Q&A: contract formation in Armenia

Contract formation

Is there an obligation to use good faith when negotiating a contract?

Armenian law does not currently recognise the obligation on contracting parties to use good faith when negotiating a contract.

How are ‘battle of the forms’ disputes resolved in your jurisdiction?

To conclude a contract, it is necessary to have two or more declarations of intent, both corresponding with one another. It is commonly accepted that a contract is concluded if the parties have reached a consensus on the essential conditions of the contract.

Under the Civil Code of Armenia, if an offer is made by one party, no contract is formed unless unconditional acceptance is given to all offer terms. If the terms of the response to the offer deviate from the offer in any manner, the response shall be treated not as an acceptance but a rejection of the offer and a counteroffer. It means that each party’s reference to its own general conditions is considered a rejection of the other party’s offer and treated as a counteroffer.

Under this law, the party that sent the last form is deemed to have made an offer, based on the terms of the document it sent, that was accepted by the other party’s performance.

Is there a legal requirement to draft the contract in the local language?

There is no legal requirement to draft the contract in Armenian. The parties are free to choose the language of the contract, with one exception: if the contracts are subject to be notarised, then it shall be in Armenian or multilingual, Armenian being the prevailing language. Tax legislation recognises that if the documents are in English or Russian those can be presented during inspections, while documents in other languages shall be accompanied by an Armenian translation. Also, the language of litigation or other official correspondence in the Republic of Armenia is Armenian, so any foreign-language documents, including contracts, proffered to an Armenian court as evidence must have a concomitant Armenian-language translation (which is not the case for bilingual or Armenian language documents).

Is it possible to agree a B2B contract online?

The possibility to agree a B2B contract online is crucial nowadays not only because of globalisation but also because of covid-19. Armenian law is progressive in the acceptance of electronic signatures, which are generally considered valid for the legal execution of documents.

Under Armenian law a contract may be entered into in a written form upon signature of parties through drawing up a single document, as well as through exchanging information or а communication (document) via means of postal, telegraphic, facsimile, telephone, electronic or other communication that make it possible to confirm its authenticity and accurately establish that it comes from the contracting party.

At the same time, we still lack a comprehensive judicial practice on the online contracts. Currently, the courts hear a number of cases on online loan agreements and their enforceability. A number of issues, including on incorporation of arbitration agreement and enforceability of the online agreements are heard in national courts, but no final decision with regards to this has been achieved and it is not known how the Court of Cassation (the supreme court decisions whereof have precedential effect) will interpret these regulations.