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Keywords

contractbreach of contractdamagesliabilityappealpartnershipbad faith
contractbreach of contractdefendantjurisdictiondamagesbad faith

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Servicios Comerciales Andinos, S.A. v. General Elec. Del Caribe, Inc., 145 F.3d 463

Facts

SECOMAN, a Peruvian partnership, was engaged in the purchase and resale of cotton and sought to enter the international market. In 1990, GE del Caribe expressed interest in purchasing Pima cotton from SECOMAN, leading to negotiations that resulted in an 'Agreement to Purchase' for 1,000 tons at a price of $1.58 per pound. Although the parties began to perform under the agreement, GE del Caribe failed to secure the necessary letter of credit, leading to SECOMAN's inability to fulfill its obligations under other contracts and resulting in significant financial losses.

SECOMAN subsequently filed suit against GE del Caribe for breach of contract in the U.S. District Court for the District of Puerto Rico, alleging alienage jurisdiction under 28 U.S.C. § 1332(a)(2).

Issue

The main legal issues included whether the contract was binding under Peruvian law, whether the district court properly considered extrinsic evidence, and whether the damages awarded to SECOMAN were appropriate.

GE del Caribe contends that the district court erred in determining that it breached its obligations under the 'Agreement to Purchase,' for the simple reason that the Agreement was not a final and binding contract under the law of Peru.

Rule

Under Peruvian contract law, a contract is binding if the essential terms are agreed upon, and a breach in bad faith can result in liability for all damages proximately caused by the breach, including unforeseeable damages.

Under Peruvian contract law, a defendant who breaches a contract in bad faith is liable for all damages proximately caused by the breach, including unforeseeable damages.

Analysis

The court found that the essential terms of the contract were present and that the district court did not err in considering extrinsic evidence to clarify ambiguities in the agreement. The court determined that GE del Caribe's failure to provide the required irrevocable letter of credit constituted a breach of contract, which was done in bad faith, leading to SECOMAN's financial losses.

The district court concluded that from that point on, GE del Caribe sought ways to shirk its duties under the contract.

Conclusion

The Court of Appeals affirmed the district court's finding of breach and the award of damages, but reversed the amount of damages awarded, indicating that the damage award would be reduced.

We affirm in part and reverse in part.

Who won?

Servicios Comerciales Andinos, S.A. (SECOMAN) prevailed in the case because the court upheld the finding that GE del Caribe breached the contract and acted in bad faith, resulting in significant damages to SECOMAN.

The district court determined that GE del Caribe had not only breached the Agreement, but also that it had done so with 'dolo' or dolus —that is, in bad faith.

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