Article 710 Civil Code – contrasting agency and distribution agreements
Article 710 of the Brazilian Civil Code (BCC) presents the definitions of both Agency and Distribution agreements. In force since 2002, the BCC states that by means of an Agency Agreement, a person assumes, on a non-occasional basis and without any labour relationship, the obligation to promote, on behalf of another, and subject to remuneration, the conduct of certain transactions in a predetermined zone. As for the Distribution agreement, according to the BCC, the sole difference from the Agency agreement would be that the agent has at his or her disposal the goods to be negotiated.
The above-mentioned has been generating a great deal of confusion between agreements dealing with agency, distribution, and commercial representation.
With regards to commercial representation and agency agreements, current doctrine understands that these two modalities constitute the same legal feature, and the big discussion pertaining to Art. 710 of the BCC refers to the difference between agency and distribution. The difference stated above, however, was not sufficient to differentiate these two contractual species, and recent Brazilian jurisprudence has been forced to set the path of distinction between agency and distribution, as demonstrated below.
According to the courts of the state of Minas Gerais, the activity of a legal entity who acquires the products manufactured by another company, to subsequently distribute them in a prearranged region, constitutes a distribution, while an agency agreement presupposes the mediation and habitual promotion for the achievement of a deal.
Such courts also take the view that in spite of the similarities between agency and distribution, there two institutes distinguish themselves, mainly, for the activity of intervention of the commercial representation or agency agreement. On the other hand, in the distribution agreement, there is the acquisition of the good of the manufacture, for subsequent sale to retailers or directly to consumers.
Similar decisions from major states such as São Paulo and Rio Grande do Sul reinforce this distinction, i.e. a distribution agreement is the one which the manufacturer compels itself continuously to sell its products to a wholesale buyer, who buys them prearranged benefits for a subsequent resale in predetermined area.