The Supreme Court, in its judgment STS 447/2017 of 13th July 2017 (Civil Chamber, First Section), has established that the supervening impossibility of discharge does not apply to monetary debts and the rebus sic stantibus clause does not apply to cases where there is difficulty in financing, if this could have been foreseen.
The proceedings that gave rise to the judgment in this case began with the plaintiff’s application for the termination of the real estate sale and purchase agreement and the return in full of the sums paid to the defendant due to the impossibility of meeting the obligations established in the agreement. The defendant, in turn, protested the claim, citing the obligation to perform the agreement and its right to retain the sums paid by the plaintiff. Judgment 91/12 of 7th May by the Court of First Instance number 7 of Sabadell dismissed the plaintiff’s claims, who appealed said judgment.
The resolution of the appeal corresponded to section 17 of the Provincial Court of Barcelona, which after following the corresponding proceedings issued a ruling on December 3rd 2014, providing for the reversal of the previous ruling and the termination of the sale and purchase agreement with the consequent refund of amounts claimed by the plaintiff. The judgment refers to the plaintiff’s allegations insofar as it states that the defendant verbally promised to obtain the necessary financing for the purchase of the property, but finally the plaintiff had to apply for the financing on her own, and there is evidence that it could not be obtained, thus making it impossible to pay for the property.
Finally, the High Court resolved the appeals filed by the defendant at second instance. The first of the appeals for procedural infringement was dismissed. The cassation appeal, which was also brought by the defendant, now appellant, was upheld on the following grounds:
- On the one hand, the unforeseen impossibility, without fault, that makes the performance of the contract impossible by a fortuitous event and frees the debtor in case of loss of the specific thing that was to be delivered (art. 1182 of the Civil Code “CC”) or the objective impossibility to comply with the obligation to do something (art. 1184 CC), is not applicable to the monetary debtor.
- On the other hand, Spanish law does not regulate a general provision on the revision or termination of an agreement due to changes in circumstances. Likewise, our legislation does not contemplate that a worsening of the debtor’s economic situation would allow the debtor to discharge its obligations as such. Although it is true that in our legal system there are exceptions to the principle of pacta sunt servanda (agreements between parties should be complied with) and it is more flexible in certain situations. In this sense, so that the access to financing could be assessed as an unpredictable alteration of the circumstances existing at the time of contracting in order to justify a discharge decision regarding the debtor, it would be necessary to prove the unpredictability of the refusal of the financing, it not being sufficient to merely allege the subjective difficulties of financing that the buyer was met with. Consequently, neither the risk of a lack of financing was borne by the seller nor is there any reason not to apply the contractually agreed consequences.
The Supreme Court thus aligns itself with the case law of the Chamber, which has generally denied that the difficulties of financing for a contracting party allow it to terminate the contract, as this is a risk it must bear on its own, provided that the parties have not attributed the risk of the lack of financing to the seller. This would occur, for example, when the seller has assured the buyer that it will be able to obtain the necessary financing by subrogating itself to the loan that the seller negotiates with a third party.
Marc Martínez
Vilá Abogados
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