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.