Contracts
A quotation accepted by email is already a contract. What was not put in writing is filled in by the law, and not always the way one expected.
01What a contract is
Article 957 of the Civil and Commercial Code defines a contract as the legal act by which two or more parties express their consent to create, regulate, modify, transfer or extinguish property-related legal relationships. Three principles govern it:
- Freedom of contract (Article 958): the parties decide whether to contract, with whom and with what content, within the limits of the law, public order and morality.
- Binding effect (Article 959): a valid contract binds the parties as the law itself does, and can only be modified or terminated by agreement or in the cases the law provides for.
- Good faith (Article 961): it binds not only to what is written, but to everything that a careful and prudent contracting party would reasonably have assumed.
02Elements and formation
| Element | What it requires |
|---|---|
| Consent | An offer addressed to a specific person, with the intention of being bound and the necessary particulars, and full acceptance of that offer |
| Object | Lawful, possible, determined or determinable, and capable of economic valuation |
| Cause | The purpose that led the parties to contract, which must exist and be lawful |
| Form | Free, unless the law requires a particular one (Article 1015) |
The practical consequence of freedom of form is the one that surprises many people: a quotation sent by email and accepted by reply is already a contract, with a price, a deadline and a scope. An acceptance with modifications, on the other hand, does not close the contract: it is a counteroffer. The difficulty with a verbal contract is not that it is valid, but proving what was agreed.
03When the contract does not say everything
No contract provides for everything. When a dispute arises, the judge looks for the parties’ common intention (Article 1061), reading the words with their technical meaning if they belong to a profession, the parties’ conduct after signing and the context. What the contract does not regulate is filled in by the rules for that type of contract and by local usage.
When one party drafts everything and the other can only accept or refuse —the terms of a service, a set of general conditions—, the contract is one of adhesion. Ambiguous clauses are interpreted against whoever drafted them (Article 987), and abusive ones are deemed unwritten.
If something extraordinary and unforeseeable happens after signing that makes performance excessively burdensome —a sudden devaluation that multiplies the cost of imported components—, the affected party may ask for the contract to be adjusted or terminated on grounds of unforeseeable circumstances (imprevisión; Article 1091).
04Work contracts and service contracts
These are the contracts an engineer signs most often, and the Code regulates them together (Articles 1251 to 1279), with a distinction that has consequences:
| Work contract (contrato de obra) | Service contract (contrato de servicios) | |
|---|---|---|
| What is promised | A reproducible result, or one capable of being delivered | A diligent activity, without guaranteeing the result |
| Example | Installing and commissioning an alarm system | Advising on the best communications technology |
| When it is fulfilled | When the result is delivered in proper condition | When the service was provided with due diligence |
The contractor is obliged to carry out the work as agreed and according to the rules of the craft (accepted professional standards), and to inform the client (comitente) about the essential aspects (Article 1256). The price may be set as a lump sum (ajuste alzado; a total amount), by unit price (so much per meter of cable, so much per network point) or on a cost-plus basis (coste y costas; the actual cost plus a percentage). On receiving the work, the client who accepts it without reservations loses the right to claim for defects that were apparent; hidden ones can be claimed later.
For long-lasting works, the builder is liable for structural ruin (ruina) —defects that compromise the work’s soundness or make it unfit for its purpose— if the damage occurs within ten years of acceptance (Articles 1273 to 1275). Liability also extends to the designer and to the construction supervisor.
05Confidentiality and intellectual property
In an electronic engineer’s work, the most valuable thing that changes hands in a contract is usually information: a schematic, firmware, a test procedure. Two issues should always be put in writing:
- Confidentiality: Law 24,766 protects secret information with commercial value that is kept confidential through reasonable measures. A confidentiality agreement sets what is confidential, for how long, and what happens if it is disclosed.
- Ownership of what is developed: software is protected by Law 11,723 on intellectual property. Software developed by an employee in the course of their duties belongs to the employer, unless otherwise agreed; in a commission to an independent professional, it is advisable to expressly agree on the assignment of rights or the license, because otherwise it remains open to dispute.
06Where it shows up in electronics
| Situation | Contract and critical point |
|---|---|
| Installing a CCTV system in a factory | Work contract: scope, as-built drawings, acceptance and warranty |
| Maintenance of medical equipment | Service contract: response times, spare parts, liability for downtime |
| Developing custom firmware | Work contract: specification, deliverables, ownership of the source code |
| Selling equipment to consumers | Sale with the statutory warranty of Law 24,240, which cannot be reduced |
| Showing a prototype to a potential partner | Confidentiality agreement before the meeting |
07Activities
Write the quotation for installing a data network, including scope, exclusions, price and how it is set, deadline, acceptance conditions and warranty.
Read the terms and conditions of an online service and mark the clauses that could be considered abusive under the Civil and Commercial Code and Law 24,240.
Draft a short confidentiality agreement for showing a prototype to a manufacturer, defining confidential information, term and exceptions.
08Common mistakes
- Working without defining the scope. Everything that is not excluded can be claimed as included.
- Accepting a work without inspecting it. Accepting it without reservations prevents claiming for apparent defects.
- Not agreeing on ownership of the development. The source code ends up in dispute.
- Confusing a work with a service. Promising a result when you can only guarantee diligence increases your liability.
- Believing that without a signature there is no contract. Acceptance by email is enough.
09Self-assessment
What does the good faith principle of Article 961 say?
That the contract is entered into, interpreted and performed in good faith, and binds to everything that a careful and prudent contracting party would reasonably have assumed, not only to what is written.
What is the difference between a work contract and a service contract?
In a work contract a reproducible or deliverable result is promised; in a service contract, a diligent activity without guaranteeing the result.
What is the unit-price system?
The price is set for each unit executed, such as a meter of cable or a network point, and the total depends on the actual quantity.
Who owns software developed by an employee in the course of their duties?
The employer, unless otherwise agreed (Law 11,723).
10Further reading
- Ricardo Luis Lorenzetti. Tratado de los contratos. Rubinzal-Culzoni (in Spanish). The reference work on contracts in Argentine law.
- Ricardo Luis Lorenzetti (editor). Código Civil y Comercial de la Nación comentado. Rubinzal-Culzoni, 2014-2015 (in Spanish). Articles 957 to 1091 and 1251 to 1279, commented one by one.
- Law 11,723 on intellectual property and Law 24,766 on confidentiality. Updated texts. InfoLEG (in Spanish). The two rules that protect an engineer’s intellectual work.