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Contracts on the Costa del Sol

This guide was written by Manzanares Abogados S.L. (info@manzanaresinternational.com) in collaboration with Guides.Global (office@guides.global).

It was written on 1 June 2016. The law and practice in Spain change all the time. Our guides are updated as frequently as possible - typically every three years - but may be out of date.

Our guides are prepared by professionals from many countries. They are, of necessity, both brief and general and can take no account of your personal circumstances. They are intended to be a good introduction to the subject BUT ARE NO SUBSTITUTE FOR PROPER PROFESSIONAL ADVICE, which our contributors will usually be happy to provide upon request.

The advice and opinions contained in the guides are those of the author and are not necessarily those of Guides.Global.

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The scope of this guide

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 autónoma) lightbulb 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.

Do you need to use any special type of contract for use on the Costa del Sol?

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 on the Costa del Sol. There are several reasons for this:

Are there any taxes payable when a contract is signed on the Costa del Sol?

No. There is 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 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 that are feasible, even future ones, whenever they are not against the law or good customs.

  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. Although verbal contracts are valid, since it is so difficult to prove even their existence – if one party denies it, it would be highly complicated to prove it was made and the terms on 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.

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 into Spanish would be compulsory. A double column document would save you the expense and time of having it translated.

Formalities for written contracts

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

A Notarial contract is a contract either prepared by or 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 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 qualifications. See our Guide to Notaries on the Costa del Sol 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 - 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

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.

Which court deals with any dispute?

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 on the Costa del Sol.

Expats' Tips

Have you had experience with contracts in Spain? Tell us about it and share your story by emailing office@guides.global.

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.

Other guides of interest

 Description Link 
Disputes & Court Cases on the Costa del Sol
This guide is about all aspects of dealing with a dispute on the Costa del Sol. It covers preliminary stages, mediation, arbitration and going to court.
court cases and disputes in the Costa del Sol
The Legal System on the Costa del Sol
This guide explains, briefly, the legal system in Spain and, by extension, in the Costa del Sol. It covers the criminal legal system, the civil legal system, the family law legal system, the administrative law system, the way laws are made and the legal services available in Spain.
legal system in the Costa del Sol

Readers' Comments

 

Further information?

We hope you have found this guide useful. If you need any further help, please contact us.

Manzanares Abogados S.L.

1 June 2016


 

This guide was co-authored by John Howell (Email: John.Howell@Guides.Global or John@jhco.org. Web: www.jhco.org or www.Guides.Global)

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