Agreements and rights

A private individual with legal capacity can choose whether to conclude contracts himself or to authorize a representative to do so. A legal entity, such as a limited liability company, a general partnership or a limited partnership, must always act through its representatives. The right to conclude a binding contract for a company is based either on the statutory right of representation (for example, the managing director and board of directors of a limited liability company) or on authorization. The legal representative's eligibility is based on his or her position. In the case of authorization, the principal's voluntary expression of will is required for the agency relationship to arise.

A limited liability company is represented by a board of directors. If olet companyn CEO, also you have The qualification represents the company, but this qualification is limited to the management of day-to-day administration. The articles of association may stipulate that the chairman of the board of directors, another member of the board of directors alone or together, or the managing director have the right to represent the company by virtue of their position. Such a right of representation is based on the position of the person and is independent of the person. The articles of association may also stipulate that the board of directors has the right to grant the right of representation to certain named persons. The company may also be represented by a power of attorney or commercial power of attorney, i.e. procurator, under.  

In a general partnership, each partner and in a limited partnership, each limited partner has the legal right to represent the company alone and to enter into agreements binding on other partners in matters within the company's scope of business.  

The partners may deviate from this general rule by mutual agreement. Even restrictions on representation that are not entered in the commercial register are binding on the company's contractual partner if the latter was aware of the restrictions decided between the partners.  

If the measure is not within the company's scope of business, an agreement must be reached. to perform a legal act obtain the consent of all partners. A silent partner does not have the power of representation in a limited partnership without a separate authorization. If a partnership has a managing director who is not a partner, this person has the right to represent the company in current matters. 

In addition to statutory representation, the right to represent a company may be based on an express authorisation or power of attorney. An authorisation refers to an expression of intent on the basis of which the principal becomes a party to a contract with a third party. The authorisation to act on behalf of the company may be granted by the board of directors, the managing director or another representative of the company within the limits of their own competence. A third party may ascertain the competence of the representative of their contracting partner from the power of attorney, a communication from the principal or based on the position of the principal. In addition, the authorisation may be based on a communication from the principal to the principal. The principal may revoke the authorisation at any time.

A power of attorney is a commercial power of attorney that can be issued by a registered business. In a limited liability company, a power of attorney can only be issued by the board of directors, while in a partnership, a joint decision of all partners is required (but not a silent partner).

The procurator may act on behalf of the principal and enter this business name. However, without special authorisation, the procurator may not transfer the principal's real estate, land lease rights or apply for a mortgage on them. The procurator's right of representation may be restricted if desired so that he or she has the right to represent the company together with one or more procurators or another representative of the company. The procuratorate may be entered in the trade register or may be granted in another verifiable manner.

It is advisable to verify the right of representation of the representative of the contracting partner from the trade register extract, if necessary, because the lack of qualification of the representative may result in the agreement concluded not being binding on the company. It may also be a good idea to clarify the restrictions on the right of representation. It is worth noting that the CEO cannot enter into a binding agreement in an agreement that does not fall within the scope of the company's day-to-day administration without a decision or authorization from the board of directors.

A contract is concluded when an acceptance has been given to an offer, the agreement has been signed or the agreement can otherwise be considered to have been concluded. The offer-response mechanism provided for in the Legal Transactions Act is relevant, for example, when there is uncertainty between the parties as to whether a binding agreement has been concluded at all. An offer is binding on the offeror in the content as it is made. A contract is concluded when an acceptance has been received to an offer made. However, in order for a binding agreement to be concluded, the response must correspond to the content of the offer and be timely.

If the offeror has stated the validity period of the offer, and the offeree responds to it after the deadline or the offeree changes the content of the original offer to an unacceptable level, for example in terms of price, no contract is formed. The offeree is deemed to have made a new offer. In this case, a contract is only formed if the original offerer accepts the amended offer as is. It should be noted that a request for quotation is not binding in principle.

The starting point of contract law is the principle of the binding nature of contracts: once a contract has been concluded, it is generally no longer possible to withdraw from the contract. However, a binding offer or response may be withdrawn without penalty if it is withdrawn before or at the latest at the same time as the other party has had time to understand the offer or response and before the offer or response has had a decisive influence on the other party's actions. The question of when the offer or response has had a decisive influence on the actions of the other party can only be decided on a case-by-case basis. Consumers have a right of withdrawal in certain situations specified by law, such as distance selling, while traders do not have such a general right of withdrawal based on the law.

The content of the agreement is binding on both parties, and changes to the agreement usually require the consent of both parties. This also applies to oral agreements.

Entrepreneurs often experience uncertainty in a situation where certain terms have been agreed upon over the phone or otherwise verbally, but later the other party has sent written terms that differ from what was agreed upon verbally.

In principle, there is a simple solution to the problem: the contract was created as agreed orally, and any terms and conditions sent afterwards do not become part of the contract.

The order confirmation and other general terms and conditions related to the contract should always be read carefully immediately, and in the aforementioned situation, the entrepreneur should, without undue delay, complain to his contractual partner in writing, for example by email, that he does not accept the terms and conditions provided subsequently as part of the contract. The same complaint document should state the main content of the terms and conditions agreed upon orally.

Often, before the actual contract is concluded, the parties clarify the conditions for concluding a mutually satisfactory agreement through negotiation. Negotiating a contract does not in itself create an obligation to terminate the contract (freedom of negotiation) or liability for costs incurred by the other party (negotiation risk). In principle, an agreement is concluded between the negotiating parties only when an acceptable response is received to the offer made. A negotiating party may refuse to terminate the contract without consequences, unless otherwise agreed.

However, if one party is guilty of unethical or otherwise inappropriate negotiation behavior, compensation for the costs incurred by the injured party may be an issue. Liability for damages may arise, for example, in a case where the other party did not have a real intention to terminate the agreement from the beginning, but only sought to obtain a cost estimate for the project. Providing misleading information or continuing negotiations without the intention of concluding an agreement may also give rise to liability for negotiation costs.

Before concluding the actual contract, the parties can draw up various agreements concerning the negotiation phase. Drawing up agreements for the negotiation phase may be appropriate, for example, when the parties need to take measures that will incur costs during the preparation phase and want to reduce the associated risk.

Explicitly agreeing on the division of negotiation costs, the formal requirements of a binding main agreement, and the protection of business and company secrets is a good way to manage liability and cost risks when negotiating a contract with significant economic value. The opinions expressed in the negotiations and rough outlines of the contract terms can be recorded in the negotiation minutes or a letter of intent, even if there is no desire to commit to the project yet. The parties can also agree on a negotiation lull (exclusivity) so that while negotiations continue, the same contract cannot be negotiated with other candidates.

A letter of intent (letter of intent, memorandum of understanding) refers to a document drawn up during contract negotiations, which records the consensus reached so far in the negotiations between the parties and how they will proceed with regard to open issues. A letter of intent is not a final agreement, and it does not in principle oblige the parties to conclude the main contract.

However, a letter of intent can also include binding matters, such as a negotiated peace. Usually, in a letter of intent, it is agreed to avoid ambiguities that each negotiating party bears its own cost risks related to the negotiations and that neither party is yet committed to the final agreement. However, the title of the document is secondary to its content. Therefore, a document called a letter of intent may later be considered a preliminary agreement if its content indicates that a commitment to the main agreement has already been made.

The binding nature of a precontract (preliminary contract) is substantially higher than that of a letter of intent. It is comparable in bindingness to a normal contract.

Preliminary agreements are used when the parties have not yet reached an agreement on all the details of the contract but are ready to commit to the agreement. The parties commit to entering into the main contract at a later date based on the matters agreed upon in the preliminary agreement.

A preliminary agreement can also be drawn up as a conditional agreement: the obligation to conclude the main agreement ceases if, for example, the competition authority prevents the performance of the agreement or the financing required by the agreement cannot be arranged. A preliminary agreement has the same formal requirements stipulated by law as an actual main agreement, for example in a real estate transaction.

The binding nature of agreements in the negotiation phase varies. The legal effects of an agreement depend primarily on what is agreed in it. As types of agreements, letters of intent and preliminary agreements are practically established and provide an indication of the degree of bindingness, but the content of the document ultimately determines the binding nature of the contractual instrument. To avoid legal ambiguities, it would be a good idea to explicitly specify in the document whether it is non-binding or whether it is intended to be binding. In addition, it is recommended to agree on the validity of the agreement in the negotiation phase and how to withdraw from it.

It is common for the seller to give or otherwise deliver to the buyer a document with a title such as “terms of service agreement”, “general terms and conditions of services” or “general terms and conditions”. These are the standard terms and conditions of the contract. In practice, standard terms and conditions can be very different and of varying scope.

The terms and conditions may be drawn up in a contract document, on a separate form or may be displayed at the premises of the person who drafted the terms and conditions and on their website. However, a common feature of all standard terms and conditions is that they have been drawn up in advance for use in several contractual relationships. Standard terms and conditions are typically drawn up unilaterally by the seller and do not take into account the special needs of the other party. However, unclear terms and conditions are interpreted to the detriment of the person who drafted the standard contract.

In contractual disputes between companies, the question often arises as to whether standard terms and conditions have entered into force in the contractual relationship. Standard terms and conditions do not, in principle, form part of the contract if they are not included in the contractual document or have not been properly referred to. The burden of proof lies with the party invoking the standard terms and conditions. It is sufficient that the other party has been given the opportunity to familiarise themselves with the terms and conditions before the contract is concluded.

The concrete opportunity to familiarize oneself with the terms and conditions may be waived if, for practical reasons related to the method of concluding the contract, it would be difficult to present the terms and conditions to the other party. For example, the initiative to conclude the contract must be made by telephone or otherwise it is in the interest of the parties to bring the contract into force quickly. In such cases, it may be considered sufficient that the buyer has the opportunity to familiarize himself with the terms and conditions on the seller's website or in another appropriate and efficient manner. In some cases, the terms and conditions may be applicable based on the trade practice of the industry or the parties' previous contractual practice.

The binding nature of an individual term may be prevented if it is considered surprising or harsh from the perspective of the other party, and such a term has not been properly pointed out or otherwise emphasized before the conclusion of the contract. A typical harsh term substantially restricts the rights of the other party or increases his obligations compared to the discretionary legislation that would be applicable to the contractual relationship without the existence of the term. For example, limitations of liability can be terms of this type. The harshness and surprise of a term can also result from internal tension in the contract, if a certain clause in the contract leads to an unexpected result from the perspective of the contract as a whole. In order to meet the requirement of emphasis, information must be provided effectively before the conclusion of the contract, for example orally or in print.

During the course of a contractual relationship, the parties may disagree about the content of the contract. There can be numerous potential interpretation problems. The disagreement may be based on a genuine misunderstanding by one party, or the other party may want to interpret an unclear contract term in a way that is more favorable to them due to changed circumstances or other circumstances. There may be ambiguity between the parties, for example, about what has been agreed upon regarding the possibility of terminating the contract.

The primary purpose of a contract is to interpret the content of the contract in a manner consistent with the parties' intent, i.e. as agreed upon when the contract was made. However, confirming the content of the contract can be difficult due to disagreements between the parties and evidentiary issues. In such cases, the aim is to confirm the content of the contract as an interpretation consistent with the wording of the contract.

Sources of interpretation may include, for example, the contract document, other statements by the parties, material related to the preparation of the contract, and discussions held during contract negotiations. Importance may also be given to the parties' previous contractual practices and established practices in a particular field.

If the parties to the contract have not agreed on a matter at all, the contract may need to be supplemented. In contract law, norms are essentially voluntary, meaning that agreements can often be made that differ from what is provided for in the law.

If a matter has been completely left unagreed upon in the contract, the provisions of the law are used to supplement the contract. Contract law principles, such as the principle of fairness, can also be used to supplement the gap left in the contract. For example, if the notice period for a contract valid until further notice has not been agreed upon, the notice period is considered to be a reasonable period.