Contract law is a system of rules that governs legal matters related to the existence or termination of contractual relationships and the enforcement of rights arising from contracts. Every system of rules represents a harmonious organisation of interconnected elements within a unified order, at the top of which are principles;2 in this case, the fundamental principles of contract law. The ability of individuals to enter into voluntary agreements regulating their mutual economic exchange is the essence of any free market economy. For the proper functionality of such voluntary agreements, the law regarding them is critical. Contract law thus establishes rules for the exchange of claims and entitlements and also determines the scope of benefits arising from mutual exchanges that society can enjoy.3
Contract law is part of the law of obligations. The law of obligations, as a branch of civil law, encompasses the body of legal rules and principles that regulate obligations. An obligation is a civil law relationship in which one party (the creditor) is entitled to demand that another party (the debtor) perform a specific act of fulfilment, while the other party (the debtor) is obliged (bound) to perform that act. Based on the legal fact that constitutes the legal basis for the creation of obligations, these relationships are divided into non-contractual and contractual obligations.
Non-contractual obligations arise directly from the law, independently of the will of the affected party. Examples of non-contractual obligations include liability for damages (e.g., liability for injury caused by slipping on a wet floor), obligations arising from unjust enrichment (e.g., compensation for the inability to use co-owned real estate), and management of another’s affairs without mandate.4 These relationships are not the subject of detailed discussion in this work.
Contractual obligations, on the other hand, arise from legal transactions. A legal transaction can be defined as a declaration of intent made by a party (the person expressing intent) with the aim of creating, modifying, or terminating a specific civil law relationship in which the party is involved, provided that the conditions prescribed by law for the creation, modification, or termination of that civil law relationship are met (e.g., Person A accepts an offer to purchase a car).5
Based on the legal effects they produce, legal transactions are divided into obligatory transactions, which create obligations and rights; dispositive transactions, which transfer obligations, property rights, or other proprietary rights (e.g., transfer of ownership rights); and corporate transactions, which create, modify, or terminate corporate legal relationships.6
Obligatory legal transactions are further divided into bilateral and unilateral transactions. Bilateral (obligatory) legal transactions are those that require the mutual consent of both contracting parties for their conclusion. Such transactions are contracts (e.g., a car sale contract). With the valid conclusion of a contract, (obligatory) rights and obligations of the contracting parties arise. For a contractual (commercial) obligation to be established, both parties must express their intent with identical content regarding the essential elements of the contract and other (mutually significant) autonomous legal rules governing their contractual relationship.7 Unilateral obligatory legal transactions are those that create or terminate a legal relationship (rights and obligations) based solely on the declaration of intent by one of the parties (subjects) involved in the legal relationship (e.g., the exercise of a right of withdrawal results in the termination of the contract).8
