Data

Date:
22-03-2022
Country:
Paraguay
Number:
39
Court:
Tribunal de Apelación en lo Civil y Comercial – Primera Sala
Parties:
Hugo Daniel Arzamendia v. Ilsung Construction Co. Ltda.

Keywords

LONG-TERM CONTRACTS - MANAGEMENT CONTRACT - BETWEEN A PARAGUAYAN INDIVIDUAL AND A PARAGUAYAN COMPANY - UNIDROIT PRINCIPLES AS A MEANS OF INTERPRETING OR SUPPLEMENTING APPLICABLE DOMESTIC LAW (PARAGUAYAN LAW)

NOTION OF NON-PERFORMANCE - REFERENCE TO ART. 7.1.1 UNIDROIT PRINCIPLES IN THE ABSENCE OF CLEAR DEFINITION IN THE APPLICABLE LAW

Abstract

A Paraguayan individual (Claimant) and a Paraguayan company (Respondent) concluded a management contract. Claimant filed a claim seeking damages (loss of profit, moral damages and actual damages) deriving from an alleged unlawful termination of the contractual relationship.

The First Instance Judge rejected the claim since the contract at hand was for an indefinite period of time and, according to Paraguayan legislation, in this case either party may terminate the contractual relationship at any moment without cause. Therefore, the First Instance Judge considered that Respondent did not breach any contractual obligation when terminating the contract and that Claimant was not entitled to any damages for the contractual termination.

The Claimant appealed the decision, alleging that the First Instance Judge failed to assess the contractual relationship between the parties. According to the Claimant, the contractual relationship was not the typical provision of services regulated by Paraguayan law but rather a atypical contract of “Upper Management.”

In determining whether there was a non-performance by Respondent, the Appellate Court noted that the Paraguayan Civil Code does not define the notion of non-performance. Therefore, it recurred to national legal scholarship mentioning the Unidroit Principles which provide a definition in Art. 7.1.1.

Then, the Appellate Court concluded that the parties entered indeed in a contract for the provision of services for indefinite duration. According to Paraguayan legislation, parties can terminate this type of contract without cause, with the sole condition of respecting the prior notice period. In this case, the parties had agreed on a 10-day prior notice period, which Respondent failed to comply with. Therefore, the Appellate Court granted only actual damages (damnum emergens) in favor of the Claimant for that period.

As a result, the Appellate Court partially revoked the First Instance decision by awarding actual damages (damnum emergens) but confirmed the decision in relation to loss of profit or moral damages, which were not proved by Claimant.

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