Obligations and contracts in times of covid-19
Obligations and contracts in times of Coronavirus: Force majeure and “rebus sic stantibus”
The crisis generated by COVID-19 has caused many companies and individuals to be unable to carry out, or unable to comply in the agreed terms, the obligations assumed under contracts of a nature civil and commercial formalized before the outbreak of the pandemic.
Although it is true that our Civil Code establishes in its articles 1,091 and 1,256 that contracts must be fulfilled in their own terms and that said fulfillment cannot be left to the discretion of either party contracting parties (all of this, in application of the principle “pacta sunt servanda”), it is also true that such principles are not absolute but are limited by the concepts of fortuitous event and force majeure < /strong>provided for in articles 1105, 1602, 1625, 1777 of the Civil Code and, in addition, by the applicability of the clause “rebus sic stantibus” (also called “excessive burden” or “hardship”), originating in Roman Law but recently incorporated and updated into our legal system by the Supreme Court.
The figure of force majeure refers to external events that cannot be controlled by the contracting parties, of an unpredictable and irresistible nature, which results in the impossibility of fulfilling what was agreed in the contract and is, as we have seen, expressly regulated in our Civil Code, for which reason it enjoys the nature of positive law.
For its part, the clause “rebus sic stantibus” would be applicable to those cases in which -like occurs with force majeure – there is an event external to the parties, not controllable by them and of an unforeseeable and irresistible nature that -and this is where it differs from force majeure- does not imply the impossibility of complying with the agreement but breaks the balance contractual contract, having to attend for its applicability in good faith.
Its applicability has been expressly recognized by our Supreme Court in its Judgments No. 2823/2014, of June 30; nº 5090/2014, of October 15; nº 1698/2015 of February 24; and No. 156/2020, of March 6 (the latter, issued just eight days before the declaration of the state of alarm, and which represents a slight setback in the applicability of the figure). If we look at the date on which such sentences were handed down and their content, we see that the update of the figure and application to the Spanish legal system was motivated by the financial crisis of 2008, which forced the establishment of jurisprudential mechanisms. of modulation of contracts absent in our positive law that would allow their survival by adapting their obligatory content to the situation of widespread and prolonged economic crisis, all in application of the principle of conservation of contracts.< /p>
Regarding the coexistence of both figures, and given that force majeure and “rebus sic stantibus” em>are different concepts that refer to differentiated assumptions (impossibility of fulfilling the obligations vs. excessive onerousness for one of the contracting parties), we must conclude that both figures cannot be applied simultaneously to the same event but they can its alternative or successive applicability is contemplated, with different consequences and effects in each case.
More information:”Second Chance Law”
Since our legal system does not provide for the figure of the suspension in the fulfillment of the obligations contained in contracts of a civil or commercial nature (as occurs, for example, in labor matters with the figure of the ERTE), the application of the figures of force majeure and the “rebus sic stantibus” clause in the current context of paralysis of the economy as a result of the crisis caused by COVID-19 acquires relevance paramount, having to be aware of the concurrent circumstances in each specific case to determine if we are dealing with one figure or another and, in each case, the effects that the application of each of them may have for the contracting parties, and it should also be noted that in In the absence of an express agreement in the contract or subsequent agreement between the parties, it will be a Court or Tribunal who decides if one figure or another is applicable to a specific contract and, in such a case, the effects that said applicability would have.
Special mention should be made of the situation of lease contracts, both for housing and for use other than housing, given that both have received express regulation by the executive in Royal Decree Law 11 /2020 and 15/2020, respectively, we understand that with the double objective of providing tenants with a waiting or withdrawal mechanism that makes it more feasible for them to comply with their obligations and, in addition, to avoid the individualized and casuistic application of the clause “rebus sic stantibus” by the different tenants.
Precisely for this, such Royal Decree Laws precisely establish a system that the parties must adhere to if they want to modify the obligations assumed in the contract in response to the situation caused by COVID- 19, being noteworthy that Royal Decree Law 15/2020, to justify the regulation contained therein on the possibility of modulating lease contracts for use other than housing, states in its Statement of Reasons that given the current circumstances “< em>it is appropriate to provide a specific regulation in line with the “rebus sic stantibus” clause, of jurisprudential elaboration, which allows the modulation or modification of contractual obligations”
LEGAL ADVICE AGAINST COVID-19
We make available to all our clients a comprehensive legal advice service in the face of the crisis generated by covid-19 for companies, the self-employed, workers and those affected by contagion. For this, we have a team of lawyers specialized in commercial, labor, bankruptcy and compensatory valuation prepared to provide 360º solutions.