The Legal Foundation of General Commercial Agreements
A commercial agreement is the primary legal instrument through which a business organises its relationships with suppliers, customers, partners and financial institutions. The Civil Code of Georgia defines the core of these relationships through the concept of an obligation: by virtue of an obligation the creditor is entitled to demand from the debtor the performance of an act, and performance may also consist in refraining from an act. In practical terms this means that a contract may require either a positive act, such as delivering goods or rendering services, or a defined abstention, such as not disclosing information or not competing in a specified field. Both types of commitment fall under the same legal regime and must be drafted with the same care, because each creates an enforceable duty between the parties.
Freedom of Contract and Its Limits
Article 319 of the Civil Code grants subjects of private law the right to conclude contracts freely within the limits of the law and to determine their content. Parties may also conclude contracts that are not provided for by law, provided that such contracts do not contradict the law. This principle means that a business is not confined to the contract types enumerated in the Code: it may create combined or entirely novel arrangements that better serve its economic purpose, for example a framework agreement that mixes supply, service and licensing elements in a single architecture.
At the same time, the Code balances contractual freedom with meaningful safeguards. If one party to a contract holds a dominant position on the market, it bears the obligation to conclude contracts in that sphere of activity, and it may not groundlessly offer the counterparty unequal terms. Likewise, persons who acquire or use property and services for non-entrepreneurial purposes or to satisfy vital needs may not be unreasonably refused the conclusion of a contract where the other party acts within the scope of its entrepreneurial activity. Companies holding significant market share should therefore treat refusals to contract and one-sided term-setting as matters carrying legal risk, and should document the commercial justification for their contracting decisions. Where the validity of a contract for the protection of essential interests of society or of a person depends on a state permit, this must be regulated by a separate law, so licence and permit questions must be verified in advance in regulated sectors.
When a Contract Is Concluded and What Terms Are Essential
The first question in every commercial transaction is whether a contract has actually been concluded. Under Article 327 of the Civil Code, a contract is considered concluded when the parties have reached agreement on all of its essential terms in the form envisaged for that purpose. Essential terms are those on which agreement must be reached at the request of one of the parties, as well as those that are deemed essential by law. The practical consequence is significant: during negotiations each party should define precisely which terms it regards as essential, because without agreement on them the contract is not concluded, even if the parties have signed a document covering other matters. A transaction letter that leaves an essential term open does not produce a binding contract until that term is settled.
The Code also recognises the preliminary contract: a contract may give rise to an obligation to conclude a contract in the future. This mechanism allows a business first to assume a documented commitment to enter into the main transaction later, and then to work out the details. Importantly, the form envisaged for the main contract extends to the preliminary contract as well, so where the principal arrangement requires written form, the preliminary agreement must be concluded in the same form to be effective.
The Form of the Contract and Its Consequences
Questions of form frequently determine whether a document has legal force. Article 328 of the Civil Code provides that where a specific form is established by law for the validity of a contract, or where the parties have envisaged such a form for their contract, the contract enters into force only after the requirement of that form has been fulfilled. This means that the parties' own agreement on form is as binding as a statutory requirement: if a commercial agreement stipulates that amendments are executed in writing, an oral understanding will not take effect. Before signing, and again at the close of negotiations, the parties should verify that the agreed form has been used and that the form requirement has been fully satisfied, since a contract that has not entered into force leaves both sides without the protections they negotiated.
Determining Terms on the Basis of Fairness
Commercial agreements often leave certain conditions of performance to be determined later by one of the parties or by a third person, for example a price calculated by an indexation formula or fixed by an independent valuer. Article 325 of the Civil Code sets a clear rule for this situation: where the conditions of performance of an obligation are to be determined by one of the parties or by a third person, in case of doubt it is presumed that such determination is to be made on the basis of fairness. If a party does not consider the conditions fair, or if their determination is delayed, the decision is made by the court. When drafting such clauses it is therefore advisable to fix in advance the criteria and deadlines for the determination, so that the matter never reaches the stage of judicial intervention.
Standard Terms in Commercial Practice
Modern commerce runs largely on standard terms. Under Article 342 of the Civil Code, standard terms of a contract are pre-formulated conditions intended for multiple use, which one party, the offeror, imposes on the other party, and through which rules differing from or supplementing statutory norms are established. Typical examples are the standard conditions of a transport company, a bank or a retail chain, which apply uniformly to every counterparty.
The law draws two important distinctions in this area. First, where the terms of a contract are determined in detail by the parties, they are not regarded as standard terms, because what exists is a genuine negotiation rather than a unilateral imposition. Second, terms agreed directly between the parties take precedence over standard terms. This distinction is decisive in commercial negotiations: if your counterparty uses a standard form, any individually negotiated clause always prevails over its general text, so critical details should be written into the agreement individually rather than left to the printed conditions.
How We Can Help
Our team handles the preparation and review of general commercial agreements through the full contract cycle. We distinguish essential from non-essential terms, establish form requirements, examine the standard terms embedded in a draft and sharpen the formulations that protect your interests. We also audit existing agreements to identify in good time the risks arising from a breach of form, unfinished essential terms or standard terms disadvantageous to you. Where conditions are to be determined on the basis of fairness, we design mechanisms that prevent conflict at an early stage. Contact our specialists for a consultation so that your commercial agreements rest on a reliable legal foundation.