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Del Credere Agency

Del Credere Agency definition

A del credere agency is an agent that guarantees to its principal the payment for the price of goods or services sold under English law.

The meaning of del credere originated from Italy during the Middle Ages and means belief or trust. Understanding the liabilities and the limitations of the del credere agency will be beneficial when appointing an agent or broker.

In a normal principal-agent relationship, the agent acts as a salesperson, or broker for the principal. However, a del credere agency is a type of principal-agent relationship where the agent also acts as a guarantor of credit to the buyer.

However, the del credere agents will only become liable to pay the amount owed to the principal in the event of a default, where the buyer fails to pay the seller (the principal). The amount owed to the principal is limited to the sum of the outstanding payment.

The agent is not liable for all other disputes arising out of the contract between the principal and the customer. For example, if the buyer withheld payment because of quality issues or late delivery, the agent will not be liable.

An example of del credere agency is an auction house, where the auctioneer could be liable to the seller as an agent for the sales if the buyer defaults on payment.

Note that a del credere agency agreement does not need to be in writing, as it may be inferred from the parties’ conduct during the course of the business.

Due to the increased risk taken on by a del credere agency for bad debt, the agency often charges an additional commission, known as the ‘Del Credere Commission’.

Due to the availability of other forms of credit protection, del credere agents are not common in most modern commercial transactions.

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