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The facts In the given question, carpet manufacturer and wholesaler—Quality Carpets (Carpets, as will be indicated in later discussion for abbreviation) ordered 10,000 lineal meters of “textureweave” from Cotton and Flax Pty Ltd (Cotton) under certain contract terms. Carpets used “textureweave” to manufacture its own carpets, and sold it to carpet retailers throughout Australia and New Zealand. After the order of “textureweave” arrived on Monday 28, July, Carpets sequentially mixed it to produce carpet during the next few days. Since Carpets started fall into voluntary liquidation on 1st August, Cotton and Flax was raising legal concerns with all unpaid “textureweave” from Carpets. Under the contract of sale which involves certain Clause as following: “Property in the goods sold will not pass to the buyer until [a] The purchase price has been paid in full; [b] The purchase price has been paid in full and the buyer has paid all other debts owed to seller; [c] If the goods are resold by the buyer before the seller has been paid, the entitlement of the seller will attach to the proceeds of resale or the debt owed to the buyer by the third party on resale; [d] IF payment becomes overdue, and it is deem due if there is any act of insolvency by the buyer, the seller may recover and resell the goods; and [e] If the goods, before payment, are incorporated in or used as material for other goods, the property in those other goods will vest in the seller, and his entitlement will attach to the proceeds of sale thereof and the debt due to the buyer on such sale, but only for so long as the seller’s debt is unpaid” The issues Whether Cotton can: • Go to Carpets plant and take back the unused portion of “textureweave” And/ Or • Seize that amount of Carpets which was made using the rest of the “textureweave”. Legal Precedent--- “Romalpa Clause” The identical circumstance encountered in the Carpets v Cotton case is remained in the famous Romalpa Case, which is the dispute between Aluminum Industry Vaassen BV and Romalpa Aluminum Ltd The plantiffs sold foil to the defendants, under certain contract. Later on, the defendants got into serious financial difficulties and went into receivership. The plaintiffs claimed that they were entitled to the amount of money that was the proceeds from selling to third parties in priority to the secured and unsecured creditors. In their contract, it is provided that the ownership of the material to be delivered by the plaintiffs will only be transferred to the defendants when they have met all that is owing to the plaintiffs. And, if the foil had been mixed with other material by the defendants for the purpose of creating new ‘objects’, the ownership of any such objects was to be transferred to the plaintiffs as ‘ surety’ for ‘ full payment’ and until full payment had been made the defendants were to keep the mixed goods for the plaintiffs as ‘fiduciary owner’.
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