When business contracts are breached in any country, it puts the injured party in a bad position. Regardless the scope of the contract, the party that is expecting some type of goods, services or money and does not receive them is greatly inconvenienced. If you’re used to doing business in the United States, you know that there are numerous remedies for contract breaches meant to help the injured party and punish the person who breached the contract. Punitive damages are meant to punish the offending party, and damages for emotional distress must also be paid to make up for the inconvenience they caused the injured party. In Brazil, the purpose of the laws in place for contract breaches is similar, but the actual law differs slightly.
Losses and Damages
In the Brazilian legal system, the offender pays losses and damages. A breach of contract in a business setting creates the obligation of the offender to pay the injured party enough to put them in the same position they would have been if the contract had been upheld. In other words, the damages must equal the amount owed, whether figuratively or literally.
On the one hand, if contract is obliged later than the date originally agreed upon in Brazil, the offender will owe the injured party enough to make up for the gains that were foreseeable when the contract was signed. On the other hand, if the terms of the contract are simply not performed, any unforeseeable damages will be owed as well.
In some cases, the injured party might not be interested in money, but instead wants the terms of the contract upheld. For example, if you hired a painting company to pain the exterior of your business but they stopped early and didn’t finish the job, money will not be the most convenient solution to your problem. Ideally, you’d have the same company come back and finish what they started. This solution is called specific performance.
When you sign a business contract, you also have the option for adding a penal clause. A penal clause states any punishments that will be enforced should the contract be breached. That way, there will less likely be an offense, since the offender will know what’s coming should he breaches the contract. Additionally, less time will be spent in court discussing punishment if a breach occurs.
In Brazil, moral damages are defined as damages that are owed for everything that does not have economic value. It’s the suffering, hurt and pain that one party causes to another with the breach of a contract. Moral damages in the Brazilian system are very similar to the emotional damages considered in the American legal system. Unlike in the American system however, moral damages are not only intended to relieve the injured party. Their purpose is twofold:
- Compensate the victim
- Punish the offender
In the United States, only punitive damages are intended to punish the offender and set an example for any future offenders.
If you’re looking to start up a business in Brazil, contracts you sign will be under the Brazilian jurisdiction of law, so it is important that you understand the proceedings when any type of business contract is breached. Being aware of the consequences, if you accidentally breach a contract is important, and knowing what you should receive in the event that someone else breaches is equally so. If you’d like to learn more about breach of contract in Brazil, you should speak with a professional about damages that will be owed.