Contract form

30.08.2022 | Contract law

Author: Siim Mägi

Form of contract means the manner in which the contract is concluded. According to the Obligations Act, a contract may be concluded orally, in writing or in any other form, unless the law stipulates a mandatory form of the contract. 

The mandatory form of the contract may be prescribed by law, but it may also result from an agreement between the parties or a party's request. 

If the contract has to be concluded in a certain form, agreements on amending the contract, setting guarantees and other secondary obligations, as well as on assigning claims arising from the contract or taking over obligations must also be concluded in this form.

Oral contract

The contract may be concluded orally if there is no stricter formal requirement. For example, by buying goods in a store and paying for them, a sales contract is concluded between the seller and the buyer, despite the fact that it is not formalized. 

Although oral contracts are probably the most common, oral form is not mandatory for any type of transaction. The main problem with oral contracts is that their content can be difficult to prove later. Thus, the oral contract form is suitable for use especially in small transactions and in situations where there is a relationship of trust between the parties to the contract. 

Written agreement

Written form means that the terms of the contract are fixed in writing and signed by the parties. In certain cases, the law may also stipulate that only the obligated party must sign. Also, in certain cases (if its use is common in circulation and the other party does not immediately demand a handwritten signature), the signature may be mechanically imprinted.

A written contract is deemed concluded when the contracting parties have signed the contract document or exchanged contract documents or letters signed by both contracting parties. The law may stipulate that a written contract is considered concluded even if the contract document is signed only by the obligated party.

In the case of a written contract, during the execution of the contract, the written declarations of intent arising from the contract may also be transmitted in another way, which allows the transmitted declaration of intent to be reproduced in writing.

The written form of the transaction can be replaced by a notarization or notarization of the transaction.

Electronic contract

The electronic form of the contract is equivalent to the written form. In order for the electronic form to be valid, the contract must be made in a way that allows permanent reproduction, the names of the persons who made the transaction must be recorded in the contract, and the parties must have signed the contract electronically. 

The electronic signature must be given in a way that allows the signature to be associated with the content of the transaction, the person who made the transaction and the time of the transaction. An example of an electronic signature is a digital signature.

Agreement enabling written reproduction

In the case of a form that enables written reproduction, the transaction must be made in such a way that it can be permanently reproduced in writing. In the case of a form that allows for written reproduction, the names of the parties must be fixed, but handwritten signatures are not required. 

A contract in a form that enables written reproduction can be concluded, for example, by exchanging e-mails or text messages, but this is provided that it is possible to define the parties to the contract sufficiently precisely from the correspondence, i.e. at least the names of the parties can be seen in the correspondence. 

Notarial contract

If the contract must be notarized or notarized, the contract is concluded as of the notarization or notarization of the contract. If the mutual declarations of intent made to conclude the contract are confirmed or proved separately, the contract is concluded from the confirmation or proof of the last declaration of intent.

Notarized contract

Notarization means that the contract must be in writing and the notary must certify the signatures of the parties to the contract. Notarization of the contract can be replaced by notarization of the transaction.

Notarized contract

Notarization replaces notarization of the contract. This means that in addition to the correctness of the signatures, the notary reviews the content of the contract and explains it to the parties. 

All contracts for which the corresponding requirement is prescribed by law require notarization, for example:

  • transactions of transfer of immovable property and establishment of property rights to immovable property;
  • marital property agreement;
  • a contract for the transfer of a part of a private limited company, if the parts are not registered in the Estonian securities register and the company has not waived the form requirement in accordance with the requirements of the Commercial Code.

What happens if the contract is not concluded in the required form?

In the event of non-compliance with the form provided by the law, the transaction is void, unless the law or the purpose of requiring the form states otherwise.

If the agreed form is not followed, the transaction is void, unless the law or the agreement of the parties states otherwise.