Renata Martins de Oliveira Amado, Patricia Yuriko Matsubara, and Raphael Augusto Lopes de Freitas The Civil Code prohibits the provision of lex commissoria clauses, which consist of inserting a clause in fiduciary sale agreements allowing the transfer of ownership of the asset provided as collateral to the creditor if the debt is not paid. The creditor may only sell the asset to a third party and use the proceeds received to pay off the debt.

Renata Martins de Oliveira Amado, Patricia Yuriko Matsubara, and Raphael Augusto Lopes de Freitas

The Civil Code prohibits the provision of lex commissoria clauses, which consist of inserting a clause in fiduciary sale agreements allowing the transfer of ownership of the asset provided as collateral to the creditor if the debt is not paid. The creditor may only sell the asset to a third party and use the proceeds received to pay off the debt.

However, lately the use of the so-called "Martian Pact" has been discussed, which is the permission for the creditor to acquire the asset given as collateral, subject to the assessment of its market value independently by a third party at the time the guaranteed debt matures. Thus, it allows the creditor to pay the difference between the appraised value and the outstanding balance.

Establishing the "Martian Pact" in fiduciary sale agreements allows the debt to be repaid faster in cases in which the creditor is interested in acquiring the asset provided as collateral. In addition, it prevents such asset from being acquired at a very low price to the detriment of the debtor, as well as legal disputes about collateral foreclosure in the event of default.

Although there is no express legal provision about the "Martian Pact", we may already find articles in the legal doctrine and case law on the subject, albeit scarce, allowing it to be established in fiduciary sale agreements.

The "Martian Pact" was analyzed at least on two occasions by the Court of Appeals of the State of São Paulo, and the most recent decision, of August 27, 2009, determined that its stipulation is not illegal, according to the understanding of the relevant legal doctrine.

In September 2015, several prosecutors, judges and lawyers gathered at the VII Civil Law Meeting, organized by the Council of Federal Justice. On such occasion, a proposal was presented for a statement - considered as a doctrinal standard for the interpretation of the Civil Code - providing that the prohibition of lex commissoria clauses does not preclude the establishment of the "Martian Pact".

Although the wording of that statement has not been approved, we can identify an increasing willingness of the legal community to allow the use of the "Martian Pact" in fiduciary sale agreements.