Contractual collusion

Article published on January 27th in the newspaper “EL MUNDO”.

The Supreme Court of Justice, in a judgment of November 15, 2017 (Daniel Villamizar vs. Banco Cooperativo de Colombia and Compañía Seguros la Equidad), in reversing a decision of a second instance judge, established its position regarding a topic that had been timidly developed by foreign jurisprudence and doctrine, but which is of great importance for the business world; contractual colligation.

This phenomenon, according to the Court, occurs when several contracts individually considered "are linked to form an inseparable business unit, so that (sic) a relationship of mutual dependence or subordination arises between the various forms applied, all in an attempt to facilitate the exchange of goods and products, the provision of services and credit". This colligation or union implies that the contracts do not lose their own physiognomy and autonomy, but that "they are conjugated for the effective realization of an economic operation, which can only be obtained in this way". This phenomenon should not be confused with complex or mixed contracts, in which we are in the presence of a single legal business -usually atypical- that groups several services, because in this modality there is only one contract that contains several different services, while, in the contractual collusion, there are multiple autonomous contracts intertwined and subordinated to each other, whose purpose is to seek the achievement of a final end.

The latter is explained by Francesco Galgano in his work "El Negocio Jurídico" when he indicates that "in colligated contracts, (...) there is not a single atypical contract with mixed cause (...) but a combined plurality of contracts, each of which responds to an autonomous cause, even though as a whole they tend to the realization of a unitary and complex economic operation".

Now, having understood the concept of contractual collusion, it is necessary to understand what obligations arise for the parties when this union of contracts takes place. In the judgment under study, the Court states that "in cases of contractual connection, the persons linked to the chain are obliged, in the first place, to enter into all the contracts required for the proper configuration of the network in a coordinated manner (...) and secondly, to maintain the proper functioning of the system thus constituted (...) These are obligations that are not specific to any of the linked contracts, but on whose satisfaction depends both the emergence and the existence of the contractual network". The Court indicates that, in Colombia, this supra-contractual duty of the contractual collaterals has its basis in articles 1603 of the Civil Code and 871 of the Code of Commerce which indicates that contracts must be executed in good faith and that, therefore, they bind not only to what is expressed in them, but to everything that corresponds to the nature of the same, according to the law, custom or natural equity.

Thus, according to the Court, an example of a collateralized contract is the sale and purchase with the granting of a credit to pay -in whole or in part- the thing transferred. There are two contracts (sale and loan) intimately linked to each other, and only when the loan materializes, the sale is right. If the purchase-sale fails, the mutual agreement lacks cause, and if it is the mutual agreement that fails, then the obligation to pay the price on the part of the buyer will have to be considered unsatisfied.

In the case under study, Mr. Daniel Villamizar, as plaintiff, in his capacity as heir of Mr. Gilberto Villamizar, sought to condemn the defendants for their liability derived from the non-payment of a group life insurance policy for debtors to guarantee the payment of the loans granted by the bank to its clients in case of death. The plaintiff alleged that such collective life insurance for debtors was related to the mutual agreement and that it was an indispensable requirement of the latter, according to the bank's credit management regulations. In this sense, both the insurance and the mutual constituted a linked contractual system, where the breach or non-observance of one of these would imply the breach of the ultimate contractual purpose.

The Court, in accepting this theory, developed the concept of "functional colligation" which indicates that, if the cause of a business is unique, even though there are multiple contracts that by themselves do not produce dependence between them, but that due to the object of the business seek a unique interest, there is a functional dependence between them, so that the breach of one of them will generate the breach of the contractual system as such.

Document

El-coligamiento-contractual_​ENG.pdf

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