We must make a distinction between the causes of extinction that are common for all the contracts (nullity, voidability, fulfillment, mutual consent, unilateral withdrawal, revocation, rescission, resolution based in breach of contract, … ), and others that are special of the real estate purchase, such as the rescission based in differences of quality or surface of the purchased plot or building respect to the stipulated ones, the rescission based in levies out of sight, the redhibitory action for undisclosed defects, and the conventional and legal retract.

In all this cases, we use the legal concept of the word “resolutory” in the sense of operating or serving to annul, dissolve or terminate a contract.

Next we try to explain briefly the causes of extinction of major incidence in the real estate transactions: the resolution based in breach of contract, the resolution based in risk of destruction of the building or loss of the price, and the resolution based in default of payment.

Resolution based in breach of contract

Breach of contract is the violation of a contractual obligation by failing to perform one’s own promise, by repudiating it or by interfering with another party’s performance.

The injured party can choose between demanding the fulfillment of the contract or demanding its resolution. In both cases he has right to obtain the indemnity of damages and payment of interests. When he had choose to claim the fulfillment and this one turn out to be impossible, the injured party can still demand the resolution.

Resolution based in risk of loss of the building or the price.

The vendor can demand also the resolution of the contract when he has founded reasons for being afraid of losing the building or the money.

To be able to file a lawsuit based in such a risk, the motive must be important enough and sufficient to justify the resolution of the contract, which is a de facto question to be considered by the court.

There constitute founded motives for demanding the resolution of the contract the insolvency of the buyer, his wastefulness, etc. The town-planning and administrative impediments, if they are not known by the buyers, are also resolutory cause.

Resolution based in default of payment

To file a lawsuit to obtain the resolution or discharge of contract based in default of payment it is necessary that the vendor makes a request by means of judicial or notary certificate to the buyer, fixing a final expiry date.

The buyer can proceed to make the payment while he has not been notified, even if the term stipulated in the contract is over. On the contrary, as soon as the request is done, the judge cannot grant a new term to the debtor.

Request of the Vendor

It is the official expression of the intention of the vendor to terminate the contract. At first, with this notification the payment of the price is not demanded, but the acceptance by the buyer of the contract’s resolution. Nevertheless, the seller can, to his will, use also the request to demand the payment, granting to the purchaser a final deadline to pay - term of grace–, under the warning of contract resolution if he doesn’t pay.

The request is considered done, whenever the parties did not specified another way in the same contract, with the notarised certified letter (once proved that the recipient really received the request), or with the court or notarised notification. The request must be notified in any case to the buyer.

The request loses its efficacy if later dealings between the parties are made. The same thing happens when, initiated the lawsuit, the process is suspended to give to the buyer the opportunity to liquidate the contract.

In case of real estate the resolution of the purchase contracts is ruled by the art.1504 and the 1124 of the Spanish Civil Code, therefore, the resolution takes place with the resolutory notificacion to the buyer.

Action for discharge of contract.

The resolution or discharge of a contract is not automatic, but it depends on the lawsuit filed to the Court. Nevertheless under certain circumstances the court can refuse the resolution and grant a term for the fulfillment. The term of exercise of the action is 15 years, general term of prescription, applicably when, as in this cases, there is not established a special term.

For the exercise of the resolutory action it is necessary the concourse of the following requisites:

a. Existence of a serious breach of contract. To justify the resolution, the breach of the contract has to be objective, unequivocal, essential and disloyal.

b. Frustration of the intention of the contract for the non breaching party, say, when he can’t reach the economic achievement that he pretended with the contract.

c. Fulfillment of the claimant. The one who exercises the action has to appear as trustworthy, independently of the attitude of the other party.