Government measures in key jurisdictions 3rd edition final - Flipbook - Page 19
Brazil
Contractual
Issues
What measures
have been taken
to reinforce
contracts?
Brazilian law addresses the general rules regarding force majeure. According to the sole paragraph of
Article 393 of the Brazilian Civil Code, force majeure or act of God (provided that such Article treats
both concepts equally) is considered to be “the necessary event, whose effects were impossible to
avoid or impair”. The event must be beyond the [affected] party’s control and diligence and must
make it impossible to comply with certain contractual obligation(s). Under such provision, if the party
has not expressly undertaken liability for force majeure and act of God events, no liability should arise
from such events.
To qualify as force majeure, an event must cumulatively satisfy the following requirements: (i) be
unforeseeable; (ii) be beyond the party’s control; and (iii) prevent the performance of contractual
obligation(s). Accordingly, the COVID-19 pandemic may be considered as a force majeure event, to
the extent that the COVID-19 pandemic and its related consequences directly affect the party’s
contractual obligations. In addition, orders enacted by the Brazilian government (or other relevant
local authority) in response to the COVID-19 pandemic, which prohibits the agglomeration of
individuals at the place of work, for example, may also qualify as force majeure.
Except for contracts ruled by consumer or labour laws, the parties are free to allocate liabilities.
Therefore, the proper determination of the parties’ liabilities, in case of a force majeure event, must
always be made on a case by case analysis and should consider contractual provisions as a key factor.
Should the contract be silent in expressly governing force majeure, or if there are gaps on the
contract’s terms in that regard, the Brazilian Civil Code will be applicable and will serve as guidance
for the interpretation and application of the law by the courts. Considering the COVID-19 pandemic,
the parties must pay attention to the contract’s provisions and whether the pandemic and/or its
consequences (such as lockdown measures; restrictions on travelling and transportation of goods) do
in fact impede the compliance with certain contractual undertaking(s).
Among other relevant issues, the parties must verify whether the contract provides for: (i) specific
notification proceedings; (ii) the allocation of risk between the parties in case of a force majeure
event; (iii) extension of time for the affected party to overcome the delay due to a force majeure
event; (iv) specific remediation measures and mitigation of the other party’s losses that must be
implemented; and (v) termination due to a prolonged force majeure event and consequences.
In such cases, the affected party must comply with the specific notification proceedings provided for
under the contract, describing (i) the force majeure event; (ii) which contractual obligations were
directly affected; and (iii) the measures adopted to mitigate and reduce the impacts of the force
majeure under the contract. In addition, the affected party remains bound to comply with all other
contractual obligations which were not affected by the force majeure event.
It is important to highlight that, due to the drastic economic and social consequences of the COVID-19
pandemic, the Brazilian government authorities have been comprehensive with projects that adopt
mitigatory measures, such as robust action plans, in line with the determinations and
recommendations of the competent health authorities, to prevent the dissemination of COVID-19 in
the place of work, allowing for the continuity of these projects in compliance with some restrictions.
n addition, Article 422 of the Brazilian Civil Code establishes that the parties must proceed in good
faith when performing the contract. Therefore, in case the parties do not reach an agreement
regarding the measures to restore the contract’s economic balance, necessary due to COVID-19
pandemic effects, Articles 317 and 480 of the Brazilian Civil Code provides that, in case supervenient
and unforeseeable events arise and cause the obligations of one of the parties to become excessively
disproportional in view of the transaction, the courts may take actions, at the request of a party, to
restore the economic balance of the contract.
As per the requirements provided under such Articles, in order to interfere in the contractual
relationship, courts should assess (i) the (un)foreseeability of the supervenient circumstances and (ii)
the disproportion between the obligations of the parties.
Government measures in key jurisdictions
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