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Price Increases in Commercial Contracts in Spain

Table of contents
  1.  In respect of existing business-to-business (B2B) agreements that do not contain an explicit price adjustment clause:
    1. a. Is the supplier permitted to unilaterally increase prices (or does it have other rights regarding price increases)? If so, to what extent?
    2. b. Do (extreme) price increases give the customer the right to terminate the agreement? If so, are there any specific rules or regulations to comply with?
  2.  In respect of future B2B agreements:
    1. a. Is it permissible to include an explicit price adjustment clause in the agreement? If so, what price adjustment clauses typically exist in your jurisdiction?
    2. b. What legal issues need to be considered (if any) to ensure that the price adjustment clause is enforceable? Is there any key legislation or case law that parties should be aware of regarding enforceability of price adjustment clauses in your jurisdiction?
    3. c. Are there any other issues that parties should consider when formulating a price adjustment clause (e.g. any sector-specific regulation)?
  3. Do any additional considerations or rules apply to the inclusion of price adjustment clauses in business-to-consumer (B2C) agreements?
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1. In respect of existing business-to-business (B2B) agreements that do not contain an explicit price adjustment clause:

a. Is the supplier permitted to unilaterally increase prices (or does it have other rights regarding price increases)? If so, to what extent?

As a general rule, neither party is legally permitted to unilaterally modify any term or condition under an existing agreement. The Spanish Civil Code (Código Civil Español) foresees that the validity and performance of contracts cannot be left to the discretion of one of the contracting parties. 

The spirit of the rule is that the performance which the parties undertake to give, deliver or receive under a contract should be economically equivalent to the performance actually rendered. 

That said that, Spanish case law has in some cases applied rebus sic stantibus principles to adapt the price to be paid under certain agreements as a consequence of an extraordinary change in the circumstances considered for its subscription. This was especially the case during the COVID pandemic. 

b. Do (extreme) price increases give the customer the right to terminate the agreement? If so, are there any specific rules or regulations to comply with?

In principle, a unilateral increase in prices by the supplier will result in the customer having the right to terminate the agreement. This is based on the assumption that any unilateral amendment of the terms of an agreement is considered as an alteration of the circumstances of such agreement. This means that the consent from the party that suffers the price increase is not obtained for such price increase and, therefore, the agreement is voided and not valid. 

In such case, the undermined party will have the right to terminate the agreement early as soon as the price increase is communicated by the supplier. It is important to clarify whether the agreement foresees any kind of specific contractual requirements on termination, such as a pre-notice term to be observed, etc.

2. In respect of future B2B agreements:

a. Is it permissible to include an explicit price adjustment clause in the agreement? If so, what price adjustment clauses typically exist in your jurisdiction?

Yes, it is possible to include price adjustment clauses in B2B agreements. The general principle for B2B agreements is that the parties may agree whatever they deem convenient, to the extent that is not illegal (Autonomy of Will).  

For instance, escalation clauses are typically included in construction contracts where the increase of the materials or equipment could be significant. By virtue of these clauses, the supplier would have the opportunity to increase the price of the works in the ratio agreed. 

Further, it is also common to include in commercial agreements clauses for the review of the price. In this sense, the parties agree an indicative price that would be adjusted where certain circumstances arise. 

There is no specific regulation on price adjustment clauses in Spanish regulations. However, the Spanish Civil Code sets out the general principles applicable to contracts and obligations in Spain, which also apply to price revision clauses. Some of the relevant aspects of the Civil Code in relation to these clauses are as follows: 

  • Autonomy of will: Article 1255 of the Civil Code establishes the principle of autonomy of will, which allows the parties to freely agree on the terms and conditions of a contract, provided that they do not contravene the law, morality or public order. This implies that the parties may include price revision clauses in their contracts if they so agree. 
  • Performance of obligations: The Civil Code provides that the parties must perform the obligations they have assumed in the contract (Article 1091). Therefore, if a price revision clause has been agreed, the parties are obliged to adjust prices in accordance with the terms set out in the contract. 
  • Contractual good faith: The principle of contractual good faith, laid down in Article 1258 of the Civil Code, requires the parties to act in good faith in the conclusion and performance of contracts. This implies that the parties must act with honesty, transparency and loyalty in relation to price revision clauses, avoiding abuses or unfair behaviour

c. Are there any other issues that parties should consider when formulating a price adjustment clause (e.g. any sector-specific regulation)?

Certain sectors in Spain have specific regulations on this matter. For instance: 

  • Public Sector Contracts Act (Ley de Contratos del Sector Público): This law sets out the rules for public procurement in Spain. The LCSP contains specific provisions on price adjustment clauses in public procurement contracts, especially in relation to works, supply and service contracts. 
  • Building Regulations Law (Ley de Ordenación de la Edificación): This law regulates the legal regime of construction in Spain. This law establishes specific provisions on price revision clauses in construction and works contracts, especially in relation to long-term contracts. 

For public sector contracts, there are special requirements for price adjustments due to raw material price increases. Please refer to our CMS Expert Guide on rising raw material prices. 

3. Do any additional considerations or rules apply to the inclusion of price adjustment clauses in business-to-consumer (B2C) agreements?

Yes, the General Law for the Defence of Consumers and Users (Ley de Consumidores y Usuarios) establishes the rights and obligations of consumers in Spain. This law contains relevant provisions on contractual clauses in general, including price adjustment clauses.  

The following are some important aspects of the General Law for the Defence of Consumers and Users in relation to price adjustment clauses: 

  • Transparency and good faith: The General Law for the Defence of Consumers and Users states that contractual clauses, including price adjustment clauses, must be clear, understandable and transparent for consumers. The clauses must be drafted in a legible and accessible manner, avoiding confusing or ambiguous terms. In addition, the parties must act in good faith in the execution of the clauses and respect the balance of rights and obligations. 
  • No unfair tying: The General Law for the Defence of Consumers and Users prohibits contractual terms that impose a disproportionate burden on consumers or limit their rights in a manner contrary to good faith and fairness. This implies that price adjustment clauses must not be unfair or generate a significant imbalance to the detriment of the consumer. 
  • Prior information and notification: The law provides that consumers have the right to receive clear and complete information on price adjustment clauses prior to the conclusion of the contract. Businesses must also notify the consumer of any change in prices in accordance with the adjustment clause, within a reasonable time and in an understandable manner. 
  • Right of withdrawal: For certain distance or off-premises contracts, consumers have the right to withdraw from the contract within a certain period of time. However, this right may be limited or excluded in contracts for the supply of goods or services whose price is subject to financial market fluctuations. 

It is important to note that the application of the LGDCU and its provisions on price adjustment clauses may vary depending on the type of contract, the specific circumstances and the applicable sectoral legislation.