Contracts and the formalisation of a contract
A contract is an agreement reached through a mutual declaration of intention by the contracting parties, with the aim of bringing about some kind of a legal outcome. The contract consists in agreed-upon terms, from which the rights and obligations of the contracting parties follow.
The concept of contract is also related to the notion of freedom of contract, which above all means the freedom to choose what kind of a contract to enter into, with which content, with whom and in which form.
With a written contract, the contracting parties must sign the contractual documents with their own hand, unless otherwise specified by law (for example, the law might provide that only the obligated party must sign). The law might also set a form for the contract that enables written reproduction. In that case the contract must contain the names of the persons who have entered into the contract, but it need not be signed in person. In certain cases, mechanical imitation of a signature (e.g. a seal) is permitted, if it is in common use.
Electronic form has been equated with the written one, unless otherwise specified in the law. Electronic form means that the contract has been formalised in a manner that enables continuous reproduction, contains the names of the contracting parties, and has been signed electronically by them. It must be possible to match an electronic signature to the content of the contract, the contracting parties, and the time when the contract was entered into.
Contracts must include the following data:
- the time and place where the contract was entered into
- the contracting parties
- the object of the contract (the item to be purchased, the flat to be rented, the amount to be borrowed)
- the material value (the price of the item, the amount of the loan or salary) and the regulation of settlement (bank account numbers)
- the parties’ obligations (transferring the item, ensuring quality, receiving, payment)
- the term (for fulfilling the obligations, for the period of validity of the contract)
- sanctions in the event of a breach of contract
- final provisions, other conditions (entry into force of the contract, attached documents, applicable laws, the procedure for amendments and contestation)
- signatures of the parties.
The written form of a contract can be replaced by the notarised form (so-called weightier form). Notarial authentication means that the contract is formalised in writing and the signatures of the contracting parties are certified by a notary. The notarial authentication of a contract can be replaced with notarial certification, which means that in addition to the authenticity of the signatures the notary also checks the content of the contract and explains it to the parties. Notarial certification is necessary with all operations for which the law has set such a requirement.
Among other things, the following require notarial certification:
- all transfers of an immovable and operations of burdening an immovable with real right
- operations of transferring or pledging dwellings, summer-houses, other buildings or movables
- marital property contract
- memorandum of association or foundation resolution of a company
- transfer deed for a share of a private limited company
- agreement concerning assignment of the right of claim to unlawfully expropriated property.
When an oral agreement was reached by exchanging mutual declarations of intention and it was the wish of the parties to give the agreement a legally binding significance, it is considered an oral agreement. For example, if you buy bread from a shop, a sales contract has been entered into, even if the salesperson does not provide a receipt in exchange of the money paid. A lease contract, for instance, can also be entered into orally. However, not all agreements reached in the course of social discourse are legally binding. What makes an agreement a contract is precisely its legally guaranteed nature.
The law has not set the oral form as mandatory for any operation. The problem with oral agreements is that they are difficult to prove; hence, whenever possible, contracts should be entered into in writing.
Use of contracts
Contracts are used in both private law and public law (e.g. administration contracts). In private law, the most common contracts are those under the law of obligations, with which a person assumes the obligation to do something or to refrain from doing something and acquires the corresponding rights of claim toward the other party. A sale of contract is a typical contract under the law of obligations. Private law contracts are also used in property law (for example, creation, amendment or transfer of real rights), family law (e.g. a marital property contract between spouses), law of succession (e.g. succession contract), partnership law (e.g. memorandum of association into a society or an association).
As a general rule, the formal requirements to a contract that follow either from the law or from the mutual agreement of the parties also apply to agreements concerning securities (e.g. pledge, surety) and other accessory obligations (e.g. fine for delay). A contract entered into in the form provided by the law or mutually agreed upon can be changed only in the same form. If the form provided by the law or agreed upon is not followed, the contract is considered null and void. Notarial certification or authentication is not free of charge – the notary has the right to charge a fee for notarial acts in accordance with the legally established rates.
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