Business Debt

Filed under : Civil Law, Litigation

Prevention is better than cure, as De Cotta Law explains…

Owning, running and managing a business in Spain during the Covid crisis has been a challenge. Unpaid invoices and accounts can cause immediate cash flow problems and build up longer term issues for both small and large companies.

One of the best ways of preventing this from happening is having correctly drafted payment terms, together with proper contractual agreements with your clients and customers. Some agreements don’t correctly define the company or provider and they are therefore difficult to enforce if you have a problem with an account.

For both parties the certainty of knowing payment terms and having copies of invoices and facturas is far better than having to go to court to make a claim. A Spanish lawyer can study the documentation you give to clients to ensure any agreement or contract can be enforced. This applies to everybody from estate agents to hotel owners and a good set of customer or client documents makes it less likely that problems will occur.

Spanish courts do have an accelerated procedure for monetary claims and something similar to a UK summary judgement can be obtained that can be enforced against the debtor if they do not contest it. Normally the first step is for a ‘burofax’ to be sent to the debtor demanding payment within a fixed number of days. If there is no response then a claim can be made. You will have to pay court costs, procurator fees and legal fees. However if you are successful some of the costs can be recovered from the other party.

For claims above 3.000€ it is normally necessary to commence a civil claim rather than just a ‘small claim’. This does involve extra costs and we normally recommend undertaking a property or asset search to see if you are likely to be able to recover the debt. Each case should be decided on its merits so it is wise to get legal advice both prior to entering into contracts and payment terms with your clients.

For more information or to book a consultation please contact De Cotta Law on [email protected] or call on +34 952 527014 or for our Tenerife office email [email protected] or call on +34 922 719520