Procedure for Concluding Contracts
Chapter 9 of the Civil Code of the Republic of Belarus regulates general rules for concluding transactions. In accordance with the civil legislation transactions are acts of the citizens and legal persons aimed at establishment, change or termination of civil rights and duties.
Transactions may be bilateral or multilateral (contracts) or unilateral.
The transaction may be carried out under suspensive or resolutory condition.
The form of the transactions. Transactions can be oral or written (ordinary written form or notarized). Unless otherwise established by the agreement of the parties, all transactions that are executed at the time they are carried out may be concluded orally, except for the transactions, which require the notarized form, and the transactions for which the non-observance of the ordinary written form causes invalidity.
Transaction in ordinary written form shall be made by drawing up a document expressing its content and signed by a person or persons committing the transaction or by the persons duly authorized by such persons (items 2, 3 article 404 of the Civil Code). Legislation and agreement between the parties may provide additional requirements the form the transaction shall meet (a bank form of certain kind, putting a seal, etc.) and shall provide consequences for non-observance of such requirements. If such consequences are not provided the consequences for non-observance of an ordinary written form of the transaction are applied under item 1 article 163 of the Code.
Use of fax reproduction of signature via mechanical or other copying, electronic digital signature or other alternative of one’s own handwriting is admitted in cases and in accordance with the procedure provided by legislation or agreement of the parties.
Observance of the ordinary written form is not required for the transactions that can be carried out orally in accordance with article 160 of the Civil Code.
Non-observance of the ordinary written form deprives the parties the right to invoke the witness testimony to confirm the transaction but does not deprive them the right to invoke written or other evidence not being testimonies of witnesses. Non-observance of an ordinary written form of foreign trade transaction causes its invalidity.
Notary certification of the transaction is fulfilled by making an attesting signature on the document that complies with the requirements of article 161 of the Code.
The transactions with land and other real estate are subject to state registration in cases and in accordance with the procedure provided by article 131 of the Code and legislation on registration of the rights to real estate and transactions with it.
Non-observance of the notarized form or the requirement on the state registration of the transaction causes its invalidity.
The transaction is invalid under the grounds established by the Civil Code or other legal acts, recognizing it invalid by court (voidable transaction) or regardless of whether it was recognized or not (void transaction).
The invalid transaction does not cause legal consequences except for those connected with its invalidity and is invalid from the moment it was concluded. However, if based on the content of the transaction it is sequent that it may be terminated only for the future, the court recognizing the transaction invalid terminates its effect for the future.
When the transaction is invalid each party shall return the other party everything obtained under the transaction and in case it is impossible to return everything in kind (including the cases when things obtained mean the use of property, work executed or a service rendered) – the other party shall reimburse its cost in money, unless other consequences for the transaction’s invalidity are provided by the Civil Code or other legal acts.
If there is an intent from the both parties of the transaction (in case two parties execute the transaction) everything obtained by the parties under the transaction shall be collected to the budget of the Republic of Belarus, and if the transaction has been executed by one of the party, everything obtained by the other party or everything due from the other party to the first party (as reimbursement for everything obtained) shall be collected to the budget of the Republic of Belarus.
If there is intent from just one party of the transactions, everything obtained by the party under this transaction shall be returned to the other party and everything obtained by the latter or everything due to it as a reimbursement for everything it had fulfilled is collected to the budget of the Republic of Belarus.
A simulating transaction, that means the transaction concluded just for show without any intent to create relevant legal consequences, is null and void.
A sham transaction, that means the transaction concluded with a view to cover the other deal, is null and void. Relevant rules are applied to the transaction the parties really meant taking into account the subject matter of the transaction.
In accordance with the requirements of article 174 of the Civil Code the transaction made by a legal person contrary to the purposes of its activity or by a legal person that does not have a license to carry out the relevant activity, may be recognized invalid by court under the complaint of its founder (member) or a state body that exercises control or supervision over the activity of the legal person, when the other party of the transaction knew or by virtue of the act of legislation should have known about the unlawfulness of the transaction but have concluded the transaction on purpose or carelessly.
When the transaction is recognized invalid because it was concluded by error, the rules provided by item 3 article 168 of the Civil Code are applied.
The transaction made by fraud, threat, intentional improper agreement of a representative of one party with the other party as well as the transaction the person was forced to conclude as the result of hardships on the terms not beneficial to him, and the other party took advantage of it (one-sided transaction), may be recognized invalid by court under the action brought to court by the damaged party. The damaged party in this case is returned everything the other party received under the transaction, and if it is impossible to return it, it gets a reimbursement of its cost. The property received under the transaction by the damaged party as well as reimbursement of the property that was transferred to the other party, goes to the budget of the Republic of Belarus. Besides, the damaged party gets from the other party the real damage caused.
Invalidity of a part of the transaction does not cause invalidity of its other parts, if it is possible to suppose that the transaction would have been concluded anyway even without the inclusion of the invalid part.
An action about establishing the fact the transaction is null and void and about application of consequences of its invalidity may be brought within 10 years from the day the execution of the transaction starts.
Text of Contract. Relations of the parties are predetermined by contractual terms as well as the applicable law that means if there are no certain provisions in the contract (for example, there is no liability of the party provided) and a dispute arises, the provisions of valid legislation are applied.
Preamble of the contract shall contain:
- name of the contract (sale and purchase, delivery, commission, etc);
- date the contract is drawn up;
- place the contract is signed;
- full firm names of partners as they are registered in the register;
- names of the parties under the contract (buyer, vendor, leaser, etc.)
- detailed description of a title, last, middle and first name of a person who signs the contract as well as the document that confirms his/her powers to sign the contract.
Checking the Powers of the Person Signing the Contract. If it’s a director, one should make sure that he/she actually is the director (ask to show a decision about his appointment, certification, minutes of the meeting of members).
When it is a person acting under a proxy, it is necessary to pay attention to the following after you’ve checked his/her identity:
- Signature of the head of the organization and a stamp;
- Date of the proxy issue (the proxy is invalid without it);
- The term the proxy is issued for
- The scope of powers.
The powers of the person to sign banking documents do not mean the power to sign contracts on behalf of the enterprise.
Subject Matter of the Contract. Rights and duties of the parties. The contract shall agree the duties and rights of one party to the contract; rights and duties of the second party to the contract; term for execution of the parties’ obligations; place for execution of obligations of each of the party; way of execution of the obligations (procedure of actions, their sequence and terms).
Additional Contractual Terms. Additional contractual terms are the following:
- term of contract validity;
- liability of the parties.
Every kind of obligations (duties) of one partner shall provide relevant liability; ways to secure the obligations (there are four main ways for obligation security: a fine, pawn (deposit), guarantee, advance payment); grounds for pre-term termination of the contract by one party and the procedures of the parties’ actions; a provision about information confidentiality; procedure for dispute settlement. If the contract is concluded between the companies from different states, the contract may include a so-called arbitration clause stipulating a dispute settlement in International Arbitration Court of the Republic of Belarus at the Belarusian Chamber of Commerce and Industry.
Other Contractual Terms (miscellaneous).
1. Besides for the contract, the relations of the parties are as well regulated by the valid legislation that is why a phrase “In cases not provided by this contract the parties are governed by valid civil legislation” shall be used. If these contracts are concluded between the legal persons of different states, it is needed to additionally stipulate the applicable legislation. In this case the attention shall be paid so that this clause and the arbitration clause are the same.
2. A condition about coordinating contacts of the parties (contact persons): every party can mention the persons authorized to give information and solve problems dealing with contract execution, as well as the means of communication.
3. Pre-contractual work and its results after the contract is signed. This point contains a provision in accordance with which the parties provide that after the contract is signed all preliminary negotiations under this contract, correspondence, preliminary agreements, contracts and protocols of intent (if there were any) are no longer valid.
4. Requisites of the parties. Every party shall indicate:
a) its postal requisites;
b) location (address);
c) banking requisites (settlement account number, name of the bank, code of the bank, MFO, settlement center information, bank correspondent account) – one should be particularly careful about it or otherwise it would be hard to claim damages.
d) Shipment requisites (for the railroad shipment, for containers and small shipments).
The parties shall stipulate their obligation to immediately inform each other when their requisites change.
5. Number of contract copies (“This contract is drawn up in __ original copies, one per each party”).
6. Procedure for making corrections in the contract text.
All corrections of the text have legal force only when they are certified by the parties’ signatures in every certain case.
7. Signatures of parties’ representatives and dates of signature (if the time the parties sign the contract is different, the contract is concluded from the moment the last party signs it).
Procedure for Preparation of the Contract Text. Contract may be concluded in the following ways:
a) by drawing up a single document named “contract” (agreement).
This way is the best. One should remember that the agreed specification is not a contract. Besides, some legal acts regulating the rules for concluding and execution of contracts of some kinds stipulate mandatory requirements to the contract as, for example, the decision of the Cabinet of Ministers of the Republic of Belarus of July 8, 1996 No. 444 approving the Regulations on goods deliveries in the Republic of Belarus stipulates;
b) conclusion of the contract in accordance with the protocol of intent. In accordance with preliminary (provisional) contract the parties take an obligation to conclude the contract in the future concerning the transfer of goods, execution of works (services) on conditions stipulated by the preliminary (provisional) contract;
c) exchange of letters, teletype messages, telegrams, faxes, etc. of the parties. It is advised not to use this form of communication for concluding contracts, especially the foreign trade ones, or when it is used, it is needed to repeat the terms of the offer and acceptance (consent) by sending the other party a relevant letter, and if the contract is drawn up as one single document – by submitting a written text of the contract for signing.
When the contract is concluded based on a guarantee letter, it is necessary to pay attention to the following: the guarantee letter shall meet all requirements of the offer (offer to conclude the contract):
1) it shall contain all information about the essential contractual terms (subject matter, terms, price, etc.);
2) it shall be definite and address a concrete person;
3) it shall come from an authorized person of the company;
4) it shall express intent of the person sending it to be bound by the rights and duties in case the offer is accepted.
If not all the abovementioned terms are included it is an advertisement or invitation to negotiations in the future.
Accepting the offer to conclude the contract shall also meet the following requirements:
1) it shall come from the persons the offer was made to;
2) the acceptance shall not have any reservations.
If the offer sets up a term for a reply, the contract is concluded if the reply is received within this term. When the term is not provided, the acceptance has legal force when the reply is received within a reasonable period of time.
d) by accepting an order to execution. The contract may be concluded by accepting the order to execution.
The signing of a contract proves the conclusion of the contract. As a rule, it includes a hand-written signature of the authorized representative of the company as well as a stamp of this company. If there is no stamp on the contract it does not mean the contract is automatically invalid. The law gives the crucial meaning of the person’s powers to sign the contract.
Please, note: if the contract is complex and crucial, one can put the signature and the stamp on every page of the contract. It cannot be attested with facsimile stamp.
The contract is the most important evidence in economic or arbitration court if any dispute arises.
Variations in contract reading shall not be admitted. If the contract text has different provisions in regard to one and the same contractual term, at all other conditions equal it is considered that the parties have not reached an agreement in regard to this term.