force majeur

The effectiveness of contracts in situations of force majeure and the application of the “rebus sic stantibus” clause

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What is its impact on home buying?

Our doctrine defines force majeure as an extraordinary, unpredictable, and unavoidable event. According to this definition, there is no doubt that the situation created by the declaration of the State of Alarm based on the protection of Public Health against COVID 19, is a case of force majeure.

As is well known, in matters of contracts, the principle of the preservation of existing legal ties and the principle of a fair balance of benefits prevails.

Although our Civil Code in its article 1005 establishes that “Apart from the cases expressly mentioned in the law, and those in which the obligation is so declared, no one will be responsible for those events that could not have been foreseen, or that, if foreseen, would be unavoidable”.

The exclusion of liability refers to compensation for damages, but not to the duty to fulfil the obligation. This article does not stipulate that the party whose provision is affected by such events is no longer obliged to do, if it is still possible, that which it was obliged to do, but rather that the liberating effect, according to our doctrine, is to eliminate the possibility of claiming possible compensation for damages.

However, although civil law does not provide for any rule that allows for the termination of a contract due to a sudden change in the circumstances of the contract, our reality is that the clause “rebus sic stantibus”, created by case law, provides for the possible termination of a contract due to sudden and exceptional circumstances that affect the basis of the business, leading to a sudden change in the conditions initially agreed.

The Supreme Court maintains restrictive criteria with respect to the application of the referred clause since priority is given to the modification or adaptation of the conditions that are affected by the alteration.

In order to terminate the contract, the requirements determined by case law that must be met are:

– That there has been an extraordinary alteration of the circumstances that led to the conclusion of the legal transaction for both parties.

– That there is an exorbitant and out-of-date disproportion of the services provided by the contracting parties that directly affects the fair balance of the services.

– That all of the above is the consequence of supervening and radically unforeseeable causes.

– That there is no remedy for the contractual imbalance that has occurred.

The recent STS 156/2020 of 6 March 2020, The SC maintains its jurisprudence line on “rebus sic stantibus clause” and clarifies that it will be applicable in long term contracts and not in short term contracts.

Understanding the current situation (COVID 19) as serious, unforeseeable, extraordinary and causing disproportion between the parties to a contract, this could be the necessary scenario to allow the termination of a contract, always taking into account the specific and concurrent circumstances in each particular case. Although in principle the preservation of the contract should prevail by opting, as far as possible, for the modification of the affected conditions, provided that this allows the restoration of the equilibrium of the services in the contract.

What about possible delays in the delivery of homes purchased under construction?

The deprovision of materials or the impossibility of providing the necessary services for the completion and delivery of a new work caused by the measures adopted would justify a delay in the delivery time of the housing. However, for the delay to have the effect of terminating the contract or exercising the guarantees, it must be qualified as serious.

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