Contract Review Before Signing

When signing a commercial contract, business owners usually focus on the price, deadlines and main terms of cooperation. However, clauses hidden in the fine print or worded too vaguely can lead to financial losses and legal disputes.

For example, a contract may include automatic renewal, substantial penalties for early termination or unlimited liability for one of the parties.

A professional contract review helps identify these risks before signing and negotiate terms that protect your company’s interests.

Here are the key provisions to examine when reviewing a commercial contract in Spain.

What Should You Check in a Contract?

Contracting Parties and Their Authority

The first step is to verify the details of the contracting parties and the authority of the individuals signing the agreement.

When dealing with a Spanish company, it is important to confirm that its representative is legally authorised to act on the company’s behalf. Otherwise, disputes over the validity or enforcement of the contract may arise.

Obligations and Performance Deadlines

A contract should clearly define the goods, services or work to be provided, their scope and the deadlines for completion.

Ambiguous wording deserves particular attention. For example, requiring a contractor to perform “all necessary additional work” without defining its scope or cost can lead to disagreements.

The agreement should also establish how completed work will be accepted and what happens if deadlines are missed.

Clearly defined obligations make it easier to establish whether a contract has been fulfilled or breached.

Price and Payment Terms

Beyond the total contract value, it is important to review payment deadlines, advance payments, additional expenses and price adjustment clauses.

Particular attention should be paid to provisions allowing one party to change prices unilaterally.

In Spain, specific rules apply to commercial transactions between businesses and self-employed professionals. If no payment period is agreed, payment is generally due within 30 calendar days after goods are received or services are provided. Contractual payment periods generally cannot exceed 60 calendar days.

A lawyer will also review late payment penalties and the possibility of claiming interest.

Penalties and Liability for Breach of Contract

Commercial agreements often include penalty clauses (cláusulas penales) for delays, contractual breaches or early termination.

Before signing, it is important to establish:

• Which breaches trigger penalties, and how are they calculated?
• Can the other party claim additional damages?
• Does the agreement limit either party’s liability?
• Are the consequences of a breach balanced between the parties?

For example, a contract may impose a minor charge for late payment but a substantial penalty for delays in completing work.

Spanish law allows courts to reduce contractual penalties in certain circumstances. However, businesses should not assume that every excessive penalty will automatically be reduced.

Contract Duration and Termination

Termination conditions can be just as important as the original contract price.

Before signing, check whether the agreement renews automatically, how much notice is required to terminate it and which obligations remain after termination.

Long-term contracts with significant early termination penalties require particular attention.

It is also essential to clarify what happens to advance payments, completed work and delivered materials if the agreement ends earlier than expected.

Which Contract Clauses Should Raise Concerns?

A lawyer should carefully examine provisions that could significantly restrict one party’s rights or create unexpected financial obligations.

Potential warning signs include:

• Unilateral changes to essential contract terms.
• Unlimited liability for the other party’s losses.
• Automatic renewal without clear cancellation conditions.
• Disproportionate penalties for minor breaches.
• Unclear criteria for completing and accepting work.
• References to appendices or additional terms that have not been provided.

Dispute resolution clauses also deserve attention, especially in contracts with foreign companies.

It is important to establish which country’s law governs the agreement, where disputes will be resolved and what legal costs may arise.

Such clauses are not necessarily unlawful, but they can create significant risks and should be assessed before signing.

Practical Example: How Unfavourable Terms Can Increase Costs

Imagine a Spanish company preparing to sign a marketing services agreement worth €24,000 per year.

The main conditions appear reasonable: the price, services and contract duration have been agreed.

However, a legal review reveals that the contract automatically renews for another year unless the client gives at least three months’ notice.

Early termination also carries a substantial penalty, while the agreement provides no clear criteria for assessing service quality.

As a result, the company could remain tied to an expensive contract even if the services fail to meet its expectations.

A lawyer may recommend changing the renewal conditions, introducing measurable service standards and renegotiating the termination clauses.

These changes can help prevent financial losses and disputes before they arise.

Legal Contract Review in Spain with Lusa Legal

Reviewing a commercial contract before signing helps businesses understand their obligations, identify unfavourable terms and reduce financial risks.

Lusa Legal is a Barcelona-based law firm with over 20 years of experience assisting international clients.

Our lawyers review commercial agreements, assess legal risks, recommend changes to problematic clauses and assist with contract negotiations.

Learn more about our legal support for businesses through Lusa Legal’s corporate law services.

Planning to sign a commercial contract in Spain? Contact Lusa Legal for a professional contract review. Our team can help identify potential risks and protect your interests before you commit to an agreement.