interpretation of the FSIA over the substance of this transaction. The Court therefore rejects plaintiff's suggestion that formation of the instant contract should be determined based on the fiction that the Bolivian government was actually a Bolivian individual.
C. Merits of Cross-Motions for Summary Judgment
The Court next considers the merits of the parties' cross-motions for summary judgment, turning first to the breach of contract theory of the case.
Based on the preceding analysis of Bolivian law, it is clear that a contract involving an agency of the Bolivian government requires certain formalities, including a notarized, witnessed writing that is recorded as a public deed and inclusion of choice of law and choice of forum clauses. However, both Walpex and YPFB agree that these requirements were not adhered to. Thus, there can be no dispute that, under clearly established principles of Bolivian law, the breach of contract action must fail.
Walpex attempts to avoid this result by asserting that "YPFB never indicated that it intended to be bound only upon execution of a formally executed contract, and nowhere in the Regulations or Specifications produced by YPFB does such a requirement appear." Plaintiff's Motion, at 20 (emphasis in original). However, all of the evidence before the Court directly supports the contrary result, and the only inference that can be drawn is that YPFB did not intend to be bound in the absence of these formalities. For example, the Specifications distributed as part of the bidding process unequivocally stated that presentation of a bid signified submission to rules of Bolivian law, and to regulations concerning governance of YPFB. Moreover, these controlling authorities require execution of a notarized, witnessed contract recorded as a public deed to form a valid contract with an instrumentality of the Bolivian government, with the absence thereof voiding the contract. Thus, because there is no disputed Issue of material fact concerning the absence of a notarized contract, and because the controlling documents make clear that YPFB did not intend to be bound in the absence of such a writing, summary judgment in favor of defendant on the breach of contract claim hereby is granted.
However, the fact that the claim for breach of contract must fail does not lead inexorably to the conclusion that Walpex has, no cause of action. In addition to its breach of contract claim, plaintiff has asserted a claim for recovery based on the allegation that YPFB acted in bad faith, and should be equitably estopped from denying the obligation it assumed with respect to Walpex.
For example, Walpex has produced various internal memoranda demonstrating that YPFB decided, soon after the award, to suspend the purchase of the pipe, while publicly adhering to the position that the purchase would proceed. Moreover, plaintiff claims that, because it was not informed of defendant's intention to suspend the purchase, Walpex incurred various expenses, including the contract with Vinson and the cost of the performance bond. This evidence clearly raises disputed issues of material fact under Bolivian law concerning whether YPFB acted in bad faith and caused injury to Walpex. Thus, after full discovery, the fact-finder will be required to determine whether defendant's actions were sufficiently misleading that YPFB should be held liable damages to Walpex. The Court therefore rejects defendant's conclusion that summary judgment is appropriate because the facts alleged by Walpex "do not come close to satisfying the heavy burden for alleging or proving [bad faith] by YPFB." Palacios Affidavit P125.
To support a recovery, however, Walpex will also have to overcome hurdles of contributory negligence and assumption of risk. Based on the evidence currently before the Court, a disputed issue of material fact exists concerning the reasonableness of plaintiff's reliance on YPFB's position. For example, YPFB has introduced evidence in support of the assertion that Walpex knew that it should not have entered into binding obligations with suppliers until a notarized contract was executed with YPFB. Defendant therefore asserts that plaintiff's execution of a supply contract in anticipation of the completion of contract formalities concerning the Walpex-YPFB contract was unreasonable, and that any recovery by the plaintiff should be limited to the cost of the performance bond procured by Walpex. Based on these disputed issues of material fact, the Court denies the cross-motions for summary judgment on the bad faith/equitable estoppel theory of the case.
For the foregoing reasons, plaintiff's motion for summary judgment on the breach of contract claim hereby is denied, and defendant's cross-motion for summary judgment dismissing the breach of contract theory of the case hereby is granted. The parties' cross-motions for summary judgment on the bad faith/equitable estoppel theory of the case hereby are denied. The parties are hereby ordered to attend a status conference on Friday, June 19, 1992, at 11:30 A.M., in Courtroom 36 of the United States Courthouse, New York, New York.
Dated: April 21, 1992
New York, New York
Peter K. Leisure