The deal fell through before signing: when there is liability

It is Chapter VIII of Title I of Book Five of the Civil Code of 2020, Articles 1271 to 1273. It sets the duties of conduct of those still negotiating, the behaviours that breach them, what must be compensated, and the duties that survive after the contract is performed.

Anyone who was in pre-contract dealings in Puerto Rico, whether or not a contract was ever signed; and, for Article 1273, anyone who has already performed a contract’s principal performance.

• That there were dealings prior to the perfection of a contract between probable contracting parties: that is the ground Article 1271 covers.Verified against the official source
• That the conduct complained of breaches the duties of loyalty and good faith; Article 1272 names six behaviours that specially breach them.Verified against the official source
• That there be expenses made to celebrate the contract or harm suffered from having relied on its valid celebration: that is what the article orders compensated.Verified against the official source
• For Article 1273, that the contract’s principal performance has already been satisfied and that the granted advantage is frustrated or confidentiality is breached.Verified against the official source

• The evidence of the dealings: emails, messages, letters of intent, partial agreements already reached and drafts exchanged.
• The receipts for the expenses made to celebrate the contract, because they are precisely what Article 1272 orders compensated.
• If the claim is about confidentiality, the document recording what information was handed over and on what terms.

1. 1

   Step 1: The underlying rule: loyalty and good faith before signing

   Article 1271 says it plainly: the dealings prior to the perfection of the contract must be conducted in accordance with loyalty and good faith between the probable contracting parties. Nothing need have been signed for that duty to exist.

2. 2

   Step 2: The four duties the article specially requires

   To collaborate in the formation of the contract; to obtain and provide information on relevant circumstances of fact and law; to maintain the confidentiality of the information received; and to preserve the thing that will be the object of the future contract. All four come from the text of Article 1271.

3. 3

   Step 3: The six behaviours the Code points to

   Article 1272 says the following constitute a violation, "especially": (a) breaking off the negotiations suddenly, inopportunely or arbitrarily; (b) not respecting the partial agreements already reached; (c) starting or continuing negotiations without seriousness; (d) incurring in dolo or violence; (e) revoking a binding offer or, suddenly, a non-binding offer; and (f) causing the nullity of a contract. The word "especially" is the article’s: the list emphasises, it does not close.

4. 4

   Step 4: Breaking off negotiations is not, by itself, wrongful

   Behaviour (a) carries three adjectives that do all the work: suddenly, inopportunely or arbitrarily. The article does not say that negotiating and then not signing is always a violation, and neither does this guide.

5. 5

   Step 5: What is compensated

   Two things, in Article 1272’s words: the expenses made to celebrate the contract and the harm suffered from having relied on the valid celebration of the contract. The article fixes no amount, formula or cap, and this guide invents none.

6. 6

   Step 6: The acceptor who could not have known

   The same article extends compensation to two further situations: the expenses made by an acceptor who is unaware, without fault, of the offeror’s supervening death or incapacity, and those of one who, on accepting, is unaware without fault of the offeror’s retraction.

7. 7

   Step 7: After performing the contract there are still duties

   Article 1273 is the reverse side: the person who frustrates the advantage granted in the contract or breaches the duty of confidentiality must compensate the harm caused. This is post-contractual liability, and it exists even though the contract has already been performed.

8. 8

   Step 8: How long that liability lasts

   Article 1273 itself bounds it: it includes the acts performed from the moment the contract’s principal performance is satisfied until the prescription period of every enforceable obligation expires. Which period that is in your case lives in the title on prescription, which this chapter does not restate.

There is no counter or agency for this: the Code names none. A claim for pre- or post-contractual liability is filed in the Court of First Instance, under the Rules of Civil Procedure, which we did not read for this guide.

• Believing there is no duty before signing: Article 1271 requires loyalty and good faith in the dealings.
• Believing the opposite, that breaking off negotiations always costs: behaviour (a) requires it to be sudden, inopportune or arbitrary.
• Ignoring the partial agreements already reached because "there is no contract yet".
• Using or disclosing the information received in the negotiations: confidentiality is one of the four duties.
• Letting the thing that will be the object of the future contract deteriorate: preserving it is also a duty under Article 1271.
• Claiming the profit the contract would have produced: what the article orders compensated are the expenses and the reliance harm.
• Throwing away the receipts for expenses made to celebrate the contract.
• Thinking the duties end once the contract is performed: Article 1273 extends them until the prescription period expires.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov