Due to the pandemic caused by the virus known as COVID-19 or the new coronavirus, many questions have been raised when it comes to fulfilling contracts.
According to what is established in article 393 of the Brazilian Civil Code, “the debtor is not responsible for losses caused by a fortuitous or force majeure events if they haven´t expressly taken responsibility for those events.´ Such article also establishes in its sole paragraph that fortuitous or force majeure events can be verified in the fact per se, and their effects couldn´t be neither avoided nor prevented.
So, there hasn´t been any disagreements in the juridical environment regarding the fact that the pandemic faced worldwide suits what is considered as fortuitous or force majeure events.
But does the application of this exclusion of liability happen right away? That´s one of the most crucial questions about this subject because of all the outcomes involved.
First of all, we need to evaluate the contract signed for both parties. There are contracts which specify that one of the parties can´t be discharged of their obligations claiming fortuitous or force majeure events. That may cause serious losses at this moment, once the party won´t be able to evade their obligations even in the face of a pandemic as it´s currently happening.
On the other hand, there are contracts specifying procedures in the occurrence of fortuitous or force majeure events, regulating deadlines for the presentation of proof of loss and even expressing the possibility of contract termination.
Also, there are some contracts which don´t mention such situation or just do it in a generically way, mentioning article 393 of the Civil Code as a liability exclusion.
However, the applicability of this article is not automatic. It´s necessary to observe the activity of the contractor who is claiming losses due to the event, as well as the real effects that this fortuitous or force majeure event has brought to this contractor specifically. As an example, we can mention a company that provides hospital materials used in the emergency rooms. It´s very likely that the company won´t be able to be discharged of their commitments, given that its activity is not paralyzed by the pandemic. Quite the opposite, it´s going to be more intense than the commonly observed.
On the other hand, there are legal and natural persons deeply affected, which proves such situation, indeed confirming that the other party will also have their income and activities affected.
That´s why many cases have been decided in the legal sphere, which will have to ponder the conflicting rights. We already have some decisions taken as, for example, a store at the mall that will pay 50% of its the rental value as long as the pandemic lasts (Case 1008477-94.2020.8.26.0001, in progress at the 6th Civil Court of the Regional Forum of Santana – São Paulo).
So, at this moment, the most interesting for both parties is to examine the situation in order to try to reach a consensus; if that´s not possible, the affected party will have to prove direct interference in their finances and activities. On the other hand, the other party may be in a similar situation, relying on those payments to keep its financial health.
Without a possible agreement, appealing to the Legal Court is the only alternative as we have already mentioned.
It´s important to remind that contracts frequently have what we call “standard clauses”. Those clauses are frequently applied and usually they are not subjected to a better analysis from any of the parties which, in a situation like that, may turn into a very prejudicial issue.
Eliana Bellucco – lawyer expert in contracts at Almeida Prado & Hoffmann office.