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El Comercio – Contractual unforeseeability resulting from the pandemic

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DATE: 12-06-2020

CORRALROSALES IN THE NEWS

-Ramón Paz y Miño
-Mateo Zavala

MEDIA: El Comercio

Novedades Jurídicas, the legal supplement of El Comercio, publishes an article by our Senior Associate Ramón Paz y Miño and our Associate Mateo Zavala in which they explain the contractual unforeseenness arising from the health crisis caused by Covid-19. In the “new normality”, the dispute resolution clauses incorporated in contracts will be triggered in the absence of agreements and, therefore, ordinary justice or arbitration will be used.

“In recent decades, the theory of unforeseeability – which is an ideal mechanism for facing adverse effects in the execution of contracts – has acquired greater importance and relevance in the legal world, with the exception of Ecuador, where little or nothing has been said on the matter,” our lawyers put into context in their article.

As they point out, contractual unforeseenness is incorporated in several legislations, such as in Argentina and Colombia, where the objective is to preserve the survival of a contract legally entered into by the parties and where compliance has been affected by external factors beyond their control, which could not be foreseen during the contract negotiation stage.

“In addition to ensuring the full force of the contract, the theory of unforeseeability seeks to ensure fairness in the contractual relationship and to avoid excessive costs for one of the parties, which could affect the performance of the obligations”, explain the authors of the article.

The current situation suggests that the theory of contractual unforeseeability will be used in more than one case in Ecuador. The absence of an express rule that regulates it does not prevent its application, which will make it possible to use reasonability criteria for contractual relations due to events that generate an imbalance between the contracting parties. “This does not mean that the validity of legal security is ignored, much less the reliability and effectiveness of the system, but seeking other solutions will ensure that the performance is fair,” add Paz y Miño y Zavala.

If you want to read the full article, click here