Insolvency of the Promisor-Seller

The art. 106 of the Insolvency and Business Recovery Code (CIRE) is presented as the
rule of the insolvency regime applicable to the promissory contract. According to paragraph 1 of art. 106th of
CIRE, in the case of insolvency of the promisor-seller, the insolvency administrator cannot
refuse to fulfill the promise contract with real effectiveness, a circumstance that binds both
parties to the conclusion of the definitive contract. We are faced with a special precept compared to the general rule
translated into art. 102 CIRE, according to which the insolvency administrator freely chooses the
fulfillment or not of ongoing business. However, this inadmissibility of refusing the
fulfillment of the purchase and sale promise contract depends on the verification of some
requirements, it is required, in particular, that the promissory contract in question has real effectiveness and that
there has been a tradition of the thing that is the object of the promissory contract.

In view of this regime, the doctrine has discussed, within the scope of the effects on ongoing business and
due to the frequency with which, in practice, the situation of promissory contracts is verified effectively
merely mandatory relating to an urban building or autonomous fraction. Having no real effectiveness, the
insolvency administrator is free to refuse compliance. Regarding this point, there are no
big doubts.

The fundamental question in this regard is whether, if the administrator refuses to comply,
the promisor-buyer who has obtained the thing's tradition, enjoys the right to receive the deposit in
double, in accordance with art. 442, no. 2 of the Civil Code, on the one hand, and on the other, benefits from the
qualification of your credit as guaranteed through the right of retention provided for in art. 755, no. 1, al.
C) of the Civil Code.

The art. 442.º, no. 2 of the Civil Code stipulates that the right to a double deposit presupposes verification
cumulative of three factors, namely:

– default by the debtor;
– verification of an unlawful non-compliance;
– and, finally, it requires that the unlawful non-compliance be attributable to the debtor.

The Supreme Court of Justice, systematically confronted with these questions, and with the
antagonism of decisions of the first and second instance courts, pronounced in two
important rulings standardizing jurisprudence.

In the first of them, the Judgment of March 20, 2014 (proc. 92/05.6TYVNG-M.P1.S1), the Supreme Court
Court of Justice opted for an extensive interpretation of arts. 442.º, no. 2 and 755.º, no. 1, al. C) of
Civil Code and art. 106th of CIRE. It understood that the requirement of non-compliance was attributable to the
debtor, included an indirect, mediate or reflex imputability, removing the concept of guilt to
come to mean causality.

But the Judgment does not directly address whether the refusal to comply by the
administrator grants the right to refund the deposit in double, or if, on the contrary, you only owe the
promising buyer receives the deposit back, in simple terms.

Regarding the right of retention set out in art. 755.º, nº1, al. f) of the Civil Code, the Supreme Court of
Justice opted for a restrictive interpretation, attributing the right of retention only to the promisor
buyer who is, at the same time, a consumer.

Detailing later, in the ruling that standardizes jurisprudence of February 12, 2019, proc.
(2384/08.3TBSTS-D.P1.S1-A), the concept of consumer for this purpose, which presupposes that the
property object of the promissory contract is intended for the private use of the promisor-buyer,
It does not include the exercise of professional or profit-making activities.

On April 27, 2021, the Ruling of the Supreme Court of Justice (proc. no. 872/10.0TYVNG-B.P1.S1-
A), came to declare itself for the removal of the regime of article 442º nº 2 of the Civil Code, and, therefore
refusing the right to return double the deposit from the promising buyer, which
one side seems to be justified, given that the administrator's conduct will not usually be illegal, for
another logically confers less solidity on the promisor-buyer who finds himself deprived of the
compensation to which he believed he was entitled when he signed the promissory contract.

It should be noted that this and other jurisprudence has been controversial, even within the country itself.
Supreme Court of Justice, and in the aforementioned rulings, several unsuccessful votes can be found,
which demonstrate the divergence of opinions and the complexity of this issue.

In view of what was decided in these judgments, the trend in jurisprudence is that, if there is a
tradition of the property, the credit of the prospective buyer overrides that of the mortgage creditor and always
If the prospective buyer is a consumer, the right to refund the deposit will be a credit
guaranteed by virtue of the right of retention.*

* This article is for informational purposes only and does not preclude the need for
advice from a lawyer.