Work commissioned without a valid contract: what the contractor can recover from the public authority
Irregular procurement by public authorities, in particular through oral commissions or contracts that are void for breach of the procurement rules, raises a classic conflict between the prohibition of contracting outside the law and the need to prevent the unjust enrichment of a public authority that has received and taken the benefit of the works or services. The judgment of the Third Chamber of the “Tribunal Supremo”, Spain's Supreme Court, of 15 June 2026, Fourth Section, cassation appeal 9117/2024, sets precise limits on the compensation available in such cases: the contractor may recover the actual cost of the works or services, including any value added tax —the Spanish “Impuesto sobre el Valor Añadido”, or IVA— which it has been unable to recover, but not the overheads (“gastos generales”) or the profit mark-up (“beneficio industrial”) proper to a validly awarded contract. Moreover, the late-payment interest regime of Law 3/2004 on combating late payment in commercial transactions does not apply automatically; what applies is the statutory interest laid down in the “Ley General Presupuestaria”, Spain's General Budget Act. The question is of particular relevance for local-authority contractors and public bodies which, in practice, continue to receive work without proper contractual cover.