Legal Definitions - del credere commission

Definition: A del credere commission is a type of commission paid to a factor (a person who sells goods on behalf of another) that is higher than usual because the factor guarantees payment to the principal (the person who owns the goods being sold) for all debts that become due through the agency relationship.

Example: Let's say that a company hires a factor to sell their products to retailers. The factor charges a del credere commission of 5%. This means that if a retailer fails to pay for the products they received, the factor will still pay the principal for the debt owed. In exchange for this guarantee, the factor charges a higher commission than they would if they did not offer this service.

Another example: A clothing manufacturer hires a factor to sell their products to department stores. The factor charges a del credere commission of 7%. This means that if a department store goes bankrupt and cannot pay for the products they received, the factor will still pay the manufacturer for the debt owed. The higher commission compensates the factor for taking on this risk.

The examples illustrate how a del credere commission works. The factor takes on the risk of non-payment by the retailers or department stores and guarantees payment to the principal. In exchange for this guarantee, the factor charges a higher commission than they would if they did not offer this service.