On June 1, 2020, the Governor of Puerto Rico, Hon. Wanda Vázquez-Garced, signed into law Puerto Rico’s new Civil Code. Some of these changes could impact employment-related contracts, although the extent of this impact is not yet known, and will likely be clarified through legislative guidance in the coming days or weeks.

Prior Civil Code

In matters of civil law, Puerto Rico’s main legal source was the Civil Code of 1930, as amended, which is based on the Spanish Civil Code, which was extended to Puerto Rico in 1889. The Civil Code regulates a range of matters including marriage, torts, contracts, property, and estate rights. Although provisions from the Civil Code have been amended throughout the years, this is the first time in close to a century that the entire Code has been revised.

The efforts to completely overhaul the outdated 1930 Civil Code began more than 20 years ago, spanned six different administrations and suffered multiple iterations. The version that was ultimately enacted and signed into law on June 1, 2020, was drafted back in 2018 and has been the subject of strong public debate since it underwent numerous revisions that were approved without the legislature having held any public hearings.

New Civil Code

In some instances, the new Civil Code simply modifies the terminology used in order to make it more current and accessible. In others areas, it modifies current rules and/or includes matters that have already been legislated or incorporated into our legal landscape by virtue of opinions issued by both the Puerto Rico and U.S. Supreme Courts. The new Civil Code further eliminates obsolete legal concepts like the “emphyteutic annuity.” The new Civil Code consists of a preliminary title and six books, covering legal relations, family institutions, property rights, obligations, contracts, and estate rights.

The new Civil Code acknowledges the jurisprudence of the Supreme Court of Puerto Rico as a source of law that complements the legal system and other sources of law such as the Constitution. This change, although not significant in its applicability, does recognize the strong influence of the common law in Puerto Rico. Among its most notable changes, the new Civil Code substantially reduces the statute of limitations of personal claims for which no special term was established (which includes claims for breach contract) from fifteen (15) years to four (4) years. It also incorporates the concept of punitive damages and created a new section titled: “Revision of Contracts,” which establishes, among others, the concept of “disproportionate economic advantage injury.” Pursuant to the new Code, a person could demand the annulment or revision of an onerous contract when one of the parties, taking advantage of the need, inexperience, cultural condition, economic dependency or advanced age of the other, gets a disproportionate and unjustified economic advantage.

In addition, and for the first time, the new Civil Code regulates adhesion contracts, which it defines as contracts in which the acceptor is forced to accept predetermined content. Although the Code adopts the general doctrine that such contracts are interpreted unfavorably against the drafting party, it goes further and establishes that the following clauses within adhesion contracts are “especially voidable”: (1) a clause that is not written in a clear, complete and easily legible manner, in Spanish or English; (2) a clause authorizing the party that drafted the contract to unilaterally modify the elements of the contract; (3) a clause that prohibits or limits the adherent party’s ability to file claims, restricts defenses or means of evidence available, or reverses the burden of proof; (4) a clause that excludes or limits the liability of the party that drafted the contract; (5) a clause that, for no reason, changes the contractual domicile of the adherent; (6) a clause that, in light of the adherent’s silence, extends or renews a fixed duration contract; and (7) a clause that excludes the jurisdiction of a regulatory agency.

The impact that these new legal additions will have, for example, on employment contracts, remains to be seen. The legislature stated that within the next few days it will publish thousands of annotations and legal memoranda to shed light on some of the adopted changes. We will continue to study this new extensive piece of legislation and provide summaries of the provisions more likely to impact the labor and employment arena.

The new Civil Code goes into effect on November 28, 2020.