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Case Study: Breach of a Service Contract, abuse of rights, and procedural fraud.

Our experience, technical skills, and commercial awareness allowed us to provide our client a complete legal service of the highest quality


M&Z advised a client on a trial relating to the breach of a service contract worth more than $1 million.

Our client’s business relationship with the defendant arose as a result of the contracting process for the rehabilitation, maintenance, expansion, and administration of an interprovincial highway of nearly 400 km (248 miles), commissioned by the National Ministry of Transport and Public Works.

As a result, the defendant signed a service contract with our client to comply with the commitments required by the State, particularly the studies of the commissioned highway.

The contract had three conditions:

  1. The approval of the studies by the Ministry of Transport and Communications;

  2. The completion of the construction stage and the start of the expansion phase of the concession contract; and,

  3. The obtaining of credit.

Our client fully complied with its commitment, including the payment terms. However, the defendant argued otherwise. According to them, the last condition was not fulfilled, and there was no documented proof that they had received the credit. The defendant intentionally did not allow our client and the court inspectors to know for a fact whether the credit had been received or not.

Ironically, the defendant’s general manager confessed under oath that they obtained financing from other sources and publicly confirmed that the commission continues to run up to date. The confession proved that all factual elements for the payment of our client were met and that the defendant simply did not pay our client for an arbitrary reason.

The claim raises highly topical legal issues and is of keen interest to private companies with exposure to public procurement trials. The defendant’s refusal to allow our client to acquire proof showing the conditions for payment were met, even after several judicial dispositions which ordered the defendant to do so – in addition to the defendant’s refusal to pay our client what was rightfully owed – constitutes an abuse of rights, procedural fraud, as well as enrichment without cause.
We advised and helped our client secure a favorable outcome. The Court ruled that the fact that the defendant refused to pay our client by pretending that the conditions were not met amounted to an unlawful act, thereby resulting in abuse of rights, and procedural fraud.
The Court did not allow the defendant to continue benefiting from the lack of documentary evidence. Instead, it concluded that since the commission was being executed, and therefore the defendant had received money for the services rendered, the excuse of lack of evidence was no longer applicable.
A Case Study in Breach of a Service Cont
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The content of this blog is provided for informational and educational purposes only and should not be considered legal advice. Regulations in Ecuador are subject to changes and updates that may affect the applicability and accuracy of the content published here. We do not guarantee that the information presented is accurate, complete or current at the time of reading. Therefore, past postings should not be construed as necessarily reflecting current regulations. We strongly recommend that you consult with our qualified attorneys for specific and personalized advice.

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