Contracts and Legal Advisory

A good share of files begins with one missing sentence in a two-page contract signed years earlier. Once a dispute has broken out, what can be done has limits; at the drafting stage the room to act is far wider. The costliest part of a contract is usually not what it says but what it never says: what happens if delivery is late, how the contract ends if one side cannot perform, and which court will hear a dispute.

Contract work Drafting, revising, reviewing a text sent by the other side and reporting the risks in it, taking part in negotiations, preparing supplementary protocols and addenda. A review looks first at whether the obligations are defined clearly, then at the payment terms, the default and termination clauses, the limitations of liability, the agreement on evidence, and the jurisdiction and arbitration clauses.

Contract types worked on most often Sale, service and works contracts; leases; dealership and distributorship agreements; confidentiality and non-compete agreements; partnership, share transfer and shareholders' agreements; subcontracting and supply agreements; licence and software development agreements.

Penalty clauses A penalty clause is one of the most practical provisions in a contract, because it removes the creditor's burden of proving loss. Its type has to be chosen with care, though. A penalty attached to performance allows both the principal obligation and the penalty to be claimed, whereas under an alternative penalty the creditor may claim only one of the two. A judge may reduce a penalty found excessive without being asked; for merchants that possibility is considerably narrower. Penalty amounts in commercial contracts should therefore be set on a realistic footing at the signing stage.

Impossibility of performance and adaptation Where performance becomes impossible for a later reason the debtor is not answerable for, the obligation ends and whatever was received from the other side is returned. If the impossibility already existed when the contract was made, the contract is as a rule void from the start. Where performance has become harder but not impossible, adaptation comes into play: if an extraordinary situation unforeseen by the parties has arisen since the contract was made, that situation did not stem from the debtor, and the balance between the obligations has been upset to a degree the debtor cannot be expected to bear, the court may be asked to adapt the contract to the new conditions, or, where that is not possible, to allow withdrawal from it. In practice adaptation claims are read narrowly, and not every price rise counts as a ground for adaptation.

General terms and conditions Provisions drafted unilaterally in advance for use in a large number of similar contracts are treated as unwritten where they damage the rule of good faith to the detriment of the other party. The same result applies to provisions that are foreign to the nature of the contract or that come as a surprise. Being printed on a standard form is not enough on its own; what matters is whether the provision was genuinely negotiated.

Ongoing advisory work Answering a business's day-to-day legal questions, preparing formal notices and correspondence, checking business processes against current legislation, reviewing employment contracts and internal regulations, and assessing obligations on the protection of personal data together with information notices and retention periods.

Assessment before a dispute Reviewing the state of the evidence and the possible outcomes before a claim is filed; exploring mediation and settlement, and deciding whether protective steps such as an interim injunction or the preservation of evidence are needed.

Frequently asked questions

Does a contract have to be in writing? Unless the law provides otherwise, contracts are not subject to any particular form, and an oral agreement is valid. For some contracts, however, official form or writing is a condition of validity: the sale of immovable property, a promise to sell immovable property, flat-for-land construction contracts, marriage agreements and promises of gift are among them. Failing to observe the required form makes the contract void from the outset. In other cases writing is needed not for validity but for proof.

Do I have to send a formal notice? Not always, but many rights can be exercised only after a proper notification. Placing the other side in default, allowing a period for performance, and declarations of termination or withdrawal usually require written notice. A formal notice sent through a notary (ihtarname) is preferred because it proves both the content of the notification and the date it arrived. Where the contract sets out its own notification procedure, that must be followed first.

What is the limitation period for contractual claims? Unless the law provides another period, the general limitation period is ten years. For periodic or particular kinds of claim, such as rent, employee wages, agency and commission fees, income from independent professional work, and accommodation and transport charges, the period is five years. Limitation is raised as a defence; the court does not take it into account of its own motion.

Can an excessive penalty clause be reduced? The judge is obliged to reduce a penalty clause found excessive, and no separate request is needed. Merchants, by contrast, cannot as a rule ask for a reduction of a penalty they accepted in connection with their commercial enterprise on the ground that it is excessive. Once the penalty has been paid, the possibility of asking for a reduction also falls away.

If the other side is not complying, can I terminate straight away? As a rule, no. In contracts involving continuing obligations, unless there is just cause, the other side must first be given a reasonable period to meet its obligation. If that period passes without result, one of three routes is chosen: performance in kind, withdrawal from the contract, or compensation. The situations where no period need be allowed are set out separately in the law. A termination made too early can put the terminating party in the wrong.

Can a jurisdiction clause be put in any contract? No. A jurisdiction agreement can be made only between merchants or public legal entities, in writing, and specifying the legal relationship the dispute arises from. Where those conditions are met, the chosen court as a rule acquires exclusive jurisdiction. Clauses of this kind are not valid in contracts made with consumers or with employees.

Time limits and procedures

• General limitation period: ten years for claims arising from a contract.
• Five-year limitation period: rent, wages, agency and commission claims, periodic obligations and similar items.
• Defects under a works contract: two years in general; longer periods run for building works, and the period is extended considerably where the contractor is grossly at fault.
• Excessive hardship in performance (adaptation): not tied to any particular forfeiture period; but where the obligation is performed in full without a reservation, a claim for adaptation will as a rule not be heard.
• Defects in consent (mistake, deceit, duress): must be raised within one year of learning of the situation, or of the effect of the duress ending.
• Commercial disputes: mediation is a procedural precondition for claims for payment of a sum of money, whether by way of debt or compensation.
• Competent court: depending on the nature of the dispute, the civil court of first instance or the commercial court of first instance; the consumer court where one party is a consumer, and the labour court where the dispute arises from an employment relationship.
• Court with jurisdiction: as a rule the domicile of the defendant; for claims arising from a contract, the court of the place of performance may also be chosen. Where a valid jurisdiction or arbitration clause exists, that applies first.

In contract disputes the outcome takes shape according to the wording of the text, the correspondence between the parties, commercial usage and the court's interpretation. No undertaking as to result can be given at any stage.