In short.
- Under Spanish law, contractual liability arises from failing to perform an agreed obligation (article 1101 of the Civil Code); extra-contractual (tort) liability arises from causing damage to a third party, with no prior contract, through fault or negligence (article 1902), and it extends to the company for damage caused by its employees (article 1903).
- The distinction is not academic: it changes the time limit for claiming against you —under the Civil Code, one year from when the injured party became aware in tort (article 1968(2)) against five years in contract where no special period applies (article 1964(2), following Law 42/2015)— and in Catalonia the periods are three and ten years (articles 121-21(d) and 121-20 of the Catalan Civil Code).
- Liability insurance covers the obligation to compensate "in accordance with the law" (article 73 of the Insurance Contract Act), but each policy defines which liabilities it takes on: general liability is built around third-party (tort) damage, while pure economic loss and contractually assumed liability require express review (professional indemnity, extensions or limits).
Under Spanish law, tort liability and contractual liability can arise from the same event. Take an illustrative example: an installation contractor that floods its client's premises while fitting equipment is liable to that client in contract; if the water also reaches the neighbouring shop, that damage is extra-contractual. One incident, two regimes, two time limits and, often, two different responses from the policy.
The classification is no textbook nicety: it decides how long a claimant has to bring a claim, what must be proven and whether your insurance programme responds.
What is extra-contractual (tort) liability?
It is the obligation to make good damage caused to someone with whom there was no prior contractual relationship. Its basis is article 1902 of the Spanish Civil Code (Código Civil), and it requires four elements: an act or omission, fault or negligence, damage, and a causal link between them.
In the life of a company it arises more often than one might think. Some illustrative cases:
- A component falls from scaffolding onto the public highway and injures a passer-by.
- An accidental spill contaminates neighbouring land.
- An employee driving for the company damages a third party's property during a delivery.
In none of them is there a contract with the injured party. Extra-contractual civil liability is, precisely, the liability that arises from the general duty not to harm others.
Article 1903: the company answers for its employees
Liability is not confined to one's own acts. Article 1903 of the Civil Code provides that the owners or managers of an establishment or business are liable for the harm caused by their employees "in the service of the branches in which they employed them, or in the course of their duties" (our translation).
The final paragraph of the same article provides the way out: liability ceases where it is proven that all the diligence of a buen padre de familia (the Spanish standard of the reasonably prudent person) was exercised to prevent the damage. In practice, the burden of that proof falls on the company. Where contractors and subcontractors are involved, matters become more complex; we cover this in detail in principal contractor liability.
Article 1902 of the Spanish Civil Code in practice
The text is brief: "Whoever, by act or omission, causes damage to another, through fault or negligence, is obliged to make good the damage caused" (our translation).
That sentence tells us what the injured party must establish: that the company acted (or failed to act) with fault or negligence, that it suffered actual damage, and that the damage was caused by that conduct. If any of the three is missing, the claim fails.
One nuance: in high-risk activities, the courts have tended to require a heightened standard of diligence. This does not turn the liability into strict liability, but it narrows the room for defence of anyone operating heavy machinery, construction works or industrial processes.
The Civil Code itself sets out specific cases of liability of the owner: article 1908 mentions, among others, the explosion of machinery not maintained with due diligence, excessive smoke harmful to persons or property, and emanations from sewers or deposits of infectious matter. Some of these cases, such as excessive smoke, have been interpreted as instances of liability close to strict liability.
Article 1101 of the Spanish Civil Code: contractual liability
Contractual liability arises where there is a contract and one of the parties fails to perform it. Article 1101 of the Civil Code requires those who, in performing their obligations, incur wilful misconduct (dolo), negligence or delay, and those who in any way contravene their terms, to compensate the resulting loss and damage.
The Code regulates the rest of the regime in detail:
- Diligence and exemption: the diligence required is that demanded by the nature of the obligation (failing which, that of a buen padre de familia), and no one is liable for unforeseeable or unavoidable events unless the law or the obligation provides otherwise (articles 1104 and 1105).
- What is compensated: actual loss (daño emergente) and loss of profit (lucro cesante) (article 1106). A debtor acting in good faith is liable for the damage foreseen or foreseeable when the obligation was created; where there is wilful misconduct, for all damage known to derive from the breach (article 1107).
- Moderation: the courts may moderate liability arising from negligence according to the circumstances (article 1103).
Illustrative business cases: a late delivery that brings the client's production line to a halt; failure to meet an agreed service level (SLA); a defect in completed works.
Limitation of liability clauses in contracts
Business-to-business contracts commonly limit the parties' liability: caps by amount, exclusion of loss of profit, contractual claim periods. There is one boundary no clause can cross: liability for wilful misconduct is enforceable in all obligations, and any waiver of the action to enforce it is void (article 1102). Beyond that, the validity and scope of each clause require legal review of the specific contract.
What is the difference between contractual and tort liability?
The underlying difference is the origin: a broken agreement as against damage with no prior agreement. The other differences follow from it.
| Contractual | Extra-contractual (tort) | |
|---|---|---|
| Origin | Breach of an agreed obligation | Damage to a third party with no prior relationship |
| Legal basis | Article 1101 et seq. of the Civil Code | Article 1902 et seq. of the Civil Code |
| What the injured party proves | The contract, the breach and the damage | Fault, damage and the causal link |
| Time limit (Spanish Civil Code) | 5 years, unless a special period applies (article 1964(2)) | 1 year from awareness (article 1968(2)) |
| Time limit (Catalan Civil Code) | 10 years generally (article 121-20); claims for payment for services and works, 3 years (article 121-21(b)) | 3 years (article 121-21(d)) |
| Extent of damages | Actual loss and loss of profit; foreseeable loss where in good faith (articles 1106-1107) | Reparation of the damage caused |
| Policy that usually responds | Depends on the wording; liability agreed beyond the law is usually excluded | General liability (public, employers', products) |
The grey area: one event, two routes
It is not always clear where one ends and the other begins. Consider damage caused to the other party to the contract but unrelated to what was agreed: for example, physical injury to one of the client's employees while your company is providing a service. There is a contract, but the damage has nothing to do with what was agreed.
The courts have accepted in certain cases that the injured party may choose the route, or that both may apply concurrently, particularly where the harmful act breaches both the contract and the general duty not to cause harm. This is not an automatic rule: the classification depends on the facts and requires legal analysis of the case.
Strict liability: when fault need not be proven
Under strict liability, a party is liable for the risk it creates, without the injured party having to prove fault or negligence. Some examples grounded in specific legislation:
- Motor vehicle use. The driver is liable "by virtue of the risk created by driving" (our translation). For personal injury, the driver is exempt only by proving that it was due solely to the fault of the injured party or to force majeure unconnected with the driving or the operation of the vehicle (vehicle defects and the breakage of its parts do not count as force majeure). For damage to property, the law refers to articles 1902 et seq. of the Civil Code (Royal Legislative Decree 8/2004, article 1.1, as worded by Law 5/2025). This is relevant to companies with fleets.
- Environmental damage. For the activities listed in Annex III of Law 26/2007 on Environmental Liability, the law applies "even where there is no wilful misconduct, fault or negligence" (our translation), and presumes the causal link unless proven otherwise (article 3.1). This is liability towards the public authorities for restoring the environment: personal injury, damage to private property and economic losses of private parties fall outside this law and are claimed through the civil courts (article 5.1). We develop this in environmental liability insurance and on the environmental liability cover page.
- Defective products. The manufacturer is subject to a special regime, which we explain in product liability.
Strict liability and fault-based liability
| Fault-based liability | Strict liability |
|---|---|
| Based on fault or negligence | Based on the risk created |
| The general rule (articles 1902 and 1101 of the Civil Code) | The exception: only where a law establishes it |
| The injured party proves fault | The injured party need not prove fault |
Strict liability exists only where a law establishes it; it is not extended by analogy to every hazardous activity. For risk management, under those regimes the question is rarely whether the company will be liable, but how much: the focus shifts to sizing the limits.
Pure economic loss: the damage that breaks nothing
Pure economic loss is a financial loss that does not result from prior personal injury or property damage. Two illustrative examples: an erroneous technical report that leads the client into a failed investment, or a supply interruption caused to a third party without any physical damage to its property.
Precision matters here: the Spanish Civil Code does not define this category. It is an insurance market concept, and its working definition lies in the wording of each policy, which may vary.
The key distinction is with consequential loss: the loss of profit that derives from covered property damage or personal injury (the factory that stops producing because your company damaged one of its machines). General liability usually covers consequential loss and excludes or sub-limits pure economic loss. Professional indemnity, by contrast, is built precisely around the financial loss caused by a professional error; we explain this in professional indemnity for engineering and consulting firms and on the professional indemnity insurance cover page.
Does your company provide technical or advisory services? We review whether your programme covers financial loss to your clients.
How long does a claimant have? Limitation after Law 42/2015
The limitation period is the difference with the greatest practical consequences.
- Tort (Spanish Civil Code): obligations arising from the fault or negligence of article 1902 are time-barred after one year from when the injured party became aware (article 1968(2)).
- Contract (Spanish Civil Code): personal actions with no special period are time-barred five years from when performance of the obligation could be demanded; for continuing obligations to do or refrain from doing something, the period starts afresh with each breach (article 1964(2)). This is the wording introduced by Law 42/2015, in force since 7 October 2015; previously the period was fifteen years.
- Recovery of fees and services (Spanish Civil Code): three years in the cases listed in article 1967 (professional fees, services, supplies), counted from when the services ceased to be provided; where the claim does not fit those cases, five years (article 1964(2)).
For actions that arose before 7 October 2015, the fifth transitional provision of Law 42/2015 refers to article 1939 of the Civil Code. Today this is a residual scenario.
Under the Civil Code, limitation is interrupted by bringing the action before the courts, by an out-of-court claim by the creditor, and by any acknowledgement of the debt by the debtor (article 1973).
In Catalonia, different periods
Where the relationship is governed by the Civil Code of Catalonia (Codi civil de Catalunya), the periods change: tort liability is time-barred after three years (article 121-21(d)); claims for payment for services and the execution of works, also after three years (article 121-21(b)); and the general period is ten years (article 121-20). For Catalan companies, or those with Catalan counterparties, determining which law applies is a preliminary legal question that should not be taken for granted. The Civil Code of Catalonia also has its own rules on the interruption of limitation.
Special statutes set their own periods. We summarise those of the insurance contract in the Insurance Contract Act, and those of the administrative route in contractor liability towards the public authorities.
Which policy responds to each type of liability?
The starting point is article 73 of Law 50/1980 on Insurance Contracts (Ley de Contrato de Seguro, LCS): liability insurance covers the obligation to compensate a third party for loss and damage caused by an event provided for in the contract "for whose consequences the insured is civilly liable, in accordance with the law" (our translation).
The law draws no distinction between contractual and tort liability. The policy does, through its sections, definitions and exclusions. An indicative map, always subject to the policy wording:
| Policy or section | What it usually responds to |
|---|---|
| Public liability | Third-party (tort) damage caused by the business activity |
| Employers' liability | Claims by the company's own employees for accidents at work |
| Products and completed operations liability | Damage caused by products delivered or work completed |
| Professional indemnity | Financial loss caused by a professional error |
| D&O | Directors' liability for their management |
| Surety insurance | Performance of obligations towards a beneficiary (not a liability policy) |
To see how these covers fit together, we explain it in types of company liability, and the integrated cover in liability insurance for companies.
One exclusion bears directly on contractual liability: that of liability assumed under contract beyond what the law imposes. Penalties, performance guarantees or agreed indemnities usually fall outside the cover, depending on the policy wording. We develop this in common exclusions in liability policies.
That is why, before signing a contract with indemnity clauses, it is advisable to check it against the policy. Finally, the injured party has a direct action against the insurer (article 76 LCS); we explain it in the article on the Insurance Contract Act.
Before you sign a contract with indemnities or penalties, we check its clauses against your liability policy.
The role of an independent broker
Many cover gaps lie not in the policy but in the contracts the company signs afterwards. As an independent brokerage, we act on the client's mandate, not the insurer's: we review your relevant contracts against your liability programme, identify contractually assumed liability that is not insured, and coordinate general liability, professional indemnity and directors' and officers' cover so that economic loss does not fall into no man's land.
We review your liability programme with no obligation: which liabilities you assume by contract, which your policy covers and where the gaps lie. Talk to us.
Frequently asked questions
How long does a third party have to bring a tort claim against my company? Under the Spanish Civil Code, one year from when the injured party became aware of the damage (article 1968(2)). Where the Civil Code of Catalonia applies, three years (article 121-21(d)). Some special statutes set different periods.
Can a client bring a tort claim against us if we have a contract? The rule is that what was agreed is claimed in contract. Where the damage is unrelated to what was agreed, the courts have accepted in certain cases that the injured party may choose the route or that both may apply concurrently. It is a question that requires analysis of the specific case.
Does my liability insurance cover the penalties I accepted in a contract? Usually not, to the extent that they exceed the liability the law would impose on you. It depends on the wording of your policy, so it is advisable to review it before signing.
What is the difference between pure economic loss and consequential loss? Consequential loss is the financial loss that derives from prior personal injury or property damage, such as the loss of profit of a factory whose machine was damaged. Pure economic loss is financial loss with no such damage behind it. The Spanish Civil Code does not define this distinction: its scope is set by the wording of each policy.
In which cases is a company liable even without fault? Only where a law establishes strict liability. For example: the use of motor vehicles (for personal injury), environmental damage from the activities in Annex III of Law 26/2007, or defective products. These are examples, not an exhaustive list.
Sources and legislation
- Spanish Civil Code, articles 1101 to 1107, 1902, 1903, 1908, 1939, 1964, 1967, 1968 and 1973 (consolidated text).
- Law 42/2015, amending the Civil Procedure Act: first final provision (new wording of article 1964 of the Civil Code) and fifth transitional provision.
- Law 29/2002, first law of the Civil Code of Catalonia (DOGC no. 3798, 13/01/2003), articles 121-20 and 121-21. The BOE states that its consolidation is not up to date; the text of articles 121-20 and 121-21 remains unchanged since its original wording.
- Law 50/1980 on Insurance Contracts, articles 73 and 76.
- Royal Legislative Decree 8/2004, consolidated text of the Act on civil liability and insurance in the use of motor vehicles, article 1.1 (as worded by Law 5/2025 of 24 July, in force since 26/07/2025).
- Law 26/2007 on Environmental Liability, articles 3.1 and 5.1.
All sources consulted on 12 October 2026.
The classification of a liability as contractual or extra-contractual, and the applicable time limit, depend on the facts and on the applicable law (Spanish state law or Catalan law); this guide describes the general framework and is no substitute for legal analysis of a specific case. The business cases are illustrative. Covers, limits and exclusions are governed in every case by the specific terms of each policy. This information is for guidance only and does not constitute legal or binding advice. New Brokers Correduría de Seguros, S.L., registered with the DGSFP under reference J0140.
