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Contract interpretation

Pursuant to the constitutional principles of freedom to contract and free will (e.g., good faith, customs, traditions and sovereignty), and subject to relevant connection elements with regard to the contract (i.e., parties, subject and place of performance), Brazilian law authorises the parties to choose the governing law of the contract. Foreign law may be chosen in general when foreign connection elements are found in the contract.

If Brazilian law is chosen, the contract provisions will be interpreted in light of the applicable legal provisions effective in Brazil, notably the Civil Code, and of the parties' practices, customs and traditions when complying with their obligations under the contract. The Declaration of Economic Freedom Rights added new interpretative rules for contract provisions, such as:

  1. the parties may freely agree on rules for the interpretation, the filling in of gaps and the integration of legal transactions other than those provided for by law; and
  2. in private contractual relations, the principle of minimum intervention and the exceptionality of contractual revision will prevail.

In addition, the parties are considered with symmetry and parity, which means that they have the same ability to analyse the contractual text, and understand and accept the risks, with fair negotiation. The principle of good faith is one of the most important drivers orienting the parties' behaviour and the interpretation and performance of contracts. It plays a leading role in contractual relationships, and several other interpretative principles ultimately derive from it.

Pursuant to the principle of good faith, the contracting parties must act with fairness, rectitude and honesty towards each other to thwart contradictory behaviour and abuse of rights, which may characterise a wrongdoing subject to indemnification; therefore, both the wording of the clauses and the parties' will, when entering into a contract, be of relevance for interpreting contractual provisions and the parties' obligation set forth in the contract.

The principle of good faith has gained such a relevance for Brazilian contractual law that the parties' practice in performing the contract may ultimately impose an increase or a reduction in the contract's obligational content as it may create in the party the lawful expectation that a certain act will or will not be performed by the other party; therefore, the manner in which the parties have been performing the contract, by mutual agreement and consent, is a way to assess the parties' actual intention towards a certain contractual provision.

The Superior Court of Justice has considered as valid:

  1. a reduction in the obligation content as a result of the lapse of a long period without a certain right being exercised or a certain obligation being enforced by the parties; and
  2. an increase in the obligation content owing to the creation of a right that has not been originally agreed to.

Emails, proposals, preliminary documents and deposition of witnesses are examples of pieces of evidence to be produced in this regard.

Also based on the principle of good faith, the contract should be construed to best ensure its concrete performance, and the harmed party may even claim indemnification for the loss of a chance.

In adhesion contracts – those in which the contractual clauses are standardised and mostly established by one of the contracting parties – ambiguous or contradictory clauses should be construed in the manner most favourable to the adhering party. In addition, clauses providing for the adhering party's waiver of rights linked to the nature of the deal will be deemed as void. This rule is absolute when dealing with adhesion contracts imposed on consumers.

The covid-19 pandemic – declared as a public health emergency by the federal government5 – may be considered as a force majeure (an event beyond human capacity or predictability) to stay or release certain duties; however, Brazilian courts are reluctant to fully exempt parties from fulfilling any contractual obligations.