How to read a contract? Reading and fully understanding a contract is an essential step to take before making any legal commitment. For this reason, even though the "contractual" language may seem extremely complicated, we propose to briefly present to you the elements that you should pay attention to whenever you have to analyze/sign a contract.
What is a contract and what exactly does its signing entail?
The conclusion of any contract involves the achievement of an agreement of wills of the contracting parties (whether there are two or ten such parties) on the essential clauses and elements of the contract. Practically, the conclusion of the contract is equivalent to the concordant meeting of the offer to contract with the acceptance of this offer.
Can you terminate the contract if you and the other contracting party do not reach a consensus on some of the secondary elements?
According to art. 1182 paragraph (2) Civil Code „It is sufficient for the parties to agree on the essential elements of the contract, even if they leave some secondary elements to be agreed upon later or entrust their determination to another person.”.
What does this mean? Essentially, if the contracting parties agree on the essential elements of the contract (subject matter, price, nature of the contract, etc.), the contract will be considered validly concluded, even if there are secondary elements on which they have not yet reached an agreement (for example, the jurisdiction of the courts in the event of a dispute between the parties).
Moreover, in the situation where the contracting parties cannot reach a consensus regarding the secondary elements of the contract or the person responsible for determining them does not carry out his duties, there is, ultima ratio, și opțiunea conform căreia instanța de judecată va dispune completarea contractului, ținând seama de natura contractului, respectiv de intenția părților contractante.
Now, let's get back to the main topic of this article, HOW TO READ A CONTRACT?
I. First of all, any contract will contain an introductory part (preamble) within which the contracting parties will be identified and the contractual framework/context of the agreement will be established.
Therefore, it is absolutely essential that the preamble identifies the contracting parties by their full name, their identification data correctly written (and with regard to legal entities, identification data should preferably be verified in advance on accredited sites – www.onrc.ro, www.listafirme.ro etc.), the legal/conventional representatives of the parties (if any) and the framework/purpose of the contractual agreement.
ATTENTION! It is essential that the identification data of the parties is valid and current, since in the event that a potential dispute is subsequently resolved in court, the lack of essential data about the natural/legal person could create serious problems in identifying/citing the party.
II. The second essential element to pay attention to is THE SUBJECT OF THE CONTRACT
According to the Civil Code, the object of the contract is essentially the legal operation (sale, loan, lease, donation, etc.) agreed upon by the contracting parties.
In the same sense, according to legal provisions, the object of the contract must be determined and lawful, under penalty of absolute nullity. What does this mean?
- The subject should be determined when the contract clearly stipulates the legal operation on which the parties have reached a consensus (sale, lease, etc.);
- The subject should be legal when it is not prohibited by law or if it does not contravene public order and morals.
Therefore, it is extremely important that the future contract you will sign accurately and clearly contains the subject matter of the contract, as depending on it, the contractual rights and obligations of the parties will also be determined.
III. RIGHTS AND OBLIGATIONS – be very careful about everything that concerns your rights and obligations, as well as those of the other party.
Each obligation, whether primary or secondary, must be clearly drafted, so as not to leave room for possible unwanted interpretations.
At the same time, it is important to correctly use the imperative form of verbs, when necessary, to emphasize the obligatory nature of the action (for example, "Part A assumes taking over the property from location X” – we thus highlighted Party A's obligation to take over, leaving the optional nature of the action to the parties' discretion).
IV. PRICE AND PAYMENT METHOD
Within this chapter, it is required to expressly state the value of the contract, as established by the parties (with/without VAT), the payment terms and conditions ("global price paid on...", "the amount will be paid in installments as follows", etc.), respectively the agreed payment methods (cash, by bank transfer, etc.).
V. DURATION OF THE CONTRACT AND TERMINATION CONDITIONS
Be extremely careful about the start and end dates of the contractual relationship! A simple mistake regarding these dates and you could drastically reduce your chances of winning any subsequent action in court.
Regarding the conditions for terminating the contract, make sure that the agreement between the parties clearly provides for all the ways in which the latter can be terminated (we recall here the possibility of unilateral termination/resolution, termination upon reaching the term or the like), along with all the information regarding notices and terms/methods of notifying the parties of their option.
VI. CONTRACTUAL LIABILITY CLAUSES
Another essential issue that must be taken into account when drafting or reviewing a contract is represented by liability clauses – you must be very careful in cases where, according to the contract, you will be legally liable for non-compliance or non-completion of the contract.
There are numerous situations in which one of the parties deliberately tries to exonerate itself from any fault regarding the (non)performance of the contract, thus inserting a series of "abusive" clauses, hoping that the other party will not notice or contest them (this is also the reason why, before signing any contract/document, it would be preferable to ask your lawyer to ensure that the document in question is compliant and does not infringe your rights in any way).
VII. COMMUNICATIONS BETWEEN THE PARTIES
An essential issue, but unfortunately often neglected by the contractual parties, is the method of communication between them. The contract must contain, among other things, the method in which one party can notify the other (by letter with declared content and confirmation of receipt, by email, via the Whatsapp application, etc.), the deadline within which communications can be made and any other relevant information related to this subject.
Can such a clause help you? Of course. Imagine that the other contracting party sues you.
The contract expressly provides that any communication between the parties must be made in writing, via e-mail or by letter with declared content and confirmation of receipt. First, let's assume that in the situation where that party was dissatisfied with your "services", it was supposed, according to the contract, to notify you in the agreement of the agreed method of communication regarding the respective irregularities, but it did not do so. As long as the clause regarding the method of communication in the contract was not respected, you will be able to appear before the court to support the failure to comply with the prior procedure or the lack of validity of those claimed by the plaintiff.
This is just an example that justifies the importance of regulating such a clause in the contract, but also certifies that you must be extremely careful, because if you do not act in the manner established in the contract, you may be the one who will lose in a possible dispute.
VIII. DISPUTE RESOLUTION
A final essential aspect that you need to check before signing a contract is the chapter on dispute resolution (or if it does not exist, express your desire to introduce such clauses).
Practically, within this article, the contracting parties will expressly establish which court will be competent in the event of a possible dispute, which will be the corresponding jurisdiction and, at the same time, whether a prior mediation procedure is required in the event of such a conflict.
In conclusion, these are 8 of the most important elements to pay attention to when reading a contract, but especially if the document involves significant or long-term obligations, we encourage you to call a specialist in the field for a prior consultation.
Understanding each contractual clause can prevent future costly conflicts and can also ensure the protection of your rights as a contractual party, so our team encourages you contact us with confidence in the event that you are about to sign a contract or any other document that would give rise to legal effects between the parties.
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