Ana Carolina Baraldi Pereira de Mello
Lawyer at Marcos Martins Advogados
Brazil and the world are experiencing a pandemic situation that has ended in a real medical-sanitary and economic-financial crisis that has caused damage to various sectors of the market, unprecedented in this century and which will certainly worsen in the coming days.
In view of this and in order to re-establish the economic and financial balance of a relationship affected directly or indirectly by these factors, is it possible and justifiable to request a contractual review? This is the subject of this article.
A contract is a bilateral legal act that depends on at least two declarations of will, aimed at creating, altering and even extinguishing rights and duties, and must comply with: (i) private autonomy; (ii) the social function of contracts (articles 421 and 2.035, sole paragraph of the Civil Code); (iii) the obligatory force of contracts (pacta sunt servanda) and; (iv) objective good faith (article 422 of the Civil Code).
Thus, although the parties have the autonomy to contract and establish their reciprocal rights and duties and, consequently, have the duty to fully honor what they have undertaken, the contract signed can certainly be reviewed, annulled or terminated when it causes excessive onerousness for one of the parties to the benefit of the other or when it represents an offense to objective good faith, and it is essential to re-establish the contractual balance.
Before seeking judicial intervention to re-establish the economic and financial balance affected by unforeseeable events that occurred after the contract was signed, in compliance with the good faith and ethics that govern contractual relations, before, during and after the term of the agreement, the party benefiting from the imbalance must offer the burdened party the possibility of payment by another means, in this sense the Civil Code provides in articles 479 and 480, in verbis:
Art. 479. Termination may be avoided by the defendant offering to equitably modify the terms of the contract.
Art. 480. If only one of the parties is responsible for the obligations in the contract, that party may request that its performance be reduced, or that the manner in which it is performed be altered, in order to avoid excessive onerosity.
Only in the event of the creditor’s rigidity, and thus the impossibility of equitably modifying the performance in another way, should the affected party seek judicial protection to safeguard the affected balance.
Article 317 of the Civil Code states that the debtor may request a judicial review of the contract, provided that the alleged disproportionality is supervening and arises from an unforeseeable reason. In verbis:
Art. 317. Quando, por motivos imprevisíveis, sobrevier desproporção manifesta entre o valor da prestação devida e o do momento de sua execução, poderá o juiz corrigi-lo, a pedido da parte, de modo que assegure, quanto possível, o valor real da prestação.
In the same vein, article 478 of the aforementioned law states:
Art. 478. In contracts for continued or deferred performance, if the performance of one of the parties becomes excessively onerous, with extreme advantage for the other, due to extraordinary and unforeseeable events, the debtor may request termination of the contract. The effects of the judgment decreeing termination will be retroactive to the date of service.
Thus, the legal norm states that revision is possible as long as it is demonstrated that there has been a change in the original situation which has made the performance excessive for one of the parties during the execution of the contract, due to the occurrence of supervening and unforeseeable facts.
Revision is an alternative to converting the breach into damages or a demand for performance, if the creditor does not offer or admit the possibility of performance by another means.
Some situations can excessively burden one side of the legal relationship. For this reason, the rule gives the debtor the possibility of requesting a review of the contract when the performance becomes excessive during its execution, with an extreme advantage for the other party, due to the occurrence of supervening facts that affect the contractual balance.
The law favors maintaining proportionality in the relationship, known as the fairness of the contract.
This proportionality does not refer to that which must exist between the performance and the consideration itself, but rather to that which exists between the performance at the time the deal is entered into and its value at the time of execution.
Notably, the pandemic situation resulting from COVID-19 falls within the scope of the possibility of revision in terms of supervening and unpredictability, and the claim must also be based on demonstrating the imbalance resulting from excessive onerousness for one of the parties.
In the words of Maria Helena Diniz, excessive onerosity occurs when an extraordinary and unforeseeable event makes it extremely difficult for one of the parties to fulfill the contract.
Nelson Rosevald, on the Theory of Unforeseeability, says: “to meet the principle of contractual justice, which imposes a balance of benefits in commutative contracts, so that the benefits of each contracting party are proportional to their sacrifices.”
On the subject, Carlos Roberto Gonçalves says that the pacta sunt servanda principle should be relaxed in the face of the rebus sic stantibus clause, in honor of preserving the contract and restoring balance to the relationship.
In the current context, the pandemic resulting from the outbreak of coronavirus (COVID-19) faced by the country and the world characterizes a supervening and unforeseeable fact that authorizes the request for judicial contractual review in the light of the aforementioned rules and doctrinal understanding.
Although humanity has been affected and suffered from outbreaks caused by diseases resulting from viruses and bacteria, with a worldwide impact, it is not absolutely foreseeable to expect such an event.
In addition, the reflex crisis caused by the pandemic affects various sectors of the market, which may benefit from the revision request.
Contractual relations must be permeated by good faith, in the light of the provisions of article 422 of the Civil Code.
Thus, contractors must act with respect, loyalty, probity, honesty, reasonableness and mutual cooperation, in honor of the social function of relationships, and it is certain that excessive onerousness for one of the parties to the benefit of the other ends in contractual imbalance, which must be re-established.
In this sense, it is possible to request a contractual review in the judicial sphere on the basis of the Pandemic, provided that, in addition to this, the financial economic imbalance in the contract is demonstrated, which has made it excessively onerous for one of the parties, without the latter having caused it and which, as a result, justifies the re-establishment of parity.
Contract revision is a legal alternative to restore contractual justice and stems from objective good faith.
However, before seeking judicial intervention to re-establish the economic and financial balance affected by unforeseeable events that occurred after the contract was concluded, in compliance with the good faith and ethics that govern contractual relations, it is recommended that an attempt be made to reach an amicable settlement, if necessary in the presence of a mediator, and that payment be made in another way that benefits the contracting parties.
Flexibility on the part of the parties with a view to re-establishing a balance in the affected relationship avoids judicialization of the issue and may represent a more effective, efficient and less costly alternative solution for the contracting parties.
Contractual relations must be permeated by good faith, in the light of the provisions of article 422 of the Civil Code.
Thus, contracting parties must act with respect, loyalty, probity, honesty, reasonableness and mutual cooperation, in honor of the social function of relationships, and it is certain that excessive onerousness for one party to the benefit of the other ends in contractual imbalance, which must be re-established.
In this sense, it is possible to request a contractual review in the judicial sphere on the basis of the Pandemic, provided that, in addition to this, the financial economic imbalance in the contract is demonstrated, which has made it excessively onerous for one of the parties, without the latter having caused it and which, as a result, justifies the re-establishment of parity.
Contract revision is a legal alternative to restore contractual justice and stems from objective good faith.
However, before seeking judicial intervention to re-establish the economic and financial balance affected by unforeseeable events that occurred after the contract was concluded, in compliance with the good faith and ethics that govern contractual relations, it is recommended that an attempt be made to reach an amicable settlement, if necessary in the presence of a mediator, and that payment be made in another way that benefits the contracting parties.
Flexibility on the part of the parties with a view to re-establishing a balance in the affected relationship avoids judicialization of the issue and may represent a more effective, efficient and less costly alternative solution for the contracting parties.
Marcos Martins Advogados is able to assist you in the judicial and extrajudicial resolution of contractual disputes in the best possible way.
[rock-convert-pdf id=”14345″]
