Breach of contract and obligations

When entering a contractual relationship there is always the risk that the client will breach his/her obligations. It is therefore important to know what constitutes a breach, what legal action can be taken to resolve the situation and how it may be prevented as a whole.

When a party does not hold his end of the contracted agreement, as a whole or in part, it is considered that the party has breached in his obligations. Article 1101 of the Spanish Civil Code specifies that a “person who, in the performance of their obligations, should incur a wilful misconduct negligence or default, and those who in any way should contravene the content of the obligation shall be subject to compensation of any damages caused”. Hence, when suffering from a breach of contract, the affected party can seek remedy by demanding damages for incurred losses or for loss of a gain that was reasonably expected to come from the successful compliance with the contract.

The first step when seeking action for a breach is demanding compliance with the contract extrajudicially, hence not through the usual course of a legal proceeding. Through this action, the actual legal handling of a breach of obligations may be avoided in the sense that it is prevented by urging concession in good faith. It is also recommended to do this with a medium through which it can be proved that the message is received, for example through burofax. If the party at fault proceeds to comply with their obligations, then the breach of contract is successfully avoided.

Otherwise, a second course of action involves voluntary mediation. Such option may be used when not yet wanting to sue the faulty client, and thus a third party mediator is used to resolve the situation considering the circumstances and interests of both parties and coming to an equally benefitting solution. If no agreement is reached through mediation, another recourse is opting to obtain a conciliation settlement agreement (Acto de Conciliación), through which the faulty party judicially recognises its contractual default or the mistakes it has made in its compliance. Nonetheless, if mediation is not successful it is unlikely that said act will come with a viable, agreeable solution for both parties.

Consequently, the last resort is taking legal action. It is important to note that in order to seek such judicial action, the breach must be substantial and sufficiently serious. The aggrieved party may choose to demand performance or to terminate the obligation. Under both choices there is availability for compensation in damages and for the payment of interest.

An example of judicial recourse is a payment proceeding when the breach is a matter of debt to be paid by the client. Such proceeding, the “procedimiento monitorio”, involves a process through which a monetary debt is claimed and when consisting of significant amounts, a LegoLex lawyer may be hired for efficient handling of the operation. When the breach is severe and involves further damages other than money owed, the process of suing for breach of obligation can reestablish the situation as it was before the contract and award damages for what harm was caused.

According to the Spanish Civil Code, there are two types of procedures through which the judicial course may be taken. The first is the verbal procedure, usually used for claiming debts under €6,000, but requires the presence of a lawyer when the amount is above €2,000. The second is the ordinary procedure which is generally longer and is used when the figure exceeds €6,000 or may not be quantified due to the complexity of the situation. This second recourse always requires a lawyer and involves the filing of a suit which may be answered within 20 days and results in the setting of a court date.

It must be noted that seeking judicial cause is time consuming as well as intricate, especially when the aggrieved party attempts to get compensation for loss of earnings. Consequently, it is recommended to specify a clause in the contract for what damages will be awarded in the case that any party defaults.

By | 2019-11-15T11:58:30+00:00 November 15th, 2019|Sin categoría|