Covid-19 (Coronavirus) brought many uncertainties, novelties and subjects for discussion in the legal field, particularly regarding impact on contractual relationships.
The unpredictability of the pandemic scenario recalls certain legal insecurity and rises questions regarding contractual repercussions and possible forms of relaxation of the agreements between private entities.
Contracts entered into before the Covid-19 pandemic must remain fully valid, provided the agreed obligation is able to be performed.
The hypothesis of settlement, however, may also be considered when it is absolutely and demonstrably impossible to fulfill the contract in any manner. Considering that the contractual relationship is based in objective good faith, the current pandemic moment must not be used as an “escape route” of previously agreed relationships.
There is no doubt that the current scenario opens up renegotiation possibilities between the parties. For this reason, each case must be analyzed separately, and if excessive burden or impossibility of fulfillment of contract objects is found, the parties may, and should, rely on objective good faith and alternative solutions for conflict in order to dampen the impact and, in addition, maintain isonomic contractual relationships.
Contract settlement, in our opinion, must be chosen only in exceptional circumstances. The recommended stance, therefore, is a contract review, based on cooperation, loyalty and objective good faith, through which the parties must communicate the actual economic situation tied to the agreed object, and seek the best way to fulfill the obligations provided.
Raphael Zaroni is a founding partner of Zaroni Advogados.