The real estate purchase and the subsequently arisen effects of the lack of funding

In the real estate purchase it is very common to sign a private contract before execution of the public deed, by which the seller is obliged to sell to the buyer, being the latter forced to buy the property object of contract within the agreed deadline.

Between the signature of the contract and the public deed, a few months or even a year may elapse, depending on what both parts have agreed, a period in which the circumstances of the parties could be altered significantly.

To cite an example of  case that has taken place more often during the last years, it may happen that the buyer may suffer a decrease in his economic power or a drawback in his expectations and possibilities of investing and financing in an unknown manner.

In such a situation, the buyer may react according to two legal principles, with quite different effects.

On the one hand, the buyer can apply the “pacta sunt servanda” principle (“agreements must be kept”). On the other hand, the buyer also has the possibility to use this pretext applying the doctrine of the “rebus sic stantibus” clause (“as things stand at present”), granting one of the parties the possibility of non-compliance of the contract,  without being liable of its non-fulfillment, as a consequence of the unexpected and unforeseen subsequent arisen effects.

The Supreme Court has analyzed this interesting matter given its relevance in the daily practice of the enterprises that promote those business, in the Sentence dated 13th July, 2017, and has concluded that only invoking the economic crisis does not allow the buyer to elude the consequences established in the contract in the case of withdraw or breach. The lack of funding is a risk taken on his expense, not at seller’s expense.


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