What is a rebus sic stantibus clause?
A rebus sic stantibus clause is a legal mechanism that addresses a fundamental change in circumstances occurring after an agreement has been concluded. The Latin expression rebus sic stantibus may be understood as “things thus standing”. In practice, it refers to the assumption that a contract was entered into on the basis of specific economic, legal, factual or market conditions. If those conditions change in an exceptional and unforeseeable way, the original contractual balance may no longer be appropriate.
Such a clause may allow the parties to renegotiate the contract, adjust certain obligations, suspend performance in defined situations or, where necessary, terminate the agreement. Its purpose is not to enable a party to withdraw from an unfavourable deal merely because performance has become less profitable. It is intended to address extraordinary events that substantially affect the possibility, cost or commercial purpose of contractual performance.
Under Polish law, the concept is reflected primarily in Article 3571 of the Civil Code, commonly known as the rebus sic stantibus clause. This provision allows a court, in exceptional circumstances, to determine how an obligation should be performed, modify the amount of the performance or even dissolve the contract. The statutory mechanism applies where an extraordinary change in relations causes excessive difficulty in performance or threatens one party with a gross loss that the parties did not foresee when entering into the contract.
How does a rebus sic stantibus clause work in practice?
A contractual rebus sic stantibus clause usually defines the events that may trigger a review of the agreement and establishes a procedure for dealing with their consequences. It may concern, for example, a major disruption of supply chains, an armed conflict, a sudden prohibition on imports or exports, a substantial regulatory change, extreme inflation, currency restrictions or an unexpected shortage of essential materials.
The wording of the clause is important. A well-drafted provision should identify which risks remain with each party and which events justify renegotiation. It should also specify how and when the affected party must notify the other party, what evidence should be provided, how long negotiations should last and whether either party may refer the dispute to mediation, arbitration or court proceedings.
There is an important distinction between a rebus sic stantibus clause and a force majeure clause. Force majeure usually concerns an external event that makes performance impossible or temporarily impossible. A rebus sic stantibus clause may apply even if performance remains technically possible, but has become excessively difficult or economically disproportionate. The distinction depends on the wording of the contract and the facts of the case.
When is legal advice on a rebus sic stantibus clause useful?
Legal support may be needed before entering into a long-term agreement, particularly where the transaction involves significant price volatility, international supply chains, construction works, financing, energy costs or regulatory risk. Parties to lease agreements, distribution contracts, manufacturing agreements, construction contracts, service agreements and investment arrangements often need to assess whether their contracts adequately allocate the consequences of changing circumstances.
Advice is also important when an exceptional event has already occurred. A party affected by increased costs or disrupted performance should not assume that a statutory or contractual clause automatically releases it from its obligations. The legal assessment requires consideration of the contract, the foreseeability of the event, the parties’ risk allocation, the impact on performance and the available evidence.
A prompt consultation with a lawyer may help avoid ineffective termination, delayed performance, contractual penalties, disputes over payment or liability for damages. It may also help a business preserve its contractual position by issuing appropriate notices, commencing negotiations on time and documenting the actual consequences of the changed circumstances.
Support from a law firm in matters involving rebus sic stantibus clauses may include:
- drafting and reviewing contractual hardship and change-in-circumstances clauses;
- distinguishing between rebus sic stantibus, force majeure and contractual risk allocation provisions;
- assessing whether Article 3571 of the Polish Civil Code may apply to a specific case;
- preparing notices, requests for renegotiation and responses to contractual claims;
- conducting negotiations concerning price adjustments, revised deadlines or amended contractual terms;
- representing parties in mediation, arbitration and court proceedings concerning contract modification or termination.
Need legal assistance with a rebus sic stantibus clause? Contact us.