We are probably unaware that each of us enters into dozens of contracts every day (when shopping, traveling by public transport, or taking a jacket to the dry cleaner’s). The vast majority of these are verbal agreements. Are such agreements legally binding? When is it necessary to conclude a written agreement? And when should we resort to an even “higher” form of agreement, such as a notarial deed?
In practice, very few contracts used in everyday transactions require a form other than oral to be valid (although for many of them, at least a documentary form is highly desirable). It is worth remembering that we can always use a “higher” form of agreement than required (e.g., a written form when an oral form is sufficient), for our own safety and comfort.
Oral agreement – the least formal way of concluding an agreement
Statistically, most contracts are probably concluded verbally. These are usually minor, everyday contracts that we do not even fully realize are contracts (e.g., grocery shopping at a nearby store = conclusion of a sales contract; travel by public transport = conclusion of a transport contract; replacement of a damaged item in the kitchen by a specialist = contract for specific work). Such agreements are binding and valid – the regulations do not require any specific form for them to be concluded effectively.
In practice, it would also be difficult to require a written agreement to be concluded in every such situation.
A contract in documentary form – a contract that can be concluded by email or text message
Another popular and slightly more formal way of concluding a contract than a verbal agreement is a so-called contract in documentary form. This is a contract concluded in such a way that it is possible to determine who agreed to what (e.g., in terms of the subject matter, price, and performance date). A contract in documentary form will therefore be a contract concluded by email, via any messenger (WhatsApp, Messenger, Slack, etc.), text message, etc.
We will also consider a contract signed by hand, scanned and sent by email to the contractor as a contract in documentary form – if there is no exchange of signed originals between the parties (in which case the contract will be in written form).
Written agreement – when is it necessary, and when is it simply worth using this form?
A written agreement is a more formal form. Regulations require the written form, e.g., in the case of transferring property copyrights. If such an agreement is not concluded in writing, it will be invalid. Until recently, the written form with the penalty of nullity was also required for leasing agreements (currently, only the documentary form is required).
Although the regulations do not require the written form in many cases, it is worth using it when the agreement we conclude is of significant value or when it is important to precisely determine the deadlines for performance, possible penalties for late performance of the agreement, or the limits of the parties’ liability.
Therefore, some agreements, such as a contract for specific work (e.g., for the development of a website), a contract of mandate (e.g., for the provision of maintenance services), or a sales agreement (e.g., for a car), should be concluded in writing, even if the law does not require it. In the event of a dispute, it will be much easier to determine what the parties actually agreed upon, when it was to be performed, what the price or remuneration was, etc.
To conclude a contract in writing, it is sufficient to sign the contract by hand (in handwriting). Signing the contract with a qualified electronic signature is considered equivalent to a handwritten signature (importantly, signing it with a so-called ePUAP will not be sufficient, as an ePUAP signature is not a qualified electronic signature).
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Contract with a notarized signature – when is it required?
A notarized signature (i.e., a written agreement in which a notary certifies only the identity of the signatory at the end, without giving the agreement the form of a notarial deed) is required, for example, for an agreement to sell shares in a limited liability company or for an agreement to sell a business.
In practice, when concluding a contract, the form with a notarized signature is rarely used when the regulations do not require it. It can therefore be assumed that a contract with notarized signatures will be used in business transactions in the majority of cases when the regulation explicitly requires this form. Failure to comply with the form with a notarized signature, when required by law, will result in the invalidity of the agreement. Ownership of shares in a limited liability company will therefore not be effectively transferred to the purchaser if the agreement is in ordinary written form.
Agreement in the form of a notarial deed – the “highest” form of concluding an agreement
A notarial deed is the most formalized way of concluding an agreement. The regulations require this form to be used in the case of the transfer of real estate (its sale, donation, exchange) or encumbering real estate, e.g., with a right of way, or in the case of executing Articles of Association of a limited liability company. In these cases, the entire agreement is covered by a notarial deed signed by the parties and by a notary (i.e., the notary does not only certify the signatures of the parties, but also includes the entire content of the agreement in the notarial deed). Failure to comply with the notarial deed form when it is required (e.g., sale of real estate through a simple written agreement) will result in the invalidity of such an agreement.
Of course, any other agreement may also be concluded in the form of a notarial deed (in accordance with the principle that it is always possible to use a form that is “higher” than that required by law). However, it should be remembered that in such a case, any amendment to the agreement will also require the form of a notarial deed.
If it is important to us, for example, the deadline for performance of the contract, or the other party’s actual compliance with the order of confidentiality of information – consider including a contractual penalty in the designed contract. This is because it is one of the more “malleable” creations of civil law, which can be easily adapted to almost any type of contract.
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