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     Brazilian Contract Law: Major Principles                                                                                                                                   Brazil • Lawyers

Obligations and Contracts in Brazil are mainly subject to the rules present in Law 10.406 of 10/01/2002, the new Brazilian Civil Code. Depending on the parties’ attributes and other requisites, a contract may also be subject to the Consumers’ Code, which sets a much more protective discipline for the end user of a product, also called the “economically weaker” party in a contract.

As a general principle, legally capable parties are free to enter into agreements with each other, setting mutual obligations at will. As long as an obligation isn't illicit, in conflict with the Law, immoral or impossible to attain, it's deemed valid. From the moment an agreement is properly settled, it becomes binding and of obligatory observance by the parties involved: what has been agreed must be accomplished in full.

Besides the above outlined principle of free will (“pacta sunt servanda”), the new Brazilian Civil Code introduced two important principles that must also be followed and observed in the performance and interpretation of any contract.

These principles are defined in the articles 421 and 422, the very first two articles dealing specifically with contracts in the code:

1) The Principle of the Contract Social Function:

Article 421: “the liberty to contract shall be exercised by virtue of and limited by the contract social function”.

2) The Principle of the Objective Good Faith:

Article 422: “the parties are obliged to keep in the contract conclusion as well as in its execution, the principles of honesty and good faith”.

It's noteworthy that in addition to their more direct and immediate meanings, these two principles may also be used to even out the principle of free will amplitude, imposing some restrictions on its interpretation. For instance, some academics believe that there must be some balance between the mutual obligations set in a contract: a contract can’t set evidently disproportional encumbrances to one party, while granting extreme advantages to the other.

Therefore, although the Law doesn’t expressly require a contract to be just, there's already a well defined tendency in admitting the “just price” as an element of Purchase and Sale contracts, for instance. However, this can’t be considered as being a settled legal matter yet. In any event, under the Brazilian Law, the interpretation of any clauses and obligations should always be performed in unison and by the light of these guiding principles.


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