Consequences of the COVID-19 outbreak have affected almost every aspect of life in society. The existence of a disease that is so contagious that it is making governments urge their citizens to stay home, although not unheard of, is not a common picture. Amid this situation, information runs freely through the media and the internet, at times playing an important role, and at times contributing to a sense of panic and imminent chaos.
In light of the uncertainty of the current scenario, many have been questioning what exactly will be the impacts of this crisis when it comes to contracts. A knee-jerk reaction would be to think of tools such as force majeure¹ or excessive onerousness² to justify possible failures to perform obligations. This, however, could be a rushed and simplistic conclusion. Every contractual relationship is unique and may contain many relevant particularities³. It would be unwise to think of a one-size-fits-all solution for such a complex realm of situations.
It is important to notice that the effects of the outbreak do not necessarily influence every type of contract. The actual impact to each case can only be identified with a full screening of the contractual relationship, including the circumstances surrounding the negotiation and entering of the contracts. Such screening would require, amongst others, the assessment of whether the contract was signed prior or after the declaration of a pandemic, if there is any relevant supervening legislation, if possible changes in timing would cause a loss of purpose, how the parties chose to apportion risk, if necessary supplies and raw materials are available and the nature of the obligations pertaining to the contract.
The analysis also must take into account the actual objectives of the contract and the intent of the parties upon the beginning of the contractual relationship. If the contract requires a periodic or continued performance, the behavior of the parties throughout the fulfilling of the obligations is also very relevant. A meticulous assessment is critical, as the current crisis should not be viewed as a way out of contracts and obligations that the parties no longer wish to fulfill.
On the contrary, the solidity of contracts is one of the reliefs that can aid society through the crisis. But for this to be an option, instead of the immediate reaction, there is only one thing to do: collaborate. The parties, now more than ever, have a duty to act on good faith and attempt to negotiate and preserve their contractual relationships as much as possible⁴⁻⁵. With an active effort on this front there is a better chance of a quick economic recovery.
1 Brazilian Civil Code, Art. 393 –The debtor is not liable for losses resulting from a fortuitous event or forcemajeure, unless he has expressly made himself liable therefor. Sole paragraph.A fortuitous event of force majeure is an inevitable event, the effects ofwhich were not possible to avoid or prevent. (ROSE, Leslie. The Brazilian CivilCode in English. Rio de Janeiro: Renovar. 2008).
2 Brazilian Civil Code, Art. 478 – Incontracts with continuing or deferred performance, if the obligation of one ofthe parties becomes excessively onerous, with extreme advantage for the other,by virtue of extraordinary or unforeseeable events, the debtor may apply fordissolution of the contract. The effects of the judgment that declaresdissolution shall be retroactive to the date of citation. (ROSE, Leslie.The Brazilian Civil Code in English. Rio de Janeiro: Renovar. 2008).
3 See SOUZA, Eduardo Nunes de; SILVA, Rodrigo daGuia. Resolução contratual nos tempos do novo coronavírus Available at https://www.migalhas.com.br/coluna/migalhas-contratuais/322574/resolucao-contratual-nos-tempos-do-novo-coronavirus
4 Brazilian Civil Code, Art. 422 –The contracting parties are bound to observe the principles of probity and goodfaith, both in entering into the contract and in its performance.
5 See SCHREIBER, Anderson. Devagar com o andor: coronavírus e contratos - Importância da boa-fé e do dever de renegociar antesde cogitar de qualquer medida terminativa ou revisional. Available at https://www.migalhas.com.br/coluna/migalhas-contratuais/322357/devagar-com-o-andor-coronavirus-e-contratos-importancia-da-boa-fe-e-do-dever-de-renegociar-antes-de-cogitar-de-qualquer-medida-terminativa-ou-revisional