The new coronavirus and its (possible) configuration as force majeure: a case-by-case assessment

In view of this delicate moment, Covid-19 has been characterized as a force majeure event, thus exempting the responsibility of companies unable to fulfill their contracts in a timely manner. But can it really justify a widespread breach of contracts signed before the spread of the disease?

Force majeure is one of the exclusions of liability provided for in Brazilian law. Its occurrence exempts the defaulting debtor from compensating the creditor for losses and damages suffered, as well as eliminating the incidence of any fines agreed between the parties. It is regulated in art. 393 of the Civil Code[4], configuring itself as a necessary fact, the effects of which could not be avoided or prevented during the fulfillment of the obligation. This is an event outside the control of the parties and beyond the control of the debtor[5], the impacts of which make it impossible to fulfill the obligation at the time, place and manner agreed in the contract.

For there to be force majeure, the event must be inevitable. The mere difficulty of fulfilling the obligation does not constitute force majeure[6], except in absolutely exceptional situations, in which the use of the necessary means to enable the fulfillment of the obligation would require an absurd expense by the debtor, imposing an absolute sacrifice and subjecting him to an intolerable material loss[7].

The first exception to the characterization of force majeure as excluding liability concerns cases in which the debtor was already in default before the event considered force majeure. In this case, it is presumed that the debtor assumed the risks of the subsequent impossibility of the obligation by delaying its fulfillment, which is why he will not be able to take the force majeure event as an opportunity and subject of defense - unless he can prove that the original delay did not give him is imputable, or that the creditor would incur the losses claimed even if the obligation had been fulfilled in a timely manner and manner[8].

The second exception involves the so-called internal fortuitous event. According to the jurisprudence of the Superior Court of Justice (STJ), the occurrence of a necessary and unavoidable event does not always exempt the debtor from his responsibility for repairing losses.[9]. The fact must also be foreign to the organization of the business and the activities carried out by the debtor[10]. If the irresistible event is inherent to the debtor's business, it is understood as business risks of its activity and, therefore, exemption from liability is permitted.

If the debtor proves that the event in question was beyond his control and that its consequences make it impossible to comply with the obligation, force majeure occurs. As this is a fact that impedes the creditor's right to recover losses and damages, proof of its occurrence is the responsibility of the debtor, who must demonstrate that, in that specific case, there was nothing he could do to prevent or mitigate the impacts. of the event and, therefore, fulfill its obligation[11].

However, as this exception can only be invoked for events that escape all due diligence and are entirely outside the debtor's will[12], the creditor can defend himself by demonstrating, for example, that the obligation became impossible because the debtor did not fulfill his duties of care and security — that is, the obligation could have been fulfilled if the debtor had taken certain measures to prevent or remedy the alleged event —  or  that, even if the event were irresistible, its occurrence would be an inherent risk to the debtor's business activity.

Although several studies have already identified the Covid-19 pandemic as a force majeure event capable of exempting liability for non-performance or authorizing the review or termination of contracts, it is not possible to state this in a generalized and abstract way. As highlighted, the core elements of force majeure are the inevitability of the event and its disconnection from the risks inherent to the debtor's business activity.

Inevitability needs to be determined in the specific case, taking into account the real and peculiar contingencies applicable to it, as it is a relative issue in time and space[13]. It is necessary to take into account the technological solutions available to each economic segment and the safety and care standards ordinarily imposed on it to verify whether, in that specific scenario, the events alleged as force majeure could be circumvented or mitigated with the adoption of preventive measures or special logistical solutions (although more costly to the debtor).

The risks of the activity, in turn, vary according to the field of activity of each company, its business models, the geographic markets in which it participates, the way in which the service is provided or the product is delivered, among other countless factors. of each business company.

Furthermore, it is necessary to bear in mind that the allocation of contractual risks can also have considerable impacts on the possible configuration of the pandemic as a force majeure event. The art. 393 of the Civil Code — which contains the exclusion of liability — is a provision that allows the parties to regulate in a contract who will assume the risks of force majeure. The parties have broad freedom to redistribute contractual risks due to the spread of pandemics, as well as to mitigate or reinforce the general parameters for the occurrence of force majeure, assigning more or less high rules for what is considered a “necessary” or “irresistible” event. .

In view of all these variables, it seems hasty to state in advance and generally that Covid-19 is (or is not) a force majeure event. The issue must necessarily be examined on a case-by-case basis. Its legal qualification will depend on several factors specific to the specific case, such as the type of contract concluded, the risk allocations agreed upon, the location where the services should be provided or the products delivered, the field of activity of the companies involved, etc.

[1] GUIMARÃES, Fernanda; PIOVESANA, Matheus; LAURENCE, Felipe. B3 records biggest drop among global stock exchanges. Estadão, March 22, 2020. Available at: , accessed on 3/70003242944 /23. 

[2] BUENO, Sinara. Coronavirus: Economy and Foreign Trade. FazComex, March 20, 2020. Available at: , accessed on 23/03/2020. 

[3] According to the American news network, CNBC, by the beginning of March, China had already issued more than 4.800 Force Majeure Certificates to Chinese companies, with a total impact of US$53,79 billion for creditors harmed by the default. . (TAN, Huileng. China invokes 'force majeure' to protect businesses — but the companies may be in for a 'rude awakening'. CNBC, March 06, 2020. Available at: , accessed on 2020/03/06. 

[4] Civil Code, Art. 393. The debtor is not liable for losses resulting from unforeseeable circumstances or force majeure, if he is not expressly held responsible for them. Sole paragraph. The fortuitous event or force majeure occurs in the necessary fact, the effects of which it was not possible to avoid or prevent. 

[5] MARTINS-COSTA, Judith. Comments on the New Civil Code, volume V, volume II: Arts. 389 to 420 – Failure to fulfill obligations. 2nd Edition. Rio de Janeiro: Forense, 2009. p. 290 to 291. 

[6] MARTINS-COSTA, Judith. Comments on the New Civil Code, volume V, volume II: Arts. 389 to 420 – Failure to fulfill obligations. 2nd Edition. Rio de Janeiro: Forense, 2009. p. 298. 

[7] GOMES, Orlando. Obligations. 19th Edition. Rio de Janeiro: Forense, 2019. 114 – Legal concept of impossibility [Electronic Book] 

[8] Civil Code, Art. 399. The debtor in default is liable for the impossibility of performance, although this impossibility results from unforeseeable circumstances or force majeure, if these occur during the delay; unless they prove exemption from guilt, or that the damage would occur even when the obligation was timely performed. 

[9] STJ; AgInt in AREsp nº 941.250/RJ. Fourth Class; Rapporteur: Minister Raul Araújo. Judgment date: 19/03/2019. 

[10] STJ; REsp nº 1.341.605. Fourth Class; Rapporteur: Minister Luis Felipe Salomão. Judgment date: 10/10/2017. 

[11] Civil Code, Art. 373. The burden of proof lies with: (…)II – the defendant, regarding the existence of a fact impeding, modifying or extinguishing the author's right. 

[12] CAVALIERI FILHO, Sergio. Civil Responsibility Program. 11th Edition. São Paulo: Atlas, 2014. p. 88. 

[13] CAVALIERI FILHO, Sergio. Civil Responsibility Program. 11th Edition. São Paulo: Atlas, 2014. p. 89.