Financial Contracts Introduction

A similar in function and structure agreement is the distribution agreement. In that agreement a distributor sells products provided by the supplier, and his/her activity can be restricted by territory and distribution channel. The basic difference is that the distributor buys and sells the products/services on his behalf and risk. The distributor also gains profit through the margin between the buying and the selling price. According to the Greek Law (Law 3557/2007 art. 14), the Presidential Degree 219/1991 governs the distribution agreements. The Greek jurisprudence sets the conditions for this application by analogy.

Another important and similar financial contract is the franchising agreement. In franchising, the franchisor grants the license to a third party (franchisee) for the conducting of a business under the distinctive signs and the methods of the franchisor. The franchisor aims at the expansion of the network and the dominance of his/her business in places where the franchisor is not commercially active. The franchisee aims at the benefits of the exploitation of the franchisor’s reputation and intellectual property (marks, methods, know-how, patents). This agreement can be a part of a master agreement or be combined with other financial agreements. The structure of this type of agreement is similar to the agent agreement and the contract itself is governed by the Commission Regulation (EC) No 330/2010 and the Greek Civil Code. The rights of the franchisor regarding the intellectual property and the given license of exploiting these rights by the franchisee are governed by specific law provisions on intellectual property.

Apart from the above, a very common and important commercial agreement is the leasing agreement. This type of contract applies when one party (the lessor) which is a special cause company or a banking institution conveys to the other party (the lessee) which is a business entity, in return of series of payments (rentals), the right to use a property or an asset for an agreed period of time. Title of ownership to the leased property or asset may or may not be transferred to the lessee at the end of the leasing agreement or, alternatively, the term of the agreement may be renewed as such. Under Greek Law, the leasing agreement is governed by Act 1665/1986.

Another type of commercial agreement which involves three parties (the Factor, the Supplier and the Debtor) is “factoring”. The Factor, which is usually a banking institution and acts as an agent, offers to the Supplier a package of services for a specific term upon an agreed fee concerning the Debtor, such us prepayment, customers’ solvency monitoring, accounting, recovery and, on some occasions, adoption of credit default risk, depending on the format of factoring chosen. Under Greek Law, the factoring agreement is governed by Act 1905/1990.

Finally, forfaiting is a commercial agreement which is concluded between an exporter (the forfaitist) and a bank or a factoring company (the forfaiter). Based on the agreement, the forfaitist sells to the forfeiter claims which are incorporated in bills of exchange or promissory notes. Forfaiting is connected to medium- and long-term international commerce (6 months to 10 years) and means that the seller (exporter) loses his right for future payments from the buyer (importer).