- Arbitral Award
- Centro de Arbitraje y Conciliación Mercantil de la Cámara de Comercio de Bogotá
CONSTRUCTION CONTRACT - BETWEEN TWO COLOMBIAN PARTIES - UNIDROIT PRINCIPLES AS A MEANS OF INTERPRETING OR SUPPLEMENTING APPLICABLE DOMESTIC LAW (COLOMBIAN LAW)
NOTION OF NON-PERFORMANCE - REFERENCE TO ART. 7.1.1 UNIDROIT PRINCIPLES IN THE ABSENCE OF CLEAR DEFINITION IN THE APPLICABLE LAW
MITIGATION OF HARM – DUTY TO MITIGATE - REDUCTION IN DAMAGES TO THE EXTENT AGGRIEVED PARTY HAS FAILED TO MITIGATE HARM - REFERENCE TO ARTICLE 7.4.8 UNIDROIT PRINCIPLES AND ARTICLE 77 CISG
A Colombian company concluded a contract with a Colombian consortium for the construction by the latter of some buildings in the oil terminal of Barrancabermeja (Colombia). During the execution of the works, the initial project underwent a series of changes that led to a delay in delivery of the work and higher costs. In addition, the contractor had only built two of the six buildings envisaged in the initial project. Therefore, the client company paid only part of the initially agreed price. The consortium commenced arbitral proceedings asking for the payment of the residual price.
The Arbitral Tribunal ruled that the contractor had not correctly fulfilled its obligations under the contract and was therefore required to pay damages to the client. In the opinion of the Tribunal, the contractor was under a duty to achieve a specific result and therefore the fact that the defect in the work carried out was of certain importance, in relation to the purpose pursued under the contract, amounted to non-performance. In this context the Court cited Art. 7.1.1 UNIDROIT Principles together with its Comment: “Non-performance is failure by a party to perform any of its obligations under the contract, including defective performance or late performance. This Article defines “non-performance” for the purpose of the Principles. Particular attention should be drawn to two features of the definition. The first is that “non-performance” is defined so as to include all forms of defective performance as well as complete failure to perform. Thus, it is non-performance for a builder to erect a building which is partly in accordance with the contract and partly defective or to complete the building late. The second feature is that for the purposes of the Principles the concept of “non-performance” includes both non-excused and excused non-performance.”
The Arbitral Tribunal also stated that the client company was under a duty to mitigate harm, but it had failed to do so. In this respect the Tribunal referred to Art 77 CISG and Art. 7.4.8 UNIDROIT Principles, affirming that “this duty has been recognized in different instruments for the harmonization of international trade law”. As a consequence, it reduced the amount of the recoverable damage by 30%.