Getting out of a works contract: the 20%, the five days, and what you pay

They are Articles 1378 to 1380 of the Civil Code of 2020: the three ways to rescind a contract for works — for necessary variations raising the price 20%, for completion of the minimum limit in a piece-or-measure work, and the principal’s unilateral rescission on paying for what was done.

Principals wishing to exit a work and contractors affected by that exit, under the Puerto Rico Civil Code. Article 1379 reaches the contractor as well.

• To rescind under Article 1378: that the necessary variations imply an increase of twenty per cent of the agreed price.Verified against the official source
• And to exercise that faculty within five days of having learnt of the need for the modification and its estimated cost.Verified against the official source
• For Article 1379: that the work was agreed by piece or measure and that the minimum limit of the agreed work has been completed.Verified against the official source
• For Article 1380: to pay the contractor the expenses incurred and the work done.Verified against the official source

• The contractor’s communication with the need for the modification and its estimated cost: the five days run from its date.
• If the work is by piece or measure, the record of the agreed minimum limit and that it was completed.
• For unilateral rescission, the detail of the expenses incurred and the work done, which is what must be paid.

1. 1

   Step 1: The exit for cost overrun: the 20%

   Article 1378: the principal may rescind the contract where the necessary variations imply an increase of twenty per cent (20%) of the agreed price. The threshold is measured against the agreed price, not against the isolated cost of the variation.

2. 2

   Step 2: Five days, counted from when you learn

   The same article: this faculty must be exercised within five (5) days of having learnt of the need for the modification and its estimated cost. Both things: the need and the estimated cost.

3. 3

   Step 3: That is why the contractor’s communication matters

   Another article of the same chapter obliges the contractor to communicate to the principal any necessary variation and its estimated cost. That communication is what sets the five days running, which is why it should be in writing and dated.

4. 4

   Step 4: What the article does not clarify about that period

   It does not say whether the five days are calendar or business days, nor in what form the rescission is exercised, nor what happens if the increase is exactly twenty per cent. This guide fills none of those gaps; it does advise not cutting the period fine.

5. 5

   Step 5: The exit on completing the minimum limit

   Article 1379: where the work has been agreed by piece or measure, both the contractor and the principal may unilaterally rescind the contract where the minimum limit of the agreed work has been completed. This is the only one of the three that also serves the contractor.

6. 6

   Step 6: Where that minimum limit comes from

   From the price article: where the price is agreed by piece or measure, the parties must also agree a minimum limit. If none was agreed, the article does not say what happens, and this guide does not assume it.

7. 7

   Step 7: The door that is always open

   Article 1380: the principal may unilaterally rescind the contract even though execution has begun. No reason is needed, and the article sets no period.

8. 8

   Step 8: But it costs what was already done

   The second sentence of the same article: however, it must pay the contractor the expenses incurred and the work done. Two items, neither of which the Code defines or quantifies.

9. 9

   Step 9: Which one to use

   They are different routes with different costs. Article 1378’s does not by itself require paying anything, but it closes after five days and requires the twenty per cent threshold. Article 1380’s is always available but requires paying expenses and work. This guide does not advise which to use in a given case: that depends on facts the Code does not settle.

Rescission is exercised by the party itself against the other; the Code orders no permission from any agency or court. If it is disputed whether it lay, or how much must be paid for what was done, the Court of First Instance decides.

• Letting the five days lapse from learning of the need for the modification and its estimated cost.
• Counting those five days from when the changes were made rather than from when they became known.
• Measuring the twenty per cent against the cost of the variation instead of against the agreed price.
• As the contractor, making necessary variations without first communicating the estimated cost, which is what lets the principal decide in time.
• Believing Article 1380’s rescission is free: the expenses incurred and the work done must be paid.
• Believing a reason is needed for Article 1380’s unilateral rescission: the article requires none.
• As the contractor, trying to rescind unilaterally under Article 1380: that faculty is written for the principal.
• Using Article 1379 on a work not agreed by piece or measure.
• Contracting by piece or measure without agreeing the minimum limit, which is what triggers that exit.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

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