Meaning
Legal right of a supplier or service provider to hold possession of a customer’s property until an outstanding debt is paid. A retention lien is frequently applied to injection moulds when a client fails to pay for the initial tooling build or subsequent part production runs. It allows the moulder to halt shipments and keep the tool on their premises but expires once the full balance is cleared.
Financial Leverage
Control over the means of production gives the manufacturer a powerful tool in payment disputes. The threat of a retention lien can stop a customer from moving their tool to a competitor before settling their account. This strategy is effective in high-volume industries where a stoppage in part supply can trigger massive penalties for the customer.
Expense Recovery
Rising resin prices and energy fluctuations often put pressure on the working capital of a moulding shop. If a customer refuses to accept price increases that are contractually allowed, the manufacturer might exercise a retention lien to recover the costs already incurred. This action is usually a last resort after negotiations fail.
Statutory Limit
Right to hold property is governed by local statutes and the specific terms of the supply agreement. Clear language regarding a retention lien prevents ambiguity when a relationship sours. These terms define the point at which the right to hold the property expires.
