Contract or Gentlemen’s Agreement?

The Romanian legal system is formalist, and recent legislative changes have turned it into an excessively formalist one. In what sense? In the sense that, although verbal agreements are recognized by law as contracts, a handshake is not enough. Some of the reasons are imposed by law and others by practice.

For example, if a dispute arises between the contracting parties, an agreement that is not embodied in a written contract can hardly be proven and not always completely. Therefore, although the law recognizes these “gentlemen’s agreements” as valid, the parties do not benefit from sufficient legal protection.

Situations that arise in the absence of written contracts

There are situations in which people choose to make verbal agreements, and then send each other e-mails. What happens with this correspondence, what value does it have if we want to prove what was established through the verbal agreement?

According to the law, correspondence is only a secondary means of evidence. In no case does it have the “force” of a written contract. Sometimes correspondence can be even harmful for the parties because people tend to say as much as possible in correspondence. Either this is completely wrong. Any correspondence of the “fluvial novel” type has the effect of distorting the initial understanding.

Even the accepted invoices are not a guarantee for obtaining a court decision to compel the debtor to pay. People need to understand that invoices are NOT a contract. They have the role of an accounting supporting document and, possibly, a notification. But it does not clarify the contractual aspects and, sometimes in litigation, they can even be successfully fought.

On the other hand, verbal agreements are difficult to prove, but also difficult to execute. For what reason? For the simple reason that we are all human.

The answer is as simple as it is complicated to take this into account.

In negotiations, people promise, make compromises, increase, etc. and, in the end, conclude an agreement. Everyone has their own image of the details. Everyone has their own image of the discussion, which most often does NOT coincide with that of the contractual partner. In a way it is normal, because two contractual partners are in reality two people with opposite goals that converge in a single point, namely that they chose each other to carry out an operation and in this way they have mutual claims.

As an exercise in imagination, let’s say that the parties agree to paint a house in exchange for a price. But he does not conclude a written contract, but a verbal agreement. They establish that the materials are included in the established price. However, during the execution of the work, the provider realizes that the material requirement is much higher than anticipated, because only with the uncovering can he notice that some additional repairs are also necessary. What happens in this case? The owner will probably refuse to add some costs, and the provider will refuse to continue the work because it becomes too expensive for him. However, none of them will know how to proceed if their understanding has not become a written contract.

Just like in the previous example, in any type of convention, elements of surprise may appear or, even if they are not a surprise, the parties may not remember the details that they did not consider important at the time of the agreement.

Our advice as specialists is that any agreement, however simple it may seem, should be transposed into a written contract. And any written contract should contain the details that the parties consider important, the expectations they have from the contractual partner. However, the drafting of the contract must be left in the hands of a legal specialist. Just like health, just like in any field where expertise and an overall vision is needed, a legal specialist will know: how to draw up a contract according to the needs of his client, he will know how to guide him along a path as sure as possible, you will know how to anticipate the effects of certain commitments. All these things are called “Preventive Attitude”.

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The main management structure of the company in Romania is the general meeting of associates / shareholders. The constitutive act establishes the rules for convening and adopting decisions and whether the exercise of the vote can be delegated by special mandate by the associate / shareholder who cannot take part in the meeting. In the limited liability company, each shareholder entitles the holder to one vote in the respective meeting. The general meeting of associates has the following main obligations: ✓ to approve the annual financial statement and to establish the distribution of the net profit. ✓ to appoint the administrators and the censors, to revoke / dismiss them and to discharge them, as well as to decide to contract the financial audit, when it is not obligatory, according to the law; ✓ to decide the pursuit of the administrators and censors for the damages caused to the company, designating also the person in charge to exercise it; ✓ to modify the constitutive act.
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The limited liability company is the most common form of company in Romania, being the legal entity that best serves the interests of investors both from the point of view of the reliability of the activity, and from the perspective of its management. The limited liability company is abbreviated "SRL" in Romania and is the equivalent of the American limited liability company Limited Liability Company (abbreviated to LLC) or the German economic structure "Gesellschaft mit beschränkter Haftung" (abbreviated to GmbH), or the structure called "limited" , the structure used in most Latin American states.
The limited liability company is characterized by:
✓ the character intuitu personae, which means that this economic structure is based on the trust between the associates;
✓ the division of the share capital into fractions called shares, which cannot be negotiable securities;
✓ the liability of the associates is limited to their contribution to the share capital.
The limited liability company may also have a single partner, natural or legal person, of Romanian or foreign nationality, who will be the owner of all shares. Instead, the maximum number of associates is 50 people.
At present, the Romanian law no longer conditions the subscription and payment of a certain amount as share capital.
Through registration, the company acquires legal personality, becoming, under the law, a collective subject of law. The conclusion given by the judge is sent, ex officio, to the Official Gazette of Romania for publication at the expense of the company and to the Financial Administration in whose territorial area is the main headquarters of the company for fiscal registration, mentioning the registration number in the Trade Register .

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