COVID-19 /CORONAVIRUS / STATE OF ALARM
WHICH CAN BE THE CONSEQUENCES FOR PROPERTY PURCHASE CONTRACTS IN SPAIN?
Last 14 of March 2020 the Spanish Government approved Royal Decree 463/2020 (RD 463/2020) which activated the STATE OF ALARM, as a mean of managing the current crisis due to COVID-19, also called “CORONAVIRUS”.
Amongst the measures included, which are common knowledge, such as the interdiction for citizens to circulate on public roads, either by foot or by car, except to carry out some basic activities, there are some other measures, such as the suspension of all Court, administrative, prescription and expiry deadlines.
This suspension will not take place in some very specific cases. As for the rest of situations, the period shall run again from the day that the Royal Decree will no longer be in force. And, what about purchase contracts or earnest money contracts signed, that are due in the next days?
First of all, we would like to make clear that each particular case must be treated separately, to check the agreements reached between the parties and be able to give a precise response.
In general terms, from our firm of lawyers, we understand that any contract in force, signed before the declaration of the State of Alarm in Spain, will be suspended during the validity of the Royal Decree, and therefore, these contracts will not have any effect currently. As a result, the parties will not be entitled to claim the contract fulfillment, due to force majeure and exceptional reasons.
However, what happens if the other party tries to force us to fulfill the contract, and as a consequence, claims the payment of the corresponding penalty? As explained on the previous paragraph, this is a case of force majeure, in accordance with the stipulations of Article 1105 of the Spanish Civil Code, which establishes that “Except for the cases specifically indicated by law, and those in which it is compulsory, nobody will be held responsible for unpredictable events, or even if they were predicted, they were unavoidable.” For this reason, we cannot be held responsible for breaking the contract, hence avoiding the payment of any penalties.
In this same line, some other questions come to our mind. Is it possible to terminate a purchase contract or earnest money contract on these grounds? We will discuss this possibility in our next article.
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