Special Purchase and Resale Agreements

Introduction

A competent distribution of financial resources is an integral component of the successful economy, and corresponding procedures determine some possible ways of money investment. Various treaties and agreements that are regularly concluded among different entities are the mechanisms of the business sphere and are controlled by the banking authorities. Financial transactions, whether committed by individuals or legal entities, are subject to control, and no serious monetary contracts can be dispensed without the participation of banks.

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The purpose of the study is to determine what the special purchase and resale agreements (SPRAs) are, what role they play in the current market, and what potential risks they can bear. In order to explore the topic in as much detail as possible, some peer-reviewed scientific articles with similar studies have been used. The results and findings can be useful for further research in this field and will serve as a basis for study and application as one of the sources in this topic.

Importance of SPRAs for the Market

The search for new ways of allocating financial resources and the proper investment of funds are keys to a successful business, and many market players are well aware of it. According to Kuenzler, in accordance with the emergence of new economic strategies, the role of the consumer as one of the central participants in financial processes is quite essential (75). Various monetary transactions, which are conducted daily in large quantities, are intended to not only make a profit for those who conclude them but also settle appropriate decisions in accordance with the law.

Thus, SPRAs that are now widely distributed everywhere are formalized while taking into account the banking rules and norms. The essence of these agreements is to formalize the purchase or resale of movable or immovable property and obtain the support of the relevant financial institution, which the bank usually serves. The participation of qualified intermediaries provides a guarantee that in case of violation of certain provisions or agreements, a responsible party will have to answer the law.

Also, SPRAs is important not only for parties themselves but also for the financial market. The ability to document in strict accordance with the existing tax laws and other government regulations allows responsible authorities to monitor all the sources of financial flows. Accordingly, it is easier to make a forecast concerning the economic development of the market if all the data are registered in accordance with the existing legislation and are controlled by the responsible authorities.

As Marvel claims, if the market is considered successful, the level of consumers’ activity is high, and a number of financial procedures are constantly conducted (233). Therefore, the role of SPRAs and their implications for the market are significant, which is due to the factors of stability and the ability to competently predict the development of the business sector.

The Advantages of SPRAs

Under the conditions of SPRAs, one party, as a seller, undertakes to transfer a specific item, that is, the goods to the other party, and the buyer agrees to accept this product and pay a certain amount of money for it. This procedure is widespread and differs from a typical transaction in that the agreement is documented. Accordingly, it imposes a specific responsibility on both parties and defines some obligations that they are required to fulfill.

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One of the significant advantages of special purchase and resale agreements is the speed of its formalization, as no state registration is usually required. According to Blair and Wang, the resale price and other conventions are determined by contractors themselves, which significantly simplifies the drafting process and imposes no additional obligations in the form of payment of contributions, taxes, etc. (159).

Also, for the cancellation of a transaction by a third party, a minimum number of conditions are implied. It means that state agencies and other authorities will be able to influence the terms of a special agreement only as a last resort if relevant and pre-negotiated conditions are violated. Such agencies, as a rule, do not have many reasons for suspending the terms of contracts. Perhaps, the most evident advantage of SPRAs is the guarantees that both the seller and the buyer received. The participants of agreements can expect the protection of their rights on the part of the state and use the documents drawn up as a basis in case of filing a complaint with the courts (Chapman and Damar 459). Thus, the benefits of SPRAs are quite numerous, which makes them very popular among the population.

Scenarios to Apply SPRAs

There are also a number of contractual conditions related to the characteristics of the goods, which, although not essential, are necessary for the seller to perform his or her duties. Such conditions are recommended to be observed by the parties of agreements in order to avoid disputes. As a rule, common topics to discuss are the assortment and quality of goods, their completeness, accompanying documents, and some other aspects that need to be taken into account (Marvel 237).

Also, it is necessary to agree the moment when the seller is considered to have fulfilled his or her duty to transfer some goods; otherwise, the blame for accidental damage to the goods is imposed on the buyer. The moment of performance of the seller’s obligation to transfer specific goods may be considered their delivery to the buyer, the provision of goods at the disposal of the buyer, etc.

Other conditions of special purchase and resale agreements are common contractual terms. They include the procedure for payment, the responsibility of parties, the termination of the contract, the procedure for resolving disputes, etc. In the process of drawing up SPRAs, quite a lot of conventions are required to be met, which, nevertheless, play a significant role in ensuring security for both parties and guarantee the reliability of transactions.

According to Poddar and Gill, drawing up an agreement does not require certain skills in mastering the basics of document processing (215). Nevertheless, all the points should be written correctly; otherwise, there is a risk of challenging certain conditions in the future.

Potential Risks Involved with SPRAs

The most vulnerable party of special purchase and resale agreements will be the buyer since it is him or her who transfers a certain part of the money to the seller. An incorrectly formulated SPRA does not allow protecting buyers’ interests in case of a conflict situation and, in some cases, makes this protection impossible. As Marvel notes, such agreements provide for a significant number of details that are necessary for the coordination of all essential conditions (238). Without them, the document can be recognized as illegal and, in some cases, will not allow returning the funds that were spent.

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Among the risks of the seller, there are such threats as the incomplete or untimely receipt of a contract price, as well as the difficulty in reclaiming transferred but unpaid or not fully paid goods. In addition, sellers quite often receive unreasonable demands for replacement of goods of inadequate quality, elimination of defects, or return of goods (Comanor and Salant 174). The buyer can impose penalties and refuse the agreement, demanding the return of the paid money. Sometimes there are situations when particular SPRA’s statements are violated. For example, customers may abuse the warranty requirements, which is inconvenient for the seller.

In order to avoid all these problems, it is essential to adhere to the terms of agreements to anticipate potential risks in advance. The relationship between the seller and the buyer will be favorable if both subjects fulfill their duties. Therefore, the higher the level of responsibility of the parties is, the greater the chances that the agreement will be drawn up correctly, and no problems will arise.

Conclusion

Thus, the role of SPRAs in the work of the financial market is quite significant, and these agreements have a number of conventions that should be observed. The process of drawing up relevant documents is not too complicated; nevertheless, various details must be taken into account so that in the course of the contract, no misunderstanding to appear between the seller and the buyer. The described data can be useful for further studies in this field. As a possible area that can be researched in more detail, specific rules can be observed for the termination of special purchase and resale agreements and the measures to be taken in these cases.

Works Cited

Blair, Roger D., and Wenche Wang. “Resale Price Maintenance: An Economic Analysis of its Anticompetitive Potential.” Review of Industrial Organization, vol. 50, no. 2, 2017, pp. 153-168.

Chapman, James, and Halil Evren Damar. “International Banking and Liquidity Risk Transmission: Evidence from Canada.” IMF Economic Review, vol. 63, no. 3, 2015, pp. 455-478.

Comanor, William S., and David Salant. “Resale Price Maintenance post Leegin: A Model of RPM Incentives.” Review of Industrial Organization, vol. 50, no. 2, 2017, pp. 169-179.

Kuenzler, Adrian. “Dilution Law, Vertical Agreements, and the Construction of Consumption.” Oxford Journal of Legal Studies, vol. 37, no. 1, 2017, pp. 75-104.

Marvel, Howard P. “Leegin and the Economics of Resale Price Maintenance.” Review of Industrial Organization, vol. 50, no. 2, 2017, pp. 221-244.

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Poddar, Dave, and Kiran Gill. “Australia: First Authorisation of Resale Price Maintenance?” Journal of European Competition Law & Practice, vol. 7, no. 3, 2015, pp. 212-218.

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StudyCorgi. (2021, January 24). Special Purchase and Resale Agreements. Retrieved from https://studycorgi.com/special-purchase-and-resale-agreements/

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StudyCorgi. 2021. "Special Purchase and Resale Agreements." January 24, 2021. https://studycorgi.com/special-purchase-and-resale-agreements/.

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StudyCorgi. (2021) 'Special Purchase and Resale Agreements'. 24 January.

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