- Tribunal de Apelación en lo Civil y Comercial de Asunción, Sexta Sala
- Ofelia Valenzuela Fernandez v. Paraguay Granos y Alimentos S.A.
LONG-TERM CONTRACTS - AGENCY CONTRACT - BETWEEN A PARAGUAYAN INDIVIDUAL AND A PARAGUAYAN COMPANY - UNIDROIT PRINCIPLES AS A MEANS OF INTERPRETING OR SUPPLEMENTING APPLICABLE DOMESTIC LAW (PARAGUAYAN LAW)
CONCLUSION OF AN ORAL CONTRACT - BURDEN OF PROOF - NO PARTICULAR FORM REQUIRED - REFERENCE TO ART. 1.2 UNIDROIT PRINCIPLES IN ORDER TO CONFIRM THE PRINCIPLE OF FREEDOM OF FORM EXPRESSED BY DOMESTIC LAW
NOTION OF NON-PERFORMANCE - REFERENCE TO ART: 7.1.1 UNIDROIT PRINCIPLES IN THE ABSENCE OF CLEAR DEFINITION IN THE APPLICABLE LAW
ESTABLISHED PRACTICE BETWEEN PARTIES - BINDING CHARACTER - REFERENCE TO ART. 1.9 UNIDROIT PRINCIPLES AND ART. 9 CISG IN THE ABSENCE OF AN EXPRESS PROVISION OF THE APPLICABLE LAW
ESTABLISHED PRACTICE BETWEEN PARTIES - SOURCE OF IMPLIED OBLIGATIONS ACCORDING TO ART. 5.1.2 (B) UNIDROIT PRINCIPLES
SALES COMMISSION AGREEMENT - REVOCATION OF AUTHORITY BY THE PRINCIPAL - NOT EFFECTIVE UNTIL IT IS MADE KNOWN TO THIRD PARTIES - REFERENCE TO ART. 2.2.10 UNIDROIT PRINCIPLES
CLAIMANT, a Paraguayan citizen, and RESPONDENT, a Paraguayan company, orally concluded a sales commission agreement. Some time after the conclusion of the contract, RESPONDENT withdrew from the agreement, while CLAIMANT filed a lawsuit against RESPONDENT claiming damages for RESPONDENT’S non-performance.
The First Instance Court ruled in favour of the CLAIMANT. RESPONDENT appealed on several grounds.
One of the arguments brought forth by RESPONDENT was that CLAIMANT had failed to prove the existence of a contractual relationship between the parties, since no contract was signed between CLAIMANT and RESPONDENT.
The Court of Appeal, in deciding whether or not a contractual relationship between the parties existed, referred not only to national law on freedom of form with respect to contract formation, but also to Art. 1.2 of the UNIDROIT Principles and Art. 2:101 PECL.
Having established the existence of a contractual relationship, the Appellate Court proceeded to examine whether or not RESPONDENT was liable for non-performance of its obligations. In this respect, the Court referred to Art. 7.1.1 of the UNIDROIT Principles, quoting it in extenso, since Paraguayan law does not provide a clear definition of contractual non-performance.
The Court of Appeal then went through the examination of the contractual obligations of the parties and found that, despite the original agreement provided that CLAIMANT had to collect the goods at RESPONDENT’s premises, a difference practice has been established between the parties, according to which RESPONDENT had begun delivering the goods directly to the costumers.
In order to determine the relevance of this practice in the contractual relationship, the Court of Appeal referred both to Art. 9 and Art. 1.9 of the UNIDROIT Principles, since the Paraguayan Civil Code does not provide any specific provisions on contractual practices. The Court then concluded that RESPONDENT had assumed an implied obligation to deliver the goods to customers, as set forth by Art. 5.1.2 (b) of the UNIDROIT Principles, which expressly indicates the practices established between the parties as a source of implied obligations.
As to RESPONDENT's right to withdraw from the agreement, the Appellate Court affirmed that the sales commission contract is governed by the rules on agency. Therefore, it quoted Art. 2.2.10 of the UNIDROIT Principles, according to which termination of authority is not effective in relation to the third party unless the third party knew or ought to have known of it. In the case at hand, although RESPONDENT was free to revoke the authority given to CLAIMANT, this revocation was ineffective until it has been disclosed to third parties. RESPONDENT was then required to pay commission to CLAIMANT until that date.
Ultimately, the Court of Appeal confirmed the judgment of the First Instance Court, but modified the amount RESPONDENT had to pay to CLAIMANT, considering the first responsible only for CLAIMANTS's actual loss (plus interests), and not for loss of profit, non-material harm and currency revaluation.