BRAZIL Law and Practice Contributed by: Alberto Malta, Davi Ory, Ana Vogado and Maria Eduarda Amaral, Malta Advogados
global price contracts, the builder has a legal duty to guarantee the construction’s soundness and safety for five years. Liability limitations are allowed if agreed between technically and economically balanced parties, provided they do not breach public order or result in unjust enrichment or excessive pen - alties. These limitations often involve pre-fixed damages for specific situations. However, in contracts governed by the Consum - er Protection Code, these clauses are ineffective and liability for construction defects cannot be limited. In more complex or financed projects, insurance policies, such as engineering risk and general civil liability, are commonly used to transfer and mitigate operational, technical and financial risks. 7.4 Management of Schedule-Related Risk Time risk in construction projects is managed through contractual tools authorised by the Civil Code, such as default penalty clauses, set as daily fines or percentages of the contract val - ue and triggered upon objective delay. In real estate developments, Statute No 13,786/2018 formalised a 180-day legal tolerance for project delivery. Under STJ Theme 970, if compensa - tory penalties are expressly agreed, they absorb claims for lost profits related to the same delay. In large-scale infrastructure or commercial pro - jects, more advanced tools are used, including: • liquidated damages clauses, which waive the need to prove actual loss; • acceleration clauses, allowing the owner to require faster completion for added compen - sation; and
• step-in rights, enabling lenders to intervene in case of critical delays. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance To mitigate performance risks, particularly in large projects or those involving CRIs, contrac - tors and financiers often require additional guar - antees. Common mechanisms include: • performance bonds; • bank guarantees; • corporate guarantees from the parent com - pany, often with waiver of the benefit of order; • retention of 5% to 10% of contract payments, released upon project completion; • linked accounts, with disbursement tied to milestone achievement; • segregated estate, mandatory in off-plan developments; and • real estate guarantees, such as mortgages on assets owned by the developer or third parties. 7.6 Liens or Encumbrances in the Event of Non-Payment The Brazilian legal system does not grant auto - matic retention or lien rights to builders or designers in case of non-payment. However, creditors may seek judicial protection. In fore - closure actions, they can request a premonitory registration and, later, a judicial mortgage, which grants priority in proceeds from sale or expro - priation. If the debt relates to the construction of the prop - erty itself, it may override the inability of family property to be seized (Statute No 8,009/1990, Article 3, II). While owners commonly withhold payments until stages are completed, contrac - tors cannot withhold the construction site as leverage for payment.
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