Can a contract be terminated for breach?
Business Law
There are many occasions in which one of the parties fails to fulfill its promise or stipulation agreed upon in a verbal or written contract, and multiple claims are made day after day to resolve contracts due to non-payment, non-delivery of merchandise, non-compliance with actions of to do, not to do, etc.
What do we understand by contractual breach?
Contractual breach is understood as the failure to comply with one or more clauses of an agreement between two parties (purchase and sale contract, mortgage contract, commercial contract, lease contract, etc.). Said agreement can be verbal or in writing, and can be in a Public Deed before a Notary, or it can only be a private contract between the parties. Whether it is a private contract or a contract made public before a Notary, it must comply with the clauses that have specifically been written in the contract, failing which, the provisions established in our Civil Code will be complied with.
If there is a breach of contract, there is the possibility of terminating the contract. Termination is a way of voiding a contract, which is characterized by the cause that determines it: compliance with a resolutory condition.
When exercising contractual resolution, and therefore terminating the contract unilaterally, it is very important to prove that the breach of contract has been serious, essential, with real importance for the economy and that there is bad faith.
What elements must be met for a contractual resolution?
1) Gravity.
When we talk about severity, we understand that the breach derives from a main obligation, not from a complementary or accessory obligation. Therefore, gravity can be assimilated to essentiality, without that gravity on what was stipulated, the contract would not have been breached.
2) Essentiality.
By essentiality, we consider that condition that means that a contract has been made to regulate that specific principle. We understand as essential, that purpose that is mandatory and indispensable for the contract to have effect on the regulation of the specific legal business.
3) That it has real importance for the economy of the parties.
This point is because it must be a characteristic whose non-compliance causes serious economic and property damage to the contracting parties. We focus on those damages that, by virtue of having been regulated, mean an economic or property loss of great interest or value for the parties, a loss that can be realized and that is real, that exists. This is not a future or conditional loss, but rather a direct consequence.
4) That it has the intention of undermining the interest of the other party, that is, there is bad faith.
Finally, the criterion of bad faith must be given, that there is a desire to harm or deceive the opposing party, knowing that this damage will lead to serious problems for the opposing party.
In this sense, the Supreme Court Ruling no. 162/2012 of March 29, citing 366/2008, of May 19, reiterates the jurisprudential doctrine on contractual breach.
What points do you consider that there is a resolutory condition in a contractual breach?
The unfulfilled obligation would have been provided as essential in the contract itself, not as an accessory or complementary part. Rather, it must be understood that non-compliance affects a fundamental part of the contract.
The breach of contract is intentional or makes the other party think that it cannot reasonably expect future performance from the person who behaves in that way. That an attitude of bad faith, abnormal and inappropriate behavior occurs.
Produces the consequence of substantially depriving the injured contracting party of what he had the right to expect in accordance with the contract, this being foreseeable for the defaulter.
For all these reasons, in the event of any contractual breach, it is necessary and advisable to go to a law firm specializing in commercial law, so that it can be analyzed whether legally there is a breach or not, and whether the claim thereof is considered viable or unviable, based on the characteristics of the contract and the stipulated formalities.
Contact us, and our contract lawyers will study your specific case.
At Forcam Abogados we have offices in Barcelona, Madrid and Reus.
What do we understand by contractual breach?
Contractual breach is understood as the failure to comply with one or more clauses of an agreement between two parties (purchase and sale contract, mortgage contract, commercial contract, lease contract, etc.). Said agreement can be verbal or in writing, and can be in a Public Deed before a Notary, or it can only be a private contract between the parties. Whether it is a private contract or a contract made public before a Notary, it must comply with the clauses that have specifically been written in the contract, failing which, the provisions established in our Civil Code will be complied with.
If there is a breach of contract, there is the possibility of terminating the contract. Termination is a way of voiding a contract, which is characterized by the cause that determines it: compliance with a resolutory condition.
When exercising contractual resolution, and therefore terminating the contract unilaterally, it is very important to prove that the breach of contract has been serious, essential, with real importance for the economy and that there is bad faith.
What elements must be met for a contractual resolution?
1) Gravity.
When we talk about severity, we understand that the breach derives from a main obligation, not from a complementary or accessory obligation. Therefore, gravity can be assimilated to essentiality, without that gravity on what was stipulated, the contract would not have been breached.
2) Essentiality.
By essentiality, we consider that condition that means that a contract has been made to regulate that specific principle. We understand as essential, that purpose that is mandatory and indispensable for the contract to have effect on the regulation of the specific legal business.
3) That it has real importance for the economy of the parties.
This point is because it must be a characteristic whose non-compliance causes serious economic and property damage to the contracting parties. We focus on those damages that, by virtue of having been regulated, mean an economic or property loss of great interest or value for the parties, a loss that can be realized and that is real, that exists. This is not a future or conditional loss, but rather a direct consequence.
4) That it has the intention of undermining the interest of the other party, that is, there is bad faith.
Finally, the criterion of bad faith must be given, that there is a desire to harm or deceive the opposing party, knowing that this damage will lead to serious problems for the opposing party.
In this sense, the Supreme Court Ruling no. 162/2012 of March 29, citing 366/2008, of May 19, reiterates the jurisprudential doctrine on contractual breach.
What points do you consider that there is a resolutory condition in a contractual breach?
The unfulfilled obligation would have been provided as essential in the contract itself, not as an accessory or complementary part. Rather, it must be understood that non-compliance affects a fundamental part of the contract.
The breach of contract is intentional or makes the other party think that it cannot reasonably expect future performance from the person who behaves in that way. That an attitude of bad faith, abnormal and inappropriate behavior occurs.
Produces the consequence of substantially depriving the injured contracting party of what he had the right to expect in accordance with the contract, this being foreseeable for the defaulter.
For all these reasons, in the event of any contractual breach, it is necessary and advisable to go to a law firm specializing in commercial law, so that it can be analyzed whether legally there is a breach or not, and whether the claim thereof is considered viable or unviable, based on the characteristics of the contract and the stipulated formalities.
Contact us, and our contract lawyers will study your specific case.
At Forcam Abogados we have offices in Barcelona, Madrid and Reus.