The possible application of the “rebus sic stantibus” rule for the termination of real estate purchase agreements affected by the financial crisis may not be based solely on financing difficulties, but instead require a set of factors that always require evidence

This extraordinary appeal concerns the termination of a real estate purchase agreement by the buyers because they were unable to pay the price due to the impossibility of attaining financing.

The Court of First Instance rejected the action to terminate the real estate purchase agreement by the buyers, who furthermore exercised action to claim the quantities paid to the seller until that time, as stipulated in the sale agreement itself.

The Court of Second Instance upheld the appeal of the buyers, furthermore rejecting the counterclaim filed by the seller to convict the buyers to fulfill the agreement and pay the pending portion of the price. The seller appealed for annulment and the Supreme Court upheld its appeal, overturning the appeal ruling and confirming the first instance ruling. The Supreme Court, in addition to dismissing the grounds on which the ruling of First Instance was based, referred to the doctrine of the clause on

“rebus sic stantibus” (i.e. things thus standing), on which the ruling of appeal was based in accordance with the restriction of credit caused by the financial crisis and the subsequent difficulties of buyers to obtain a mortgage.

To this regard, the Supreme Court overturns the appealed ruling, establishing that while the aforementioned clause could be applied to given cases of the inability to obtain financing (something unforeseeable when concluding the purchase of the real estate), it does not justify on its own that the financial crisis allows buyers to unilaterally terminate the purchase agreement, since this would be a clear and manifest imbalance against the seller.

The Supreme Court likewise cites a series of factors that would justify the application of the “rebus sic stantibus” rule to purchases of dwellings affected by the financial crisis: (i) the use of the dwelling purchased as the primary or secondary residence; (ii) the contractual assignment of the risk of not obtaining financing, distinguishing between contracting parties that are real estate professionals and those that are not; (iii) the financial situation of the buyer upon concluding the agreement and when having to pay the pending portion of the price for which financing was expected; (iv) the real degree of the impossibility of financing and its specific causes added to the general financial crisis, along with the evaluation, where appropriate, of the conditions imposed by the credit entities for granting financing; or (v), the possibilities of negotiating payment conditions with the seller and, therefore, of maintaining the agreement as a preferable alternative to its invalidity.