Are the difficulties caused by COVID-19 grounds for refusing or delaying the performance  of financial contracts (e.g., financing agreements; OTC derivatives, etc.) in order to obtain more advantageous conditions, or to terminate them?

Under Portuguese law, as a general rule, the risk of circumstances happening after the signing of the contract, which jeopardize the economic balance envisaged by the parties at the time of contracting, shall be borne by the debtor, that is, the one who is bound to perform, since only the impossibility of performance, for reasons not attributable to the debtor, exonerates the debtor without further consequences. To make applicable the impossibility framework, the supervening circumstance must make the performance absolutely impossible, as even an extremely serious and unforeseeable hardship is not considered sufficient, nor is a practical or economic "impossibility", or the exception of the debtor’s ruin. Such cases, the respective "conditions of admissibility" having been verified, set motion the application of Article 437 of the Civil Code, the institute that regulates the "change in circumstances" which is applicable when performance is still possible but entails to the debtor an unexpected loss at the time of the contract and makes unfair the claim for performance by the part of the creditor.

Although in some circumstances the exceptional and temporary measures relating to the epidemiological situation of the novel Coronavirus – COVID 19 may lead to a proper impossibility ( v.g. the measures limiting access to spaces frequented by the public, provided for in Decree-Law No 10-A/2020 of 13 March), it will not be what typically happens in financial contracts, taking into account the monetary nature of performance set forth in them. Therefore, the framework to be applied, in the face of situations of hardship in the performance of the contract, shall be that of changing the circumstances. However, some market disruption events, such as the closure of trading platforms or the unavailability of means of payment may constitute a real scenario of impossibility, in principle only temporary, which excludes compensation for late performance.

Having said that, it is not possible to give a general answer to the questions raised, since only by analysing the specific factual circumstances of each situation, as well as the specific terms of the financing contracts, will allow gauging the existence of the legal conditions for the extinction or suspension of obligations or the modification or termination of the contract.

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