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From Crisis to Crisis: Weakness of Contracts in Argentina

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The Effects of Financial Crises on the Binding Force of Contracts - Renegotiation, Rescission or Revision

Part of the book series: Ius Comparatum - Global Studies in Comparative Law ((GSCL,volume 17))

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Abstract

By the end of the nineteenth century and the beginning of the twentieth century, Argentina was the destination of hundreds of thousands of immigrants who considered it was a land full of opportunities, with an extraordinary future (The Royal Spanish Academy Dictionary in its 1913 Edition stated: It all leads to believe that Argentina is called to compete with the United States of America, due to the wealth and extension of its land as well as for the activity of its inhabitants and the development of its industry and commerce, which progress could not be more noticeable.). The reasons of its decline are hard to find, and even harder to explain. Some people state that the legal and judicial answers to those crises, which weakened the contractual nexus, legitimated the governmental interventions regarding private contracts and even abandoned nominalism, contributed not little to speed up said process of decline, which frustrated such hope.

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Notes

  1. 1.

    Robledo (2002), p. 541.

  2. 2.

    National Supreme Court, 28.4.22, Decisions 136–164.

  3. 3.

    In the same paragraph stating so, the National Supreme Court recalls that a similar law enacted by the District of Columbia was declare unconstitutional by the U.S. Supreme Court in the case “Block”, decision 18.4.21.

  4. 4.

    National Supreme Court, 7.12.34, Decisions 172:21.

  5. 5.

    The cited resolution of the U.S. Supreme Court of Justice is entitled Home Building, dated January 8, 1934. Other precedents of U.S. Courts are invoked, which ratified emergency laws regarding rents which avoided evictions and authorized the courts to fix the price of rents.

  6. 6.

    Civil Court of Second Instance, 30.12.38, LL 13-408. This court order adopted the idea that it was necessary to avoid “economic bankruptcy of debtors”, as done by German case law further to both wars.

  7. 7.

    Spota (1953) and Rezzónico (1954) claimed the unenforceability of contracts affected in their commutativeness, based on the abuse of law doctrine. The abuse of law was not stated in the Civil Code; however, the 1949 Constitution had introduced a concept which expressly prohibited it (section 35), which was the basis of the authors’ opinion and some court orders stating that the intention to fulfill a contract affected by inflation constituted an abusive conduct.

  8. 8.

    Thus, some court decisions revised the prices fixed in some contracts based on the principle of good faith (LL 75-255; ED 17-606), equity (LL 104-555), presupposition doctrine (National Court of Second Instance, chamber I, 2.10.51, ED 18-97, summary 8), unforeseen events (National Court of Second Instance., 25.8.65, LL 121-645).

  9. 9.

    Section 1198 of the Civil Code, arisen from a recommendation of the III National Congress of Civil Law which took place in Córdoba in 1961 which, under a formula similar to the one of the 1942 Italian civil code, gathered the proposals of the authors who attended such important meeting.

  10. 10.

    National Supreme Court, 21.5.76, ED 67-410.

  11. 11.

    National Supreme Court, 23.9.76, ED 69-189.

  12. 12.

    More than 250 % of inflation in June, 1989.

  13. 13.

    National Supreme Court, 27.12.90, LL 191-D-518.

  14. 14.

    Law 23928. Sobre ella v. Alegría – Rivera, Convertibility Law, Buenos Aires, Abeledo Perrot, 1991.

  15. 15.

    National Commercial Court of Second Instance, plenary session, 20.10.1967, ‘in re’: “Argentrac Cía. Argentina de Tractores y Maquinaria, S. A. v. Empresa Constructora Vidal, Martí y Cía., S. R. L.”, LL 128-751.

  16. 16.

    National Supreme Court, “Massa, Juan Agustín c. Poder Ejecutivo Nacional”, December 27, 2006, Court Orders 329:5913.

  17. 17.

    Larenz (1956).

  18. 18.

    Case law also accepted it; thus, it is said that “the pacta sunt servanda principle can only be breached when the basis of the legal act has changed, and a serious and essential damage is caused”: National Court of Second Instance., civil and commercial chamber, 24.2.70, LL 140-452.

  19. 19.

    Those criteria have been reflected in the Commission No. 3 of the XIX National Congress of Civil Law in Rosario, in 2003, entitled “Renegotiation and revision of contracts” [Renegociación y revisión del contrato] which reads: “ Revision of contracts due to excessive onerousity in term contracts –section 1198, 2° part of the civil code- does not exhaust the events in front of the negotiations unbalance in term contracts. The theory of unforeseen events, frustration of the contract purpose, the general principle of good faith, the abuse of law and equity are useful means of contract revision”: Iñiguez, Marcelo, Advances of authors’ opinion in the field of subsequent unbalance. The extraordinary in question, in the Communitarian and Private Law Magazine [RDPyC] 2007-1-141 et seq.

  20. 20.

    Section 1522: If due to an act of God or force majeure the lessee is forced not to use the thing, or if it cannot be used for the purpose of the contract, he/she can claim for termination of the contract, or cessation of payment of the price, during the term he/she cannot use the property.

    Section 1531: If lessor is the non-prevailing party in a lawsuit regarding a part of the rented property, lessee can claim for a reduction of the price, or for termination of the contract if the part he/she is deprived of was the main part of the property, or of the object rented, and for subsequent damages .

  21. 21.

    National Civil Court of Second Instance, chamber F, 25.4.96, ED 169-345. The court decision is relevant since the Court clearly defined the concept; thus, it stated that the purpose of the contract is the basic purpose of one of the parties, known and accepted by the other, in such a way that it is objectified and becomes the purpose of both parties; and frustration thereof is observed when compensation is possible, but the purpose cannot be fulfilled due to circumstances beyond the parties’ control.

  22. 22.

    Rivera 1998, p. 60.

  23. 23.

    In Argentina the doctrine has also linked the idea of contract basis with the cause; disappearance of the basis of the act would affect the cause of the act: Zannoni1998, p. 560.

  24. 24.

    National Civil Court of Second Instance, Chamber K, 27.8.03, Jud. Doc. 2004-1-721.

  25. 25.

    Lorenzetti (2004), p. 521.

  26. 26.

    As cited in the award in re “Empresa de Energía de Boyacá c/Compañía Eléctrica de Sochagota”, 21.4.04, Casación Civil, Colombia, 23.6.00.

  27. 27.

    An Argentine judicial court said the unforseen contingencies principle considers as extraordinary those events which do not usually occur, without giving unforseeability an absolut sense, as according to experience any event, even if unexpected, could be known and eventually thought of: CNCom., Chamber C, 22.8.77, LL 1978-B, 314.

  28. 28.

    Alterini (1998), p. 407.

  29. 29.

    Lorenzetti (2004), p. 523.

  30. 30.

    National Civil Court of Second Instance, chamber C, 19.10.78, LL 1978-D-684.

  31. 31.

    Lorenzetti states that even in the case of contracts between pairs, the external event may break the economic equation; the difference would lie in the fact that if there are other extra-patrimonial elements or a practical end which can only be fulfilled by passing of the time, it could be more equitable for the parties to disassociate before being forced to fulfilled their obligations since, even when the preservation principle is still applicable, the court may decide upon due valuation of the case giving it less intensity.” Lorenzetti (2004), p. 516.

  32. 32.

    Llambías (1978) t. I, No. 225, p. 276 et seq.

  33. 33.

    Lorenzetti (2004), p. 248.

  34. 34.

    National Civil Court of Second Instance, chamber E, 5.8.81, LL 1982-A-514; id., chamber D, 2.6.81, ED 95-418; id., chamber F, 30.9.81, ED 97-384.

  35. 35.

    National Commercial Court of Second Instance., chamber B, 2.12.76, ED 72-639; National Civil Court of Second Instance, chamber G, 23.2.81, ED 93-383.

  36. 36.

    Conf. Mosset (1977), p. 229.

  37. 37.

    San Rafael Congress of civil law, recommendation cited by Mosset (1977).

  38. 38.

    SCJ Mendoza, July 10, 1984, Lexis Nexis Jurisprudencia y Doctrina, Document No.: 16.7363.

  39. 39.

    National Civil Court of Second Instance, chamber B, December 09, 1983, JA 1984-III-136.

  40. 40.

    Alterini (1998) No.16 f) on p. 454; decision of Cavagna Martínez and Barra in Supreme Court, June 10, 1992, “Lafontaine, Oscar Rodolfo v. Lafontaine de Minteguiaga, Elsa Esther y otro”, Court decisions 315:1247.

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List of Cases

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  1. Faculty of Law, University of Buenos Aires, Buenos Aires, Argentina

    Julio César Rivera

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  1. Istanbul Kemerburgaz University, Istanbul, Turkey

    Başak Başoğlu

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Rivera, J.C. (2016). From Crisis to Crisis: Weakness of Contracts in Argentina. In: Başoğlu, B. (eds) The Effects of Financial Crises on the Binding Force of Contracts - Renegotiation, Rescission or Revision. Ius Comparatum - Global Studies in Comparative Law, vol 17. Springer, Cham. https://doi.org/10.1007/978-3-319-27256-6_2

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