Seller of property not appearing on registry caused ‘fundamental breach of contract’

Breach of Contract Property Purchase SpainThe Supreme Court has rejected an appeal by the seller of a property in Almeria ordered to pay damages for selling a property despite not being named on the property register.

The property was sold originally in 1978 but it was many years later that the new owners of the property were served notice to vacate the property at which point they discovered that the property had not been registered in the name of the seller of the property on the property register,  but rather was registered in the name of an old business partner of the person purporting to sell the property.

At the Court of First Instance the seller was ordered to pay damages of €190,383. The High Court agreed with the decision of the lower court, though lowered the amount of damages to € 143,000. The matter was appealed to the Supreme Court on the grounds that the relevant articles of the Civil Code dealing with the law of contract were not sufficiently precise to deal with the situation posed in the current appeal whereby a property was sold by a person other than the person named on the property register.

Discussing the legal effects of contracts in general, the Supreme Court reasoned that Article 1258 of the Civil Code  ‘obliges the fulfilment not only of that which is expressly agreed to, but also to all consequences, which are by their nature,  a product of good faith, custom and the law’. From this Article it can be deduced that whoever sells a property must bear the title to the property whether the property is unregistered or indeed registered.

What constitutes a ‘breach’

Reviewing the law relating to what ‘breach’ is considered fundamental and capable of rescinding a contract, this would include anything affecting the obligation to deliver legal possession to the buyer of the property that is the subject matter of the contract such as where the buyer’s legal possession could be subject to legal action by another party in the future.

The breach must be serious or substantial  which does not mean it must forcibly and persistently make difficult the performance of the contract but rather that the actions frustrate the objectives of the contract i.e. that the legitimate aspirations of the contracting party become spoiled.

This was certainly the case here where the buyer is deprived of that which may have been expected as a result of the contract,  which would include such logical expectations on the part of the buyer that they will receive the thing in the timeframe, place and form that had been stipulated by the contract.

There is both a material and a legalistic obligation to deliver – the former relating to the physical thing itself, in this case the property – and the latter which relates to the conditions which are necessary to enable quiet enjoyment and legal possession of the property. This legalistic obligation is that which requires, save express stipulation to the contrary in the contract itself,  that the property be registered in the name of the seller.  The appeal was therefore dismissed.

Image byDavid Castillo Dominici

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