Real estate transactions can face complications that sometimes result in mutual breach in real estate purchase contracts by both parties involved. Recently, an important ruling by the Spanish Supreme Court clarified how to proceed when both parties fail to fulfill their contractual obligations.

What does a mutual breach in real estate purchase contracts imply?

In real estate purchase and sale contracts, it is essential to know the consequences of a mutual breach in real estate purchase contracts. A mutual breach is considered to exist when both parties frustrate the main objective of the contract, making it impossible to achieve the purposes initially proposed.

The recent judgment of the Supreme Court, dated March 4, 2025, details a significant case: both parties had simultaneously breached the conditions stipulated in a purchase contract. This bilateral breach led to the frustration of the contract, a situation in which neither party was able to benefit from the intended agreement.

When buying property in Spain, particularly in desirable locations like Málaga or Nerja, it is crucial to seek professional property legal advice in Spain. Working with experienced real estate lawyers in Spain helps to prevent common pitfalls, including disputes arising from a mutual breach of contract, which could complicate your real estate transaction.

Restitution of the price in cases of mutual breach.

In the absence of specific provisions in article 1124 of the Spanish Civil Code on the specific consequences of bilateral non-performance, i.e. by both parties, the Supreme Court applies article 1303 of the same code analogically. According to this interpretation, the legal effect is similar to that which occurs when there is nullity of the obligations: both parties must return what was received together with the corresponding fruits and interest.

In the case under analysis, the Court determined that neither of the parties was deserving of additional compensation, since both shared equally the responsibility for the frustration of the contract. However, restitution of the previously exchanged sums of money was considered essential.

This decision underlines the importance of having expert legal advice when entering into real estate contracts, especially when dealing with properties located in attractive markets such as Malaga and Nerja, where the values and economic risks are usually high, due to the amount of the properties.

The ruling of the Supreme Court clearly establishes the restitution of the price in case of Mutual Breach in Real Estate Purchase Contracts. Legal advice by expert lawyers in Real Estate Law is essential to avoid problems and ensure the best result in a real estate transaction. The Supreme Court ruling clearly establishes the restitution of the price in case of mutual default in sales and purchases.

Disputes involving a mutual breach of contract require detailed documentation and diligent legal strategy. Our Spanish property law experts are skilled at resolving complex real estate contract disputes in Spain, ensuring clients regain their investments efficiently, without unnecessary delays or costs.

How to protect yourself against a possible mutual breach?

To avoid adverse consequences in the real estate sale and purchase, it is essential:

• Thoroughly review the contract: Check that all clauses are clearly defined and contemplate possible scenarios of mutual breach.
• To carry out previous legal audits: To verify the legal situation of the property and the antecedents of the implied parts.
• To establish adequate economic guarantees: Contemplate mechanisms that ensure the return of the money delivered in case of contractual frustration.

Proper legal assistance for property purchase in Málaga can provide significant protection. Our team at Pérez Parras Economistas y Abogados specializes in real estate purchase agreements and property conveyancing in Spain, ensuring your transaction runs smoothly from start to finish. Should complications arise, understanding your rights regarding contract cancellation refunds becomes essential.

Effects of mutual breach in real estate purchase contracts: restitution of price

The sentence establishes three practical consequences:

1. Full restitution of the benefits. Buyer and seller must return to each other what was delivered (price, deposit, possession) with its fruits and interests. In the case analyzed, the return of €120,000 was ordered, divided 50/50, as no greater culpability was found in any of the parties.
2. Impossibility of claiming damages. Since there were symmetrical breaches, the basis for claiming additional damages disappears; the compensation is limited to “returning things to the previous state”.
3. Evidentiary value of the contractual behavior. The Supreme Court emphasizes that the party claiming a higher compensation must demonstrate a higher degree of diligence or an exclusive damage, which in practice makes it necessary to file mails, work certifications, proof of payment and any evidence that proves the effort to comply.

For those interested in buying property in Nerja and Malaga, our firm offers bilingual legal services, ensuring clear communication and complete understanding of every step involved in your property acquisition process. Trusting our specialists helps you navigate through any legal complexities seamlessly and confidently.

Good practices to avoid litigation in real estate sales and purchases.

In the light of the new doctrine, from Pérez Parras Economists and Lawyers we recommend:

• Exhaustive prior due diligence. Check registry charges, urban status and energy certifications before signing the private contract.
• Realistic and staggered schedule. Adjust the deadlines for handing over the keys or obtaining the first occupancy license to the reality of the town halls in the province of Malaga.
• Clear termination clauses. Establish what happens if the buyer does not obtain financing or if the seller does not provide the required documentation; specify the restitution of the price plus interest as a basic rule.
• Early mediation. At the first sign of delay, open a negotiation channel to avoid irreconcilable positions; an amicable agreement is usually quicker and less costly than litigation.
• Bilingual advice and procedural representation. Our team in Malaga city and Nerja offers assistance in Spanish, English, French and German, managing NIE, opening of accounts and powers of attorney so that the national and foreign investor can operate with total legal security.

For real estate transactions in Malaga and Andalusia, where urban development deadlines or banking procedures can be lengthy, this jurisprudential framework reinforces the advisability of establishing risk allocation clauses and of using escrow accounts that facilitate automatic restitution in the event of termination.

At Pérez Parras Economists and Lawyers we offer comprehensive advice specialized in real estate purchase and sale contracts. Our experience allows us to anticipate possible legal problems, helping our clients, both national and international, to protect their investment. If you are located in Malaga, Nerja, or any other part of the province of Malaga, our legal team is ready to offer you the specialized assistance you need. Visit our website for more information or contact our offices directly.

If you want to buy a property, business premises, building or parking, or sell a property in Malaga, and you want to avoid problems following the purchase of a property in Malaga, in the Law Firm Pérez Parras Economists and Lawyers in Málaga we are expert lawyers in the purchase and sale of properties in Malaga and Nerja, with a team of lawyers and economists bilingual English / Spanish who can advise you to avoid surprises in the purchase of your property. We have offices in the centre of Malaga and Nerja. Do not hesitate to contact us and ask us for a quote to accompany you in the process of buying or selling your property. We will prepare and review your earnest money contract after ensuring that the purchase you wish to make is viable and secure, without hidden charges of any kind, and we will help you and deal with all the taxes associated with your property purchase and sale operation in Málaga, optimising for example the IRPF to pay if the property comes from an inheritance, advising you until the end of your purchase, or sale of the property, including the tax declaration, whether you are resident or taxed as a non-resident, and any other procedure with the Administration or Land Registry. Equally, if you have any difficulties following the sale or purchase of a property, please do not hesitate to contact us so that we can advise you and defend you in or out of court if necessary. If you are a highly qualified professional in Malaga and wish to purchase your property in Malaga, we will also advise you in every step of the purchase process, ensuring that the property you wish to buy and the investment you wish to make will not cause you any problems, protecting your interests, organising your taxes and taxation as a highly qualified professional, so that you can develop your professional career and settle your life and your future in Malaga with all the guarantees of the best legal advice.