Do you think you don’t need a written contract?

13. 3. 2020

The Civil Code fully respects contractual freedom, leaving it to the parties whether they conclude a contract, with whom they conclude it, in what form (if the form is not prescribed) and with what content. It is usually up to the parties to decide in what form they will conclude the contract, whether in writing or orally.

The written form laid down by law is only prescribed for certain acts, namely those with serious legal consequences. Typically, these are contracts for the transfer of real estate, where the written form is compulsory in particular with regard to the economic importance and value of the immovable property. The written form is also required, for example, for contracts that are entered into public registers or for documents where there is an interest in the protection of the weaker party.

For most legal acts, there is no statutory requirement for the written form. This applies to the assignment of a claim or the assumption of a debt, but the written form is not mandatory even for the contract for work or for the contract for the lease of premises used for business. Most purchase contracts, even for valuable things (such as machinery and home or office equipment), are also not concluded in writing – the parties often believe that they have not even concluded any contract. Even if the conclusion of an oral contract is fully in accordance with law, such a decision may not pay off, especially if there is any disagreement between the parties concerning the content of the contract, such as the deadlines, nature of the performance or payment.

If you decide to make only an oral agreement, you need to bear in mind that, in the event of a dispute, you are very likely to have insufficient evidence, since the content of the oral agreement is generally difficult to prove. Conversely, the advantage of written contracts is that even long after the contract was concluded, the parties have concrete evidence of what they agreed upon and what their rights and obligations under the contract are. Thus, they need not rely on these facts to be proven, for example, by witness statements, which are often very unreliable – especially if long time has elapsed between the conclusion of the contract and the need to solve the problem.

The written contract also has a warning function. When drafting a contract, the parties are forced to reflect more on the content of the obligation, including what is otherwise required by law, and the parties often fail to realize the application of such rules in the case of an oral agreement.

For these reasons, it is only advisable that (important) contracts be concluded in writing. The content of the contract is recorded in case a problem occurs – which can be neither foreseen, nor excluded.

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