Colombia Update: How to apply the unfulfilled contract exception?

Due to the pandemic caused by covid -19, it is possible that many people have breached their contracts even when it is not considered that there was a force majeure cause.

In this scenario, when you are on the other side of the contract, it might seem logical that in the event of non-compliance by one of the parties, the other party is not obliged to comply by applying article 1609 of the Civil Code. However, the normative and jurisprudential development of said exception in Colombia is limited to eliminating the effects of the delay for both parties, considering that both parties are equal in non-compliance without it being relevant who did not comply first.

In terms of the Civil Code, the exception of an unfulfilled contract is that none of the parties is in default even failing to comply with the agreement, while the other party does not comply or is not willing to comply (1609 CC). Different is the case of a party that complies or is willing to comply, who has the right to claim compliance or request the termination of the contract and claim compensation for damages (1546 CC).

It is worth noting that not being in default is different from not being obliged to comply, it is obliged to comply when the other party has the right to claim the breach of the contract, while it is in default when it is obliged to recognize the damages of a breach.

In this sense, what the rule tells us is that regardless of who first breaches the contract, neither party is in default, but both are still obligated to comply. This interpretation has been reiterated by the Supreme Court of Justice in several cases, in which the defendant has been sentenced to comply with all obligations, except for the payment of interest on arrears, even when he has shown that his non-compliance was due to a previous non-compliance. of the plaintiff (CSJ, Ag. 8/19).

This allows us to affirm that, in Colombia, that one party defaults does not mean that the other party is not obligated to comply. The standard is not interested in identifying which party breached first, on the contrary, it understands that only the party that complied or was willing to comply can oppose the claims of a breached party.

When neither party complies or is willing to perform, it has been interpreted that both parties have the same right to claim the performance or termination of the contract and lose the right to claim damages.

Also, note that by the mere fact of breaching, the two parties lose the right to claim the damages caused by the breach, regardless of which party has breached first. This has been confirmed by the Supreme Court of Justice recently, by reiterating that when the two parties fail to comply, both equally have the right to demand compliance or termination of the contract, as well as both equally lose the right to request the payment of compensation for damages (CSJ, Jul. 5/19).

So again, it is essential to demonstrate that it was complied with or was willing to comply, so as not to lose the right to claim the damages of a breach.

In other words, due to the scope of the interpretation to the exception of a non-compliant contract in Colombia, the subtle difference between being willing to comply and simply not complying determines the possibility of validly opposing the claim of a non-compliant party, as well as the possibility of claiming the damages derived from the breach, reasons not to breach a breached contract.

By Mónica Moreno, LLOREDA CAMACHO & CO, Colombia, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact colombia@transatlanticlaw.com 

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 42 Brook Street, London W1K 5DB, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.