Blog
6 March 2020
Rebus sic stantibus rule

Pursuant to Article 357 (1) of the Civil Code, if, due to an extraordinary change in circumstances, a performance entails excessive difficulties or exposes one of the parties to a serious loss which the parties did not foresee when executing the contract (agreement), the court may,  having considered the parties’ interests, in accordance with the principles  of community life, designate the manner of performing the obligation, the value of the performance or even decide that the contract be dissolved. When dissolving the contract, the court may, as needed, decide how accounts will be settled between the parties, being guided by the  principles set forth in the preceding sentence.

We ought to emphasize that in the above shown case, the decision to change or terminate the relationship is made by the Court. If you find yourself in such a situation, you should bring the case to Court.

It is the duty of the debtor to perform an obligation in accordance with its contents, irrespective of the circumstances which occurred after the obligation arises. This rule, referred to with the brocard pacta sunt servanda (agreements must be kept), is often  contrasted with rebus sic stantibus, according to which the parties undertake to perform their obligations in accordance with the agreement, unless the conditions under which the agreement was concluded change (contracting grounds). In addition to the obligation to comply with the agreement, it includes an addition for it provides for an opportunity to change the agreement if special circumstances arise.

Pursuant to Article 3571 of the Civil Code, if certain conditions are met, one may seek judicial adjustment of the obligation to new, changed conditions or, should this prove impossible, request that the agreement be dissolved. The following conditions of court intervention must be jointly met: 1) extraordinary change in circumstances; 2) performance entails  excessive difficulties or exposes one of the parties to a serious loss; 3) causal relationship between the above listed conditions; 4) at the conclusion of the agreement the parties did not foresee the risk related to the change of circumstances.

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