Kinds of “arras” covenant in the private purchase-sale agreement

The “arras” is a crucial part of the procedure of sale or purchase of a property. Other names given to arras are earnest money agreement or deposit agreement.

It is a covenant included in the private purchase-sale agreement with the payment of “arras”, for which the buyer gives a percentage of the price to the seller on account for the future purchase of the property. Depending on the kind of “arras” agreed, the withdrawal of the agreement will entail a series of consequences for the parties.

In other articles of the blog we have talked about the procedure to make a purchase or sale of a property.

What are the “arras”?

First, during the phase of the private purchase-sale agreement with delivery of arras, or more commonly known as “arras”, they state the agreements of the parties in a private document with regard to the procedure of purchase-sale  and the problems this particular case shall have for you. Therefore, it is a crucial procedure and, in many occasions, one of the most difficult times of all the transaction, because it is at this moment when the parties have to reach an agreement.

Within the agreement or private document of purchase-sale with delivery of arras, we can find the covenant or “pacto de las arras“, also known as “the sum of the repentance” or “penitential fine”.

This covenant is stated by the Civil Code and the Civil Code of Catalunya as a covenant by which the buyer delivers to the seller a certain amount of money (in practice a 10% is established, though the law does no set any particular percentage) in proof of his future acqusition, this in such a way that the parties can ever withdraw the agreement assuming certain consequences, which will vary depending on the kind of arras agreed.

What kind of arras are there?

For this reason, we shall briefly explain the most common kinds of arras:

1. Confirmatory arras:

   The purpose is to confirm and give a certain amount on account for the future purchase. Therefore, its purpose is only that the purchaser gives a sum of the price on advance. In case the seller does not fulfill the agreement, he must return the amount received and to compensate the purchaser for remedies.

2. Criminal / penal arras:

   Criminal arras are set to guarantee the withdrawal of the agreement, adding a covenant to the private purchase-sale agreement which establishes an economic sanction in case any of the parties withdraws it. Its configuration will vary depending on each asumption.

3. Penitential arras:

   These arras have to be expressly agreed as such. They enable to the parties to withdraw the agreement, but assuming as a consequence that the purchaser will loose the sum delivered and that the seller shall have to return the doble of the sum he received.

Depending on your case, your lawyer shall advice you on the one which best benefits or best suits you.