Commercial transactions in Bulgaria
A commercial transaction is a form of civil legal transaction, however, it has some special characteristics. The commercial nature of the transaction is determined by the parties to it, i.e. traders, or by the particular type of transaction (the Commerce Act exhaustively lists in Art. 1 (1) transactions which, although concluded by non-traders, are still commercial transactions and their conclusion by occupation gives commercial status of the parties thereto).
Its conclusion represents the implementation of a factual transaction with a view to invoke the parties’ desired legal consequences. The relevant civil law rules apply in terms of commercial transactions. What is needed is an offer and acceptance, such that the essential elements of the offer, the possibility of withdrawal, its acceptance, the timing and place of the conclusion of the agreement in principle are all governed by the rules of the Obligations and Contracts Act (OCA). When the offer or the acceptance is carried out in electronic form, the rules of the Electronic Document and Electronic Signature Act (EDESA) apply, where the legislature allows the relevant statements to be made in electronic form if the addressee of the statement is obliged, under the legal provisions, to receive electronic statements, or when based on unambiguous circumstances it can be considered that the addressee of the statement agreed to receive statements electronically. The general provisions of the Commerce Act regulate the features of commercial transactions. There is a possibility for the offer to not be addressed, i.e. addressed to an indefinite number of persons. This non-addressed offer is called a public offer. There are two related requirements - contain quantity offered and the time period for which the offeror is bound. This does not mean that it cannot specify a price. Subject of the public offer may only be fungible items.
Art. 290 CA also governs the public invitation – announcement made by price lists, catalogs, tariffs or otherwise, through the media or otherwise for making a real offer. It binds the offeror, whereby for that person also arises a pre-contractual obligation to accept the proposal made in accordance with the terms of the offer. If the offeror unduly refuses to accept the proposal, they owe damages to the respective party. The burden of proof lies with the offeror to provide evidence that there was a substantial reason for not accepting the proposal.
According to the CA, silence on the part of the trader is seen as acceptance of the conclusion of the transaction. In order to implement this statutory presumption, the parties to the future transaction need to be in a permanent trade relationship (repeated contracts of the same type of deals concluded so far). The proposal should not be explicitly rejected immediately, i.e. within a reasonable time, and no specific form is required. An obligation arises for the person who rejected the proposal to protect and preserve the goods delivered with due diligence. This obligation does not arise, however, if they are not secured against the costs that they would have incurred, or the preservation of the goods would cause greater discomfort than usual.
Commercial transactions may be concluded either personally or via a representative, such representative is required to have a representative authority arising by law or on the basis of the authorization transaction. It is possible for the person acting on behalf of the trader to act without authorization. Art. 301 CA provides that where a person acts on behalf of a trader without authority for representation, it shall be deemed that the trader confirms such actions provided he has not objected immediately after learning of them. The objection should be explicit without needing any specific form. Art. 301 CA is applicable to all acts committed on behalf of the trader, incl. contracts of employment.
In certain cases, the legislature determines the conclusion of commercial transactions by approval or authorization by a public authority. The lack of approval or authorization does not allow the deal to produce the desired legal effects by the parties, where the party responsible to request approval or authorization should inform the other party thereof, with due diligence.
When concluding commercial transactions, according to Art. 292 CA, parties may have agreed with third parties to identify individual clauses in the contract. In the event that the third party does not do so, either party may request the court to fix these arrangements. Judicial intervention in determining the content of a commercial transaction can also be invoked in cases where the parties have agreed, upon the occurrence of additional conditions, to amend the contract but an agreement is not reached thereto. In such a case, either party may request the court to amend the contract (by filing a claim). The court must be guided by the objectives of the contract, its remaining content and commercial practices. Here it does not rule on the legality, but rather on the expediency.
The law allows the parties to agree that the deal will create valid legal consequences if confirmed by a third party. There is no form required, but the parties can agree on such. If within three months the person has not confirmed the transaction, no legal consequences follow therefrom.
Special laws regulate some specific rules regarding a business transaction - they concern the determination of the counter party on the deal, or the manner in which to identify part of the clauses of the transaction (e.g., Public Procurement Act, State Property Act, Municipal Property Act).
Form of commercial transactions
Commercial transactions are generally concluded orally. The legislator has provided a written form for certain transactions (e.g., check, bill of exchange, insurance contracts, bank transactions, transport contracts). Parties may also agree on a form of actuality of transactions, and or on a stricter form than the one provided in the law. However, they cannot relieve the form. In civil law, the written form is considered concluded, if the parties outline their wishes in a written document and ending with the signatures of both parties. In commercial law, the following differences can be found: the written form is considered satisfied when the wishes between the parties are carried out in a technical way, allowing their reproduction (eg., videoconferencing, cameras, recorders, negotiations conducted by video-conference, by telex or fax). The legislator equates the electronic document with the written document. Where the legislator has foreseen a certain form, it is considered satisfied when the electronic document is issued. The electronic document can be reproduced an unlimited number of times, there is no difference between copy and original.
It is important to bear in mind that the form established by the parties or the law is applicable to the transaction’s conclusion and performance (the performance being noted in the handover protocol) regarding the amendment or termination of contract.
The Bulgarian legislator also regulates the transactions under general conditions in Art. 16 OCA, Art. 298 CA, Art. 186 of the Insurance Code (IC) and the Consumer Protection Act. The general conditions are imposed where it is necessary to standardise the content of commercial transactions. The legal framework is found in the IC, CPA.
They are commonly used in the relations between a trader and a non-trader. The general conditions are predefined stipulations set by one party to the transaction, containing the recurring elements of the respective transaction. These general conditions can determine almost the entire content of the transaction or only some specific arrangements. They are freely formulated by the party providing the service. There are cases where the general conditions are formed under administrative control (e.g. Art. 149 Energy Act). Along with the general conditions, the contract may contain individual conditions, such that in case of discrepancy or contradiction between the common and individual circumstances, the legislature gives priority to the individual.
The legislator has provided safeguards for the benefit of the party, who is offered general conditions:
- the minimum content of the general conditions is in many cases determined by the legislature (e.g. Energy Act, Consumer Credit Act, Insurance Code, etc.);
- regarding the contracts in general terms, they cannot (according to the Consumer Protection Act) contain the so-called unequal clauses/provisions that are harmful to the consumer. In the event that such provisions have been included, they are null and void, i.e. not binding on the consumer and their nullity does not involve the nullity of the transaction at OU, if it can be applied without them.
Execution of commercial transactions
The execution represents the realisation of the due result. In commercial law the relevant principles of civil law apply to the execution:
- execution must be timely, i.e. fulfilled in the stipulated time, quality, quantity, packaging;
- principle of actual execution - in case of delay on part of the debtor, they only owe the initial amount;
- principle of good faith.
A specific feature of commercial law is the higher standard of duty of care - the care that an honest and experienced trader of the same branch of the commercial area usually undertakes in the performance of their duties. An argument in favor of the requirement for a higher standard of duty of care is the fact that the trader has professional knowledge. Bulgarian legislature has taken account of the specificities of the relevant trade, and this is reflected in the requirements in special laws regarding the care of some traders (eg., care of a good banker). According to Art. 303a CA, parties to a commercial transaction may agree on a deadline for the implementation of the monetary obligation of not more than 60 days. A longer term may exceptionally be agreed when required by the nature of the goods or services or other substantial reason, if this is not grossly unfair to the creditor and is without prejudice to good morals. When one of the parties is a public contractor, the implementation deadline is 30 days, and it may be extended to no more than 60 days if there is mutual consent. In the event that no such agreement exists on the implementation period, the payment must be made within 14 days of receipt of the invoice or call for payment or, at the latest, 14 days of receipt of the goods or services (Art. 303a (4) CA). These rules also apply in respect of transactions with craftsmen and persons performing personal services as well as freelancers. Outside the scope of the law in this part remain certain cash obligations, obligations under bankruptcy proceedings and damages (incl. insurance benefits) (Art. 303a (5) CA). The CA also provides for new sanctions for failure to comply with the statutory payment period or the one agreed between the parties. They are regulated in Art. 309a CA. According to this text, the creditor is entitled to compensation at the statutory interest rate from the date of default as well as compensation for the costs of collection of no less than BGN 80, without the need for an invitation for payment. For this right in favour of the creditor to arise, the only requirement they need to fulfil is to have fulfilled their obligations. Further, the law provides for the possibility of limiting the liability of the debtor, but only by virtue of good morals and under the condition that the interest of the creditor would not be explicitly prejudiced In this case, the agreement would be invalid and will not have legal effect between the parties.
It is assumed that the debtor is obliged to execute throughout the working day, and the creditor should provide the opportunity for acceptance of execution within the working hours.
According to Art. 294 CA, interest among traders is due, unless otherwise agreed, unlike civil law, where interest is due only if agreed.
A feature of commercial law is that persons who undertake a joint obligation upon conclusion of a commercial transaction shall be considered joint and several debtors, unless the parties have explicitly excluded joint liability or this is evidenced by their actions (Art. 304 CA).
Another difference with civil law is that no transaction concluded between traders can be declared invalid because it was signed under clearly unfavorable conditions.
Pursuant to Art. 305 CA, where payment is effected through debiting and/or crediting bank accounts, any such payment shall be deemed to be perfected at the moment of crediting the debtor’s account or by means of payment of the amount of the obligation to the creditor.
Non-performance of commercial transactions
Non-performance is in effect failure to perform the due result. Forms and regulation of non-performance in civil law also apply to commercial law.
Commercial law governs several institutes, which are not provided in civil law:
Force majeure is governed by Art. 306 CA, according to which a force majeure is an unforeseen or unavoidable event of an extraordinary nature which has occurred after the conclusion of the contract. A debtor in a commercial transaction is not liable for failure to perform due to force majeure. Where the debtor was already in default, they may not invoke force majeure. A debtor who cannot perform due to force majeure shall notify the other party in writing within a reasonable time about the nature of the force majeure, and its potential consequences for the contract. In case of failure to notify, compensation shall be due for the damages resulting from such failure. The performance of obligations and the related counter-obligations are suspended for the duration of the force majeure. Should the duration of the force majeure be such that the creditor loses their interest in the performance, they are entitled to terminate the contract. The debtor enjoys the same right.
Art. 307 CA governs business frustration, i.e. where such circumstances occur which the parties could not and were not obliged to foresee, and where the preservation of the contract would be contrary to fairness and good faith. In those cases the law provides one of the parties with the opportunity to request a court to modify or terminate the contract entirely or in part.
The principle of earnest money (Art. 308 CA) entitles the party which has given or promised something upon conclusion of the contract to back out or renounce the contract, if its performance has not yet commenced. In those cases the party which has backed out shall be bound to pay earnest money, and if they have given such earnest money upon conclusion of the contract, the party shall forfeit it. When the contract is executed, the earnest money shall be paid back or set off. It shall also be paid back in the event of termination of the contract by mutual agreement.
Another distinctive feature of commercial transactions concluded between traders is that the liquidated damages due thereunder may not be reduced on grounds of excessive amounts, as is the case in civil law (Art. 309 CA).