|June 2, 2010|
As a consequence of the current international financial crisis that has triggered inflationary pressures, major currency and exchange rate changes, and other economic problems, much has been discussed about the possibility of reviewing contracts that have become excessively burdensome.
A contract termination, or an adjustment in its agreed-upon price due to becoming excessively burdensome, consequently giving rise to an imbalance between the parties, is known as “Theory of Unpredictability”, as provided for in Article 478 of the 2002 Brazilian Civil Code, which reads as follows: "As regards continued or deferred performance contracts, if performance thereof becomes excessively burdensome to one party by virtue of extraordinary and unpredictable events, the party that carries such excessive burden may claim the contract termination. The effects of the decision accepting such claim shall be enforced retroactively to the date notice of this claim is served.
Application of the “Theory of Unpredictability” in the Brazilian Civil Code has only been accepted by the judges, if in the case under concern all legal requirements are observed, to wit: a continued performance contract (e.g. monthly rent payments) or a deferred performance contract (e.g. payment agreed upon for a future time) established and enforced; a contract excessively burdensome to one of the parties thereto; a contract extremely advantageous to the other party; and acceptance specifically by virtue of extraordinary or unpredictable events.
Due to this fact, most judges have denied requests for contract termination in cases of inflation and changes in currency and exchange rate, on the grounds that these events are deemed predictable, especially in Brazil.
This condition nonetheless changes when judges examine consumption relations, to which the Consumer Protection Rights Code - Law no. 8078/90 applies.
As provided for in Article 6, V, of the Consumer Protection Rights Code, in a consumer relationship, it possible to apply the “Theory of Unpredictability” with the consequent amendments to contractual terms that have become excessively burdensome, because, for instance, of incidental facts that make the attendant contractual obligations virtually unenforceable.
The Consumer Protection Rights Code is thus more flexible than the Civil Code as regards the “Theory of Unpredictability” application, given the greater vulnerability of one of the parties to the detriment of the other party.
Therefore, unlike what one finds in civil relationships, application of the “Theory of Unpredictability” under the Consumer Protection Rights Code does not require existence of a continued performance contract or a deferred performance contract, or even that the excessive burden to one of the parties should be extremely advantageous to the other party.
In view of all the above, when judges are faced with matters such as high inflationary pressure, major changes in currency and exchange rates, and other economic problems in contracts under the Consumer Protection Rights Code made excessively burdensome to one of the parties, they may apply the “Theory of Unpredictability”, with the consequent revision of the contract in the behalf of the consumer.