On the wave of enthusiasm which typically accompanies the execution of a preliminary contract, people often forget that clauses that provide for conditions and a mode of its unilateral termination should be introduced to it. How could one not just trust such a professional party as a developer?
When stipulating a preliminary contract aimed at a future execution of a contract establishing a separate ownership of the premises and of their sale (for more on the Polish preliminary agreement click here) not only a developer but his Clients as well assume that everything will go as planned. Thus, it seems well obvious for a purchaser that within the determined time the transaction will be finalized by an execution of a final sale and purchase contract (a so called promised contract). While the most of the people are running high on the wave of optimism that accompanies the execution of a preliminary contract, only few of them consider introducing clauses that provide for conditions and a mode of its unilateral dissolution. How could one not just trust such a professional party as a developer?
Better to protect yourself that to trust
One should always bear in mind that such cases are not only about a trust in the other party to a contract or a lack of it. Of course, one can come across dishonest developers; one should be prepared for it, too. More often matters just happen not to prove successful at the end because of various reasons not depending on a developer. A possibility of coming out of such an investment becomes rather priceless at that time and clear contractual provisions with that regard enable a party to avoid a lengthy and costly court proceeding. Therefore, according to an ancient saying that prevention is better that cure, such matters that could potentially give rise to a contention should be settled at the very beginning of a cooperation. It is so especially as in the light of Polish Civil code provisions the parties to a preliminary contract are not entitled by virtue of law itself to any means that would enable them to a unilateral termination of the contract (more on the matter is to be found here).
One of possible solutions is to introduce into the preliminary contract a clause that provides for a entitlement to renounce (the contract), set out in the article 395 of Polish Civil code. It grants one party or both parties a right to terminate the contract unilaterally. In order to avail of such a right, a party makes an appropriate written statement. Such a statement, if made effectively, results in an expiration of the preliminary contract and imposes on both parties a duty to bring about such a state as if the contract has never been executed. In such a case it means, for instance, that a developer is obliged to return the means that have been paid to date by the Client.
Remember about time limits
There are a few things that should always be reckoned with. First of all, the contract, should indicate clearly, which of the parties and on what occasions is entitled to a right to renounce it. There can by any reasons that substantiate the exercise of such a right – they range from a non-completion (that the developer is at fault of) of the premises’ construction within the time limit to delays brought about by exceptionally tough weather conditions or by actions of administrative organs that supervise the building process.
The most important thing is however to determine a time limit within which one could exercise the right to renounce the contract. Its determination may occur in any manner – for example by indicating a specific date which is the most simple and the best one. Other way consist in indicating a specific period (that is days, weeks, months) or an event in the past that is certain to come into being. A failure to indicate a time limit gives rise to serious consequences. According to a view that dominates among practising lawyers as well as in jurisprudence of Polish courts, the lack of it results in an invalidity of a contractual provision by means of which a right to renounce the contract is being reserved. This means that should a Client (or their lawyer) fail to see to it that such a time limit be introduced into the preliminary contract, a developer will be able to effectively undermine a statement on the contract’s renouncement made by the Client on the basis of a contractual clause that was formulated imperfectly and as a result proved to be invalid.
The preliminary contract may also provide for a manner that a statement on the contract’s renouncement be made (be it in writing, by e-mail, orally and so on). By way of an example, one could determine a time limit and a manner in which the means that are being paid in by the Client are to be returned to them. This is particularly important where a credit for a purchase of an apartment is being provided for by a bank.
In the view of what was said above, the content of the contractual clause that provides for a right to renounce the contract will usually, the price of the apartment apart, a subject to the toughest talks.
It is nevertheless worth taking up such an effort and determine entitlements and duties of parties in a clear manner. Just in case the investment did not go according to an original, optimistic plan.
