Factoring is the purchase of the customer’s receivables from third parties by the factoring company by paying the price in advance. This contract is only available for short-term receivables. The contract must be drawn up in writing. In factoring, the seller sells his receivables to the factoring company with this contract and also transfers the risk of non-collection to the factoring company.
Parties to Factoring Agreement
There are three related parties in the factoring contract.
First is the factoring company, a company that transfers and purchases the customer’s receivables, provided that they pay in cash. The seconfd party is the customer, which is the enterprise that transfers its receivables to the factoring company. And finally the third party is the debtor,the business or person to whom the customer is creditor.
Types of Factoring Contracts
Factoring contracts are examined in two groups. Real factoring agreements and unreal factoring agreements.
In real factoring contracts, the customer remains responsible only for the presence of the receivables, whereas the responsibility for the soundness of the receivables belongs to the factoring company. In other words, the factoring company undertakes the “danger of the debtor not paying their debts”.
In unreal factoring agreements, unlike the real factoring agreement, the factoring company does not undertake the risk of failure of the debtor to pay, in other words, the inability to collect the receivable. In the real factoring contract, the factoring company undertakes the risk of not being able to collect the receivable is in accordance with the relevant provision regulating the assignment of the receivable for a price. In this way, the nature of the advance transaction is to appear as a sale in the real factoring contract.
In the unreal factoring contract, if the factoring company does not assume the risk in question and this danger remains with the customer, the advance transaction is considered a loan. In this way, the core part of the factoring contract is the sales element in the real factoring contract and the loan element in the unreal factoring contract. Provisions of the Code of Obligations regarding the proxy agreement are applied to the aspect of doing business that is common in both types of the factoring agreement, to the extent their qualifications are appropriate.
Factoring contracts actually includes the “transfer (assignment) of receivable” process. However, the customer transfers all their receivables to the factoring company with a factoring agreement.
Antalya Attorney Baris Erkan Celebi and his Antalya Law Firm advise their clients in all subjects of FACTORING AGREEMENTS IN TURKISH LAW including but not limited to the carrier’s legal liability, its limits, the breaking of the limits, the carrier’s exoneration, freight insurance and reinsurance, contracts of carriage, charter agreements, a recap of the fixture, disputes arising from the bill of lading and other fields of.
Whether you need legal advice, representation, or assistance with a legal matter, our law firm in Antalya is here to achieve the best possible results with a strong commitment to our clients.
