What is a deposit contract?
A deposit contract (contrato de arras) is a private agreement made before the sale and purchase of an asset, usually a property, under which the buyer pays the seller a sum of money as a sign of commitment. It serves as a guarantee that both parties intend to complete the transaction on the agreed terms.
This contract can be converted into a public document by means of a notarial deed, providing greater legal certainty.
When is it signed and what is its purpose?
- It is formalised before the final public deed of sale is signed.
- Its purpose is to reserve the property, set out the essential terms (price, deadlines, etc.) and establish the consequences in the event of a breach.
- A deposit contract can take different forms depending on the legal effect sought: confirmatory, penitential (withdrawal) or penalty deposits.
What does it involve at a notary's office?
- Formal draftingThe notary can draft or review the deposit contract to ensure it is lawful and clear.
- Impartial adviceThe notary informs the parties of the legal consequences of each type of deposit.
- Notarisation (elevación a público)If desired, the contract can be incorporated into a public deed (escritura pública), giving it legal force against third parties.
- Safekeeping of the documentThe notarial deed guarantees the authenticity, integrity and preservation of the agreement.
Most common types of deposit
- Confirmatory deposit (arras confirmatorias)Simply an advance payment on the price. In the event of a breach, either performance of the contract or its termination with compensation may be demanded.
- Penitential deposit (arras penitenciales, art. 1454 of the Civil Code)Allows either party to withdraw from the contract, with the buyer forfeiting the deposit or the seller returning double the amount.
- Penalty deposit (arras penales)As well as confirming the reservation, it establishes a penalty in the event of a breach.
Minimum content of a deposit contract
- Identification of the buyer and seller.
- Description of the property (e.g. home, commercial premises, plot of land).
- Total price and amount paid as a deposit.
- Deadlines for signing the final deed.
- Type of deposit and consequences of a breach.
Main legal effects
- Binding commitmentThe parties are obliged to complete the sale within the agreed period.
- Clear consequences in the event of a breachDepending on the type of deposit, the deposit is forfeited, returned doubled, or compensation may be claimed.
- Registry protectionIf converted into a public deed, it has effect against third parties (not compulsory, but recommended).
Advantages of executing it at a notary's office
- Legal certaintyThe notary guarantees that the contract is lawful and faithfully reflects the wishes of the parties.
- TransparencyPrevents unfair or poorly drafted clauses.
- Dispute preventionA notarial deed can prevent future litigation arising from ambiguous interpretations.
- Documentary evidenceA public deed carries greater evidential weight in the event of a dispute.