The common definition of a broker is “an agent who negotiates a contract of purchase and sale”. According to DRC Trading Standards, a broker who fails to perform any specification or duty in connection with a transaction may be held liable for damages happening as a result thereof. What are those specifications or duties?
- Fully inform the parties involved in the transaction of all the terms and conditions proposed.
- Submit to the seller and buyer a proper Memorandum of Sale or Confirmation of Sale, including all of the essential details of the agreement such as the INCOTERM, product description, price, brokerage fees or commission, payment terms, and any other detail.
- The Memorandum of Sale or Confirmation of Sale must identify the party who engaged the broker. If not identified, it would be assumed the broker was engaged by the buyer.
- The broker will be entitled to payment of brokerage fees by the party who engaged them to act as a broker.
- A broker may not be entitled to brokerage fees if there has been a failure to perform its duties.
- A broker does not guarantee the performance of the contracting parties but is entitled to receive prompt payment of brokerage fees when a valid and binding contract is negotiated.
- Unless specifically agreed, the broker is not responsible for payment to the seller by the buyer.
- A broker who acts in a dual capacity, either as a true broker or as a buying broker, must clearly disclose this status prior to completion of the contract.
- A broker has no authority to file a claim with a carrier. However, if the broker comes into possession of valuable information related to a carrier claim, the seller/buyer should be advised promptly of the information.
It is important to understand that this definition is not meant to cover the rights and responsibilities of a transportation broker. However, there are some similarities and for those in logistics or who are transportation intermediaries, we suggest a review of Section 3 of DRC’s Transportation Standards.
