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

Should filing a claim and not the summon interrupt the statute of limitation?

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The amendment to the General Organic Code of Processes (COGEP), which entered into force on June 26, 2019, modified article 64(4) substantially modifying the interruption of the statute of limitations. Thus, before the reform, COGEP established that: “The effects of citations are… 4. Interruption the statute of limitations.” While after the amendment, it establishes that: “The effects of citations are… 4. Interruption of the statute limitations. If the lawsuit is summoned within six months of being filed, the interruption of the statute of limitations will be rolled back to the date in which the lawsuit was filed.”[1] Due to the amendment in reference, ¿is the right to legal certainty compromised?

Historically, the regulations governing civil procedures in Ecuador contemplated that the statute of limitations was interrupted only through citation. Since the first Civil Code enacted in 1869, until the last amendment to the COGEP entered into force, the citation of the lawsuit had been a concrete and verifiable date, that interrupted the statute of limitations. With the amendment, the interruption is rolled back to the date the lawsuit was filed, which is an unknown fact until the citation is made-, solely if the citation occurs within 6 months after the filing of the lawsuit. Keep in mind that the citation of the lawsuit is a fundamental factor, since only once it is achieved the litigation between the parties in conflict is locked and any legal terms begin to apply.

The Civil Code defines the statute of limitations as a way of acquiring goods or extinguishing rights for not having exercising those rights within the period determined by law[2]. Thus, a legal proceeding may be initiated within the time frame established in the law. If there were no statute of limitations, the right to legal certainty would be violated. It is the responsibility of citizens to initiate proceedings in due time and form or, to plead statute of limitation when having been sued and summoned once the legal term is exceeded.

Legal certainty implies, among other things, that the parties shall know the applicable rules when a process starts. The Constitutional Court has determined that “…the right to legal certainty is understood as the certainty in the application of the law that derives from the obligation of public authorities to respect the Constitution as a supreme law, and the rest of the legal system.” This right to know with certainty the enforcement of the existing norms in the legal system is violated the amendment since, rolling back the date for interrupting the statute of limitation to the moment the lawsuit was filed exclusively if the citation took place within six months, causes the defendant uncertainty.

For example, before the amendment, in a moral damage proceeding, were the statute of limitations ends 4 years after the perpetration of the act, the law allowed the defendant to know the legal framework for his defense. That is, the plaintiff was certain of the time frame stated in the law to exercise his right and initiate a proceeding. The amendment to the COGEP allows the interruption of the statute of limitation to take place not on the date the lawsuit is summoned, but on the date on which it was filed, undermining the defendant´s right to legal certainty.

To a greater extent, in the previous example, before the amendment, if the plaintiff filed a lawsuit for moral damage on the last day, that is, 3 years and 365 days, the statute of limitation would have ended. While with the amendment, if the lawsuit is filed on that same day, the statute of limitation would not have ended as long as the defendant is summoned within the following 6 months. That is to say, in the proceeding for moral damage, the plaintiff would have 4 years and six months for the lawsuit to be summoned and still rightfully exercise the respective proceeding, while before the amendment there were exactly 4 years to summon the defendant.

With the amendment of the article 64(4) of the COGEP, the legislator has allowed the lawsuit citation to interrupt the statute of limitation of the proceeding as long as the defendant is summoned within the following 6 months after the lawsuit is filed, which, in our criterion violates the constitutional right of the defendants for legal certainty.

Mateo Zavala
Associate at CorralRosales
mzavala@corralrosales.com


[1] COGEP, art. 64: “Art. 64.- Effects. The effects of the citation are: […]
4.” Interrupt the statute of limitations. If the lawsuit is summoned within six months of filing, the interruption of the statute of limitations will be rolled back to the date when the lawsuit was filed.”
[2] Art. 2392.- Statute of limitations is a way of acquiring things of others, or of extinguishing the actions and rights of others, for having possessed the things, or not having exercised said actions and rights, for a certain time, and concurring with the other legal requirements.