Stacks of Coins with the word LOAN on  white background

This is, perhaps, not the most encouraging description of a set of legal rules, but is the one recently applied by the Law Commission (the body responsible for law reform proposals) to those concerning bills of sale. So, why the description?

A bill of sale is primarily a way for individuals to use their existing goods as security for a loan. The principal law governing them is over 130 years old and uses the language of that era – ‘chattels’ instead of ‘goods’ – but the concept remains the same: the items being secured must be capable of being transferred by actual delivery. Assets such as shares, cash, money claims and farming stock are not subject to the bills of sale provisions.

An increasingly common use of bills of sale in the modern era is the so-called ‘logbook loan’ – a person hands over the ownership document for their vehicle, while continuing to use it. In order to be effective, the bill of sale has to comply with the following:

  • A prescribed form has to be used, including a detailed description of the goods in question
  • It must be signed and witnessed by one or more persons who are not parties to the bill of sale
  • The person taking the security has to register it with the High Court within seven days after its execution (only paper registration is permitted)
  • Registration must be renewed every five years. Failure to renew the registration after five years will make the bill of sale void. The register is a public register and can be searched at the Court.

The rules are strict – failure to follow the prescribed form or other technical defects will make a bill of sale unenforceable, even if the individual is solvent. On the other hand, where the bill of sale is effective and the borrower fails to make repayments, the lender can usually repossess the goods without notice or a court order.

The Law Commission has recently started looking at reform of the current rules with a view to modernising and simplifying them.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.