Coronavirus (COVID-19): Legal Impacts on Business Agreements
What would be the effect of the coronavirus pandemic on business agreements governed by Brazilian law? The Brazilian Civil Code contains some provisions that could be in theory invoked in the current context. But for such purpose we must ask: Would the pandemic be an “act of God” or “force majeure” event? Would it be an “unforeseen reason” capable of causing a “manifest disproportion” between the obligation that had been agreed upon by the parties at the time the agreement was executed and the obligation to be discharged at the time of its performance? Would it be an “extraordinary and unpredictable event” capable of rendering the performance of one party’s obligations “excessively burdensome” while affording to the other party an “extreme advantage”?
Articles 317, 393 and 478 of the Civil Code aim to relieve contracting parties or allow them to review or even seek to terminate their agreements. You will find below a brief discussion and analysis of each of these articles.
Article 393 – Act of God or Force Majeure: It provides that a “debtor is not liable for damages resulting from act of God or force majeure, unless it has expressly agreed to be so”, defining act of God and force majeure as a “necessary fact”, the effects of which “were not possible to avoid or prevent.”
Article 393 does not give the contracting party the right to seek the revision or termination of the agreement. Its goal is to exempt the contracting party from losses arising from the noncompliance with an obligation.
Contributing Advisors
Martim MachadoPartner, CGM Advogados
Myles CulmerDirector, BDO Advisory Services