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Pacta Sunt Servanda Versus the Social Role of Contracts: the case of Brazilian agriculture contracts

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  • Rezende, Christiane Leles
  • Zylbersztajn, Decio

Abstract

This study explores the instability created by contradictory court decisions related with contract breaches. Forward marketing contracts represent an important source of resources to finance Brazilian agriculture, however a large number of contract breaches were observed during a period of marked increase in soy prices. The study analyzed 161 judicial appeal decisions and a survey was carried with 70 farmers. The results show the difference of judges’ interpretation and the existence of second order effects. The effects of court decisions were more requirements of guarantees and the reduction in the number of contracts. Those soybean farmers who did not breach their contracts have also been negatively affected by the strategic reactions of trading and processing companies. The concept of “social function of the contract” introduced in Brazilian civil code led to a higher degree of instability in contracts, raising transaction costs and motivating private economic sanctions.

Suggested Citation

  • Rezende, Christiane Leles & Zylbersztajn, Decio, 2012. "Pacta Sunt Servanda Versus the Social Role of Contracts: the case of Brazilian agriculture contracts," Revista de Economia e Sociologia Rural (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 50(2), January.
    • Handle: RePEc:ags:revi24:341558
    DOI: 10.22004/ag.econ.341558
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    References listed on IDEAS

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    4. Zylbersztajn, Decio & Farina, Elizabeth Maria Mercier Querido, 1999. "Strictly Coordinated Food-Systems: Exploring The Limits Of The Coasian Firm," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 2(2), pages 1-17.
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