Spanish Contractual Law: Not So Watertight
If there is a word that I am never comfortable with when advising clients, in law, is ‘watertight’. I often hear the adjective in front of `legal case´, `contract´, `lease agreement´, `terms´ or even, just recently, a firm called Watertight Legal. Let’s now focus on how non-watertight can certain contracts be, in particular Consumer contracts.
Spanish contract law operates the principle of “libertad de contratación”. This means that parties to contracts are allowed to agree on the terms of a contract so long as they do not violate public policy, ethics/morals or the consumers’ rights, and they conform to special legislation that may exist pertaining to the activity i.e. banking, insurance etc.
Surprisingly, employing the best lawyers to draw up contracts is sometimes a recipe for disaster: banks, insurance companies and other large operators have found out, to their horror, that contracts drawn up by the most expensive law firms their money can pay are riddled with (loop)holes like a Swiss cheese.
The examples below come to show what can happen with supposedly watertight contracts (and terms), when challenged in Court:
- Madrid Courts declare at least 45 clauses in banking contracts null and void as they breach Consumer protection regulations (6-9-2013).
- Supreme Court voids 8 clauses found in contracts with insurers Allianz, Caser and Mapfre (1-7-2010).
- Madrid Court rules that 8 clauses in Ryanair contracts must be removed because they are unfair, such as charging €40 for a boarding pass (23-10-2013).
- Costa Cruceros, the cruise liner operator (and owner of the infamous Costa Concordia sinking) agreed to remove 7 clauses off its contracts.
In my experience it is everyday practice, and not some lawyer’s intuition, excessive self-belief in his abilities or the firm he works for, what will help identify clauses (or even the contract) prone to be successfully challenged. That, and articles 82-90 of the Consumer Protection Act that has blacklisted no less than 30 unfair contract terms.