Commercial Agency, Brokerage, and Factoring Contracts Explained

Commercial Agency

Agency is a contract in which a natural person or legal entity (the agent) is engaged by another party, on a continuous or stable basis and for a fee, to promote trade acts or operations. The agent acts on behalf of others as an independent broker without assuming the risk and responsibility of such operations. This is a permanent or lasting contract characterized by a lack of impartiality, the authority to conclude contracts on behalf of the principal, and the independence of the agent as an employer. This contract differs from labor agreements, such as those concluded with commercial representatives.

Brokerage or Mediation

Commercial mediation occurs when a party, typically the mediator or broker, facilitates a commercial agreement. It is a sui generis, consensual, and bilateral contract by which a person is obliged to pay remuneration to a broker who undertakes to promote or facilitate the conclusion of a contract with a third party. As a consensual contract, it is perfected by mutual consent. The mediator only receives remuneration (commission or brokerage) if the contract is successfully concluded as a result of their activity. The mediator must remain independent of the parties involved, and the termination of the contract follows a regime similar to that of a commission.

Factoring Contracts

Factoring is a collaborative business management and financing tool originating from North American practice. In Spanish and international practice, factoring takes a variety of forms due to the autonomy of the contractors. This contract allows employers to obtain assistance from a specialized company (the factor) in exchange for remuneration. Services typically include:

• Information on clientele.
• Billing for products or services.
• Coverage of the risk of insolvency for debtors.

When the amount fits the classification given to each client, it is considered proper factoring, where the risk is assumed by the factoring company and the assignment is pro soluto. In cases of improper factoring, the default risk is not transferred to the factoring company, and the assignment is pro solvendo, meaning it remains subject to collection.