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COLOMBIA

COLOMBIA: Commercial agency and distribution contracts may coexist between the same parties and involving the same products or services.

In recent years, Colombian courts have refined the elements that differentiate a commercial agency agreement against other similar arrangements, like distribution, supply and concession schemes.

Gabriela MANCERO-BUCHELI - 15.07.20
Country expert

According to the Supreme Court of Justice, the differentiating element between a commercial agent and a distributor is that the first performs a mandate in an independent and stable manner in an established territory as a representative or agent of a local or foreign business for one or more of its products. This means that, the agent is acting on behalf of the business that gave him the task, and, thus, the principal is the party that undertakes the financial risks with its own equity.

On the other hand, the distributor acts on its own behalf and at its own risk, by buying products from a business to sell them in a determined territory; hence, the distributor undertakes the economic and financial risks of the activity, such as the loss or damage of the products or the decrease in their prices.

On September 9, 2019, the Colombian Supreme Court of Justice passed decision No. SC 3645-2019[1] where it analyzed the elements differentiating the commercial agency vis-à-vis other agreements, such as: concession contracts, brokerage contracts, firm representation, deposit of merchandise, supply contracts, franchise agreements among others.

In this decision, the Court established that the commercial agent`s main activity is to, through its own resources, perform activities aimed at obtaining new customers, retain the existing customers, widen or reconquer a market, all of these activities in favor of another merchant who has entrusted the agent with said task, and that, for that purpose, the agent must use its own resources, acting within a certain territory.

The Court, hence, indicated that certain distributors may be agents; however, not all distributors are agents, because, even though these two figures have similar characteristics, a distributor who acquires assets or services to resell them are not agents because they are acting at their own risk and interests.

The Court in fact indicated that it is possible that a commercial agency and a distribution contract coexist with the same or different goods or services; however, the scope of each activity must be clearly defined, and in the event of a dispute, it must be proven in trial.

It is therefore necessary to examine the way the contractual relationship was performed in order to establish if the party carrying out the activity did it on its own account, or on the account of the other party.

In conclusion, even though the commercial agency and the distribution figures share common elements, it is possible to differentiate them after analyzing the reality of the contractual relationship carried out between the parties.

If there are coexisting relationships of different legal nature (commercial agency, distribution, franchise, concession) between the same parties, it is also important to differentiate them clearly and to define the scope of each one of the activities, in order to prevent that a distribution relationship is interpreted as a commercial agency or vice versa, which can result in additional liabilities for the principal.

 

[1] SC 3645-2019 09/09/2019 Rad. 15001-31-03-001-2009-00236-01. LUIS ARMANDO TOLOSA VILLABONA.

 

Gabriela Mancero-Bucheli, IDI Country Expert for agency & distribution in Colombia

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