07 April 2017

Is the authenticated form mandatory in case of a preliminary sales agreement upon real estate property?

In practice, the parties frequently encounter themselves in the situation in which they are not able to conclude the purchase agreement. Nevertheless, they agree to conclude a preliminary sales agreement.

Which are the cases in which it would be useful for the parties to conclude such a preliminary sales agreement?
  • The promissory-seller has not registered his ownership right in the Real Estate Registry because of the fact that the cadaster works are not yet finalized;
  • The promissory-buyer does not have the full price of the sale and it is necessary for him to sign a loan;
  • Both parties do not own sufficient financial means: the promissory-seller – to perform the cadaster works, the promissory-buyer – to support the purchase fees: the fee of the Public Notary, the taxes regarding the purchase etc.
What happens in the case in which one of the parties refuses to conclude the purchase agreement?

According to art. 1669 para. (1) of the Civil Code, the other party may request that the Court issue an order which will substitute the agreement, if all the other validity conditions are fulfilled.

Therefore, the Court will substitute the consent of the party which refused to conclude the promised contract if the parties are legally competent and if they decided upon the essential elements of the purchase agreement: the property sold and the price. Thus, the condition of the determined object for the validity of the preliminary sales agreement is fulfilled.

Is the authenticated form of the preliminary sales agreement upon real estate a mandatory condition for the issuance of a court order which will substitute the contract?

A recent order of High Court of Cassation and Justice states that „In the interpretation and the implementation of the provisions of art. 1279 para. (3), first thesis and of art. 1669 para. (1) of the Civil Code, the authenticated form of the preliminary sales agreement is not a mandatory condition for the Court to render an order which will substitute the authenticated document”.

Thus, regarding the form of the purchase agreement upon real estate, even though it is solemn agreement, the preliminary sales agreement does not have to be authenticated, as the law requires for the purchase agreement.

As stated by the doctrine, in case of a preliminary sales agreement upon real estate, this condition would be fulfilled by the fact that the court renders an order which has the nature of an authenticated document.

Also, we deem that the reasons for which the High Court of Cassation and Justice decided that the authenticated form is not a mandatory condition for rendering an order which will substitute the contract are based on the fact that it would be extremely onerous for the contracting parties to conclude both the preliminary sales agreement and the purchase agreement in an authentic form.

Another argument is the fact that the legislator stated expressly that a certain preliminary agreement should have a certain form, when the regulation had this purpose, i.e. the preliminary donation agreement, the option agreement.

We appreciate that this decision of the High Court of Cassation and Justice will put an end to all the controversies regarding the necessity of the authenticated form in order for the court to render an order which will substitute the contract and will create a unitary practice of the national courts.