Construction 2016

Last verified on Thursday 9th March 2017

Brazil

Massami Uyeda Junior and Rodrigo de Mello Motta
Arap, Nishi & Uyeda Advogados (São Paulo)
  1. 1.

     Are construction contracts for projects developed in your jurisdiction required to be governed by local law? Are foreign choice-of-law clauses enforceable in contracts for construction projects developed in your jurisdiction?

  2. In general, construction contracts in Brazil between or among private parties are governed by the Brazilian Civil Code (Law No. 10,406 of 2002). However, although unusual, foreign law may be elected to govern construction contracts for projects to be executed in Brazil, provided that the parties involved are private parties and at least one of them is from abroad. Local private parties entering into a construction contract could also elect foreign law to govern such contract, if arbitration is chosen for any dispute resolution. In such cases, the terms and conditions of such contracts are fully enforceable in Brazil if submitted to the elected arbitration board.

    Construction contracts for projects entered into with public administration entities must be regulated and governed by Brazilian law, regardless of the other party’s nationality.

  3. 2.

    Are there any formalities applicable to construction contracts? 

  4. There are no additional formalities applicable to construction contracts governed by Brazilian law. Construction contracts may be freely executed by means of private instruments and notarisation of the corresponding signatures is not required by law, but may be required by any of the parties involved. According to the Brazilian Civil Procedure Code, in order for a private instrument to be an extrajudicial title the contract must be signed by two witnesses.

  5. 3.

    Are contractors entitled to impose mechanics’ or similar liens on work performed in order to secure payment in your jurisdiction? Are lien waivers from contractors and subcontractors enforceable in your jurisdiction? Are these commonly used in your jurisdiction? Can payments to contractors be contingent on receipt of lien waivers?

  6. There is no legal prohibition in Brazil for the imposition of mechanics’ or similar liens on work performed in order to secure payment. Accordingly, such provisions, although not common in construction contracts in Brazil, could be negotiated and agreed upon by private parties in the corresponding agreements. It is important to bear in mind, however, that depending on the type of lien and the good or asset over which it refers to, certain registrations and additional formalities are required. In such cases, it would be important to evaluate, on a case-by-case basis, the convenience of including such mechanics in the construction contract, especially with respect to the time and costs involved in the registration and performance of such liens.

  7. 4.

    Are there any strict liabilities that extend to owners of construction projects in your jurisdiction?

  8. Yes, owners of construction projects may be held directly liable for certain liabilities, regardless of the construction being conducted by a third party, especially with respect to tax matters, whenever the contracting party is the party responsible for collecting and/or retaining a specific tax or contribution. For matters involving environmental matters and/or third party related claims, the construction owner is directly liable for such claims and, according to the terms of its construction contract, may seek indemnification from the contracted party.

    In certain cases, the contracting party (construction owner) may be also held liable for labour liabilities related to the contracted party’s employees. In these particular cases, it is not unusual for the employees to file labour claims against both their direct employer (contracted party) and the contracting party.

  9. 5.

    Do owners typically negotiate a full pass-through of liabilities from their revenue contracts to contractors?

  10. A relevant number of construction contracts in Brazil are directly related to infrastructure projects which, on the other hand, are most likely to involve some public administration entity and some sort of concession agreement. In these cases, in particular, it is very common for the private contracting party to seek, to the extent possible, a back-to-back agreement. Accordingly, it is quite common for such agreements to extend to the contracted party, the same penalties to which the contracting party is subject to before the public administration entity.

  11. 6.

    What are the most common pricing modalities in your jurisdiction? Is one modality more prevalent in certain types of projects than others?

  12. The most common pricing modalities adopted nowadays in Brazil are lump-sum and unit prices. Cost plus or cost reimburse are also adopted in certain cases, however, on a smaller scale. Between lump-sum and unit prices, lump-sum has been the most common modality, particularly in concession agreements, given the fact that the construction cost has to fit into the concessionaire’s business plan. In addition, we have also verified that, given the fact that certain projects have poor quality plans and/or preliminary plans, it is natural that the contracting party tends to transfer cost overrun risk to the contracted party by means of a lump-sum agreement. On the other hand, for construction contracts directly entered into with public administration entities, unit prices are usually the most common modality.

  13. 7.

    What are the key approvals and permits required for a construction project? What is the typical cost and timing to obtain or fulfil such approvals, permits and obligations for large-scale infrastructure projects in your jurisdiction?

  14. Prior to the execution and/or initiation of the construction, the main approval and/or permit is with respect to environmental obligations. Depending on the construction to be executed, federal, state or municipal environmental approvals may be required. The time frame for such approvals may require a considerable amount of time, especially depending on the studies and/or documents required by the environmental agency, which will vary according to the type of construction, its location and the impact it may cause to the environment. These authorisations may take anything from a few months, to up to a year.

    It is important to bear in mind that no construction may be initiated without the corresponding environmental licence or authorisation. Typically, the project may receive a prior authorisation that enables the execution of certain initial activities. For the execution of the construction itself, an installation licence must be obtained. Finally, once the construction is terminated, operation may only initiate upon the obtainment of the corresponding operation licence.

    In addition to environmental licences, certain authorisations from the corresponding municipality may be required. These are usually related to zoning areas and the possibility to perform the intended construction within such areas, as well as the limits of such construction (total area to be constructed, distance to be observed from the street and/or other constructions, etc).

    Once the construction is terminated, all social security payments shall also have been paid and the contracted party shall obtain the corresponding clearance certificate from the social security agency.

    Finally, it is important to bear in mind that depending on the construction to be executed, other authorisations may be required such as, for example, technical term of responsibility – ART shall be obtained by the engineer and architect responsible for the project with the Regional Engineers Council, land tax payment from the Treasury Department of the Municipality, construction approval permit and construction execution permit with the municipal public authorities, authorisation issued by the fire department, the inspection from the labour public attorney’s office, the certificate of occupancy (habite se) with the municipal authorities and, if the project is related to any infrastructure project, the regulatory preliminary approvals. 

  15. 8.

    Are subsurface conditions a common source of delays for construction projects in your jurisdiction? Do the laws of your jurisdiction permit the parties to freely allocate this risk contractually?

  16. Subsurface conditions may represent a considerable source of delay depending on what is being constructed, its location and if any preliminary studies or research have been previously conducted by any of the parties. For large projects such as the construction of hydroelectric plants and/or roads, particularly those with a considerable amount of tunnels, subsurface conditions are most likely to become a source of delay and a key issue to be addressed in the corresponding agreement, especially when no previous studies or research of the subsurface have been conducted. Nevertheless, the parties may freely allocate such risk as they find suitable in the corresponding contract.

  17. 9.

    Does your jurisdiction provide statutory protection for ‘unforeseeable’ or similar risks? Do such statutory protections supersede contractual allocations of risk?

  18. Article 625, section II of the Brazilian Civil Code provides that the contracted party may suspend the construction upon the verification, during the construction, of unpredictable difficulties for its execution, resulting from geological, hydric conditions or any other similar condition that leads the construction to be extremely costly to the contracted party and the contracting party refuses to adjust the price for the project initially provided by the contracted party. In addition, unless otherwise specifically provided in the construction contract, the contracted party shall not be held liable for force majeure or act of god, which, under certain circumstances, may include or be directly related to unforeseeable events.

    In either case, the parties may agree to allocate such risk to the contracted party, in which case the contractual obligations shall supersede the statutory provisions.

  19. 10.

    Will the laws of your jurisdiction strictly interpret contractual provisions granting cost or schedule relief? Or is there flexibility to arrive at ‘equitable’ solutions even if contrary to contractual provisions? Are there any specific rules in your jurisdiction regarding the evidence required to support cost or schedule relief claims?

  20. The Brazilian Civil Code admits the possibility to arrive at ‘equitable’ solutions in certain cases. According to the Brazilian legislation, whenever there is a clear difference between the amount due and the amount corresponding to the moment of its execution in view of unpredictable motives, the judge may review such provision in order to, whenever possible, assure the real amount of the execution. In such cases, it is important to bear in mind that the term "unpredictable motives" shall include situations in which the events themselves were unpredictable and/or whenever the events were predictable but the results were unpredictable. In addition, the facts leading to such event must have been supervening in relation to the moment in which the contract was executed and there must be a loss to the party.

  21. 11.

    Does your jurisdiction recognise economic equilibrium clauses? Have any such clauses been utilised in practice?

  22. Yes, Brazilian legislation recognises economic equilibrium clauses in construction contracts executed between private parties and in contracts executed with public administration entities, including federal, state and municipal governments, autonomous government entities, public foundations, state-owned companies, mixed capital companies, and other entities directly or indirectly controlled by the federal, state, federal district or municipal governments and regulatory agencies.

    With respect to contracts executed between private parties, the Brazilian Civil Code does not specifically have any provisions determining and/or regulating equilibrium clauses. Nevertheless, the Brazilian Civil Code determines that a party may terminate any agreement with continuous or deferred execution whenever the conditions attributed to one party are excessive or whenever there is an extreme advantage to the other party in view of extraordinary and unpredictable events. Furthermore, the Civil Code also determines that, whenever the contracting party has been responsible for elaborating the construction project, the contractor may suspend the construction if such costs turn out to be excessively high to the contractor in view of the occurrence of unpredictable difficulties resulting from geological or hydrological conditions and the contracting party refuses to accept any price adjustment.

    In view of such provisions, it is quite common for economic equilibrium causes to be included in construction contracts under Brazilian legislation. It is also quite common for such provisions to be bilateral and provide that the price may be reduced in case the costs are reduced for any reason.

    For contracts executed with public administration entities, the legislation establishes some rules for contractual changes after its execution. In Brazil, a construction contract for a public work can be unilaterally changed by the public administration when the plan or specifications are modified to better adapt them to their technical objectives, as well as when it is necessary to modify the value of the contract as a result of an increase or reduction in the quantities provided in the agreement, within the limits permitted by the law. In such cases, the contracted party may formally request for the rebalance of the financial and economic equilibrium of the contract in view of a supervening extraordinary and unpredictable event, or a predictable event with unexpected effects, not caused by or with the participation of the contracted party.

  23. 12.

    How significant is the impact of labour unions on construction projects in your jurisdiction?

  24. Labour unions can play a significant role under construction projects, particularly when it comes for salary readjustments, the concession of benefits and the observance of working conditions. Pursuant to Brazilian labour law, employees are entitled to annual readjustments of their salaries according to the terms and conditions negotiated by labour and employer unions. It is fairly common for certain sectors to undergo strikes when negotiations with the unions fail to reach an agreement or in an attempt to force certain conditions proposed by labour unions.

    In addition, certain labour unions known to be more active, also have an important role when it comes to supervising the working conditions to which the workers are subject to. It is important to bear in mind that employers must not only observe labour laws, but also any agreements previously entered into with labour unions, directly or by means of employer’s unions.

  25. 13.

    Highlight any significant public procurement law provisions applicable to public construction project tenders.

  26. The basic legislation with respect to public procurement are: (i) Federal Law No. 8,666 of 1993 (PBLC) which establishes the general rules for public bidding procedures and for administrative agreements providing for works, services, purchases, disposals and leases; (ii) Federal Law No. 10,520 of 2002 (Pregão), which establishes a reversed auction system for government procurement. In general terms, the Public Authority is entitled to apply the rules set forth in the Pregão Law to contract ordinary services, purchases or works (ie, cases in which the description of the works or services can be easily defined in standard terms in the tender documents); (iii) Federal Law No. 12,462 of 2011 (RDC) which establishes another specific bidding procedure, the Special Regime for Public Procurements. RDC was originally issued in view of the high demand for infrastructure works caused by the 2014 FIFA World Cup and the 2016 Olympic Games (ie, new stadiums, airports, public transportation, among others). However, RDC is also applied to implement other types of public works and services, including federal investments in infrastructure and logistics. Please note that the above-mentioned laws are at the federal level. It is possible for states, federal district and municipalities to enact their own laws to regulate such matters, provided that they observe the guidelines and principles imposed by the Federal Laws. In addition, the Brazilian Constitution provides that public companies, mixed capital companies and federal entities can have their own proceedings to contract, to be determined in specific rules. Accordingly, some public entities have their own procurement rules governed by specific laws and/or decrees, such as Petróleo Brasileiro S/A, whose public bidding procedures are provided in Federal Decree No. 2,745/98 and which contains more flexible rules than those foreseen in the PBCL. Nevertheless, this specific set of rules must observe the principles provided in the PBCL.

  27. 14.

    Do contractors commonly carry out construction activities through consortia or other types of joint ventures? Under these arrangements in your jurisdiction, are joint venture partners jointly and severally liable for their obligations?

  28. It is fairly common for certain construction activities to be executed by consortium specifically formed for such purpose, especially in agreements executed with public administration entities.

    For construction contracts in which a consortium is contracted by a private party, provisions limiting the liability among the members of the consortium may be negotiated and agreed with the contracting party. In such case, the contracting party should observe such limitations in case of any claim against the consortium and its members.

    On the other hand, for contracts in which a consortium is contracted by a public administration entity, any sort of liability limitation is null and void and all members of the consortium shall be jointly liable, without any benefit of order, before the public administration entity. Nevertheless, the consortium members could agree on liability limitation within the consortium itself, but such provision may not be opposed before the public administration entity and shall serve only in case of recourse among any of its members.

  29. 15.

    Are time-bar clauses for claims enforceable in your jurisdiction? Do courts in your jurisdiction interpret these provisions strictly?

  30. Yes, time-bar clauses are enforceable under Brazilian law. As a general rule, contracts executed between or among private parties, may be freely negotiated and drafted to suit the parties’ interests, provided that: (i) the purpose of the contract is licit, possible, determined or determinable; and (ii) the parties have duly observed any form or formalities provided in law. Other than that, the parties may freely negotiate and determine the terms and conditions that shall regulate the contract and their relation under or in relation to the contract.

    Accordingly, the parties could freely determine to include time-bar clauses in their agreements, which in case of dispute could be enforceable. It is most likely that under a dispute the interpretation of such clauses should remain strictly to its provision, unless, due to the nature of the matter being discussed, or any omission, contradiction or ambiguity of such clause or situation requires a broader interpretation.

  31. 16.

    Are limitations of liability enforceable in your jurisdiction? What are the exclusions for such limitations?

  32. For contracts involving private parties, limitations of liabilities are not only enforceable, but also fairly common. In this sense, one may find a variety of examples in construction contracts regulated by Brazilian legislation. Such examples include limitations for the total amount to be indemnified by the contracted party to the contracting party under the construction agreement, mechanisms providing for indemnifications to be presented under the concept of a basket, predetermined amounts or limits for indemnification, as well as the exclusion of any indirect loss or damage. As a matter of fact, it is quite common for the parties to adopt a cap for all indemnifications that may be due by the contracted party to the contracting party.

    With respect to contracts executed with public administration there is no limitation of liability. The contracted party must be responsible for all damages caused to the client. However, the contracted party is entitled to the right of prior defence. 

  33. 17.

    Are exclusive remedy clauses enforceable in your jurisdiction?

  34. The new Brazilian Civil Procedure Code (Law No. 13,105 of 2015) with effect from March 2016, has introduced a considerable change with respect to the adoption of exclusive remedy clauses. Pursuant to the new Civil Procedure Code, the parties may agree to certain procedures and/or aspects to be observed in case of a dispute to be submitted to Brazilian courts. Although this provision has been recently enacted and there are still no decisions related to interpretation or enforceability of these types of clauses, one must bear in mind that a judge could decide not to accept any provision in this sense if it is clearly against or conflicting with any legal provision or considered as legally null or void.

  35. 18.

    Are liquidated damage provisions enforceable in your jurisdiction? Are there any limitations on the formulation of such liquidated damages? Does local law allow courts in your jurisdiction to reduce the amount of liquidated damages provided in a construction contract?

  36. The Brazilian Civil Code admits that the parties to a contract may freely agree to the penalties to be applied in case of breach of any of its provisions, which may include delay and/or compensation for losses and damages. In either case, the parties may agree that the amount due will be as specified in the contract or that the parties may claim additional amounts.

    Notwithstanding the above, a party could challenge in the courts such amount and require it to be lowered, under the claim that the obligation was partially fulfilled or that the amount of the penalty being applied is excessively higher than the obligation itself, thus having no proportion with the loss caused by the default and the penalty being applied. Despite the above, the inclusion of such clause in the construction contract may still be considered as enforceable.

  37. 19.

    How is force majeure governed in your jurisdiction? Are carve outs to general force majeure provisions provided by law enforceable?

  38. The sole paragraph of article 393 of the Brazilian Civil Code determines as force majeure or act of God those situations in which the effects could not be avoided or prevented. As a general rule, unless otherwise specifically provided in the corresponding construction contract, the contracted party shall not be held liable for losses resulting from force majeure or act of god. Nevertheless, given that the provision set forth in the Civil Code may still lead to discussion regarding the extent to which a certain event could or could not be avoided or prevented, it is not unusual for the parties to include carve outs to the force majeure and act of God provisions in certain construction contracts. Provided that such carve outs do not expressly conflict with the provision set forth in the Brazilian Civil Code, these provisions should be perfectly enforceable between the parties.

  39. 20.

    What instruments are typically used as performance security in your jurisdiction? Are such instruments liquid?

  40. The most common instruments used as performance security for construction contracts in Brazil are performance bonds. In such cases, performance bonds are typically contracted under the modality of an insurance policy. Accordingly, upon the occurrence of the event being secured and subject to the terms of the insurance policy, the performance security shall be considered a liquid instrument.

    Other types of performance security instruments also commonly used in Brazil are parent company guarantees and bank guarantees. In these cases, the guarantees are usually in the form of a letter of guarantee payable on demand.

  41. 21.

    How is concurrent delay in construction projects treated in your jurisdiction?

  42. Article 476 of the Brazilian Civil Code specifically provides that in bilateral agreements, no party may require the fulfilment of the other party’s obligation prior to fulfilling the obligations attributed to such party – exceptio no adimpleti contractus. In this sense, in a construction project, the contracting party could not require, for instance, the fulfilment of a certain obligation by the contracted party if the fulfilment of such depended on the fulfilment of a previous obligation by the contracting party. It is important to bear in mind that this provision may be applied in case of absolute or partial default by either parties.

    In light of the provision set forth above, the contracted party would have, at least, a claim against the contracting party, for the extension of time for the fulfilment of such obligation, in the same proportion of the contracting party’s default.

  43. 22.

    Does your jurisdiction recognise degrees of negligence and culpability?

  44. Brazilian legislation does not expressly determine or establish levels or degrees of negligence and culpability. However, the levels of negligence and culpability of a party under a construction contract may be considered for purposes of determining the extent of an indemnification and/or penalty to be applied against the defaulting party.

  45. 23.

    Is there a distinction in your jurisdiction between consequential losses and those resulting ‘naturally’ from a breach of contract?

  46. Brazilian legislation makes no distinction between consequential losses and those resulting naturally from the breach of contract. Pursuant to the Brazilian Civil Code, a party shall indemnify the other for the full extension of the damages and losses caused by such actions. Accordingly, such concept includes direct and indirect losses and damages, provided that such damages and losses have a direct relation with such event and there is proof of such relation.

  47. 24.

    Are there mandatory provisions in connection with the transfer of title of works or materials delivered in your jurisdiction?

  48. There are no mandatory provisions other than the delivery of the corresponding documents (invoices, statements, certificates) related to the propriety of materials and equipment, when applicable. The construction contracts will usually determine the provisions to be taken and deliveries to be made by one party to another and the consequent transfer of title of works and materials. In this sense, construction contracts tend to provide greater detail in such provisions whenever the contracted party is not responsible for the safety and maintenance of the equipment and material once delivered to the working site.

  49. 25.

    Must a contractor fulfil specific requirements when presenting an application for payment in your jurisdiction? What is the maximum time provided by law to pay an invoice from a contractor? Do local laws allow owners to make set-offs, deductions, withholdings or retentions from payments due to contractors, and are there any limitations on the circumstances in which owners can exercise these rights?

  50. Brazilian law does not require any specific documents to be presented when applying for payment. Likewise, there is no specified term for the payment to be made upon the presentation of the corresponding invoice. Usually these matters are defined by the parties in the corresponding construction contract. Such provisions usually require the contracted party to present its invoice within a certain number of days as of a specific event, along with additional documents and information, if applicable. The term for payment, provided that there is no challenge or questioning regarding the amount being charged, will usually involve a few days, mainly for the contracting party to be able to take the necessary provisions for the execution of such payment.

    There are also no laws prohibiting or limiting the set-offs, deductions, withholdings or retentions from payments due to the contracted party in case any amount is due to the contracting party in view of the application of any penalties under the construction contract. It is also common for the contracting party to retain a portion of the payment due to the contracted party as a guarantee for future obligations and the completion of the contract pursuant to its terms and conditions. Accordingly, such provisions shall be clearly determined in the agreement.

  51. 26.

    Must insurance policies for construction projects in your jurisdiction be placed with local insurers? Are there restrictions in your jurisdiction regarding the payment of insurance proceeds offshore or to third parties?

  52. Yes, insurance policies for construction projects to be executed in Brazil must be placed with local insurers. The only exception for such restriction are the cases in which the insurance being contracted is not offered in Brazil, provided, however, that it does not represent any violation to the existing legislation, or whenever the coverage for such insurance has not been accepted by an insurance company within the Brazilian territory. In these specific cases insurance policy could be placed with insurers from abroad.

    There are no restrictions regarding the payment of insurance proceeds offshore or to third parties, provided that such provision is included in the terms of the insurance policy. As a matter of fact, for construction contracts with public administration entities and lenders, it is quite common for such parties to figure as beneficiaries of the insurance in order for the payment of the proceeds to be made directly to them, if it is necessary in order to guarantee the full execution of the construction contract.

  53. 27.

    Briefly describe the tax regime applicable to construction projects. Are withholding and value added taxes applicable? Are construction contracts typically structured so that onshore and offshore work are performed by separate contractors?

  54. The most important aspects with respect to the tax regime applicable to construction projects in Brazil are related to agreements entered into with public administration entities. In such contracts, the contracted party must observe certain particular aspects, which usually differ from contracts between private parties.

    For contracts entered into with public administration entities, the contracted private party must register its revenues according to a cash method rather than by the accrual method. In addition, the contracted party must observe certain accounting principles, particularly with respect to the appropriation of certain costs, when involving, especially, concession agreements.

    Withholding tax is applicable under Brazilian legislation. In such cases, the party responsible for such withholding can be held directly liable for not performing such obligation and/or differences withheld. Value added tax can be applied in the acquisition of materials.

    There are no requirements for contracts involving onshore and offshore work to be performed by separate contracts. However, given the fact that there may be a different tax regime between certain local and offshore contracts, it is important to clearly identify each portion of work to be executed and their corresponding compensation. In view of the above, it is common for the parties to execute separate contracts in order to avoid any discussion regarding the extension and/or work executed by either party and the corresponding compensation due in view of such activity.

  55. 28.

    Are there any statutorily mandated or implied warranties under the laws of your jurisdiction? What is the minimum defect liability period in your jurisdiction? Are there specific minimum defect liability periods for certain types of works?

  56. According to the Brazilian Civil Code, in contracts for the construction of buildings or other significant construction works, the party contracted for the rendering of materials and the execution of the construction  shall be liable, for a period of five years, for the soundness and safety of the construction, as well as for the material and for the ground of the construction works. This five-year period refers to the legal warranty period to which the contracted party is subject to and is specific for the above-mentioned circumstances.

    The five-year warranty period shall commence upon the conclusion of the construction works and may not be reduced by the parties in the construction contract.

  57. 29.

    What is the statute of limitations for contractual and non-contractual claims in your jurisdiction?

  58. With respect to claims related to the warranty period described in the item above, upon the occurrence of any of such defects, the construction owner must file the corresponding claim (by means of a lawsuit or arbitration procedure), within one 180 days as of the appearance of such defect.

    On the other hand, for claims related to economic equilibrium or for losses and damages, which are not characterised under the above-mentioned provision, the statute of limitations is 3 and 10 years, respectively.

  59. 30.

    Describe any local arbitration institutions and any specialised construction law courts in your jurisdiction.

  60. There are no specific courts in Brazil specialised in construction law. Any dispute arising from, related with or in any way originating from a construction contract shall be submitted to the governing court, unless the parties have expressly agreed to submit such matters to arbitration.

    The Engineering Institute (Instituto de Engenharia) located in the City of São Paulo, State of São Paulo, holds and maintains, since 1999, an arbitration tribunal specialised in disputes arising from or in any way related to engineering and construction contracts. Among its arbitrators are engineers specialised in several areas of expertise.

  61. 31.

    Are agreements to mediate enforceable? Are there any mandatory mediation provisions for construction contracts in your jurisdiction?

  62. Mediation is not mandatory under Brazilian law. Nevertheless, the parties may freely negotiate the inclusion of such provision in their agreement. In this case, if the parties agreed to such provision, its observance by the parties in case of a dispute is enforceable. Likewise, the decision of such mediation may also be enforceable, provided that an agreement was reached under the mediation.

    In addition, Law No. 13,140 of 2015 has recently enabled the union, states and municipalities to create special boards to prevent and solve administrative conflicts related to agreements entered into with the public administration. In such cases, the same rules generally applicable to mediations involving private parties shall be observed, in an attempt to solve such matters without formal dispute.

  63. 32.

    How prevalent are dispute adjudication boards appointed by the parties in construction contracts in your jurisdiction? Are agreements to submit disputes to dispute adjudication boards enforceable?

  64. The adoption of dispute adjudication boards in construction contracts in Brazil is not common. Most construction contracts in Brazil tend to adopt arbitration for dispute resolution or simply submit such disputes to judicial courts.

    Nevertheless, there is no prohibition for the parties involved to agree upon the adoption of a dispute adjudication board. In such case, given the liberty granted to the parties to freely negotiate and determine the terms and conditions to which they will be bound to pursuant to the agreement, such provision, if adopted, could be enforced, especially if the parties decide that any decision enacted by the corresponding dispute adjudication board is final and binding among the parties.

  65. 33.

    Discuss recent trends in your jurisdiction affecting large-scale construction projects.

  66. Considering Brazil’s economic scenario, Brazil will experience in the short term a new phase of privatisations, public services’ concessions and Public Private Partnerships (PPPs), as part of a fiscal adjustment programme, which focuses on the reduction of the government’s expenditures and the improvement of the efficiency of social programmes.

    Expectations are that assets held by the various public companies in several infrastructure areas (oil, power generation, airports, etc) should be auctioned by public bidding processes for the transfer of their ownership to the private sector, as well as the implementation of a new and large public services’ concessions programme, particularly in areas of transportation (airports, roads, ports and railways), oil and gas, housing and other public utilities that can be hired under the PPP regime. It is the intention of the new government to reduce significantly its direct presence in the operations of public services and to focus on the regulatory aspects of these services.

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Questions

  1. 1.

     Are construction contracts for projects developed in your jurisdiction required to be governed by local law? Are foreign choice-of-law clauses enforceable in contracts for construction projects developed in your jurisdiction?


  2. 2.

    Are there any formalities applicable to construction contracts? 


  3. 3.

    Are contractors entitled to impose mechanics’ or similar liens on work performed in order to secure payment in your jurisdiction? Are lien waivers from contractors and subcontractors enforceable in your jurisdiction? Are these commonly used in your jurisdiction? Can payments to contractors be contingent on receipt of lien waivers?


  4. 4.

    Are there any strict liabilities that extend to owners of construction projects in your jurisdiction?


  5. 5.

    Do owners typically negotiate a full pass-through of liabilities from their revenue contracts to contractors?


  6. 6.

    What are the most common pricing modalities in your jurisdiction? Is one modality more prevalent in certain types of projects than others?


  7. 7.

    What are the key approvals and permits required for a construction project? What is the typical cost and timing to obtain or fulfil such approvals, permits and obligations for large-scale infrastructure projects in your jurisdiction?


  8. 8.

    Are subsurface conditions a common source of delays for construction projects in your jurisdiction? Do the laws of your jurisdiction permit the parties to freely allocate this risk contractually?


  9. 9.

    Does your jurisdiction provide statutory protection for ‘unforeseeable’ or similar risks? Do such statutory protections supersede contractual allocations of risk?


  10. 10.

    Will the laws of your jurisdiction strictly interpret contractual provisions granting cost or schedule relief? Or is there flexibility to arrive at ‘equitable’ solutions even if contrary to contractual provisions? Are there any specific rules in your jurisdiction regarding the evidence required to support cost or schedule relief claims?


  11. 11.

    Does your jurisdiction recognise economic equilibrium clauses? Have any such clauses been utilised in practice?


  12. 12.

    How significant is the impact of labour unions on construction projects in your jurisdiction?


  13. 13.

    Highlight any significant public procurement law provisions applicable to public construction project tenders.


  14. 14.

    Do contractors commonly carry out construction activities through consortia or other types of joint ventures? Under these arrangements in your jurisdiction, are joint venture partners jointly and severally liable for their obligations?


  15. 15.

    Are time-bar clauses for claims enforceable in your jurisdiction? Do courts in your jurisdiction interpret these provisions strictly?


  16. 16.

    Are limitations of liability enforceable in your jurisdiction? What are the exclusions for such limitations?


  17. 17.

    Are exclusive remedy clauses enforceable in your jurisdiction?


  18. 18.

    Are liquidated damage provisions enforceable in your jurisdiction? Are there any limitations on the formulation of such liquidated damages? Does local law allow courts in your jurisdiction to reduce the amount of liquidated damages provided in a construction contract?


  19. 19.

    How is force majeure governed in your jurisdiction? Are carve outs to general force majeure provisions provided by law enforceable?


  20. 20.

    What instruments are typically used as performance security in your jurisdiction? Are such instruments liquid?


  21. 21.

    How is concurrent delay in construction projects treated in your jurisdiction?


  22. 22.

    Does your jurisdiction recognise degrees of negligence and culpability?


  23. 23.

    Is there a distinction in your jurisdiction between consequential losses and those resulting ‘naturally’ from a breach of contract?


  24. 24.

    Are there mandatory provisions in connection with the transfer of title of works or materials delivered in your jurisdiction?


  25. 25.

    Must a contractor fulfil specific requirements when presenting an application for payment in your jurisdiction? What is the maximum time provided by law to pay an invoice from a contractor? Do local laws allow owners to make set-offs, deductions, withholdings or retentions from payments due to contractors, and are there any limitations on the circumstances in which owners can exercise these rights?


  26. 26.

    Must insurance policies for construction projects in your jurisdiction be placed with local insurers? Are there restrictions in your jurisdiction regarding the payment of insurance proceeds offshore or to third parties?


  27. 27.

    Briefly describe the tax regime applicable to construction projects. Are withholding and value added taxes applicable? Are construction contracts typically structured so that onshore and offshore work are performed by separate contractors?


  28. 28.

    Are there any statutorily mandated or implied warranties under the laws of your jurisdiction? What is the minimum defect liability period in your jurisdiction? Are there specific minimum defect liability periods for certain types of works?


  29. 29.

    What is the statute of limitations for contractual and non-contractual claims in your jurisdiction?


  30. 30.

    Describe any local arbitration institutions and any specialised construction law courts in your jurisdiction.


  31. 31.

    Are agreements to mediate enforceable? Are there any mandatory mediation provisions for construction contracts in your jurisdiction?


  32. 32.

    How prevalent are dispute adjudication boards appointed by the parties in construction contracts in your jurisdiction? Are agreements to submit disputes to dispute adjudication boards enforceable?


  33. 33.

    Discuss recent trends in your jurisdiction affecting large-scale construction projects.


Other chapters in Construction 2016

  • Brazil
    Arap, Nishi & Uyeda Advogados (São Paulo)
  • Chile
    Reymond & Cía
  • Peru
    Miranda & Amado Abogados