Total Breach and Defective Performance (Misconduct in Spanish Law)

Total Breach and Defective Performance are two types of misconduct as a part of one contract. Total Breach and Defective Performance are a result of failing to perform obligations or failing to fulfil obligations to an agreed standard under a contract. These two types of misconduct are differentiated due to the quantity and quality of the failure of the debtor’s obligations and the extent of the creditor’s dissatisfaction.

In Spain, the Civil Code states that misconduct occurs when there is any violation of the contract and this will result in compensation for the damages. Therefore, it is crucial to decide if the party (either creditor or debtor) who failed to perform the obligation should have to compensate for their misconduct and to what extent.

Different kinds of misconduct:

Total Breach

• Total Breach – a contract is breached when either one or both parties fail to perform and cannot perform in the future as promised in the contract.
• Examples of actions that would lead to a total breach:
  • If one party sells the promised goods to a different customer and therefore cannot fulfil their obligations in the contract with a creditor who is no longer interested in the transaction.
  • If one party (the debtor) pretends to deliver the promised goods which results in a delay of the obligations and a breach of the promised terms of the contract, which were essential for the creditor.
  • If the promised goods of the contract became unobtainable/lost or the performance becomes impossible to fulfil, as a way of extinguishing the obligations.
  • Even if the performance is still possible and the creditor is still interested but it is clear that the debtor is either not going to fulfil their obligations, has expressed a will of misconducting or it is clear from the debtor’s acts, this situation would lead to a total breach.

Defective Performance

• Defective Performance – a contract would lead to detective performance if the obligations are not carried out adequately to what the parties agreed; but rather in a defective or partial way. Usually, the debtor has carried out certain acts to perform the obligations however these acts do not fulfil the performance agreed.
• In these contracts, a creditor can refuse to accept the debtor’s acts and refuse incomplete payment if they are not what was agreed by the parties in the agreement. Therefore, it is clear that the creditor can refuse a defective performance if it does not fulfil their aim in the contract. In the case of defective performance, the creditor can ask for a return of their money or for the performance to be redone to what the parties agreed. Alternatively, the creditor also has the option to terminate the contract if the defective performance is important or to refuse to perform/uphold their part of the contract until the debtor has performed his obligations correctly.
• Breach of misconduct is summarised in Article 1101 of the Spanish Civil Code, which states that ‘persons who, in the performance of their obligations, should incur in wilfull misconduct, negligence or default, and those who should breach the content of the obligations in any way shall be subject to compensation of any damages caused.’