Legal security x risk of shortages: role of contracts in war scenarios

It is no exaggeration to say that the impacts of the war between Russia and Ukraine affect the entire globalized world. Here in Brazil, agribusiness is one of the sectors most affected by the conflict, since its performance is completely linked to the import of fertilizers. In 2021, 85% of inputs used in national plantations came from the foreign market; Of this total, 23% came from Russia alone. Brazilian dependence, which was once a warning sign, now represents a concrete threat to future harvests. Some experts even point out the risk of internal shortages. In this period of scarcity, the need for rural entrepreneurs to be able to count on specialized legal advice stands out, investing in the predictability and security of agricultural businesses and avoiding new unpleasantness. 

It is a fact that, especially from a contractual perspective, few producers were supported to deal with the crisis in Eastern Europe. Even though uncertainties and risks are part of agricultural activity, traditional contracts do not usually include war situations. Now, clauses that stipulate these scenarios as force majeure, justifying non-compliance with legal agreements, become essential. After all, contractual predictability could - and still can - avoid legal discussions and present new solutions to disputes. 

Therefore, legal support will, from now on, play a central role in negotiating and renegotiating the supply of fertilizers, in port and customs clearance costs, in cases of non-compliance with deliveries and price fluctuations. 

The tendency is for models of fertilizer purchase and sale contracts to increasingly adopt precautions present in other sectors, incorporating new provisions, such as the washout clause, which foresees the economic consequences of dissolutions and contractual breaches, establishing compensation in accordance with the price charged at the time of non-compliance.

 National agro-industries will now pay particular attention to guarantees of delivery of imported inputs, redoubling their attention to forms of solution in conflictual scenarios.

With the crisis, we learned about the fundamental nature of contracts capable of predicting and protecting agribusiness against this type of situation, creating a schedule that brings the possibility of accountability and penalization between the parties. Anticipating a problem, having a negotiating relationship that previously establishes any and all circumstances, reduces the scope for discussions in the judicial sphere and brings more security, tranquility and support to those involved.