The resolutory condition is a guarantee of the fulfilment by the buyer of his duty to pay, in those contracts of sale with deferred payment. The parties agree that failure to pay the price, or any of its terms, will result in the full resolution of the purchase contract.
The resolution condition obliges the mutual restitution of the property and the price paid in case of failure to pay. Although the seller cannot automatically terminate the sale, but must obtain, after a notary or judicial request for payment to the buyer, a judicial decision declaring the termination of the contract.
This covenant, known as the “comisorio pact” -confiscatory covenant- allows that, in the event of default by the debtor, the creditor can proceed to the confiscation or direct and immediate appropriation of the related property as a guarantee of compliance with the obligation.
If the resolutory condition is inscribed in the Land Registry, through a marginal note, it also has effects on a third party.
The non-fulfilment in the real estate sale (CC art.1504) is different from the generic contractual breach (CC art.1124), being a prerequisite for the first one the judicial or the notary request of payment, in order to execute the resolution or termination of the contract; until the payment request is notified, the debtor can pay the debt.
For this reason, it seems that the breach in the real estate purchase is softer than in the general case, when authorizing to pay even if the term has expired until the request is executed in due form; But once the request has been made, the default on the purchase of real estate is more severe, since it determines the resolution, without admitting justificatory causes and expressly prohibiting the grant of a new term to fulfil the obligation.
1.- Application of the express resolution condition
a. Must be a contract for the sale of real estate with deferred payments.
b. The buyer defaults the payment within the agreed term. The default can be total or partial.
c. A buyer’s will to resist compliance is sufficient to frustrate the economic purpose of the contract.
d. The buyer must be judicially or notarially requested to pay. It must be a resolutory requirement, in which the seller notifies to the buyer his will to terminate the contract, for non-payment within the agreed term. A requirement that contains a simple claim for payment is not sufficient. If the requirement is deemed resolutory, the payment that the buyer intends to make will be out of time and may be rejected by the seller. However, if the seller accepts the payment, the requirement will lose its effectiveness. If the requirement has been limited to a simple claim of the price, the subsequent payment made by the buyer will prevent the exercise of the resolutory action.
Art.1504 of the Spanish Civil Code does not admit freedom of form for the resolutory request, but requires one of these two forms:
A. Judicial. It may take place in the document issued by the court summoning the buyer to a preliminar hearinf of conciliation, in the civil action or the counterclaim.
B. Notarial. The omission, in the notarial requirement, of the notarial custom of granting the debtor a term of grace or courtesy does not impede the effectiveness of the resolutory action.
Therefore, if the price is not paid in the agreed term, the seller who imposed the condition in the guarantee of the payment can initiate the resolution of the sale. The termination of the sale contract damages any third party acquirer only if the resolutory condition is registered in the Property Registry. If so, it implies the cancellation of the seats for the subsequent purchasers.
2.- Breach of the resolutory condition.
For the cancellation of the buyer’s right and re-registration of the right for the seller, the seller must submit to the Registry:
A. The judicial or notarial notice of being declared resolved the sale.
B. The seller’s title, in which the Registrar will note the new registration in his favour.
C. The document justifying the consignment of the quantities to be returned by the seller to the buyer, deducting any deductions that may be applicable.
D. In the absence of a judicial decision, the request for resolution, without any opposition of the buyer, within the legal term of reply to the notification made by the seller.
3.- Compliance with the condition through full payment.
Once the entire price is paid, the guarantee is extinguished and must be cancelled at the Land Registry through a marginal note, using one of the following procedures:
a. By means of “payment letter” granted in a public deed by the seller, in which he consents to the cancellation of the guarantee.
b. By the end of the period for the seller to exercise the resolutory power, without exercising it, a period agreed in the public deed of purchase.
c. By means of a file releasing the levies that have been prescribed according to the civil legislation, according to the date that was registered in the Property Registry.
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