Berkeley Program in Law and Economics

The development of the soybean agribusiness complex in Brazil took place, in part, as a consequence of credit alternative forms, such as the soybean anticipated sale by contracts. The problems which have motivated this study were the contractual breaches during an expressive increase of price and their lawsuit decisions. Quantitative surveys have been carried out on 147 judicial decisions of Goiás State and with 70 farmers. The tests were done on decisions of first and second instance and a large dispersion of court decisions was found to the identical problem of contractual breaches. A significant difference was also proven between the second instance decisions of the four Civil Chambers of Goiás Court of Justice, however, most of decisions were favoring farmers. The effects of decisions can already be realized such as more requirements of warranties and the reduction in the number of contracts. Those soybean producers who did not breach their contracts also have been negatively affected by the strategic reactions of trading and processing companies. The use of the concept of “social role of contract” inserts a high degree of instability in contracts. Therefore, the transaction costs have been increased for all the agents and the importance of economic sanctions has increased as well.