Exploring Principal's Obligations in Commission Agency Contracts
In a commission agency contract, the principal is obligated to ensure payment of commission to the agent upon conclusion of transactions. Additionally, the principal must reimburse the agent for incurred expenses. The relationship between principal and third party, as well as exceptions to this rule, are also discussed.
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Presentation Transcript
Lecture 5 The Obligations of Principal and third party Q : Explain the Principal's Obligations under commission agency contract? 1. Payment of Commission: commission agent contract is a commutative contract, obligatory for both parties, where the commission agent is entitled for a commission or a fee, a feature which distinguishes the commission agency from the ordinary agency. It was already demonstrated that the commission is due when the transaction is concluded rather than waiting for the transaction tom be enforced, but the situation differs where the agency contains a guarantee provision, in which case the transaction has to be implemented so that the commission agent receives his commission, due to the fact that the latter guarantees the implementation of the transaction. 2. Reimbursement of expenses and costs: the law stipulates that the principal is obliged to reimburse the commission agent for the expenses and other costs incurred by the latter in performing the agency. It was already discussed that the
Lecture 4 The Obligations of Principal and third party Q : Explain the Obligations of Third Parties? 1. In principle, third parties have no right of recourse against the principal; likewise, the principal has no direct action against third parties, as the principal remains an outsider in respect of the direct relationship that exists between the third party and the commission agent who contracts in his own name on behalf of the principal, hence he is a contracting party not an agent.
Lecture 4 The Obligations of Principal and third party To this general rule, however, there are certain exceptions dictated by reality and the nature of commission agency, as follows: A- In case of a commission agent who is involved in a sale transaction but declared bankruptcy before receiving the price from the buyer, the principal may demand the buyer to pay him directly without commission agent. B- In case of a commission agent who is involved in a purchase transaction but declared bankruptcy before taking delivery of the sold item, the principal may demand the seller to directly deliver the sold items to him without passing through the commission agent. passing through the
Lecture 4 The Obligations of Principal and third party 2- In addition, disclosing the name of the principal to the third party would not create any direct relationship between the two parties, though the third party who contracted with the agent may exercise a right of recourse directly against the latter.
Lecture 5 The Obligations of Principal and third party
