If one party fails to fulfill its contractual obligations, the other may, under the Civil Code, request enforcement, resolution, or termination, and, if the conditions are met, damages and interest. The choice depends on the unfulfilled obligation, the severity of the breach, and the terms of the contract. A delay or dissatisfaction does not automatically invalidate the contract.
What does the resolution mean and how is it different from termination?
The resolution nullifies the contract with retroactive effect: the contract is considered not to have been concluded, and the parties return the received benefits, under the law. Termination of the contract only terminates the future part of the contract. This difference is provided for by Article 1.554 of the Civil Code and is especially relevant when it comes to determining the refunds and benefits already executed.
The qualification is not made solely based on the name used in the application or in the contract. The nature of the relationship, the obligations assumed, and the intended effect must be analyzed.
When the resolution can be requested
According to Article 1.549 of the Civil Code, the creditor who does not opt for forced execution may request the resolution or, as the case may be, the termination and damages if they are applicable to him. Resolution is not available for minor non-execution. For contracts with successive execution, minor but repeated violations may justify termination. If the circumstances permit, the law may grant the right to a proportional reduction of one’s own remuneration.
The debtor’s fault must not be treated as a distinct condition that is proven in the same way in any case: Article 1.548 establishes the presumption of contractual fault by the mere fact of non-performance. Liability for damages and the consequences of an unavoidable impossibility are analyzed separately, according to the law and evidence. For compensation, the damage must be proven, with the exceptions provided by law or agreed upon by the parties.
Is the delay mandatory?
The same rule does not apply in every situation. Delay may be necessary, but the Civil Code also provides for cases of legal delay or other situations in which prior notice is not required in the same form. In the case of unilateral resolution, Article 1.552 allows for written notice when the parties have agreed upon it, when the debtor is in default, or when the obligation is not fulfilled within the time period set by the delay.
Check the execution deadline, the notification clauses, the method of communication, and the proof of receipt. An unclear or sent to the wrong address notification can generate an additional dispute.
The unilateral resolution and the commission pact
The resolution can be ordered by the court upon request, or it can be declared unilaterally or operate in full force in the cases provided for by law or agreed upon by the parties. For the commission agreement, Article 1.553 requires that the obligations whose non-execution leads to legal dissolution be expressly provided for. As a rule, it operates after the delay has occurred; the parties can agree that the effect results from the mere fact of non-execution.
The unilateral declaration must be made within the applicable statute of limitations. It becomes irrevocable upon communication or upon the expiration of the term granted for execution, as the case may be. For opposability to third parties, entries may be required in the land registry or other registers, in accordance with the law.
What the evidence should look like
Organizes the documents so that each party's obligation, due date and conduct can be verified. The following may be relevant:
- the contract, the annexes and additional documents;
- proof of payments, deliveries or works performed;
- the notifications, summonses and confirmations of communication;
- Correspondence, minutes of proceedings, invoices and technical reports;
- the documents showing the extent of the non-performance and its effect on the contract.
Test the harm and its connection to the non-execution separately if you are seeking compensation. The mere existence of non-execution does not automatically prove the amount of damages.
What happens after the termination of the contract
After the rescission, each party returns, under the law, the benefits received. Damages and interest may also be claimed if the conditions of contractual liability are met. The resolution does not remove the clauses regarding the resolution of disputes or those intended to have effect after termination, such as some obligations of confidentiality.
What to check before sending the notification or going to court
- Identify the specific obligation and the term of execution in the contract.
- Check whether the non-execution is of sufficient importance and whether it can be remedied.
- Read the clauses regarding notifications, late filing, and the commission agreement.
- Determines whether you are pursuing execution, resolution, termination, reduction of benefits, or compensation.
- Keep the contract, communications and evidence of execution or non-execution.
Official source
Civil Code, Art. 1.549–1.557 regulates the resolution, termination, commission agreement and their effects. For an analysis of the contract and the documents, you can consult Legal services.
The information is general. The appropriate remedy and its conditions depend on the contract text, the applicable law, and the circumstances of each case.
