The modifications of the economic freedom law in the contractual scope

October / 2019

It was converted into law, on September 20, 2019, Provisional Measure n. 881/19, which was called the “Provisional Measure of Economic Freedom” considering the liberal content of its norms, aimed at reducing the State’s intervention in the economy, exaltation of private autonomy and, as a consequence, a possible economic liberalization. This conversion changed several points that had originally been provided for in the Provisional Measure n. 881/19, which resulted in Law n. 13.874/19 – also known as the “Economic Freedom Law”.

The main reflexes of the Economic Freedom Law derive from its modifications of several provisions in important legal acts, such as the Consolidation of Labor Laws (CLT) and the Civil Code. In regard to the last one, important changes were made in relation to the disregard of the legal person – which now has more objective and clear requirements and conditions –, corporate law (e.g. the possibility of setting up limited companies with only one partner) and, expressively, in contractual matters.

Among the relevant changes made in the Civil Code regarding contractual relations, it is possible to mention: (i) the addition of the sole paragraph to Article 421, which renders contractual review and exception and, thus, emphasizes the principle of minimum intervention; (ii) inclusion of art. 421-A, which provides for the parity and symmetry of civil and business contracts, with the exception that it shall not be presumed if there are specific elements and facts that justifying not doing so; (iii) possibility for the parties to freely agree on objective parameters for the interpretation of clauses, their review and resolution parameters; (iv) the possibility of risk allocation by the parties, which must be observed and respected; and (v) bringing, once again, the limitation on contractual revision, which will only occur exceptionally.

Also, under the terms of Article 113, specifications were provisioned as to the interpretation of legal transactions, which should now give them the meaning that: (i) is confirmed by the behavior of the parties subsequent to the conclusion of the business; (ii) correspond to market usages, customs and practices related to the type of business; (iii) correspond to good faith; (iv) is more beneficial to the non-drafting party if identifiable; and (v) correspond to what would be the reasonable negotiation of the parties on the issue, considering the business’ dispositions, its economic rationality and information available at the time of the celebration. In addition, rules on the interpretation and filling of legal transaction gaps may be agreed upon.

In addition to these changes, the Economic Freedom Law also has a declaration of economic freedom which, in regard to contracts, includes provisions such as the presumption of good faith in acts performed in the exercise of economic activity, which shall preserve private autonomy, and ensure that equal corporate business deals are freely agreed upon by the contracting parties.

Thus, the Economic Freedom Law reassures private autonomy in the contractual sphere, especially because it renders contractual revision an exception and, on several occasions, makes reference to the possibility of free stipulation between the parties. It remains to be seen now how this legislation and its changes will be dealt with by the judiciary, which will have to evaluate and decide on its consequences.

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