Consequences of Contractual Breach due to COVID-19

Contractual relations have been affected by the crisis caused by COVID 19. This has meant that some of the obligations have been prevented or impossible to fulfil, while others have only had to be postponed. We must therefore consider the legal framework for analysing the effects that may arise in cases under the concept of «force majeure».

The concept of «force majeure» does not appear in our Civil Code, but has been developed through doctrine and jurisprudence as an event that is not only unforeseeable, but even if it had been foreseen, it would have been inevitable, and is outside the scope of the party in breach, being something alien to it.

“Force majeure» does not totally exonerate the party in breach from performing the obligation, but only excuses it from having to pay damages to the other party during the period in which the obligation cannot be performed. This means that the non-performance of the obligation by the party who is obliged to perform it must be completed, provided that it is still possible once the circumstances which led to the non-performance have ceased to exist.

It is important to emphasize that «force majeure» does not apply to money debts, as indicated in the Supreme Court’s Sentences of May 19, 2015 and July 13, 2017.

On the other hand, there is the possibility of modifying or terminating the contract when the circumstances that led to the conclusion of the contract are altered. However, in order to make this possible, the following requirements must be met:

(a) the new circumstances are unforeseeable

(b) the new circumstances have led to a disturbance of the balance between the contracting parties which makes the performance excessively burdensome for one of them.

Modification of the contract is usually the preferential solution given the principle of conservation of contracts governed by our law, but termination is also possible if it is absolutely impossible to restore the balance of the contract’s performance.


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