Limiting liabilityProhibition on exclusions and limitations
What liabilities cannot be excluded or limited by a supplier in a contract?
The parties to a commercial agreement are free to exclude or limit any liability in a contract, except for the liability arising from wilful misconduct, which is always enforceable as provided for by article 2106 of the Federal Civil Code. Such article states that liability by reason of wilful misconduct shall always be enforceable, and that its waiver or any attempt to exclude it shall always be void. Hence, neither a supplier nor any party may exclude such a liability from a contract.Financial caps
Are there any statutory controls on using financial caps to limit liability for breach of contract?
Yes. Civil liability or damages for breach of contract may be limited by the parties in the agreement, pursuant to article 2117 of the Federal Civil Code. Nevertheless, liability arising from wilful misconduct shall always be enforceable (and cannot be waived by the parties), as provided for in article 2106 of the code.Indemnities
Are there any statutory controls on indemnities used to cover liability risks in contracts?
Yes. If the parties establish a contractual penalty, pursuant to which the party in breach must pay to the other party a certain amount to indemnify for damages caused, the damaged party may claim either the performance of the agreement or the contractual penalty, but not both (article 88 of the Commercial Code).
The aforementioned does not apply to commercial purchase agreements, where the damaged party may claim both the termination (or performance) of the agreement and the contractual penalty for damages (article 376 of the Commercial Code).
Also, civil law establishes that the damage must be an immediate and direct consequence of the breach of the agreement, so in principle no indirect, consequential or punitive damages may be claimed. However, given specific precedents from the Supreme Court, the concept of punitive damages starts to be introduced and granted under specific circumstances.Liquidated damages
Are liquidated damages clauses enforceable and commonly used in your jurisdiction?
Yes, contractual penalties that mention liquidated damages are commonly used in commercial agreements and may be enforced. The only limitation is the one provided for in article 88 of the Commercial Code, which states that the damaged party may claim the performance of the agreement or the contractual penalty, but not both.
However, as already explained, the foregoing does not apply to commercial purchase agreements, where the damaged party may claim both the termination (or performance) of the agreement plus the contractual penalty for damages (article 376 of the Commercial Code).
Law stated dateCorrect on
Give the date on which the information above is accurate.
15 June 2020.