In Bulgaria, the law of obligations is set out by the Obligations and Contracts Act (OCA). According to article 20a, OCA contracts shall have the force of law for the parties that conclude them.
Contract In Bulgaria, the contract is one of the prerequisites for the development of obligatory relations. The term contract refers to a bilateral legal transaction, which consists of two declarations of intent (offer and acceptance) that must be linked to each other and match in their contents. A contract is considered concluded from the moment in which the acceptance reaches the offeror.
Form of Contract The Obligations and Contracts Act provides that contracts of ownership transfer and those of establishing other property rights on real estate must be executed through a notarial deed.
Contract Invalidity Contracts that violate legal requirements or show other legal deficits are invalid. Regarding invalid contracts, there are two subgroups to distinguish: void contracts and voidable contracts.
Voidable contracts Initially, voidable contracts are contracts that are valid and binding unless avoided or declared void by a party to them on the grounds prescribed by the law. General legal provisions regarding these grounds are provided in the Bulgarian Obligations and Contracts Act (OCA); specific legal provisions are (inter alia) contained in the Family code, the Law on Protection of Competition and the Inheritance law. Invalidation may be claimed only by the party in whose interest the law allows such invalidation. A contract subject to invalidation may be ratified by the party entitled to demand its invalidation, by way of an instrument in writing which should indicate the grounds for invalidation. A contract shall also be ratified where the party entitled to demand its invalidation voluntarily performs it, in whole or in part, being aware of the grounds for invalidation. A contract which is subject to invalidation on grounds of extreme necessity may not be ratified. According to art. 27 OCA a contract may be subject to invalidation of the following grounds: Legal incapacity – if a contract is concluded by incapable persons or by their representatives not respecting the specific legal provisions for representation; According to Article 28 of the Act, a material mistake may cause the cancellation of the contract. If the contract has been concluded with regard to a specific person being one of the parties to it (intuitu personae) a mistake concerning this person may render the contract void. Fraud - According to Article 29 of the Act, a fraud may cause the cancellation of the contract under the condition that one party has been deceived maliciously to enter into the contractual relationship. If the fraud has been induced by a third party, the deceived party may request the cancellation of the contract if the other party knew or ought to have known of the fraud. A contract may be cancelled if one of the contracting parties concluded the contract out of reasonable fear induced by threats from the other party or third person. Incapacity to comprehend one's own actions - If a person capable of acting is enabled to comprehend his own actions while concluding a contract, the contract may be cancelled. Stringent necessity - The contract is voidable as well if it has been concluded under stringent necessity and under apparently unfavorable conditions for one of the parties. The court may cancel the contract completely or in the future. If the other party offers to compensate the damages, the contract may remain in force.
Void contracts According to the concept of void contracts used by the Bulgarian lawmakers these contracts should be regarded as if they had never been concluded. The void contracts are those which have no legal effect because of their defectiveness from their conclusion and where a conformation is usually not possible. Contracts contravening or circumventing the law, as well as contracts infringing good morals, including contracts on inheritance that does not exist as yet, shall be null and void. Null and void shall also be those contracts that have an impossible subject, as well as the contracts which lack either consent or a form prescribed by law, or grounds. Fictitious contracts are also null and void. The grounds shall be presumed to exist until otherwise proved.
Partial invalidity The invalidity of few clauses does not render the entire contract void given that the clauses may be replaced by binding prescriptions of the law or if the transaction is supposed to have been concluded even without the void clauses. If the contract is declared invalid, each party must pay back what he has received from the other party.
Reinterpretation If an invalid contract complies with the requirements of another legal transaction, the former is valid and considered transformed in the latter given that the parties would have agreed to conclude the latter.
Representation The representation is governed by art. 36-43 OCA. The Representation is a legal institution referring to legal actions of one person (agent) on behalf of another (principal) whereby the principal has to bear the consequences resulting from the agent's legal actions. here are two forms of representation to be distinguished: voluntary representation – here, the representation is wanted and organized by the principal; and the second form is obligatory representation imposed by the law – in this case the law itself requires representation by certain persons.
Formation declaration of intent made by a private person: - from the principal's unilateral declaration of intent (authorization), e.g. his last will- a contract. Formation of representation power by an enactment: - If the representation power arises from an administrative act, e.g. if the administrative act is appointed by a guardian that hereby obtains actual authority - from a court decision - from a child's birth (parents obtain the actual authority for their child).
Preconditions for a successful representation The agent must deliver an own declaration of intent. To guarantee the declaration of intent delivered by the agent, he must be capable of acting. The agent must deliver the declaration of intent in the name of the principal. He must make obvious that he is acting in someone else's name. The agent must have powers of representation and act within these powers. If the agent and the person he negotiates with reach an agreement to the detriment of the principal, the contract shall not be binding on the latter. If several persons have been authorized to exercise the same right to act, each of them may perform the act by himself unless something else is provided by the authorization. In several cases, where strictly personal legal actions are required (marriages, wills etc.) agency is inadmissible as in these cases the legal actions are decided by the personal estimation of the person.
Termination The representation is cancelled in the following cases: with the death of the agent or principal; with the dissolution of the legal entity; with the incapacitation of the agent or principal; with the withdrawal of the representation powers; with the adoption; regarding the guardianship over persons placed under disability: with the cancellation of the guardianship etc.
Default Debtor’s default If for the performance of an obligation a time limit has been fixed, the debtor is in default when he is unable to meet the obligation within this time limit. If there is no date fixed for the performance, the debtor is in default after the creditor's request for performance. If the obligation arose due to a tort action, the default for the payment of the damages occurs without a request, from the date of the tort. If the debtor is in default, he must pay damages even if the performance becomes impossible for reasons for which he is not responsible unless he can prove that the creditor would have suffered the loss/damage also in case of a timely performance. The damages due to a default encompass the suffered damages as well as any lost profit, provided that the suffered damage is directly linked to the default and the profit could be expected under the contract. If the debtor did not act in good faith, he is liable for all direct and indirect damages.
Creditor’s default According to Article 95 of the law of obligations and contracts, the creditor defaults if he does not accept the delivery/performance offered by the debtor or if he does not cooperate when this is required for the fulfillment of the obligation.
Transfer of claim Assignment According to Article 99 of the Bulgarian law of obligations and contracts, a creditor may transfer his claims, provided that neither the law, a contract or the nature of the claim dictates otherwise. he transferred claim including the prerogatives, the remuneration and all other additions as well as the accrued interest passes on to the new creditor, unless something else is appointed. The old creditor must inform the debtor about the transfer of claim and hand over all present documents regarding the claim to the new creditor. Besides, the creditor must confirm the transfer in writing. The transfer is effective regarding third parties and the debtor from the day that the debtor gets informed by the old creditor. Regarding the transfer of claim for consideration, the old creditor is liable for the validity of the claim at the time of the transfer. The old creditor is only liable for the debtor's ability to pay if he pledged himself to and only to the amount that he obtained by transferring the claim.
Stepping in as co-debtor With the approval of creditor and/or debtor, an obligation may also be joined by a third person as co- debtor. If the creditor agreed to the joining, it may not be cancelled or modified without his consent. The principal debtor and the co-person are jointly and severally liable toward the creditor. The debtor may be substituted by third parties only with the explicit consent of the creditor. The substituted debtor is relieved from the liability towards the creditor. The securities given by third parties expire if they do not agree on serving the new creditor. Pledges and mortgages that have been given to the first creditor remain effective. The new debtor may plead against the creditor any defenses of the former debtor arising from the transferred legal relationship.
Unlawful Acts The definition of the term unlawful acts can be derived from art. 45 OCA – if a person causes guiltily damage to another person, they must redress it. In all cases of tort guilt is presumed until proven otherwise. This provision applies to all natural persons. The legal entities are liable in accordance with art. 49 OCA as principal. The subject of the tort act must be a person with legal capacity to be held liable for tort action. That is why A person lacking the capacity to understand or control his actions shall not be liable for the damage he has caused while in such a state unless he himself has faultily caused his lack of capacity (47 OCA). The legal capacity shall be evaluated in each particular case – for majors as well as for minors. In cases of Self-Defense the liability is excluded. It is supposed that the tortfeasor's actions are not unlawful per se. However, in cases of stringent necessity, the created damage has to be repaired – even if the actions were not culpable, the result is unlawful. The OCA provides for several cases of liability in case of unlawful acts:
Responsibility of persons with legal duty to care for incapable persons The person with legal duty to care for incapable persons (e.g. teachers) is liable for damage caused by the person unable to act, unless the occurrence of the damage could not have been prevented.
Responsibility of parents (art. 48 OCA)