Contract
A contract is the agreement of wills between two or more contracting parties. According to the provisions of Article 26 of the Law on Obligations (hereinafter referred to as the ZOO), a contract is concluded when the contracting parties have agreed on the essential components of the contract. For the formation and legal effects of a contract, it is necessary to fulfill certain conditions regarding the ability to contract, agreement of wills, subject matter and grounds, but often also the form of the contract. Depending on the seriousness of the contract and the contracting party, the contracting process itself may consist of several stages: negotiations, pre-contract and finally the conclusion of the contract. Although these stages are not mandatory, in some contracts, such as, for example, a contract for the sale of real estate, in practice they have become necessary.
Stages in the contracting process
Stage I – Negotiations. As for the negotiations themselves, they do not pose a major problem in practice, since they can, generally without consequences, be completed either successfully – by moving on to the next phase, or unsuccessfully – when the legal transaction is abandoned. Therefore, the rule is that “Negotiations preceding the conclusion of a contract are not binding and each party may terminate them at any time” (Article 30, paragraph 1 of the ZOO). However, even here the institute of compensation for damages may be applied if it is established that one party entered into negotiations without a real intention to conclude a contract (Article 30, paragraph 2 of the ZOO) and thereby caused damage to the other party or conducted negotiations with the intention of concluding a contract, and then abandoned that intention without a valid reason and thereby caused damage to the other party (Article 30, paragraph 3 of the ZOO). Therefore, since no agreement has been reached on the essential elements of the contract at the negotiation stage, negotiations themselves do not bind and cannot force the conclusion of a contract, but they can force compensation for damages if they were incurred by one party because the other party did not intend to conclude a contract or unreasonably abandoned that intention.
Example. Person A and person B bet that person A’s weekend house outside the city can be sold within a month and advertise the sale in the newspaper. Person C, as an interested buyer, responds to the advertisement and arranges a meeting with person A to negotiate the purchase and sale. Person C is ready to buy the weekend house in a short time, but person A gives up further negotiations. However, person C incurred certain expenses due to these negotiations: fuel costs for the trip to the weekend house and back and lost earnings for one working day because he had to be absent from work due to the negotiations. Therefore, person C incurred real expenses and person A did not have a real intention for the negotiations to succeed or for the purchase and sale contract to be concluded. In this case, person C can sue to claim compensation for the damage he suffered due to the lack of real intention of person A to sell the cottage.
When the negotiation process is successfully completed, the next phase can be completed, the conclusion of a preliminary contract or the contract itself.
Phase II – Preliminary contract. As mentioned, more serious contracts also require going through the preliminary contract conclusion phase.
A preliminary contract also represents the consent of the contracting parties. However, a preliminary contract does not mean the conclusion of the main contract, but rather the consent of the parties to assume the obligation to conclude the main contract within a certain period. The conclusion of a preliminary contract most often occurs in situations where, for some reason, all the conditions for concluding the main contract have not been met.
Characteristics of a preliminary contract
An important characteristic of a preliminary contract is that it must contain all the essential elements of the main contract. Also, the form of the preliminary contract follows the form of the contract, and if a special form is required for the main contract, the same form must be observed when concluding the preliminary contract: “The regulations on the form of the main contract also apply to the preliminary contract, if the prescribed form is a condition for the validity of the contract” (Article 45, paragraph 2 of the ZOO).
The conclusion of the preliminary contract obliges the conclusion of the main contract
A preliminary contract, unlike negotiations, as mentioned, obliges the parties to conclude the main contract – the rule pacta sunt servanda (a contract is the law for the parties, who are obliged to fulfill their obligations in the manner specified by the contract and who are responsible for fulfilling their obligations). However, it is only exceptionally possible that, if after concluding the preliminary contract, the circumstances change so much that the preliminary contract itself would not have been concluded if the circumstances as such existed at the time of its conclusion and which could not have been foreseen, there will be no obligation to conclude the main contract – the rebus sic stantibus clause (changed circumstances).
A preliminary contract, although its name suggests otherwise, is actually a contract. The parties are obliged by this contract to conclude a (main) contract. Therefore, the contractual obligation of the contracting parties is to conclude a contract, and not to hand over the goods and pay the price as in the main contract. It is precisely this obligation to conclude a contract that protects the conscientious party from the withdrawal of the other party.
Deadline for concluding a main contract and court judgment
The law stipulates that the conclusion of a main contract may be requested within 6 months of the expiry of the deadline set for concluding the main contract, or, if a certified copy of the real estate transaction contract to the competent authority in accordance with Article 4v of this Law;
2) fails to submit a signed statement with attached documents to the Republic Property Directorate of the Republic of Serbia, or to the competent authority of an autonomous province or local self-government unit in accordance with Article 13, paragraph 4 of this Law;
3) fails to submit a copy of the contract to the competent attorney-at-law in accordance with Article 14, paragraph 1 of this Law.
V TRANSITIONAL AND FINAL PROVISIONS
Article 16
In the territory of the basic court for which notaries have not been appointed, until a notary public with an official seat in the seat of the basic court is appointed, the basic court shall perform the tasks related to the confirmation (solemnization) of the real estate transaction contract in accordance with the provisions of this Law and the law regulating notary public activities.
If a notary public with an official seat outside the seat of the basic court is appointed in the territory of the basic court, until a notary public with an official seat in the seat of the basic court is appointed, the basic court shall be competent for matters related to the confirmation (solemnization) of real estate transfer contracts, only for the territory of the city or municipality where the official seat of the appointed notary public is not located.
Courts are obliged to enable the notary public to have access to special records of real estate transfer contracts submitted for the purpose of verifying the signatures of the contracting parties, which the courts shall keep until the date of entry into force of this Law in accordance with the Rules on Keeping Special Records of Real Estate Transfer Contracts (“Official Gazette of the Republic of Serbia”, No. 4/10).
Article 17
On the date of entry into force of this Law, the Law on Real Estate Transactions (“Official Gazette of the Republic of Serbia”, No. 42/98 and 111/09) and the Rulebook on Keeping Special Records of Real Estate Transactions (“Official Gazette of the Republic of Serbia”, No. 4/10) shall cease to be valid.
Article 18
This Law shall enter into force on 1 September 2014.