For the conclusion of a contract, a specific form is generally not required (the principle of consensualism), unless the law mandates a particular form or the parties agree to it. The will to conclude a contract can be expressed through words or other conclusive, active behaviour,¹²⁶ which means that an orally concluded contract is valid.

The OZ prescribes the written form as a condition for the valid conclusion of the following contracts: a contract by which ownership rights to real estate are transferred or another property right to real estate is established (e.g., a mortgage), a construction contract, a licence agreement, an allotment contract, and an instalment sales contract. The legal requirement for a contract to be concluded in a specific form also applies to all its subsequent modifications or additions. However, later oral amendments regarding ancillary points not covered by the formal contract are valid unless they contradict the purpose for which the form was prescribed. Later oral agreements that reduce or ease the obligations of either party are also valid if the special form is prescribed only in the interest of the contracting parties.¹²⁷

The contracting parties may agree that a special form is a condition for the validity of their contract. A contract for which a special form has been agreed upon can be terminated, supplemented, or otherwise modified through an informal agreement. If the contracting parties agreed on a special form merely to ensure proof of the contract’s conclusion or content or to achieve another purpose, the contract is considered concluded once an agreement on its content is reached, and both parties are simultaneously obligated to provide the contract in the agreed form.

A contract that is not concluded in the prescribed form is void unless the purpose of the provision requiring the form indicates otherwise. A contract that is not concluded in the agreed form is void if the parties have agreed that a special form is a condition for its validity.¹²⁸

The question arises whether the sanction of nullity also applies when a contract is not concluded in the prescribed form but has been fully executed. A contract for which a written form is required is valid even if it was not concluded in this form, provided that the contracting parties have fully or predominantly fulfilled the obligations arising from it, unless the purpose for which the form was prescribed clearly indicates otherwise.¹²⁹ This is known as the theory of realisation. Realisation, by which a formally incomplete contract can still be valid, is justified by the full or predominant performance of contractual obligations.

A notarial deed is a stricter form of formal requirement. The Notary Act (ZN)¹³⁰ prescribes which legal transactions must be concluded in the form of a notarial deed, namely:

• agreements on the regulation of property relations between spouses and cohabiting partners,
• contracts on the disposal of property belonging to persons who have been deprived of legal capacity,
• agreements on the renunciation of an uninitiated inheritance,
• other legal transactions which the law stipulates must be concluded in the form of a notarial deed.¹³¹

If these legal transactions are not concluded in the form of a notarial deed, they are null and void.¹³² The theory of realisation applies only in cases where a written form is required for contractual transactions, but it does not apply when a stricter formal requirement (the form of a notarial deed) has been violated. This means that an agreement that has not been concluded in the prescribed form cannot be validated (become valid), even if it has been fully or largely executed.

Exercise:

1. List the assumptions for a valid conclusion of a contract:

2. 17-year-old George was preparing intensively for his driving test a month before reaching adulthood, as he wanted to take the exam as soon as he became legally of age. At that time, he saw an offer for an expensive car at a dealership. He believed that such a purchase was favourable and reasonable since he would then have his own vehicle upon turning 18. He signed a leasing contract with the seller, committing to monthly payments of €600.00 for the next seven years. He did not inform his parents about the contract, as he believed he would earn enough through occasional student work to cover the monthly instalment.

• Has George concluded a valid legal transaction?
• What can the seller do to protect their legal position when they discover the next day that George is a minor?
• George’s parents found the purchase favourable and therefore approved it. Has the approved sale become valid?

3. Loredana really wanted Jacob to lend her his car for the weekend. Jacob refused because he knew Loredana was a poor driver. However, knowing that she would be very disappointed if he did not agree and that her disappointment would affect their relationship, he reluctantly stated through gritted teeth that she could take the car. Loredana was unaware of his concerns.

• Was the contract concluded? What was Jacob’s true intention?
• Would it affect the assessment if Loredana had known Jacob’s true intention?

4. George, as the seller, and Ethan, as the buyer, concluded a sales contract for a mountain bike. Some time later, Ethan discovered that the bike he had received and already paid for did not actually belong to George but to George’s brother, Mike.

• Is the sales contract valid?
• What can Ethan do?

5. The employer and the employee concluded a settlement regarding compensation for the damage the employee suffered while performing work duties. The employee signed the settlement out of fear because the employer forced him to conclude it by threatening him with a weapon.

Is the settlement valid? Justify your answer!

The employee signed the settlement due to the employer’s threat that, otherwise, he would terminate his employment contract.

Is the settlement valid?

6. Frank wants to buy a piece of land adjacent to his own to expand the garden in front of his house, which is situated on his property. While searching for information on neighbouring plots, he makes a mistake regarding the parcel number of his property. The correct parcel number of his property is 213/17 in the cadastral municipality of Šiška, but Frank mistakenly believes it is 212/17. Due to this mistake, he looks up a plot of land that borders the property with parcel number 212/17 in the cadastral records and concludes a sales contract with the owner of that property.

• Can Frank succeed in a lawsuit to annul the sales contract by claiming he was mistaken?
• What if the seller knew that Frank intended to buy the property adjacent to his own because Frank had informed him of this before the purchase?

7. A, as the seller, and B, as the buyer, concluded a contract in the form of a notarial deed for the transfer of a business share in company L. The contract states that the subject of the transferred business share includes the share in all the company’s assets as of the date of signing, along with all credit balances, receivables, and any debts of the company. The seller guaranteed to the buyer that he had correctly presented the financial and asset status of the company as the basis for determining the market value of the business share. In a parallel agreement, the buyer (B) committed to assuming a tax debt of €17,000 on the date of purchase. Later, it was revealed that the obligations of the sold company significantly exceeded the amount guaranteed by A. B then filed a lawsuit for the annulment of the business share sales contract, claiming that he was mistaken about the actual value of the business share (or the extent of the tax debt the company had to pay).

• Will the buyer succeed in his lawsuit for annulment of the contract? Justify your answer!
• Could the fact that the seller has already refunded the purchase price to the buyer be relevant in this assessment?

8. Peter deceived Anthony into signing a sales contract that he otherwise would not have agreed to. Before discovering the fraud, Anthony had already partially fulfilled his contractual obligation. However, he refused to pay the remaining purchase price and objected that the contract was invalid due to fraud. Peter argued that Anthony could no longer claim the contract’s invalidity because, by partially fulfilling it, he had implicitly approved it.

Who is right?

9. A and B are co-owners of the property ID… Essentially, it is a multi-apartment house with land. They concluded an agreement on the division of co-ownership. A received the draft contract several days before signing it at the notary’s office. A claimed that she was deceived when she mistakenly agreed that the bathroom and the hallway belonged to B. She argued that she had been using them herself, as she was the one who built the bathroom.

Will A succeed with a claim for annulment of the contract?

10. The defendant as the seller and the plaintiff as the buyer concluded a contract for the sale and purchase of a business share in the company S., Ltd., on February 11, 2002. The company S., Ltd., and the company E., Ltd., concluded a Management Agreement for E. (for the year 2000) on 31 March 2000. Both companies subsequently signed an Agreement on the Regulation of Relations Regarding the Management of E. on 28 June 2000, which concerned the division of management fee costs under the Management Agreement for E. They agreed that all payments would be made by S., Ltd., while E., Ltd., would reimburse them. On 13 June 2001, they then agreed that E., Ltd., would not reimburse S., Ltd., for the performance bonus. For the year 2001, S., Ltd., and E., Ltd., concluded a new agreement (Agreement on the Regulation of Relations Regarding Management …). They agreed on the same terms as those for the year 2000. At the end of 2001, both companies signed an annex to the agreement for 2001, once again agreeing that E., Ltd., would not reimburse S., Ltd., for the performance bonus for that year, either. The defendant informed the plaintiff of the existence of the management agreements but did not disclose the actual costs associated with management. The documentation detailing these costs was available at the headquarters of S., Ltd., and the plaintiff was informed of this. However, the plaintiff did not review this documentation nor request specific details regarding the management costs of E., Ltd. The plaintiff challenged the contract for the purchase of the business share in S., Ltd., claiming that the defendant had deceived them by withholding information that S., Ltd., was liable for the management costs of E., Ltd. Because S., Ltd., had to bear these management costs, its profits were significantly lower. The plaintiff argued that if they had known this, they would not have purchased the business share in S., Ltd.

• Will the plaintiff succeed in their claim for annulment of the contract? Justify your answer
• Why does legal theory and case law consider fraud to be a qualified form of mistake?
• Can a contracting party be deceived through the omission of facts that there is a duty to disclose?

11. A and B concluded a sham loan agreement.

What are the legal effects of a sham contract?

12. George and Anthony concluded a written sales contract for real estate ID… on 29 March 2002. The contract stated a purchase price of €73,000.00. However, the actual agreed purchase price was €123,000.00. Anthony paid €73,000.00 but still owed €50,000.00. This amount was to be paid in three equal annual instalments of €16,666.00 in the years 2002, 2003, and 2004. Out of this debt, he only paid €8,888.00 and no more. Anthony acquired ownership rights to the disputed property. George filed a lawsuit demanding that Anthony pay him the remaining €41,112.00 . Anthony defended himself by arguing that the disputed agreement constituted an illegal transaction, as it was an act of tax evasion. A transaction that constitutes a criminal offense in itself is null and void, as it contravenes mandatory regulations and public morality.

• Is the purchase price specified in the written sales contract an expression of the true will of the contracting parties?
• Will George succeed in his lawsuit to claim the remaining €41,112.00? Justify your answer!

13. Can the following be the subject of a contract:

• If A commits to building a time machine,
• The Soča River,
• A’s kidney,
• 100 tons of corn, year 2017,
• If A commits to giving false testimony,
• Movable equipment in B’s apartment,
• Novak’s field.

14. Based on a final default judgment, Matilda owes George €146,052.41. The enforcement for the repayment of his claim through the sale of Matilda’s half co-ownership share in apartment no. 24 was unsuccessful because Matilda, less than two months after the finality of the default judgment, transferred it to Luke, her common-law partner. Matilda and Luke concluded an agreement on the division of joint property in the form of a notarised deed on 8 December 2008, under which Luke became the sole owner of the apartment, while Matilda secured a lifelong usufruct (right of use) over it. Matilda and Luke still live together in the apartment; Luke was aware of Matilda’s debt to George. They concluded the agreement with the sole intention of preventing George from collecting his claim through the sale of Matilda’s co-ownership share in the apartment.

• Is the cause of this agreement permissible?
• Is the agreement on the division of joint property valid? Justify your answer!

15. A and B concluded a loan agreement. After its conclusion, B (the lender) refuses to hand over the agreed amount of money to A (the borrower), believing that the contract is not valid because it was not concluded in writing..

• Is B correct?
• What legal remedies are available to A?

16. John agreed with his neighbour Peter to buy a garden from him for €10,000.00. They concluded the purchase agreement orally. The money was handed over, and possession and use of the garden were transferred. Peter then filed a lawsuit demanding the return of the garden, claiming that the sales contract was not valid because it was not concluded in the required written form.

Can he succeed with the lawsuit?

17. Provide an example of a contract for which the law requires the form of a notarial deed!

18. Which contracts must be concluded in written form?

• contract for the sale of a commercial property,
• rental contract for an apartment,
• loan-for-use contract,
• commercial agency contract,
• mandate contract,
• gift contract,
• employment contract,
• construction contract,
• settlement agreement.

19. What type of contract invalidity applies below:

• A concluded a lease agreement but was mentally incompetent at the time of conclusion,
• A concluded a contract under a fundamental and excusable mistake,
• A gift contract was concluded with an illicit motive,
• A 17-year-old concludes a contract for the purchase of a vehicle,
• Usurious contract,
• Excessive disadvantage.

20. A wants to sell a computer to B at a favourable price. A hands over the computer to B and says: “I am giving you the computer for €500.00, even though it is worth at least twice as much.” B understands A’s statement as being that he intends to gift him the computer and so takes possession of it.

• Is the sales contract concluded?
• How long does the offer bind the offeror if no deadline is specified in the offer?

21. A, Ltd., negotiated with B, Ltd., for more than a year regarding the purchase of real estate in Ljubljana. After a year, the negotiations between the companies broke off.

• Are the parties bound to anything based on the negotiations? 
• What can A, d. o. o., do if it finds out that B, d. o. o., withdrew from the negotiations because it realised that its price calculations were incorrect?

22. If the statement of acceptance does not match the content of the offer, then the legal transaction:

• arises with the content specified in the offer,
• arises with the content specified in the statement of acceptance,
• does not arise, and the statement of acceptance has the legal nature of a counteroffer,
• does not arise, and the statement of acceptance has no legal effect.

23. a) On the local radio, there was a live classified ad segment. Gloria called in and wanted to sell two Pirelli car tires, size 185/14 inches, for €100. She provided her phone number to potential buyers.

• Is this a valid offer?
• What is the difference between an offer and an invitation to make an offer?

b) Mike called Gloria and offered €60 for the tires. Gloria did not say anything but gave him her address.

• Is the contract concluded?
• At what price?

24. In the window display of a clothing store hung a beautiful evening dress. Next to it, the price was marked as €40. Nina liked the dress and was also thrilled about the price. She entered the store and told the salesperson that she wanted to buy the dress. The salesperson noticed that the dress had been marked with the wrong price. She apologised to Nina and informed her that the actual price of the dress was €400.

Can Nina demand that the dress be sold to her for €40?

25. A was selling his Renault Clio on a website for used cars. He posted a photo of it and listed the price as €2,000. Many interested buyers contacted him. After reviewing other listings, he realised that the average market price for such a car was €3,000. When B called him and said he wanted to buy the car, A told him that there had been a mistake and that the price was actually €3,000. B insisted that the advertised price was valid and that the contract was already concluded.

Is B correct?

26. Nina and Alison concluded a preliminary contract on 23 February 2006, agreeing that the first would sell the renovated house to the second for a purchase price of €69,270. To secure the obligations arising from the preliminary contract, a deposit was also paid. On 23 November 2006, the inspection authority proposed an entry in the land registry regarding unauthorised construction due to an illegal extension of the house.

• Does the preliminary contract bind Alison and Nina?
• Can Alison assert a warranty claim due to a legal defect?

27. Ana bought a new washing machine in a hardware store. She was not given the general terms and conditions of business; only the receipt stated that they were part of the contract and were available on the store’s website. The seller’s general terms and conditions specified, among other things, that a complaint would only be recognised if the company received it in written form and that the customer could address it only directly to the manufacturer, while the seller assumed no liability for defects in the goods.

• Do these constitute general terms and conditions that have become part of the contract?
• Which source of law is relevant for general terms and conditions, and under what conditions?
• Could the stated provisions of the general terms and conditions be considered unfair? Provide arguments!¹³³