A contract signed in the United States can, in many circumstances, produce legal effects and be enforced in Brazil. However, the fact that an agreement is valid under U.S. law does not automatically mean that it can be taken directly to a Brazilian court for immediate enforcement.
For U.S. companies dealing with contracts in Brazil, the central questions are usually different: Does a Brazilian court have jurisdiction? Which country’s law governs the obligations? Does the document qualify for direct enforcement? Is there a foreign forum or arbitration clause? Has a judgment already been obtained in the United States? And where are the debtor’s assets located?
These distinctions become particularly important when the Brazilian party stops paying, breaches a supply or distribution agreement, fails to deliver goods or services, or otherwise refuses to perform its contractual obligations.
Companies facing these issues should distinguish between three concepts: contract validity, judicial enforceability and direct execution. They are related, but they are not the same.
Can a contract signed in the United States be valid in Brazil?
The fact that a contract was signed outside Brazil does not, by itself, make it invalid in Brazil.
Brazilian private international law contains rules determining which law may govern obligations with connections to more than one country. Article 9 of the Brazilian Introductory Law to Brazilian Law — LINDB provides that obligations are generally governed by the law of the country in which they were constituted. It also establishes specific rules when an obligation is to be performed in Brazil.
This means that a U.S. agreement involving a Brazilian company cannot be analyzed only by asking where it was signed.
The place of performance, residence of the parties, formation of the agreement, nature of the obligation, dispute-resolution clause and mandatory Brazilian rules may all become relevant.
This is one reason why companies using U.S. contractual templates for transactions involving Brazil frequently request a review by a contract lawyer in Brazil for foreign companies before signing or when a dispute begins.
When do Brazilian courts have jurisdiction over a U.S. contract?
Brazilian jurisdiction is governed primarily by the Brazilian Code of Civil Procedure.
Under Article 21, Brazilian courts may process and decide a claim when the defendant is domiciled in Brazil, when the obligation must be performed in Brazil, or when the claim is based on an act or fact occurring in Brazil. Article 22 also recognizes Brazilian jurisdiction when the parties expressly or tacitly submit to it.
A typical example is a U.S. supplier that signs a contract with a Brazilian company and later seeks payment from that Brazilian counterparty. Even if the agreement was negotiated electronically and signed in the United States, the domicile of the defendant, place of contractual performance and location of assets may establish substantial connections with Brazil.
However, the contract itself must be reviewed before proceedings are initiated.
Article 25 of the Code of Civil Procedure provides that Brazilian courts generally will not process an action when an international contract contains an exclusive foreign forum clause, provided that the defendant raises the clause in its defence. The rule does not override matters of exclusive Brazilian jurisdiction.
Accordingly, a clause stating that disputes must be heard exclusively in New York, Delaware, California or another U.S. jurisdiction can materially change the enforcement strategy.
The wording of the clause matters.
There is an important difference between a contract stating that a particular court may hear disputes and one expressly establishing an exclusive forum.
Can the U.S. contract be directly enforced in Brazil?
This is one of the most important questions.
Brazilian procedural law distinguishes an ordinary contractual claim from an enforcement proceeding based on an enforceable title.
Under Article 783 of the Code of Civil Procedure, enforcement of a monetary obligation requires an instrument establishing a certain, liquid and enforceable obligation. Article 784 identifies different categories of extrajudicial enforceable instruments.
The same Article 784 specifically addresses foreign instruments.
It provides that extrajudicial enforceable instruments originating in another country do not require prior recognition in Brazil. However, the foreign instrument only has executive force when the formation requirements established by the law of the place where it was executed have been satisfied and Brazil is indicated as the place where the obligation must be performed.
This distinction is critical.
A U.S. contract does not require homologation by the Superior Court of Justice merely because it was signed abroad. A contract is not the same thing as a foreign court judgment.
Nevertheless, not every foreign contract qualifies for direct execution.
The document and the obligation must first be examined to determine whether the requirements for an enforcement proceeding are actually satisfied.
What if the U.S. contract does not qualify for direct enforcement?
Failure to qualify for direct execution does not necessarily mean that the contractual rights cannot be pursued in Brazil.
It may simply mean that a different judicial procedure is required.
For example, Article 700 of the Brazilian Code of Civil Procedure allows a monitory action — ação monitória — when a creditor has written evidence of an obligation but that evidence does not itself have the force of an enforceable title.
Depending on the circumstances, a foreign company may therefore pursue the Brazilian counterparty through a monitory action or through ordinary civil proceedings seeking recognition of the contractual obligation and payment of the debt.
The appropriate route depends on the contract, invoices, purchase orders, correspondence, proof of performance, acknowledgements of debt and other available evidence.
For unpaid commercial obligations, the documentation should also be assessed in connection with the alternatives described in the firm’s guide to debt collection in Brazil for foreign companies.
The distinction between these procedures can have practical consequences for timing, available defences and the stage at which enforcement measures against assets may begin.
Does a U.S. governing-law clause control the dispute?
Foreign companies frequently use agreements stating that the contract is governed by the law of a particular U.S. state.
Such a clause should not simply be ignored, but its effect in Brazilian proceedings requires careful analysis.
For litigation before Brazilian courts, applicable law is determined within the Brazilian private international law framework. Article 9 of the LINDB provides rules regarding the law governing contractual obligations, while Article 17 establishes that foreign laws, acts, judgments and declarations of intent cannot produce effects in Brazil when they violate national sovereignty, public policy or good morals.
The situation is somewhat different in arbitration.
Article 2, paragraph 1, of the Brazilian Arbitration Act — Law No. 9,307/1996 expressly permits parties to choose the rules of law applicable to an arbitration, provided that the choice does not violate public policy or good morals.
Therefore, the interaction among governing law, forum selection and arbitration clauses should be analyzed before a dispute strategy is defined.
What if the contract contains an arbitration clause?
An arbitration clause can fundamentally change the route available to the parties.
Brazilian law recognizes arbitration for disputes concerning disposable property rights, and written arbitration clauses may require the parties to resolve contractual disputes before an arbitral tribunal instead of ordinary courts.
If the arbitration takes place outside Brazil and results in a foreign arbitral award, that award follows a different enforcement procedure.
Article 35 of the Brazilian Arbitration Act provides that a foreign arbitral award must be recognized by the Superior Court of Justice — STJ before it can be recognized or enforced in Brazil.
Consequently, the contract itself may not require recognition, while a foreign arbitral award issued under that same contract generally will.
This is another reason why the dispute-resolution clause should be examined before litigation or arbitration is commenced abroad.
What happens if the U.S. company already obtained a judgment?
The situation changes considerably when the U.S. company has already sued the counterparty in the United States and obtained a court judgment.
At that stage, the creditor is no longer merely trying to enforce a contract. It is seeking to give effect in Brazil to a foreign judicial decision.
Articles 960 and 961 of the Brazilian Code of Civil Procedure establish the general framework for recognition of foreign decisions. As a general rule, a foreign judgment must be recognized before it becomes effective and enforceable in Brazil.
The Superior Court of Justice is responsible for the recognition procedure.
Only after the relevant Brazilian requirements have been satisfied can enforcement of the recognized decision proceed against assets located in Brazil.
This can create an important strategic question for U.S. companies at the beginning of a dispute: whether to litigate first in the United States and later seek recognition in Brazil, or whether a direct proceeding in Brazil is available and more appropriate.
There is no universal answer. The forum clause, evidence, debtor’s location, assets, costs and procedural position must be considered.
Does the contract need to be translated into Portuguese?
For court proceedings, usually yes.
Article 192 of the Brazilian Code of Civil Procedure requires Portuguese to be used in procedural acts and provides that a document written in a foreign language may only be filed in court when accompanied by a Portuguese version transmitted through the appropriate official channels or signed by a sworn translator.
Therefore, an English-language agreement can be reviewed and analyzed before litigation without necessarily being translated immediately, but an official Portuguese translation may be required when the document is submitted to a Brazilian court.
Not every private contract automatically requires an apostille merely because it was executed abroad. Authentication requirements depend on the nature of the document, the signatures, its intended use and the procedure in which it will be presented.
The document formalities should therefore be checked individually rather than applying the same requirement to every foreign agreement.
Evidence matters as much as the contract
Enforcement disputes frequently depend on more than the signed agreement.
A U.S. company considering a claim in Brazil should preserve the contract and amendments, purchase orders, invoices, proof of payment, proof of delivery or service performance, acceptance records, emails and messages, notices of default, acknowledgements of debt, corporate documents identifying the Brazilian counterparty, guarantees and any evidence showing the authority of the person who signed the contract.
The importance of verifying the contracting entity should not be underestimated.
A commercial group may operate under a brand name while different Brazilian legal entities hold contracts, bank accounts and assets. Signing an agreement with the wrong company can complicate subsequent enforcement.
For significant transactions, a legal due diligence in Brazil before execution of the agreement may identify corporate authority, litigation, insolvency risks and other issues that later affect enforcement.
Where are the Brazilian debtor’s assets?
A successful contractual claim is economically useful only if the resulting obligation can ultimately be satisfied.
For that reason, contract enforcement should also consider whether the Brazilian counterparty has bank accounts, receivables, vehicles, real estate, ownership interests or other assets that may legally respond for the debt.
Article 789 of the Code of Civil Procedure establishes the general principle that the debtor responds with present and future assets for its obligations, subject to statutory restrictions.
Asset location can therefore influence the decision regarding where and how a dispute should be pursued.
A favourable U.S. judgment against a Brazilian company with all of its meaningful assets in Brazil may still require a Brazilian recognition and enforcement strategy.
What should be reviewed before trying to enforce a U.S. contract in Brazil?
Before selecting a procedural route, counsel should determine which legal entity signed the contract, whether the signatory had authority, where the agreement was formed, where the obligations were supposed to be performed, what governing law was selected, whether there is an exclusive forum clause, whether there is an arbitration clause, whether the obligation is already due, whether the amount is liquid or can be calculated, whether the document may qualify as an enforceable title, what evidence proves performance by the creditor, whether proceedings already exist abroad and where the Brazilian counterparty’s assets are located.
These questions determine whether the matter involves direct execution, a monitory action, ordinary litigation, arbitration, recognition of a foreign judgment or another procedure.
Can a U.S. company handle the case without opening a Brazilian company?
In many contractual disputes, a foreign creditor does not need to establish a Brazilian subsidiary merely to pursue contractual rights against a Brazilian counterparty.
The foreign company may normally retain a lawyer in Brazil and provide the corporate and representation documents required for the specific proceeding.
A power of attorney and supporting corporate documents are commonly required so that Brazilian counsel can demonstrate both the existence of the foreign company and the authority of the person granting representation.
Additional information on this structure is available in the firm’s guide to legal representation in Brazil.
Foreign companies with broader Brazilian operations may also require continuing legal advisory services for foreign companies in Brazil beyond a single contract dispute.
Can a U.S. contract be enforced in Brazil? The practical answer
Yes, potentially — but the enforcement route depends on the contract and the circumstances.
A U.S. contract may be recognized as evidence of an obligation in Brazil and, in specific circumstances, may qualify for direct enforcement as a foreign extrajudicial title.
In other cases, the creditor may need to obtain a Brazilian judicial decision first. A foreign forum clause may require litigation outside Brazil. An arbitration clause may send the dispute to arbitration. A judgment already obtained in the United States will ordinarily require recognition in Brazil before enforcement against Brazilian assets.
The correct analysis therefore begins with the agreement itself rather than with the assumption that a U.S. contract is either automatically enforceable or automatically ineffective in Brazil.
Foreign companies dealing with a breached agreement, unpaid obligation or Brazilian counterparty can submit the contract and relevant documents through the contact page of Willian Nunes Advogados for an assessment of the Brazilian legal issues involved.
Each matter depends on the contract, evidence, applicable law, jurisdiction, procedural stage and location of the parties and assets.
This article provides general legal information and does not constitute individualized legal advice.