The Contract Review in the Brazilian legal system

The Brazilian Civil Code of 1916 was strongly influenced by French legislation. It was inspired by liberalism, valuing the individual, freedom and property.

The contractual basis on which the 1916 civil law was based also had individualistic characteristics, observing only formal equality, in the sense that the contract was understood as a law between the parties, in accordance with the doctrine of pacta sunt servanda . According to this legal diploma, contractual immutability was ensured and the parties freely entered into an agreement that should be absolutely respected.

However, the applicability of pacta sunt servanda began to be relativized and to observe the rebus sic stantibus clause , as a specific demand for social needs that no longer supported the predominance of contractual relations with imbalances.

With the advent of the 2002 Code, there was a break with the individualistic aspect that until then predominated, mainly in the contractual area. The new legal provisions of this code start to discipline a set of interests structured on the principle of sociality, in which, for example, the mandatory force of contracts is mitigated to protect the common good and the social function of the contract.

Prior to the 2002 Code, human beings were considered only as the holders of a credit or linked to a debt, without questioning the social relations in which they are inserted.

The directive of sociality guided the Civil Code of 2002 and deals with the placement of legal rules in a plan of social experience through which the constitutional principle of social function is transformed into an instrument of action in the plan of civil law.

Miguel Reale, when commenting on the Civil Code Project of 2002, mentions that the principle of socialism guided the new legal diploma:

The social sense is one of the Project’s most striking features, in contrast to the individualistic sense that conditions the Civil Code still in force (…)

If there was no victory of socialism, there was the triumph of sociality, making collective values ​​prevail over individual ones, without losing, however, the founding value of the human person. On the other hand, the Project is distinguished by greater adherence to contemporary reality, with the necessary revision of the rights and duties of the five main characters of traditional Civil Law: the owner, the contractor, the entrepreneur, the family man and the testator. 20

From the perspective of sociality, it is clear that contract law needed to adapt and gain the function of achieving justice and contractual balance. Socialization takes place in the intervention of the State in contracts, which will eventually lead to greater use of the principles of good faith and contractual revision in the formation and execution of obligations. Good faith embraces an ethical principle, based on loyalty, trust and honesty. It will be up to the judge to establish the conduct that should have been taken by the contracting party, also taking into account the usages and customs. The effectiveness of the principle of good faith must accompany the execution of contracts, when illicit enrichment or excessive onerousness is configured. The modification of such situation must obey the judgment of equity.

Art. 317 of the Civil Code deals with the legislative enshrinement of the judicial review of benefits due to imbalance or disproportion supervening the formation of the obligatory relationship. Not provided for in the Civil Code of 1916, and even rejected due to its deductible principles, the revision was already being accepted by doctrine and jurisprudence, including to rebalance the contract due to acts of state intervention in the economic domain through economic plans. To interpret art. 317, it is necessary to use the principle of solidarity translated into good faith, in contractual balance.

In a contract, the party could certainly base the intention of contract revision in art. 317 of the Civil Code. Although this article aims to show itself as an exception to the nominalist principle inscribed in art. 315 of the Civil Code, it goes beyond, affirming the principle of preservation of legal business. The provision is clear in allowing the maintenance of the contractual balance by the judge when there is disproportion due to an unpredictable cause.

The inclusion of the revision of contracts due to a supervening imbalance in the Consumer Defense Code influenced the modification of the legal system and extrapolated the limit of consumer relations, extending the revision rule to the very domain of common law relations.

For the application of the review of contracts, it is still up to action for contractual resolution in the form of art. 478, which can be avoided if the defendant offers to equitably modify the conditions of the contract, as stated in art. 479.

In the case of a contract in which the obligations fall only to one of the parties, the latter may claim the reduction of the service or the change in the way of its execution, in order to avoid excessive burden, in accordance with the provisions of art. 480.

Articles 479 and 480 are consistent with the notion of taking advantage of the legal business rather than simply discarding it in respect of the principle of conservation of contracts, which seeks to preserve the business when there is a possibility of its disruption. As a rule, it is more appropriate to revise the contract to adapt it to the new conditions, but on an optional basis for the creditor. This is because, while it is not fair for the debtor to be excessively burdened by unforeseen events, it is also not fair for the creditor to be deprived of the reasonable earnings he would receive.

The principle of preservation of contracts determines that, as far as possible, contracts should be maintained because they create wealth and circulate it and, therefore, create favorable conditions for economic and social development and, ultimately, favor the promotion of human being. The principle of preserving the contract derives from the constitutionally enshrined principle of human dignity.

For this reason, the legislator did not act in the most appropriate way when inserting the revisionism clause in the chapter referring to the termination of the contract, since it is possible to request the resolution or revision of the contract.

The most coherent solution seems to be the judge’s analysis in each specific case, that is, opting to remain with the contract, providing only the fairest correction in certain situations, and, in others, opting for the contractual resolution, because the damages are higher, making the possibility of maintaining the obligatory legal relationship insubstantial.

To enable the review of the contracts, their content will be submitted to judicial review, where the direction of the will of the State can be seen. From the perspective of dirigisme, the modification of the conditions stipulated by the contracting parties is admitted, in order to enable the fulfillment of the agreement.

The parameter between the review and termination of the contract must be the usefulness and uselessness of the provision, and also the interest of the parties in maintaining the business. In the first case, to privilege the provision in kind and, in the second case, to preserve the security of relationships and expectations of contractual rights generated.

The party harmed by the occurrence of a supervening situation in the contract may request its resolution, as provided for in art. 478 and 480 of the Civil Code, which lays down some conditions for termination or contractual review.

In the context of the Civil Code of 2002, it is necessary that the contract be for future, continued or deferred execution. Continuous duration contracts, which are those that extend over time, that is, they are successive execution contracts, as opposed to instantaneous execution contracts, which are those in which the provision is performed in a single act. Deferred performance contracts are those that have the obligation to be fulfilled at a future time, previously agreed between the parties.

It is also necessary that an unpredictable and extraordinary event occur after the completion of the adjustment. Extraordinary and unpredictable events are those that are totally considered impossible to predict by the contracting parties, that is, events that depart from the ordinary course of things, such as the abrupt variation of the US dollar due to the devaluation that occurred in Brazil in 1999 , in obligations involving delivery of imported products.

There is jurisprudential divergence regarding the application of the theory of unpredictability based on changes in the economy (economic plans). While some understand that changes in the economy are predictable, others understand that they are not.

It is also necessary that the fact causes excessive burden for one of the parties, and there may or may not be an advantage for the other. Excessive onerousness means a fact that makes it difficult to fulfill the obligation in the adjusted form, as it imposes a disproportion between the provision and the consideration, which, as a consequence, will end up causing an exaggerated disadvantage for one of the contracting parties and will compromise the equitable execution of the contract.

The Civil Code, in the chapter dealing with the termination of the contract, also provides for a kind of contractual termination, through the allegation by one of the parties of excessive onerousness, as stated in article 478. However, onerousness may or may not lead to termination of the contract, as mentioned in article 479 when providing that “the resolution may be avoided by offering the defendant to equitably modify the conditions of the contract”.

Interpreting art. 478 of the CC together with the principle of preservation of legal business (articles 317, 157 and 170 of the Civil Code), it is possible to obtain a contractual review in case of excessive burden, enabling the debtor to claim the review of the contract. The jurisprudence of the Superior Court of Justice has supported this interpretation:

“(…) – Notwithstanding the literalness of art. 478 of CC/02 – which only indicates the possibility of contract termination – it is possible to recognize excessive onerousness also to revise the agreement, as determined by the CDC, provided that the specific requirements stipulated in the Civil Law are obviously respected. Value must be given to the principle of conservation of legal business that was expressly adopted in several other provisions of CC/02, as in the sole paragraph (sic) of art. 157 and in art. 170.” (REsp 977.007/GO, Min. Rel. NANCY ANDRIGHI, 3rd class, judge. 11/24/2009, DJe 12/02/2009)“INEXISTENCE OF ABUSIVITY OF THE AGREED PERCENTAGE BETWEEN THE PARTIES IN RELATION TO THE AVERAGE MARKET RATE. POSSIBILITY OF CONTROL AND REVIEW, BY THE JUDICIARY, IN EACH CASE, OF POSSIBLE ABUSIVITY, EXCESSIVE ONEROSITY OR OTHER DISTORTIONS IN THE CONTRACTUAL COMPOSITION OF THE INTEREST RATE, IN ACCORDANCE WITH THE CIVIL CODE.” (AgRg in REsp 1064156/RS, Reporting Justice LUIS FELIPE SALOMÃO, FOURTH PANEL, judged on 12/16/2008, DJe 02/02/2009)

Civil right. Special resource. Review action of green soybean purchase and sale contracts linked to rural product bills. Exchange variation clause. Authorization for the pact. Law 8.880/94. National Monetary Council. Resolutions no. 2148/95 and no. 2483/98. Adjustment validity. Excessive onerousness. January 1999. Equitable Distribution. (…) Given the abrupt exchange variation of the American currency against the Real, verified in January 1999, the excessive onerousness of the installments taken by the debtor who signed a rural product certificate with an indexation clause for exchange variation must be recognized. In this case, the clause must be revised in order to equally distribute the observed exchange variation between debtor and creditor. Special feature partially known and, in that part, provided. (REsp 579.107/MT, Min. Nancy Andrighi, 3rd Panel, judge. 12/07/04, DJ 02/01/05 p. 544)

It is necessary not to confuse the theory of unpredictability with the occurrence of force majeure and the fortuitous event. Force majeure and unforeseeable circumstances refer to the fact that the provision adjusted in the legal transaction cannot be fulfilled and the debtor will not be liable for the resulting damages, as this is a case of excluding liability. On the other hand, in the cases of article 317, the theory of unpredictability does apply, in agreements that are feasible in the medium or long term, if one of the parties is at a clear economic disadvantage.

Art. 6, V, of the Consumer Protection Code mentions that it is the consumer’s right to modify contractual clauses that establish disproportionate benefits or their revision due to supervening facts that make them excessively onerous. Thus, this standard is not related to the rebus sic stantibus theory and its variants, as it is not based on the unpredictability of the occurrence of new situations that modify the preexisting situation at the time of the contract. In addition, in addition to rejecting the unpredictability, it also admits the alteration of the contract even if no new facts occur. The Consumer Protection Code is enough for the occurrence of onerousness for the contract to be reviewed.

It is essential to reread the legal positions held by the contracting parties before the advent of the Civil Code of 2002. The contract can no longer be seen as an instrument that ignores the social reality in which the person is inserted, only considering him as a holder of rights and subject of obligations.

There was a theoretical renewal of the contract that placed at its core the concept of socialization of contractual theory. Starting from the principle of sociality, allied to the principle of the conservation of the contract, it is necessary to suggest plausible solutions to be adopted by the contracting parties to equitably modify the contract, overcoming the factual conditions that broke its balance.

Finally, in contracts of continued duration or of deferred execution, the theory of unpredictability may be applied, with the consequent relativization of the principle of pacta sunt servanda . This is because, due to the change in the paradigm of the Civil Code of 2002 in relation to the Brazilian Civil Code of 1916, the principle of sociality applies to the contract.