Drafting a License Agreement with the Civil Code's Machinery
A license agreement — over copyright, a trademark or technology — rests on the machinery of the Civil Code, and it is that machinery which decides whether the drafted document will stand: the freedom of contract for shaping an atypical licence (Article 319); the fairness gap-filler for unwritten terms (Article 325); the surprise-clause filter for standard terms (Article 344); and the enforceable penalty architecture (Article 418). This page explains these mechanisms as a licence document uses them.
Freedom of Contract — Article 319
Subjects of private law may, within the limits of the law, freely conclude contracts and determine their content; they may conclude contracts not provided by law provided these do not contradict it — hence the possibility of non-standard licence structures. There are boundaries: where one party holds a dominant position on the market, it bears an obligation to contract and may not groundlessly offer the counterparty unequal terms; and persons acquiring or using property or services for non-entrepreneurial purposes or vital needs may not be unreasonably refused a contract where the other party acts within its entrepreneurial activity. For the licensor this means: freedom is broad, but market power has a limit on its use.
The Fairness Gap-Filler — Article 325
Where the conditions of performance must be determined by one party to the contract or by a third person, in case of doubt it is presumed that the determination is to be made on the basis of fairness. And where a party does not consider the terms fair, or their determination is delayed, the decision is taken by the court. In licences this norm works often: a royalty formula depending on one party's data, or technical specifications to be set by a third person, are read in case of doubt against the standard of fairness. The determiner's authority must therefore be written into the contract precisely.
The Surprise-Clause Filter — Article 344
Those clauses of the standard terms of a contract which are so unusual in form that the other party could not have reckoned with them do not become a constituent part of the contract. In licensing practice this filter addresses templates: an unusual clause buried in pre-formulated terms — say, an unusual territorial restriction or a unilateral right of amendment — does not enter the contract where the other party could not have expected it. When using a standard form, unusual conditions must therefore be set out with particular prominence.
The Penalty Architecture — Article 418
The parties may freely determine a penalty which may even exceed the possible damage, save for the exceptions provided by the Code. An agreement on a penalty requires written form — an oral penalty is unenforceable. In a licence agreement this instrument creates a pre-agreed price for breach: each case of excessive use will have its price fixed in advance, and the court will intervene only within the limit established by law.
The durability of a licence agreement is checked with three questions. The first is structural: whether the chosen form stands within the freedom of contract and does not contradict imperative norms — atypicality is lawful in itself, but each of its elements must preserve compatibility with the law. The second is performative: whether each term has a defined carrier — who measures, who sets the formula, what happens on delay; where the determiner's authority is unwritten, the presumption of fairness and the court's competence switch on. The third concerns dispute scenarios: what happens on breach, how the penalty is calculated and whether it has written form. The answers to all three questions must be in the document itself — and each is checked separately, because a weakness in one layer diminishes the whole construction. The participation of an experienced lawyer expresses itself precisely in this simultaneous control of three layers: a clause that reads smoothly in negotiation may fail in court because its carrier was never defined, and a penalty that looked deterrent may prove unenforceable because the written-form requirement was neglected at signing. A licence drafted with all three questions answered in advance not only survives litigation but also shapes behaviour before it — counterparties treat precise, measurable and enforceable terms differently from aspirational ones, and the document begins to work as a governance tool rather than a declaration.
Frequently Asked Questions
Below we answer the questions most frequently raised about drafting licences.
May an atypical licence be concluded?
Yes — the parties may conclude a contract not provided by law, so long as it does not contradict the law.
What happens to unwritten terms?
Where a term is determined by one party or a third person, fairness is presumed in case of doubt; on disagreement the court decides.
How do we protect ourselves from a template's unusual clauses?
By the filter: a clause so unusual in form that the other party could not expect it does not become part of the contract — such terms must therefore be displayed prominently.
How high may the penalty go?
Freely — it may even exceed the possible damage, save for the statutory exceptions; the form is written.
How We Help on Legal.ge
A licence agreement demands precision in the machinery: the limits of freedom, the determiner's authority, the template filter and the form of the penalty. The specialists at Legal.ge will explain Articles 319, 325, 344 and 418 of the Civil Code, assess your draft, and help in negotiation. Contact us through the Legal.ge form.