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Modification of contracts: The “rebus sic stantibus” clause

Real Estate
Modification of contracts: The “rebus sic stantibus” clause
What is the “rebus sic stantibus” clause?

Our high court issued a ruling on March 6, 2020, specifically STS 153/2020 in which the Supreme Court failed to clarify the contractual disputes on the “rebus sic stantibus” clause.

We must take into account that both the doctrine and the jurisprudence have integrated this clause, which is not integrated or regulated in the legislation, but deals with the search for the restoration of the balance between the contracting parties devised by the doctrine.

Therefore, this clause is a mechanism or mode of reestablishing the balance of benefits, which is applicable to contracts, when due to circumstances difficult to foresee, unforeseen and supervening, it is totally impossible to fulfill the obligation.

The high court has designed and implemented a new doctrine of the “rebus sic stantitubus” clause applicable to contracts produced by the fatal economic crisis of 2008. The implementation of this clause is of vital importance to overcome unexpected and unforeseeable crises and situations , such as the current coronavirus crisis.

It should be noted that the clause under analysis does not have termination, termination or termination effects, it only has modifying effects of the contracts, to try to balance the provisions between the contracting parties. In other words, trying to compensate for the imbalance between the weakest part and the strongest part of the contractual relationship, in a context produced by unforeseeable and extraordinary circumstances at the time of the conclusion of the contract and at the time of the perfection of the contract between the subjects bound by its compliance.

In case of being affected by an extraordinary situation, the owner should contact a specialist lawyer as quickly as possible.

Is there a new approach by the doctrine?

The new doctrinal approach of the different judgments issued by the Supreme Court, recognizes that an extraordinary economic situation such as that produced recently by Covid-19 or a great economic recession, may be considered extraordinary and unpredictable causes that can alter the agreed conditions by contract.

It should be noted that the judgment of the Supreme Court dated June 30, 2014, on the effects of contracts in the application of the “rebus sic stantibus” clause was issued in a framework after the economic crisis of 2008 and in a framework prior to the health and economic crisis derived from Covid-19.

Next, we highlight the effects of the judgment issued by the STS on June 30, 2014.

“… The current economic crisis, with deep and prolonged effects of economic recession, can be openly considered as a phenomenon of the economy capable of generating a serious disorder or mutation of circumstances and, therefore, altering the bases on which the initiation and the development of contractual relationships had been established… ”. “… It should be noted that the application of the clause, strictly speaking, does not imply a break or singularity with respect to the preferential rule of loyalty to the given word ('pacta sunt servanda'), nor does it imply a breach or maintenance of contracts … ”.”.

What does the new sentence issued on March 6, 2020 introduce?

Instead, the new ruling 156/2020 issued by the STS on March 6, 2020, qualifies and outlines the details of the previous ruling, creating a precedent in the health crisis produced by the coronavirus pandemic.

It should be noted that the most outstanding peculiarity of this last sentence is that it differentiates the application of the “rebus sic stantibus” clause between long and short-term contracts. What this last sentence intends, more than the modification of what is established in previous jurisprudence, is the introduction of explanatory notes capable of solving the legal gaps in a doctrine not anchored to current legislation.

In summary, it gives preference and effectiveness in the application of the clause in long-term contracts and rejects the application for short-term contracts.

"The change in these characteristics that, under the premises established by jurisprudence, could generate an assumption of application of the "rebus sic stantibus" rule is more likely to occur in a long-term contract, ordinarily of a successive tract. But not in a case, like this one, of a short-term contract, in which something extraordinary can hardly happen that affects the basis of the contract and is not covered within the risk of that contract. "

In conclusion, it seems logical that, if extraordinary circumstances occur that affect the contractual capacity of the parties to comply with the stipulated obligations, these circumstances will only affect the contract when it is prolonged in time, that is, when it is a contract of Long duration.

Contact us, and our lawyers specializing in civil law will study your specific case. 

At Forcam Abogados we have offices in Barcelona, Madrid and Reus.