The rebus sic stantibus clause and short-term contracts

Monday, 1 of June of 2020

As we know, the rebus sic stantibus clause is a jurisprudential construction that aims to re-establish the contractual balance broken by the effect of unexpected and extraordinary circumstances. Despite being a figure of restrictive application, the current health and economic crisis has meant that many legal operators have had to resort to it as a remedy to alleviate the rigours of the pacta sunt servanda principle.

In this vein, pronouncements such as Judgment No. 156/2020, of 6 March, from the Civil Chamber of the Supreme Court (ECLI: ES:TS:2020:791) become very relevant. This decision resolves the conflict that arose between the Galician regional television and an advertising marketing company that was entrusted with the task of promoting the sale of advertising space through the broadcast of the corresponding advertisements.

The parties had signed two contracts stipulating that the marketing company undertook to attract advertising for its principal, with a minimum guaranteed amount of several million euros. In exchange for its intermediation work, the marketer received a commission on the gross revenue from the advertising as contracted. In 2008, it was agreed to extend the effectiveness of the contracts for a period of one year, being that the minimum turnover was not reached in that year due to a general decrease in advertising investment.

In the court case, the commissioner claimed certain outstanding commissions, while the television channel claimed the payment of the difference between the advertising revenue obtained in 2008 and the guaranteed minimum it considered applicable. Although the television company's claims were upheld at first instance, at the appeal stage the Provincial Court decided to adjust the amounts recognised when it found that there had been a break in the economic basis of the contract as a result of the fall in the advertising market, which was beyond the control of the advertising intermediary.

The Supreme Court does not share this assessment. For the High Court, in a short term contract such as the one we are dealing with here (1 year extension), it is difficult that something extraordinary happens that affects the basis of the contract and is not covered within the risk foreseen by the contract. When the intermediary signs the extension of the advertising management contract, he assumes a minimum guaranteed amount at least equal to that of the previous year. The drop in demand for TV advertising, referred to a short time period, is a risk of the contract itself, which was not so drastic and unpredictable as it had been hinted in previous years.