Barter deals have been known since ancient times. For example, the Phoenicians practiced this type of trading relationship with neighboring tribes. And in the Babylonian state, a complete system was even developed that included not only products, but also weapons in barter exchanges. Many merchants in the Middle Ages, traveling along trade routes, exchanged some goods for others. After the invention of money, barter relations became more streamlined. Financial resources are often not enough, for example, in the United States during the Great Depression. Therefore, the exchange of goods flourished with the advent of money. To survive, citizens united in cooperatives engaged in the exchange of goods.
Consider in this article which of the actions can be called a barter transaction.
Barter definition
In fact, barter is a special type of transaction in which one product is changed to another. In other words, this is the exchange of goods in accordance with the terms of the contract. There are two parties to such transactions, fulfilling a mutual desire to exchange one product for another, or a product for a service. Thus, barter does not imply the existence of any financial payment. Often this type of commodity relationship is used in business, since there are objects defined by the agreement that are subject to exchange.
Which of the actions can be called a barter deal and why?
Products instead of products
One of the parties puts forward a proposal when for its product it does not want to receive financial means, but another product or service, or the party can offer its products instead of paying. If the desire is reciprocal - such a deal is made.
Barter not only avoids the waste of company funds, but also increases sales. And with the advent of progress in the form of the Internet, its special exchange sites and the ability to contact anyone at any time, the geography of this process has expanded significantly.
Flexible system
The barter system is very flexible, as it allows the conclusion of mixed agreements. For example, when part of the transaction is paid in cash or by bank transfer, and the other with products.
Which of the actions can be called a barter deal is interesting to many.
There are some terminological discrepancies about what is called legal barter. This is characteristic of the Russian economic space. A barter transaction can be called either a contract that the participants entered into in respect of a civil turnover of natural exchange or sale, or a currencyless, but at the same time balanced and valued exchange of products, fixed by an agreement with general conditions.
What is it? In other words, a barter transaction (or a barter condition) is a transaction in the course of which an exchange of one product for another is carried out at the same price, i.e. "purchase and sale", in which payment is not through finance, but through compensation in the form of return delivery of products. This repeats the form of natural exchange that existed before the use of monetary settlements. In other words, a barter transaction is a separate form of reverse trading that does not imply the introduction of funds.
Now you know which of the actions can be called a barter transaction.
What is the need for systematization of such transactions?
It is needed mainly for general, theoretical purposes. Its significance lies in the fact that the parties to the contract correctly understand their obligations, so that a circle of legal and commercial rules is defined that should be used in the process of the emergence, implementation, and termination of legal relations in this process.
The contractual relationships in such transactions are:
- Counter purchase. At the same time, one association instructs another to sell the products produced by the first association, and at the same time immediately instructs him to buy a counter product with the proceeds.What action can be called a barter deal? The farmer can exchange his crop for any other product.
- Counter delivery, in which everything is the same, only in the opposite order.
- Barter rental. It can be considered by the example when organization No. 1 provides its equipment to organization No. 2 on a rental basis, but instead of financial payment, organization No. 2 pays off with its products that it produced on leased equipment. Or company No. 2 can carry out repair of units of the first company.
- Tolling, or otherwise - a contract for the processing of raw materials. Moreover, organization No. 1 supplies its organization No. 2 with its raw materials for processing and receives finished products as payment.
Which of the actions can be called a barter deal is not an idle question.
Varieties of barter
Barter can be balanced or unbalanced. What does it mean? By equilibrium is meant a non-currency operation in which counter deliveries of the same price are carried out. And unbalanced barter is a type of transaction when deliveries differ in price, and the final settlement is carried out in a clearing form - reimbursement of mutual claims by currency or securities.
Direct and indirect
Also, barter can be direct (bilateral) or indirect (multilateral). In the first case, the transaction follows the formula "product for product": each of the counterparties acquires the goods he needs. Other organizations participate in the multilateral transaction. The exchange process continues until all participants receive the product they require. This is a mandatory rule. Only after this, the multilateral barter exchange will be considered completed.
People often do not understand which of the actions can be called a barter deal. The farmer can profitably sell his crop. But this will no longer be considered an exchange. Why?
Real barter, unlike valuation barter, does not take into account the monetary value of the products exchanged. In the second case, the products are evaluated, and the exchange takes into account their value.
The content of barter transactions
This is a form of countertrade - a barter deal. That is, an agreement between participants in each specific commercial turnover. Moreover, participants may have different municipal or national affiliations. Such transactions have certain indicators:
- they are exchange operations;
- they have a contract signed by several persons, which may be onerous, formal or consensual;
- objects of exchange can be not only products (things), but also services, work, results of intellectual labor.
We explained which of the actions can be called a barter deal. We will consider their features below.
Positive and negative sides
Barter deals have many advantages. These include:
- Convenience and advantages of the barter economy, especially in times of crisis.
- This is a great way to get rid of surplus goods and at the same time circumvent the organization’s lack of funds.
- Long-term and prudently fixed (at the cost of the product) barter agreements help to avoid potential costs if suppliers increase the prices of their goods.
- Such deals help organizations expand their market presence while saving on advertising costs. However, this paragraph is valid only for barter, in which there is an exchange of equivalent values.
Which of the actions can be called a barter deal? Exchange, of course.
The disadvantages of barter are as follows:
- sometimes there are problems in the ratio of the value of goods to be exchanged, or when the parties have diverged in interests;
- sometimes you have to use additional operations for the purpose of exchange;
- products in barter transactions are not sold at the best prices.
But even despite the minuses of such transactions, barter was and remains a convenient and profitable tool for the parties in trade and economic relations.