Posts in "Contract Law"

Contract Law

Swiss Substantive Law: A Viable Choice for International Contracts

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Swiss Substantive Law: A Viable Choice for International Contracts

The Swiss legal system is highly stable. As an example, both The Civil Code and the Code of Obligations came into effect in 1912 and have remained unchanged since then. A modernization is generally known years in advance, and amendments are not retroactive.

Statues in Switzerland are intentionally written in plain language, unlike those in some other countries. Aside from European law, there are fewer special laws, so it is less likely to get lost in a maze of parallel statutory rules. Lastly, the courts in each part of the country are unbiased and professional, ensuring equal treatment and application of the law. Furthermore, a consistent application of statutes throughout the country is ensured by the Federal Supreme Court.

Swiss law is also known for its flexibility. As a result, there are relatively few statutory provisions – for example, in employment law or lease law – that are compulsory. As a result of this reality and the solid general principles of Swiss private law, Swiss law has been able to remain up-to-date and respond flexibly and predictably to changes in the economy and in international trade.

In addition, there is little danger of contractual gaps leading to the invalidity of entire contracts under Swiss law. Any gaps that may exist in a contract can and will be filled by reference to general principles and non-compulsory statutory law, as long as both parties agree on all the essential elements of the contract (in essence, performance, and counter-performance). This has several benefits, including the fact that even complex and high-volume contracts can be reduced to a handful of pages in principle, which dramatically reduces the time and cost of contractual negotiations.

Swiss law should not be applied randomly in contractual negotiations despite all these advantages. Involving Swiss counsel early on in the contract negotiation process is essential to ensuring predictability of choice of law and forum clauses. Having a single source of legal advice also streamlines things when they may get contentious.

Contract Law Real Estate Law

Swiss Tenancy Law: What You Should Know

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Swiss Tenancy Law: What You Should Know

Before entering into a rental agreement, there are a few things you should have in mind. Stay on this page to learn more.

What is the procedure for renting an apartment in Switzerland?

Basically, renting an apartment involves paperwork. First comes the filling of an application. You will be asked to provide your personal information such as your age, marital status, profession, employment info, salary, residency status, and so on.

You will also be asked to provide a document that proves your credit eligibility from the debt collection register officially known in Switzerland as the “Betreibungsregister”. You can apply for this document online or from the local credit agency.

If your landlord is satisfied with the provided information, next comes the signing of the rental agreement.

By putting your signature on paper, you agree to the terms and conditions pursuant to the agreement. So you want to make sure to read carefully and completely understand the entire agreement. 

Oftentimes, the landlord will hire an agency to prepare all the necessary paperwork.

Security deposit

Most landlords will ask you to put a certain amount of money in advance as a security deposit. According to Swiss Law, the deposit can be as high as a three months’ rent and has to be paid into a bank account in the tenant’s name, specifically arranged for the purpose. This deposit serves the purpose of security for the Landlord. Should the tenant fail to pay the rent on time or causes damage to the landlord’s property, the tenant can request compensation from the security deposit. Otherwise, once the tenant moves out, the security deposit is returned to the tenant.

Rent reduction

Article 270 of the Swiss Code of Obligations, indicates the right of the tenant to challenge the initial amount of rent before an arbitration authority, and request to be reduced. However, certain criteria will have to be met.

  • The rent from previous rental agreements for the property is significantly lower;
  • The tenant is compelled to enter into the rental agreement on account of personal hardships;
  • The challenge has to be initiated within 30 days from concluding the rental agreement or taking over the rental property;

Demand remedies  

According to Swiss Las, there are three levels of deficiency: mild, moderate, and severe. In cases of moderate and severe deficiencies, the tenants have the right to request from the landlord to remedy the defects. In the case where property defects cause damage or in some way impact the tenant, the tenant will also have the right to request compensation or to reduce the rent. If the defects are severe to a level that make the property unusable, due to no fault of the tenant, the tenant has the right to request termination of the rental agreement without notice.

For mild defects, the responsibility for remedies falls on the tenant. An example of a mild defect would be a broken lightbulb, a loose screw on a doorknob, etc.

Termination of rental agreements

Both parties to the rental agreement have the right to request termination. Request for termination has to be done in writing and delivered via registered mail. If the tenant is married and lives with the spouse, the letter of notice has to be signed by both spouses. Otherwise, the request for termination shall be considered invalid. If the tenant requests termination of the rental agreement prior to the date stated in the agreement, they can recommend another tenant to take over the property. In such a case, the landlord is obliged to vet recommended tenant within a month’s period and confirm or deny such a request. If the recommended tenant does not meet the required criteria, the current tenant will have to continue with the payments of rent until the termination date of the agreement.

The landlord also has the right to request termination of the agreement. Especially in cases where the tenant falls short with monthly rent payments or causes damage to the rented property. In any case, the notice has to be done in writing using an official termination form. If the tenant does not agree with the termination request, the landlord can file an appeal to an arbitration authority within a 30 days notice.

Contract Law

Swiss Inheritance and Estate Taxes and Laws

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Swiss Inheritance and Estate Taxes and Laws

If you buy a Swiss property, estate tax and inheritance tax rules can apply to you. These can vary depending on which Swiss canton you live in. The inheritance rules in Swiss vary, so it may be beneficial to contract an expert to ensure you’re getting the best treatment possible.

Switzerland Inheritance Law and Succession Rules

As an expat living in Switzerland, you can choose whether to have Swiss inheritance tax law, or the laws of your home country applied to your estate. This is specified in your will. Swiss inheritance law applies by default without a will or the expression of their preference.

It’s important to note that Swiss inheritance law included forced heirship rules. This means certain relatives cannot be disinherited, even through a last will and testament. This leaves 50% of the estate to the spouse or registered partner. Of the remaining half, at least 75% goes to the children and grandchildren. 

Inheritance Law on Pensions in Switzerland

Spouses and children may be entitled to inherit some of their relative’s pensions. If the deceased paid AHV contributions for at least one year, a survivor’s or orphan’s pension might be available for a spouse, same-sex registered partner, or child of the deceased. If the benefits are already in place, then the survivor’s pension will increase by 20%

Switzerland Inheritance Tax

Heirs under Swiss tax law have some flexibility. They can accept the inheritance, reject it, or accept it subject to public inventory.

Accepting an inheritance subject to public inventory is an excellent option for an heir who is unsure of the deceased’s financial situation and is concerned debts will outweigh the assets inherited.

The heir has three months from the date of death to decide on a course of action before it’s assumed the inheritance will be accepted. 

For those choosing to accept an inheritance, a certificate of inheritance can be obtained from the Swiss authorities. This proves the right to inherit and is needed by financial institutions before money can be withdrawn from the deceased’s accounts. The cost of this certificate varies between cantons but can range up to a few thousand Swiss francs.

For an heir who chooses to reject their inheritance, the Swiss government website will provide more guidance on disclaiming an inheritance.

Estate Tax in Switzerland

The amount of tax due when inheriting a property can be affected by several factors:

● The property’s market value

● The degree of relationship to the deceased (ranging from 0-40%)

● The canton’s surcharge (100-300% applied to the basic rate)

Paying Inheritance Tax in Switzerland

Once the tax assessment is received, you generally have 20 days to pay Swiss inheritance taxes. Switzerland has double tax treaties that can benefit expats in Switzerland as well as Swiss residents abroad. Set up between more than 50 countries, these ensure you won’t get taxed by both countries. However, if your country isn’t one of these, you could be subject to paying Swiss inheritance tax and your home country’s tax. 

Inheritance Tax Rates

Each canton has a different rate of inheritance tax. Some share with municipalities while others levy on their own. The canton Schwyz has no inheritance tax. The taxable rate also depends on the overall value of the assets and your relationship to the deceased. The person who inherits the estate will also pay the charges. Tax doesn’t apply to personal and household goods.

Switzerland Tax and Inheritance Rules

Switzerland is known for progressive taxation, allowing its residents to benefit at home and abroad. Inheriting in Switzerland changes depending on the canton you’re in, so be sure to understand the rules for the specific place you find yourself in.

Contract Law

Tout ce que vous devez savoir sur les contrats en droit suisse

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Tout ce que vous devez savoir sur les contrats en droit suisse

Un contrat doit comporter une contrepartie, une offre et une acceptation, un objet légal, des parties compétentes et un accord mutuel pour être juridiquement contraignant pour les parties concernées. Le contrat peut être invalide, annulable ou inapplicable si certaines parties essentielles sont manquantes, viciées ou irrégulières.

Contrepartie

Ce qui convainc deux personnes à conclure un contrat est appelé “contrepartie”. Les contrats exigent que les deux parties fournissent quelque chose de valeur à l’autre.

La vente d’un bateau est un excellent exemple de prise en compte de la contrepartie. Lorsque l’acheteur paie une certaine somme, vous lui remettez le bateau.

La contrepartie inclut la prise en compte du temps, des conditions de paiement et de toute autre attente. Un contrat n’est légitime que si les deux parties l’acceptent.

Offre et Acceptation

Pour qu’un contrat soit accepté, il faut que l’offre soit valable, compréhensible et détaillée. Pour éviter tout malentendu, l’offre et l’acceptation de l’offre doivent être concises mais précises.

L’acceptation peut être exprimée verbalement, par écrit ou par des actions. Un échange de mots tels que “Accepteriez-vous 100 dollars pour ce bateau ?” et “Oui” peut constituer une offre et une acceptation dans certains cas.

Objectif Légal

Avoir un objectif légitime qui ne viole pas la loi est crucial pour l’intégrité de tout contrat. Engager quelqu’un pour commettre un crime et voler quelque chose, par exemple, est contraire à la loi. Si vous acceptez d’accomplir un acte illégal, cela ne constitue pas un contrat au regard des lois du pays.

Le contrat doit être légitime en vertu des exigences législatives déclarées et implicites et du droit coutumier. Les gouvernements des États et le gouvernement fédéral peuvent exiger que des critères supplémentaires soient satisfaits dans plusieurs cas.

Parties Capables de Discernement

Pour être considéré comme “capable de discernement” de conclure un contrat, une personne doit comprendre la portée de ses actes.

Les mineurs et les personnes considérées comme incapable de discernement, sont souvent considérés comme incapables de conclure un accord, car ils ne comprennent pas la portée de leurs actes. Les personnes sous l’influence de la drogue ou de l’alcool ne sont pas autorisées à signer des accords juridiquement contraignants.

Aucune des parties ne doit être contrainte de signer l’accord.

Consentement Mutuel

Chaque partie doit accepter les termes pertinents du contrat et accepter d’être liée par eux dans un contrat. Les parties doivent s’entendre sur la nature de l’accord et le contenu du contrat.

Le Contrat en tant que Document

Bien que les contrats oraux puissent être légalement valables dans certaines situations, la forme la plus courante d’un contrat est par écrit. En cas de litige, les accords bien rédigés sont souvent plus faciles à comprendre.

L’objet de l’accord, les obligations des parties, les pièces à conviction, les définitions et d’autres éléments pertinents sont généralement inclus dans les contrats en tant que documents.

Le Contrat en tant que Processus

Les parties discuteront des détails du contrat, qu’il soit écrit ou non, après avoir convenu qu’elles peuvent se faire confiance. Pour s’acquitter de leurs responsabilités respectives dans le cadre du contrat, les deux parties doivent s’y conformer. L’autre partie peut intenter une action en justice pour non-respect du contrat et faire appliquer le contrat légalement si l’une des parties ne le fait pas.

Autres Dispositions du Droit des Contrats

Si vous avez des questions concernant la validité de votre contrat ou les étapes à suivre, n’hésitez pas à vous adresser à un de nos avocat chez Lexpro.

Un contrat n’est valable que lorsque les deux parties le signent.

Lorsqu’une partie intente un procès pour non-respect du contrat, le tribunal doit d’abord déterminer si les parties avaient un contrat, pour commencer.

Pour qu’un contrat soit valide, il doit y avoir la preuve de quatre choses. L’offre, la contrepartie, l’acceptation et la réciprocité font toutes partie de cet équilibre.

Est-il nécessaire d’avoir un contrat par écrit ?

Le délai de prescription joue un rôle important dans la distinction entre les contrats oraux et les contrats écrits dans le cadre d’un procès pour non-respect du contrat. Pour ces raisons et d’autres encore, un contrat écrit est toujours préférable.

Ce que vous devez savoir sur les exigences contractuelles

N’hésitez pas à contacter un des avocats spécialisés chez Lexpro si vous avez besoin de renseignement complémentaire.

Contract Law

Everything You Need to Know About Contract Requirements Under Swiss Law

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Everything You Need to Know About Contract Requirements Under Swiss Law

A contract must include a consideration, offer and acceptance, a legal purpose, competent parties, and mutual agreement to be legally binding on the parties involved. The contract may be invalid, voidable, or unenforceable if any essential parts are missing, vitiated, or irregular.

Consideration

That which persuades two people to enter into a contract is known as “consideration.” Contracts call for both parties to provide something of value to the other.

Selling a boat is an excellent example of taking consideration into account. When the buyer pays a certain sum, you will hand over the boat to the buyer.

Consideration includes consideration of time, payment conditions, and any other expectations. A contract is only legitimate if both parties agree to it.

Offer and Acceptance

Contracts need an offer that is valid, understandable, and detailed to be accepted. To avoid any misunderstandings, both the offer and the acceptance of the offer must be concise but precise.

Acceptance can be expressed verbally, in writing, or through one’s actions. An exchange of words such as, “Would you take $100 for this boat?” and “Yes,” may constitute an offer and acceptance in some cases.

Legal Purpose

Having a legitimate objective that does not violate the law is crucial to the integrity of any contract. Hiring someone to commit a crime and steal anything, for example, is against the law. If you agree to do an unlawful act, this does not constitute a contract under the country’s laws.

The contract must be legitimate under both stated and implicit legislative requirements and common law. The state and federal governments may require additional criteria to be satisfied in several instances.

Capable Parties

To be regarded as “capable” of entering into a contract, one must understand what they are doing.

Minors and those deemed mad are frequently considered incompetent to join into an agreement since they do not understand what they are signing up for. People under the influence of drugs or alcohol are not allowed to sign any legally binding agreements.

Neither party should be constrained to sign the agreement.

Mutual Assent

Each party must agree to the contract’s relevant terms and agree to be bound by them in a contract. The parties must agree on the nature of the agreement and the contents of the contract.

The Contract as a Document

Although verbal contracts might be legally enforceable in some situations, the most common form of a contract is in writing. In a legal dispute, well-written agreements are often easier to understand.

The agreement’s purpose, the obligations of the parties, exhibits, definitions, and other relevant elements are commonly included in contracts as documents.

The Contract as a Process

The parties will discuss the details of the contract, whether it is written or not after they have agreed that they can trust each other. To fulfill their respective responsibilities under the agreement, both parties must adhere to them. The other party may sue for breach of contract and have the contract legally enforced if either party fails to do so.

Other Contract Law Regulations

If you have any questions regarding the validity of your contract or what steps you should take next, you should speak with a competent local contract law attorney, such as LexPro.

A contract is only valid when both parties sign it.

When one party files a breach of contract lawsuit, the court must first determine whether the parties had a contract, to begin with.

For a contract to be valid, there must be proof of four things. Offer, consideration, acceptance, and mutuality are all parts of this equilibrium.

Is it Necessary to Have a Contract in Writing?

The statute of limitations plays a significant part in the distinction between verbal contracts and written ones when pursuing a breach of contract lawsuit. For these and other reasons, a written contract is always preferable.

What You Need to Know About Contract Requirements

LexPro is a great location to ask questions about contract requirements. So, if you need any further clarifications do not hesitate to contact us.

Contract Law

What Causes Contracts To Be Null and Void according to Swiss law

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What Causes Contracts To Be Null and Void according to Swiss law

It’s all about the details, especially in legal contracts.

What does it mean in legal terms, when a contract is null and void? To draft a legally binding contract can be a challenging task, and can cause a great deal of discomfort and trouble if declared unenforceable by law. When a contract is declared null and void, it basically means that it is missing some of the key elements that make it legally binding.

Here is a list of the key elements you need to have in mind, to create a legally valid contract:

· Contractual capacity – Minors, mentally challenged, and people under the influence of drugs and alcohol, do not have the power of law to enter into a fully binding legal contract. Therefore, only people of a certain age (in most cases above 18) and of sound mind can enter into contractual obligations.

· Offer and Acceptance – The offer and the acceptance of an offer, are two sides of a contractual coin, if one is missing, you cannot have a contract.

· Legality of contracts – A contract can only be legal if it abides by the rule of law. If some of the terms oppose the existing laws, it can be declared invalid and thus unenforceable.

· Consideration of contracts – This entails the exchange of goods, services, or anything of equal value between the parties of the contract.

· Mutuality of contracts – A contract means that at least two parties have to provide something for the other, for it to be valid. You cannot have a valid contract where only one party has obligations and the other only has a right to something.

The difference between void and voidable contracts

When we say a contract is void it means that it cannot be enforced and cannot be fixed to be legally valid. Basically, these contracts do not have some of the key elements that we mentioned previously.  

Voidable contracts, on the other hand, mean that even though some element is missing, they could still be enforced under certain circumstances, especially if both parties of the contract when discovering the missing element, choose to continue with the enforcement.

The main difference is that void contracts are invalid from the very beginning of the engagement but voidable contracts may become invalid at a certain time, maybe at the beginning or if circumstances change later on.

Termination of contracts

· Termination by mutual consent of the parties: the best option to terminate a legally binding contract is when both parties find an amicable solution to terminate it. This entails the signing of a legally binding agreement, which in many ways is a type of contract where the parties agree to release one another from their obligations.

· Convenience: In some cases, the contracts contain a clause that allows the parties to terminate the contract by giving reasonable notice in time and if certain criteria are met.

· Causable termination: When a party fails to perform one or more of its obligations, the other party usually has the right to cancel the contract by giving notice.

The proper way to review contracts

Now that you know the key elements of a contract, and how they can become unenforceable, here is some advice on what to keep in mind to avoid troubles in the future.

Read carefully and thoroughly

It goes without saying that one of the most important things to do before entering into legal obligations with another person or entity is to read the contract entirely and check all the important provisions. These types of documents may be very long and confusing, so having them checked by a person with legal knowledge is not a bad idea.

Make it plain and clear

Every detail of the contract should be easy to understand. Don’t leave any room for misconception and multiple meanings.

If something is not clear, make sure it is

When reading the draft of a contract, you might stumble upon some provisions and terms that you will not fully understand. In such cases, you should make sure to ask for clarification, if you wish to avoid future headaches. You should be comfortable with all the content of the contract before signing.  

Put it on paper

Laws typically recognize the validity of oral agreements, but they are much more difficult to enforce and prove their existence. When you have the contract in writing, it is easier to enforce in cases of dispute about some of the terms.

Know your contractual party

You cannot enter into a legal obligation with everyone out there, can you? Well, you can, but it can be a major issue if the other party proves to be untrustworthy and deceiving. This is why you should always make a background check of the person or entity you wish to engage in legal obligations with. Always make sure that as much as possible that the other party can deliver on their promise.

Read it again 

Last but not least, it is always a good idea to double-check what you already read. Sometimes a key issue may escape your eye or can be understood differently than intended. So before you put your signature at the bottom of the paper, try to make sure that you understood it completely.

Commercial Law Contract Law

Swiss Commercial Contracts – Distribution Agreements

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Swiss Commercial Contracts – Distribution Agreements

A company may promote its products in a variety of ways. While some manufacturers choose to offer their products directly to customers via their retail stores and websites, most opt to work with intermediaries through so-called distribution agreements.

The following are the most popular forms of distribution agreements in Switzerland:

Agency agreement: The agent acts as the manufacturer’s extended arm. The agent facilitates sales of products or enters into sales contracts on behalf of and for the account of the manufacturer.

In a nutshell, a distribution agreement states that the distributor is an independent dealer. The distributor buys the items from the producer and resells them under its name and account. The distributor is responsible for the sales risk.

Franchise agreement: The franchisee is also an independent dealer, but they distribute products and services by the franchisor’s standard distribution and marketing philosophy.

The parties are allowed to negotiate the conditions within the bounds of the law. Competition law establishes important boundaries. While an agency agreement must conform with numerous statutory aspects of contract law, the parties to the other two kinds have significant leeway in drafting their contracts.

Agency Agreements

The agent gets compensated depending on performance. It is entitled to the agreed-upon commission on all transactions aided or closed throughout the agency relationship. Unless otherwise agreed in writing, the agent is likewise entitled to a commission on transactions closed by the principal without the agent’s active participation, provided that the agent sought the respective client for such transactions. Suppose an agent is assigned an exclusive territory or client group. In that case, the agent is entitled to a commission on any transactions finished with customers from that territory or customer group, even if the agent did not contribute to completing the corresponding transaction. Because disagreements often develop at the end of a partnership, it is especially important to agree on clear and easy norms for the commissions that the principal owes at and after termination.

If the following requirements are satisfied, an agent may be legally entitled to fair remuneration for customers upon the termination of the agency agreement: The agent’s activities significantly increased the principal’s clientele; the principal benefits significantly from the business relationship with the clientele after the agreement is terminated; the award of such compensation is not inequitable, and the agreement was not terminated for a reason attributable to the agent. The maximum compensation amount is equal to the agent’s net yearly profits from the agency connection computed as the average over the previous five years or, if shorter, the average throughout the life of the agreement.

A Narrow Interpretation of Distribution Agreements

There are no special requirements in Swiss contract law that relate to distribution agreements in a broad sense. However, by analogy, rules designed for other agreements may apply to the individual distribution agreement. This may be especially true for agency law rules. The remuneration for clientele is the most prominent example of such an analog application. The Federal Supreme Court specified the grounds for a distributor’s entitlement to clientele reimbursement. In a nutshell, it demands that the distributor’s condition be comparable to that of an agent. The Federal Supreme Court considered the amount of autonomy of the distributor: the more restricted the distributor’s autonomy and the greater its integration into the seller’s sales team, the more likely the distributor would be entitled to compensation. This determination must be made on a case-by-case basis, considering the specific circumstances.

Franchise Agreements

Franchise agreements may be subject to rules created for other sorts of agreements. Aside from sales agent legislation (e.g., the claim for clientele compensation), individual labor law rules may apply by analogy to safeguard franchisees, especially under a subordination franchise agreement where the franchisee lacks control over its business choices (similar to an employee). The more the franchisee’s lack of autonomy, the greater the possibility for labor law to be relevant by analogy.

This risk may be reduced by not placing limits and requirements on franchisees normally placed on employees. It is also critical to mention explicitly in the agreement that the franchisee will continue to be a legally independent entrepreneur with the flexibility to make its own business choices. On the other hand, a judge may reach a different decision after reviewing the whole agreement and how it was executed. The implementation of labor law rules may have far-reaching implications for the franchisor. The franchisor, for example, may be held liable for the franchisee’s social security payments.

Commercial Law Contract Law

Swiss Commercial Contracts: Contracts for Supply

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Swiss Commercial Contracts: Contracts for Supply

Supply-side contracts are often structured as a purchase contract, contract for work, service contract, or a mix thereof, depending on the type of materials, goods, or services procured. A purchase contract is distinguished by exchanging an object of purchase (which may also include groups of assets, rights, and claims of various sorts, natural forces like electricity and water, or economic advantages such as goodwill and knowhow, to mention a few) for money.

Meanwhile, both labor contracts and service contracts are distinguished by a commitment to executing a certain work or service. The primary difference between these two types of contracts is the verifiability of success. In a work contract, the service provider agrees to execute labor to deliver a (tangible or intangible) work outcome that meets the agreed-upon (or implied) specifications. As a result, the service provider owes an objectively provable effect or result. Contracts in the construction, manufacturing, and maintenance industries are classic examples.

In contrast, the outcome of the service provider’s efforts cannot often be tested against objective criteria under a service contract. As a result, the service provider is not required to accomplish the anticipated result to fulfill the contract but is just required to perform the agreed-upon services diligently. Consultancy and management services are common services delivered under a service agreement.

Considerations for Drafting

The CO includes a special set of regulations for each of the above-mentioned categories of contract, which complement and, in the event of a disagreement, precede the requirements of the general part of the CO. However, because the vast majority of the CO’s provisions are non-mandatory, parties frequently choose to replace a larger portion of these provisions with their unique contractual agreement. In the case of contracts that mix different services and deliverables and do not clearly match one of the above-mentioned contracts, it is especially important to spell out the parties’ obligations and available remedies in more detail.

While the specification of deliverables and services and the accompanying remuneration are the focal point of any supply agreement, the following issues are frequently a source of contention. They should be addressed, particularly in mixed-type contracts:

Subcontractor involvement and liability: By default, the service provider under a work contract is free to designate subcontractors but remains entirely liable for the end outcome. In contrast, the service provider is more constrained in appointing subcontractors by default under a service agreement but has a limited obligation in circumstances where such restrictions do not apply.

Acceptance procedure, warranties, and remedies: The CO specifies a precise (albeit not identical) default acceptance procedure for purchase contracts and work contracts, as well as remedies in the event of non-conformity of goods or deliverables. These are regularly updated since they do not meet the parties’ needs, especially in the case of increasingly complicated projects.

Termination: By default, the CO provides several termination choices to the customer under a work contract, frequently amended or excluded. For service contracts, the CO states that either party may end the contract at any time (subject to liability for damages in case of untimely termination). The Federal Supreme Court has ruled on various occasions that this termination power is mandatory and that the parties are thus not bound by the contract duration or notice periods.

Commercial Law Contract Law

General Swiss Contract Law in 2022: The Swiss Code of Obligations (CO)

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General Swiss Contract Law in 2022: The Swiss Code of Obligations (CO)

For commercial contracts governed by substantive Swiss law, the CO is the primary source of law. The CO includes broad laws on contract law and regulations on specific forms of contracts, such as purchase contracts, leases, and contracts for work or services. These rules also apply (by analogy) to contract kinds not expressly covered by the CO (so-called innominate contracts).

Commercial Contract Formation and Validity

The contractual parties’ exchange of an offer and corresponding acceptance is the primary requirement for contract formation. The contract’s essential terms (essentialia negotii) must be included in both the offer and the acceptance. Contracts can generally be concluded without any formal criteria. Assignments, suretyships (guarantees), and property sale contracts are the principal exceptions to this norm. In practice, the parties frequently include explicit conditions in their contractual relationship to establish the content of their agreement.

Additionally, the fundamental notion of contractual freedom underpins Swiss contract law. It offers the parties the ability, within the bounds of mandatory legislation, to conclude or not conclude a contract, select their contractual partner, determine the contract’s content, and terminate or change a contract. Swiss contract law comprises few mandatory elements; further restrictions may be imposed by laws other than contract law, such as competition law, unfair competition law, criminal law, or tax law. A contract (or any part of it) is void if its conditions are impractical, illegal, or immoral.

Moreover, where there is a clear disparity between performance and counter-performance under a contract (due to one party’s exploitation, inexperience, or thoughtlessness), the injured party may declare within one year that it will not honor the contract and demand restitution for any performance already made. Furthermore, a party who enters into a contract due to (fundamental) error, fraud, or coercion may normally declare to the other party within one year that it does not intend to honor the contract; nonetheless, such party may become liable for damages.

Adoption and Use of Standard Terms

In B2B relationships, the rules governing general terms and conditions are nearly identical to those governing individual contracts, particularly the concept of offer and acceptance. According to the Federal Supreme Court, judicial authority over standard terms in business-to-business partnerships is limited to their incorporation. It does not include substantive control over their content (except for the application of mandatory law). Nonetheless, the inclusion of standard terms is a tool for controlling the substance of such terms, particularly under the general rule that odd standard phrases are not incorporated into the contract. Furthermore, if the structure of a specific provision allows for two distinct interpretations, the drafting party must bear the risk of ambiguity.

Contract Breach and Remedies

The type of breach determines the set of remedies accessible to the aggrieved party under Swiss law: impossibility, defective performance (including delivery of non-conforming products), or delay. If execution of an obligation is impossible for objective reasons before or at contract completion, the contract is void. Under the idea of culpa in contrahendo, the party who breaches the contract may be accountable for damages. In contrast, if the execution of an obligation becomes impossible after the contract’s conclusion due to the fault of one of the parties, the contract remains legal. In general, the offended party may seek restitution.

In the event of a party’s failure to perform properly, the other party may, as a general rule, seek either particular performance or damages. In practice, the common remedy is monetary damages (positive interest). In the event of purchase contracts and labor contracts, further remedies for non-conformity of the goods (or works) apply.

If a party fails to perform on time, it must pay damages for the delay. Subject to certain conditions, the aggrieved party may also (i) waive performance and seek compensation for damages incurred as a result of non-performance (positive interest), or (ii) withdraw from the contract and seek compensation for damages incurred as a result of non-performance (negative interest). Unless the parties agree differently, a debtor in default on paying a financial debt must pay default interest of at least 5% per annum.

Under Swiss law, both liquidated damages (meant to compensate for expected damage) and contractual penalties (meant to punish) are regularly utilized. However, at his discretion, a court may lower the number of liquidated damages or a contractual penalty if he believes it is excessive.

Liability and Liability Limitation

In general, the obligor is accountable for any fault attributable to it. The obligor carries the burden of establishing that it was not at fault for the contract’s incorrect or non-performance.

Swiss law allows for the limitation (and exclusion) of liability, such as for specific types of damages or financial limits. Any arrangement reached in advance that purports to limit liability for any unlawful purpose or gross negligence, on the other hand, is null and void. Furthermore, suppose the limitation of responsibility occurs in connection with state-licensed commercial activity (e.g., banks). In that case, the advance limitation of liability for mild negligence may be void as well, at the discretion of the court. Furthermore, under specified sections of the CO (e.g., governing purchase contracts or contracts for work) or specific laws such as the Product Liability Act, limitation of liability is not authorized for death or personal harm.

Termination and Term

In general, a contract can be entered into for a set period or unlimited time. A fixed-term contract expires with no warning. A contract with an indefinite term, on the other hand, maybe terminated by either party by giving notice of termination by the termination provisions agreed between the parties or, if a contract lacks any termination provisions or if mandatory termination provisions apply (such as lease or services), according to the statutory provisions of the CO.

In addition, in the case of continuous obligations, either party may cancel a Contract with immediate effect for valid reasons at any moment. Valid reasons are circumstances that make the contract’s continuation unacceptable to the terminating party. Such termination must be declared as soon as possible.