We are living in very difficult times not solely from a personal, family and human point of view but also from business perspective, as a set of measures have been approved which greatly affect usual functioning of our production, distribution, advertising, sale and purchase system, our employment market, as well as our relations with different Public Authorities. And all the above is due to an unforeseeable event such as the pandemic caused by the coronavirus.
This situation can involve a change in a normal compliance with a contract, entailing an unforeseen and unexpected modification of the basic circumstances that were taken into account at the moment of its signature. Such contracts despite both parties' will to comply with them can be doomed to their breach. What shall be done in this case? Who shall take on responsibility for such non-compliance?
There are different mechanisms which usually help our legal system: fortuitous event, force majeure, unexpected impossibility to fulfil and the clause "rebus sic stantibus".
Let us briefly focus on the concept of "rebus sic stantibus", basing on the fact that it is not a norm, but a creation of jurisprudence, that it has been mainly considered as an exception, that as the Judgement of the Supreme Court of June 30, 2014 says "Its application is caused by a breach or frustration of commutative and onerous contracts which were supposed to produce a practical result intended by parties", and that it aims at maintaining contractual equilibrium on the basis of equity.
By analysing this Judgement, therein it was considered that: "Having determined extraordinary nature of alteration of the circumstances for a well-known event of the current crisis, its substantial impact in the context of advertising sector of transport and its element of unpredictability in the framework of reasonableness of distribution of allocation of contractual risks, the type of the contract requires, besides said alteration or change in the circumstances, that a failure of commutative nature of the contract occurs meaning serious hardship for an affected party to comply with its obligation"
Therefore, the essential requirements are: unpredictability of the risk and excessive hardship to comply with the obligation.
Regarding excessive hardship, as the indicated Judgement pointed out: "it is necessary to note that its impact has to be relevant or significative for the economic basis of the signed contract. This fact takes place when excessive hardship caused by said change results to be decisive both for frustration of the economic objective of the contract (its viability) and when it represents a significant alteration or failure of equivalence relation between mutual obligations (communitive nature of the contract)"
In conclusion, we will have to examine case by case, contract by contract, in order to know particular scope of application of this clause, being aware that a disagreement between parties unavoidably leads to a judicial answer, which may, in turn, determine that this clause is no longer so exceptional as has been so far in the majority of cases.
As for the effect arising from the application of this clause, it will consist in the subsistence of a contract and the recovery of equivalence of obligations, as was concluded in the judgment that we have mentioned in these lines.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.