Del credere

A del crede commission is a commission

which is paid as direct commission instead
of paying through someone else. Del Crede
commission is that of a surety who is
liable to the principal should the
purchaser make default. The agreement
between agent and principal need not be
reduced to or evidenced by writing, for the
undertaking is not a guarantee within the
Statute of Frauds (29 Car 2 c 3).[1]
A Del Credere Agent not only establishes
a privity of contract between the principal
and the third party but also guarantees to
the principal the due performance of the
contract by the third party. The agent is
liable, however, only when the third party
fails to carry out their contract, e.g., by
insolvency. The agent is not liable to the
principal if the third party refuses to carry
out the contract, for example if the buyer
refuses to take delivery.

In the case of United States v. Masonite

Corp., 316 U.S. 265 (1942), the U.S. Supreme
Court evaluated the antitrust status of use
of a del credere agency business
structure. Such an arrangement often may,
as it did in the Masonite case, involve the
principal's fixing the price at which the
agent sells the goods that the principal
supplies it. The Supreme Court held that,
although the parties’ agency agreement
could be assumed genuine rather than
sham, use of del credere agency does not
necessarily insulate the firms from
antitrust liability.[2]

The Court observed that the label the

parties used for their agreement was not
significant, because the Court “has quite
consistently refused to allow the form into
which the parties chose to cast the
transaction to govern.” Id. at 278.
Moreover, although the contract may be
useful “in allocating risks between the
parties and determining their rights inter
se, its terms do not necessarily control
when the rights of others intervene,” such
as those of creditors or the public. Id. at
276–77. Because the arrangement had the
purpose of fixing competitors’ prices it
was held illegal under Sherman Act § 1.
The holding in Masonite thus seems to
overrule partially the Supreme Court's
earlier holding in United States v. General
Electric Co., 272 U.S. 476 (1926).
References
1. One or more of the preceding
sentences incorporates text from a
publication now in the public
domain: Chisholm, Hugh, ed. (1911). "Del
Credere". Encyclopædia Britannica. Vol. 7
(11th ed.). Cambridge University Press.
p. 953.
2. The Court said, “We assume in this case
that the agreements constituted the
appellees as del credere agents of
Masonite. But that circumstance does not
prevent the arrangement from running
afoul of the Sherman Act.” Masonite, 316
U.S. at 277.
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