CIVIL AND COMMERCIAL LAW CIRCULAR 11/2026 · 23 SEPTEMBER 2026
Supreme Court (Tribunal Supremo) Judgment No. 1204/2026 of 17 July. Sale of future property. Allocation of risk.
Javier Condomines Concellón, Jorge Sánchez Rodríguez, Luigi Chicco
We believe a recent Supreme Court (Tribunal Supremo) judgment may be of interest. It resolves a dispute over the sale of land carrying certain development rights. Those rights were affected when the urban planning instrument on which they were based was later annulled.
The case provides an opportunity to comment on an issue of particular practical relevance: how risk is allocated when the subject matter of a transaction depends on an external factor (in this case, an administrative act).
Facts:
A foundation sold certain plots of land to a property development company under a private contract. At that time the land was classified as non-developable, because the new General Urban Plan that would change that classification had not yet been approved.
Once the new Plan was in force, the parties formalised the sale in a public deed. The deed identified the development rights transferred under the approved Plan.
However, the Plan was later annulled with retroactive effect by a final judgment of the contentious-administrative courts. The planning instrument approved to replace it met the same fate, as it was also annulled on procedural grounds. As a result, the land reverted to non-developable status.
The developer sued the foundation. Its primary claim was termination of the contract for lack of subject matter. In the alternative, it sought termination for breach of the obligation to deliver, supervening impossibility, mistake vitiating consent and frustration of the sale of future property. It also claimed repayment of the price paid.
The Court of First Instance dismissed the claim. It held that the subject matter of the contract was clearly defined. There had been no mistake or failure to deliver, since the seller transferred the property with the development rights in force at the time of the deed. Nor was there any supervening impossibility or frustration of purpose, because the buyer, as a professional developer, knew of the pending appeals against the Plan and had assumed that risk.
The Provincial Court of Appeal reversed that judgment, upheld the appeal and ordered the foundation to repay the price received. It found that this was a sale of future property. Since the annulment of the Plan had retroactively eliminated the development rights, the court held that the seller had breached its obligation to deliver.
The Supreme Court found in favour of the foundation. It set aside the Provincial Court’s judgment, upheld the judgment of the Court of First Instance and dismissed the buyer’s claim.
Supreme Court:
The Supreme Court considers that, when the public deed was executed, the General Plan had been approved and the development rights sold existed and were enforceable. The seller therefore fulfilled its obligation to deliver at that time. The court annulled the Plan years later, and that annulment does not make non-existent something that did exist and was delivered at the time. It is a supervening event, not an original failure to deliver. In the words of the Supreme Court:
La declaración de nulidad de los planes de ordenación urbana podría tener exclusivamente alguna significación como causa sobrevenida que afectara a la distribución del riesgo contractual asumido por las partes contratantes. Pero debemos observar que la nulidad del plan no fue algo que sobrevino de manera imprevisible tras el contrato. Cuando se otorgó la escritura ya se habían interpuesto los recursos que acabaron dando lugar a la declaración de nulidad y no resulta creíble el desconocimiento de este hecho por parte de la recurrida.
In other words, the risk that the Plan would be annulled was foreseeable, because the appeals against it had already been filed when the deed was signed. That risk must therefore be borne by the buyer, a professional property developer.
In this case, the Supreme Court does not dispute that the development rights did in fact come into existence. Instead, it places the risk of their later loss, once the sale had been completed, on the party that was in a position to know about and assess the litigation over the Plan, as a professional developer. The general rule in Spanish law of obligations is that, unless otherwise agreed, a debtor who has performed is not liable for risks arising after performance. Shifting that risk to the seller would have required an express clause to that effect, and the parties agreed no such clause.
Access the full text of the judgment: https://www.poderjudicial.es/search/AN/openDocument/dbc6a27ea8c2586ba0a8778d75e36f0d/20260803
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