The claimant, a consortium composed of thirteen companies from various countries in Europe and the Americas, undertook to build and supply an industrial complex pursuant to a turnkey contract, governed by Brazilian law, made with a company whose rights and obligations under the contract were subsequently assigned to the respondent, a Brazilian company. The claimant sought to recover costs incurred for additional work and payments it alleged were due. The respondent alleged that the claims brought against it were for unjust enrichment and were therefore time-barred; that they had been settled by an amendment to the parties' contract; and that, by entering into a turnkey contract, the parties had agreed on a lump sum, which meant that no additional compensation could be claimed. The arbitral tribunal undertook a detailed examination of relevant contractual and statutory provisions and case law before dismissing the claim for additional compensation by a majority decision. A dissenting opinion was submitted expressing the view that as the parties' contract accorded with the law it had to be interpreted with the same tolerance as had been applied to the application of the law.

La demanderesse, un consortium de treize sociétés de différents pays d'Europe et d'Amérique, s'était engagée à construire et livrer un complexe industriel, conformément à un contrat clés en main régi par la loi brésilienne, conclu avec une société dont les droits et obligations contractuels avaient ensuite été cédés à la défenderesse, une société brésilienne. La demanderesse cherchait à obtenir le remboursement de frais engagés pour des travaux supplémentaires ainsi que le paiement de sommes qui, selon elle, lui étaient dues. La défenderesse alléguait que les demandes qui la visaient portaient sur un enrichissement sans cause et étaient par conséquent prescrites, qu'elles avaient été réglées par un avenant au contrat et que, en signant un contrat clés en main, les parties étaient convenues d'une somme forfaitaire, ce qui signifiait qu'aucune rémunération supplémentaire ne pouvait être demandée. Le tribunal arbitral a analysé en détail les dispositions contractuelles et légales ainsi que la jurisprudence avant de rejeter la demande de rémunération supplémentaire par une décision à la majorité. Une opinion dissidente a été formulée, indiquant que dans la mesure où le contrat était conforme à la loi, il devait être interprété avec une tolérance identique à celle qui avait tempéré l'application de la loi.

El demandante, un consorcio formado por trece empresas de diversos países europeos y americanos, se comprometió a construir y suministrar un complejo industrial mediante un contrato llave en mano regido por la ley brasileña y celebrado con una empresa cuyos derechos y obligaciones en virtud del contrato posteriormente se asignaron al demandado, una empresa brasileña. El demandante trató de recuperar los costes generados por el trabajo adicional y los pagos que, según afirmó, se le debían. El demandado alegó que las demandas interpuestas contra él eran por enriquecimiento sin causa y que, por consiguiente, habían prescrito; que estas había sido resueltas por medio de una enmienda al contrato firmado por las partes y que, al celebrar un contrato llave en mano, las partes habían acordado una suma global, lo que significa que no podía reclamarse una compensación adicional. El tribunal arbitral procedió a un estudio detallado de las disposiciones legales y contractuales y de la jurisprudencia antes de desestimar la reclamación de una compensación adicional por decisión mayoritaria. Se presentó una opinión divergente que consideraba que, dado que el contrato entre las partes era conforme con la legislación, este debía interpretarse con la misma tolerancia que se había aplicado a la aplicación de la legislación.

'Chapter V

Decisions on prescription and on the effects of Amendment IV

The Arbitral Tribunal rules first on the defense raised by Respondent that claims A to J made by Claimant are extinct by prescription (statute of limitations). It also rules in this Chapter on Respondent's defense that through Amendment IV and the settlement made in such document, claims A . . . and B . . . are also extinguished.

The decisions rendered in this Chapter are in conformity with the Terms of Reference.

5.1. Claims A to J are not extinguished by prescription

. . . Respondent alleged that under Article 206, § 3, IV and V, of the Brazilian Civil Code of 2002, all claims filed by Claimant, with the exception of Claim K (breach of the Mediation Agreement) were extinguished by the passing of time. Respondent alleged that Claims A to J are claims for unjust enrichment and that prescription-statute of limitations-for claims for unjust enrichment is three (3) years.

The legal provision of the Brazilian Civil Code of 2002, cited by Respondent, reads:

Art. 206. Prescribe:

[…]

§ 30 In three years:

[…]

IV-the action for reimbursement of enrichment without cause;

V-the civil action for reparation.1

Respondent alleged that the right to reparation for unjust enrichment is born at the time of the occurrence of the fact or facts that cause the enrichment. Respondent alleged that those causes occurred more than three years before the date when the arbitration claim was filed with the Secretariat of the ICC . . .

The Arbitral Tribunal notes that Respondent did not allege when such facts occurred and that the claim was filed by the Consortium with the Secretariat on . . .

Respondent alleged additionally that the claims for interest, monetary adjustment and attorneys' fees were also extinguished for the same reasons.

Claimant in response alleged that its actions were for the payment of additional works based on the Contract and on contract Brazilian law. For Claimant his actions are contractual and not for unjust enrichment.

The Arbitral Tribunal after examining Claims A to J presented by Claimant concludes that these claims are not for unjust enrichment. The actions filed by Claimant pretend to have Respondent pay for additional works carried out by Claimant during the execution of the Works and for breaches of contract by Respondent.

It will be explained in detail in Chapters VI and VII that Claimant based its Claims A and B on its reading and interpretation of provisions of the Contract, the Consolidated Technical Proposal (Attachment I to the Contract), and [the owner]'s Technical Specifications (Attachment IV to the Contract). In addition, these Claims A and B are supported [sic] by Claimant on the legal provisions for the contrato de empreitada found in the Civil Code of 1916, specifically, article 1246. It reads:

Except as otherwise provided, the contractor hired to develop a work in accordance with a plan previously accepted by the owner, shall not be entitled to claim a price increase, even if the project is modified, unless the change results from written instructions given by the owner.2

As will be explained in more detail in Chapter VI, although this provision requires that the owner of the works delivers to the contractor a written authorization for variations or additional jobs, to allow the latter to receive additional compensation, several Brazilian authors and scholars, and also decisions of Brazilian tribunals, have waived such requirement if the owner had knowledge of the supplementary work, could not ignore what was happening, and never protested.

These claims A and B, find inspiration also in Article 619 of the new Civil Code of 2002 that kept the same provision, but added a new Sole Paragraph to reflect the evolution followed by Brazilian courts and scholars. Such Paragraph reads:

Sole Paragraph. When no written authorization has been given, the owner of the works is obligated to pay the contractor for expansions and additions, according to what is adjudicated, if because of his permanent presence at the site or his continued visits, he could not ignore what was going on and never protested.3

It is clear then that Claims A and B are contractual claims based either on contractual provisions or legal rules applicable to the Contract.

As will be seen in Chapter VII, Claims C to J (excepting Claim I, which was dropped by Claimant) are based on allegations of breaches of contractual obligations by Respondent.

The Consortium, therefore, is not claiming restitution for unjust enrichment according to Brazilian legal principles, as this action, although recognized by Brazilian scholars and Brazilian courts, was not specifically dealt with in the Civil Code of 1916.

Claimant actions are not based either on Articles 884, 885 and 886 of the Civil Code of 2002 that provide:

Art. 884. He, who without a just cause, is enriched in detriment of another, is obligated to return what he unduly obtained, after updating the monetary values.4

Art. 885. The restitution is due, not only when there is no cause to justify the enrichment but also when the cause has ceased to exist.5

Art. 886. There shall be no restitution for enrichment, if the law confers to the aggrieved party other means to recover the prejudice suffered.6

Claimant actions, as explained before, find their justification and cause in the Contract and in legal provisions applicable [to] the contractual relationship that existed between the parties. Claimant has sought to find redress of his grievances exercising its right to obtain payment of obligations due and/or damages. In fact, Claimant actions find support on Articles 389 of the 2002 Brazilian Civil Code and 1056 of the 1916 Code that confer to the creditor of an unfulfilled obligation the right to recover losses and damages, plus interest and monetary adjustment according to indexes legally established.7

Although in Claimant's view, Respondent would be unjustly enriched if its actions are denied, from a stringent legal point of view, the claims filed by Claimant are not based on the legal provisions of unjust enrichment. Therefore, the three (3) years term for prescription in cases of unjust enrichment of Article 206 of the Civil Code of 2002 is not the governing provision in this case.

According to Article 177 of the Brazilian Civil Code of 1916, contractual actions such as the ones filed by Claimant prescribe in thirty (20) [sic] years.

This legal provision reads:

Personal actions ordinarily prescribe in 20 years, real actions in 10 years between persons at hand, and in 15 between absents, counted since the time they could have been filed.8

Such term was reduced to ten (10) years in Article 205 of the Brazilian Civil Code of 2002. Such provision reads:

Art. 205. Prescription occurs in ten years, unless the law has fixed a shorter period.9

Pursuant to Article 2028 of this same Code, the old term will continue to rule if the period of time has run for more than half when the new Code came into force. The provision reads:

Prescription periods shall be those of the previous law, when reduced by this Code if at the time of its coming into force, more than half of the period provided for in the revoked law had elapsed.10

All the facts related to this case occurred in a span of time that started on . . . 1999, when the Letter of Award . . . was signed by the parties and . . . 2003, when the Provisional Acceptance was signed by both parties . . . when it must be assumed that the Works were concluded. The toll for the statute of limitations could not have started before [the aforementioned date in 1999]; and on January 10, 2003, when the Civil Code came into force, only four (4) years and twenty (20) days had elapsed, that is less than half of the twenty year period prescribed in the 1916 Code. Therefore, the prescription period for the actions filed by Claimant was ten (10) years.

Claimant filed its Request for Arbitration with the Secretariat of the ICC on June 14, 2006, in no case after ten (10) years of the occurrence of the facts that are discussed in these proceedings.

The Arbitral Tribunal holds, based on the above, that the term for prescription-statute of limitations-was not completed when Claimant filed its claims with the Secretariat of the ICC, on June 14, 2006. The defense of prescription-statute of limitations-filed by Respondent is dismissed.

5.2. Claims A and B were not settled in Amendment IV

Respondent alleged that in Section 5.2.6 of Amendment No. IV . . . signed on January 30, 2002, the parties agreed not to make claims based upon prior contractual events. Accordingly, the claims filed by Claimant, especially Claims A and B, based on events that took place prior to that date, are inadmissible. Such provision reads as follows:

5.2.6 [The owner] and the Consortium members mutually agree that no further claims about any Contractual event prior to the signature of Amendment No. 4 will be acceptable unless there is new technical request from [the owner] not included in the Consolidated Technical Proposal (Attachment I of the Contract )

Respondent alleged also that in accordance with Article 112 of the Brazilian Civil Code the Tribunal should look more to the real intention of the parties rather than the specific written words of the agreement. In its view there are no doubts that the intention of the parties was to definitely bar the possibility of making claims with basis on the Contract or on Brazilian law for events that occurred prior to January 30, 2002.

Respondent argued that Amendment IV was a settlement of all disputes, or to prevent future disputes, by mutual concessions all in accordance with Article 840 of the Brazilian Civil Code.

Claimant, on the contrary, asserted that the contractual provision of Section 5.2.6 of Amendment IV refers only and exclusively to controversies derived from the delay of [Respondent] in arranging the proper financing of the Project that caused delays in the Works and damaged the Consortium. Consortium incurred additional costs and expenses for such delays. In Amendment IV Respondent promised to pay Claimant the amount of . . . and to pay a Bonus B if certain target dates were met as the timetable for the Works had to be rescheduled. This additional amount and Bonus B would compensate Claimant for the financial delays caused exclusively by [Respondent].

The Arbitral Tribunal believes that the placing of such Section 5.2.6 under the title Additional Amounts related to the financial delays provides a sense that the parties wanted to close and discard all possible disputes directly related to the financial delays. The rest of the provisions under the same title are related to financial delays and to the additional amounts to be paid by [Respondents] to the Consortium. If the intention of the parties was to additionally close other or additional disputes, most probably they would have inserted a similar contractual provision in a different section that did not have a title and contents limited to financial delays and the methods to cure such specific problems.

In fact at some point the parties discussed the possibility of placing this Section 5.2.6 as Section 5.8 to give it wider effects. . . .

The Arbitral Tribunal retains from these testimonies that the placing of Section 5.2.6 where it is now-in 5.2.0, under the title Additional Amounts related to the financial delays-was a subject of discussion between the parties although the parties differ as to the effects of such placing. Although the placing of such clause is not a determinant factor, the Arbitral Tribunal concludes that placing Section 5.2.6 where it finally ended indicates that its effects were tied to the financial delays and the cures envisaged to those events. But this isolated argument does not by itself serve to reject the allegation made by Respondent.

The Arbitral Tribunal finds inappropriate to extend the effects of Section 5.2.6 of Amendment IV to events that had not been finalized but were then occurring, or occurred after the signing of Amendment IV . . . An example serves to point up this matter: . . . months after the signing of Amendment No. IV, drawings with references to piles and foundations were being reviewed and approved by [Respondent].

In addition, there is no evidence in these proceedings that when Amendment IV was signed the Consortium had made any claim concerning the additional works . . ., or any of its other claims. In fact, Respondent argued that Claimant made its claims long after the Works had been finalized. Section 5.2.6 of Amendment IV says that all claims based upon contractual events that occurred prior to its signing were being settled; thus, it is improper to admit that rights or claims that had not been born or had not been put together could be settled.

It is the Arbitral Tribunal's view that the parties are allowed to settle disposable11 rights and actions, but they must know the rights they are waiving partially or totally in exchange of concessions from the other party. Settlement-transação-is a contract where the parties make mutual concessions of rights and it is not conceivable that they do so not knowing what rights they are waiving. If the party that is totally or partially giving away a right ignores the existence of such right that party cannot provide its consent to the settlement contract.

It is not required that such right or action be presented before a court of law or an arbitral tribunal, or even with the other party, because settlement is permitted to avoid future disputes. It is necessary, though, that all elements for the existence of a right or action be met.

Furthermore, Article 843 of the new Brazilian Civil Code of 2002 expresses that in a settlement agreement-transação-rights are declared or recognized. This confirms that a settlement requires an identified, already existing and pending right or claim. But that was not the case when Amendment IV was signed at least with regard to the claims made by Consortium in these proceedings.

The same legal provision indicates that a settlement must be interpreted restrictively. Likewise, Article 114 of the Brazilian Civil Code requires that waivers be also read restrictively.

The Arbitral Tribunal finds that Section 5.2.6 of Amendment IV fully settled existing claims that related to financial delays prior to January 30, 2002. It is improper, however, to embrace other matters not clearly related to those delays that were not expressly and clearly dealt with in Amendment IV or that were occurring at the time of its signing.

Therefore, Respondent's defense arguing the extinction of Claims A and B because they were settled in Amendment IV is dismissed.

Chapter VI

Decisions on Claims A and B

. . . . . . . . .

6.3. Claims A and B and the Contract

To resolve the controversies that derive from [the parties'] different points of view it becomes necessary to analyze the Contract . . . in the context of the Brazilian legal provisions governing it. The Arbitral Tribunal will review the nature of the Contract to determine if it is an Engineering, Procurement, Construction, Turnkey Lump Sump Contract (abbreviated as EPCT). It will review the rights conferred to the parties and the duties and obligations assumed by both parties, in particular those related to the improvement of the soil conditions and the design and construction of foundations. The Arbitral Tribunal will analyze also the provisions for variations or changes to the agreed Works and the process to get authorizations required to implement the changes.

The Arbitral Tribunal will review Brazilian law to discern if Claimant has a right to claim additional compensation for the additional piling and additional concrete underbuilding that substituted the originally planned shallow foundations when Respondent-although not issuing a formal written authorization-knew what was happening and never opposed the initiation and completion of such works.

6.3.1. The legal framework of the Contract: freedom of the parties

The parties using their free will entered into negotiations and signed the Contract all in accordance with Brazilian law, selected by both parties as its governing law.

Under Brazilian law private parties-such as the members of the Consortium and [Respondent]-are free to enter into a contract and to determine its content if they do it within the limits of public policy, good public behavior and if they respect the social functions of contracts (Art. 115 of the Civil Code of 1916; and Articles 122 and 421 of the Civil Code of 2002).

The principle of pacta sunt servanda, that is, that the parties are bound by the terms of their agreements, is well entrenched in the Brazilian legal system. In Brazil, a contract validly entered is law between the parties.

The Brazilian Civil Code contains provisions regulating the contract of enterprise, empreitada (from Article 1237 to Article 1247 of the Civil Code of 1916; and from Article 610 to Article 626 of the Civil Code of 2002). But, it must be pointed out, that the Code provisions on empreitada are disposable or default legal provisions. They will come into play only if the parties have not provided for themselves in the Contract on one specific subject or in case the provisions of the Contract on one specific subject are ambiguous and doubtful to the point of rendering them ineffective.

It is then clear that the Arbitral Tribunal must discern the extent of the duties and rights of the parties examining in detail the nature and the provisions of the Contract.

6.3.2. The Engineering, Procurement, Construction Turnkey (EPCT) Contract

The parties defined the Contract that they entered into in its title and in the preliminary provisions. . . . It must be noted that the parties have used the terms Turnkey, Lump Sum and Engineering, Procurement and Construction Contract. These terms have conceptual and legal consequences, as will be explained below.

In the preliminary statements, or whereas provisions, the parties affirmed:

(C) WHEREAS, [the owner] and the CONSORTIUM wish to enter into an agreement ("CONTRACT") to set forth the terms and conditions under which the CONSORTIUM shall, on a Turnkey basis, split up in several lump sum deliveries, provide the equipment supplies (local and foreign), perform the general engineering, erect the equipment, supervise the erection, perform the related civil works, the commissioning of the equipment as well as provide training and supervision related with the equipment;

This provision sets that the works to be performed by the Consortium for the benefit of [Respondent] would be on a Turnkey basis, split up in several lump sum deliveries. Therefore, the parties have themselves defined this Contract as a Turnkey, Lump Sum relationship.

The intention of the parties was reaffirmed in the same whereas provision: "Consortium shall . . . provide the equipment supplies (local and foreign), perform the general engineering, erect the equipment, perform the related civil works, the commissioning of the equipment and provide training and supervision..." Therefore, Consortium assumed a responsibility that went from the general engineering, that is, the conception of the plant to be erected and the planning of the works to be performed, passing through the selection of the equipment to be installed and the carrying out of the works that permit their installation, up to the final erection of the plant. In addition, the Consortium agreed to provide training and supervision of the equipment. This type of contractual relationship is known also as Engineering, Procurement, Construction Turnkey Contract abbreviated with the acronym, EPCT.

. . . . . . . . .

Under this EPCT contract, the Consortium assumed a firm commitment to attain an end result. This category of obligation is called, in the Brazilian legal system and other civil law systems, an obrigacao de resultado. In this case Consortium took total responsibility for the design and execution of the Facility. Consortium was responsible for turning over to [Respondent] a fully-equipped plant, ready for operation at the turn of the key.

It is important to point out that in an EPCT contract the contractor, in addition to carrying out all tasks indicated in the contractual documents, must undertake those additional tasks omitted in the contractual documents but required to reach the final end. This concept is included in Section 1.6 of the Contract which points out that only those tasks clearly excluded in the contractual documents (Attachments I and II and their annexes) do not fall under the obligations assumed by Consortium. . . .

In view of these provisions the Arbitral Tribunal concludes that Consortium was bound to carry out all the works expressly provided in the contractual documents. In addition, Consortium was bound to carry all the works not expressly provided in such documents, but which were required for an appropriate, efficient, stable and safe erection, and for the proper operation of the facilities, as though the same had been expressly stated in the contract. All these tasks to be carried out by Consortium were considered included and covered by the lump sum price.

Specific works or tasks could be excluded from Consortium's responsibility. To make such exceptions effective, the contractual documents had to clearly attribute a specific work or task to some other entity, be it [Respondent] or a third party that was not a member of the Consortium.

. . . . . . . . .

6.4. Claims A and B and the Brazilian legal system

The Tribunal will now examine Claims A and B under the provisions of Brazilian law.

The Tribunal will take into account the legal provisions that may be applicable to this matter. In addition, the Arbitral Tribunal will also look at secondary sources of Brazilian law, such as writings by legal scholars and decisions taken by Brazilian courts. It will take into account the opinions written by the distinguished legal experts brought by the parties to these proceedings. Furthermore, to enlighten this review [the] Arbitral Tribunal will also take into account sources of comparative law, particularly of countries of the civil law tradition that have similar regulations for the contrato de empreitada.

The Arbitral Tribunal holds that these secondary sources of law do not serve as precedents and they are not imperative or binding, but they are useful to attain a duly justified and fair decision. To review the reasoning for the solution of similar cases-be it in Brazil or in other civil law countries-is an appropriate tool for the Arbitral Tribunal to use.

6.4.1. The Brazilian Civil Code of 1916. The origins of Article 1246.

The Brazilian Civil Code of 1916, among the rules of the contrato de empreitada, included Article 1246:

Except as otherwise provided, the contractor hired to develop a work in accordance with a plan previously accepted by the owner, shall not be entitled to claim a price increase, even if the project is modified, unless the change results from written instructions given by the owner.12

This Brazilian legal provision is similar to Article 1793 of the French Civil Code of 180413 that was reproduced in the Italian Civil Code of 1865. This rule of invariable price without written authorization from the owner was also followed in the Civil Codes of several countries such as Spain (Article 159314), Uruguay (Article 184515) and Venezuela (Article 163816). A modern version of this line of legal tradition may be found also in Article 210917 of the Quebec Civil Code promulgated in 1991.

On the other side, one finds Civil Codes that have amended the rigorous rule initiated by the French. One of such examples is the Chilean Civil Code, promulgated in 1857, that in Article 2003 provides as follows:

Contracts for the construction of a building, entered into by a builder, who takes charge of the whole work for an agreed one and only fixed price, is in addition subject to the following rules:

1. The builder may not ask for an increase of price because the cost salaries or materials has increased, or because additions or changes have been made to the original plan, except when a price has been agreed for such additions or changes.

2. If for unknown circumstances, like an unknown condition of the soil, there are costs that could not be foreseen, the builder must obtain authorization from the owner to incur such costs and if he refuses, the builder may appear before the judge to have him decide if the additional charges could have been foreseen and resolve the increase of price that is due.18

In this provision, the principle of invariability of the price remains the same but the Chileans give the builder the right to claim compensation for additional work or additional costs, arising from circumstances that could not be foreseen at the time the price was agreed upon. In addition, the Chilean provision entitles the builder to file a claim with a judge if the owner is not willing to consider an adjustment to the agreed price.

A major legal mitigation of the French stringent rule came with the promulgation of the Italian Civil Code of 1942. This Code differentiates three different situations of changes made to the works originally agreed:

a) In Article 1659,19 called Concerted Amendments to the Project, it is provided that the contractor cannot make changes to the agreed works if the owner has not given his authorization. Such authorization must be given in writing. If the parties have agreed on a lump sum, the contractor is not entitled to additional compensation, unless agreed otherwise by the parties.

b) In Article 1660,20 called Required Changes to the Project, it is provided that if for the implementation of the works it is required, according to technical rules, to make changes to the project and the parties do not reach an agreement, it is up to the judge to determine the changes required and the corresponding adjustment to the price. If the value of the changes exceeds 1/6 of the lump sum price, the contractor may rescind the contract and obtain a compensation for his services. If the changes are important the owner may rescind the contract but he shall be obligated to pay compensation to the contractor.

c) In Article 1661,21 called Changes ordered by the Owner, it is provided that the owner may bring changes to the project but limited to 1/6 of the agreed price. In such case the contractor has the right to be compensated for the additional works, even when the price has been agreed to be a lump sum. These rules shall not be applicable when the changes, although within the aforesaid indicated limit, bear considerable changes to the nature of the works or for the quantitative estimates provided for in the contract.

The second provision (Article 1660) poses a wise and relevant rule. It dispenses the requirement of written authorization when the changes or variations are overwhelmingly necessary due to technical considerations. In these cases, the contractor can carry on with the changes and in order to preserve the equivalence of the rights and duties assumed by the parties he is entitled to a fair compensation.

Another example of this trend is Article 1214.3 of the 1966 Civil Code of Portugal. It provides that when the written authorization for additional works and costs issued by the owner is missing, the contractor has the right to claim compensation but only to an amount equal to the enrichment of the owner.

In those cases where statutory law has not introduced changes to moderate the requirement of the written authorization, legal scholars and courts of the civil law world have analyzed this provision under the principles of contract law and have in many cases brought derogations to the stiff rule.

The best example is France. Although the basic rule remains the same-a written authorization given by the owner is required for additional works if the contractor wishes to get compensation-there are a few cases where the French courts have exonerated the contractor to get [sic] such authorization. Some French courts have permitted the contractor to obtain compensation if the development of the additional and necessary works destroys the equilibrium of the contract,22 although the written authorization for the additional works has not been obtained from the owner.

These positions take into account that a works contract (empreitada), in addition to its specific rules, is also subject to the general rules of contracts. More specifically, a work contract is subject to the rules that derive from its nature or category. The contract of empreitada is a consensual, bilateral, onerous, and commutative agreement.

It is a consensual agreement which means that it is formed by the sole exchange of consents between persons having capacity to contract. It is also a bilateral agreement, which means that the parties obligate themselves reciprocally, each to the other, so that the obligation of one party is correlative to the obligation of the other. It is also an onerous contract, meaning that each party obtains an advantage in return for his obligation. And finally it is commutative because at the time it is formed, the extent of the obligations of the parties and of the advantages obtained by them in return is certain and determinate.

These principles impose that some equality must exist between the rights and duties of both parties. Although the parties are free to agree as they wish and assume whatever burdens they desire, it is natural that in bilateral agreements [a] certain equivalence should exist between their respective charges. They can of course make gifts if they desire, but there is no reason to believe in this specific case that either Consortium or [Respondent] entered into the Contract with the idea of sacrifice in their minds. As professionals, in response to the obligations they assumed, both companies intended to benefit from the Works . . .

It follows from this last analysis that the provision contained in Article 1246 of the 1916 Brazilian Civil Code that imposes a written authorization from the owner for any change or variation of the works must be applied restrictively. This provision is an exception to the general principles of contract laws when it requires a written authorization from the owner for any variations or changes. Because what is crucial here is not so much that the owner provides a written document giving an authorization for the changes to take place, but that he is informed of what are the changes, their costs and time extensions if any and that he gives his consent to the changes, costs and time extensions. Therefore, if the consent for additional works, additional costs and/or additional time by the owner has been expressly or implicitly manifested to the contractor by other means and there are reasons to believe that the contractor has in good faith acknowledged such consent and has introduced the changes or variations to the project, it would be improper to deprive the builder of a right to be paid for the additional work.

If the contractor is not fairly compensated when the changes and its additional costs are known to the owner and he has given his consent implicitly, it may occur that the financial equilibrium of the contract is broken producing an undue advantage to one of the parties.

The subject becomes more critical if the changes that have been introduced to the project are required for the proper erection and conclusion of the works. If the changes were necessary to avoid the malfunctioning of the project and guarantee the safety of the construction, and also the safety of people, the consent of the owner must be acknowledged when such consent for the additional works and additional costs is manifest and indisputable, although, not in writing. Brazil has followed this line of thought.

However, as it is explained below such position is not unconditional. The parties may have validly agreed differently. They may agree to make the written authorization an indispensable requirement for additional compensation of the contractor. This is common practice in EPCT Lump Sum Contracts.

6.4.2. The Brazilian evolution

In line with the French tradition, Article 1246 of the Brazilian Civil Code of 1916 requires written authorization from the owner to allow contractor to receive additional payments for extraordinary works. However, this apparently imperturbable principle was subdued-in the absence of contractual provisions-when the owner has expressed his consent expressly or implicitly for the changes and the additional costs although not in writing.

In the words of Silvio Rodrigues, the courts have disregarded "it [the rule of Article 1246], based in the understanding that the amount corresponding to increases in the works was to be deemed payable, whenever such increases were performed in full sight of the owner, even in the absence of written evidence".23

In 1949, the Supreme Federal Court of Brazil held that Article 1246 does not prevent claims for additional payments if the owner knew that additional work was being performed and never protested. It must be pointed out, as we will see below, that the Court seems to allude to situations where the parties have not provided otherwise in their contractual provisions. The words used by the Court stress the unfairness of a rigorous attachment to the legal rule: "it would be against good legal ethics to impose upon the constructor the inadequate rigidity of the rule of Article 1246 of the Civil Code and to permit the enrichment of one of the parties and the impoverishment of the other party".24

The Court added that additional works that are indispensable for the quality of the end result and that were carried out under the strict, daily and direct inspection or surveillance of the owner, who never protested, should be compensated even when a written authorization was lacking.25

Several Brazilian legal scholars adhered to this opinion . . .

The Ministers of the Quarta Turma do Superior Tribunal de Justicia of Brazil rendered a decision on October 5, 1999 . . . where they confirmed these views. They stated that in spite of the lack of written authorization, if the additional works were carried out visibly and openly, under the supervision and presence of the owner (or his representatives), payment for such works is due.

Exceptions to this trend do exist, however. A decision issued by the Supreme Federal Tribunal of Brazil, on April 16, 1957,26 took a different course. It decided not to review a decision of the Court of Appeals of the Federal District. This lower court held that a written authorization was required as provided for in Article 1246 of the Brazilian Civil Code. Excerpts of these decisions read as follows:

Excerpt from the Supreme Tribunal's decision:

SUMMARY - Contractor - Not to exceed the contract, since it does not have the action to charge what, without written authorization, exceeds the accepted plan for the execution of the works. Appeal to the Supreme Court not cognized.

Excerpt from the Court of Appeals' decision:

In order to have the right to request payment of his percentage over the constructed area that exceeded the 500 square meters, it is required that the works in the plant had been modified or increased by written instruction of the owner. In addition, the contractor must have the document with such authorization so that he can show it. That is clear in Article 1246 of the Civil Code.

[...]

There is a presumption that the increases and modifications of the works made after the drawings have been accepted by the parties are included in the agreed price, although this presumption vanishes when there is a written instruction that authorizes the increases or modifications.27

The debate about the contents of Article 1246 of the Civil Code of 1916 was not closed. But in 2002 a new Civil Code was promulgated in Brazil. This Code kept the same provision of the old Article 1246 but added a new paragraph waiving the required written authorization if the owner knew of the changes made and never opposed them. The full provision of this new Article 619, now reads:

Except as otherwise provided, the contractor hired to develop a work in accordance with a plan previously accepted by the owner, shall not be entitled to claim a price increase, even if the project is modified, unless the change results from written instructions given by the owner.

Sole Paragraph. When no written authorization has been given, the owner of the works is obligated to pay the contractor for expansions and additions, according to what is adjudicated, if because of his permanent presence at the site or his continued visits, he could not ignore what was going on and never protested.28

Brazilian legislation made definitely clear that the owner who was continually present at the site, or went there periodically, could not ignore the changes or additions that were being made in the works. In addition, if the owner never protested, it is assumed that he gave his consent to those extraordinary works and is obligated to compensate the contractor.

Neither the Brazilian courts nor the new Civil Code of 2002 intended to void contractual provisions if the parties had agreed differently and the written authorization was required in their contracts. In accordance with the freedom of the parties, the contractual provision will prevail.

As we have stated earlier, the provisions of the Brazilian Civil Code-and the readings of such Code made by scholars or the Brazilian courts-are disposable or default provisions. In these matters, the parties have complete freedom to provide as they wish. The parties can agree that a prior written authorization for additional works and additional compensation must be issued by the owner. If that is the case, the contractual provisions will prevail over the Sole Paragraph of Article 619 of the 2002 Civil Code or the thoughts of scholars.

Brazilian courts-correctly-give priority to the parties' agreements. In the aforementioned 1949 decision of the Supreme Federal Court of Brazil it seems that the Court held this view. The paragraph where the Court deals with this matter says in Portuguese:

Quanto às obras acrescidas o laudo pericial as comprova, sendo tais e de tal espécie que sua efetivação teria sido impossível, se não fossem autorizadas pelo réu, sob cuja direta diária e rigorosa fiscalização foram feitas. Por isso, e porque, à falta de documento escrito, não seria de boa moral juridica impor ao autor a inadequada rigidez da regra do art. 1246 do Cód. Civil como o que se facilitaria a locupletação de um contratante corn a espoliação do outro.29 (Emphasis added)

The English translation of this insert reads:

With regard to the additional works the expert's report proves that they occurred and they are of such nature that they would have been impossible to carry out if they were not authorized by the Defendant, under whose direct, daily and rigorous supervision they were made. Therefore, and in the absence of a written document, it would be against good legal ethics to impose upon the constructor the inadequate rigidity of the rule of Article 1246 of the Civil Code and to permit the enrichment of one of the parties and the impoverishment of the other party. (Emphasis added)

It may be said that the reference made by this Court decision to a written document is not sufficiently clear as it does not explain well if it is referring to a contractual provision or to other written document.

But a more recent decision issued by the Primeira Camara Cível, Apelação Civel No.3.414/96, Estado de Rio de Janeiro (First Civil Chamber, Civil Appeals No. 3,414/96, State of Rio de Janeiro) on July 16, 1996, confirmed that if the parties had agreed on a prior written approval, such contractual provision should govern any conflict that the parties may have had on such matter. We copy below portions of this decision:

Qualquer alteração ou modificação do projeto só poderia ser realizada mediate autorização prévia, expressa e por escrito da dona dea oba ou da gerenciadora e a empreiteira não teria direito, em caso algum a receber indenização por quaisquer obras realizadas sem esssa autorização (cláusula 7.2 e 73.3, fls. 29/30).

A apelante não contesta que a empreitada era dessa natureza e que os serviçios adicionais foram executados sem essa prévia concordância, mas alega que depois de concluida a obra, a autora e a gerenciadora anuiram com a cobrança.

É certo que houve negociações a respeito do pagamento desses serviços adicionais (fls. 182/189), mas é inegável que as tratativas não chegaram a bom termo.

Na carta de fls. 182, está dito pela IESA, gerenciadora da obra, que alertou "firmemente a CLIMATEC durante as negociações que o valor contratado não seria acrescido".

Portanto, houve negociação, mas não chegaram as partes a nenhum acordo sobre o pagamento dos serviços adicionais.

Meras tratativas não geram obrigação.

À hipótese tem inteira aplicação a cláusula 7.3 do contrato: "A contratada não terá direito, em case algum, a receber indenização da Contratante, por quaisquer obras realizadas sem a autorização prévia acima referida, cabendo à contratada sua demolição, sem ônus para a contratante, se assim a Contratante determinar."

The English translation reads as follows:

Any change or modification of the project could only have taken place through previous authorization, express and in written form of the construction's owner or manager and the constructor had no right, in any case, to receive reimbursement for any work done without this authorization.

The appellant does not deny that the contract was of this nature and that additional work was executed without this previous agreement, but alleges that after the completion of the work, the claimant and the manager consented with the charge.

It is certain that there were negotiations concerning the project of the additional services (p. 182/189), but it is incontestable that the negotiations did not turn out successful.

In the letter of p. 182, it is written by IESA, that manages the works, that it "strongly warned CLIMATEC during the negotiations that the contracted value would not be increased".

Therefore, there were negotiations, but the parties did not search an agreement about the payment of additional services.

Single discussions do not breed obligations.

To the hypothesis there is a full application of clause 7.3 of the contract: "The constructor has no right, in any case, to receive reimbursement for any work done without authorization previously referred to above. The constructor has, in this case, to demolish without any payment from the owner, if the latter decides so."

It must be pointed out that the Contract entered into by the parties in these proceedings was defined by them as a Turnkey Lump Sum Engineering, Procurement and Construction Contract, where Consortium agreed to provide the equipment supplies (local and foreign), perform the general engineering, erect the equipment, perform the related civil works, the commissioning of the equipment and provide training and supervision.

Under this EPCT contract, Consortium assumed a firm commitment to attain an end result, an obrigacao de resultado. In this case Consortium was responsible for turning over to [Respondent] a fully-equipped plant, ready for operation at the turn of the key.

In accordance with Section 1.6 of the Contract, the Consortium, in addition to carrying out all tasks indicated in the contractual documents, undertook those additional tasks omitted in the contractual documents but required to reach the final end. Therefore, Consortium was bound to carry all the works not expressly provided in such documents, but which were required for an appropriate, efficient, stable and safe erection, and for the proper operation of the facilities, as though the same had been expressly included in the contract. All these tasks undertaken by the Consortium are considered included in the lump sum price.

It derives from the nature of the Contract and from its specific provisions (Section 27.3) that a prior authorization from [Respondent] was required if supplementary compensation was to be claimed by Consortium for additional Works. Any change made by Consortium that was not specifically authorized by [Respondent] as to cost (and time if applicable) falls within the lump sum price agreed by the parties.

The Arbitral Tribunal concludes that in spite of the evolution of Brazilian law to substitute the requirement of a written approval issued by the owner for implicit consent when he is present at the time of the additional works and never opposed them, the parties may validly agree otherwise. If the parties require a written authorization from the owner to compensate the contractor for additional works, there are no legal grounds to invalidate this contractual provision.

6.4.3. Application in time

The parties have discussed, with different views, if the new sole paragraph of Article 619 of the Civil Code of 2002, is applicable to the case under consideration by this Arbitral Tribunal.

The new Brazilian Civil Code provides in Article 2044 that it would come into force one year after its promulgation. The new Code was promulgated on January 10, 2002. Therefore, it came into force on January 10, 2003.

The Contract was entered into on . . ., before the coming into effect of the new Code.

On the specific subject of Contracts, the new Code provides in Article 2035 that the validity of conventions entered into before the coming into effect of the 2002 Code is ruled by the provisions of the abrogated Code. But the effects produced after the coming into force of the Code of 2002, would be ruled by the new Code. The question then arises if the Sole Paragraph of Article 619 of the new Civil Code would govern this controversy.

To discern, however, whether the matter under consideration is to be governed by the abrogated Code or by the more recently promulgated Code becomes academic. Such discussion is inconsequential to the matter under consideration. In spite of the evolution of Brazilian law to substitute the requirement of a written approval issued by the owner for [sic] implicit consent, the parties may validly agree otherwise. If the parties require a written authorization from the owner to compensate the contractor for additional works, there are no legal grounds to invalidate this contractual provision.'

1
In Portuguese this provision reads: "Art. 206. Prescreve: ... § 30 Em três anos ... IV - a pretensão de ressarcimento de enriquecimento sem causa; V - a pretenslo de reparação civil;"

2
Salvo estipulação em contrario, o empreiteiro que se incumbir de executar uma obra, segundo plano aceito por quem a encomendou, não terá direito a exigir acréscimo no preço, ainda que sejam introduzidas modificações no projeto, a não ser que estas resultem de instruções escritas do dono da obra.

3
Paragrafo único. Ainda que não tenha havido autorização escrita, o dono da obra é obrigado a pagar ao empreiteiro os aumentos e acréscimos, segundo o que for arbitrado, se, sempre presente a obra, por continuadas visitas, não podia ignorar o que se estava passando, e nunca protestou.

4
Aquele que, sem justa causa, se enriquecer à custa de outrem, será obrigado a restituir o indevidamente auferido, feita a atualização dos va/ores monetários.

5
A restituição é devida, não só quando não tenha havido causa que justifique o enriquecimento, mas também se esta deixou de existir.

6
Não caberá a restituição por enriquecimento, se a lei conferir ao lesado outros meios para se ressarcir do prejuízo sofrido.

7
Não cumprida a obrigação, responde o devedor por perdas e danos, mais juros e atualização monetária segundo índices oficiais regularmente estabelecidos.

8
As ações pessoais prescrevem, ordinariamente, em 20 anos, as reais em 10, entre presentes, e entre ausentes em 15, contados da data em que poderiam ter sido propostas.

9
A prescrição ocorre em dez anos, quando a lei não lhe haja fixado prazo menor.

10
Serão os da lei anterior os prazos, quando reduzidos por este Código, e se, na data de sua entrada em vigor, já houver transcorrido mais da metade do tempo estabelecido na lei revogada.

11
It alludes to rights or actions where no public interest is in play and private parties can freely exercise, waive, sell, alienate, transfer, assign or ... settle.

12
Salvo estipulação em contrario, o empreiteiro que se incumbir de executar uma obra, segundo plano aceito por quem a encomendou, não terá direito a exigir acréscimo no preço, ainda que sejam introduzidas modificações no projeto, a não ser que estas resultem de instruções escritas do dono da obra.

13
Art. 1793. Where an architect or a contractor has undertaken to erect a building at a fixed price, according to a plan settled and agreed with the owner of the ground, he may not ask for any increase in the price, either under the pretext of increase in labour or material, or under that of changes or additions made in the plan, unless those changes or additions have been authorized in writing and the price agreed with the owner.

14
Articulo 1593. El arquitecto o contratista que se encarga por un ajuste alzado de la construcción de un edificio u otra obra en vista de un plano convenido con el propietario del suelo, no puede pedir aumento de precio aunque se haya aumentado el de los jornales o materiales; pero podrá hacerlo cuando se haya hecho algún cambio en el plano que produzca aumento de obra, siempre que hubiese dado su autorización el propietario.

15
1845. Cuando un empresario se ha encargado por un tanto de la ejecución de una obra conforme a un plan acordado, no puede reclamar aumento alguno de precio, ni bajo pretexto de la mano de obra o de los materiales ni de modificaciones hechas en el plan, a no ser que haya sido autorizado para estas por escrito y por un precio convenido con el propietario.

16
ArtIculo 1.638. Cuando un arquitecto o un empresario se han encargado de construir un edificio a destajo, conforme a un plano convenido con el propietario del suelo, no pueden pedir ningún aumento de precio, ni bajo pretexto de que el precio de la obra de mano o de los materiales ha aumentado, ni bajo pretexto de que se han hecho al plano cambios o aumentos, si estos cambios o aumentos no han sido autorizados por escrito y al precio convenido con el propietario.

17
2109. Where the price is fixed by the contract, the client shall pay the price agreed, and may not claim a reduction of the price on the ground that the work or service required less effort or cost less than had been foreseen. Similarly, the contractor or the provider of services may not claim an increase of the price for the opposite reason. Unless otherwise agreed by the parties, the price fixed by the contract remains unchanged notwithstanding any modification of the original terms and conditions of performance.

18
Art. 2003. Los contratos para construcción de edificios, celebrados con un empresario, que se encarga de toda la obra por un precio único prefijado, se sujetan además a las reglas siguientes: 1. El empresario no podrá pedir aumento de precio, a pretexto de haber encarecido los jornales o los materiales, o de haberse hecho agregaciones o modificaciones en el plan primitivo; salvo que se haya ajustado un precio particular por dichas agregaciones o modificaciones. 2. Si circunstancias desconocidas, como un vicio oculto del suelo, ocasionaren costos que no pudieron preverse, deberá el empresario hacerse autorizar para ellos por el dueño; y si éste rehúsa, podrá ocurrir al juez para que decida si ha debido o no preverse el recargo de obra, y fije el aumento de precio que por esta razón corresponda.

19
Art. 1659 Variazioni concordate del progetto L'appaltatore non può apportare variazioni alle modalità convenute dell'opera se ii committente non le ha autorizzate. L'autorizzazione si deve provare per iscritto. Anche quando le modificazioni sono state autorizzate, l'appaltatore, se ii prezzo dell'intera opera è stato determinato globalmente, non ha diritto a compenso per le variazioni o per le aggiunte, salvo diverse pattuizione.

20
Art 1660 Variazioni necessarie del progetto Se per l'esecuzione dell'opera a regola d'arte è necessario apportare variazioni al progetto e le parti non si accordano, spetta al giudice di determinate le variazioni da introdurre e le correlative variazioni del prezzo. Se l'importo delle variazioni supera sesto del prezzo complessivo convenuto, l'appaltatore può recedere dal contratto e può ottenere, secondo le circostanze, un equa indennità. Se le variazioni sono di notevole entità, it committente può recedere dal contralto ed è tenuto a corrispondere un equo indennizzo.

21
Art. 1661 Variazioni ordinate dal committente ll committente può apportare variazioni al progetto, purché il loro ammontare non superi il sesto del prezzo complessivo convenuto. L'appaltatore ha diritto al compenso per i maggiori lavori eseguiti, anche se il prezzo dell'opera era stato determinato globalmente. La disposizione del comma precedente non si applica quando le variazioni, pur essendo contenute nei limiti suddetti, importano notevoli modificazioni della natura dell'opera o dei quantitativi nelle singole categorie di lavori previste nel contratto per l'esecuzione dell'opera medesima.

22
"Bouleversent l'économie du marché". In Contrat d'entreprise, by Bernard Boubli, Rép. Civ. Dalloz, avril 2003.

23
Cited [in an expert's report produced by Claimant].

24
Ibidem . . .

25
[From the aforementioned expert's second report.].

26
Recurso Extraordinário No. 33.430, Revista Trimestral de Jurisprudencia do Supremo Tribunal Federal, v. 2, julho, agosto e setembro de 1957, p. 107/109.

27
Para que tivesse este direito a exigir pagamento de sua percentagem calculada sôbre a área construída que excedeu aos 500 metros quadrados, seria de mister que a obra ajustada na planta tivesse sido alterada ou aumentada mediante instrução por escrito do autor contratante, e o empreiteiro tivesse o instrumento de tal autorização para ser por êste exibido. É isto o que está ciaro no art. 1246 do Código Civil. [..] Há uma presunção de que os aumentos e alterações da obra posteriores ao plano aceito se incluem no preço contratado, embora tal presunção ceda em face do instrumento escrito que as autorizasse.

28
Salvo estipulação em contrário, o empreiteiro que se incumbir de executar uma obra, segundo plano aceito por quem a encomendou, não terá direito a exigir acréscimo no preço, ainda que sejam introduzidas modificações no projeto, a não ser que estas resultem de instruções escritas do dono da obra. Paragrafo único. Ainda que não tenha havido autorização escrita, o dono da obra é obrigado a pagar ao empreiteiro os aumentos e acréscimos, segundo o que for arbitrado, se, sempre presente à obra, por continuadas visitas, não podia ignorar o que se estava passando, e nunca protestou.

29
Revista Forense, Novembro, 1950, p. 110.