Loss of trust in long-term contracts: termination based on “compelling reasons”

Abstract

This paper analyses the admissibility, the limits, and the challenges, in Brazil, regarding the so-called termination for compelling reasons in long-term contracts, especially due to loss of trust. The starting point of the analysis are the discussions held during the Working Group on Long-Term Contracts in charge to review the Unidroit Principles 2016, where the adoption of a general rule on termination for compelling reasons was debated (and, at the end, rejected). The discussed draft provision was influenced by German Law, where termination for compelling reason is ruled in the German Civil Code. The text analyses the main features of long-term contracts in order to examine the discussions on termination compelling reasons held under the context of the Unidroit Principles, German law and, finally, in Brazilian Law, to study how to deal with the loss of trust in a long-term contract.