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Administrative Contracting in Covid-19 Times: Alternatives Against Contractual Imprevisibility

The difficult situation that the country is experiencing as a result of the covid-19, forces us to make some clarifications regarding the impact that it could have, both for the Contracting Administration and for the Contractors.

It is known that the administrative contract has conditions that differentiate it from the so-called commercial contracts while:

  • are governed by the Principle of Legality -and not by the Autonomy of the Will-
  • they are agreed -as a general rule- to satisfy public images
  • the contractor is a collaborator of the administration for the fulfillment of the public purpose
  • the Administration has the obligation to fulfill the contract -as agreed-, without detriment, of course, that the Administration can exercise the known Exorbitant Powers.

Note that the contractor is not entitled to simply stop fulfilling an obligation; therefore, you must go to the administration to show the condition that makes compliance impossible. The foregoing, in order to seek - by consensus - which legally established mechanism is suitable to use in order to achieve a favorable balance between: the public interest pursued by the contract; and, its economic balance.

Thus, what options does the Costa Rican law foresee in a scenario - such as the current one - that could give way to situations of unpredictability in the fulfillment of the contractual object. In this regard, the Administrative Procurement Law (LCA) Provides 3 mechanisms:

Suspension of the contractual term (ART. 207 LCA)

This figure applies to situations of:
• fortuitous event
• force majeure where the only thing that is suspended is the execution of the contract; without the deadlines being extended (as could well be given in the figure of the term extension provided in article 206 LCA). Additionally, this figure can be ex officio or even a banner of the contractor.

Suspension of the contract (ART. 210 LCA)

This figure, similar to the previous one, is essentially a privilege -prerogative- of the Administration that allows a contract in execution to be temporarily suspended for a period of 6 months, which can be extended by the same amount. The reasons that the Administration would have to allege to use this mechanism are:
• public interest
• institutional interest
• unforeseen or unforeseeable causes for the Administration.
It goes without saying that, due to the suspension decision, there is a unilateral nature -in this case, the Administration's mooring-, it empowers the contractor to claim compensation for those damages and prejudices that the suspension causes.
Like any administrative act, the suspension must be duly motivated, reasoned, and therefore, there must be an express reference - for the safety of the parties - regarding:
• reasons that justify the suspension
• what tasks have been carried out at the time of the suspension
• who assumes responsibility for the conservation of what has been executed
• how the economic balance of the contract will be maintained
• indication of the restart date of the contractual performance.

Unilateral termination (ART. 214 LCA)

In this case, the contract could end by a unilateral decision of the Administration -Exorbitant Power-, for which there must be reasons of:
•    public interest
• fortuitous event
• duly accredited force majeure (art. 11 LCA).
Medular turns out to warn that, in this case, a very specific procedure must be followed (art.216 ECO) where:
• the reasons for terminating the relationship in advance are communicated to the contractor
• The contractor is given a space to demonstrate - 10 days - where he must express what he deems appropriate and - fundamentally - present the settlement of those items owed by the administration with their respective proof.

Other aspects to consider

  • The contractor is not empowered to simply stop fulfilling an obligation: he must always go to the administration to show the condition that makes it impossible to fulfill. Management that the Administration must process applying the principles of speed and efficiency in favor of the managed.
  • How the administrative contract pursues a public purpose; the logical thing is to search suitably - in a consensual way - which mechanism is healthy to use in order to achieve a favorable balance between: the public interest pursued by the contract and the economic balance to which the contractor is entitled.
  • When the termination is unilateral for reasons not attributable to the contractor, the Administration will always have the obligation to liquidate what it has executed; and, to compensate the damages derived from the "abnormal" termination of the contract.

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William Villalobos's picture

His professional practice has focused on the legal structuring of public-private participation models in Telecommunications, Infocommunications, Power Generation and Renewable Energy Projects. Also, hi has experience in Litigation in Contentious-Administrative matters, as well in multiple Administrative Proceedings before Regulatory Agencies.

In 2018 was recognized as a one of the 100 highlighting most influential in-house lawyers in Energy & TMT practice in Central America by The Legal 500 GC Powerlist: Central America 2018. Also, in 2019 he was included as a LACCA Member.