Meaning of Del Credere Agent
A Del Credere Agent is a special type of agent under Section 185 of the Indian Contract Act, 1872. This agent not only sells goods on behalf of the principal but also guarantees the solvency of the buyer, assuming personal liability if the buyer fails to pay. In addition to the usual agent duties, a del credere agent receives an extra commission known as del credere commission, in consideration of this added risk. The distinguishing feature of a del credere agent is the dual role: he acts as an agent in procuring the buyer and as a guarantor for payment. This arrangement is particularly common in commercial transactions where principals seek assurance against default by unknown or risky buyers. By guaranteeing payment, the del credere agent provides added security to the principal while being entitled to extra remuneration.
Duties and Legal Provisions
The duties of a del credere agent extend beyond those of a normal agent. Section 185 specifies that the agent must exercise due care and skill while selecting a buyer, as he becomes personally liable for payment. If the buyer defaults, the principal may recover the price from the agent. The agent’s liability is contingent upon acting within the scope of his authority; if he exceeds it, the principal may not hold him responsible. In return for assuming this risk, the del credere agent is entitled to del credere commission, which is usually a percentage of the sale price. This provision incentivizes agents to carefully choose solvent buyers while protecting the principal’s financial interests. The Act ensures clarity in responsibilities, rights, and remuneration, establishing a balance between risk and reward in commercial agency.
Legal Consequences
The primary legal consequence of being a del credere agent is personal liability for buyer’s default. If the buyer fails to pay, the principal may directly sue the agent for the debt, irrespective of whether the goods have been delivered. This liability is limited to transactions authorized by the principal and covered under the agency agreement. Simultaneously, the agent enjoys the right to commission for assuming the additional risk, making the role commercially rewarding. Courts have consistently held that del credere agents act as guarantors only for the solvency of the buyer, not for other aspects like quality or delivery. This legal framework ensures that principals can engage agents with financial assurance while protecting agents’ rights to remuneration for undertaking higher responsibilities.
Real-Time Example
Suppose Mr. A appoints Mr. B as a del credere agent to sell goods worth ₹5,00,000 to various retailers. Mr. B finds a buyer, Mr. C, who agrees to pay later. If Mr. C defaults, Mr. A can recover the unpaid amount directly from Mr. B, even though Mr. B successfully facilitated the sale. For assuming this risk, Mr. B receives an additional del credere commission, say 2% of the sale price. However, if Mr. B sells to a buyer outside his authorized authority, he may not be liable for default. This example illustrates how a del credere agent combines the roles of a sales agent and a guarantor, providing financial security to the principal while receiving additional remuneration for the risk undertaken.
Easy Mnemonic
To remember Del Credere Agent, use the mnemonic “G-C-R”:
- G – Guarantor for payment of the buyer.
- C – Commission extra (del credere commission).
- R – Responsibility to select solvent buyers (care and diligence).
Think of it as: “Guarantor Commits Responsibly” – meaning the agent guarantees payment, earns extra commission, and carefully chooses buyers. This mnemonic helps students quickly recall the key features, duties, and legal implications of a del credere agent under Section 185 of the Indian Contract Act, 1872.
About lawgnan:
Understanding the Del Credere Agent under Section 185 of the Indian Contract Act, 1872 is essential for law students preparing for exams and professionals dealing with agency law. At Lawgnan.in, we simplify legal concepts with detailed explanations, real-time examples, and exam-focused notes. Whether you’re revising duties, liabilities, or the significance of del credere commission, our resources provide structured clarity. Strengthen your grasp of commercial law with easy mnemonics, practical illustrations, and reliable study guides. Visit Lawgnan.in today to explore comprehensive law materials, question banks, and exam preparation tools designed to help you excel in your legal journey.
