What is contractual liability?

What is contractual liability?
Published on: 2 February 2023

Contractual liability, or also known as contractual civil liability, is a set of legal obligations arising from the conclusion of a contract. All parties are bound by this document, which is signed in accordance with the law and has legal effect. Whoever breaches the contract is obliged to compensate the other party, therefore it is advisable to seek advice from a civil specialist.

The most important provisions on contractual liability can be found in Article 1101 of the Civil Code, which stipulates that the parties involved in the contract must comply with the contents agreed in the contract. In addition, the Code states that there is no liability for fraudulent, fraudulent or malicious conduct subject to its performance.

What are the conditions for assuming contractual liability?

In order for contractual liability to arise, certain elements must be fulfilled, such as the presence of a valid contract, i.e. it must not violate objective laws. Another condition is that the party involved in the contract must be liable for the damage and the other party must be the injured party.

Types of contractual liability enforcement

Performance comes in two basic forms; one voluntary which is the party bound by the contract actually fulfilling the obligation expressed without coercion and the other by performance which in case of non-performance is acted upon giving rise to an obligation to be fulfilled.

Types of non-compliance

The breach can be caused by one or both parties involved in the contractual relationship.

  1. Unilateral breach of contract: Only one of the parties violated the requirements of the contract.
  2. Passive unilateral breach of contract: The obligee does not abide by the expressly agreed content. The most common form is refusal to accept payment or failure to appear.
  3. Mutual non-performance: Neither party has fulfilled its obligations.

Causes of non-performance and legal consequences of contractual liability

The Civil Code states that a contractual obligation is breached if there is a breach of what has been subscribed or agreed by both parties, which may occur through negligence or fraud. All these situations give rise to legal consequences of contractual liability.

Non-performance may give rise to a series of actions aimed at demanding the fulfilment of the obligations and/or reparation of the damage or harm caused:

  • Performance: when the obligations are not performed accurately, fully and on time. The creditor requests the court to demand voluntary performance or the participation of the debtor's attachable assets.
  • Enforcement of obligations: Article 705 of the Code of Civil Procedure empowers a judge to grant a debtor a time limit to enforce a claim in an enforceable right. If it is irreplaceable or unenforceable, the obligation continues to be performed.
  • Compulsory performance of an obligation to give: A court or executive holds an auction or public auction to dispose of the debtor's assets to compensate for the non-performance.
  • Performance of obligations of omission: Spanish law establishes the possibility of granting the debtor a period of time for the rescission of consummated acts. After that time, the executor has the power to enforce the obligation by a third party at the debtor's expense, or if this is not possible, to enforce the obligation given.
  • Compensation for damages: This is the amount that the debtor has to pay for breach of the contractual relationship.

The Code of Civil Procedure establishes the limitation period for contractual liability. This period has been modified with the reforms carried out in 2015 to simplify the process and promote the Second Chance Law. Previously, the limitation period was 15 years, now it is 5 years. Professionals are contractually obliged to rent services or work for a fee. Obligations differ from contract to contract, which may affect the timing of a claim for breach.

A professional undertakes to perform a specific job in exchange for a fee. In this case, the obligations are consequential, so the obligor's contractual obligation is assumed and the obligee does not have to prove fault. The professional undertakes to provide services, but his undertaking does not promise results. In practice, the obligee must prove fault in order to affect the obligor's contractual obligations.

How does contractual liability differ from non-contractual liability?

The essential difference is that in tort liability there is no contract as the only connection between the parties. There is an obligation to indemnify, but there are no documents. In addition, there are other factors that influence the occurrence of a dispute, such as the relationship of the parties prior to the signing of the contract, among others.

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