US Dollar Denominated Debt: Rejection Of Payment In Argentine Pesos

Author:Mr Juan Diehl Moreno and Maria del Rocio Beccar Varela
Profession:Marval O'Farrell & Mairal

On April 5, 2016, Division A of the Argentine Court of Appeals in Civil Matters (hereinafter, the “Higher Court”) confirmed the ruling issued by the lower court that dismissed the lawsuit initiated in judicial proceedings “Producción Animal SRL vs B.M.I. in re consignment” (file No. 23,284/2013).

The lawsuit was filed by the acquiring party of a fraction of land in the Province of Buenos Aires, who committed to pay the price in US dollars. The first payment was made upon execution of the public deed transferring ownership on August 31, 2012, committing the debtor to pay the balance of the price in four installments and securing payment with an in-rem guarantee of mortgage.

The agreement reached between the parties expressly stipulated that the payment in US dollar bills was an essential condition of the contract of sale.

The indebted party stated expressly in the contract that they knew the risks involved and irreversibly and irrevocably waived the right to claim or invoke any reason or cause of unpredictability, among others, since they knew the economic situation of the country and had carried out a detailed analysis and evaluation of “all economic and financial and legal variants of the situation and prospects and risks of fluctuations of prices in the US currency in the national and international market, none of which would prevent them from meeting their obligations in the fixed currency and/or claim another form of restitution and/or payment (...)”. In addition, in the contract the parties expressly agreed on alternative mechanisms to acquire the bills needed to cancel the debt in the agreed currency.

Prior to the expiration of the first installment of the balance of the price, the debtor sustained that in February 2013 a formal notice was sent to creditors requesting them to indicate a bank account in local currency, in which they could deposit the amounts due in Argentine pesos. Upon the refusal of the creditors to receive a payment in the terms offered by the debtor, the latter brought a lawsuit to deposit the payment, stressing that the context in which the agreement had been reached had changed considerably and that the theory of unforeseen events was applicable.

Although the plaintiff argued that a measure ordered by the Argentine Government prevented them from accessing the foreign exchange market, the creditors and the lower court pointed out that the referenced provisions of the Argentine Central Bank (BCRA) and resolutions...

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