The Spanish–Portuguese War between 1761 and 1763 is fought as part of the Seven Years' War.

Because no major battles are fought, even though there are numerous movements of troops, the war is known in the Portuguese history as the Fantastic War (Portuguese and Spanish: Guerra Fantástica), or War of the Pacte de Famille.When the Seven Years' War between France and Great Britain starts in 1756, Spain and Portugal remain neutral.

Their differences in South America had been settled by the Treaty of Madrid (1750).

King Ferdinand VI of Spain's prime minister Ricardo Wall opposes the French party who want to enter the war on the side of France.Everything changes when Ferdinand VI dies in 1759 and is succeeded by his younger brother Charles III of Spain.

Charles is more ambitious than his melancholic brother.

One of the main objects of Charles's policy is the survival of Spain as a colonial power and, therefore, as a power to be reckoned with in Europe.By 1761 France looks like it is losing the war against Great Britain.

Furthermore, Spain suffers from attacks by English privateers in Spanish waters, and claims compensation.

Fearing that a British victory over France in the Seven Years' War would upset the balance of colonial power, the king signs the Family Compact with France (both countries are ruled by branches of the Bourbon family) in August 1761.

This brings war with Great Britain in January 1762.Portugal had been struck by the disastrous 1755 Lisbon earthquake.

The Prime Minister Sebastião José de Carvalho e Melo, Marquis of Pombal directs all efforts towards the reconstruction of the country, and neglects the armed forces, in which he has little interest.By the Treaty of El Pardo (1761) between Spain and Portugal all aspects of the Treaty of Madrid are null and void.