We are constantly entering into contracts. We go to the supermarket, to a bookstore. We subscribe to a new streaming service , or online music service. We buy goods and services, hire people, and agree on desires.

Just as individuals hire people, companies do too.

Both contracts with individuals and contracts with companies are governed by the 2002 Civil Code . For this reason, the terms " business contracts , " " corporate contracts ," or even " contracts between businesspeople " have been adopted when referring to contractual relationships arising from Business Law.

What are the characteristics of these business contracts? What is their purpose?

Let's investigate!

Business contracts: concept and principles

A contract is defined by Ricardo Negrão as a legal transaction in which two (bilateral) or more (multilateral) contracting parties create, modify, or extinguish legal relationships of a patrimonial nature.

Business contracts are specifically agreements between business owners to ensure the legal security of the parties, listing all the elements of the legal transaction within the limits of the law.

If a contractual relationship is established between a businessperson and a legal entity not engaged in business activity, it should be governed by a different branch of law.

Some examples include Civil Law (purchase and sale contracts between a company and an individual), Labor Law (employment contracts between a company and an individual), or Consumer Law (service contracts between a company and a car dealership for its fleet).

These same parties must adhere to certain principles, both in general contracts and in business contracts. Let's look at some of them:

a) Principle of autonomy of will

In simplified terms, we have the freedom to choose whether or not to enter into a contract, with whom to contract, and on what terms to contract, through a declaration of intent.

It doesn't matter if the will comes from a natural or legal person: rights can be created, modified, and extinguished as long as there is no legal prohibition against doing so, nor does it violate public order and good morals.

In business contracts, an example of a legal prohibition would be the formation of gas station cartels, as stipulated in Law No. 8137/90.

The principle of autonomy of will also allows for the stipulation of atypical contracts, that is, those contracts that do not have a form regulated by law. However, the general rules established therein must be observed, as per article 425 of the Civil Code.

b) Principle of the social function of the contract

The freedom to contract, as we have seen, has some limitations, and one of them is the social function of the contract.

Ricardo Negrão understands that limiting the social function of the contract imposes two kinds of duties on the contracting parties.

One of them is to fulfill its economic function within society. Wealth must circulate, thereby driving material progress and, consequently, establishing social well-being.

The second duty is to not harm the non-contractual interests of third parties or the community when regulating one's own interests, ensuring useful and fair exchanges.

One example to consider would be a contract signed between a large company that intends to establish abusive clauses with a small company. Due to the establishment of unfair exchanges, the principle of social function should be used as a limitation on the contract in this specific case.

c) Principle of probity and objective good faith

This is another principle of public order that governs contracts. Contracting parties are expected to act in good faith, obeying a rule of conduct expected of them, as opposed to the internal virtue of each individual (subjective good faith).

Objective good faith must:

• to guide the interpretation of contracts (article 113 of the Civil Code);
• to fulfill the duties inherent in the contract, when not expressly stated in a specific clause, through mandatory conduct (article 422 of the Civil Code); and
• to serve as a guideline in the review of abusive clauses (article 187 of the Civil Code).

The parties must observe this principle from the negotiation stage, through the conclusion of the contract, its execution, and the post-contractual phase, if any.

In business contracts, we can take mergers between companies as an example. Merger agreements are the main documents in this type of negotiation. They must be well-drafted and should include all the rights and obligations of both parties.

In this case, a contract with a clause that serves the best interests of only one of the companies, and not both, would violate the principle of good faith.

d) Principle of consensus

To be valid, all contracts require the consent of the contracting parties. This means that the mere agreement of the parties is sufficient to perfect them.

The solemnity or formality of contracts are exceptions, which must be provided for by law.

One example is the purchase and sale of real estate between companies with a value exceeding 30 minimum wages, which must be formalized through a public deed (article 108 of the Civil Code).

e) Principle of compulsory force

A contract binds the parties to the clauses that have been established. This principle is well known through the Latin maxim pacta sunt servanda , meaning agreements must be kept.

Another very common saying in the legal world is: "The contract is law between the parties ."

The goal is to ensure the legal security of the transaction: the contractual clauses cannot be altered, nor can the contract be terminated by one party without the consent of the other.

Non-compliance with the contract may occur, however, in so-called cases of unforeseen circumstances or force majeure, as per article 393 of the Civil Code.

Other occurrences include the review of excessive performance due to supervening events (article 317 of the Civil Code) and termination due to excessive burden (articles 478 to 480 of the Civil Code).

f) Principle of economic equilibrium

This principle is the basis for two legal concepts: lesion (article 157 of the Civil Code) and the revision or termination of the contract due to excessive supervening onerousness (article 157, §§ 1 and 2, of the Civil Code).

In both cases, it functions as a limit or moderator of the principle of the binding force of contracts and as a byproduct of the principle of objective good faith, with the aim of achieving contractual balance.

However, they can only be applied when there is pressing need or inexperience (article 157 of the Civil Code) or in the event of extraordinary and unforeseeable events (article 478 of the Civil Code).

g) Principle of the relativity of the effects of the contract

As a rule, contracts are effective only between the parties involved and do not bind third parties.

Thus, if the contract is signed by companies A and B, as a rule, it does not produce effects against company C, which is not a party to the contract and cannot be bound by the agreement between A and B.

This principle can be mitigated if there is an interest of the community or even of a third party.

I want to learn more about business contracts!

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• financial market;
• business contracts;
• shareholder agreements;
• strategic management of corporate finance; and
• corporate governance.

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References

NEGRÃO, Ricardo. Course on Commercial and Business Law – v. 2. 11th ed. São Paulo: SaraivaJur, 2022.