Commission agreement: obligations of the parties

The commission agreement is an agreement under which the first party (the commission agent) on behalf of the committent (the second party) undertakes to make one or more transactions for the fee at the expense of the committent, but on its own behalf.

Legislation allows on the basis of a commission contract to enter into various types of transactions, for example, supply contracts. This can be multilateral transactions aimed at creating obligations that are executed without the participation of the committent, but the result obtained from their commission can be transferred to this person.

The commission agreement of the Civil Code provides for the following duties of the commission agent. This party undertakes to execute the commission taken on the most favorable terms for the committent in accordance with its requirements and instructions.

Also, the commission agent is obliged to perform the duties and exercise the rights that result from transactions with third parties concluded in fulfillment of the contract. This party is not responsible for non-fulfillment of the transaction concluded by the commissioner by third parties, but he must inform the principal immediately if the transaction is not executed. In addition, the commission agent is required to collect all the evidence and, at the request of the committent, to perform the transfer of rights on the transaction, following the rules for the assignment of the claim.

When the commission is executed, the commission agent submits the report to the principal and sends him all that was received. The commission agreement may provide for the period during which the received funds or commodity values must be transferred (transferred) to the principal, and also the right to familiarize him with the documents of the commission agent for the performance of the contract. When determining the deadline for submitting a report, as well as the documents attached to it, one should be guided by legal regulations governing accounting and taxation.

Under the contract, the commission agent has the right to withhold from all the amounts that came at the expense of the committent, the monetary funds due to him for fulfilling the obligations.

The commission agreement for the simplified taxation system provides for the duties of the committent. He must pay remuneration to the commission agent under the agreement, and in cases where he vouched for the performance of the transaction by a third party (delkredere), pay an additional bonus in the manner and amount established in the contract.

The essence of delcredere lies in the fact that under the agreement the commission agent becomes a guarantor of a person with whom an agreement is concluded on behalf of the principal. If the terms of the transaction are not fulfilled by a third party, the responsibility will be borne by the commission agent. If the non-performance of the contract was due to the fault of the principal, then he must reimburse the commission agent for all expenses incurred and pay the commission fee.

Also, it is the duty of the committent to reimburse the sums spent by the commission agent for execution of orders. If there are no clear criteria for the separation of costs associated with sales, it is advisable to clearly write them down in the contract.

The creditor is obliged to accept the performance under the agreement, namely: to receive from the commission agent all that has been performed, to inspect the acquired property, as well as to notify him of the shortcomings found in the property received.

The commission agreement obliges the committent, if there are objections, to notify the commission agent about them within a month from the receipt of the report, unless the parties specify another term in the agreement.

The main feature that this document contains is that the commission agent acquires rights and obligations at the same time when making a deal with a third party - even with the participation of the committent in direct relations with a third party.