According to the financial vocabulary, committees are a party to a commission agreement that instructs the other party (commission agent) to make a transaction with the goods for a monetary reward (commission). A transaction can also be concluded with bills, 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 principal. The goods from him are transferred to a special off-balance account and at the same time are not property.
Commission is a contract
By concluding an agreement, a reseller sells and buys tangible assets on his own behalf, but he must act strictly within the limits of his authority. 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 must be stipulated in the agreement. Such trade may be of a one-time nature. During a certain period, several transactions may be made in import, export, certain banking operations or employment. In general, committees are those who only instruct to sell any product.
How to avoid trouble during the transaction?
In order to avoid misunderstandings, it is necessary to stipulate everything in the contract. In addition, the principal shall reimburse all expenses associated with the execution of a particular order. The signing of such agreements is widely used in international trade, but in this case it is one-off. An important part of such an agreement is the statement of powers of the parties on technical and commercial terms. Committees should state this in the agreement, indicate everything that is necessary, and write that the transaction will be completed only once. If everything is done correctly and legally correctly executed, then each side will fulfill its obligations, as a result of which such a business will bring considerable profit. Otherwise, it will be difficult to keep documents and record revenues, which may affect their size, and the transaction will bring only 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 delivery time for the consignment should be stipulated in the contract by the committees. This is necessary so that subsequently there are no misunderstandings. The document also prescribes technical and quality data, limit amounts on the responsibility of all parties, as well as the size and procedure for paying remuneration and commission money. You should also know that the commission agent and the principal fix their duties and the main terms of the contract, for example, the quantity of goods, prices, delivery times, loan terms , if available, etc.
Responsibilities of the intermediary
Partners on the opposite side and sellers are all commission agents. These persons are responsible and must submit a report to the committee in a timely manner. They are responsible for the safety of the goods, i.e., it must be in proper form throughout the entire period of the contract. Intermediaries may fulfill additional obligations in the form of the provision of market research services, advertising, maintenance services or the protection of commercial interests. The contract should contain information on 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 a seller, then the intermediary assumes responsibility for the solvency of the buyers. In this case, the commission agent must independently compensate for all cash expenses if a third party is insolvent.
Conclusion of agreements with organizations
Foreign trade companies that act as guarantors should include seller’s responsibility in the document. This applies in particular to the timeliness and completeness of all payments. In any commercial business, all documents must be in order so that in the event of inspections or some kind of dispute, it would be possible to sort out and calculate sales and cash. It should be borne in mind that the postings at the principal are made alone, and in the papers at 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 engage in the manufacture of goods, and the company must also finance transportation to the point of delivery. If she resells the products of another manufacturer, then the principal independently finances foreign trade operations, namely, it pays the producer the cost of the goods.
Commission agreement - accounting for all types of relations
Such an agreement is bilateral, therefore, each party has its rights and obligations. Administrative, financial and personal relations are taken into account between the guarantor and the intermediary in the process of developing the terms of mutual settlements. If a company acts as a commission agent in whose capital the principal was invested, then financial and other relations are maintained on a trust basis. It is also possible that the intermediary sells products at lower prices, then he needs to compensate the difference to the guarantor if he does not prove that it was not possible to sell the property at the indicated price, and the sale at a lower price prevented losses. It is worth noting that the contract with the principal is also used in the sale of shares. In general, such an agreement should be concluded with a guarantee of sales to another person.