Q&A: contract formation in Bulgaria

Contract formation

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

Yes. Bulgarian law expressly requires parties to negotiate in good faith. Failing to do so results in parties’ liability to compensate their counterparties. An example may be that where a party negotiates to sell a property, knowing it does not intend to enter into a binding contract, it will be liable for the expenses that its negotiation partner reasonably incurs, for example, to retain valuers of the property being apparently offered for sale. Similarly, where parties negotiate a joint venture, but one of the partners abandons the negotiation before execution of the joint venture agreement in favour of a different use of the assets it would have contributed to the venture, that party would most likely be liable to compensate its counterparty for the expenses incurred during the negotiations, at least from the point when it ought to have notified its counterparty of the alternative use onwards.

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

Bulgarian law (in common with other civil law traditions) seeks to identify a shared contractual intent between contractual parties: a ‘joint will’. In other words, a contract arises only if and insofar as the parties agree on important terms. What is important may be a matter of convention (eg, price and quantity in contracts for the supply of goods) or may be determined by the court ex post facto, taking into account the characteristics of the parties’ bargain and what would appear to be important within it. Failure to achieve unity of minds on the less central terms of the agreement is not crucial to the contract; therefore, if the parties exchange offers that are at loggerheads with each other, there would only be a contract if offer and counter-offer or acceptance agree on some minimal set of terms. The courts would seek to identify what these are based on the circumstances of the case.

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

Contracts governed by Bulgarian law or intended to be enforced in Bulgaria may be in any one or more languages and do not need to be in Bulgarian (the official language of Bulgaria). Exceptions to this are contracts intended to be certified by a notary, which must be in Bulgarian, even if they are also presented in other languages.

In what circumstances are signatures or any other formalities required to execute commercial contracts in your jurisdiction? Is it possible to agree a B2B contract online (eg, using a click-to-accept process)? Does the law recognise the validity of electronic and digital contract signatures? If so, how are they treated in comparison to wet-ink signatures?

Contracts are oral by default unless expressly required to be in writing (parties may generally prefer writing for provability and clarity). A further important requirement for writing arises because contracts with a price of 5,000 Bulgarian lev (approximately €2,500) must be proven in court proceedings by way of written documentary evidence – imposing if not a requirement to contract in writing, then at least a requirement to evidence in writing.

More formality is required: 

• to transfer real estate;
• for creation or transfer of rights in rem in general (this can only be by notary deed); and
• for other registrable titles such as those over motor vehicles and company shares.

Contracts in electronic form are considered to be ‘in writing’ if they are signed with either a qualified digital signature or bear simpler types of digital signature, but only where the parties agree to the use of these and the electronic form. Therefore, B2B contracts may be entered into online. In any event, a merchant cannot plead contractual invalidity due to lack of form if it has part-performed a contract.

If a party proposes an online contract and informs its counterparty in detail about the execution process (eg, that a click-to-accept process will be deemed an ordinary signature and will have the effect of a handwritten signature), and the other party accepts, there will be a binding contract between the parties.