Legal tip 57. New, unexpected circumnstances... can I cancel my contract?
Tuesday, March 17, 2009 @ 11:25 AM
Relatively often, once a contract is signed, there are events beyond the control of the contracting parties which substantially alter the contractual circumstances; the inevitable result is that certain effects violate the due contractual balance.
These cases of unexpected change of contractual circumstances produce numerous problems that need to be solved by the Legal System, regardless of the silence of the Law or the foresight or anticipation of the signatories of the contract.
A clear example of this are, in my opinion, off plan contract purchases, where external financing was part of the contract assumptions in relation to the current situation derived from the credit crunch.
Supreme Court Case Law in Spain resort to the legal principle "rebus sic stantibus" as an instrument to try to mitigate the consequences of the imbalance produced by the alteration of the contractual circumstances. This High Court understands that all contracts with deferred completion have this implicit clause by which alteration of circumstances legally demands the adaptation of contract clauses to new reality and therefore, obligatory enforceability of original contract obligations is somehow questioned or modified. (The Latin statement for that is: contractus qui habent tractum succesivum vel dependentiam de futuro rebus sic stantibus intelligitur).
Anyhow, the application of the clause by the Supreme Court is restrictive and conditioned to the following facts:
1. Extraordinary event happening between circumstances existing at the moment of the signing and those existing at the moment of fulfilment or completion.
2. Exorbitant disproportion of reciprocal obligations arising out of the extraordinary event.
3. No other compensation legal mechanism being practicable.
4. New circumstances being entirely unforeseeable by the parties when the contract was signed.
5. Good faith and no responsibility by the claimer.
Virtuality of the clause "rebus sic stantibus," understood as adaptation of the content of the contract ( revision) or a declaration of their ineffectiveness ( cancellation) in the future, is not the result of any contractual agreement, nor a presumed clause, but one of the rules of contractual mandatory integration under Article 1258 of the Civil Code, which is applicable to contracts with deferred completions:
"Contracts are perfected by mere consent, and since then require not only compliance with what has been expressly agreed, but also with all the consequences that according to their nature, are consistent with good faith use and Law”
Sunset at " El Chozo" ( Tarifa-Cadiz) by Chodaboy at Flickr.com