2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
According to the financial dictionary, a committent is a party to a commission agreement that instructs the other party (commission agent) to make a transaction with goods for a monetary reward (commission). A transaction can also be made with bills of exchange, foreign currency, bonds, etc. In addition, it is made on behalf of the commission agent, but in the interests and at the expense of the committent. The goods he receives on a special off-balance account and at the same time is not property.
Commission is a contract
By entering into an agreement, the reseller sells and buys tangible assets on his own behalf, but he must act strictly within the limits of his powers. Otherwise, the document may be terminated, and losses will be recovered from the commission agent. If a third party is involved in the transaction, then all this should be stipulated in the agreement. Such trade may be of a one-time nature. During a certain period, there may be several transactions for imports, exports, certain banking operations or hiring. In general, consignors are persons who only order the sale of a product.
How to avoid trouble during the transaction?
To avoid misunderstandings, it is necessary to stipulate everything in the contract. In addition, the committent must reimburse all costs associated with the execution of a particular order. The signing of such contracts is widely used in international trade, but in this case it is one-time. An important part of such an agreement is to set out the powers of the parties on the technical and commercial terms. The principals must state this in the agreement, indicate everything that is necessary, and write that the transaction will be made only once. If everything is done correctly and legally competently executed, then each party will fulfill its obligations, as a result of which such a case will bring considerable profit. Otherwise, it will be difficult to maintain documents and take into account income, which may affect their size, and the transaction will only bring losses.
What is fixed in the contract?
This document should contain information on the minimum selling prices when exporting goods and the maximum, if importing. Also, the minimum terms of delivery of a consignment of goods must be stipulated in the contract by the committents. This is necessary so that there are no misunderstandings in the future. The document also prescribes technical and qualitative data, limits on the liability of all parties, as well as the amount and procedure for paying remuneration and commission funds. You should also know that the commission agent and the committent fix their obligations and the main terms of the contract, for example, the quantity of goods, prices,delivery times, credit conditions, if available, etc.
Responsibilities of an intermediary
Partners from the opposite side and sellers are all commissioners. These persons are responsible and must submit a report to the principal in a timely manner. They are responsible for the safety of the goods, i.e. it must be in proper condition throughout the entire period of the contract. Intermediaries may fulfill additional obligations in the form of market research, advertising, maintenance, or advocacy services. The contract should contain information about the remuneration, which should cover all expenses incurred by commission agents. Its amount may increase for the adoption of additional guarantees. For example, if the buyer is a third party and the guarantor is the seller, then the intermediary takes responsibility for the solvency of the buyers. In this case, the commission agent must independently compensate for all cash costs if the third party becomes insolvent.
Concluding agreements with organizations
Foreign trade companies that act as guarantors must include the seller's liability in the document. This applies in particular to the timeliness and completeness of all payments. In any trade business, all documents must be in order so that in case of checks or some kind of dispute, sales and cash can be sorted out and calculated. It must be borne in mind that the transactions are made at the committent alone, and inpapers from the intermediary - others. They depend on what the duties of the intermediary under the commission agreement were. If the guarantor is an organization, then it can be engaged in the manufacture of goods, and the company must also finance transportation to the point of delivery. If it resells the products of another manufacturer, then the committent independently finances foreign trade operations, namely, pays the cost of the goods to the manufacturer.
Commission agreement - accounting for all types of relationships
This agreement is bilateral, so each party has its own rights and obligations. Administrative, financial and personal relations are taken into account between the guarantor and the intermediary in the process of developing the conditions for mutual settlements. If the commission agent is a company in whose capital the committent has invested money, then financial and other relations are maintained on a trust basis. It is also possible that the intermediary sells products at reduced prices, then he needs to reimburse the difference to the guarantor, unless he proves that it was not possible to sell the property at the specified cost, and the sale at a reduced price prevented losses. It should be noted that the contract with the committent is also used when selling shares. In general, such an agreement must be entered into under the guarantee of sales to another person.
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