Op-Ed: Three essential contracts for small business in 2024
Understanding what contracts are and their functions is crucial for individuals and businesses in Puerto Rico, regardless of whether they can afford a lawyer or not.
Microjuris shares at least three contracts that are essential for any small or medium-sized business in Puerto Rico.
Let’s take a look.
Service Contract (“Contrato de Servicio,” in Puerto Rico)
A service contract occurs when a person provides a service to another person, without being subordinate, in exchange for payment. Unless otherwise agreed, the person providing the service freely chooses the means and may, under their direction and responsibility, use assistants for contract execution.
The service contract is established for a specific period. When the time is indefinite, the relevant provisions of the supply contract apply.
The price of services is determined by the agreement of the parties or, in its absence, by law or customary practices.
The person receiving the service is obliged to pay the price for the services and provide the necessary cooperation for the services to be rendered.
The service provider must deliver the agreed-upon services within the agreed-upon timeframe or a reasonable timeframe.
The person receiving the service can unilaterally terminate the service contract, even if the execution has begun. However, they must pay the service provider for the expenses incurred, work performed, and the profit that could have been obtained.
A more detailed explanation of this contract is available in Articles 1381-1389 of the Civil Code of Puerto Rico.
Lease Contract (“Contrato de Arrendamiento,” in Puerto Rico)
A lease contract occurs when a lessor undertakes to temporarily transfer the use and enjoyment of a property to the lessee in exchange for a specified price.
The duration of the lease can be determined or indeterminate.
The lease of real estate is considered to be concluded for a term of one year unless a different term is agreed upon. At the agreed-upon term’s expiration, the contract continues on the same terms until either party notifies the other of its intention to terminate the contract.
The lessor’s death or the alienation of the leased property does not affect the agreed-upon lease duration, unless otherwise stipulated.
Unless expressly prohibited in the lease contract, the lessee may sublease all or part of the leased property, without prejudice to their responsibility to fulfill the contract with the lessor.
The lessor can only subsequently refuse subleasing when the sublessee does not have the same financial qualifications as the lessee or when the sublease activity or use would cause economic harm.
The rent or lease price is agreed upon by the parties based on the leased property’s value or is determined by a third party they designate, adjusted to the same criteria.
The lease contract does not require any special formality for its validity, except when it is intended to be registered in the Puerto Rico Property Registry.
A more detailed explanation of this contract is available in Articles 1331-1350 of the Civil Code of Puerto Rico.
Contract of Work (“Contrato de Obra,” in Puerto Rico)
Under a contract of work, the contractor performs, without being subordinate to the employer, a material or intellectual work in exchange for payment.
Unless otherwise agreed upon, the contractor freely chooses the means and may, under their direction and responsibility, use assistants for work execution.
If the necessary goods for execution perish due to fortuitous events or force majeure, the party obligated to provide them bears the loss.
The price of the work is determined by the agreement of the parties or, in its absence, by law or customary practices.
The work can be contracted for a lump sum, by unit of measurement, by cost, or by any other system agreed upon by the parties. Unless otherwise agreed, it is presumed that the work is contracted for a lump sum, and the contractor provides the materials.
The employer can terminate the contract when necessary, variations imply a 20% increase in the agreed-upon price. This right must be exercised within five days of learning about the need for modification and its estimated cost.
A more detailed explanation of this contract is available in Articles 1367-1380 of the Civil Code of Puerto Rico.
Beyond these contracts, there are many others that small and medium-sized businesses (SMEs) should be aware of. The essential thing is to continue educating oneself about rights and obligations to always stay ahead in 2024.
Contributor Microjuris.com is a Puerto Rican company that has been providing its users with an intelligent ecosystem of personalized legal information for more than 30 years. It offers services in Puerto Rico, Chile, Argentina, and Venezuela. Its mission is to provide legal intelligence through its research tool, news channel, and online continuous legal education program. Its vision is to democratize access to the legal debate, ensuring that it is inclusive and available to everyone.
