Purchase agreement - key contractual provisions

Ugovor o kupoprodaji nepokretnosti

What is a purchase agreement?

The purchase contract represents an agreement between the two contracting parties to transfer the right of ownership from the seller to the buyer, whereby the buyer is obliged to pay the agreed price. The most common purchase contracts are related to the sale of real estate, of which the most common in practice are: the purchase contract for a house, the purchase contract for an apartment, purchase contract for a plot of land. The purchase contract is usually drafted by a lawyer or law firm.

Elements of the purchase contract

Elements of the purchase contract can be divided into two categories: essential and secondary elements. Essential elements include those without which the contract would be null and void, and these are:

  1. Object of the purchase - the purchase contract of real estate as the object of the contract contains a detailed description of such real estate (apartment, house, plot), where it is of great importance to accurately describe it, i.e. to state which type of real estate is in question, the number of the public registry parcel under which the real estate is registered, the place and address of the real estate, area and other information to individualize the object of the sale.
  1. Purchase price - If the purchase price is not specified in the contract, the contract is null with certain exceptions. It is important to note that funds for amounts greater than 10,000 euros must be paid through the bank transfer, not in cash because the payment of more than 10,000 euros in cash is a misdemeanor.

Moreover, the purchase contract of real estate, in order to be implemented, must contain a clause according to which the seller allows the buyer to register property rights in the real estate public registry or cadastre. This provision is called the clausula intabulandi. Therefore, only immovable property is registered in the real estate cadastre. The competent real estate cadastre service registers the buyer as the owner of the real estate when the purchase contract for the apartment, house, plot, or other real estate is handed over to the public registry. The right of ownership of real estate is acquired only by registration in the cadastre, i.e. the buyer becomes the owner when he or she is registered and entitled to the right of ownership over the real estate. Until such registration in the cadastre, the seller is considered the owner, although there is a signed purchase contract. A useful piece of advice for the buyer is to check the seller's property rights before handing over the funds and signing the purchase contract. On the official website of the real estate cadastre, it is possible to check the ownership of the real estate in question, because all immovable property is registered in the cadastre.

In addition to the most common form, which is a contract for the sale of real estate, the contract for the sale of goods is common in commercial relations. Depending on what is being bought, the contractual provisions that are important for the relationship between the buyer and the seller also depend. In any case, the purchase contract serves to transfer the seller's property rights to the buyer.

In addition to the above key provisions without which the contract of sale would be null and void, there are secondary elements of the purchase contract in the commerce, as follows:

  1. Deadline, place, and manner of delivery of goods
  2. Deadline, place, and manner of payment for goods
  3. Delivery costs
  4. Quality and quantity
  5. Taxes, fees, and other expenses
  6. Documentation
  7. Warranty
  8. Passing of risk
  9. Possibility of termination of the contract and its consequences
  10. Jurisdiction

It is useful to properly draft the contract and who will bear the costs of concluding and implementing the purchase contract. This is, for example, the fee of the notary public for the certification of the contract, the fee for drafting the contract charged by the attorney at law or the law office, which drafted the text of the contract. One of the costs is the eventual tax on the transfer of property rights, and the eventual capital gains tax, as well as the fee charged by the competent real estate cadastre service for the registration of property rights.

One of the basic obligations of the seller is to hand over the subject matter of the contract of sale to the buyer. Such an act depends on the circumstances whether the subject matter of the contract is a movable property or real estate. The right of ownership over movable property is acquired by gaining physical possession of it, and this can be done in two ways:

  1. physically (by handing over the subject of the contract "hand in hand")
  2. symbolic (for example handing over car keys)

When it comes to a contract for the sale of real estate, due to the nature of the subject matter of the sale, this act is taking possession. It is useful that the purchase contract regulates the question of when the buyer will take possession of the real estate, i.e. when she or he will start using it.

There is a special provision of the purchase contract that protects the buyer from any kind of burden over the object of the contract. Simply put, there is the seller's guarantee that the subject matter, e.g. apartment, is not already sold to someone else, or that he or she did not mortgage it.

The nullity of a contract for the sale of real estate implies that the contract is opposed to imperative regulations, public order, and good customs. Such a contract has no legal effect. It is important to note that the contract of sale may be absolutely or partially null and void. In the case of absolutely null and void contracts, both contracting parties are obliged to return to each other everything they received based on the contract. Partial nullity does not imply the nullity of the entire contract, but only certain provisions, which are not a condition for the existence of the contract.

The purchase contract can be terminated. One of the ways of termination is amicable termination when both contracting parties voluntarily decide to withdraw from the contract. However, the termination of the contract can also be unilateral in cases such as when one of the contracting parties fails to fulfill an obligation. The contract may prescribe special conditions for termination of the contract, different from the conditions prescribed in the law.

One of the useful provisions of the contract is which court or other institution will resolve a possible future dispute. When it comes to the purchase contract of land, apartments, and real estate in general, the court, in whose territory the immovable property is located, has jurisdiction. When it comes to the contract of sale for movables, e.g. buying and selling goods in the commercial relations, it is useful to agree on an institution that will resolve the dispute, which is not a court. Often, it is commercial arbitration, so a possible future dispute is resolved in an arbitration procedure, which is much faster than a court procedure.

The parties often try to find an example of a contract for the sale of real estate on the Internet. This can be detrimental to the interests of the contracting parties as many of the above provisions may remain unresolved or the purchase contract may prescribe many vague provisions. It is best to leave such a complex contract to an experienced lawyer, to avoid unnecessary mistakes that could lead to serious consequences.

This blog is for informational purposes only and does not constitute legal service, as each situation requires a commitment to the specific circumstances of an individual case, which may be different from others.

For legal assistance, tailored to your needs, contact the Law Office Pekić at: pekic@attorney.rs

Author: attorney at law Stefan Pekić, law office Pekic