STJ Decision Raises Alert Regarding Compensation in Cases of Premature and Unjustified Termination of Service Agreements

The Third Panel of the Superior Court of Justice (“STJ”) issued a precedent recognizing the possibility of compensation in cases involving the unilateral and unjustified termination of service agreements entered into between companies, even in the absence of an express contractual provision addressing the matter. The decision was unanimously rendered in the judgment of Special Appeal No. 2,206,604/SP in May 2025.

The relevance of the decision lies in three main aspects: first, because this is the first time the STJ has examined the issue under the 2002 Civil Code; second, because the precedent indicates — at least preliminarily — what may become the STJ’s prevailing position on the matter, should the Court maintain its understanding as the debate develops; and third, and most importantly, because it creates significant risks that companies should consider when prematurely and unjustifiably terminating their contractual relationships with service providers, whether individuals or legal entities.

In the case at hand, the dispute concerned the unjustified termination of a service agreement between a legal entity, acting as the service provider, and a condominium, acting as the contracting party. The service provider had renewed an agreement with a residential condominium to provide building management services for a fixed term of 60 months.

Ten months after the contractual renewal, the condominium unilaterally terminated the agreement without justification, leading the service provider to file a claim for damages based on Article 603 of the Civil Code.

The Third Panel of the STJ recognized the service provider’s right to compensation, holding that Article 603 also applies to agreements entered into with legal-entity service providers, even in the absence of a specific contractual provision establishing compensation. The Court emphasized that the provision seeks to protect the principle of objective good faith and the parties’ legitimate expectation that a fixed-term agreement will be fully performed, thereby promoting predictability and legal certainty in private relationships.

In its ruling, the Panel reaffirmed its understanding that Articles 593 to 609 of the Civil Code — which govern service agreements — apply, as a general rule, to all types of contracts, except for those subject to special legal regimes, such as construction contracts, consumer relationships, and telecommunications.

Another relevant aspect is that the decision establishes that the law does not require the contract to expressly provide for a compensation clause in the event of premature and unjustified termination. In other words, compensation may be awarded even when the contract contains no provision expressly establishing it.

On the other hand, the decision also recognizes that the parties may lawfully exclude compensation in such circumstances or establish higher penalties, pursuant to Statement No. 33 of the First Commercial Law Conference of the Federal Justice Council, provided that this is done within the context of a negotiated contract between parties with equal bargaining power and on an equitable basis.

According to the Third Panel, the compensation provided for under Article 603 of the Civil Code constitutes a provision of a punitive nature, serving as an appropriate mechanism to discourage the abusive exercise of the right to unilaterally terminate contracts.

In the Court’s understanding, “The amount corresponding to half of the service fee thus constitutes the material losses and damages owed as compensation for material damage and, therefore, should not be combined with an award based on a contractual penalty clause, loss of profits, or even actual damages.” Accordingly, when compensation under Article 603 of the Civil Code applies, it may be supplemented only by any applicable compensation for non-economic damages.

The Third Panel therefore concluded that “[…] service agreements entered into between legal entities for a fixed term are subject to the rules of the Civil Code, meaning that premature termination of the agreement without just cause is sufficient to trigger the penalty provided for in Article 603 of the Civil Code.”

This decision reflects a significant development in the interpretation of compensation in cases involving the unilateral and unjustified termination of service agreements, reinforcing the need for caution from the negotiation stage through the termination of such contracts, as a means of mitigating significant economic risks.

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