Debt prevention measures in Spain

If a client falls behind in its payment duty, this can initiate a burdensome legal dispute to recover unpaid debts. To prevent default from the outset and to gain a rich body of evidence for a potential dispute, there are different measures that should be considered at the time of contraction.

Before completing the transaction, it is advisable to request full information of the counterparty, encompassing the exact corporate name, the address, legal form, the so-called N.I.F. (“Número de Identificatión Fiscal“) and where appropriate the European identification number. When dealing with legal persons, powers of representation are relevant, especially for the directors of the company. In transactions with private individuals it is worthwhile to find out the person’s birth date and present domicile. Further, a credit check of the future business partner’s financial background can provide security.

To prove a claim in case of a legal dispute, it is recommended to document each and any contracting stage in writing. This includes the order and order confirmation, delivery, invoicing and the notice. Additionally, the entire e-mail correspondence with the counterparty should be kept accessible. Proofs of delivery should be requested in due time from the shipping company, as they need to be presented signed and/or in original form to the court as proof of the delivery.

Retention of title

Retention of title can be agreed on if both parties have expressed their consent before the goods are delivered. Further, the Spanish law provides a registry for instalment sales of movable, identifiable and inconsumable goods. After agreement of the parties and publication in the registry, the retention of title applies, which can be held against third party creditors. Provided the buyer does not fulfil his obligations, the seller has a direct and exclusive right to access the goods. The discussed clause only has effect against third parties if the sale was entered in the registry.

The retention of title is a very rarely used juridical figure in Spain and is thus only employed to secure very valuable machinery.

Interest for default

In absence of a contractual agreement, the statutory payment due date is 30 calendar days (Law 3/2004 of 29 December to counter default in commerce). According to Law 7/1996 of 15 January, the term can be extended to a maximum period of 60 calendar days if the products in question are not fresh or perishable consumer goods.

The Spanish statutory interest rate, which was aligned by the EU Directive 35/2000, amounts to 7% added to the European Central Bank’s key interest rate. This interest rate supersedes individual agreements made via the terms and conditions. Still, as a general rule, an agreement on interest for default is advisable. In absence of an express agreement, the rate is determined based on the gazette’s interest rate, set by the Spanish government semi-annually.

This article is not considered as legal advice

Karl H. Lincke

As an Abogado & Rechtsanwalt, Karl H. Lincke is a Partner at Mariscal Abogados and specialises in M&A, Company law, TMT law and Real Estate law. Working languages: Spanish, German and English. For any further enquiries please Contact us