Contract of assignment and commission: comparative legal analysis

Dec, 17 2021

Contents:

Introduction

To increase sales, commercial organizations use different types of mediation. Most often, entrepreneurs resort to an agency agreement or other types of cooperation. We will conduct a comparative legal analysis of contracts of assignment and commission in order to determine which mediation option is the most profitable in each case. We will determine what these forms have in common, how contracts differ and what legislative acts they rely on.

Contract of assignment

This type of cooperation involves the presence of two parties: an attorney and a principal. The attorney assumes the obligation to perform certain legal actions on behalf of the principal. The main legislative document regulating this type of relationship is Article 971 of the Civil Code of the Russian Federation.

Features of the contract of assignment

  • The principal issues a power of attorney to the attorney, except in cases when the situation makes the powers of the parties obvious.
  • The principal and the attorney may terminate their legal relationship at any time.
  • The contract is considered concluded from the moment when the parties have agreed on all essential conditions, including the subject, that is, legal actions that the attorney must perform on behalf of the principal.

Important Details

A contract of assignment related to the entrepreneurial activity of at least one of the parties is paid, unless other conditions are provided. If the terms of remuneration and the payment procedure are not specified separately, the remuneration is paid after the second party receives the services.

It is important to distinguish the contract of assignment from other intermediary contracts – they differ in subject matter. The powers of the commission agent are limited to concluding transactions, whereas the attorney can perform any legal actions. The agent – one of the parties to the agency agreement – represents not only legal, but also other actions. For example, he can collect information, negotiate. Another significant difference is the procedure of the intermediary’s actions: the commission agent always acts on his own behalf, the attorney – on behalf of the principal, and the agent has the right to act both ways.

Commission Agreement

This type of contract is concluded between the commission agent and the commitee – two parties. The commission agent undertakes to make transactions on behalf of the commitee. The main legislative act that regulates this type of relationship is article 990 of the Civil Code.

Features of the commission agreement

  1. In order for the agreement to enter into force, the parties must conclude it in writing.
  2. Unless otherwise provided by the parties, the commission agent may conclude a sub-commission agreement.
  3. The property purchased by the commission agent at the expense of the commitee is the property of the commitee. After the transaction is concluded, the commission agent is obliged to submit a report and transfer the received items, funds.
  4. The commission agent is not responsible for the non-execution of the transaction by a third party, unless he has assumed a guarantee. The commission agent is also responsible for the actions of the sub-commissionaire.
  5. Commission agent’s remuneration from a legal point of view is not an essential condition, it is determined by the rules of the Civil Code of the Russian Federation.

Important Details

This type of contract can be reclassified into a contract of sale. However, to do this, the document must contain a condition for payment of the goods by the commission agent, regardless of whether the goods are sold or not.

A transaction with a third party concluded by a commission agent before the entry into force of the contract is not considered to have been completed within the framework of the committee’s instructions. Unless other conditions are stipulated by the contract, the commitee is not entitled to enter into direct relations with the sub-commissionaire without the consent of the commission agent.

Agency agreement

This type of agreement assumes the presence of an agent who, for a fee, assumes the obligation to perform legal and other actions on behalf of the principal. The agent acts on behalf of the other party and at its expense.

An agency agreement may prohibit the conclusion of a subagency agreement or, conversely, oblige an agent to conclude such an agreement. The main legislative act regulating this type of contracts is Article 1005 of the Civil Code.

Features of the agency agreement

  1. The subagent may act on his own behalf or on behalf of the agent, the principal.
  2. The agent must report to the second party, the law obliges him to attach to the report evidence of expenses that the agent made at the expense of the principal. The report is considered accepted if the other party has not expressed a claim within a month after its receipt.
  3. The agent is responsible to the principal for the actions of the subagent.
  4. The Contract may restrict the rights of the parties. Thus, the principal may undertake not to enter into similar contracts with other agents. In turn, the agent may undertake not to enter into similar agreements with other principals.

Important Details

Agency and subagency agreements are paid. This agreement differs from other types of contracts in its subject matter: the agent’s powers may include legal and actual actions. At the same time, the attorney’s powers are limited by legal aspects, and the commission agent deals exclusively with transactions – and nothing more.

Also, these contracts differ in the order of termination of obligations. So, if the contract of assignment allows any of the parties to withdraw from the contract at any time, then the commission contract gives such a right to the commitee, and the commission agent has the right to withdraw from the contract only in cases stipulated by law or contract.

The agency contract can be terminated by refusing to perform, but only if the contract is concluded without specifying the exact date of its termination. The remaining grounds for termination of the agency agreement coincide with the grounds that the law provides for contracts of assignment and commission.

General features of the contract instructions and commissions

All these types of agreements are united by a common principle: one party acts in the interests of the other party. In addition, legal actions take place at the expense of the party that ultimately benefits from them. But at the same time, the intermediary does not incur expenses in the performance of his duties. All these contracts are concluded in writing for an indefinite period. However, the parties may also provide for specific terms or conditions.

Differences in intermediary agreements

  • Performer. One of the most significant differences is the identity of the attorney. He performs his duties personally and cannot transfer his own rights. However, the terms of the agreement may allow you to delegate the execution to another person who will act as a deputy. In this case, the deputy can be specified in the text of the contract of assignment. However, the powers of the deputy can also be formalized by a separate act. Of course, for this purpose the principal agrees with the submitted candidate. Another thing is the commission agreement and the agency agreement. In this type of legal relationship, the identity of the performer does not have a significant role, so it is possible to delegate responsibilities.
  • The form of the agreement. All three types of contracts are concluded in writing. But at the same time, the contract of assignment has one distinctive feature: a power of attorney is sufficient for the entry into force of the contract. That is, in this case, a written contract can not be drawn up.

Rights and obligations to third parties

In the contract of assignment, the rights and obligations of the principal arise when the attorney performs actions in his interests. While the commission agreement implies that the rights and obligations under the transaction arise directly from the commission agent. But at the same time, the ownership right to the property acquired or transferred by the commitee remains.

An important feature of the agency agreement is the possibility of concluding transactions: on your own behalf or on behalf of another party. In the first case, the legal aspects of the agreement approach the commission agreement. However, if the transaction is made on behalf of the other party, it is more like assignment contracts. By the way, the legal consequences in relations with third parties for the agent will be exactly the same as in these contracts, depending on on whose behalf he is acting.

Responsibility of the parties

When it comes to any type of contracts related to actions in the interests of another person, the contractor is obliged to take care of the most favorable terms of agreements, transactions, purchases. For the sake of this, the attorney may even deviate from the instructions issued by the principal. This is possible only if the violation of the instructions is in the interests of the second party. That is, the attorney can act at his discretion, as long as it is beneficial to the second party to the agreement.

The attorney, commission agent, agent are not responsible to the employer for the actions of third parties. So, they are not responsible for the enforceability of transactions involving other people. However, the Civil Code provides for several exceptions to this rule. When does the responsibility for the transaction fall on the commission agent?

This happens if the commission agent did not show the necessary prudence and caution, acted negligently and negligently. However, as judicial practice shows, the committee has yet to prove that the second party did not fulfill its duties in full. Without evidence to the contrary, it is considered that the commission agent acted in good faith.

The commission agent is also responsible if he guarantees that the transaction will be completed.  Such a guarantee is called delcredere. It must be fixed in the commission agreement or in the transaction agreement. In oral form, it has no legal force.

Conclusion

So, the current legislation provides for three options for registration of contractual relations with an intermediary. Each of these options has its advantages and disadvantages in each specific situation. There is already a practice developed over the years of applying these types of agreements. For example, the sale of used vehicles through car dealerships takes place according to commission agreements.

Author of the article
Contract of assignment and commission: comparative legal analysis
Valentina Khlavich
Managing Partner
Send Request
By clicking on the button "Submit", you give your consent to the processing of your personal data and agree to the privacy policy.