{"id":2129,"date":"2020-12-21T08:36:56","date_gmt":"2020-12-21T07:36:56","guid":{"rendered":"https:\/\/carlotagonzalez.com\/the-importance-of-knowing-who-you-are-contracting-with\/"},"modified":"2021-05-04T16:40:47","modified_gmt":"2021-05-04T14:40:47","slug":"prior-solvency-analysis-contract","status":"publish","type":"post","link":"https:\/\/carlotagonzalez.com\/en\/prior-solvency-analysis-contract\/","title":{"rendered":"The importance of knowing who you are contracting with"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"2129\" class=\"elementor elementor-2129 elementor-419\" data-elementor-settings=\"[]\">\n\t\t\t\t\t\t<div class=\"elementor-inner\">\n\t\t\t\t\t\t\t<div class=\"elementor-section-wrap\">\n\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-8791ed8 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"8791ed8\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-66ac47b\" data-id=\"66ac47b\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-2a16a1f elementor-widget elementor-widget-spacer\" data-id=\"2a16a1f\" data-element_type=\"widget\" data-widget_type=\"spacer.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-spacer\">\n\t\t\t<div class=\"elementor-spacer-inner\"><\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-0341fa0 elementor-widget elementor-widget-text-editor\" data-id=\"0341fa0\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\"><p>Before entering into any legal relationship, it is essential to conduct some degree of research into the party with whom you intend to contract. This is intended to prevent problems in the future, such as defaults or contractual breaches. Some simple, timely inquiries will allow you to take all the necessary precautions to protect your interests. The following steps are recommended for this type of investigation.<\/p>\n<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-8588efc elementor-widget elementor-widget-spacer\" data-id=\"8588efc\" data-element_type=\"widget\" data-widget_type=\"spacer.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-spacer\">\n\t\t\t<div class=\"elementor-spacer-inner\"><\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-677a1d4 elementor-widget elementor-widget-text-editor\" data-id=\"677a1d4\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\"><p>The cornerstone of any relationship is trust. From a purely legal perspective, the term closest to trust is good faith. They are closely linked concepts that involve remaining faithful to one&#8217;s word and maintaining the standards of honesty expected of any person engaged in a legal commercial transaction.<\/p>\n<p>According to Article 7 of the Spanish Civil Code (\u2018rights must be exercised in accordance with the requirements of good faith\u2019) and Article 1,258 of the Spanish Civil Code (\u2018contracts are concluded by mere consent and from that point they are binding, not only as to the performance of the matters explicitly agreed by the parties, but also as to all consequences which, by their nature, are in accordance with good faith, custom and the law\u2019 ), good faith is a guiding principle in contracts and legal transactions. It is the standard of conduct to be applied to the behaviour engaged in by subjects of law in bilateral relations.<\/p>\n<p>The expectation that the other party will act in good faith, together with the prospective benefits from the contractual relationship that can be obtained in the future, may result in failure to exercise a prudent level of caution. Do you really know who you are contracting with? The impression that you have formed of the other party may not accurately reflect essential aspects such as their equity and their economic and financial situation.<\/p>\n<p>It should be borne in mind that the rate of litigation in civil and commercial matters <a href=\"applewebdata:\/\/1753DB8B-E91E-49C9-B86A-057BF7ED3CB9#_top\">in Spain is twice the average of that in the European Union<\/a>. In the best case scenario, the average length of time for these proceedings <strong>is 8-10 months for the first instance <\/strong>but they may take longer due to the already strained court system (aggravated by the <a href=\"https:\/\/www.elmundo.es\/espana\/2020\/04\/13\/5e8b20a2fc6c8337188b4614.html\">delays caused by COVID- 19<\/a>).<\/p>\n<p>In addition, the desired outcome may not be achieved: even if a favourable judgment is obtained, if the counterparty is insolvent it will not be possible to recover the amount due or receive compensation. A simple assessment before the start of any legal relationship or even after signing a contract can save you a lot of trouble.<\/p>\n<p><strong>How to assess the other party&#8217;s situation<\/strong><\/p>\n<p>Carrying out a preventive assessment of the equity and financial situation of the person with whom you are considering entering into a legal relationship is much more common than it seems. However, this analysis <strong>can only be conducted with respect to legal persons<\/strong>, not with respect to natural persons, since personal data, including those related to their economic or financial situation, are not publicly accessible.<\/p>\n<p>The basic information about a legal person can be obtained from certain registries and official bodies that are publicly accessible, where you can obtain data such as:<\/p>\n<ul>\n<li>Who the company&#8217;s directors are.<\/li>\n<li>The assets that the company owns.<\/li>\n<li>If the company&#8217;s financial statements for the more recent period have been filed.<\/li>\n<li>The profits and losses and the situation reflected in the latest financial statements.<\/li>\n<li>If the company has links to other companies.<\/li>\n<li>If it has outstanding debts, liens or obligations.<\/li>\n<\/ul>\n<p>However, performing this task does not simply involve consulting the public records and obtaining the information: one must have the ability, knowledge and experience necessary to analyse it, <strong>interpret it and draw the relevant conclusions<\/strong>. That is why it is advisable to engage a legal professional to make these preventive assessments of the assets and the economic and financial situation of the counterparty.<\/p>\n<p>The quality and depth of an analysis by a professional will always be greater than that carried out by someone who is not used to this type of inquiry. Besides, the economic cost of a good analysis prior to entering into the legal relationship is not significant, compared with the problems that it can help prevent.<\/p>\n<p>It is more economical to pay a lawyer&#8217;s fees for a preliminary assessment\u00a0\u00a0\u00a0\u00a0 \u00a0than the time and costs involved in suing or prosecuting the other party in the event of a dispute!<\/p>\n<p><strong>When to make an assessment of the counterparty&#8217;s situation<\/strong><\/p>\n<p>The counterparty&#8217;s situation can be assessed at one of two times:<\/p>\n<ol>\n<li><strong>Prior to signing a contract or entering a legally binding agreement with another party.<\/strong> This gives you an idea of the business risks involved before making a decision to proceed. It also makes it possible to adopt additional safeguards if you are not clear about any particular points.<\/li>\n<li><strong>After signing the contract:<\/strong> in case of non-payment or any other problem, having the necessary information about the other party in advance allows you to act more quickly in order to defend your interests.<\/li>\n<\/ol>\n<p>Regardless of when the assessment is carried out, two scenarios are possible: the outcome may be positive, in which case everything is ok; or the outcome may be negative, in which case it may be advisable to either terminate the operation or take additional measures. Whatever the outcome, having assessed the other party&#8217;s situation has clear advantages.<\/p>\n<p>&nbsp;<\/p>\n<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-e8320a9 elementor-widget elementor-widget-text-editor\" data-id=\"e8320a9\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\"><table width=\"576\">\n<tbody>\n<tr>\n<td colspan=\"2\" width=\"288\"><strong>Favourable assessment<\/strong><\/td>\n<td colspan=\"2\" width=\"288\"><strong>Unfavourable assessment<\/strong><\/p>\n<p>&nbsp;<\/td>\n<\/tr>\n<tr>\n<td width=\"144\"><strong>Before signing the contract<\/strong><\/td>\n<td width=\"144\"><strong>Once the contract has been signed<\/strong><\/p>\n<p><strong>\u00a0<\/strong><\/td>\n<td width=\"144\"><strong>Before signing the contract<\/strong><\/td>\n<td width=\"144\"><strong>Once the contract has been signed<\/strong><\/p>\n<p><strong>\u00a0<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"144\">&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Provides peace of mind and confidence.<\/p>\n<p>&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 It allows you to focus on making your business successful.<\/p>\n<p><strong>\u00a0<\/strong><\/td>\n<td width=\"144\">&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 If a problem arises, knowing the creditworthiness and assets of the other party increases the chances of recovering the amount due or reaching a settlement.<\/p>\n<p>&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 As you have all the information available, you can promptly initiate legal action.<\/p>\n<p>&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Sometimes a mere legal threat is an effective way of putting pressure on the other party and letting them see that you know how to &#8216;launch an attack&#8217;.<\/p>\n<p>&nbsp;<\/td>\n<td width=\"144\">&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 You may wish to consider whether you are interested in pursuing the business further.<\/p>\n<p>&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 You may want to ask for additional assurances such as sureties or impose more restrictive clauses in the contract.<\/p>\n<p>&nbsp;<\/td>\n<td width=\"144\">&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 If a problem arises, you can assess whether you are more interested in filing a court claim or attempting to solve the problem by other means (for example, if the other party is insolvent).<\/p>\n<p>&#8211;\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 If you choose not to bring a court claim against the other party, knowing their solvency and assets gives you an advantage when negotiating a settlement.<\/p>\n<p>&nbsp;<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a39d8f7 elementor-widget elementor-widget-text-editor\" data-id=\"a39d8f7\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\"><p>Regardless of the scenario in which you finally find yourself, having analysed the equity of the other party and their economic and financial situation at the time of starting a legal relationship is always a recommended practice to use in order to protect your interests and prevent conflicts in the future. As us lawyers know, many stories about contractual relationships started off very well&#8230; but ended up like a soap opera!<\/p>\n<p><strong>Do you want to avoid problems like non-payments or contractual breaches? \u00a0<\/strong><u>\u00a0<strong>Contact me for legal advice<\/strong><\/u><strong><u>.<\/u> \u00a0<\/strong><\/p>\n<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-2033f69 elementor-widget elementor-widget-spacer\" data-id=\"2033f69\" data-element_type=\"widget\" data-widget_type=\"spacer.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-spacer\">\n\t\t\t<div class=\"elementor-spacer-inner\"><\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Are you going to start a business or legal relationship but want assurances? It is essential to make a prior assessment of the other party&#8217;s solvency and background.<\/p>\n","protected":false},"author":1,"featured_media":2513,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[28],"tags":[122,120,121,128,124,125,127,119,126,123,129,130],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v15.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The importance of knowing who you are contracting with - Carlota Gonz\u00e0lez<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/carlotagonzalez.com\/en\/prior-solvency-analysis-contract\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The importance of knowing who you are contracting with - Carlota Gonz\u00e0lez\" \/>\n<meta property=\"og:description\" content=\"Are you going to start a business or legal relationship but want assurances? 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