The clauses that prevent disputes in a business contract are the ones that answer, with no room for interpretation, four questions: what exactly will be delivered, how much it costs and how the price changes, what happens when a party fails and how each side exits the contract. The clauses that cause disputes are the mirror image: a generic scope, price adjustment with no index or frequency, a penalty with no calculation base, no notice period and a forum chosen with no connection to the parties or to the deal. Between companies this drafting matters even more than people assume, because Brazilian law presumes the parties negotiated as equals.
What the law presumes in a contract between companies
Law No. 13,874 of September 20, 2019, the Economic Freedom Law, amended the Civil Code (Law No. 10,406/2002) on two decisive points. Article 421 now states that contractual freedom is exercised within the limits of the social function of the contract and, in its sole paragraph, that in private contractual relations the principles of minimal intervention and of the exceptional nature of contract revision prevail. Article 421-A was added to presume that civil and business contracts are balanced and symmetrical, guaranteeing that the parties may set objective parameters of interpretation, that the risk allocation defined by the parties must be respected and that contract revision will occur only on an exceptional and limited basis.
The practical consequence is direct: in a business contract, what is written tends to prevail. Counting on a court to later correct an imbalance the company itself accepted is a fragile strategy. The counterweight is Article 422, which binds the parties to probity and good faith both when entering into and when performing the contract.
Scope: the clause that generates the most disputes
A poorly described scope is the most common source of conflict. Naming the service is not enough: the contract must define the scope, deliverables, each party's responsibilities, assumptions and, above all, what is not included. Technology, marketing, engineering and continuous supply contracts gain a great deal from a technical annex and a written change procedure stating who may request a change, how long the other party has to respond and how that affects the price.
Price, adjustment and default
Price needs three companions: what triggers payment, the payment term and the effect of late payment. On adjustment, Law No. 10,192 of February 14, 2001 allows monetary correction or adjustment by price indexes in contracts with a term of one year or more, and declares null and void, in Article 2, paragraph 1, any adjustment provision with a frequency shorter than one year. Index, base date and formula must be in the contract, with a substitute index in case the chosen one is discontinued.
As for default interest, Article 406 of the Civil Code, as amended by Law No. 14,905 of 2024, now sets legal interest at the statutory rate, corresponding to the Selic rate less the monetary restatement index. A company that wants a different criterion must agree to it expressly.
SLA: promise what can be measured
A service level agreement only protects when it is measurable. It must state the indicator, the measurement method and source, the measurement window, the legitimate exclusions (scheduled downtime, third party failure, force majeure) and the consequence of non-compliance, which may be a discount on the invoice, a service credit or a penalty. An SLA with no measurement method becomes an expert witness debate; with a method, it becomes arithmetic.
Penalties and limitation of liability
Contractual penalties are governed by Articles 408 to 416 of the Civil Code. Two limits are frequently overlooked: under Article 412, the penalty may not exceed the value of the main obligation; under Article 413, the judge must equitably reduce the penalty if the main obligation has been partly performed or if the amount is manifestly excessive. Another decisive point is the sole paragraph of Article 416: if the loss exceeds the agreed penalty, the creditor may not claim supplementary compensation unless that was agreed. In other words, a party that wants to recover beyond the penalty must say so in the contract.
Limitation of liability, common in technology and supply contracts, usually combines a cap (for instance, the amounts paid in the last twelve months) with the exclusion of lost profits and a carve-out for matters that are not capped, such as willful misconduct, breach of confidentiality and infringement of third party rights. In a business contract, this allocation tends to be upheld, in line with Article 421-A, II, provided it was negotiated and is clear.
Termination: the clause you read on the worst day
The contract must provide for termination for cause and termination for convenience. For unilateral termination, Article 473 requires notice served on the other party and, in its sole paragraph, provides that if one party has made considerable investments to perform the contract, the notice only takes effect after a period compatible with the nature and size of those investments. For termination due to breach, an express termination clause operates automatically, while an implied one requires judicial notice (Article 474), and the injured party may seek termination or demand performance, with damages in either case (Article 475). It is also worth setting out what survives the end: transition, return of data and materials, confidentiality and outstanding obligations.
For extraordinary events, Articles 478 and 479 address termination for excessive burden in contracts of continuous or deferred performance, allowing the defendant to avoid termination by offering to equitably modify the conditions. A renegotiation clause tied to defined events usually settles this before it becomes litigation.
Confidentiality
Beyond the contractual obligation, Law No. 9,279 of May 14, 1996 makes it a crime of unfair competition, in Article 195, XI, to disclose, exploit or use without authorization confidential knowledge, information or data usable in industry or commerce, accessed through a contractual or employment relationship, even after the contract ends. The clause should define what counts as confidential information, the exceptions, how long the duty lasts after termination and what happens to the information at the end of the relationship.
Data protection: who is controller and who is processor
When the contract involves personal data, the roles must be qualified. Law No. 13,709/2018, the LGPD, defines controller and processor in Article 5, VI and VII, and Article 39 requires the processor to process data according to the controller's instructions. Article 42, paragraph 1, I, treats the processor as a controller and makes it jointly liable when it breaches the law or fails to follow the controller's lawful instructions. The sanctions in Article 52 include a fine of up to 2% of revenue in Brazil in the last financial year, capped at BRL 50 million per infraction. At a minimum, the contract must state roles, purpose, legal basis, security measures, subcontracting rules, incident notification and the fate of the data at the end.
Forum or arbitration
Forum selection has changed. Article 63 of the Code of Civil Procedure, as amended by Law No. 14,879 of June 4, 2024, now requires the clause, in addition to being in writing and referring to a specific transaction, to bear a connection to the domicile or residence of one of the parties or to the place of performance. Paragraph 5 treats filing in a random court, with no link to the parties or to the transaction, as an abusive practice that justifies a decline of jurisdiction on the court's own motion. Older clauses electing venues unconnected to the contract need to be revisited.
Arbitration, governed by Law No. 9,307 of September 23, 1996, as amended by Law No. 13,129/2015, is an alternative for disputes over freely transferable property rights and may even be used by the public administration (Article 1, paragraph 1). The arbitral award is not subject to appeal or to judicial confirmation (Article 18), constitutes an enforceable instrument (Article 31) and, absent agreement, must be rendered within six months (Article 23). Annulment may only be sought within 90 days of receipt of notice of the award (Article 33, paragraph 1). In adhesion contracts, the arbitration clause is only effective if the adhering party starts the arbitration or expressly agrees to it, in an attached document or in bold, with a specific signature for that clause (Article 4, paragraph 2). Choosing between courts and arbitration is an economic decision: amount in dispute, need for confidentiality, specialization of the decision maker and cost.
How the firm can help
Oliveira & Jacobovitz drafts, reviews and negotiates business contracts for supply, services, distribution, partnerships and technology, with particular attention to risk allocation, penalties and limitation of liability, data protection obligations and the dispute resolution clause. We also act in renegotiations and exits from contracts in crisis, when the original drafting is finally tested. Each case is assessed individually, with no promise of outcome.
