BRAZIL Trends and Developments Contributed by: Priscila Kei Sato, Arruda Alvim, Aragão, Lins & Sato Advogados
• This case concerns a claim for payment from which the present special appeal ( recurso especial ) arises. • The central issue on appeal is whether a contractual clause exempting one party from remunerating the other for services rendered in the event of termination breaches the prin - ciples of good faith and the social function of the contract. • Law No 13,874/2019, also known as the Economic Freedom Law ( Lei da Liberdade Econômica ), under Article 3, VIII, establishes that every individual or legal entity is entitled to rights essential to the country’s economic development and growth. In line with the sole paragraph of Article 170 of the Federal Constitution, the law guarantees that parity business transactions shall be freely stipulat - ed by the contracting parties. In such cases, corporate law provisions apply only on a supplementary basis, save for rules of public order. • Judicial scrutiny over potentially abusive clauses in business contracts is more limited than in other areas of private law, as such agreements are negotiated by professionals accustomed to commercial practices typi - cally followed within the relevant sector of the economy. • The existence of balance and freedom between the parties at the time of contract - ing, along with the nature of the agreement and the legitimate expectations of the parties, are crucial factors in assessing any alleged invalidity of a clause based on breach of objective good faith or the contract’s social function. • In the context of a service agreement entered into between two private parties on an equal footing when determining contractual terms – taking into account the economic activities they perform – there is no specific legislation
justifying special protection for either party. In such cases, Article 421 of the Brazilian Civil Code shall prevail.” (Special Appeal No 1,799,039, Third Panel of the Superior Court of Justice, Rapporteur: Justice Nancy Andrighi, judgment rendered on 4 Octo - ber 2022.) This approach aligns with broader global move - ments toward private governance and risk- based contractual design. What does Article 421-A establish? Article 421-A of the Civil Code: • presumes parity and symmetry in civil and commercial contracts, unless concrete evi - dence proves otherwise; • reinforces the binding force of contracts, allowing judicial revision only in extraordinary circumstances; and • allows the parties to set objective parameters for contract interpretation and define condi - tions for termination or review. Comparative perspective Brazil is rooted in the civil law tradition and its current contractual framework reflects a broader trend of convergence between civil and common law systems. Over time, both traditions have incorporated shared principles such as good faith, co-operation, and reasonableness, lead - ing to increasingly similar approaches in contract interpretation and enforcement. This alignment is particularly evident in the Bra - zilian legal system, where doctrines such as objective good faith, the social function of con - tracts, and the duty to mitigate damages reso - nate with concepts long developed in common law jurisdictions.
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