This article was originally published in the Litigation-Brazil Newsletter of the International Law Office – www.lexology.com/commentary.
In the last quarter of 2021, Brazil’s Superior Court of Justice (STJ) reinstated its previous rulings that prevented farmers from using force majeure due to adverse climatic conditions to exempt themselves from paying agribusiness bonds.
Banco do Brasil, one of Brazil’s largest banks, enforced a rural product note (CPR) bond against a cotton producer from the state of Paraná. The producer claimed in court that the bond could not be fulfilled due to the failure of his crops as a consequence of adverse
The producer alleged that he had sustained a drought in recent years which exceeded all normal expectations. The drought affected all producers in Paraná state and, therefore, the producer claimed it would exempt him from having to fulfil the CPR bond under force majeure.
Under section 393 of the Brazilian Civil Code, force majeure may exempt a party from liability if the effects of the extraordinary situation were unavoidable and not preventable. The producer claimed that such clause should be applied to the matter.
Paraná State Court
The producer’s claim was dismissed by the Paraná State Court on the grounds that a lack or excess of rain, or even price variation, are predictable risks in agribusiness that cannot be understood as an extraordinary event which would exempt a party from fulfilling an agreement.
The producer appealed to the STJ, claiming that the Paraná State Court ruling violated section 393 of the Brazilian Civil Code because the drought had been severe enough to impact the entire region and not only cotton production, and thus could not be deemed “expected weather”.
Before the appeal could be reviewed by the STJ, Banco do Brasil sold the credits to an investment fund that took over its position in the lawsuit.
Although the STJ started to review producer’s appeal in April 2014, the judgment was issued only in October 2021, under the review of Justice Antonio Carlos Ferreira from the STJ’s fourth chamber.
In the hearing held on 19 October 2021, Justice Antonio Carlos Ferreira accepted the appeal for trial by the STJ and, on the merits, ruled that section 393 of the Brazilian Civil Code could not be applied to the matter.
The judge’s reasoning was as follows:
- The facts referred by the Paraná State Court could not be reviewed in the appeal. Therefore, the fact that a lack or excess of rain is not an extraordinary event in agribusiness was sustained.
- Previous rulings by the STJ stated that risks which are known or intrinsic to a business are deemed to be accepted by parties in an agreement, such that the element of uncertainty relating to the result of future production was inherently considered by the parties when the agreement was signed and the price was established.
- The producer could not invoke adverse climatic conditions as force majeure to exempt himself from fulfilling the bond, considering that production will always be subject to climatic conditions and other phenomena. Such situation constitutes an inherent risk of agribusiness.
Justice Antonio Carlos Ferreira also noted that the STJ had previously ruled in the same sense back in 2020 and 2013. In the 2013 ruling in particular, the STJ ruled that climatic conditions, adverse or not, cannot be deemed as unpredictable or extraordinary.
The producer’s appeal was unanimously dismissed by the fourth chamber and the bond’s fulfillment was ensured to the investment fund.
Claims relating to CPR bonds (or other relevant agribusiness funding operations) are always indicative of what agribusiness represents in Brazil’s economy.
The reinstatement of the STJ’s rulings regarding risks associated with agribusiness sets out the foundations needed for agribusinesses to continue growing and attracting investments of all kinds, even in times of climate change and adverse events being seen around the globe.
Although climate change has not yet been particularly challenged in the STJ, it is likely that, in the near future, appeals will address climate change as a whole (ie, as opposed to specific adverse conditions or events) in agribusiness matters. The ruling in this case will be relevant in such appeals.
For further information on this topic please contact Paulo Guilherme de Mendonça Lopes or Alexandre Paranhos Tacla Abbruzzini at Leite Tosto E Barros Advogados Associados by telephone (+55 11 3847 3939), fax (+55 11 3847 3800) or email (email@example.com or firstname.lastname@example.org).
 STJ – 4th chamber, REsp 1450667/PR, Rel Min Antonio Carlos Ferreira, j 19 October 2021, DJe 26 October 2021.
 STJ – 3rd chamber, AgInt no AREsp 1602292/RJ, Rel Min Marco Aurélio Bellizze, j 24 August 2020, DJe 1 September 2020.
 STJ – 4th chamber, AgRg no AREsp 155702/MS, Rel Min Raul Araújo, j 16 May 2013, DJe 27 June 2013.