Legal Definitions - del credere factor

Definition: A del credere factor is an agent who guarantees the solvency of the third party with whom the agent makes a contract for the principal. The agent receives possession of the principal's goods for purposes of sale and guarantees that anyone to whom the agent sells the goods on credit will pay promptly for them. For this guaranty, the agent receives a higher commission for sales. The promise of such an agent is almost universally held not to be within the statute of frauds.

Example: A clothing manufacturer hires a del credere factor to sell their products to retailers. The del credere factor guarantees that the retailers will pay for the goods they purchase on credit. If a retailer fails to pay, the del credere factor is responsible for the payment. In return for this guarantee, the del credere factor receives a higher commission for sales.

Explanation: The del credere factor acts as a guarantor for the principal, ensuring that the third party will pay for the goods they purchase on credit. This provides a level of security for the principal, who may not have the resources to pursue legal action against a non-paying third party. The del credere factor assumes the risk of non-payment and is compensated for this risk with a higher commission.