A private purchase contract (in Spanish: ‘Contrato de arras’) is a private contract between the buyer and seller prior to the final purchase of a property in Spain. In this contract, the parties set out the conditions under which the sale will be completed, and the buyer usually pays a sum as a deposit or ‘guarantee’.
Although it may be sometimes a relatively short document, it has significant legal consequences, especially if one of the parties decides not to proceed with the purchase or sale. It is therefore essential that this contract is drawn up correctly and that it clearly states the type of arras that applies.
WHY IS IT IMPORTANT TO SIGN A CONTRATO DE ARRAS?
The ‘Contrato de arras’ fulfils an important function in Spanish real estate practice:
• For the buyer: the property is effectively ‘reserved’ (the seller will not usually negotiate with other buyers), while the buyer is given time to arrange financing, documents and due diligence.
• For the seller: there is a clear confirmation of intent and an economic incentive for the buyer to take the purchase seriously.
In addition, the contract often sets out crucial agreements on deadlines, the final purchase price, the notarial transfer and the consequences of non-compliance.
LEGAL BASIS: ARTICLE 1454 OF THE SPANISH CIVIL CODE
In Spain, Article 1454 of the Civil Code (Código Civil) is particularly relevant. This article forms the legal basis for arras penitenciales (the most commonly used form in property transactions), whereby parties may, under certain conditions, withdraw from the purchase in exchange for a financial penalty:
• if the buyer withdraws: he loses the deposit
• if the seller withdraws: he pays back double
Important: Spanish case law applies a restrictive interpretation. If it is not clearly and unambiguously stated that it concerns arras penitenciales, arras are often interpreted as arras confirmatorias (a normal advance payment).
THE 3 TYPES OF “CONTRATO DE ARRAS” IN SPAIN (AND THE DIFFERENCES)
In practice, we distinguish between three main types of arras. Each type has different legal effects in the event of cancellation or non-performance.
- Arras penitenciales (penalty for withdrawal – Art. 1454 CC)
This is the most common type in real estate transactions.
• The buyer may withdraw from the purchase: he loses the deposit.
• The seller may withdraw from the sale: he pays back double.
This type therefore creates a contractual right to “terminate” with a predetermined financial consequence. 2) Arras confirmatorias (confirmatory deposit/advance payment) - Arras confirmatorias. In the case of arras confirmatorias, the deposit is usually an advance payment on the purchase price (a ‘señal’ or advance payment). There is no automatic right to cancel without reason.
If one party fails to comply, the general contract rules apply: the other party can usually demand compliance or termination and, depending on the circumstances, claim damages. - Arras penales (penalty clause for non-compliance)
Arras penales function as a kind of penal clause: a predetermined penalty for non-compliance.
• There is generally no right to free cancellation as with penitenciales.
• In the event of non-performance, the aggrieved party may claim the penalty and, in some cases, performance, depending on the wording of the contract.
This type is often treated legally as a penalty clause, not as an advance on the purchase price.
CONTRATO DE ARRAS VS. RESERVATION AGREEMENT: WHAT IS THE DIFFERENCE?
A reservation agreement is often used by estate agents or property developers to temporarily reserve a property in exchange for a payment.
The difference with a ‘Contrato de arras’ is that a reservation agreement is usually:
• less comprehensive,
• sometimes primarily a commercial agreement,
• and does not automatically have the same legal structure and legal consequences as a correctly drafted “contrato de arras”.
In practice, we recommend paying particular attention to:
• who receives the deposit (seller or agent),
• whether the deposit is refundable,
• and what legal consequences are stipulated in the event of cancellation.
WHAT SHOULD A GOOD ‘CONTRATO DE ARRAS’ CONTAIN? (CHECKLIST)
A legally correct contrato de arras usually contains at least:
- Identification of the parties (passport/NIE)
- Exact description of the property + references (land registry/registro)
- Purchase price and payment structure
- Amount of the arras (often 5–10%, but freely negotiable)
- Date or deadline for notarised signing
- Who pays which costs and taxes
- Statement of encumbrances (mortgage, seizure, etc.)
- Clear indication of the type of deposit (very important)
- Conditions (e.g. financing reservation, due diligence)
- Consequences of non-compliance or cancellation
CAN A CONTRATO DE ARRAS BE EXTENDED?
Yes. In Spain, it is customary for parties to sign an addendum or ‘supplement’ that:
• extends the term,
• includes the reason (e.g. bank delay, documents),
• and agrees on any additional conditions.
IS IT MANDATORY TO SIGN A CONTRATO DE ARRAS?
It is not legally mandatory, but it is strongly recommended. It is the most commonly used instrument to legally structure the period between agreement and notarial transfer.
Important: the contract itself is usually private. The notary usually only becomes involved when the final deed of sale (‘escritura pública de compraventa’) is drawn up. However, a correctly drawn up private deed is already legally binding.
CONCLUSION
A ‘Contrato de arras’ is an essential document in Spanish real estate transactions. It:
• confirms the intention of the buyer and seller,
• sets out conditions and deadlines,
• and determines the consequences in the event of cancellation or non-compliance.
Because the type of arras (penitenciales, confirmatorias or penales) has major legal consequences, it is wise to have the contract checked by a specialist property solicitor before signing. The case law is clear: if the contract does not explicitly refer to arras penitenciales, the arras can be interpreted as confirmatorias, which can lead to a completely different legal outcome.
At CPG Abogados, we are happy to help you draw up and review arras contracts and guide you through the entire purchase process.
Would you like advice? Feel free to contact us for personalised and expert legal advice.
