10 Surprising Facts About Commercial Transactions

10 Surprising Facts About Commercial Transactions

Commercial transactions take place every day in virtually every industry, and understanding the rules and regulations that apply to these can be intimidating to anyone. Whether you are buying or selling products or services or engaging in joint ventures with other companies, learning about commercial transactions can help keep you out of trouble and ensure your rights are protected. Here are 10 surprising facts about commercial transactions that every business owner should know!

1. Many commercial transactions have tax implications

  1. Certain purchases have federal and state income tax implications that can be as high as 18%. These Commercial Transactions purchases are called luxury goods which are items with a price of over $2500 or more.
  2. For example, in Commercial Transactions if you purchase a Cadillac car for $53,000 the federal tax would be close to $4,500 and your state taxes could add up to another $3,100 for a total of $7,600 in taxes.
  3. Cars are not the only luxury item; jewelry is also considered one and it has a higher amount threshold than cars at over $5000 to avoid any income tax implication from the purchase.

2. A credit is a contractual right that entitles you to payment of the credit

A credit of Commercial Transactions is a contractual right that entitles you to payment of the credit. You may have created this contract with your creditor, who then lends you money or performs another service for you. When you use the loan or service, you will make a specified number of payments of Commercial Transactions.

When those payments are made, your obligation is considered paid in full and the amount owed to the creditor is discharged. If you do not make all of these payments, then your debt becomes overdue and the creditor can take steps to collect it from you.

3. Letters of credit are irrevocable and must be paid according to the terms

A letter of credit is an agreement between a bank and the applicant (buyer) wherein the bank agrees to provide payment to the seller upon presentation by the buyer of certain documents.

A letter of credit is irrevocable once drawn down, which means that it cannot be canceled without compensating penalties. This also means that funds are withdrawn from your account immediately and if not approved, you are liable for all transactions involved in this trade.

A Letter of Credit usually requires an upfront payment by the applicant before drawing on it with a Letter of Credit irrevocably committing an amount up-front.

4. Merchants can give security deposits on large purchases if they want, but consumers cannot usually do so because it is risky for them

On the one hand, some customers are not pleased to have to pay for the privilege of purchasing from a merchant and see it as a way for merchants to take advantage of them. However, from the customer’s perspective, there is always an incentive to have some form of a security deposit.

For instance, if somebody is planning on buying something very expensive that they can’t pay for all at once then a deposit may be an attractive option. If things go well and no one cancels on them and they manage to make more than enough to cover the rest of the cost then they never end up giving the deposit which means they end up with more money!

5. Online contracts are valid in most countries

In most countries, an online contract is just as valid as a contract signed in person. Most notably, Canada and the United States accept online contracts and recognize them as legally binding agreements.

Canadian courts have already ruled on one particular case where one online retailer had breached its contractual obligation with another company by making the terms of the service agreement change unilaterally and electronically. The court recognized that by doing so, the merchant was able to avoid any court review of the new agreement. Had these changes been made verbally or in writing, they would have been held to be unenforceable.

6. The English rule applies regarding how many witnesses are required for a document’s creation

Under English law, one witness is required to create a document, with the exception being if the deed/witness is forged. There are no formal requirements for who can witness a document, and it does not matter if they are minors or not. Witnesses can be people of any status.

For example, lawyers, family members, medical practitioners (e.g., doctors), or third-party agents can all be witnesses and endorse the deeds with their signature and capacity (i.e., witness).


7. Mailbox rule refers to stipulating validity in where documents arrive from the person

In general, the mailbox rule is used to determine when a commercial transaction occurs. The mailbox rule states that where a document or communication arrives from is where the documents or communiqué is considered effective, or not null and void. That means if you want your customers, employees, and other members of the public to follow the mailbox rule,

then you must make sure that any document you send out will only be valid at your place of business address. For example, if I send out invoices for services in my office building but I list my house as my mailing address on those forms, then according to this principle the invoices are null and void because they do not comply with the mailbox rule.

8. Recital clauses in any contract should contain language related to addressing substantive issues or concerns between parties involved

The recitals are an important part of any contract. They allow the parties to set forth what they are entering into the contract for, so that in case there is a dispute about the contract, both sides will know why it was written and what it relates to.

The recitals also help provide a quick overview of the transaction and describe how it was negotiated. This helps other people who may have been involved in negotiations be more clear on what they discussed or agreed upon as well. Recitals should be simple, factual, and not legal jargon-filled, or overly broad.

9. Sale of goods does not apply when no goods are being sold (intangible items) such as real estate sales

A sale of goods does not apply to intangible items, such as real estate sales. In this case, the item being purchased is the ownership of a piece of property (such as a home) rather than a tangible good.

10. Post-dating checks/drafts/etc. is illegal as well as cashing them before the date written on them

Post-dating checks, drafts, or any other type of negotiable instrument is illegal. If you are going to sign a check or a draft you should ask yourself the following questions:

What would I do if the drawer never deposits funds? How long would it take me to cover the debt? If a bank manager called and asked for an explanation as to why I am posting dated checks or drafts, what would I say? Would I be comfortable with my spouse reading that email/receiving that phone call from the bank?

If after this questioning process it’s determined that post-dating checks, drafts, etc., are an appropriate course of action, then there are some specific rules and laws that must be followed.

Keep browsing Law Scribd for more updates.

Leave a Reply

Your email address will not be published. Required fields are marked *