Contract formation

Good faith in negotiating

Is there an obligation to use good faith when negotiating a contract?

Yes. Under Spanish legislation, there is an obligation to negotiate a contract in good faith. This is based on article 7 of the Spanish Civil Code, which states that the exercise of any right must be made according to the standards of good faith. This principle obliges parties to behave in an honest and diligent way when negotiating the terms of a contract.

If a party fails to comply with the good-faith principle by unilaterally terminating negotiations in an unfair manner, the counterparty may have a claim against the terminating party for the loss that it may have suffered arising from termination of the negotiations (culpa in contrahendo). The good-faith expectations of the non-infringing party and the ‘reasonable’ outcome from the negotiation process are crucial elements to qualify a potential court claim against the party acting or negotiating in bad faith. The claimant will need to prove the bad faith of the counterparty and the link between the behaviour and the damage suffered.

‘Battle of the forms’ disputes

How are ‘battle of the forms’ disputes resolved in your jurisdiction?

Although the Civil Code and Mercantile Code remain silent on this point, it is generally accepted by the Spanish courts that, unless there is any contrary evidence, the last set of terms to be provided prior to the acceptance or performance of the contract will govern the contract. So the ‘last shot’ doctrine, as established by the Vienna Convention on Sale of Goods, will in principle prevail, unless the initial supplier rejects the new set of terms presented by the counterparty.

Where parties do business together on the same terms on a regular basis over a period of time, there may be evidence of a ‘course of dealing’, as a result of which the terms normally used between them will be considered the ‘agreed’ terms of their contracts. This may enable a supplier to argue that their terms should apply and prevail even if a buyer subsequently attempts to introduce new terms of purchase or terms that substantially modify the standard terms that have governed their relationship over time.

In some situations, a supplier dealing on standard terms may incorporate a provision which stipulates that the supplier’s contract terms will prevail over the buyer’s. The clause would read, for example:

The acceptance by supplier of your order is subject to supplier’s terms and conditions of sale.

This wording would be, in principle, enforceable under Spanish law and would allow a supplier to impose its own terms, waiving the standard terms of the buyer. In addition, this clause may discourage some buyers from responding with their own terms on the basis that they are unlikely to be accepted. Such a ‘prevail clause’ will not be effective where the supplier has subsequently agreed to accept the buyer’s terms or the buyer expressly refuses to accept the supplier’s terms.

Language requirements

Is there a legal requirement to draft the contract in the local language?

There is no legal requirement to draft a contract in the local language. However, if the parties to the contract are Spanish entities or nationals, it is highly recommended to draft the agreement in Spanish. In all events, a contract written in another language other than Spanish will require an official translation to be validly invoked in court.

Online contracts

Is it possible to agree a B2B contract online?

Yes, it is possible to enter into a contract online.

Under Spanish legislation, a contract does not need to be in any particular form to be legally binding. As long as the basic elements of a contract exist (concurrence of wills of the parties (offer and acceptance), purpose, and cause of the contract), it does not matter if the contract is formalised on paper or online.

The Law of Services of the Information Society and Electronic Commerce establishes that for the celebration of contracts by electronic means the previous agreement of the parts will not be necessary. Whenever the law requires the written form for a contract, this requirement will be considered fulfilled if an electronic means is used.

The aforementioned principle of freedom of form shall not apply in relation to contracts relating to family and inheritance law and those in which the law requires the intervention of jurisdictional bodies, public notaries, land registrars and mercantile or public authorities.

The key issue when making contracts online is to ensure that the terms are properly incorporated into the contract, namely, that the party accepting the terms has an opportunity to read them before accepting the contract.

There are no specific evidentiary requirements and courts are free to evaluate the evidence on a case-by-case basis if the other party questions the existence or content of the contract. Therefore, depending on the risk assessment to be made in each case, different means can be used, such as a link to the terms with a tickbox to show acceptance, different levels of electronic signature, time stamping, trusted third parties and such like.