Proposed Reforms to the Civil and Commercial Code Regarding Obligations and General Theory of Contracts

 

1. Interests: powers of the judges

 

In the Emergency Decree 70/2023, the intention to significantly limit the judicial powers to interfere in contracts and the obligations arising from them was already evident. However, this was done in an incomplete manner, since although articles 960 and 989 of the Civil and Commercial Code (CCyC) were modified, articles 962 and 389 remained. These include provisions that now appear in open contradiction with the new texts the Emergency Decree imposed.

 

The Bill proposes replacing current article 771, which refers to the judges’ power to reduce interest, which had always been recognized. Accordingly, this power could only be exercised at the request of a party that is not in arrears. Thus, officiousness is excluded. This is practically tantamount to suppressing the power of judges, because it is usually exercised when the debtor is sued for being in default. Therefore, an action in anticipation of arrears is frankly unusual.

 

2. Arrears regime

 

The Bill proposes reforming article 887 paragraphs a and b. The text seems to be taken from the Preliminary Draft of reforms that had been presented by the commission integrated by Daniel Pizarro, Diego Botana, and Julio César Rivera in 2018. The text proposed supplements a serious omission of the aforementioned paragraph a. It establishes that, in obligations of tacit duration, arrears are not automatic—the issue is regulated within the exceptions to the referred principle—but without indicating how this happens. The aforementioned Preliminary Draft proposed maintaining the criterion of article 509 second paragraph of the repealed Civil Code (Law 17711), which worked well from 1968 until July 31, 2015. This is exactly what the Bill does.

 

Regarding paragraph b, the Bill deletes the erroneous expression "if there is no term," which appears in the text in force and which causes confusion with pure and simple or immediately enforceable obligations. In this case, there is a term, but it is undetermined. This reform was also foreseen in the Pizarro-Botana-Rivera Preliminary Draft.

 

Article 356 of the Bill suggests modifying article 888, which refers to the exemption from the effects of arrears by adding a paragraph providing—quite logically—that the debtor is not in arrears if the other party is in arrears or if they have not fulfilled their service. This clarification also has its source in the Pizarro-Botana-Rivera Preliminary Draft, although it is expressed in a different way.

 

3. Preliminary contracts. Option

 

One of the most incomprehensible provisions of the current CCyC is the second paragraph of article 994, according to which "[t]he term of the promises provided for in this article is one year, or such shorter term as may be agreed by the parties, who may renew it upon its expiration." As in the Pizarro-Botana-Rivera Preliminary Draft, the Bill proposes eliminating it, since the options may have much longer terms or—simply and plainly—not be expressly subject to this modality.

 

4. Contracts between spouses

 

Another anachronistic provision of the CCyC—not included in the Preliminary Draft the Lorenzetti, Highton and Kemelmajer commission prepared but incorporated in one of the Executive or the Senate’s revisions—is the one that prohibits contracts between spouses under a community property regime (article 1002, paragraph d). The Bill, also following the Pizarro-Botana-Rivera Preliminary Draft, proposes repealing it.

 

5. Object of legal acts

 

The Bill proposes a new article 1004 referring to the object of legal acts. It is a modern version of the old and prestigious article 953 of Velez’s Code, which Spota described as a "valve precept." The point of the reform that eliminates some of the qualifications of the article currently in force—such as being "contrary to morality or public order"—is not well understood. The legislator should be warned that, even if such expressions are deleted, this does not imply that contracts with immoral or affecting public order objects can be validated. It is, therefore, a sterile reform.

 

6. Long-term contracts

 

On the other hand, the proposal to reform article 1011 is very appropriate. Although scholars have received including the category of "long-term contracts" well, the fact is that the CCyC’s imposition to renegotiate before the relation terminates is a serious infringement on the freedom of the parties. This has given rise to countless questions, as well as to serious difficulties to satisfy such requirement. Therefore, the Pizarro-Botana-Rivera Preliminary Draft proposed to eliminate it, and this is what this Bill does.

 

7. Wrongful cause

 

Article 1014 deals with contracts with an illicit cause. The Bill deletes item a, which qualifies as such a business in which the cause is contrary to morals, good customs, or public order. This shows a new externalization of the intention to suppress references to morals and good customs, as if this guideline could magically make judges and arbitrators’ considerations on the conduct of individuals and the content of legal relations disappear. We see this as an erroneous legislative policy, because it is unreasonable to abandon the paradigm of morals and good customs. Moreover, it is sterile, because—in the end—whether expressly written or not, it will always be in force, since it is anchored in Constitutional Law and in the Human Rights system.

 

8. Action quanti minoris

 

The  Bill includes a new article 1056 according to which "[t]he existence of hidden defects entitles the purchaser to sue for rescission. In contracts in which a price in money has been paid, the purchaser may also request its reduction." This is another precept taken literally from the Pizarro-Botana-Rivera Preliminary Draft, which explains the proposal as follows: "In the current regime, the action quanti minoris has been eliminated without any explanation, which has caused the unanimous criticism of scholars. Therefore, it is proposed to provide for the possibility that the purchaser—when the price is in cash—may exercise the redhibitory action or the quanti minoris action."

 

9. Imprevision

 

The Bill suggests a new text for article 1091, which deals with the unforeseeability (imprevision) as an event for revising contracts. The proposed text practically follows the exact wording of the Pizarro-Botana-Rivera Preliminary Draft which, in its rationale, explained the reasons for these modifications:

 

a. the party suffering the harm who has acted negligently or who is in causally-relevant arrears cannot appeal to imprevision,

b. the termination defendant is entitled to prevent it by offering an equitable improvement of the effects of the contract.

 

These were the criteria arising from article 1198, second paragraph of the repealed Civil Code and that, inexplicably, were left out in the current Civil and Commercial Code.

 

Finally, the defendant for contractual adjustment (i.e., readjustment) is entitled to request the termination of the contract. This is because it may happen that, in the context of a major economic crisis, their ability to pay does not evolved in a way that allows them to face a readjustment, even if it is equitable.

 

 

                                          Justice - Changes on Statute of Limitations in the National Civil and Commercial Code

The Bill “Law of Bases and Points of Departure for the Freedom of Argentines”, which was released on December 27, 2023 (the “Bill”), contains in its Title V: “Justice”, procedural reforms that modify the Argentine Civil and Commercial Code (CCC). In particular, the Bill proposes relevant amendments to the statute of limitations, as well as its suspension and interruption.
 

Firstly, the Bill contemplates the following two amendments to Article 2560 of the CCC, relating to the generic statute of limitations period:

• It incorporates within the civil actions that are imprescriptible those actions derived from acts of corruption of public functionaries. This amendment is consistent with the imprescriptibly of corruption offenses in criminal matters that was declared in a precedent of the Federal Cassation Chamber, where it was interpreted that, by application of Article 36 of the National Constitution, serious acts of corruption committed against the State that entail enrichment are imprescriptible.

• It establishes that the generic five-year term also applies to all tax credits, regardless of their origin, which constitutes a simplification of the tax statute of limitations regime.
   

Secondly, the Project proposes that the suspension of the statute of limitations with cause in the process of a mediation occurs from the filing of the mediation request, thus modifying Article 2542 of the CCC, which only provides for the suspension of the statute of limitations from the communication of the date of the mediation hearing.

In addition, the Bill would amend Article 2546 of the CCC, adding that the course of the statute of limitations shall be interrupted not only by judicial petition but also by administrative claim, when such a petition before an administrative agency is required by law.