In our PPS training we use examples from the motor vehicle industry because it offers excellent examples of the supply chain of security interests I discussed here.
The industry includes vehicle and parts manufacturers, wholesale and retail financiers, dealerships, body workshops, smash repairers, detailers and accessory retailers.The contracts between them include arrangements for the sale of vehicles and parts as well as the factoring of debts, equipment and vehicle lease finance, floor plan finance and debt factoring.
Supply of goods may be on a retention of title basis (that reserves title in the goods to the seller until the purchase price has been paid even though possession has been given to the buyer). Alternatively, cars or parts may be delivered on a consignment basis so that the retailer is only an agent or bailee.
Factors and discounters provide funds in return for an assignment of the grantor’s book debts.
Parts or materials from one supplier may be attached to or used in the manufacture of vehicles by another business. Parts will be used in modifications or repairs to vehicles.
At any one time all those parties may have competing interests in the same vehicles or parts. In addition, the PPS Act takes into account the rights of third party buyers (including the ultimate consumer) and what happens in the event of insolvency of a grantor of a security interest.
As we approach commencement of the PPS Register it is essential that each business in the supply chain understands the nature of their security interest and how that can be registered to protect their contractual rights.