreed compensation in Civil Code article 170: when it is due, when it may be reduced, and when more may be claimed.
- 02Unforeseen hardship and rescission of a contractExceptional general events in article 146, and rescission of two-sided contracts in articles 177 and 178 of the Civil Code.
- 03Drafting a contract when dealing in BasraDrafting a contract when dealing in Basra under the federal Civil Code, followed from Baghdad.
- 04What does the Civil Code govern in a contract?How a contract is formed and becomes binding under Civil Code No. 40 of 1951: offer, acceptance and subject-matter.
- 05Points to review in a contract before signingMatters to review before signing: parties and authority, subject-matter, time, rescission, compensation and language.