Del credere risk refers to the potential loss that arises when a buyer or guarantor is either unable or unwilling to fulfill their payment obligations. This risk is particularly relevant in transactions where a seller relies on the buyer's promise to pay, making it crucial for sellers to assess the buyer's creditworthiness and reliability before proceeding with a sale.
Del credere risk is commonly encountered in various legal contexts, particularly in commercial transactions and contracts. It is relevant in areas such as:
Understanding del credere risk can help parties manage their exposure to financial loss. Users can utilize legal templates from US Legal Forms to create contracts that address this risk and outline payment terms clearly.
Here are a couple of examples of abatement:
Example 1: A manufacturer sells goods to a retailer on credit. If the retailer later declares bankruptcy and cannot pay for the goods, the manufacturer faces del credere risk.
Example 2: A real estate agent guarantees a buyer's payment to a seller. If the buyer fails to pay, the agent may incur del credere risk due to their guarantee. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Del Credere Risk Considerations |
|---|---|
| California | Strict enforcement of payment guarantees in commercial contracts. |
| New York | Various legal standards apply depending on the type of goods sold. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Credit Risk | The risk of loss due to a borrower's failure to repay a loan. | Del credere risk specifically pertains to payment obligations in sales agreements, while credit risk is broader and includes loans. |
| Performance Risk | The risk that a party will not fulfill their contractual obligations. | Performance risk can encompass a wider range of obligations beyond payment, whereas del credere risk focuses solely on payment issues. |
If you are a seller concerned about del credere risk, consider the following steps:
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