Breach of Contract: Legal Remedies and Enforcement

Posted on Jan 21, 2025 in Law & Jurisprudence

Remedies for Breach of Contract

  • 1. Petition or Action for Compliance (Acción de Cumplimiento): Legal Action to Require Contractual Performance

This is the legal remedy used by the creditor to demand the fulfillment of the obligation before the court. The creditor sues the debtor and claims their right by filing a complaint against the debtor. For instance, the lender demands the borrower to pay back the money.

  • A total or partial breach, or a defective performance, is sufficient for an action for compliance.
    • Consequently, the Court gives judgment and holds that the plaintiff has the right they claim, and requires the debtor to fulfill their obligation.
    • In cases in which there is a total or partial breach, the content of the Court’s decision will be the following:
    • When the performance consists of giving a concrete thing, the judgment of the Court will order the debtor to deliver that thing. If the debtor does not voluntarily fulfill their duty, the judge will use the legal measures provided for enforcement of property.
    • When the performance consists of giving a generic thing (for instance, wheat, barley, or oil), the debtor will be ordered to deliver it. If the debtor does not voluntarily fulfill their duty, the judge will order to give the creditor a similar amount of the generic thing at the expense of the debtor.
    • When the performance consists of giving an amount of money, the enforcement will imply that the assets of the debtor be seized, the sale of this property, and the payment with the obtained money.
    • When the performance consists of doing something (de hacer), the judge will order to do it at the expense of the debtor, unless it is a personal obligation.
    • When the performance consists of not doing something (no hacer), the judge will order that the wrongdoing is reversed.
    • General Rules of the Action for Fulfillment:
    • In the case of total breach, the creditor can request the performance of the obligation as it was originally agreed, performance in natura (cumplimiento en forma específica), or, if that is no longer possible, they can ask for the equivalent in money (cumplimiento por equivalente), plus the compensation for damages in both cases. The rules contained in the Civil Code regarding the action for performance have to be completed with the rules established in Article 701 and following of the Civil Procedure Law.
    • In the case of defective performance, the action for fulfillment can consist of:
    • – Repair of defects
    • – Replacement of the service or good owed
    • – Price reduction
    • When the defective product is a serial product, the buyer can choose between claiming for repair or its replacement.
  • 2. Termination of Bilateral or Reciprocal Obligations:
  • Regulation: Article 1124 Cc, the power to terminate obligations is deemed to be implied in reciprocal obligations, where one of the obligor’s should not perform their obligation. The aggrieved party may choose between:
    • Demanding performance or
    • Termination of the obligation,
    • With compensation of damages and payment of interest in both cases. They may also request termination, even after having chosen specific performance, where the latter should be impossible.
  • What is a bilateral obligation? It is an obligation in which both parties are simultaneously creditor and debtor of each other. For instance, in the case of a sale contract, the vendor is the creditor of the price and the buyer is the creditor of the delivery of the sold thing.
  1. Requirements to Exercise the Termination Action or Resolutory Action (Acción Resolutoria):
    • 1. The existence of a bilateral relationship between the contracting parties.
    • 2. One of the contracting parties fails to comply with their obligation.
    • 3. The breach of the contract by one party is not caused by a previous breach of the contract by the other party.
    • 4. The breach of the contract has to be serious, affect the principal obligation, and be definitive.
  2. Effects: The services or performances received by both parties must be mutually waived. Partes deben restituirse las prestaciones ya realizadas, o no realizar las prestaciones pendientes de ejecución.
  3. 3. Compensation for Damages (Indemnización de Daños y Perjuicios):
  4. Persons who, in the performance of their obligations, should incur in willful misconduct, negligence, or default, and those who in any way should contravene the content of the obligation shall be subject to compensation of any damages caused. (Article 1101 CC)
  5. Compensation for damages is compatible with the action for fulfillment (con la acción de cumplimiento).
  6. Requirements to Claim for Compensation for Damages:
    • 1. The damage caused by the breach of the contract must be proved.
      1. Exception: When the debt consists of an amount of money (Article 1108 CC), in such a case the compensation will comprise the agreed interest, or in other case, the legal interest.
    • 2. A causal link between damage and the behavior of the debtor must be proved.
  7. What Items Comprise the Claim for Compensation for Damages?
  8. Positive Interest: (daño emergente). It is the real damage suffered by the creditor. For example, an entrepreneur buys furniture for a cinema, including the seats, but the seller does not deliver this furniture. The real damage is the price of the furniture and seats, and the extra price to be paid if the new one is more expensive. It comprises material and moral damages.
  9. Negative Interest: (lucro cesante). Lost profits. For example, in the former case, the economic damage caused by the delay in the opening of the cinema.
  10. Other Questions: Exclusion of Liability (Exoneración del Deudor), and Criteria for Attribution of Liability in Case of Breach of Contract
  11. E.1. Exclusion of Liability:
  12. General rule: Breach of contract is attributable to the debtor.
  13. Exception: There are special cases in which the law excludes liability in case of breach of the contract.
  14. A) Agreement for the exclusion of liability of the debtor: Article 1102 CC states that the contracting parties can agree to exclude the liability of the debtor, except in case of willful misconduct.
  15. B) The debtor is not liable when non-performance is due to unforeseeable fact (act of God) (caso fortuito) or force majeure (fuerza mayor). These are events that do not depend on the will of the debtor, events of such character that cannot be prevented by any kind of foresight or by any reasonable degree of care. Act of God and force majeure are events out of the debtor’s control and which prevent them from performing their obligation (Article 1105 CC).
  16. C) When the creditor is who provokes the breach of the contract (mora creditoris): For example the creditor has to deliver work material, and they do not deliver it, and the debtor cannot build the promised building.