Overview

As a United States territory with a unique legal heritage, Puerto Rico’s contract law landscape is a fascinating blend of civil law and common law traditions. Rooted in the island’s Spanish colonial past, yet influenced by the common law principles of the United States, contract law in Puerto Rico presents both opportunities and challenges for businesses and individuals seeking to engage in contractual agreements.

We’ll explore the key aspects of contract law in Puerto Rico, delving into the statutory framework, judicial interpretations, and practical considerations that shape the contracting process on the island.

The Foundations of Contract Law in Puerto Rico

The foundation of contract law in Puerto Rico is found in the Puerto Rico Civil Code, which draws heavily from the Spanish civil law tradition. Article 1213 of the Civil Code defines a contract as “a manifestation of the consent of two or more persons whereby one or more bind themselves to give, to do or not to do something.”

This broad definition sets the stage for the core elements of a valid contract in Puerto Rico, which include:

1. Consent: The parties must freely and voluntarily agree to the terms of the contract.
2. Capacity: The parties must have the legal capacity to enter into a binding agreement.
3. Lawful object: The subject matter of the contract must be legal and not contrary to public policy.
4. Consideration: There must be an exchange of value, either in the form of money, goods, or services.

While these elements may seem familiar to those versed in common law contract principles, the interpretation and application of these concepts in Puerto Rico can differ significantly from their U.S. mainland counterparts.

For instance, the concept of “consent” in Puerto Rico is often viewed through a more subjective lens, with a greater emphasis on the parties’ true intentions and the overall fairness of the bargaining process. Additionally, the issue of capacity can be influenced by cultural norms and societal expectations, particularly when it comes to the contracting abilities of minors or individuals with diminished mental capacity.

The sources of contract law in Puerto Rico are diverse and include:

1. Puerto Rico Civil Code: As mentioned earlier, the Civil Code is the primary source of contract law in Puerto Rico. It provides the general principles and rules governing contracts, including formation, validity, and enforcement.
2. Puerto Rico Commercial Code: The Commercial Code, enacted in 1912, regulates commercial transactions and provides specific rules for contracts related to commerce, such as sales, leases, and agency agreements.
3. Federal Laws: As a US territory, Puerto Rico is subject to federal laws, including the Uniform Commercial Code (UCC), which applies to commercial transactions involving goods and services.
4. Judicial Precedents: Court decisions and judicial precedents play a significant role in shaping contract law in Puerto Rico. The Supreme Court of Puerto Rico and the US Court of Appeals for the First Circuit have issued numerous decisions that interpret and apply contract law principles.
5. Custom and Usage: Local customs and usage can also influence contract law in Puerto Rico, particularly in areas such as trade and commerce.

Contractual Formalities in Puerto Rico

Another key aspect of contract law in Puerto Rico is the emphasis on formalities, which can vary depending on the type of contract and the subject matter involved. While some agreements can be formed through a simple exchange of offers and acceptances, others may require more stringent formalities, such as the involvement of a notary public or the execution of a public deed.

For example, contracts for the sale or transfer of real estate in Puerto Rico must be executed through a public deed, which is a formal, legally binding document drafted and signed in the presence of a notary. This requirement reflects the island’s civil law heritage, where the public recording of property transactions is seen as essential for ensuring the integrity of the land registry system.

Similarly, certain types of contracts, such as those involving the creation of a business entity or the establishment of a mortgage, may also require the involvement of a notary public to ensure the validity and enforceability of the agreement.

Elements of a Contract in Puerto Rico

A contract in Puerto Rico must have the following essential elements:

1. Offer: A proposal or offer must be made by one party to another, which can be accepted or rejected.
2. Acceptance: The offeree must accept the offer, either explicitly or implicitly, to create a binding contract.
3. Consideration: The contract must be supported by consideration, which can be a benefit or a detriment to one or both parties.
4. Capacity: The parties must have the capacity to contract, meaning they must be of legal age, mentally competent, and not under any legal disability.
5. Legality: The contract must be lawful and not contrary to public policy or morals.

Types of Contracts in Puerto Rico

Puerto Rico recognizes various types of contracts, including:

1. Bilateral Contracts: Contracts where both parties exchange promises or performances.
2. Unilateral Contracts: Contracts where one party makes a promise or performs an act, and the other party has the option to accept or reject.
3. Implied Contracts: Contracts where the parties’ intentions are inferred from their actions or circumstances.
4. Express Contracts: Contracts where the parties explicitly state their intentions and terms.
5. Contract of Adhesion: Contracts where one party has all the bargaining power, and the other party must accept the terms as presented.

Interpretation and Construction of Contracts in Puerto Rico

When it comes to the interpretation and construction of contracts in Puerto Rico, the courts often take a more holistic approach, considering not only the literal language of the agreement but also the underlying intentions of the parties, the broader context of the transaction, and the applicable principles of equity and fairness.

This approach is rooted in the civil law tradition, which places a greater emphasis on the spirit of the law rather than a strict, literal interpretation of the contractual text. As a result, Puerto Rican courts may be more willing to look beyond the four corners of the contract and consider extrinsic evidence, such as the parties’ course of dealing, industry customs, and the overall circumstances surrounding the agreement.

One notable example of this interpretive approach is the concept of “good faith,” which is deeply embedded in Puerto Rico’s contract law. Article 1210 of the Civil Code requires that contracts be negotiated and performed in good faith, with the parties acting with honesty, fairness, and respect for each other’s legitimate interests.

This good faith requirement can have significant implications for the enforceability and interpretation of contracts in Puerto Rico, as courts may be more inclined to intervene and modify or even invalidate agreements that they deem to be unfair or contrary to the parties’ reasonable expectations.

The content of this article has been prepared for information purposes only. It is not intended as, and does not constitute, either legal advice or solicitation of any prospective client. An attorney-client relationship with Weinstein-Bacal, Miller & Vega, P.S.C., cannot be formed by reading or responding to this article. Such a relationship may be formed only by express agreement with Weinstein-Bacal, Miller & Vega, P.S.C.