Building law and regulation in Brazil during Covid-19

There is not yet any construction-specific COVID-19 regulation. The Federal Government, states and municipalities in Brazil are issuing COVID regulations restricting the circulation of people, commerce, transport and services in each jurisdiction and some will affect the construction sector.

As of yet, the government has not put in place subsidies or financial support for employers, contractors or other parties involved.  Some civil construction unions have agreed to relax certain restrictions in collective bargaining agreements, facilitating changes to working hours, granting of collective holidays and the temporary suspension of construction activities, for example.

Yes, the effects of the Epidemic may constitute force majeure if they prevent the performance of contractual obligations.  Construction companies may not be charged fines for delays or suspension of construction caused by the Epidemic. They may be able to postpone period of conclusion of the works and should not be liable for damages for consequences of the Epidemic, if the Courts consider that it constitutes a force majeure event.

Eventually, market disruption and changes in prices caused by the Epidemic may give grounds to terminate or review the commercial terms of the contract in accordance with the principle of economic equilibrium.  In bilateral contracts requiring ongoing performance, a party may invoke this principle to require the contract’s revision or termination where a radical, extraordinary and unforeseeable change in economic conditions creates an excessive burden for one of the parties and exaggerated benefit for the other.

Termination for force majeure is not provided for at law, although may be permitted by the courts if the event of force majeure effectively permanently prevents performance.  However, construction contracts frequently allow the parties to terminate in case performance is prevented by force majeure for a prescribed period.  Termination may also be awarded if the economic equilibrium of the contract is radically changed by an extraordinary and unforeseeable event, which creates an excessive burden for one party, and it is not possible to revise the contract.

There have been certain legislative changes that may constitute a change in law for the purposes of contractual clauses allowing for revision to the commercial terms of the contract in such circumstances.  This will depend on the drafting of the contract and the impact of these legislative changes on the performance of the contract by the parties.