March 2020 – Brazil – Rossetti Advogados
Due to the arrival of the “coronavirus” or Covid-2019 in Brazil, and depending on the so far unknown extension and consequences of the disease, the effects thereof on the legal world commence to be discussed, specially on civil and corporate agreements.
Among thousands of situations that could result from the consequences of this disease, we already note, for example, factories that have interrupted their production line due to the high number of workers infected with the disease, resulting in a lack of inputs and other products from China and, therefore, late deliveries and compliance with deadlines agreed in the most varied global production chains.
For this type of event, the Brazilian civil law sets forth in articles 478 through 480 and 317 of the Brazilian Civil Code the possibility of termination or review of agreements based on the so-called “unpredictability doctrine”, applicable whenever extraordinary and unpredictable events occur at the time of compliance with the agreed obligation, for example such a major outbreak, which renders the provision of one of the parties to the agreement excessively burdensome or impossible to perform.
We note that the application of the “unpredictability doctrine” to justify the termination or review of agreements is an exceptional measure and shall always be conditional upon the analysis of each specific situation and of the specific facts involved in each case, because from the perspective of the Brazilian law, such legal situation can only be claimed with respect to unpredictable events.
In this respect, in case the parties enter into an agreement knowing that an outbreak is occurring, it is no longer unpredictable, which would result in the impossibility of justifying the termination or review of agreements, in the event of delay or even if it is not possible to comply with an obligation due to the consequences of the epidemic, because the risk of these events were already known to the parties.
Therefore, without prejudice to the possible effects, whenever they face exceptional situations that significantly affect and render the agreement excessively burdensome, the contracting parties are recommended to be cautious and insist in renegotiating the contractual conditions, whenever possible and as long as this is recommended, even if on a provisional basis, for the duration of the exceptional situation.
This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.