In Latvia, contractual arrangements and business activities are based on the law on contracts.  Firms functioning in the nation must comprehend the legal structure guiding agreements.  This thorough article gives a clear understanding of Latvian contractual law and business deals, including fundamental ideas, prerequisites, and crucial factors to take into account when establishing legally binding agreements.

Contract law principles in Latvia

The main body governing contracting in Latvia is the Civil Code of Latvia, which is founded on several important tenets that form the foundation of the legal system there. A foundation for the creation, comprehension, and execution of treaties is provided by these concepts. Three basic tenets of Latvian contract legislation are as follows:

Freedom of contract

Parties are given the right to discuss and choose each aspect of the deal under the doctrine of freedom of the deal.  In general, participants are free to incorporate any conditions they think fit, provided that they don’t contravene any laws or public policies. This idea promotes individual freedom in dealings and company efficiency by allowing for adaptability and customization in contractual arrangements.

Good faith

In Latvian contracting law, the good faith standard is quite crucial. It mandates that all parties negotiate, carry out, and terminate agreements in a way that is truthful, equitable, and reasonable. It is anticipated that both parties will provide all pertinent information, conduct fair negotiations, and refrain from any unethical or fraudulent strategies.  In general, good faith contributes to the reliability and durability of commitments by encouraging collaboration, impartiality, and trust between participants.

Pacta sunt servanda

A cornerstone of Latvian contract law is the pacta sunt servanda principle, which is derived from the Latin “agreements must be kept.” It highlights how contracts are legally binding and how parties are expected to carry out their end of the bargain. Parties are required to fulfill their obligations under the agreement unless they are legally exempted for reasons like an impossibility, inability, or a significant violation by the other side. This approach improves corporate sustainability and fosters trust between parties by bringing consistency and assurance to contractual interactions.

Formation of contracts

In Latvia, contracts must be formed under certain guidelines to guarantee their legality and effectiveness.  Throughout the document creation procedure, the following essential components must be present.

Offer and acceptance

A precise and unequivocal offer submitted by one party and complied with by the other is necessary for a contract to be enforceable. The terms specified in the offer must be reflected in the acceptance. This principle guarantees mutual comprehension and agreement between the parties regarding the conditions of the deal.

Consideration

In Latvia, consideration is a term used to describe anything of significance that is transferred between both sides in an agreement.  Appreciation can come in many different ways, including cash, commodities, services, or commitments. It shows that a mutually agreed-upon trade has been established when each side offers an item of value as payment for the other’s work.

Capacity

The contractual sides have to be of legal age to engage in an agreement.  This implies that they have to be able to comprehend the terms and implications of the agreement and have the necessary legal competence. The ability to contract may be absent in minors, those with impaired mental capability, or people under the effect of drugs or alcohol. Treaties signed by incompetent persons may be regarded as null and void.

Important elements of commercial agreements

The following crucial components should be carefully considered while creating business agreements in Latvia:

Clarity and specificity

The highest level of precision and clarity should be used when drafting deals for business.  It is crucial to specify each party’s freedoms, duties, and liabilities in precise words. Parties can prevent future disputes and confusion by reducing ambiguity and uncertainty. Smooth application and the establishment of a shared awareness of the contractual obligations are facilitated by precise and unambiguous wording.

Terms and conditions

The commercial deal must contain precise statements of all relevant conditions of sale.  These could contain information on the cost, terms of payment, service specifications, guarantees, and cancellation policies. By making these provisions explicit, both individuals can carry out their contractual tasks with clarity and knowledge of each other’s roles.  

Governing law and jurisdiction

Participants must identify the applicable legislation and venue in the event of a dispute. In general, parties have latitude in selecting the relevant law under Latvian law. The legal framework that will govern the resolution of conflicts between parties can be established by incorporating a choice of statutes and court clauses. 

Navigating contractual waters: Principles and considerations in Latvia

Navigating business agreements requires a grasp of Latvian contract law fundamentals. Contractual ties are governed by the ideas of pacta sunt servanda, the autonomy of the deal, and good faith. Transparency, linguistic issues, choice of law, and development requirements all need to be taken into account. Damages, specified efficiency, dismissal, and mediation procedures are available as remedies for breaches. In Latvian business transactions, trust and stability are fostered by following these guidelines. To ensure compliance and peace of mind, get legal advice.

You can also find these articles helpful
How to grow small businesses
Guide on franchising your business in Latvia
Required licenses for Information and Communication business in Latvia