Three causes of nullity of contracts
There is a possibility to terminate a contract in accordance with Spanish law and that is when the contract has been concluded, without the free autonomy of the will of the parties to the agreement. See: invalidity of contracts. The following is an explanation of the 3 reasons which can lead to nullity.
1. Error as cause of nullity
The first reason for termination of a contract by invalidity is “Error as cause of nullity”. This is set out in article 1266 of the Spanish Civil Code, in which it is determined that:
Error about the person leads to nullity of the agreement in the case a decisive importance was given to the correct identity of the other party.
The error in calculation shall only cause to correct such”.
In practice, Spanish courts are quite demanding in cases of error to consider them as cause of nullity of an agreement. There is a settled case-law in which they repeatedly state that the error must be “substantial” or “essential”, in other words, it must affect directly the merits of the agreement and not the ancillary obligations or secondary services. Therefore, the courts consider these cases often as exceptional because it is not so easy to prove that such situations take place and in case they do, there must be sufficient proof.
It can be proven for example if we buy a couple of glasses in the supposition that they were diamonds. Or if we think that we engage Beyoncé to give a concert and we are really hiring another Afro American singer.
Nevertheless, it is difficult that such situations occur. And if such situations do take place, there must be enough proof that the agreement has been entered into as a consequence of the error.
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Exercise all duty of care
Following this legal subject, the Spanish Supreme court requires that the error, to be considered cause of nullity of a contract, “may not be attributable to the aggrieved party who suffered harm due to the error or if it finally appears to be unimportant because it could have been avoided if duty of care had been used”. What is meant here is that error is only the case if it is proven that the one suffering harm as a consequence of the error, has exercised all duty of care without any possibility that the error is attributable to him/her. The Supreme Court requires also that there is “Causal Link (cause-consequence relation) between the suffered error and entering into the agreement”. In other words, we are dealing with a contract that someone has entered into with regard to something or someone whilst in reality, that person was thinking of something or someone else, that we have used all duty of care to avoid such error and that in the end the circumstances regarding the error, the diamonds or Beyoncé, have been decisive in our decision to enter into the contract.
2. Violence and intimidation as cause of nullity
Violence or Intimidation as causes of nullity are set out in article 1267 of the Spanish Civil Code, in which it is determined that:
“Violence or intimidation lead to invalidity of the obligation, even though such was used by third parties not intervening in the contract”.
This is a more clear case of nullity easier to understand. If someone obliges us to enter into a contract by using physical violence or threats, regardless of who expresses this violence or threat, the contract is rendered absolutely null and void.
The most sensible question to consider nullity as a cause to terminate the contract, is that there is enough proof to show that violence or intimidation was used. In case this can be proven, then there will be no problem at all to declare the agreement null.
3. Fraud as cause of nullity
Fraud as cause of nullity is set out in articles 1269 and 1270 of the Spanish Civil Code, in which it is determined that:
Fraudulent misrepresentation exists where, with insidious words or machinations on the part of one of the contracting parties, the other is induced to enter into a contract which he would not have done without them”
In order for fraud to lead to the nullity of the agreement, it must have been severe and not having been used by both of the contracting parties.
Two forms of fraud
- Incidental fraud
Incidental fraud only obliges the party who has employed fraud, to pay for compensation.
- Intentional fraud
Dolo, the Spanish word for Intentional fraud is a legal term meaning the express and unmistakable will to do something.
It is legally considered that the contract would be void if there is a clear will which is expressed in making false documentation or false instruments of any other kind, or misleading information of such nature that the other party enters into the contract but which he would not have done without them.
Contract not be declared void
Spanish law requires this fraud to be severe, in other words, in a way as described before when explaining the requirements for error as a cause for nullity, that this must affect the merits of the contract and not the ancillary obligations or secondary services. Equally another requirement is that fraud has not been employed by both contracting parties. Incidental fraud is not decisive for the decision of the aggrieved party as he/she would have entered into the contract anyway, just under better conditions. That’s why the contract will not be declared void, but the party who has acted in this way, would have to pay compensation to the aggrieved party.
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