Last Monday, April 27, the online session: Modification of contracts due to the effect of the pandemic, in which they participated as speakers Sigismund Alvarez, Notary of Madrid and Miguel Fernandez Benavides ONTIER Senior Lawyer. The session was moderated by SAMANIEGO Law's senior attorney Blas Pinar Guzman.
We present below a brief summary of the topics covered in the session:
The session addressed a topic of great interest and unavoidable topicality in the context of the global impact of the pandemic caused by the latest coronavirus. In the caso Spain, the Government, in its role as emergency legislator, has ordered measures that affect mortgage loans, housing and business leases, consumer relations or public procurement. However, there are many private contracts that, at least to date, have not been subject to extraordinary legal measures but whose sudden alteration is also a consequence of the pandemic and the decreed state of alarm.
In the first part of the session, given by the Madrid notary Sigismund Alvarez Royo-Villanova, the legal regime of the caso fortuitous and force majeure, as well as the doctrine, of jurisprudential creation, relative to the implicit clause rebus sic stantibus. It was explained how it is necessary to contrast the particularities that the pandemic has in relation to the casos that resolve the most recent judicial precedents, referring to the context of the economic-financial crisis that caused financing difficulties and extraordinary falls in income.
The second part of the session, led by ONTIER's lawyer, Miguel Fernandez Benavides, dealt with the implications of the pandemic on certain types of contract, the negotiation strategies with the counterparty and the dispute resolution methods that can be activated if the parties are not capable, by themselves, of rebalancing the allocation of contractual risks . He proceeds, first of all, a careful examination of the clauses of the contract, where the parties have been able to agree in advance an express allocation of the risks derived from it. Failing this, an implicit allocation of said risks can be inferred from the contractual typicity or the very nature of the contract, as the Supreme Court has determined in casos with a strong random element (such as certain financial contracts). The applicable law and the conflict resolution mechanism are other elements to take into consideration when addressing the phenomenon.
The restrictive application of the rule was highlighted rebus sic stantibus, signifying the wide margin of assessment by the court and the need for the parties to the affected contractual relationship to previously negotiate in good faith the modulation of the obligations or, in its caso, the orderly and peaceful termination of the contract. Mediation and arbitration turned out to be more efficient methods than jurisdiction, given the agility of the former and the imminent collapse of the latter, due to the eventual dispute arising from the impact of the pandemic on each contract.
Already in the debate with the attendees, several attendees raised their questions and gave their point of view on matters such as the creation of specialized courts and an abbreviated process, within the framework of the CGPJ's proposals as a "shock plan" for the administration of justice, the doctrine contained in the STS of June 30, 2014 or the incidence of the clause rebus sic stantibus in penitential deposit or in the rent of rooms on the part of university students.
