In a scenario marked by economic crises, exchange rate fluctuations, and unpredictable events, the economic and financial equilibrium of administrative contracts stands out as an essential instrument to guarantee continuity and fairness in public procurement. This article presents the legal foundations, the main grounds for revision, and recent case law on the subject.

What is economic and financial equilibrium in administrative contracts?

Economic and financial equilibrium is an essential principle of Administrative Law, ensuring that the contractor maintains the original conditions of the proposal accepted by the Public Administration.

This guarantee finds constitutional support in article 37, item XXI of the Federal Constitution of 1988, which requires the preservation of the effective conditions agreed upon at the time the contract was formed.

In practice, economic and financial equilibrium ensures that the contractor is not harmed by unforeseen or extraordinary events. These events can make the execution of the contract more expensive than initially anticipated.

This protection is not merely an option for the administration, but a legal duty. The administration can only refuse to restore the balance in cases where it has been proven that there was no valid economic or financial imbalance.

Legal provision and constitutional foundations 

In addition to Article 37 of the Constitution, the principle of economic and financial balance has solid support in Law No. 14.133/2021 , known as the New Law on Bidding and Administrative Contracts.

Article 92: mandatory clauses 

Article 92, item V, requires that contracts contain clauses regarding price, payment terms, base date and frequency of readjustment, as well as mechanisms for monetary updating.

Paragraph XI of the same article establishes that a deadline must be set for responding to the request for reestablishing the economic and financial balance , ensuring speed and security for the contractor.

Article 124: 

Article 124 provides that contracts may be amended by agreement between the parties, including "to restore the initial economic and financial balance" in cases of force majeure, acts of God, acts of government, or unforeseeable or foreseeable events with incalculable consequences.

This device reinforces the extraordinary nature of the rebalancing — dissociating it from periodic reviews — and highlights the objective distribution of risks according to the contractual matrix.

Related principles

The principle of economic and financial equilibrium is also based on general principles of Administrative Law, such as objective good faith, legal certainty, and the prohibition of unjust enrichment.

These principles ensure that public contracts are executed with fairness between the parties, stability in relations, and without the Administration unduly benefiting from unbalanced situations.

Main causes of economic and financial imbalance

Several events can compromise the economic and financial balance of administrative contracts. In recent years, three scenarios have been the most recurrent:

• High inflation
  
• Exchange variation
  
• Pandemics and force majeure events

Situations like these align with the criteria of the theory of unforeseen circumstances: unpredictable events, or predictable events with incalculable consequences, that profoundly alter the contractual equation.

To characterize an economic-financial imbalance, it is necessary to demonstrate that the event exceeded the normal risks of economic activity and impacted the overall cost of execution, delaying or preventing the fulfillment of the contract.

Contract review: when and how to request it?

Contract revision is a legal instrument available to the contractor whenever there is a disruption of the economic and financial balance of the administrative contract. This mechanism can be activated in the following cases:

• Unpredictable eventsEvents that could not have been anticipated by the parties at the time the contract was entered into, but which directly impact its execution.
  
• Predictable events, but with incalculable effects.Situations that, although expected, had consequences of great magnitude, becoming exceptionally costly.
  
• Act of God or force majeure: external events, unavoidable and beyond the control of the parties, such as floods, pandemics or general strikes, that make contractual performance impossible or difficult.
  
• Prince's factUnilateral acts by public authorities, unrelated to the contract, that affect its execution, such as legislative changes, injunctions, or administrative restrictions.
  
• Delays or failures on the part of the Administration itself: actions or omissions by the contracting authority that excessively burden the contracted party or make it impossible to fulfill its obligations properly.

The request for review must be formalized in writing, preferably by means of an official letter or specific document, in accordance with the administrative procedures adopted by the contracting body. In this regard, the applicant must present a precise description of the event that caused the imbalance, accompanied by documentary evidence demonstrating the occurrence of the event and its economic impact.

Among the recommended documents are invoices, comparative cost spreadsheets, market research, technical reports, and any other elements that prove the increase in contractual charges. Furthermore, it is essential to demonstrate the causal link between the supervening event and the alteration of the initially agreed-upon conditions.

The Public Administration, in turn, has the duty to analyze the request based on current legislation and the principles of legality, proportionality, reasonableness, and good faith. When an economic-financial imbalance is proven, the contractual readjustment must be effected through an addendum or other suitable instrument, in order to guarantee the continuity of the contractual execution under equitable conditions.

Rebalancing or readjustment? Key differences

It is common to confuse economic-financial rebalancing with contractual readjustment, but these instruments have different purposes and applications.

• Rebalancing: It is an exceptional contract readjustment, requested when unforeseen or extraordinary events—such as economic crises, pandemics, or government actions—make execution more burdensome. It can be requested at any time, provided there is evidence of the impact and the causal link to the imbalance.
  
• Adjustment: It is a periodic adjustment stipulated in the contract, usually annual, based on official indices such as IPCA or INCC, serving to update the values ​​due to inflation and does not require the occurrence of extraordinary events.

Both aim to maintain the viability of the contract, but through different means. Adjustment is routine and automatic; economic-financial rebalancing is exceptional and depends on technical and legal analysis.

Recent case law on economic and financial equilibrium

The higher courts and audit courts have been reinforcing the importance of economic and financial balance in cases of crises and extraordinary events that impact public contracts.

Precedents of the Superior Court of Justice – Application of the theory of unforeseen circumstances.

The Superior Court of Justice (STJ) has consolidated its position that the theory of unforeseen circumstances can be applied to administrative contracts to restore economic and financial equilibrium. In its decisions, the Court emphasized that revision is only applicable when the triggering event is unforeseeable and brings incalculable consequences to the contractual execution.

In other words, predictable market fluctuations do not justify automatic revision — it is necessary to demonstrate that the event exceeded the risks inherent in the contractual activity.

Understandings of the Courts of Auditors

The courts of accounts, in turn, have reinforced that economic and financial rebalancing should only be granted when there is consistent technical evidence of imbalance caused by extraordinary events and not just by normal market variations.

They follow uniform criteria, such as:

• Price fluctuations alone are not enough.Common or foreseeable increases in input costs do not justify rebalancing. The event must be unforeseen and significant, exceeding the risks normally inherent in the contract.
  
• It is essential to demonstrate global impact.The contractor must present robust documentation proving the impact of the extraordinary event on the entire cost of execution, not just on isolated items.
  
• Application in an emergency contextIn contracts affected by crises such as the COVID-19 pandemic, the courts of accounts recognize the need for rebalancing, provided that it is proven, with data and expert reports, that there was significant burden and a direct impact on contract execution.

The closing thought 

Economic and financial equilibrium is one of the pillars of administrative contracts and represents an essential safeguard to ensure that the commitments made between the Public Authority and the contractor are fulfilled in a fair and feasible manner. The correct application of this principle guarantees legal certainty , efficiency in contract execution , and respect for good faith.

For professionals working with bidding and contracts, understanding the fundamentals, grounds for review, and current case law is essential. The IDP Postgraduate Program in Bidding and Contracts offers solid and practical training, enabling you to face the challenges of public administration with excellence and technical expertise.

References

BRAZIL. Superior Court of Justice. The STJ's view on the theory of unforeseen circumstances in contractual relations. Published on: March 26, 2023. Available at: https://www.stj.jus.br/sites/portalp/Paginas/Comunicacao/Noticias/2023/26032023-A-visao-do-STJ-sobre-a-teoria-de-imprevisao-nas-relacoes-contratuais.aspx.

JUSTEN FILHO, Marçal. Comments on the Law of Bidding and Administrative Contracting: updated according to MP 1.167/2023. 2nd ed. rev., updated and expanded. São Paulo: Thomson Reuters Brasil, 2023. 1869 p. Includes bibliography. ISBN 9786526002315.

JUSTEN FILHO, Marçal. Course in Administrative Law. 15th ed. rev., updated. Rio de Janeiro: Forense, 2024. E-book. (1 online resource). ISBN 9786559649822. Available at: https://integrada.minhabiblioteca.com.br/books/9786559649822.

MAZZA, Alexandre. Administrative law course. 14th ed. rev., updated. São Paulo: Saraiva Jur, 2024. E-book. (1 online resource). ISBN 9788553620296. Available at: https://integrada.minhabiblioteca.com.br/books/9788553620296.