Estonia 109 - Concluding Contracts

  • It is time for the next installment in our introduction to Estonia series. This time, we welcome you to a short introduction to Estonian contract law. Enjoy!

    Freedom of Contract

    Parties to a contract are usually free to agree on any terms they wish. If statutory law provides for mandatory terms, such terms, of course, prevail. Where there is no express agreement, the rights and obligations of the parties arise from the law in statutes, established trade practice between them and terms customary in the industry.

    Oral Contracts, Notarised Contracts

    Oral contracts are generally valid. However, the law may require that certain contracts are in written form (e.g. certain consumer credit agreements) and even notarised (usually contracts relating to real estate). E-mail would not qualify as a written agreement. On the other hand, an exchange of facsimile signatures may. The law may require that certain agreements are made in a form that can be reproduced in writing (in such cases, e-mail correspondence is sufficient). See also “Owning Property and Taking Security” and “Employing Workforce”.

    Commonly, contracts are concluded with an electronic signature.

    Standard Terms

    Estonian law prohibits and renders void contractual standard terms (i.e. terms that have not been negotiated between the parties) that are overly imbalanced in favour of the party using such terms. The statute provides for a non-exhaustive list of such terms, involving a ban on limitations on the use of legal remedies, excessive prepayment obligations, excessive penalties, shifting the burden of proof, unilateral changes of contractual terms,commitments to conclude further agreements, unreasonably long notice periods, etc. Standard terms must be clear and understandable to an average contractual counterpart.

    While illegal standard terms presented to consumers are per se void, similar terms used between business partners may be enforceable if the party using the standard terms is able to prove that the terms are not overly imbalanced.

    Governing Law

    Parties are usually free to subject their contract to foreign law. Foreign law is not applied by Estonian courts, if it contradicts public order (i.e. the most important constitutional principles such as the ban on slavery or servitude and similar prohibitions). It is also not possible to contract out from certain mandatory law provisions of Estonian law by using foreign law as the governing law (especially in the case of consumer contracts and employment contracts).

    Choice of Venue

    Estonian law generally allows the parties to a contract to choose the venue, which has jurisdiction over the contract as long as the chosen venue is an EU/EEA country. Arbitration agreements are also generally enforceable.

    **Key statutes: **
    Law of Obligations Act 2002
    International Private Law Act 2002
    Code of Civil Procedure 2006
    Brussels I Regulation recast (1215/2012)

    Information posted above is intended as a general guide and does not constitute legal advice.

  • legal 12 civil law 1 law 11 contract law 1
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