BRAZIL Trends and Developments Contributed by: Priscila Kei Sato, Arruda Alvim, Aragão, Lins & Sato Advogados
Modern contracts increasingly incorporate ESG- related clauses, data security obligations, and technology risk-sharing provisions – an emerg - ing layer of complexity that requires lawyers to anticipate reputational, regulatory and cyber vul - nerabilities beyond traditional financial metrics. European regulations (such as the 2022 propos - al for a Corporate Sustainability Due Diligence Directive), as well as UK practices on cyberse - curity warranties, provide useful models. Role of good faith and fairness Even with the most detailed contracts, unfore - seen behaviour – particularly from opportunistic creditors – can still jeopardise the relationship. Here, the principle of good faith becomes essen - tial. Brazilian courts increasingly recognise its function in: • filling interpretative gaps; • preventing abusive conduct; and • requiring damage mitigation by creditors rather than maximising penalty enforcement. In volatile markets, it may be more profitable for a creditor to enforce penalties than to receive actual performance – something not always foreseeable when the contract was signed. Courts have shown a willingness to intervene where this dynamic undermines the contract’s original purpose. Internationally, the UNIDROIT Principles of Inter - national Commercial Contracts provide strong inspiration for this approach. These principles treat good faith not merely as a moral notion but as a binding legal standard. Key takeaways The inclusion of Article 421-A in Brazil’s Civil Code – under the Economic Freedom Act – sig - nals a modern, risk-aware approach to contract -
ing. It recognises that private agents, not public institutions, are now at the front line of managing complexity. For lawyers, it reinforces the need for contracts that are not just legally sound but commercially sensible, ethically grounded, and dynamically adaptable to an increasingly unpre - dictable world. Contract lawyers in Brazil must combine legal craftsmanship with business intelligence and risk foresight. The Economic Freedom Act, rather than simplifying, has elevated the sophistication required in contract drafting – calling not only for compliance but also for creativity. Cross-border clients will benefit from this hybrid model that blends civil law rigour with common law prag - matism, evident in the growing application of international contractual standards. The following key points should be taken into consideration by contract lawyers in Brazil. • Contracts are strategic tools – they should reflect real operational needs, not just legal formality. • Customisation over templates – high-value deals require tailored clauses, revision trig - gers, and risk-sharing terms. • Certainty with flexibility – contracts remain binding, but can allow predefined review in exceptional scenarios. • Cross-department input is essential. Legal, finance and operations must align on contract structure. • ESG and tech clauses are strategic – they reduce exposure to regulatory and reputa - tional risks. • Good faith is enforceable – courts expect conduct that prevents unnecessary losses or abuse.
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