The del credere commission is a form of compensation granted to a factor for ensuring that the principal receives payment for all debts that arise from the agency relationship. This entails assuming additional responsibility and risk, and as a result, the factor is rewarded with a higher commission. Essentially, it’s akin to receiving extra pay for performing a more challenging task.
A del credere commission is a commission paid to a factor that is higher than usual because the factor guarantees payment to the principal for all debts that become due through the agency relationship. For instance, if a company hires a factor to sell their products to retailers, the factor may charge a del credere commission of 5%. This means that if a retailer fails to pay for the products they received, the factor will still pay the principal for the debt owed. In return for this guarantee, the factor charges a higher commission than they would without offering this service. Similarly, a clothing manufacturer may hire a factor to sell their products to department stores, with the factor charging a del credere commission of 7%. This ensures that if a department store goes bankrupt and cannot pay for the products, the factor will still pay the manufacturer for the debt owed. The higher commission compensates the factor for taking on this risk. These examples demonstrate how a del credere commission operates, with the factor assuming the risk of non-payment and guaranteeing payment to the principal in exchange for a higher commission.
A Del Credere Commission is a type of commission agreement where a sales agent guarantees payment to the principal for goods sold to customers. The agent assumes the risk of non-payment by the customers.
The main benefit of a Del Credere Commission is that it provides an added layer of security for the principal, as the agent takes on the risk of customer non-payment. It can also incentivize the agent to actively pursue sales and ensure timely payment.
While a written agreement is not legally required, it is highly recommended to have a clear and comprehensive contract in place. This helps to avoid any misunderstandings or disputes between the principal and the agent regarding their respective rights and obligations.
Yes, a Del Credere Commission can be terminated by either party, subject to the terms and conditions specified in the agreement. It is important to review the termination provisions in the contract to understand the rights and obligations of both parties in such a situation.
If a customer fails to pay for goods sold under a Del Credere Commission, the agent is responsible for compensating the principal for the loss. The agent’s guarantee ensures that the principal receives payment, even if the customer defaults.
Yes, an agent can negotiate and limit their liability under a Del Credere Commission. The extent of liability can be specified in the agreement, allowing the agent to cap their responsibility for non-payment by customers.
There are no specific legal requirements for a Del Credere Commission, but it is advisable to comply with general contract law principles. This includes ensuring that the agreement is entered into voluntarily, has a lawful purpose, and contains all essential terms.
Without a Del Credere Commission, the principal cannot hold the agent directly liable for non-payment by customers. However, they may have other legal remedies available, such as terminating the agency agreement or seeking damages for any breach of contract.
Yes, a Del Credere Commission can be combined with other types of commissions, such as a fixed commission or a sales-based commission. The terms and conditions of each type of commission should be clearly outlined in the agreement.
Yes, a Del Credere Commission can be used in various industries where goods are sold on credit. It is commonly used in industries such as manufacturing, distribution, and wholesale, where there is a risk of customer non-payment.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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