Rebus Sic Stantibus Clause

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After the Government decreed, on March 14, 2020, the State of Alarm throughout the Spanish Territory (Royal Decree 463/2020), and after the World Health Organization (WHO) declared the Coronavirus as a pandemic, many contracts that were concluded prior to this Alarm State are currently in a totally different context, with conditions that are difficult to fulfill. Therefore, many of these contracts will try to apply the “rebus sic stantibus” clause as a means to justify the breach of the conditions or to request the resolution of a contract that has become detrimental to their interests.

The rebus sic stantibus clause, is a clause implicit in long-term contracts for those situations in which a substantial alteration of the circumstances, that could not have been foreseen by the contracting parties, demands the concurrence of good faith. Said clause constitutes an exception to the obligation of fulfilling the existing contracts between the parties, therefore its range of application is restrictive and exceptional.

In order for the aforementioned clause to be applicable, and therefore the possibility of reviewing the clauses of a contract, there must be certain requirements that our Firm understands comply with the situation of the State of Alarm decreed in Spain as a consequence of the expansion of the Coronavirus:

1. That between the existing circumstances at the time of the conclusion of the contract and the concurrent ones at the time of its fulfillment or execution, there has been an extraordinary alteration.

2. That, as a consequence of said alteration, there is an exorbitant disproportion, that exceeds any calculation, of the agreed benefits.

3. That there is no other legal means to compensate for the imbalance.

4. That the new circumstances were unforeseeable for the parties at the time of the conclusion of the contract.

5. Whoever alleges the clause has good faith and lacks guilt.

 

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