Contracts, obligations

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Purchase contract

All of us encounter a purchase contract almost every day, whether we buy groceries in a shop, a ticket at a train station or coffee in a vending machine. A purchase contract is a contractual legal relationship in which the seller undertakes to hand over the object of purchase to the buyer and enable the buyer to acquire ownership of it, and the buyer, on the other hand, undertakes to take over the object and pay the seller the purchase price. It is regulated mainly by the Civil Code, although the provisions of the Consumer Protection Act must also be considered. If one of the parties (typically the buyer) is a consumer, the contract must also respect the limits set out in the general provisions on obligations to protect consumers (see also Distance contracts). In general, a purchase contract can be concluded in oral form. However, a written form is always required if a right in rem to immovable property is transferred.

Every purchase contract must contain:

Definition of the object of purchase

  • Purchase price or at least the method of its calculation (if not, then the usual price; there must always be obvious consideration)
  • Obligation to enable the acquisition of ownership and hand over the object of purchase

Lease agreement

A lease agreement is surely familiar to some of you as well. The essence of a lease agreement is the lessor’s obligation to let the lessee use the property temporarily and the lessee’s obligation to pay the lessor rent in return. If the lessor agrees, the lessee may sublease the leased asset to a third party. Then it is called a sublease. The Civil Code regulates both lease agreements in general and special cases of lease, such as the lease of an apartment, the lease of business premises and the lease of movable property, which have their own legal specifics (e.g. possibilities of termination of the lease agreement, rights and obligations of the lessee and the lessor, etc.). A lease agreement can also be concluded orally, although it is recommended to enter into it in writing. However, with the exception of the lease of an apartment, for which a written form is always required.

Every lease agreement must contain:

  • Definition of the leased asset
  • Obligation to let the lessee use the leased asset temporarily for the agreed purpose or for the usual purpose
  • Arrangement on the price of the lease, i.e. the rent (if no payment is agreed for the use of the leased asset, it is no longer a lease, but either a precarium or a loan for use)

Contract for work

Under a contract for work, the contractor undertakes to perform a work for the client at its own expense and risk, and the client undertakes to take over the work and pay the agreed price for it. A work is to be understood as the making of a particular thing which is not subject to a purchase contract, as well as maintenance, repair or alteration of a thing, or an activity with any other result. This contract can also be concluded orally, although we strongly advise against it (the specification of the work is particularly important). The price of the work may be determined as a fixed amount, by reference to a budget or even by an estimate. The selected method affects the possibility of adjusting the price if the work required more effort or costs that the contractor did not foresee. For example, if the price is set by a budget and the contractor requests an increase of more than 10%, the client is entitled to withdraw from the contract.

Every contract for work must contain:

  • Definition of the subject-matter of the contract for work (i.e. the work)
  • Arrangement on the price for the work (if not, then the usual price)

The work is executed if it is completed, i.e. its fitness for the designated purpose is demonstrated and the work is handed over to the client. The client takes over the work with or without reservations, which affects, in particular, whether the court will grant the right arising from an apparent defect if the contractor argues that the right was not exercised in time. If the work does not conform to the contract, it is therefore defective and the client has rights arising from defective performance. For this reason, the proper specification of the subject-matter of the work must be laid down when concluding a contract for work.

The Civil Code also separately regulates some specifics when the subject-matter of the work is construction. These specifics include, for example, the inspection of construction works or liability for defects (e.g. the impossibility of refusing to accept the construction for minor defects or the five-year limit for claiming construction defects).

Contract of donation

A contract of donation is a type of contract under which the donor voluntarily and gratuitously transfers the ownership right to a particular item to the donee, who accepts the donation. A contract of donation does not require a written form, with one exception: if the item is registered in a public register (e.g. real estate). Donations are subject to the old rule “don’t look a gift horse in the mouth”, meaning that if the donation is defective, the donee has no right to have the defects removed or be otherwise compensated. However, if the donor knew that the item had defects and did not notify the donee of them, the donor is liable to the donee for the damage resulting therefrom (e.g. if he donates a sick horse, he is liable for the damage caused by other horses in the stable falling ill).

Every contract of donation must contain:

  • Donated item
  • Obligation to enable the acquisition of ownership and to hand over the donation
  • Gratuitousness and voluntariness

Nevertheless, the donation is not irrevocable as the donation can be revoked under the circumstances provided by the law, either due to the destitution of the donor, who lacks the means for the necessary subsistence of himself or his children, or due to the ingratitude of the donee, who has harmed the donor or a close relative of the donor intentionally or through gross negligence in clear violation of good morals. The law also regulates a “promise to make a donation”. Those who promise to donate but eventually change their minds do not have to donate, but they must compensate for the cost incurred by the donee in anticipation of the donation (e.g. renting a garage or a parking spot for the donated car).

Loan agreement

A loan agreement (according to the statutory terminology of the Civil Code, this refers to a loan for consumption) is a type of contract under which the lender undertakes to hand over a fungible thing (most frequently money) to the borrower and the borrower undertakes to return the same kind of thing to the lender over time.  The agreement may be concluded without or with consideration if interest is agreed upon. However, these are not to be confused with statutory default interest, which accrues if the loan is not returned in time. It should be noted that the loan agreement is a real contract, meaning that it is only concluded when the loaned items are actually handed over. A written form is not required for a loan agreement.

Contract of mandate

A contract of mandate is the basic type of mandate-type contract (other mandate-type contracts expressly regulated by the Civil Code include a brokerage contract, a commission contract, an agency contract, etc.), under which the mandatary undertakes to arrange a matter for the mandator. Unlike other types of mandate-type contracts, the contract of mandate is the only contract that can be concluded without consideration. By means of a mandate, the mandatary undertakes to perform a certain activity for the mandator, whether an actual activity (e.g. mowing the garden) or an activity consisting in a legal act (e.g. representation by a lawyer). However, the mandatary is not liable for the result of his activities, in which case it would rather constitute a contract for work. Nevertheless, the mandatary is liable to execute the mandate in person, dutifully and diligently to the best of his abilities and to follow the mandator’s instructions in arranging the matter. A contract of mandate is informal and is not required in writing.

Conclusion

In practice, we often encounter clients who go before court to resolve disputes arising from the above contracts that could have been easily avoided at the outset by setting appropriate contractual arrangements, had they turned to us or another expert to draft them. In order to save money, many people download a model contract online, modify it on their own and sign it in this form with the other party. These commonly available templates do not guarantee correctness and up-to-dateness and are also very universal, i.e. they do not take into account the variability of contractual relations and are thus not tailored to the specific parties and their needs. We also deal with clients in our practice who, when negotiating contractual terms without the assistance of an expert, accepted the other party’s contractual proposal without realising that such a proposal is very disadvantageous and risky for them. In most cases, it is cheaper to seek the paid assistance of a legal expert at the beginning than to try to enforce one’s contractual rights in court later on with uncertain prospects of success. It is therefore always better to have the contract drafted by an expert or at least consult the contract and have it reviewed by an expert as they can point out many problematic aspects of the contract and you can easily avoid potential future disputes.

What issues do we typically handle for clients in relation to contracts and obligations?

  • How to draw up a purchase contract?
  • How to draw up a lease agreement?
  • Termination of a lease agreement
  • Legal opinion on concluded contracts
  • Recoverability of a security deposit paid upon signing a lease agreement
  • Contracts for the purchase of real estate
  • How to draw up a contract for work?
  • How to draw up a contract of donation?
  • How to draw up a loan agreement?
  • How to draw up a contract of mandate?
  • How and under what circumstances can one withdraw from the contract?
  • What to do if an obligation under a contract has been breached?
  • In which cases is the oral form of a contract sufficient?
  • Contracts concluded via e-mail
  • ​Types of contracts – purchase contract, lease agreement, contract for work, contract of donation, loan agreement, contract of mandate, etc.