Legal Definitions - del credere agent

A del credere agent is a specific type of agent who, in addition to their standard duties, provides an extra guarantee to their principal. This guarantee means the agent promises that the third party they deal with on behalf of the principal will fulfill their financial obligations, most commonly making payments for goods or services received.

If the third party fails to pay or defaults on their agreement, the del credere agent becomes personally liable to the principal for that outstanding amount. Because the agent takes on this additional financial risk, they typically receive a higher commission or fee for their services.

Here are some examples to illustrate this concept:

• Example 1: Art Gallery Consignment
  An art gallery owner acts as a del credere agent for a painter. The gallery displays and sells the painter's artwork. When a wealthy collector purchases a painting through the gallery, the gallery owner guarantees to the painter that the payment will be made. If, for some unforeseen reason, the collector fails to pay the gallery for the painting, the gallery owner is still obligated to pay the painter the agreed-upon price for their artwork out of the gallery's own funds. The gallery owner takes on the risk of the collector's non-payment.

• Example 2: International Sales Representative
  A small electronics manufacturer in the United States wants to expand into the European market but lacks the resources to vet international buyers. They hire a sales representative in Germany who operates as a del credere agent. The German agent finds a large retailer interested in placing a significant order. The agent facilitates the sale, and the manufacturer ships the goods. If the German retailer subsequently declares bankruptcy and cannot pay the manufacturer, the German sales representative, as a del credere agent, is responsible for paying the manufacturer the outstanding amount for the electronics.

• Example 3: Agricultural Brokerage
  A farmer needs to sell a large harvest of corn and engages a commodities broker to find buyers. The broker agrees to act on a del credere basis. The broker successfully finds a food processing company that agrees to purchase the entire harvest. After the corn is delivered, the food processing company experiences unexpected financial difficulties and defaults on its payment to the farmer. Because the broker was a del credere agent, they are legally bound to pay the farmer the full amount for the corn, even though the processing company failed to pay them.