Representative or Mandatary: know the differences between each activity

  • 01/10/2019
  • 9 minutes

International trade, as you probably know, follows a series of rules and adjustments that discipline operations. In this aspect, shipowners, NVOCC, and the shipping agency, for example, may at times perform very similar functions.

Among these functions are those of the representative and the mandatary, which, although apparently similar, have distinctions that need to be considered. This is because there are legal consequences involved in their performance if the limits imposed by law are violated.

To better understand what these limits are and to provide an overview of the subject, we invited Rafael Chor, of the Wilson Sons Shipping Agency’s division legal department, and Promare | Rabb Carvalho Law Firm lawyer Larry John Carvalho. Check it out!

What does the law say about representation?

A good starting point is to clarify what the Brazilian legal system says about the ability of a company to be represented. About this, Larry Carvalho explains:

“The institute of representation is regulated by Chapter II of Book III of the Civil Code, and, as provided in article 115, ‘the powers of representation are conferred by law or by the person concerned’. Thus, we see that representation (lato sensu) has two species: legal representation and voluntary representation.”

Therefore, representation consists of a documented resource, of legal representation, whereby a professional receives from a company the function of representing it in its operations. Thus, as Rafael Chor adds, he or she “assumes obligations on behalf of a third party (the client), being equally responsible for the obligations he or she has assumed on its behalf”.

Invested of full powers, the representative has, as a rule, the possibility to manage the assets of the entity or person represented. This is what cargo agents who have the power to negotiate spaces or containers inside ships do, for example. The law itself stipulates that the foreign NVOCC must have a legal representative appointed in Brazil.

What is the role of the NVOCC?

In this context, you must also consider the functions performed by a Non Vessel Operating Common Carrier, better known as NVOCC. It may also be understood as an operator who doesn’t own the vessel, or rather, a “non-vessel operator”.

Therefore, it refers to all companies that operate in the maritime trade without their own ships, acting in practice as a cargo manager. A NVOCC can therefore purchase space on full-container vessels, where they allocate products from different exporters.

As a result, shipowners charter spaces on their ships to wholesale NVOCCs so that they can then retail them. That is why, in contracts signed between NVOCCs and shipowners, the most common ones are slot charters, in which ship spaces are chartered, and not the whole vessel.

On the other hand, such a company may act through representatives or mandataries. This will therefore depend on the type of transaction, the contract that was closed, and the experience of the contracted intermediary.

What are the responsibilities of a representative?

Considering the legal implications, according to Rafael Chor, “the legal representative, having power of administration over the assets and business of his or her represented party, jointly responds with it for the acts practiced”.

Thus, it is a function in which the responsible professional takes the initiative to answer for the company that hires him or her even without an express order. That is, he or she has autonomy and decision-making power to make expenses and, if necessary, use the company’s assets to assist in his or her routines.

According to Larry Carvalho, it is also necessary to distinguish between shipping agents and representatives, since “the shipping agent cannot be considered as the legal representative of the transporter, since the legal representative is the one resulting from the imposition of law (…). They are service providers and are only mandated to act on behalf of their clients.”

Therefore, a representative must assume great responsibilities, since his or her autonomy generates the counterpart of responding in solidarity, should any irregularity occur.

What are the limitations of a mandatary?

A mandatary, on the other hand, by the nature of his or her duties, has a much more limited spectrum of action, since “(…) they are hired to act on behalf of a third party, but without management powers. That is, they can only do exactly what their client asked them to do”, explains Rafael Chor.

“Other than that, they can do nothing, otherwise they would be penalized for breaking the limits of their acting powers. Shipping agencies are included here, since they are hired to act on behalf of the shipowners, acting as their mandataries, and can do nothing beyond what was requested by the shipowner.”

A mandatary, then, has much less autonomy and decision-making power compared to the representative. Therefore, he or she does not have the prerogative to decide if any unforeseen event requires a decision with effects not provided for in the contract.

By the way, if a mandatary goes beyond the functions established in the contract, he or she may be punished administratively or even in the civil sphere.

Do they perform the same functions, after all?

According to Chor, they “get confused all the time, since the performance of both is very similar, having as differential points the powers attributed to each and their respective limitations of responsibility”.

It’s also important to consider the type of professional relationship established in each case, as John Carvalho well defines. According to the expert, the mandatary is authorized to act if the client, in order to expand its possibilities of acting in the legal world, gives him or her an express or tacit, verbal or written, mandate. In turn, the legal representative acts according to what the law or the judge determines. Hence the most substantial difference between these very similar functions.

Thus, these similarities and differences apply to the routines of a shipping agency, a NVOCC, and shipowners who, for convenience, hire the services of representatives or mandataries.

Is it clear to you now? Since you are here getting informed, learn also what are the 5 best techniques to improve negotiations in sea freight shipping!