The Concept of a Contract and Its Basic Characteristics
Contract law is a very broad legal field that concerns all types of contracts. Considering the fact that there is a vast number of contracts, both named ones which are regulated in detail by law, and unnamed ones developed through practice, as well as the fact that an average citizen is usually not familiar with the legal provisions, it is often necessary to engage a professional who can properly represent your interests in situations where you are dealing with complex contract law.
A contract represents the agreement between two parties, the offeror and the offeree. Our legal system regulates a large number of contracts – sales contracts, lease agreements, loan contracts, contracts for services, construction contracts, freight forwarding contracts, and many others. Generally speaking, it involves an agreement between two parties, although there are contracts that result from the agreement of more than two parties, such as a partnership contract.
A contract is considered concluded when the contracting parties agree on the essential elements of the contract. What constitutes the essential elements of the contract is not a question that can be answered uniformly, as it depends on the type of contract; in other words, each contract has its own essential elements. For instance, in a sales contract, the subject of the sale and the purchase price are considered essential elements.
The subject of contract law is primarily regulated by the Law on Obligations, which is considered the fundamental law in this field – lex generalis. In addition, there are numerous other legal acts that more precisely regulate specific types of contracts. For example, the sale of real estate is thoroughly regulated by the provisions of the Law on Real Estate Transactions, while the Insurance Law regulates the form and content of insurance contracts.
Conditions for Concluding a Contract
For a contract to be concluded, certain conditions must be met:
- Legal capacity: The contracting parties must have the legal capacity to conclude the specific type of contract. For example, an 8-year-old child can buy bread at a store, but cannot purchase real estate.
- Agreement on essential elements of the contract: This condition represents the essence of the contract, as the contract itself is defined as an agreement of wills. What constitutes essential elements depends on the type of contract.
- The object of the obligations of the contracting parties must be clearly defined or definable, possible, and permitted: The object of the contract is the obligations undertaken by both parties, and this includes giving, doing, refraining from doing, or enduring something that the parties agree to by entering into the contract.
- Form of the contract: One of the basic principles of contract law in Serbia is the principle of informality. This principle implies that contracts can generally be concluded informally (verbally), except where the law stipulates otherwise, which is often the case. For example, you cannot buy real estate or establish an employment relationship through a verbal agreement or handshake, but you can conclude a gift contract for a valuable watch verbally.
- Cause – the basis must be lawful: If the cause does not exist or is unlawful, the contract is void.
Categories of Contracts
Contracts can be divided according to various criteria. The most common theoretical classifications are:
- Formal and informal contracts, depending on the form in which they are made;
- Named and unnamed contracts, depending on whether they are regulated by law;
- Burdened and beneficial contracts, depending on whether they create a burden or benefit for the contracting party;
- Unilateral and bilateral binding contracts, depending on whether they create an obligation for only one or both parties;
- Aleatory and commutative contracts, contracts with mutually determined content, contracts by adhesion (so-called adhesion contracts), preliminary contracts and main contracts, and many other divisions.
Negotiations
Before concluding the contract, the parties usually engage in negotiations, which are not legally binding for the future contracting parties. The negotiations preceding the conclusion of the contract do not bind the parties, and either side can terminate them at any time. However, this does not mean that negotiations can be conducted without the genuine intention of concluding the contract, as in such cases, the other party may be entitled to compensation for damages.
Preliminary Contract
A preliminary contract represents the agreement of two parties to later, at some point, conclude the main contract. A preliminary contract binds the parties if it contains the essential elements of the main contract and must be concluded in the same form that is mandatory for the main contract. If this is not the case, the preliminary contract will not have legal effect.
If one of the parties does not want to proceed with the conclusion of the main contract, the other party has the right to demand, through legal action, that the main contract be concluded, and this right must be exercised within 6 months from the expiration of the period set for concluding the main contract.
A preliminary contract is not binding if the circumstances have changed so much since its conclusion that it would not have been concluded if those circumstances had existed at that time.
Amendment of Contract Content
Once a contract text is made, it can be changed. Any changes to the contract text are made by concluding an annex to the contract.
Contract Security Instruments
In our legal system, there are various instruments that contracting parties can agree upon to protect their contractual interests, such as guarantees, pledges, mortgages, solidarity of debtors, and so on.
These instruments serve to indirectly compel the parties to voluntarily fulfill their contractual obligations within the agreed timeframe, as failure to do so will lead to legal procedures for the enforcement of their obligations, whether they want to or not.
Statute of Limitations for Contractual Obligations
The general rule is that claims become time-barred after 10 years. However, there are numerous exceptions to this rule. For example, a claim for payment of utility services becomes time-barred after one year, while the obligation to pay rent becomes time-barred after 3 years.
Termination of Contract
The most common and natural way for a contract to terminate is through the fulfillment of the contractual obligation. This is the most straightforward mode of termination. If someone voluntarily assumes a contractual obligation, it is natural that they will fulfill it without any problems. This applies to contracts that are legally valid.
On the other hand, with contracts that were not concluded in a legally permissible manner, there is the possibility of revoking the legal effect. These are absolutely and relatively void contracts.
In such cases, a legal process for the annulment of the contract in whole or in part may be initiated if the contract does not comply with mandatory regulations, public order, or customary rules. In such a case, the contract is considered void and produces no legal effect – it is deemed not to have been concluded. The same consequences arise when a contract is not concluded in the legally prescribed form or when the basis for the contractual obligation does not exist or is unlawful, or when the subject of the obligation is not possible, permitted, specified, or at least definable.
A court ruling establishing the nullity of such a contract has a declarative effect. Additionally, there are no deadlines for seeking the annulment of void contracts, nor are specific persons listed who are actively authorized to bring lawsuits in such cases.
If you were subjected to fraud, coercion, threat, or were in error when concluding a contract, your contract will be voidable. In this case, you have a short legal deadline to file a lawsuit if you want the contract annulled. If the deadline passes and you do not file a lawsuit, the contract is considered to have been validated, and it can no longer be annulled. In such cases, the law specifies which parties are legally authorized to file a lawsuit.
If the nullity of a contract is determined or if a voidable contract is annulled, the legal consequence is that each party must return to the other party what they received under the void or voidable contract.
Complexity of Contractual Matters
There are much more complex and intricate contracts that require a thorough legal analysis, careful and conscientious negotiations, and the preparation of a contract text that will allow the parties to achieve their desired goal. This can only be achieved with the legal support of an attorney specializing in contract law and all issues related to this legal field, such as the attorneys in our expert team. Our team has extensive experience in both domestic and international contract law. Our team has participated many times in negotiations for concluding various contracts with foreign elements and drafting such contracts (bilingual contracts).
Having an attorney by your side is advisable not only when the conclusion of a contract is imminent but also in the phase that precedes the conclusion – during negotiations, as this is the critical phase for protecting your interests. If negotiations are not conducted properly, you risk finding yourself in a situation where your own interests are not satisfactorily protected later – when concluding the contract or fulfilling the contractual obligations. Therefore, it is of great importance to engage a contract lawyer who knows how to negotiate and who always puts the client’s interests first.
In modern business conditions, contract law represents one of the most important and widely applied branches of law. Without a fundamental understanding of contract law, purchasing a car, real estate, or entering into business contracts can become a risky venture. You cannot achieve successful business cooperation with clients, nor can you effectively transport goods. In fact, you can do all of the above, but if you approach any contract in a “careless” way and with minimal caution, you expose yourself to a significant risk that your interests will not be adequately realized and protected.
Legal Services We Provide
Our expert team has vast practical experience, particularly in contract law, where we have encountered almost every type of contract.
When it comes to contracts, we cannot single out individual types, as our team regularly prepares and drafts a wide range of various contracts on a daily basis.
As contract attorneys, our team provides a wide range of services in the field of contract law:
- Providing oral and written legal advice;
- Offering detailed legal analysis of a situation and providing advisory services regarding the choice of contracts to pursue;
- Negotiating with the opposing party on behalf of our client, aiming for the most favorable outcome for the client;
- Drafting all types of contracts (the most common contracts in practice include sales contracts, lease agreements, loan agreements, gift contracts, exchange contracts, construction contracts, transportation contracts, shipping contracts, lifetime maintenance contracts, life asset transfer and distribution contracts, employment contracts, business cooperation agreements, storage contracts), drafting contracts in Serbian and English based on client needs;
- Identifying any flaws or deficiencies in a previously drafted contract and offering solutions to these legal issues;
- Initiating legal actions related to the protection of our clients’ interests (such as lawsuits for the annulment of a voidable or void contract, lawsuits for fulfillment of contractual obligations, lawsuits for termination due to changed circumstances, lawsuits for the return of valuable gifts after the dissolution of marriage, etc.);
- Representing clients in such proceedings with the primary goal of protecting the client’s interests.
With years of experience in drafting, negotiating, and analyzing contracts, we provide complete legal services in the field of contract law.
Frequently Asked Questions
Contracting parties are obligated to fulfill their contractual obligations and are responsible for their performance. To protect your interests and prevent uncertainty about fulfilling the obligations, it is advisable to consult an attorney before drafting the contract. However, if the contract has already been concluded and the other party fails to fulfill its obligations, you have the right to request fulfillment within a reasonable additional time. If the obligation is not fulfilled within that time frame, you can unilaterally terminate the contract and may also claim compensation for damages due to non-fulfillment. The option to allow additional time for fulfillment is not obligatory but is available only for contracts where fulfilling the obligation within a specific time frame is an essential element – in such cases, if the obligation is not fulfilled within that time frame, the contract is considered automatically terminated under the law.
Serbian contract law is based on the principle of informality, which means that a contract can be concluded without any formal requirements unless stipulated by law. This means that a simple agreement expressed verbally or through actions can produce legal effect. However, not every contract can be concluded verbally, as the law requires a specific form for certain contracts. For instance, a real estate sale contract must be concluded in a notarized (solemnized) form. Even when a verbal agreement is allowed, it is still advisable to conclude contracts in writing to avoid misunderstandings and problems in the future.
In some cases, contracts may be terminated before the agreed obligations are fulfilled. A contract can be terminated by mutual agreement or unilaterally, depending on the terms of the contract or the legal regulations that apply. If one party does not fulfill its obligations, the other party may seek termination and compensation for damages. In addition, contracts can be terminated based on changed circumstances, such as a significant change in the conditions under which the contract was concluded.
The statute of limitations for claims related to breach of contract or damage compensation is generally 3 years from the moment the party entitled to claim damages becomes aware of the breach and the identity of the liable party. However, certain contracts may have different limitations based on the nature of the obligation. For instance, claims related to certain consumer protection matters may have shorter time limits for filing a lawsuit. It is crucial to act promptly and consult with a lawyer to determine the specific statute of limitations that applies to your case.
If you are dealing with contracts, whether you’re about to sign one or find yourself in a dispute, don’t hesitate to reach out for legal assistance. An experienced attorney can ensure your interests are protected and help you navigate the complexities of contract law effectively.