A key issue in business contracts is how risks and responsibilities are allocated within contractual chains. Another major discussion is whether—and to what extent—the way risks and responsibilities are shared internally affects liability toward third parties. This includes vulnerable groups like consumers and workers, as well as non-contractual creditors such as victims of environmental damage. These cases involve extra-contractual liability.
This question matters because business contracts are assumed to be based on equal bargaining power. The agreed-upon risk allocation should hold, even when complex issues arise. One such issue is whether a duty of care exists toward all chain participants, even those not directly bound by contracts.
However, the focus of concern in this article is to determine the extent of the allocation of risks and responsibilities established by economic agents in relation to third parties, especially those who deserve special protection.
In this sense, the reflection proposed here aims to give practical effect to the principle of balance between power and responsibility, avoiding the creation of an environment of organized irresponsibility towards third parties.
Consumer Law’s Joint Liability Challenge
In the case of Consumer Law, as previously discussed, there is a general rule of joint and several liability among all participants in the chain. Thus, the challenge is to try to define the direct participants in the chain, in order to not unduly extend joint and several liability to those with indirect or ancillary participation in the supply of the product or service.
However, Labor Law and Environmental Law lack provisions for joint and several liability among chain members. Here, greater effort is needed to determine liability for damages suffered by third parties. The extent of each participant’s responsibility must be carefully assessed.
To advance this discussion, it is necessary to consider the recent transformations that the duty of diligence of company administrators has undergone. In effect, this duty has been gaining a procedural dimension, in order to encompass the care with which managers structure the business organization to deal with the respective risks.
As a result, the duty of diligence extends equally to business partners, requiring care in both the choice and monitoring of their activities. From this perspective, it is not enough to know if the partner provides a good service or delivers a good product; it is essential to know how they provide such a service or manufacture the product, as well as what care they take to comply with legislation and compliance targets.
After all, a good product or service that is offered at the cost of corrupt practices, slave labor, environmental degradation, or other illegal activities is of no use.
Environmental Law’s Broad Accountability Push
Some areas, such as Environmental Law, seek to broaden the accountability of economic agents through broad definitions of responsibility centers, an example of which is Article 2 of the Brazilian Environmental Law.
Now, if even in the criminal sphere, penal responsibility affects all those who, through their actions or omissions, participated in the practice, with even greater reason, this reasoning should be applied in the sphere of civil liability.
On the international plane, national legislative initiatives and the recent European Union directive stand out, which provides for a broad duty of diligence in relation to business partners in matters of sustainability in the broad sense, including human rights.
In any case, it can be affirmed that, in Environmental Law, the definition of a polluter, combined with the extension of the duty of diligence in relation to business partners, can help attribute responsibility for environmental damage to those who participate in the production chain and, in some way, have contributed, through their actions or omissions, to the production of the damage.
Labor Law and Outsourcing Responsibilities
In Labor Law, an important reference is the judgment of the STF in the case of outsourcing of core activities.
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Although the Court recognized the possibility of outsourcing, its reasoning is convergent with the economic basis that it is possible to outsource activities, but not responsibilities.
In this case, the STF made it clear that the responsibility of the service provider, although modified, does not cease to exist.
It continues to be present, albeit in a subsidiary form, depending on the degree of guilt in the choice or supervision of partners or even the risk assumed by each member of the chain.
The abstract already makes it clear that it is fundamental for the service provider to verify the suitability and economic capacity of the outsourced company and to respond subsidiarily for non-compliance with labor and social security norms, highlighting the vote of Minister Barroso when dealing with the theme:
“The subsidiary responsibility of the service provider, in outsourcing, constitutes a minimum corollary of the rights assured by the Constitution to workers and the prohibition that the exploitation of economic activity occurs at the expense of the worker’s dignity. (…) Celebrating outsourcing contracts, at low cost, with outsourced companies, not supervising them, appropriating part of the economic advantages obtained with the violation of such norms and pretending to exempt oneself from any consequence arising from such a state of affairs is illegitimate.
Who outsources obtains advantages and, therefore, must also assume the risks of outsourcing, which cannot be borne only by employees and the Public Power, in its social security and assistance aspect.”
Beyond this, specific legislative initiatives have contributed to ensuring the responsibility of chain participants in labor matters.
Legislative Initiatives and Chain Accountability
See, for example, the object of ADI 5465, an opportunity in which the Court declared constitutional a law from São Paulo that provided for heavy sanctions – cancellation of the ICMS registry and even prohibition from acting in the activity branch for up to ten years, according to the interpretation given by the STF – for acquisitions of products related to slave-like labor.
Although the directors were acquitted, the CVM did not consider it impertinent to discuss the violation of the duty of diligence in such cases, basing the acquittal on the existence of reasonable internal control.
The vote of Director Marina Copola mentions, inclusively, that “the risk related to the compliance, by service providers, with the legislation applicable to them, was inherent to the Company’s activity.
Such risk should, therefore, be figured as a priority in the monitoring exercised by the board of directors, integrally and ostentatiously integrating the risk management system of T4F.”
The difference is that, while in the consumer area, in the face of a broad legal definition of the production chain, efforts are being made to better define this chain, in other areas, where there is no legal rule, the effort is precisely to find grounds for holding its direct participants accountable.
For this, the procedural vision of the duty of diligence and its association with the compliance requirements of contractual partners is very important, which requires an increasingly close dialogue between Corporate Law and Contractual Law.
It is also fundamental to consider the peculiarities of each area – such as the notion of polluter adopted by Environmental Law, the applicable constitutional principles, and the economic rationality of holding production chain participants accountable, which is to avoid creating economic efficiencies through the undue transfer of social costs.
