Termination of contracts in Spain

Contracts in the Spanish legal system

Our law firm in Marbella, wishes to provide you with an approach to this certainly complex matter, but of transcendental importance for the legal traffic, establishing itself on the basis of the solution of many controversies and litigations generated after the conclusion of a contract and during its execution.

One of the ways to deprive a contract of its effectiveness is to invoke defects in the essential elements of such contract. Article 1261 states that a contract does not exist unless the following requirements are met:

  • Consent of the contracting parties
  • Certain object to be the matter of the contract
  • Cause of the obligation to be established

Regarding the first of these requirements, the consent of the contracting parties must be fully, faithfully and seriously informed about the elements of the contract and the declaration of intent must be issued in a conscious, serious and unequivocal manner regarding the obligations arising from it. It is essential that such consent be expressed freely and seriously. Thus, those who have been concluded with animus iocandi or without serious intent are deprived of effectiveness because one of the essential elements of the contract is missing. Also those that have been produced by error or simulation, as well as those suffer from mental reservation or malice.

We do not intend to go into the detailed study of each of them. However, it should be noted that the main consequence of this is the non-existence of the contract, since the contract could not have been concluded without consent according to the mentioned terms. This non-existence can be highlighted by the declaration of invalidity, which will result in the return of the various services that had been performed derived of its execution. Article 1265 C.c. provides that «Consent given by error, violence, intimidation or malice shall be null and void».

The error is the first cause listed after this article 1265, indicated in 1266 C.c. provides «For the error to invalidate the consent, it must fall on the substance of the thing that is the object of the contract, or on those conditions of the same that mainly would have given reason to enter into the contract.

An error about the person will only invalidate the contract when the consideration of the person was the main cause of the contract. A simple accounting error will only lead to correction.»

Such an error must be substantial or essential, affecting the core of the contract, not its incidental or ancillary elements. This error may be evident in situations such as the person providing a very personal service, an error in the object or an error in the essential circumstances of the contract. Supreme Court jurisprudence has identified error in cuantitatem, error in cualitatem, error in objecto, and error in personam, among many others, as types of error.

The Supreme Court also points out that the error must not be attributable to the sufferer, even if it is inconsequential because it could have been avoided through the use of a minimum of care, i.e., the error will not invalidate the contract when it could have been overcome through the observance of due care by the sufferer. This is why it is essential to be assisted by qualified professionals to detect such an error before becoming bound by the contract. The Supreme Court also specifies a cause and effect relationship between the error and entering into the contract, i.e. a causal link between having suffered such misunderstanding of the essential circumstances of the contract and its conclusion. With regard to intimidation, Article 1267 states: «Violence occurs when irresistible force is used to extract consent.

Intimidation occurs when one of the contracting parties is inspired by a rational and well- founded fear of imminent and serious harm to his or her person or property, or to the person or property of his or her spouse, descendants or ascendants.

To qualify the bullying, the person’s age and condition must be taken into account.

Fear of displeasing those to whom submission and respect are due will not annul the contract.» The C.C. distinguishes between violence and intimidation, violence being the physical force and intimidation the psychological violence given in the contract. Both the physical and the psychological aspect must be proved by the person who invokes it, in order to urge the nullity of the legal transaction.

With regard to fraud in Articles 1269 and 1270, it mentions fraud in Article 1269: «There is fraud when, by means of words or insidious machinations by one of the contracting parties, the other is induced to conclude a contract which, without them, would not have made», and Article 1270: «For fraud to result in the nullity of contracts, it must be serious and must not have been used by both contracting parties.

Incidental malice obliges the active subject only to pay damages.»

Following Dlez Picazo, we understand fraud as «the insidiousness that produces a deception», a concept that is accepted in article 1269 C.C.

Article 1270 distinguishes between, on the one hand, the need for the fraud to be serious, leaving outside the scope of application of this fraud the so-called dolus bonus, or those statements made with the intention of concluding the contract, and on the other hand, the code also excludes the possibility of said fraud being used by both contracting parties, thus banning, based on the good faith, the possibility of exercising the action for nullity of the contract on the basis of the fraud used by the other party when the plaintiff himself has also used fraud in the conclusion of the contract.

Finally, fraud during the performance of the contract only obliges the parties to pay damages, but does not render the contract null and void.

With regard to the contracting parties power of resolution, we can distinguish the causes of resolution that the contracting parties themselves, on the basis of private autonomy or autonomy of will in Article 1255 C.C. introduce into the contract, and the so-called tacit condition of resolution in Article 1124 C.C. Focusing on this one, we say that a cause for resolution is configured that is implicit in the reciprocal obligations, in the case that one of the obligors does not comply with what is incumbent upon him. Thus, article 1124 C.C. provides that «The power to resolve obligations is understood to be implicit in the reciprocal ones, in the event that one of the obligors does not comply with what is incumbent upon him.

The injured party may choose between demanding the fulfilment or the resolution of the obligation, with compensation for damages and payment of interest in both cases. May also request the resolution, even after has opted for compliance, when compliance is impossible.

The Court shall rule on the decision claimed, unless there is good cause for it to set a time limit.

This is without prejudice to the rights of third party purchasers under Articles 1295 and 1298 and the provisions of the Mortgage Act».

There is a solvent and consolidated jurisprudence in the Supreme Court regarding the emergence of the resolutory power in bilateral or synallagmatic obligations, highlighting the following requirements:

1. Existence of a reciprocal and enforceable contractual bond, including a pre-contract or a contract with a suspensive condition. In this respect, the STS (Supreme Court Judgement) of April 28, 1991 or July 29, 1996. We must also consider that the moment of performance by the other party, unless otherwise contractually stipulated, occurs from the moment at which performance has begun by the party suffering from delay or non-performance because the other party is in delay.

2. Non-compliance must be serious. It can be either partial or totally defective, but it is not enough to fail to comply with minor or additional conditions that do not impede the economic purpose of the contract, frustrating the legitimate aspirations or expectations of the counterparty. STS of October 18, 1983; June 5, 1989; May 5, 1997 or April 11, 2003. This does not include defective or late performance which would result in damages, but not the power to terminate the contract except where the time for performance was an essential requirement for contracts execution. Think about a wedding celebration where a sumptuous vehicle is rented to take the bride, and the vehicle arrives after the celebration of the event. The action in these cases is the actio non fite adipleti contractus, the action of defective performance.

3. That the other party has not failed to comply with its obligations, since in this case there would not be a failure of the first party to comply because it was not in default. Thus the STS of June 26, 1995 or April 10, 1997. Nor that the party invoking the action for termination for noncompliance caused such noncompliance on the contrary, STS of December 27, 1995.

Thus, we understand that this article 1124 includes two main actions:

– Actio exceptio non adipleti contractus or termination action for breach of contract, whose legal consequence is the business termination.

– Actio non fite adipleti contractus, whose consequence is compensation for damages.

In all these cases, and as the Supreme Court has also pointed out in its jurisprudence, it is particularly relevant to demonstrate who failed to comply first, as well as the diligence of the person seeking judicial protection for the termination of the contract or compensation for damages prior to the exercise of the action before courts. In all these cases, it is necessary to be guided by a skilled hand in the knowledge and application of our legal system, to provide the best solutions, and to reach an agreement with the counterpart to the conflict that is generated by the breach of its obligations.

Do not hesitate to contact our law firm now for any tax, accounting and legal queries

Este sitio web utiliza cookies para que usted tenga la mejor experiencia de usuario. Si continúa navegando está dando su consentimiento para la aceptación de las mencionadas cookies y la aceptación de nuestra política de cookies, pinche el enlace para mayor información.

Aviso de cookies