In review: contract formation in Austria

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Contract formation

The ABGB contains provisions for certain ‘standard’ types of contracts, such as sales contracts, loan agreements, donations, rental or lease agreements. Austrian contract law is ruled by the fundamental principle of freedom of contract.

Section 861 of the ABGB stipulates that whoever declares that he or she intends to transfer his or her rights to someone else (which means they will allow or give them something, do something for them or refrain from something to their benefit) makes a promise. However, if the other person validly accepts the promise, a contract is concluded by mutual consent. As long as the negotiations are pending and a promise has not yet been made or has neither been accepted in advance nor afterwards, no contract is established. A contract is thus concluded by one party making an offer and the other party accepting said offer.

An offer is binding as soon as it reaches the other party, and it remains binding for the time specified by the party making the offer or a reasonable period of time.

Consent to a contract must be declared freely, seriously, in a determined fashion and clearly as per Section 869 of the ABGB. Offer and acceptance must be definite and must express the parties’ intent to be legally bound by the effect of their declaration (declaration of will). The offer is definite and precise if it includes the key terms, such as goods and price for sales contracts. Certain limited types of contracts, such as safekeeping contracts, require actual delivery of the goods.

Most contracts may be concluded without complying with any special form – an oral offer and acceptance suffices. Some contracts, such as suretyships, require written form; others, such as donations not handed over immediately, must be conducted by notarial deed.

Especially where actual delivery of goods is required, preliminary agreements may be concluded. A preliminary agreement is an agreement to conclude a (main) contract in the future. It is only binding if the key terms of the main contract and the time of the conclusion of the main contract are determined. One party can sue the other for conclusion of the main contract within one year of the date of the intended conclusion of the main contract stipulated by the preliminary agreement, otherwise the right lapses.

Contracts may benefit a third party who is not party to the contract, but third parties must not be burdened with any duties. Contracts benefiting a third party may either grant the third party the right to demand delivery in his or her own right or only entitle one of the parties to the contract to demand performance to the third party.

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