Next August, the recently ratified civil and commercial code will go into effect, impacting several fun areas of Argentine law such as contracts, liability, property ownership transfer and family-related legal issues (adoption, marriage, civil and strict liability, inheritances, etc). I know you’re looking forward to finding out what this all means, so let’s jump right into the nuts and bolts of the new code.
The new civil code was drafted by a special commission led by Dr. Lorenzetti, the current president of the Federal Supreme Court. The law was then approved by Congress, which introduced some changes at the request of the Executive. (Legal disclaimer: in Argentina, separation of powers does not mean different branches cannot interact with each other. In fact, they retain a close relationship — some like to say that “love is in the air” when it comes to Argentine government.)
The new civil code contains a simpler form of Spanish and is shorter than the former document. It was fused with the commercial code and puts into words certain previously unwritten decisions judges have been taking for years . For example, the new code does not oblige couples to wait three years before filing for divorce — a tenet under the old code that judges hardly ever enforced. (It was finally deemed unconstitutional as it infringed on individuals’ freedom to marry and, moreover, was probably at odds with the UN Convention Against Torture. Just kidding.) However, it does present some radical changes to Argentine law. Let’s take a look at these.
Changes to business relationships brought by the new code
- Perhaps one of the most important changes is the inclusion of single-partner corporations to the list of businesses whose liability can be limited, meaning that a single person can limit his or her liability when doing business. These kinds of companies can only be incorporated as corporations (“sociedades anónimas”) and are subject to government control. They must also appoint at least three directors.
- Commercial leases will be set for a minimum of two years and may be extended to a maximum of 50 years. Temporary leases will be set for a maximum of three months and leases of residential premises will remain unchanged at a two-year minimum.
- Bank deposits made in dollars will remain in dollars (well, at least for now, according to Section 1390). But for other transactions such as debt originated in services or private loans, a debtor in charge of delivering a certain sum of money (which, originally, was not quoted in Argentine tender) will have to deliver an equivalent amount in legal tender (in pesos). This clearly implies a certain degree of state intervention on private contracts and surely will imply some legal engineering of the law to preserve all parties’ intentions.
- In my opinion, the government should encourage parties to draw up contracts in Argentine pesos. However, this would result in parties looking for alternatives in order to preserve their money’s worth due to inflation. Thus the government should focus its energies on implementing solid economic policies in order to restore people’s confidence in the country’s currency. Keep in mind that currently, the highest bill denomination, 100 pesos, can be used to buy two plates of ravioli. We’re talking about ricotta, here.
- Banks will be able to limit theft liability to safes and fortuitous events and be able to cap their liability. So make sure to read the small print in order to be sure when your bank is liable and when it isn’t.
- The new civil code regulates several contracts regarding arbitration, agencies, concessions, franchises, supplies, leasings and trusts. Except in cases of fraud, workers of a local franchise will not be able to reclaim the brand owner. For example, if FacturaGrone SA Café franchises its trademark to Carlochos Coffee SRL, which then puts a store in the posh neighborhood of Palermo but then fails to pay its employees, under the new code, those employees won’t be able to sue Café FacturaGrone SA.
- Weak parts of a contract will be protected. Punitive damages are already known under US law: they are sums that someone is entitled to claim as a “reward” for winning a case against a large company that frequently fails to comply with the law. Punitive damages will continue to exist under the new code and their scope will be extended to some degree since they will apply to new practices, such as abusive clauses or undue restrictions to consumer contracts. For example, under the new civil code, a provider cannot subordinate the buyer to acquire a product if he or she has to buy another one.
The reform has been highly anticipated and is hoped to help establish some sort of uniformity to the different criteria judges use when interpreting the law. Sometimes, clarity is as valuable as good legislation. However, as always, it will take some time for everyone involved to adapt to the new regulations. This includes lawyers, who will have to go back to school or do some additional homework.
In the meantime, as we said, ambiguous statements ought to be interpreted in a manner that benefits the consumer, so that ordering a panqueque de dulce de leche con bocha de helado (dulce de leche-filled crepe with ice cream on top) should mean getting a whole lot of ice cream instead of a miserly scoop. You see, bocha can mean “loads of” or “scoop” — it’s best to go with the more generous definition.
Stay tuned for our next exciting entry: the legal perspective on family issues.