Renegotiating contracts may be relevant for your company at this time of pandemic. After all, the postponement of events and the inability of commercial and service establishments to serve the public are some of the impacts on businesses. The business owner knows well that keeping the company closed or postponing the fulfillment of a previously scheduled commitment is not so simple, since, in general, business relationships are established in advance through contracts.
As a result of this public health emergency situation, some contracts are inevitably breached. Even though the parties involved are not responsible for the impossibility of carrying out what had been agreed, they run the risk of becoming entangled in a legal predicament.
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The legislation provides alternatives for situations in which the contract cannot be performed due to unforeseeable events that are beyond the control of the parties. Examples of this are the cases of force majeure and the theory of unforeseeability – bearing in mind that the ideal legal solution may vary on a case-by-case basis, depending on the nature of the contract and what was negotiated.
Force majeure or fortuitous event
The Civil Code establishes that “the debtor is not liable for losses resulting from a fortuitous event or force majeure, unless they have expressly assumed responsibility for them”.
It is also important to point out that force majeure refers to human events that, even if foreseeable, cannot be avoided. Fortuitous events, in turn, are events that cannot be foreseen – generally, these are natural phenomena, such as hurricanes and earthquakes.
Thus, the coronavirus pandemic may be understood as a case of force majeure. As a result, if the contract provides that neither party shall be held liable for failures in the performance of obligations due to force majeure events, there is no penalty for whoever breaches it.
The clause may even establish that, in the event of force majeure, the contract shall be reviewed, temporarily suspended, or terminated – unless the document expressly states that the party owing the obligation assumes responsibility for fulfilling it even in such a situation.
Theory of unforeseeability
The termination or revision of the contract based on the theory of unforeseeability, according to the Civil Code, is applicable when extraordinary and unforeseeable events take on such proportions as to generate contractual imbalance. This occurs in cases in which one of the parties is excessively burdened in relation to the other.
In addition to the imbalance and the extraordinary fact, the theory of unforeseeability, in order to be applied, requires that the contract be of the following type:
- Synallagmatic (having proportionality of rights and duties between the parties)
- Onerous
- Commutative (when there are certain and determined obligations)
- Of continued or deferred performance (when the fulfillment of the obligation is subsequent to the execution of the contract)
The Economic Freedom Act (Law No. 13,874/2019) established the principles of parity and symmetry of civil and business contracts. Furthermore, the rule determined that the risks defined by the parties must be respected, so that contractual revision may only occur on an exceptional basis and in extreme cases. As a result, the law ensures that any renegotiations must be carried out seeking balance between the parties.
Renegotiating contracts
In view of the pandemic, which imposes difficulties on the operation of businesses, the Federation of Commerce of Goods, Services and Tourism of the State of São Paulo (FecomercioSP) recommends that companies, when they find themselves unable to fulfill what was agreed, seek to resolve conflicts amicably, through the renegotiation of contracts, in order to minimize damages and other legal implications.
It is also worth emphasizing that, due to the excess of cases awaiting judgment, resorting to the Judiciary for the readjustment of contracts entered into between private parties is only recommended as a last resort. An interesting alternative is to resort to arbitration and mediation chambers, if there is contractual provision for it.
Source: FecomercioSP
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