Asking the court to declare a preliminary agreement final

Parties often use a preliminary agreement to make their transaction more secure. It is particularly common in real estate purchases: the sums involved are substantial and either party’s refusal to complete can create significant risks.

Under Article 19 of the Bulgarian Obligations and Contracts Act, a preliminary agreement must be in writing if the final contract requires a notarial deed or notarial certification. The preliminary agreement must settle the essential terms of the final contract. The parties must agree on the subject matter and legal basis of the transaction: for example, that an apartment is being sold, its location, area and other identifying details, who the parties are and what price they have agreed. They may change these terms by mutual agreement when concluding the final contract. The agreement is not inherently personal: the contractual position may be transferred to a third party who then enters into the final contract. The preliminary agreement is a contract in its own right, with its own effect, legal basis, purpose and form. Its principal purpose, however, is to secure the conclusion of the final contract. The law gives either party the right to ask the court to declare the preliminary agreement final. If it sets a date for the parties to exchange performance — in the example, for one party to transfer ownership of the apartment and the other to pay the price and transfer fees — and a party fails to perform as agreed, the party that has complied with its obligations may bring an action for the conclusion of the final contract. In that event the contract takes effect when the judgment becomes final, and the parties owe each other their agreed performance.

Court proceedings for a declaration that a preliminary agreement is final have specific features. This type of action is expressly provided for by law and recognised in legal scholarship. If you are about to enter into a contract, we recommend consulting a civil lawyer with experience in property law and the law of obligations.