Background
In a purchase and sale agreement one party undertakes to transfer goods or property, and the other party agrees to pay a specified price for them. [1]
When the sale and purchase contract is business-oriented, it is regarded as a commercial purchase and sale agreement, in addition to those commercial acts contemplated in the Commercial Code (the “Law”) [2]
In commercial purchase and sale agreements, the contracting party who complies with his obligation may sue from other party the rescission or the compliance of the agreement and an indemnity, in addition to the damages and lost profits, according to the Law.[3]
In order for a complying party to sue from the defaulting party the rescission or compliance of the agreement, the following conditions must be met: (i) the existence of a contractual relationship (ii) the proof of obligations performance on the part of the plaintiff, and (iii) the proof of non-compliance of the defaulting party.
However, if the plaintiff’s obligation under the commercial purchase and sale agreement is not yet due, may he claim the agreement’s rescission? And if so, what he shall prove in a trial? A federal court issued a ruling in this regard.
Facts
Two persons entered into a purchase and sale agreement of goods, whereby they agreed that the seller would deliver the goods on a certain day, while the buyer would pay the price when he received a loan.
The seller did not deliver the goods on agreed date, therefore the buyer claimed the rescission of the agreement, even though it had not yet paid the goods.
The Judge hearing the case approved the rescission of the agreement, under the argument that to claim the rescission it is a requirement that the plaintiff proves the performance of its obligation, however the buyer’s obligation to pay was not due when it filed the lawsuit, therefore it only had to prove the contractual relationship and the seller’s failure to comply with his obligation.
Afterwards the seller filed a constitutional trial to challenge the above decision.
Court’s rationale
The Fifth Collegiate Tribunal in Civil Matters of the First Circuit (the “Court”), determined that, when a party sues the rescission of a commercial purchase and sale agreement and the plaintiff’s obligation is not due at that time of filing the lawsuit, the plaintiff will only have to prove the existence of the contractual relationship between seller and buyer and the other party’s failure to comply with his obligations. [4]
According to the Court the purpose of requiring the plaintiff to prove that he performed its obligation for him to be allowed to claim the recission of the agreement, entails the inadmissibility to claim the defendant’s non-compliance when the plaintiff has not complied with his obligations.
However, this general rule has exceptions where the plaintiff is not obliged to prove he complied with his obligations, in the following cases:
I. In cases where the plaintiff’s obligation is subsequent to that of the defendant. That is, that the defendant firstly fulfills its obligation in order for the plaintiff compliance his.
II. Where the Plaintiff’s obligations are subject to a term or a condition precedent, and that the same have not been carried out when the lawsuit has been filed.
III. When the failure of performance of the plaintiff is due to causes attributable to the defendant.
In such cases, the plaintiff will only have to prove the existence of a contractual relationship and the other party’s failure to comply with his obligations.
Conclusion
In commercial purchase and sale agreements, either party may claim the rescission even if the other party has not fulfilled its obligation, if it meets at least one of the exceptions listed above.
In exceptional cases, the plaintiff must only prove two conditions (the contractual relationship and other party’s failure to comply with his obligations), however, the non-compliance of obligations is hard to prove because it entails a negative fact, as the general principle of law provides that only “who asserts is obliged to prove.”
Therefore, the plaintiff would primarily be obliged to prove the existence of the commercial purchase and sale agreement.
[1] Article 2248 Federal Civil Code.
[2] Article 371 Commercial Code.
[3] Article 376 Commercial Code.
[4] https://sjfsemanal.scjn.gob.mx/detalle/tesis/2026680
By: Monserrath Bustamante
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