Trade and commercial contracts

Privredni Zakon

The vast amount of disputes between legal entities (contractors, subcontractors, suppliers, agents, etc.) arise from unclear articles of commercial contracts, most often downloaded from the Internet. You can prevent this by having a lawyer draft a contract for you in a commercial relationship. Law office Pekić concisely and precisely drafts or reviews your contracts and other statements assesses the risk and distributes it in accordance with your intentions. Commercial contracts represent a category that is regulated by various laws and regulations.

Law on Obligations in Serbia and commercial contracts

The Law on Obligations as the basic contract law regulates many commercial contracts:

1. Sales contract

A sales contract is not exclusively a commercial contract. However, the contract of sale is the most common contract in general. Every time a company (legal entity) or a sole proprietor issues an invoice and sells its goods, that entity actually concludes a verbal sales contract. If the goods are delivered damaged, such non-conformity is regulated by the Law on Obligations. If there is envisaged continuous cooperation or a larger amount or volume, it is useful for the legal entity to conclude a written sales contract with its customer, in order to precisely regulate the relationship.

2. Power of attorney (authorization)

Although a power of attorney is not a contract, but a unilateral declaration by the person providing the power of attorney, it is necessary to point out that a power of attorney is a very common statement. With the power of attorney, the principal authorizes the attorney to perform certain legal actions for the principal. A power of attorney is often given for the conclusion and certification of real estate purchase and sale contracts, for signing contracts for the sale of goods, and for representation in proceedings before a state authority.

3. Agreement on commercial representation

This contract is concluded by the principal legal entity with its representative in a certain area of work and on a certain territory. The representative is most often authorized to conclude contracts on behalf of the principal through whom the goods or services are sold. The difference between commercial representation and intermediation is that the commercial representative is more closely related to his client and is usually authorized to conclude the contracts themselves on behalf of the client, while the intermediator only connects the client with potential customers or collaborators.

4. Intermediation Agreement

The contract on intermediation is a very common contract in practice, where the intermediator connects the seller of certain goods or services with the customers, in order to conclude, mainly, the contract of sale. It often happens in practice that contracts on intermediation are downloaded from the Internet and do not regulate every important issuebetween the intermediator and the principal (seller of goods or services), so the disputes arise before the court, where the outcome depends on the interpretation of an imprecise contract.

We devoted much attention to the key provisions of the agreement on intermediation in international trade in the BLOG.

5. Loan Agreement

A loan agreement is not exclusively a commercial agreement. It can also be concluded between natural persons outside of commercial activity. What is specific about loan contracts in commerce is that the interest is assumed, that is, the borrower is obliged to return the borrowed amount increased by the appropriate interest, even if this is not specifically agreed upon.

6. Guarantee

A guarantee is one of the basic means of securing a claim. For example, when a client takes out a loan, the bank often requests another third party as a guarantor, that the loan will be paid. The guarantor obliges to certain performance, e.g. payment, if the principal debtor fails to fulfill his or her obligation to pay a certain amount.

This method of securing a claim is extremely common because of its practicality and affordability. The guarantee contract must be concluded in writing, but notarization is not necessary, so the costs of the guarantee, as a means of security, are low.

7. Pledge agreement - mortgage

A mortgage is also one of the most common and safest means of securing a claim in Serbia. A pledge on the movable property enables the creditor to sell the pledged item and collect his or her claim, in case the debtor fails to fulfill his obligation. A mortgage is a pledge on immovable property. Therefore, if the debtor does not fulfill his obligation, the creditor can sell the pledged immovable property and collect his or her claim from the collected price in the name of the sold immovable property. The mortgage is based on the mortgage contract or the debtor's unilateral notarized statement. Although the pledge is defined by the Law on Obligations, the Law on Mortgage regulates the mortgage as a means of securing a claim in a more detailed manner.

8. License Agreement (Software License Agreement)

In Serbia, a license agreement allows the intellectual property owner, e.g. of the patent, to allow the use of his patent to a third party, in exchange for an agreed fee. In modern times, the software is most often licensed. Startups and companies that develop software as a service (Eng. SaaS) especially use a license to enable the use of their software to their users for an agreed fee, which can also be reflected in a subscription.

Legal protection of software in general is a complex topic, which is scrutinized in a separate blog.

9. Construction contract

A construction contract is a common commercial contract in the construction industry, in which the investor concludes with various contractors and subcontractors for the construction of a building or other facility. Since there are frequent delays in the execution of works, and investors have an obligation towards buyers to complete the apartments within the promised period,investors should implement a liquidated damages provision for delays in the execution of works in their construction contracts.

10. Contract of carriage

The transportation of goods is the essential activity of the modern international trade of goods. Through transport, the goods reach customers and the sale of goods and their placement on the market is facilitated. From the point of view of the transporter, as well as from the point of view of the transport orderer, it is important to ensure appropriate conditions of cooperation, especially in case of sudden changes in the price of fuel. A contract of carriage may contain unprofitable conditions for one party, if the cost of carriage changes suddenly, and no price change has been agreed upon in that case.

These are the most common commercial contracts regulated by the Law on Obligations (ZOO) of Serbia. In addition to these, the Law on Obligations also regulates forwarding, storage contract, contract for inspection of goods, insurance contracts, and credit contracts. In addition to the above, there are also contracts in business that are not regulated by the Law on Obligations, although they are very common in practice.

Non-disclosure Agreement (NDA) in Serbia

Almost every company has its trade secrets. The success of a business often depends on the fact that the company has some knowledge that others do not have, which puts the company in an advantageous position. Trade secret protection is implemented through a confidentiality agreement (NDA - Non-disclosure agreement). A confidentiality agreement is concluded with employees, consultants, external contractors, and anyone who is familiar with confidential information and who, by disclosing confidential information to third parties, may damage the company. The confidentiality agreement usually contains liquidated damages that the signatory will pay in case he discloses confidential information to third parties.

Consulting Services Agreement

A contract for consulting services is a common business contract, especially when it comes to startups in the early stages of development. Consultants most often help startup founders to properly organize their development, draft pitch decks, and arrange their relationships within the startup, as well as promote their startup in order to raise capital from investors. Consultants are not a rare phenomenon even in multinational corporations. When a certain aspect of a corporation's operations is not functioning as the shareholders and management would like, a consultant is hired to point out the deficiencies. The relationship between the consultant and the client (startup, corporation) is complex and, in Serbia, is regulated exclusively by the contract on consulting services. The precise arrangement of those relations in advance is crucial in order to avoid misunderstandings and interruptions of cooperation.

Promissory note and authorization to fill out a promissory note

A promissory note is an important means of securing a claim that enables fast and efficient collection of a monetary claim. A blank promissory note is most often made in those cases, where the debtor signs the promissory note, without inputting the amount of the future debt, which is still unknown, and authorizes the creditor to fill out the promissory note with the amount and theother necessary inputs and use it to collect claims in case the debtor does not fulfill his or her obligation. The promissory note makes it possible not to file a lawsuit and hold a hearing because that part is skipped, but to submit a claim for enforcement directly without litigation and the enforcement procedure is carried out. A promissory note authorization for filling out the promissory note is necessary because the creditor is unable to fill out all promissory note elements on behalf of the debtor without this authorization, which makes the promissory note incomplete.

Franchising Agreement in Serbia

There are many definitions of franchising. The most common definition is the following: Franchising is an agreement by which the owner of a business entity grants a license to one or more parties to conduct business using the same trademarks, trade names, clothes, and other identifying aspects of the business, business secrets, know-how and more.

Franchising in Serbia is not such a rare contract. What is significant considering the importance of franchising contracts is the fact that this contract is not defined by any regulation in Serbia, as well as in many other European countries. Therefore, if someone wants to conclude a franchising agreement with a well-known international cafe or restaurant, all rights and obligations are regulated only by that franchising agreement, which is why the franchising agreement must be drafted by a lawyer who will take care of your interests.

The advantages and disadvantages of franchising are not mutually exclusive. The advantage of franchising is that you start a business where you immediately have a brand, users, and way of doing business and preparing food or drinks. The disadvantage is that a substantial initial capital is required to be paid off before opening a franchise facility and that you give part of the income to the company that owns the brand and with which you have a contract.

Smart contracts

Smart contracts in Serbia are prescribed in the Law on Digital Assets. The Law on Digital Assets prescribes the definition of a smart contract: "a computer program or protocol, based on distributed database technology or similar technologies, which, in whole or in part, automatically executes, controls or documents legally relevant events and actions under the already concluded contract, whereby that contract can be concluded electronically through that program or protocol". The law enables the use of smart contracts in the trading of digital assets and obliges the service provider related to digital assets to obtain the client's consent if it provides services that include the use of smart contracts. The law also regulates the contract on the pledge of digital assets and states that this contract can also be executed using a smart contract.

Attorney for commercial contracts in Serbia

The law office Pekic provides legal assistance for the purpose of the drafting of all the above-mentioned contracts in the commerce and negotiations regarding the conclusion of one of them. If you need legal assistance to draft a contract regarding your business or you are interested in the estimated price charged by our law office, feel free to contact us at [email protected], by filling out the contact form on the website or via Facebook messenger or Linkedin.