Excessive hardship clause

Actualizado18 de July de 2023

PorImperio Rojas

What is an excessive onerous clause?

A onerosity clause excessive is a contractual provision that allows one of the parties to request the modification or the resolution of the contract when a unforeseen and extraordinary change of the circumstances that make the fulfillment of its obligations much more difficult or expensive than originally anticipated.

This clause is based on the principle of good faith and contractual balance, and aims to prevent one of the parties from benefiting unfairly from the situation of the other.

The modification may consist of an adjustment of the price, the term, the object or any other contractual condition.
The resolution implies the extinction of the contract and the mutual restitution of the services performed. In other words, what has been delivered under that contract must be returned, in order to return to the situation prior to its conclusion.

For example, if a contract for the sale of a car is voided, the buyer must return the car to the seller and the seller must return the money to the buyer. Mutual restitution also includes the fruits or benefits that have been obtained from the things delivered, such as interest on money or use of the car.

Essential content

In order for it to be invoked, the following requirements must be met:

That the change of circumstances:

It is subsequent to the celebration of the contract and is not attributable to any of the parties.
It is extraordinary and unforeseeable, that is, it cannot be attributed to the normal risk of the contract or to the ordinary diligence of the parties.
Seriously upset the economic balance of the contract, making the performance of one of the parties excessively expensive compared to the consideration of the other.

That the party affected by the change in circumstances notify the other party of its intention to modify or terminate the contract within a reasonable period of time.

Optional content

Define what type of events or circumstances can be considered as causing excessive burden.
Define what type of events or circumstances can be considered as causing excessive burden.
Establish alternative conflict resolution mechanisms, such as mediation or arbitration.

In which contracts is it usually applied?

It usually occurs in long-term contracts, such as:

Supply contracts
work contracts
lease agreements

Limitations

It can only be invoked when all essential requirements are met.
It must be proven by the person who alleges it.
It cannot be applied when the change in circumstances is attributable to the party that is affected by the excessive burden.
It cannot be applied when the contract has been fully fulfilled by both parties, or when the deadline for its fulfillment has expired.
It cannot be applied when the contract has been fully fulfilled by both parties, or when the deadline for its fulfillment has expired. For example, some force majeure clauses may expressly provide that certain events or circumstances shall not be considered as causes of excessive onerousness.
When dealing with the contractual field, it is important that the basic contracting limits established in article 1,255 of the Civil Code are always respected.