Commercial negotiations, including the negotiation of contractual clauses between parties, have for some time now ceased to occur exclusively through in-person interactions. They are now conducted entirely through virtual means—drafts are exchanged electronically rather than in print, negotiations occur via email, WhatsApp, videoconference, or audio messages, and contracts are frequently signed electronically, in accordance with the provision set forth in Article 784, §4 of the Brazilian Code of Civil Procedure.
However, in many instances, the parties involved in a negotiation fail to adhere to the guidance provided by their legal counsels and prematurely commence performance of the agreed activities before a finalized and duly signed contract is executed by their authorized legal representatives, containing detailed provisions governing the commercial relationship.
Such premature commencement of contractual performance may arise for various reasons, including but not limited to: urgency in initiating business operations, delays in clause negotiations, slow internal legal review, difficulty reaching consensus on certain contractual provisions, or administrative delays in obtaining signatures from authorized representatives. Below are a few examples drawn from real-life scenarios:
- During the exchange of draft contracts, one party may, on several occasions, accept a particular clause or wording proposed by the other party (via email, WhatsApp, audio, or video), prior to the formal execution of a final agreement. Subsequently, before the contract is signed, the same party may change its position and refuse to agree to previously accepted terms due to supervening circumstances.
- The parties may engage in negotiations over a contractual draft through email, only to abandon the process midway due to the demands of daily business activities, ultimately initiating the agreed services or supplies—and respective payments—without finalizing the written agreement or obtaining signatures.
- The parties may reach what appears to be a final consensus on contract terms through virtual exchanges (such as email). However, according to the corporate bylaws or articles of incorporation, only a legal representative is authorized to formally bind the company. If negotiations are conducted by a delegate or representative without such authority, the legal representative may later refuse to sign the draft previously agreed upon, citing disagreement with certain clauses.
These examples illustrate common occurrences in modern contractual negotiations, which now take place predominantly through virtual channels.
The key question arises: Why highlight these situations? The answer lies in their frequency—backlogs of unsigned contracts and prematurely initiated contractual obligations are common—and in the widespread lack of awareness among commercial professionals regarding a critical legal point, which is the central theme of this article: the absence of a formal signature does not preclude the formation of a valid and binding contract.
A contract is the result of a mutual agreement between parties. It may be written or oral, express or implied, onerous or gratuitous, formal or informal (unless a specific form is required by law). In general, a contract is formed upon the acceptance of an offer. The offeror is bound by the offer (unless otherwise stipulated) from the moment it is made.
As a rule, once an offer is accepted, a binding agreement is formed, even in the absence of a formal signature, with respect to the accepted terms.
To elaborate: most commercial contracts do not require a specific form prescribed by law. Contracts involving the supply of goods, materials, equipment, or the provision of services, for example, may be concluded in various ways: orally; through email exchanges; by text or audio messages via messaging applications (e.g., WhatsApp, Telegram); or, most commonly, through the exchange of draft contracts, whether or not all provisions have been finalized and signed.
Article 427 of the Brazilian Civil Code establishes that a proposal binds the offeror and that a contract is formed upon its acceptance. Thus, if Company “A” accepts the terms proposed by Company “B” via email or text/audio message, such terms are, in principle, binding, even in the absence of a signed document. What matters is not the signature, but the existence of evidence of the offer and the corresponding acceptance. For instance, an email or WhatsApp message describing the offer and subsequent acceptance suffices to establish a binding agreement regarding the terms in question.
Civil Code, Article 427:
A contract proposal binds the offeror, unless the terms of the proposal, the nature of the business, or the circumstances of the case indicate otherwise.
Furthermore, Article 422 underscores the governing principles of contractual relations:
Civil Code, Article 422:
The contracting parties are required to observe the principles of probity and good faith during both the formation and performance of the contract.
On the basis of these legal provisions and principles, it is clear that if both parties acted in good faith at the time of the contract’s formation (i.e., during the offer and acceptance phase), the absence of a formal signature does not invalidate the agreement. A contract—even a verbal one—may still be valid and enforceable.
There are, of course, numerous other scenarios and legal nuance addressed in the other articles following Article 427, but for the purpose of this discussion, we focus on the most common cases. In these situations, once an offer is accepted, the contract is deemed to be valid and enforceable, even in a virtual environment and without a signed final version. What is necessary is proof—emails, text messages, or voice messages suffices.
Thus, if Party “A” proposes a penalty clause to Party “B” in the event of non-performance, and Party “B” accepts it via email, even if a formal contract is never signed, a valid and enforceable agreement has been formed regarding that penalty.
It is important to dispel the common misconception that a contract must be signed to be valid. This is not the case when the contract is not subject to any formality imposed by law. A party cannot simply assert, “there is no penalty because the contract was never signed,” if the proposed penalty clause was accepted and evidence of that acceptance exists (e.g., via email).
Nevertheless, there is a legal mechanism available to prevent such unintended contractual formation through mere acceptance of an offer without a signature. This mechanism is the express reservation of non-binding intent, commonly referred to as a “waiver.” By making such a reservation during negotiations, the offeror invokes the exception explicitly stated in Article 427:
“A contract proposal binds the offeror, unless the terms of the proposal, the nature of the business, or the circumstances of the case indicate otherwise.”
Therefore, if a proposal clearly states that it shall not be binding on the offeror unless and until a formal agreement is signed by the legal representative, such reservation will prevail. The proposal will not be binding, even if accepted by the other party.
In plain language: to avoid potential disputes over the enforceability of contract terms accepted during negotiations but never formalized in a signed document, it is advisable to include express reservations in all communications (emails, messages, audio recordings, etc.) stating that negotiations, proposals, acceptances, and all related content shall only become binding upon execution of a formal agreement and/or amendments by the company’s authorized legal representative.
This possibility, expressly contemplated by Article 427, serves as a legal safeguard against the unintended formation of binding contracts in the course of ongoing negotiations prior to the execution of a final, signed contract.
By Mayra Mega Itaborahy
