Contract Law in Spain

Contracts - written or verbal, long or short, important or not so important - are pretty much central to large parts of our personal and business lives. How do they work in Spain? How do you know if a contract is legally valid? What happens if things go wrong?

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This guide covers…

This guide is about the form and validity of contracts for use in Spain.

It describes, in particular, how to deal with contracts in the area of Andalusia/Andalucía – which contains the Costa del Sol. See a map here. Please note that certain aspects of the law in Spain vary from one “autonomous community” (comunidad autónomalightbulb image - click here for more information on this subject to another.

Introduction

Most countries in the world use one of two basic systems when it comes to contracts; the Continental European (Roman Law/Napoleonic Law) system or the Anglo-Saxon system. The system in Spain is modelled on the Continental European system.

Video guide to contracts in Spain

You can get a quick overview of contract law in Spain by watching this video interview (below) with Spanish lawyer Antonio Manzanares. Learn more by scrolling down and reading the detailed guide he has written with us.

Do you need to use any special type of contract in Spain?

No. Spain, like many countries, allows “freedom of contract” in most cases, although some specific areas/cases may require some extra formalities in order to generate legal validity. This means that the parties are – with a few exceptions – free to agree the terms, the format and the jurisdiction to apply to their contract.

Having said that, in many cases it makes sense to use a Spanish format contract (rather than a document drawn up in accordance with the law of another country) for dealings in Spain. There are several reasons for this:

  • The main subject matter of the contract is likely to be in Spain and so, if there is a dispute, it may be most appropriate for it to be dealt with by the courts of Spain.
  • In some cases, the law requires you to make the contract subject to Spanish law.
  • If there is a dispute about the contract then a Spanish judge will be much more familiar with the Spanish form of contract than the form of contract used in another country.

Are there any taxes payable when a contract is signed in Spain?

No. There are no taxes payable as a result of signing a contract; but, of course, the contract could relate to an item that is subject to some form of tax. For example, if you sign a contract for buying a car, either VAT or Transfer Tax would be payable, depending on whether the car is new or second-hand. If you sign a contract to buy a house, there will also be VAT or transfer Tax to pay.

If you want to use a Spanish-style contract, what is required?

For a contract to be valid under Spanish law there are three main requirements. These are set out in the Spanish Civil Code. They are:

  1. The consent of the parties to the contract
    This means that the parties must be clear that they are agreeing to a legally binding contract.
  2. A certain and clear object
    The contract must be clear about what the parties intend. Any assets or services must be feasible, even future ones, and promised in good faith.
  3. The contract must be to perform an act that is lawful

As you can see, the formal requirements for a Spanish contract are very flexible. In particular, readers who are from an Anglo Saxon background should note that there is no precise equivalent to the Anglo Saxon concept of consideration – i.e. that the promises made in the contract must be in return for something.

Contracts can be made by way of offer and acceptance. In this case, once an offer has been made the contract will become binding when it is accepted by the other party.

Does the contract have to be in writing?

The general practice is to have contracts in writing.

For centuries, lawyers have advised clients that verbal contracts aren’t worth the paper they are written on!  This is because, although verbal contracts are valid, it is so difficult to prove even their existence or exactly what was agreed. If one party denies it, it would be highly complicated to prove the contract was made and the terms of it.

There are two ways in which contracts are generally produced in writing.

The first is the ‘simple’ written contract. See below as to the formalities associated with this.

The second is a contract prepared by and witnessed by a Notary public (Notario).

Does the contract have to be in Spanish?

No – but it is, in practical terms, highly desirable for the contract to be either in Spanish or in dual language format (Spanish in one column and your chosen language in the other). This is standard in contracts we prepare at our law firm. If it is in dual language format, you should make sure that the legally binding version is declared to be the Spanish version.

The reason that this is so desirable is that if there is a dispute and the contract has to be interpreted by a judge, a sworn translation of a foreign-language contract into Spanish would be compulsory. A double column document would save you the expense and time of having it translated. More importantly, you would know exactly what was being presented to the judge. However good official translators might be, they might slightly misunderstand the subtlety of the contract and so give the judge a false impression of what had been agreed.

Formalities for written contracts in Spain

There is no special formality. It must be in writing. It can either be in the handwriting of one of the persons making the contract (although this is now very unusual!) or it can be produced in some other way. Typed contracts are now almost universal.

A written contract needs to be signed by or on behalf of the parties. See the section on Powers of Attorney below if it is proposed that one of the parties does not sign in person.

Signatures do not need to be witnessed.

Formalities for Notarial Contracts in Spain

A Notarial contract is a contract signed in the presence of a Notary. These contracts are always prepared by the Notary.

It’s important to understand that, in Spain, a Notary (Notario) is a highly respected professional who started off as a fully-qualified lawyer and then took additional qualifications before being allowed to practice as a Notary. It is not at all the same as a Notary found in some countries, whose sole job is to witness the signature of documents and who may have limited or no qualifications. See our Guide to Notaries in Spain for more details.

In the case of a Notarial contract, the parties’ wishes will be conveyed to the Notary’s staff – often by way of a draft document prepared by your lawyer – and they will produce a notarial document that incorporates those wishes whilst being clear and complying with any required formalities.

When the time comes to sign the contract, the parties must produce to the Notary proof of identity (usually their passport) and – in many cases – evidence that they satisfy the Compliance, Spanish money laundering, and other relevant applicable legislation.

Once the Notary is satisfied as to their identity he will allow the parties to read the contract but he must then read it to them himself – word by word. This is because it is the Notary’s obligation to ensure that the parties have read and fully understood what they are signing.

If one of the parties does not speak Spanish, that person must arrange for an interpreter to translate the contract in the presence of the Notary. Notarial contracts are always in Spanish, although in some cases they also produce bilingual documents – but not all notaries do so.

Once the contract has been signed, a fee is paid to the Notary and the original document is stored with the Notary’s record. Copies are supplied to the parties.

A contract can only be officially registered at a Public Registry (e.g. Company House, Land Registry, etc.) if the contract is Notarial Contract (Contrato Publico or Escritura )

Powers of Attorney in Spain

Sometimes it is not convenient for a person to attend in person to sign the contract.

In this case, they can appoint someone else to do it so, on their behalf. This may be a trusted friend or relative or it may be a lawyer. To do this they need to sign a Power of Attorney.

For details of how to grant a Power of Attorney to someone else, please see our Guide to Powers of Attorney for use in Spain.

Which court deals with any dispute in Spain?

If the contract relates to the sale of land or buildings in Spain, any dispute must be dealt with by the courts of Spain and the contract must be interpreted in accordance with Spanish law.

In any other case, the parties to the contract are free to choose whichever way they like for dealing with any dispute and to make the contract subject to whichever legal system they prefer, as long as it respects the International Law, Conventions and Treaties. Sometimes this can be useful, especially if both of the parties to the contract are based in that place.

It is possible to have a contract subject to the courts of Spain but to the law of another country but this is generally not a good idea because of the expense and the complexity it brings into the case.

It is possible to arrange for any dispute to be dealt with by arbitration instead of going to court. See our Guide to Disputes & Court Cases in Spain.

Conclusion

Whenever you decide to go into a contract, no matter how simple you think the agreement is, it is always advisable to have a lawyer drafting or checking it for you. This can save you money and headaches in case the other party breaches the contract.

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