Contract obligations

The legal principle “rebus sic stantibus”

Contracts are based on the fact that everything agreed upon is binding, which comes from another principle known in Latin as “pacta sunt servanda.” The “rebus sic stantibus” principle allows the modification of the clauses of a contract when new circumstances appear over time that were not foreseen at the moment of sign the agreement. Therefore, we can define the legal principle “rebus sic stantibus” as a postulate that makes the flexibility of contracts possible.

Article 1091 of the Spanish civil code provides that “the obligations arising from contracts have the force of law between the contracting parties, and must be fulfilled in accordance with them”, or in other words: contracts have the force of law, which implies that the agreement can only be modified by another arrangement or pact between the parties, or, otherwise a Breach of contract would occur.

Although, the “rebus sic stantibus” clause is not regulated in the Spanish civil code, our jurisprudence has attempted to provide it with a doctrinal body, listing a series of inexcusable assumptions to admit a possible contract modification by the Courts.

Due to the enormous growth in Breach of contract on the economic crisis of 2008, Spanish jurisprudence caused a transcendental transformation through SSTS 333/2014 of June 30th (LAW 84939/2014); 591/2014, of October 15th (LAW 171646/2014) and 64/2015, of February 24th (LAW 47081/2015), in which the traditional approach to the conception about the legal principle “rebus sic stantibus” was changed. ”, giving it a more conducive and modern vision to normalizing its application by the Courts, as long as certain conditions has been achieved.

Admissibility conditions of the rebus sic stantibus clause

"Rebus sic stantibus" means "as long as things continue like this", which means that it is viable to review the obligations of the contracts when, due to unforeseen circumstances, the economic balance of the contract is broken and it is impossible or very difficult for one of the parties their fulfillment. The conditions required for admissibility are usually the following:

  • The contract must be about repeated and prolonged obligations over time, or in which there are a period of time between its perfected and consummated.
  • A benefit imbalance and excessive burdensomeness must be caused for one of the parties.
  • The risk of the change in circumstances has not been assumed by the party that bears the excessive burden at the time of entering into the contract.
  • The change in circumstances must imperatively be unforeseeable.
 

If you are facing an unwanted breach of contract derived from new unforeseeable circumstances, contact us and our specialized lawyers in contract law in Marbella can help you.

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Establishment of doctrine on the characterization and legal regime of the rebus sic stantibus clause, STS 333/2014 of June 30th, 2014, Resource No. 2250/2012, Civil 1st court room.