1. Introduction

In Spanish banking and commercial law, a hardship clause is a contractual mechanism dealing with extraordinary changes in circumstances that occur after a contract has been concluded and make performance substantially more burdensome or fundamentally disturb the contractual balance.

Spanish law distinguishes contractual hardship clauses from the judicial doctrine known as rebus sic stantibus—literally, “things standing thus.” The Spanish Civil Code does not contain a general codified hardship rule equivalent to provisions found in some other jurisdictions. Instead, the Supreme Court has developed the rebus doctrine through case law. Spanish authorities continue to describe it as a jurisprudential doctrine requiring an unforeseen event, serious alteration of the contractual balance and frustration or serious disturbance of the contract's economic purpose.

This doctrine is particularly important to banking transactions involving:

• long-term loans;
• syndicated facilities;
• project finance;
• acquisition finance;
• refinancing agreements;
• derivatives and structured financing;
• long-term credit commitments; and
• financing affected by major regulatory or economic changes.

The starting point nevertheless remains pacta sunt servanda: contracts must generally be performed according to their agreed terms.

2. Legal Foundation under the Spanish Civil Code

Although rebus sic stantibus is not expressly codified as a general rule, several Civil Code principles provide its doctrinal background.

Article 1091 — Binding force of contracts

Article 1091 provides that contractual obligations have the force of law between the contracting parties and must be performed according to their terms.

This establishes the basic rule:

Financial difficulty does not ordinarily permit a borrower to rewrite a loan agreement.

Article 1255 — Freedom of contract

Article 1255 permits contracting parties to establish the agreements, clauses and conditions they consider appropriate, provided they are not contrary to law, morality or public order.

Banks and corporate borrowers can therefore negotiate express hardship mechanisms.

Article 1258 — Good faith

Article 1258 provides that contracts bind the parties not only to what has expressly been agreed but also to consequences arising, according to their nature, from good faith, usage and law.

The Supreme Court has associated the modern development of rebus sic stantibus particularly with contractual good faith and the underlying basis of the transaction.

3. What Is a Hardship Clause?

An express hardship clause usually establishes what should happen when extraordinary circumstances fundamentally change the economics of a transaction.

For example, assume a bank enters into a 15-year project-finance arrangement.

Five years later, an extraordinary regulatory event fundamentally changes the economic basis upon which the financing structure was negotiated.

A properly drafted hardship clause could require:

Notification → consultation → renegotiation → adjustment → specified remedy if negotiations fail.

The precise result depends on the wording of the contract.

This is different from asking a court to apply rebus sic stantibus. Where parties have expressly allocated the relevant risk in their contract, that allocation can be highly significant when determining whether judicial adjustment is justified. Spanish Supreme Court jurisprudence emphasizes that rebus should not normally operate where the relevant risk was expressly or implicitly assumed by one party.

4. Hardship Compared with Force Majeure

The two concepts should not be confused.

Force majeure

Force majeure generally concerns circumstances that prevent or excuse performance under the applicable legal or contractual rules.

Hardship

Hardship usually concerns performance that remains possible but has become extraordinarily burdensome or where the contractual equilibrium has fundamentally changed.

For example:

A legally imposed prohibition making performance impossible raises a different question from a massive unexpected increase in the economic burden of performance.

In banking transactions, a borrower normally cannot establish hardship merely because repayment has become less profitable or more inconvenient.

5. Rebus Sic Stantibus

The judicial equivalent of hardship is principally the rebus sic stantibus doctrine.

The Supreme Court's case law generally requires a significant and exceptional change rather than ordinary economic difficulties.

Relevant considerations include:

1. a substantial change occurring after conclusion of the contract;
2. extraordinary or reasonably unforeseeable circumstances;
3. serious disturbance of the contractual equilibrium or purpose;
4. absence of an assumption of the relevant risk by the party seeking relief; and
5. a sufficiently direct causal connection between the event and the claimed hardship.

Later Supreme Court decisions have emphasized that foreseeability and contractual allocation of risk are particularly important.

6. Extraordinary Change in Circumstances

An ordinary change is insufficient.

Suppose a company obtains financing at a time when its industry is highly profitable. Two years later, market demand declines by 10%.

That would ordinarily represent commercial risk.

Now suppose an exceptional external event radically changes the economic basis of a long-term contractual arrangement.

That may provide a stronger foundation for a rebus argument—but it still does not produce automatic relief.

The actual impact on the specific contract must be demonstrated.

The Supreme Court made this particularly clear in STS 64/2015, holding that the financial crisis could not, merely because it was notorious, automatically justify application of rebus sic stantibus.

7. Foreseeability

Foreseeability is one of the most important requirements.

The Supreme Court explained in STS 455/2019 that rebus requires circumstances that were genuinely unforeseeable. If the parties expressly or implicitly assumed the risk—or reasonably should have contemplated it given the nature of the contract—the doctrine generally cannot be used to transfer that risk afterward.

This principle is especially important in banking.

Banks and sophisticated corporate borrowers routinely allocate:

• interest-rate risk;
• refinancing risk;
• currency risk;
• market risk;
• regulatory risk;
• credit risk; and
• business-performance risk.

A party normally cannot invoke rebus simply because an allocated risk subsequently materializes.

8. Excessive Onerousness

The doctrine requires considerably more than reduced profitability.

Historically, Spanish jurisprudence referred to an extraordinary imbalance or “exorbitant disproportion” between contractual performances.

The modern approach focuses more broadly on whether the unexpected change has seriously disturbed the contractual basis or increased the risk of frustration of the contract's purpose.

Consequently:

Higher cost ≠ automatically hardship.

Lower profit ≠ automatically hardship.

Economic recession ≠ automatically hardship.

The effect must be sufficiently serious in the particular contractual relationship.

9. Allocation of Risk

Risk allocation is central to banking contracts.

Consider a loan agreement containing a variable interest-rate mechanism.

If rates subsequently increase within the contemplated structure of the contract, the borrower generally cannot characterize the increase itself as an unforeseeable hardship when the agreement expressly allocated that risk through the variable-rate mechanism.

STS 455/2019 strongly supports this principle: when the parties assumed the relevant risk expressly or implicitly, rebus sic stantibus should not be used to reallocate it.

For sophisticated banking transactions, courts therefore examine the contract before deciding whether an external event qualifies as legally relevant hardship.

10. Long-Term and Short-Term Banking Contracts

Duration is particularly important.

The Supreme Court's STS 156/2020 of 6 March 2020 emphasized that an extraordinary change is more likely to justify rebus in a long-term contract, especially a continuing contractual relationship, than in a short-term agreement. Spanish administrative legal analysis has subsequently summarized the same jurisprudential principle.

This makes the doctrine potentially more relevant to:

• 20-year infrastructure financing;
• long-term project finance;
• long-duration lease financing;
• long-term supply financing arrangements;

than to a very short-term financing arrangement where ordinary fluctuations are part of the transaction's inherent risk.

11. Renegotiation

An express hardship clause may impose a contractual obligation to renegotiate when specified circumstances arise.

For example, parties might agree that if a specified regulatory change fundamentally alters the economic assumptions underlying a facility, they must negotiate in good faith for a defined period.

This does not necessarily mean that either party must accept the other party's proposed terms.

The legal consequences depend primarily on the wording of the clause.

This illustrates why express hardship clauses can provide greater predictability than relying solely on the judicial rebus doctrine.

12. Modification Versus Termination

Historically, Spanish jurisprudence has preferred modification or adaptation of the contractual relationship rather than termination whenever adjustment can adequately address the imbalance.

The objective is not to give a financially disadvantaged party an easy exit from an undesirable contract.

Instead, the doctrine seeks, in exceptional circumstances, to respond to a fundamental disturbance of the contractual basis.

Spanish case law has repeatedly warned against transforming rebus sic stantibus into an instrument for opportunistic non-performance.

Important Spanish Case Laws

Case 1 — Supreme Court Judgment 820/2012, 17 January 2013

This Full Chamber judgment is an important modern authority.

The Supreme Court explained that rebus sic stantibus addresses an unexpected alteration of circumstances existing when the contract was formed where the alteration is sufficiently serious to increase extraordinarily the burden of performance or frustrate the contractual purpose.

Banking-law significance

The case helped establish that Spanish law recognizes a genuine judicial mechanism for extraordinary contractual hardship despite the absence of an express general Civil Code provision.

But financial difficulty alone does not satisfy the test.

Case 2 — Supreme Court Judgment 333/2014, 30 June 2014

This is one of the landmark modern rebus sic stantibus judgments.

The dispute concerned an advertising-related contractual relationship affected by the severe economic crisis and major changes in the advertising market.

The Supreme Court adopted a more modern formulation of the doctrine, connecting it with:

• contractual good faith;
• the contractual basis;
• contractual equilibrium; and
• substantial changes occurring after formation.

The Court accepted contractual adjustment in the circumstances before it.

Banking significance

STS 333/2014 demonstrated that rebus was not merely a theoretical doctrine.

However, later judgments narrowed the broader interpretation that might otherwise have been drawn from the 2014 decisions.

Case 3 — Supreme Court Judgment 591/2014, 15 October 2014

STS 591/2014 continued the modern development initiated by STS 333/2014.

The Supreme Court considered a contractual relationship affected by the economic crisis and addressed whether extraordinary economic circumstances had fundamentally altered the contractual basis.

The judgment reinforced the possibility of applying rebus where extraordinary changes seriously affect the economic equilibrium of the contractual relationship.

Banking significance

The decision initially suggested greater flexibility for long-term commercial contracts affected by extraordinary economic changes.

But subsequent jurisprudence clarified that the existence of an economic crisis itself is insufficient.

A claimant must demonstrate the specific effect on the contract.

Case 4 — Supreme Court Judgment 742/2014, 11 December 2014

This judgment represents an important limitation.

The Supreme Court rejected the proposition that financial crisis automatically constitutes an unforeseeable event for businesses.

Later Spanish courts summarize STS 742/2014 as holding that financial crisis occurring within the sphere of business activity cannot automatically be treated as unforeseeable or unavoidable.

Banking significance

This is particularly important for borrowers.

A company generally cannot argue:

“There was an economic crisis, therefore my financing obligations should automatically be reduced.”

Commercial and financing risks remain relevant.

Case 5 — Supreme Court Judgment 64/2015, 24 February 2015

This case involved the sale of rural land associated with expectations of urban development.

The purchaser attempted to rely upon the 2008 economic crisis and the resulting decline in property values.

The Supreme Court rejected automatic application of rebus.

It stressed that the notorious nature of the economic crisis did not itself justify generalized application of the doctrine. The claimant needed to establish the crisis's actual causal effect on the particular contractual relationship.

Banking significance

This provides an essential principle for lending disputes:

Macro-economic crisis alone is insufficient.

A borrower must establish how the extraordinary event fundamentally affected the specific financing relationship.

Case 6 — Supreme Court Judgment 237/2015, 30 April 2015

This decision further restricted opportunistic use of the doctrine.

The Supreme Court accepted that economic crisis could potentially be relevant but warned against applying rebus in a manner that would encourage opportunistic contractual non-performance.

Banking significance

A borrower cannot deliberately stop performing an unattractive financing contract and subsequently invoke hardship simply because economic conditions deteriorated.

Courts examine causation, contractual risk and the behaviour of the parties.

Case 7 — Supreme Court Judgment 455/2019, 18 July 2019

This is one of the clearest modern statements on foreseeability and assumption of risk.

The Supreme Court held that the relevant change must be sufficiently serious and unforeseeable.

More importantly, where a party:

• expressly assumed the risk;
• implicitly assumed the risk; or
• reasonably should have assumed it because of the nature of the transaction,

the change cannot ordinarily support rebus sic stantibus.

Banking significance

This principle is crucial in sophisticated financing agreements.

Where loan documentation expressly allocates a particular financial risk, courts should ordinarily respect that allocation rather than use rebus to rewrite the bargain.

Case 8 — Supreme Court Judgment 156/2020, 6 March 2020

This decision is another major authority.

The Supreme Court returned to a cautious approach and emphasized the significance of contractual duration.

An extraordinary and unforeseeable alteration is more plausible in a long-term continuing contract than in a short-duration agreement.

The case also reinforces the broader principle that ordinary market fluctuations belong to normal contractual risk.

Banking significance

The decision is especially relevant to long-term loans and project-finance arrangements.

A 20-year financing relationship potentially presents a materially different hardship analysis from a short-term facility.

13. COVID-19 and Hardship

COVID-19 generated substantial Spanish litigation concerning rebus sic stantibus.

The Valencia Provincial Court, Order 43/2021 of 10 February 2021, treated the pandemic as qualitatively different from ordinary market fluctuations and previous financial crises for purposes of interim relief in the contractual dispute before it. The court emphasized the exceptional, unforeseeable and widespread nature of the pandemic.

However, COVID-19 did not create an automatic right to contractual modification.

Courts still needed to examine:

• when the contract was concluded;
• whether the event was foreseeable at that time;
• the actual impact on performance;
• contractual allocation of risk;
• the duration of the contract; and
• the proportionality of the requested remedy.

14. Hardship in Loan Agreements

Consider a Spanish company with a 15-year bank loan.

An extraordinary external event occurs after year five.

The borrower experiences serious economic difficulties.

The correct analysis is not simply:

Extraordinary event → reduce loan repayments.

Instead, the questions include:

1. Was the event unforeseeable when the agreement was signed?
2. Did the borrower assume the relevant risk?
3. Is the event outside normal business fluctuations?
4. Has it fundamentally changed the contractual equilibrium?
5. Is there a direct causal connection?
6. Does the contract itself contain a hardship or adjustment mechanism?
7. Can the problem be addressed through modification rather than termination?

This reflects the cautious approach of STS 64/2015, STS 455/2019 and STS 156/2020.

15. Interest-Rate Changes

Interest-rate increases provide a useful banking example.

Suppose a borrower agrees to a variable-rate loan expressly linked to a benchmark.

Rates subsequently rise considerably.

That does not ordinarily establish hardship by itself because rate fluctuation is inherent in the structure selected by the parties.

The risk-allocation principle in STS 455/2019 is particularly relevant: rebus does not normally apply where the event falls within a risk expressly or implicitly allocated under the contract.

The analysis could differ where an entirely separate extraordinary event fundamentally changes the contractual basis, but the threshold remains demanding.

16. Currency and Market Risk

Similar reasoning applies to foreign-exchange fluctuations.

A sophisticated corporate borrower taking a foreign-currency loan normally accepts some currency exposure unless the contract or another arrangement reallocates that risk.

Ordinary:

• exchange-rate fluctuations;
• inflation;
• demand changes;
• financing difficulties; or
• market movements

are not automatically hardship events.

The distinction is between normal contractual risk and a genuinely extraordinary disruption of the contractual basis.

17. Regulatory Change

A major unexpected regulatory intervention can potentially provide a stronger hardship argument.

For example, legislation adopted after a long-term financing transaction could fundamentally affect the legally permitted operation of the financed business.

But even then, rebus is not automatic.

The court must determine whether:

• regulatory change was foreseeable;
• the contract allocated change-in-law risk;
• the effect is sufficiently serious; and
• modification is justified.

Sophisticated project-finance documentation often contains specific change-in-law clauses, reducing uncertainty over this issue.

18. Express Hardship Clauses in Banking Contracts

A well-structured hardship provision can address:

Trigger event: What constitutes hardship?

Materiality: How serious must the financial impact be?

Notice: How quickly must the affected party notify the other?

Evidence: What documentation must demonstrate the hardship?

Negotiation: Must the parties renegotiate?

Duration: How long does renegotiation continue?

Interim performance: Must payment continue while negotiations occur?

Adjustment: Can pricing, maturity or other terms be modified?

Termination: Is termination permitted if renegotiation fails?

Dispute resolution: Who decides whether hardship exists?

These provisions are important because they allocate risk in advance.

19. Relationship with Good Faith

Good faith under Article 1258 of the Civil Code plays an important role in the jurisprudential foundation of rebus sic stantibus.

STS 333/2014 explained that where circumstances forming the basis or purpose of the transaction change profoundly, good faith can support adaptation of the parties' contractual expectations in appropriate circumstances.

But good faith operates in both directions.

It protects a genuinely affected party, while also preventing hardship doctrine from becoming a mechanism for escaping a commercially inconvenient agreement.

20. Practical Example

Suppose Spanish Bank A provides Company B with a €100 million, 20-year infrastructure facility.

Eight years later, an extraordinary event fundamentally affects the legal and economic basis of the financed project.

A court considering rebus sic stantibus would likely examine:

First: the financing agreement itself.

Second: contractual allocation of the relevant risk.

Third: foreseeability when the agreement was executed.

Fourth: actual economic effect rather than general market conditions.

Fifth: whether the project remains commercially and legally viable.

Sixth: whether performance has become extraordinarily burdensome.

Seventh: whether modification could restore contractual equilibrium.

Only after that analysis could hardship relief realistically be considered.

21. Practical Lessons from the Case Law

The Spanish jurisprudence establishes several recurring principles:

1. Pacta sunt servanda remains the starting rule.
2. Rebus sic stantibus is available only in sufficiently exceptional circumstances.
3. A general economic crisis does not automatically justify contractual adjustment.
4. The claimant must establish the event's concrete impact on the particular contract.
5. Foreseeability is crucial.
6. Contractually allocated risks ordinarily remain with the party that assumed them.
7. Normal business and market fluctuations do not ordinarily constitute hardship.
8. Long-term contracts are generally more capable of experiencing qualifying unforeseen changes than very short-term arrangements.
9. Courts are cautious about opportunistic attempts to escape bad bargains.
10. Adaptation or modification can be preferable to termination where contractual equilibrium can reasonably be restored. 

Conclusion

Hardship clauses in Spanish banking law operate against the fundamental principle that contracts are binding. Spain does not have a general statutory hardship provision in the Civil Code comparable to some international instruments; instead, the courts developed the doctrine of rebus sic stantibus to deal with exceptional changes in circumstances.

The leading authorities—including STS 820/2012, STS 333/2014, STS 591/2014, STS 742/2014, STS 64/2015, STS 237/2015, STS 455/2019 and STS 156/2020—show the evolution from an extremely restrictive doctrine, through a comparatively broader approach in 2014, toward a careful modern approach emphasizing unforeseeability, causation, contractual risk allocation and the severity of the economic disturbance.

For banking transactions, the most important principle is that ordinary financial difficulty is not hardship. Changes in interest rates, financing conditions, property values, demand or profitability generally remain ordinary commercial risks where the agreement or nature of the transaction assigns those risks to the affected party. A stronger rebus case arises only where an extraordinary and unforeseeable event fundamentally alters the contractual equilibrium and the relevant risk was not assumed by that party.

For this reason, long-term Spanish banking and project-finance agreements benefit from carefully drafted hardship, change-in-law, force-majeure, material-adverse-change and renegotiation provisions. They allow the parties to determine in advance how exceptional events should affect their financial relationship rather than depending entirely upon the comparatively demanding judicial doctrine of rebus sic stantibus.