What are the differences between the force majeure clause, rebus sic stantibus and excessive onerousness?
Differences between the force majeure clause, rebus sic stantibus and excessive onerousness
To make it easier to distinguish the differences between these types of clauses, we will clarify that:
- The force majeure clause is the one that is used when there is an event that cannot be avoided or foreseen that prevents the fulfillment of the contract. It is a cause that frees you from complying with it and from responding for the damages caused to the other party.
For example, in a contract context to deliver goods. There is an earthquake that destroys the roads and force majeure is invoked. Thus, you do not have to pay compensation for the delay or failure to deliver.
- The rebus sic stantibus clause is the one that is invoked when there is a change of circumstances that makes performance of the contract much more difficult than anticipated. It allows you to change or terminate the contract to restore the economic balance between the parties.
For example, in the context of a share purchase agreement, a crisis arises that causes the shares to lose a lot of value. The rebus sic stantibus is invoked to request that the contract be modified or terminated.
- The excessive hardship clause is a specific type of rebus sic stantibus, which is regulated by some legal regulations.
For example, we are facing a contract for the sale of products where there is a shortage of raw materials that causes production costs to skyrocket. Excessive burden is invoked to request that the contract be modified or terminated.
These clauses are not specifically typified in the law. However, the most basic notions of these can be found in article 1105 of the Civil Code.