In order to understand what a fiduciary transaction is, you need to decide on the concept of the transaction as a whole.
A deal - what is it?
In the textbooks on jurisprudence it is written that the transaction involves the commission of actions with the subsequent receipt of a certain result. The transaction in civil law is one of the fundamental categories. It is widespread and serves all areas of property turnover. The term “deal” is understood not only as a merger and takeover of large and small companies, but even as a banal purchase of goods in stores.
So what is a deal? Legal and fiduciary species will be considered below.
Characteristic signs
The transaction has characteristic features:
- it is a legal act;
- the transaction always expresses the will of the participants;
- it can only be lawful;
- the result of the transaction is the termination or change of any civil legal relationship;
- sometimes transactions can be made with the participation of third parties.
It is necessary to remind one more important point: the transaction is an intellectual act. That is, we can reach an agreement that it will take place, but we can not reach it and there will be no deal. This is what distinguishes it from the actually committed actions.
Deal Classification
Current legislation classifies all transactions into several subspecies. The grounds for such a classification are the circumstances of the transaction, terms, characteristics, etc. By the number of parties, transactions are divided into unilateral (powers of attorney, wills, waivers of property rights, etc.), bilateral (the conclusion of which requires the consent of two parties), multilateral (expression of will is necessary from all participants in the process). Classification of transactions by the nature of the relationship is a division into fiduciary and non-fiduciary transactions.
History reference
Under a fiduciary transaction in Roman law, the initial type of collateral was most often understood, although it is noted that there was no single term for collateral in Roman law. The debtor handed over to the creditor a certain thing to secure the debt. In addition, an oral agreement was usually concluded, which provided for the return of the thing to the debtor after payment of the debt at a certain time. The agreement was concluded on the basis of personal trusting relationships between the creditor and the debtor and had moral value. By committing the act of transferring the pledged thing to the creditor, the debtor gave him more rights than the pledge requires, that is, showed confidence in him, expecting in return that the thing would be returned to him intact. If the thing did not return after the payment of the debt, the debtor could file a so-called lawsuit of good conscience and recover from the creditor only compensation for losses. A fiduciary transaction is a very interesting concept.
However, at the same time, the thing could remain with the creditor, since he was its owner and disposed of it at his discretion. As we see, the creditor's trust and moral qualities turned out to be the basis for the transaction. If the thing turned out to be from third parties, the debtor also could not demand to return it, in this case the creditor was dishonored. In a later period, the fiduciary transaction was considered as an independent agreement in which the debtor of the main obligation - the fiduciary - acted as the creditor, and the creditor - the fiduciary - the debtor. In domestic practice, fiduciary transactions previously took place when a bill was pledged in the form of a regular transfer using the inscription on it.The creditor, accordingly, became the owner of the pledged bills.
Fiduciary and aleatory transactions are now quite common.
Certain legal relations arise from the fiduciary contract, which can be considered imaginary, since the parties can hide their true intentions for many reasons. However, an analysis of transactions of this kind concluded at the present time with a view to their compliance with the fundamental principles of civil law and the current norms of civil law on the invalidity of transactions allows us to conclude that such doubts are generally not based on.
Fiduciary deal - what is it?
A fiduciary is a legal entity or an individual who is entrusted with the responsibility for the entrusted property and who manages it in the interests of another person. According to the Civil Code of the Russian Federation, a fiduciary transaction is the name of a transaction concluded on trust. Refusal to comply with the terms of the transaction in this case is possible if this nature of the relationship has ceased to exist, that is, the factor of trust becomes an occasion to interrupt existing agreements. Transactions of this type include: life-long dependent maintenance contracts, instructions, trust management of property.
Conditions under which a transaction is considered valid
In order for a transaction to be considered valid in this case, a simple contradiction to the current legislation is sufficient.
This requirement is met if the following conditions are available:
- The content of the transaction is legal.
- The parties are capable of making a deal.
- Correspondence of will and will.
- Complied with the form of the transaction.
In case of failure to comply with one of the above provisions, the transaction will not be considered valid, unless otherwise specified by law. Fiduciary transactions are those that are often confused with imaginary or pretended actions, since they are of a special nature. Not so long ago, these transactions were called feigned or disguised and executed as a pledge or power of attorney. Recently, these cases have come to be seen not as sham or fraudulent actions, but as a planned legal transaction.
The content of the transaction and its legality
The totality of all the conditions that make up a transaction is called its content. These conditions create the prerequisites for the occurrence of a certain legal result. The compliance of the circumstances of the transaction with the requirements of the law ensures, in fact, the legitimacy of the substantive part of the transaction. By the nature of the content, they may differ from dispositive norms established by law (recognized as transactions by analogy of the law) or may not be provided for by them at all (recognized as transactions by analogy of law). In any case, they must comply with the basic provisions and the meaning of civil law and the legal and moral foundations in general, taking into account the principles of good faith, reasonableness and justice.
Parties to the transaction
To complete a fiduciary transaction, entities must be fully capable (individuals) and capable (legal entities). Limited or partially capable individuals can participate in the transaction if they have their own will, but it must have the approval of an authorized person (parents, guardians, trustees). Legal entities with general legal capacity have the right to make any transactions permitted by law. The special legal capacity of a legal entity makes it possible to make transactions permitted by law, except for those that contradict the goals of their activities established by law. For the execution of certain types of transactions requires a special permit (license). However, the issue of legal personality cannot singly determine a person’s ability to make a deal.This concept is much broader and implies that the parties to a transaction have rights to dispose of property, which is its subject, that is, legitimacy. If a transaction is concluded on behalf of the state by a state body, then its ability to participate in the transaction must be confirmed by the presence of the necessary authority for this, established by acts determining the status of this body.
We give examples of fiduciary transactions in civil law.
Examples of fiduciary transactions
There are many examples of fiduciary transactions; we will give the most characteristic of them. This is, for example, a contract of commission concluded during the sale of a car: in this case, the principal entrusts the sale of the car to an attorney, to someone who will be involved in the sale. These entities have the opportunity to terminate the transaction at any time, provided that the costs are reimbursed to the other party, if any.
Fiduciary transactions also include life-long dependent contracts, as well as trust management contracts for property, etc.
Partnership participants have the full right to leave it without asking the consent of other participants in the partnership agreement. This means a free exit from it. Such transactions are rarely concluded when it comes to any property.
Reasons for concluding such deals
The incentive to commit fiduciary transactions, as a rule, is the desire to use the amenities that such an agreement provides in comparison with other legal actions and transactions that are directly consistent with the purpose set by the parties. Sometimes fiduciary transactions are caused by the lack of an appropriate legal form. The fiduciary (the one to whom the rights under the transaction is transferred) passes the effective right to own the thing, he becomes the owner of the securities or the subject of claims for obligations.
Fiduciary transactions (we examined examples) are similar to imaginary and differ from them in that the parties do not hide their true intentions. The fiduciary action committed by the parties to the transaction is legally valid, all normal consequences of the transaction occur. In the case of a special agreement of the parties based on trust, these consequences in the indicated relations do not occur, but are replaced by others that correspond to the true intention of the parties. Characteristic of these transactions is precisely that the limitations of the natural consequences of the transaction are made here dependent on the moral qualities of the fiduciary. Thus, the conclusion of a fiduciary transaction allows you to maintain a high degree of confidentiality, as well as property rights in the case of financing trade operations and investments in a commercial project. In certain cases, the conclusion of a fiduciary transaction allows you to save resources when managing work processes, transferring them to the care of professional managers, and may also be part of the toolkit for tax planning and asset protection.
What is the result?
The conclusion of such transactions allows you to finance individuals or legal entities while maintaining the confidentiality of the transaction. When conducting trade and commercial operations, confidential information about the fiduciary is also stored. This method often helps protect assets much better than in the case of direct investment. A professional manager trusted by financial management is able to attract more attractive resources in the interests of the client, carrying out professional planning and implementation of a trade transaction. The client can control the completion of the transaction and its implementation. Fiduciary transactions allow you to optimize tax costs. In addition, all large businessmen consider fiduciary transactions to be an effective way of consolidating assets for a combination of companies, transferring financial resources and providing loans to specific companies,and debt restructuring.
Conclusion
In general, the conclusion can be drawn as follows: any obligation carries in itself the risk of default by one of the participants. The conclusion of any agreement is in principle impossible without a certain degree of trust; the essence of the agreement has not changed since the time of the Roman Empire. However, one must remember that it is impossible without proper fulfillment of obligations. Therefore, it is necessary to apply protective measures that really ensure normal conditions of civil law.
We examined fiduciary relationships.