- Tribunal de Apelación en lo Civil y Comercial de Asunción, Tercera Sala
- R.G. Yodice S.A. v. Nestlé Paraguay S.A.
DISTRIBUTION AGREEMENT - BETWEEN TWO PARAGUAYAN COMPANIES - UNIDROIT PRINCIPLES AS A MEANS OF INTERPRETING OR SUPPLEMENTING APPLICABLE DOMESTIC LAW (PARAGUAYAN LAW)
INTERPRETATION OF A PENALTY CLAUSE - REFERENCE TO ART. 4.1 UNIDROIT PRINCIPLES IN ORDER TO AFFIRM THAT, IF THE COMMON INTENTION OF THE PARTIES CANNOT BE ESTABLISHED, THE CONTRACT SHALL BE INTERPRETED ACCORDING TO THE MEANING THAT REASONABLE PERSONS OF THE SAME KIND AS THE PARTIES WOULD GIVE TO IT IN THE SAME CIRCUMSTANCES
The dispute concerns a contract for the distribution of food products concluded between two Paraguayan companies. The contract contained a clause which recognized each of the parties' right to withdraw, even without cause, upon payment of an indemnity. The question brought to the attention of the Court concerned the interpretation of the formula for calculating this indemnity.
In deciding what meaning was to be attributed to the contractual clause, the Court referred to art. 4.1 of the Unidroit Principles, affirming that if the common intention of the parties cannot be established, as in the case at hand, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances. The Court therefore stated that the penalty clause envisaged by the parties must be interpreted within the context of the contract, taking into account the nature of the contract, the obligations of each party, the duration of the contract and the specific terminology used by the parties.