Commercial Contracts: Every Commercial Relationship with the Protection It Deserves

Commercial contracts in Spain are governed primarily by the Spanish Commercial Code (Código de Comercio) and the Civil Code (Código Civil), supplemented by sector-specific legislation such as the Agency Agreement Law (Ley 12/1992), the Retail Trade Law (Ley 7/1996), and EU regulations on consumer protection and unfair commercial practices. Key contract types — distribution, agency, franchise, joint venture, and SaaS agreements — each carry specific legal requirements regarding exclusivity, termination indemnities, post-contractual non-compete obligations, and governing law under Regulation (EC) 593/2008 (Rome I). Deficiencies in commercial contracts are the leading cause of business litigation in Spain.

Most commercial disputes that end in litigation share a common cause: a contract that did not anticipate what has happened. Distributors who leave and take the client portfolio with them, joint venture partners who interpret control clauses in opposite ways, technology providers who invoke liability limitations the client never read. A well-drafted contract does not prevent every problem, but it determines who has legal standing when the problem occurs.

The real cost of a poorly drafted contract

A deficient contract costs nothing until the day it costs everything. The most frequent scenarios we manage:

An exclusive distributor who has worked with a brand for ten years decides to change supplier. The contract had no minimum targets clause, no post-contractual non-compete clause, and no provision governing the client portfolio at the end of the relationship. The distributor leaves with the clients they built on the manufacturer’s brand. Result: ten years of channel investment lost with no compensation.

A Spanish company enters a joint venture with a foreign partner to develop a market together. After two years, strategic disagreements make the relationship unworkable. The contract had no exit mechanisms or share valuation methodology. The dissolution process lasts three years and consumes management resources the company cannot afford.

A SaaS provider signs a contract without a liability limitation with a significantly sized client. A four-hour availability incident generates a damages claim equivalent to ten times the annual contract value. Without the liability cap, the cost of defending the claim and the risk of an adverse judgment are real.

These are not extraordinary cases. They are the predictable result of operating with standard contracts or generic templates in commercial relationships with specific risks that deserve specific clauses.

Types of commercial contracts every company needs

Each commercial relationship has its own legal logic and its own critical clauses. The contracts we most frequently draft and the points that generate the most conflict when not properly addressed:

Distribution and agency agreements. The most important clause in a distribution contract is not the price: it is who retains the clients when the relationship ends. The Commercial Agency Act (Ley 12/1992) establishes a goodwill indemnity for the agent when the relationship terminates, if they have generated new clients or increased operations with existing ones. That indemnity can be significant. Anticipating it in the contract — not eliminating it, which is not possible, but regulating it — is a strategic decision.

Franchise agreements. Royal Decree 201/2010 requires the franchisor to deliver the Documento de Información Precontractual (DIP — pre-contractual disclosure document) at least 20 days before signing. Non-compliance can render the contract void. Registration in the ROESGF is mandatory before commencing any franchise activity. The contract must also regulate use of the brand, the operations manual, entry fees and royalties, territory and exclusivity, and the quality control protocol.

Joint ventures and UTEs. In a corporate joint venture, the shareholders’ agreement is as important as the articles of association. Governance clauses (quorum, majority required for strategic decisions), exit clauses (drag-along, tag-along, right of first refusal), and share valuation methodology in the event of disagreement are the three areas that generate the most conflict when not properly regulated.

Supply contracts. Long-term supply contracts need price review clauses (price adjustment clauses linked to indices such as the CPI or raw material costs), well-defined force majeure clauses (the pandemic demonstrated that the definition matters), and delivery delay penalties that are reasonable and enforceable.

General terms and conditions. Law 7/1998 on General Contract Terms (LCGC) establishes incorporation, interpretation, and content review requirements that many companies fail to meet. A clause that does not pass the incorporation test — because the adhering party was not aware of it before signing — is void even if the contract as a whole is valid. Unfair clauses in consumer contracts are subject to a specific regime under Royal Legislative Decree 1/2007 (TRLGCU).

International contracts: governing law, jurisdiction, and INCOTERMS

In contracts between parties from different countries, three decisions determine the legal framework of the relationship: the law applicable to the contract, the forum for resolving disputes, and — in the sale of goods — the INCOTERMS that govern the allocation of logistics risks and costs.

Governing law. The Rome I Regulation (EC 593/2008) allows the parties to freely choose the law governing the contract, subject to the public policy rules of the court’s country. If there is no express choice, Rome I assigns the law of the country of habitual residence of the provider of the characteristic performance. In consumer contracts, the protection of the consumer’s country of residence cannot be removed by a contrary choice of law.

Jurisdiction and arbitration. For relationships between EU companies, the Brussels I Recast Regulation (1215/2012) recognises express choice of jurisdiction clauses in favour of the courts of a member state. For non-EU relationships, an arbitration clause under the ICC, LCIA, or CAM rules guarantees enforceability of the award in more than 160 countries that are signatories to the New York Convention. The choice between jurisdiction and arbitration depends on multiple factors: expected dispute value, confidentiality, the need for interim measures, and the profile of the other party.

INCOTERMS 2020. INCOTERMS are not mandatory, but they are the global standard for delimiting where the risk in the goods transfers, who arranges insurance, and who pays for transport at each stage. The difference between EXW, FCA, CIF, and DDP is not just logistical: it is a legal and economic decision that directly affects who bears the loss if something happens during transport. Many international sale contracts reproduce an INCOTERM without understanding its actual consequences.

In distribution or agency contracts with international scope, the interaction between Directive 86/653/EEC (commercial agency) — transposed in Spain as Law 12/1992 — and the law of the agent’s country can generate goodwill indemnities higher than anticipated. We advise on these implications before signing.

Technology contracts: SaaS, licences, and bespoke development

Technology contracts have their own specific characteristics that generic contracts do not adequately address. The critical points that most frequently generate conflict:

Intellectual property. In bespoke software development contracts, the default rule under the consolidated text of the Intellectual Property Act (TRLPI) is that the exploitation rights belong to the author (the developer), unless otherwise agreed. If the client wants to own what they commission and pay for, this must be expressly agreed. The rights assignment clause must specify the modality (exclusive or non-exclusive), the territorial scope, the duration, and the sublicensing conditions.

Liability limitation. In SaaS and technology services contracts, limiting liability to the total fees paid in the preceding twelve months is the market standard. Without it, a security or availability incident can generate a claim for direct and indirect damages entirely disproportionate to the value of the service. The other party may negotiate it, but the provider must start from that position.

SLAs and consequences. An SLA (Service Level Agreement) without binding consequences is marketing, not a legal commitment. SLA clauses must precisely define the availability calculation window, the exclusions (scheduled maintenance, force majeure, client errors), the claims mechanism, and the applicable credits or discounts. A 99.9% availability level implies a maximum of 8.76 hours of downtime per year: many companies do not calculate what that means for their operations.

GDPR and subprocessing. When the SaaS provider processes the client’s personal data, they are a data processor within the meaning of Article 28 of the GDPR. The service contract must include — or be accompanied by — a Data Processing Agreement (DPA) specifying the controller’s instructions, security measures, subprocessing conditions, and the protocol in the event of a data breach. The absence of this agreement is a direct GDPR infringement that can result in fines for both parties.

Termination conditions. SaaS contracts must clearly regulate the consequences of service termination: the data portability period, the available export format, the maximum timeframe for data return or destruction, and the prior suspension conditions for non-payment. A suspension without adequate notice can expose the provider to liability if the client suffers direct operational damage.

The drafting of technology contracts in the area of intellectual property and their coordination with data protection obligations are two areas where separation between legal departments creates the most gaps. Our team covers both dimensions on an integrated basis.