24/03/2005 – Economic and Financial Equilibrium of Administrative Contracts – Case Copasa
The contracts, even those executed before the Public Administration or any individual representing the public authorities, must be regulated by the basic principle of equity, aiming the contractual balance between the parties and their obligations.
A general principle of the Brazilian law stands to prove it, by repudiating the unlawful enrichment, allowing the legislator and the Brazilian courts to consider null any situations that cause enrichment of one party to the detriment of other. Thus, the modern legislators decided to create and include legal provisions in order to establish a legal environment, which reacts whenever the contractual obligation to one of the parties becomes excessively onerous towards the other party’s obligations. It is in this scenario, the New Brazilian Civil Code (Law. Nº 10.406/02) provided for the legal concept of “economic and financial balance of contracts”, principle that was being for long considered and applied by Brazilian jurisprudence.
By establishing this concept, the law attempts to establish the harmony between the parties, or, at least, some proportionality. By observing these terms, the judiciary branch has modified and also annulled previous contracts that provided, in their clauses, extremely onerous clauses to one of the parties, exposing such parties to unequal conditions. It is important to stress out that it not only refers to isolated cases, rarely occurred or of little importance. It is seen all the time situations that expose service renders to conditions of extreme disproportions above all, when these disadvantageous contracts or conditions are imposed by big corporations or representatives of the public power.
A clear example of these abuses can be verified in the administrative contracts executed by the sanitation company of the State of Minas Gerais (“COPASA”) during the period of 2003 to 2004. During this period, COPASA abusively did not provide for any clauses regulating the restatement and monetary updating, and paid to service renders, therefore, amounts based on unbalanced tables which caused, consequently, damages estimated in more than 10%over the contracted values.
The gravity of said occurrence must be emphasized herein. The contractors, bidding winners and legally empowered in the condition of contracted parties, were hindered of their rights (dully guaranteed under the terms of Law no. 8.666/93) by realizing adjustments and monetary updates of the contracted compensations for constructions being carried on. Such fact characterizes economic and financial unbalance between the contracting parties, and, consequently, generates to COPASA the obligation to indemnify the respective contracted parties, in order to reestablish the contract equilibrium. In several identical cases, former related court decisions were issued in favor of the contracted parties. Therefore, in view of the above mentioned, the economic-financial unbalance of the contracts executed with COPASA in the period of 2003/2004, caused by the denial of contractual price adjustments and monetary updates of the respective values, it is understood that, to a large sum of the contractors responsible for works during the referred period, a compensation is due as a result of damages in this amount higher then 10% of the values contracted in the biddings, which amounts shall be paid by the sanitation company of the State of Minas Gerais.
Source: Almeida Advogados – Leonardo A. F. Palhares