The effect of coronavirus on signed contracts. Modification or termination of the contracts. Act of God, force majeure, etc.

THERE are a number of opinions with regards to how the current situation influences contracts signed prior to the declaration of the state of alarm in Spain and the coronavirus crisis.

It is evident that many of these contracts will not be able to be fulfilled within the agreed terms, especially with regard to the length and deadlines agreed, given the mobility restrictions, etc.

This also affects many foreigners who have signed contracts in Spain and who cannot travel to our country in order to complete them.

First, we must take into account the pacta sunt servanda principle, which refers to the fact that the parties are bound by what has been agreed and the clauses of a contract have the force of law for all parties.

Secondly, we must bear in mind that the obligation of the parties to fulfil the contract could be affected by the concepts of force majeure, act of God or fortuitous event, as understood in the Spanish civil code at  articles 1105, 1182, 1184, etc.

In such cases, the party in breach of the contract is exonerated from liability where the inability to fulfil the obligation is due to events that could not have been foreseen or if they could have been foreseen they were unavoidable, due to altered circumstances, etc.

In the situation created by the so-called coronavirus, it could be understood that the circumstances that were agreed at the beginning of the contract have been modified without the intention or the unilateral will of the parties intervening in the breach and without being the fault of the parties.

In this sense, the doctrine rebus sic stantibus must be taken into account which is understood to be applicable to contracts and  implies that the absolutely unpredictable modification of the circumstances in which the agreement was reached or the contract was signed, may lead in some cases, to the modification or even the elimination of the obligations of the contract.

The Supreme Court has been considering rebus sic stantibus, highlighting that the two most important factors to take into account in order to apply it, are the total unpredictability of the facts and causation. That is, the relationship between the fact and the lack of compliance with the obligation.

However, it must be borne in mind that when a fortuitous event, force majeure, act of God, or the rebus sic stantibus doctrine is alleged, the effects and consequences must be proportional.

In summary, if you are in this situation, the first thing will be to analyse in depth the contract signed between the parties and if nothing has been expressly agreed about these issues, it will be necessary to check whether in the specific case, the requirements established for the modification or even the extinction of contractual obligations, are as a consequence of the fortuitous event or force majeure, such as the coronavirus pandemic (covid-19).

If you have signed a contract and you are in this situation so that you or the other party cannot fulfil the contract, and you need specialised legal advice to see whether a modification of the contract is appropriate or justifiable, contact us and we will help you.

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.



Carlos Baos (Lawyer)

White & Baos

Tel: +34 966 426 185


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