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Breach of contract

In the case of a breach of contract, the non-breaching party may file a lawsuit requesting the specific performance of the defaulted obligations or, alternatively, if the specific performance is no longer possible or if the non-breaching party is no longer interested in it, it may claim for damages, including substantial damages and loss of profits.

In such a commercial contract claim, the plaintiff must prove that the counterparty has breached a certain provision set forth in the contract, that it has not given cause to the breach, that such a breach has not been cured and has caused, or is causing, damage to the plaintiff, and that this breach must be remediated by the counterparty through its specific performance or by means of an indemnification. Specifically, if the plaintiff files an enforcement proceeding to immediately demand the specific performance of the obligation or the payment of any amount set forth in the contract (e.g., a penalty), the plaintiff must also prove that the contract fulfils the legal requirements of an extrajudicial executive title, and that the obligation or amount is certain, liquid and demandable.

The breach of contract may also derive from tortious interference, which is considered as a violation of the duty of good faith and grants the harmed or threatened party the right to claim protection against it.

In addition to contractual breaches, disputes concerning commercial contracts may frequently address requests for rebalancing or reviewing provisions and obligations set forth in the contract if the plaintiff is able to prove:

  1. the supervening occurrence of an unforeseeable and extraordinary situation responsible for changing the original assumptions of the agreement; and
  2. the extreme disadvantage to one of the parties, which compromises the financial obligations undertaken under the contract.

This rebalancing possibility ends up mitigating the strength of the pacta sunt servanda clause in exceptional circumstances.

The plaintiff has the burden to prove that:

  1. the commercial contract was breached by the counterparty and that it is legally entitled to demand its specific performance or claim damages arising out of the breach; or
  2. there were supervening, unforeseeable, disadvantageous events justifying the need to rebalance the contract.

This proof is generally made by the disclosure of the contract in court. If it is written in any language other than Portuguese, the document must be translated into Portuguese by an accredited translator in Brazil. If the document was executed abroad, it must be notarised and the signature of the notary public must be legalised by a competent authority, in the case of appostilation, or authenticated by a Brazilian consulate, if the document emanated from a country that is not signatory to the Hague Convention of 5 October 1961, Abolishing the Requirement of Legalisation for Foreign Public Documents. If demanded by law, the plaintiff must also register the contract with the relevant office of the Registry of Deeds and Documents in Brazil.

If the plaintiff alleges that it is entitled to receive an indemnification as a result of the counterparty's contractual breach, the plaintiff will have the burden to evidence not only the losses it has suffered, but also to quantify its extension. Depending on the nature of the damage, an expert may be appointed to conduct an expert examination not only to confirm the losses and their link to the counterparty's undue conduct, but also to assess how much the breaching party must pay as indemnification.

The defendant also has the burden to prove its allegations raised in the defence, meaning the existence of facts that prevent, extinguish or modify the plaintiff's rights and allegations. For instance, the defendant may prove that it stayed the performance of contract because the plaintiff had failed to comply with its obligations in the first place (the exception of a non-performed contract).

In any circumstances, the use of evidence obtained by illicit methods is prohibited, pursuant to the Federal Constitution.

Although both plaintiffs and defendants have the burden to prove their own allegations and claims raised in the complaint and in the defence, in exceptional cases, the court may impose on the counterparty the burden to produce certain pieces of evidence important for the matter under scrutiny, dynamically allocating the burden of proof among the parties. For instance, in view of the peculiarities of the lawsuit, this inversion on the burden of proof may occur when the party originally obliged to produce the evidence in court cannot do so, or when one of the parties has more ready access to the evidence.

The dynamic distribution of the burden of proof may also be agreed by the parties, before or during the lawsuit, as the Code of Civil Procedures allows the parties to allocate the burden of proof by themselves, provided that such an allocation does not impact an inalienable right or renders the exercise of a right by one of the parties extremely difficult. This provision is especially useful for domestic and transnational commercial agreements, improving legal certainty and avoiding the risks inherent to leaving that allocation at court's discretion.

The Brazilian system does not provide for a full disclosure of documents. Normally, the parties must rely on their own pieces of evidence, use them to substantiate the claims raised in the lawsuit and, then, submit such evidence to scrutiny by the counterparty and by the court (the adversarial principle). Once discovery is complete, including the holding of trial hearings, the court may render its decision, which is appealable at the respective court of appeals. Unlike US proceedings, Brazilian legislation does not provide for a broad discovery allowing the party to oblige its opponent to disclose a vast number of documents and information as evidence in the litigation. The Code of Civil Procedure puts at the parties' disposal a more limited proceeding, in which the plaintiff must satisfy certain legal requirements – such as to prove that it does not have access to all relevant documents needed to prove its injury, to prove with high level of certainty that the documents exist, are in possession of the counterparty or third-party, as well as the purpose of the document and their relevance for the matter under scrutiny – to be granted the command obliging the opponent to disclose the specific documents in court.