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The commercial sale under the Bulgarian Commerce Act

Commercial sales are governed in Art. 318 – 341 CA. A commercial sale is a sale which constitutes a commercial transaction pursuant to the provisions of this Act (e.g., speculative sale). The CA explicitly states in Art. 318 (2) that a sale the subject of which is an item for personal use and where the buyer is a natural person, is not a commercial sale. In this case the provisions of the Obligations and Contracts Act (OCA) apply. Doubt could arise where a commercial sale is concluded by a sole trader (ST).

Typical for commercial sales is that their subject are mainly goods.

In the event that there is no agreed time period on the transfer of the goods under the commercial sale, the buyer may request a transfer within a reasonable period.

A specific feature of commercial sales is also the place of performance and location of delivery of the goods. The parties may agree on the place of performance, or for a third party to determine the place of performance, assuming that if the parties have not agreed to anything, civil law shall apply – Art. 68 OCA.

Upon conclusion of the transaction parties may invoke the relevant provisions of fob, cif, cib etc., regulated in the INCOTERMS or the United Nations Convention on Contracts for the International Sale of Goods. These rules define the location of delivery, lay down the passage of risk, may provide for compulsory insurance of the goods. They are most often used in international sales. Regarding the place of delivery is applied the so-called franco clause (i.e. the seller is deemed to have fulfilled their obligation when they deliver the goods at the agreed place - warehouse, factory, etc.).

The commercial sale price may not have been agreed by the parties in which case the usual price is due. The parties could include the clause "at current prices" (i.e. market or stock exchange prices). If one is selling generic items, the cost can be determined by weight - by deducting the weight of packaging (the so-called tara). In accordance with commercial usage the tara is a certain percentage of the transaction value. In practice, the price is usually further reduced by deducting the corresponding percentage for the so-called "firi" - loss or damage of goods.

Obligations of the buyer include:

  • pay the price upon delivery of the goods or of the documents entitling him to receive the goods, unless otherwise agreed (Art. 327 CA);
  • obligation to receive the goods;
  • in the event that the buyer does not approve the goods, then the obligation arises for him to store it with due diligence until further instructions by the seller;
  • inspect the goods in the course of time as necessary in view of the circumstances, and where the goods fail to meet the requirements, he shall immediately notify the seller. If the buyer fails to do so, the seller shall only be liable for hidden defects. (Art. 324 CA).

Obligations of the seller:

  • to transfer ownership over the subject of sale;
  • to deliver the goods by the deadline and where no such deadline exists - within a reasonable time period;
  • to issue an invoice, as well as other documents, if so agreed between the parties (Art. 321 CA);
  • to provide service according to the commercial practice (Art. 322 CA).

 

Particular types of commercial sales

  1. Transit sale, governed by Art. 329 CA.

Here the parties may agree, upon conclusion or afterwards, that the seller deliver the goods to a third party indicated by the buyer. Under this type of sale additional duties arise borne by the seller, found in Art. 329 (2):

  • notify the buyer of the forwarding of the goods to the third party;
  • send the buyer copies of the documents accompanying the goods, also sending the said documents to the third party;

According to the CA, the price can also be paid by the third party, but the seller can claim the said price only from the buyer.

  1. Distance sale – where the goods have to be forwarded to a place other than the place of delivery, the costs pertaining to forwarding and transportation shall be on account of the buyer.

According to Art. 330 CA, the seller undertakes the costs of loading and transportation, if delivery has been agreed franco a specific point other than the point of delivery.

The costs pertaining to forwarding and transportation, as well as the distribution of other costs related to the performance of the contract, may be determined by reference to the general terms stipulated by international and other institutions.

  1. Sale with additional specification (Art. 331 CA) – it is characterized by the fact that the parties agree on a period in which the buyer can specify the subject of the sale. In case of delay by the buyer, the seller is entitled to the legal right to specify the subject of the sale or to repudiate the contract.
  2. Sale with periodic performance (Art. 332 CA), which is a sale with periodic supplies of goods of the same type. The law provides that the seller may perform in advance, what has been given in excess during the preceding period, which shall be deducted from what is due.
  3. Sale with buy-back clause (Art. 333 CA) – in this case the seller transfers the goods to the buyer, such that under certain conditions the latter is obliged to return the ownership of the goods to the seller. A valid transaction needs to be concluded in writing, and it must stipulate the time period within which the seller may exercise their right to buy back the goods. After such period expires, the right of repurchase lapses.
  4. Sale with advance payment of the price (Art. 334 CA) - here the agreement for advance payment of the price must be in writing. If the seller does not transfer the goods, the buyer may claim the interest on the price paid as well as actual transfer of the goods, or alternatively to cancel the contract and receive double the price paid.
  5. Installment sale (Art. 335 CA) – the installment sale contract must be concluded in writing. It may be repudiated in case of non-payment of contributions that exceed one fifth of the price of the goods. If the sail fails due to default by the buyer, the seller may also claim compensation. The provisions under the OCA also apply.
  6. Sale of goods by assignment of a negotiable instrument, governed by Art. 336 CA - here the seller is relieved from the obligation to deliver the goods by assigning the negotiable instrument to the buyer, which in turn materializes ownership over these goods. The transfer of negotiable instruments replaces the factual transfer of the goods. Such function is performed by the negotiable instruments by materializing ownership rights (bill of lading, bills and warrants, respectively stock records as part of the warehouse warrant). Unless otherwise agreed, the price is due at the time of transfer. This means that it is due at the place where there is any such transfer.

 

Public auction sale

The public auction sale is governed by the Bulgarian Commerce Act(Art. 337-341). In this type of sale an indefinite number of people is invited to conclude the sale, announcing it in at least one daily newspaper. The notice should contain the terms of the auction such as time and place, the initial price, or the so-called bidding step. A public auction sale is carried out by submitting bids by the bidders to the person who directs the auction, indicating that this person may be the seller himself, however, in most cases it is a person authorized by the seller. According to Art. 338 CA, a participant in the auction shall be bound by his proposal in compliance with the terms of the auction. The law does not impose limits on the amount of the bidding step. The contract for auction sale is considered concluded from the moment when the head of the auction announces the highest bidder. Normally in practice the head repeats the highest bid 3 times (this must be stated in the terms of the auction). The award made by the head of the auction is an informal statement. The buyer shall be bound to pay the price immediately, unless otherwise provided by the terms of the auction. The seller may cancel the contract if the buyer fails to fulfill this obligation (Art. 340, sentence 2 CA), with no need for prior notification.

Art. 341 CA stipulates that an auction sale concluded as a result of acts contrary to the law or good morals may be declared null and void upon the request of any interested party, within ten days following the assignment. In the case of an action for payment of the price, the buyer may demand nullification of the sale by means of an objection.