Reserve of Domain in Brazil

The purchase and sale with reservati dominii clause, regulated by the Brazilian Civil Code in its articles 521 to 528, constitutes an effective warranty for payment in instalments of the price of movable and non-fungible assets, provided that the reserve of domain is stipulated in writing directly between the buyer and the seller.

According to the local civil code in its article 524, the transfer of the asset’s property to the buyer is only considered completed after the full price payment.

Anyhow, the buyer is responsible for the risks related to the asset from the moment when it is delivered, once the buyer becomes its holder. In this sense it is convenient to foresee the buyer’s obligation of contracting an insurance policy in favour of the owner.

It is important to emphasize that for such agreement to be effective and enforceable in Brazil before third parties, it must be registered in the Public Registry of the buyer’s domicile. This formality also allows the opposition of the agreement during a judicial recovery process.

It is worth mentioning that the buyer has the right to use the asset, having as obligation the accurate payment of the agreed value, in instalments. If the buyer fails to pay any of the instalments on time, shall occur the early maturity of the agreement.

According to local normative, such agreements assign to the seller the right to reclaim the asset if the buyer is in default, by means of the respective search and seizure action (usually in short term), or alternatively to exercise the right to receive payment of the balance due and indemnification damage.

The seller will only be able to execute the clause of reserve of domain after constituting the buyer in delay, by means of the protest of the agreement.

This agreement is normally used for the importation of instrumental assets and, considering the peculiarity of the local normative, it is advisable the indication of Brazilian’s law and court for the effectiveness of the seller´s right.