Contract Revision Based on Unforeseeability: When It Is Possible and How It Works

The stability and binding force of contracts are pillars of business relations. However, extraordinary and unforeseeable events — such as pandemics, wars, market crashes, hyperinflation, or abrupt regulatory changes — may render the performance of certain obligations excessively burdensome for one of the parties.

It is in these contexts that the theory of unforeseeability applies, allowing for the revision or termination of the contract due to supervening imbalance. In this article, we explain the legal foundations, requirements, recent case law, and how your company can protect itself and act safely in scenarios of contractual unpredictability.

1. What Is the Theory of Unforeseeability?

The theory of unforeseeability is a legal doctrine that permits judicial revision of a valid and duly executed contract when unforeseeable and extraordinary events make the obligation excessively onerous for one party, thereby breaking the initial balance of the agreement.

It constitutes an exception to the rule of pacta sunt servanda (contracts must be fulfilled), provided for in Brazilian law based on the principles of the social function of contracts, objective good faith, and contractual balance.

2. Applicable Legal Foundations

Brazilian Civil Code – Article 317

“When, due to unforeseeable reasons, there arises a manifest disproportion between the value of the obligation due and that at the time of its performance, the judge may, upon request of the party, adjust it in such a way as to ensure, as much as possible, the real value of the obligation.”

Brazilian Civil Code – Article 478

“In contracts of continuous or deferred performance, if the obligation of one of the parties becomes excessively onerous, with extreme advantage to the other, due to extraordinary and unforeseeable events, the debtor may request the termination of the contract.”

Consumer Protection Code – Article 6, V

Recognizes the consumer’s right to modification of contractual clauses that become excessively onerous due to supervening circumstances.

3. Requirements for Revision Based on Unforeseeability

For contractual revision on the grounds of unforeseeability to be judicially admitted, it is necessary to prove:

·         A contract of successive performance or with future execution;

·         A supervening, unforeseeable, and extraordinary event (e.g., pandemic, natural disaster, abrupt macroeconomic instability);

·         A significant contractual imbalance, with excessive burden for one party and undue advantage for the other;

·         Absence of fault or previously assumed risk by the party invoking the revision;

·         Good faith and attempt at extrajudicial renegotiation.

4. Case Law: Revision and the Pandemic as a Concrete Example

The Covid-19 pandemic revived the theory of unforeseeability in the courts, leading to several decisions recognizing the need for proportional and temporary adjustment of obligations.

·         “Contract revision due to excessive burden arising from the pandemic is admissible, provided unpredictability, disproportion in performance, and prior attempt at negotiation are proven.” (STJ – REsp 1.870.120/SP)

·         “The theory of unforeseeability justifies the equitable modification of contractual clauses, particularly in long-term contracts affected by exceptional events.” (TJSP – Civil Appeal 1010422-59.2020.8.26.0100)

·         “The abrupt increase in the cost of essential inputs, combined with currency instability, constitutes an unforeseeable event capable of justifying contract revision.” (TJMG – Civil Appeal 1.0000.21.027345-4/001)

5. Which Contracts May Be Revised Based on Unforeseeability

·         Continuous or long-term supply contracts;

·         Commercial lease agreements affected by external events;

·         Service agreements with fixed price adjustments and variable inputs;

·         Construction, infrastructure, or turnkey contracts impacted by currency devaluation or supply chain disruption;

·         Financial or loan agreements with disproportionate clauses under a new economic context.

6. How to Act Preventively to Reduce Risks

1.       Include a renegotiation clause for extraordinary events

2.       Clauses expressly providing that the parties are required to renegotiate the contract in the event of unforeseeable changes reduce litigation risks and demonstrate good faith.

3.       Monitor risk factors during contract performance

Indicators of inflation, exchange rates, supply chain stability, and public policies should be monitored on an ongoing basis.

4.       Attempt extrajudicial solutions before judicial revision

Offering addenda, extensions, or deferrals before resorting to the courts is viewed favorably by judges.

5.       Formalize the entire contractual history

Notices, emails, renegotiation proposals, and meeting minutes document attempts at resolution and prevent unfounded allegations.

7. Final Considerations

Contract revision based on unforeseeability does not represent a weakening of contracts, but rather the preservation of balance and good faith in exceptional contexts. Companies that act diligently and strategically are able to maintain business relationships, safeguard their interests, and avoid prolonged litigation.

Preventive action guided by specialized legal counsel is the key to structuring resilient contracts, with protective clauses and flexible rebalancing mechanisms.