Definition of Buying or Selling Commission Contracts
Buying or selling commission contracts are defined under Article 532 of the TCO. Pursuant to this article, a buying or selling commission contract is a contract where the commission agent undertakes to buy or sell negotiable instruments and movables in his name but for the account of the principal, in return for a fee.
The provisions governing agency shall be applicable to commission contracts, without prejudice to the provisions of the TCO regarding commission contracts.
Duties of the Commission Agent
Article 533 of the TCO sets forth the commission agent's duty to inform and to insure. Pursuant to said article, the commission agent is obliged to inform the principal regarding the transactions conducted and in particular must notify the principal immediately when the commission contract is performed. In principle, the commission agent is not obliged to insure the goods on commission. However, upon instruction from the principal, the commission agent must insure the goods on commission.
In accordance with the duty of care stipulated under Article 534 of the TCO, where the goods for sale on commission are evidently defective, the commission agent must safeguard the rights of recourse against the carrier, secure evidence of the defective condition of the goods, preserve the goods where possible and notify the principal immediately. In case the commission agent fails to comply with these duties, he shall be held responsible for any damage caused by such an omission. Another duty of the commission agent under the duty of care is to arrange the sale of the goods where there is a risk that they will rapidly deteriorate provided that the principal is notified immediately.
The commission agent must comply with the instructions of the principal regarding the price. Likewise, Article 535 of the TCO clearly sets forth that where the commission agent sells goods below the minimum price instructed, he is liable to the principal for the difference unless he can prove that such sale averted loss or damage that the principal would otherwise have incurred and that he was unable to seek the principal's instructions within the time available. Moreover, the commission agent, in the event he is found at fault, shall be liable for other damages suffered by the principal as a result of his noncompliance with the relevant instruction. On the other hand, the commission agent who bought goods below or sold goods above the price determined by the principal shall not be entitled to retain the difference arising from these transactions.
Pursuant to Article 536 of the TCO, if commission agent, without permission of the principal, sells the goods on credit or pays the price without receiving the goods, he must bear the damage arising therefrom. However, Article 536 of the TCO stipulates an exemption regarding sale on credit. Accordingly, unless prohibited by the principal, the commission agent may sell the goods on credit as per the commercial customs in the selling area.
The commission agent cannot be held liable for the debtors' nonpayment and nonperformance of other obligations except the sale of goods on credit without permission. However, in case the commission agent explicitly gives warranty or the commercial customs at the place of business require so, the commission agent shall be liable for the debtor's nonpayment or nonperformance of other obligations. Pursuant to Article 537 of the TCO, the commission agent who assumes liability for nonperformance by the debtor shall be entitled to special remuneration.
Rights of the Commission Agent
Pursuant to Article 538 of the TCO, the commission agent is entitled to reimbursement of all expenses incurred on the principal's behalf and all prices paid plus interest on all such amounts.
Concerning the fee stipulated under Article 539 of the TCO, the commission agent is entitled to commission on execution of the transaction or failure to execute it for a reason attributable to the principal. Where transactions could not be executed for other reasons, the commission agent is entitled to remuneration for his endeavors only to the extent provided for by local custom.
Article 540 of the TCO sets forth that the commission agent shall forfeit his right to the commission if he has acted against good faith and especially if he indicates to the principle a higher price for what is purchased or a lower price for what is sold. If the price is misrepresented, the principle has the right to take action against the commission agent himself as buyer or seller for the actual price.
The commission agent is granted a right of lien by Article 541 of the TCO. Pursuant to this article, the commission agent may use the right of lien on the price of goods sold or on goods purchased.
Pursuant to Article 542 of the TCO, where the goods on commission remain unsold or the order to sell is withdrawn and the principal fails to take them back or otherwise dispose of them within a reasonable time, the commission agent may apply to the court to have them sold at auction. However, if the goods are listed or have a specific market value or have a value less than the costs to be incurred, the judge may decide to sell the goods through other way.
Pursuant to Article 543 of the TCO, unless otherwise instructed by the principal, a commission agent instructed to buy or sell goods, bills of exchange or other securities with a quoted exchange or market price is entitled, in his own capacity as seller, to deliver the goods he is instructed to buy or, in his own capacity as buyer, to purchase the goods he is instructed to sell. In such cases, the commission agent must account for the exchange or market price that applied at the time the instruction was given and is entitled to both the usual commission and reimbursement of the expenses normally incurred in commission business. However, the commission agent must inform the principle about such transactions on the same day.
Pursuant to Article 544 of the TCO, where the commission agent is permitted to act of his own account and he notifies the principal that the instruction has been executed without naming another person as buyer or seller, the presumption is that he himself has assumed the obligations of the buyer or seller.
Pursuant to Article 545 of the TCO, the commission agent is not permitted to act as buyer or seller if the principal has withdrawn his instruction. However, this provision shall not apply if the notice of execution was dispatched before the notice of withdrawal reached the commission agent.
A buying or selling commission contract is regulated under Articles 532-545 of the TCO and is defined as a contract where the commission agent undertakes to buy or sell negotiable instruments and movables in his name and for the account of another, the principal, in return for a fee.
The duties of the commission agent may be listed as: (i) to notify the principle, (ii) to insure the goods on commission in case the principle gives instructions; (iii) to take care of the goods on commission; (iv) to comply with the principle's instructions with respect to the price; (v) to avoid selling goods on credit or paying in advance without receiving the goods; and (vi) liability for the debtor's nonpayment or nonperformance of other obligations where the commission agent explicitly gives warranty or the commercial customs at the place of business require so.
The rights of the commission agent are: (i) to claim the money paid and expenses incurred; (ii) to claim a commission fee; (iii) the right of lien; (iv) to arrange the sale of the goods at auction; and (v) to make transactions with himself.