Fiduciary alienation is a widely used instrument in the financial market to secure credit, in which fiduciary ownership of a given asset—offered as collateral—is transferred from the debtor to the creditor, while the debtor retains direct possession until the debt is fully paid. Despite its effectiveness in reducing risks for financial institutions in cases of default, this mechanism can place consumers in a vulnerable position, particularly when the asset involved is real estate considered as a family home.
In this context, the principle of the social function of contracts emerges as a fundamental tool for balancing contractual relationships, ensuring that individual interests do not override social needs and the dignity of the contracting party in a weaker position.
The principle of the social function of contracts, enshrined in Article 421 of the Brazilian Civil Code, emphasizes that contracts must serve not only the interests of the parties involved but also broader social needs and the preservation of human dignity. This principle is, albeit indirectly, connected to constitutional principles that uphold the dignity of the human person and the building of a just and supportive society.
In fiduciary alienation contracts, this principle may be applied to limit practices that place the debtor at an excessive disadvantage or jeopardize their right to housing—especially when the pledged property is considered a family asset.
Brazilian legislation protects the family home as essential to the dignified survival of the household. Law No. 8,009/1990 establishes the non-seizability of such property, except in cases explicitly provided for, such as debts arising from housing financing itself. This protection is backed by the Federal Constitution, particularly Article 6, which guarantees housing as a fundamental social right. Additionally, Article 5, XXIII, states that property must fulfill its social function, thereby prohibiting its use in ways contrary to the common good.
Even in legally permitted foreclosure scenarios, the principle of the social function must be invoked to prevent the loss of the family home in ways that violate fundamental rights, ensuring that enforcement respects the boundaries of human dignity and the right to housing.
Contract Review
Despite these constitutional guarantees, banks and financial institutions often use fiduciary alienation as a way to pressure debtors into paying off debts—even if that means losing their only family home. In banking contracts, the borrower is typically required to sign adhesion contracts without the opportunity for negotiation, containing clauses that overwhelmingly favor the lender and violate the principles of good faith and contractual balance.
In such cases, judicial review of fiduciary alienation contracts becomes an essential tool for protecting debtors’ rights. Brazilian courts have increasingly recognized the possibility of reviewing contracts that contain abusive clauses or that undermine the social function of the contract.
For instance, when the outstanding balance is inflated due to unjustified charges or when the bank refuses to renegotiate the debt, it is possible to request contract revision based on the principles of social function and good faith. Furthermore, it is possible to argue that the enforcement of the family home should be suspended or invalidated in cases of evident abusiveness. These claims are supported by Article 5, XXXV, of the Constitution, which guarantees access to the judiciary for the protection of threatened or violated rights.
The principle of the social function of contracts is a vital tool to ensure that fiduciary alienation contracts are instruments of legal security rather than tools of social exclusion. In cases involving real estate designated as a family home, it is imperative that the Judiciary and legal professionals work to balance the interests of both parties—protecting consumers against abusive banking practices and upholding the right to housing.
The social function is not merely an ideal; it is a constitutional mandate that underpins all contractual relations and is essential to building a fairer and more supportive society.