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Topic 6 . Commercial transactions , t heir types and regulation

Topic 6 . Commercial transactions , t heir types and regulation. Structure of to pic 6. 3.1. International and national legislation, types of transactions . 3.2. A lienation contracts. Structure of trade (purchase) contract.

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Topic 6 . Commercial transactions , t heir types and regulation

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  1. Topic 6. Commercial transactions, their types and regulation

  2. Structure of topic 6 3.1. International and national legislation, types of transactions. 3.2. Alienationcontracts. Structure of trade(purchase) contract. 3.3. Commercial Commissioner and commercial agents. 3.4. Regulation of relations with staff , independent entrepreneurs and representatives 3.5. Transactions connected with transfer of debts 3.6. Contracts to use other person's property. Renting and leasing. 3.7. Grants, gifts, donation in business. 2

  3. Question 3.1 Legislation in the field of commercial transactions International National(Latvia) • The UN Convention on Contracts for the International Sale of Goods 1980 (150 countries) • Principles of International Commercial Contracts UNIDROIT 1994 • The Hague Convention on the Abolition of Legalisation for Foreign Public Documents in 1961 • International rules on the interpretation of trade terms "Incoterms" The Civil Law of Latvia, Part IV • transaction and the contract  obligations, delay, interest, damages,  methods of termination of obligations, the duration (10 years) • Transaction: gift, return, cession, alienation, leasing and hiring, etc.   Commercial Law of Latvia, part “D’ • types of transactions (7): buying, commission, forwarding, storage, leasing, factoring, franchise 3

  4. Question 3.2 What does “alienation” mean? • Alienation: • change of ownership for remuniration, payment: • purchase ( trade contract) • exchange (barter contract) • Other forms(e.g.maintenance contract, supply contract) • Not alienation • change of property’s owner • without any compensation • (non-refundable transaction): • Donation. Possibility to cancel • Loan. Without or with interest • Differences in therules for taxation 4

  5. Question 3.2 International sale contracts of purchase Structure of Contract Documents on the use ofdeal • Preamble (the legalization of office) • Subject, the quantity and quality (how fixation) • Basic terms of delivery (INCOTERMS: Groups E, F, C, D) • Term date, guarantees, penalties • Price (hard, sliding), payment (deposit, loan), the method of calculation (the open account, letter of credit, bill) • Delivery (transfer ) of goods and documents, responsibilities and claims, arbitration, force majeure. • 1)The main commercial documents:trade bill, bill of transportation (marine, rail, automobile, airplane, etc.) , invoice • 2)Additional documents: • -the preparation for shipping, • -insurance, • customs declarations, • -licenses, • sertificate of receipt and acceptance of goods. 5

  6. Question 3.3 The forms of commercial proxy and representatives of business • LEGAL PROXY • Full power (proxy) to • represent a mercant • according to law: • In a partnerships • – each complete(general) • participants • * In LLC and SC- each • member of the board • CONTRACT PROXY • Power (proxy) to represent • a mercant according to” letter of • attorney” received for a time • Procuration (all butfull proxy) • General and special proxy • commercial agents • and brokers – next slide 6

  7. Question 3.3 Commercial Commission: specific features Commercial commission In comparison with the usual (civil) commission CC in comparison with activity of commercial agent (Art. 45 Commercial Law) • Commissioner makes deals, on behalf of a beneficial owner, but in his own name • A commercial agent is a merchant who works to the benefit and in the name of a beneficial owner • Payments - provisions for the transaction + delcredere guarantee + and compensation for cancellation of the contract in advance • Commissioner has the right to not only sell but also buy goods on behalf of the principal (beneficial owner) • The possibility of cession (look slide 10) the claims to beneficial owner in order to protect the commissioner’s interests 7

  8. Question 3.7 Personnel engaged in any activity of a merchant Employees Representatives:   member of the board, clerk, agent, broker, procurator) Contracts for work-performance ( independent entrepreneur) • Employment contract (Labour Law) • High social protection, limitation of working hours, vacation, labor safety, employer's liability for damages to third parties • High payroll taxes (25% + 35,09%), min salary per month or per hour • All you need to work on the employer receives • Free to choose the form and organization of work and rest, individual rensponsibility for damages to third parties • Lower taxes on income, the freedom to provide their social security • They use their own tools and equipment • Necessity of registration of their activity • Legal or contract proxy, or equivalent • Freedom to choose the time and rest, responsible to the principal (and sometimes to third parties) • Remuneration-is possible, not obligatory • Income taxation: he pays by his own or the principalpays 8

  9. Signs of labor relations in the deal with independent entrepreneur (IE): Question 3.7 1) the economic dependence of the IEon the person to whom services are provided;2) absence of financial risk in case the execution is not income-generating work, or loss of receivables;3) integration of the IE 's business, which he renders his services.4) the presence of actual weekends and holidays ... compliance with internal regulations of the enterprise or work schedule ...5) activity is under the direction or control of others. The inability to bring to fulfillment of their staff.6) the d IE does not own the assets, and other materials used in the business assets. 9

  10. Question 3.4 Transactions connected with transfer of debts Termination of Obligations Rights: methods Transfer of rights to receive  debt from the debtor : • Giving of commercial authotity to collect debts, • Cession of Right to Claim • factoring, • collection of payment (encash- ment) • letter of credit ( to accredit smbd) • performance (settling the debts, e.g.by payment) • Set-off(discharge of a debt by • means of a counterclaim) • *Presription (rights shall terminate within the period • specified by law) • *Settlement (out-of-court agreement about reduction or renouncement of debts, so one of the parties to the settlement withdrawshis claim) On cession - look next. slide 10

  11. Cession: definitions 1801. A contract of cession between the creditor who cedes the claim (the cedent), and the person to whom it is ceded (the cessionary) may be entered into in any form whatsoever. The consent of the debtor against whom the claim is directed is not required, and the cession shall be in effect, even if the debtor has no knowledge thereof.

  12. Cession and set-off transactions (examples) Form Payables Replacement of the debtor Replacement of the creditor Calculation of triangular transactions А AssetsLiability Debtors В Creditor С offset С А Asset Liability Debtors B А А product В Loan 1000 - Contribution, 1000 - creditor C htrson X B The requirement of set-off   law in 1000, - Payment service С В С "C" buys "A" of its right to receive debt from "B". In "A" disappears debtor "B". At "B" creditor "A" changes to "C ". Offset accounts payable and debt between the "B" and "C". Money 10,- Creditor “C” (Offshore) gives the rights to receive debt from "A“ to non-resident”X” and he gives them to "B"- the comp.’s "A" owner. Offset accounts payable and debt. Debtor "B " buys from "C" its right to obtain debt from a person "A" and does not return him to duty ,but requires set-off. "A" sells the right to receive debt from "B" of its creditor "C", which becomes a debtor "A". Offset accounts payable and debt.

  13. Question 3.5 Contracts to use somebody else’s property Lease contract Gratuitous* temporary use Rental contract • Limitations of use in commercial activities: • complicity in the use of the donation is considered, • obligation to bear the costs • ownership of the fruits and profits • *[gre’tju:ites] – without payment • profit and other fruits from used property , • rules for payment, • to buy used property or to return it, • tax in the case of capital repairs • operational, financial,leasback leasing; • wet or dry leasing The use of a fruit- bearing property to gain fruit is a lease, but any other contract granting use, is a rental contract. Example-residential rental premises 13

  14. Donation (gifts)(Civil Law of Latvia art/1912-1933) Revocation of Gifts (Cancelling) No reward, compensation- Motive Object Within a com. activity Change of ownership generosity Value for VAT, income tax The opportunity to limit taxes Availability of gifts

  15. Donation (gifts): basic forms Foreign. finance.  help Grants Donations Benefitburial,prizes Writting off  debts Other Gifts Tax incentives and discounts (specific objective) Limited exemption Strict taxation State regulation of business by tax

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