On the conditions in the Bulgarian Law of Obligations

Can a resolutory condition which constitutes action or inaction of the parties to a contract be agreed?
Under Article 9 of the Obligations and Contracts Act: “The parties can freely determine the content of their contract as long as it does not contravene mandatory provisions of law and morality”. It is therefore possible that parties agree to conclude a contract under a resolutory condition which may represent action or inaction of the parties insofar as there is no mandatory provision of law to the contrary. The risk of contravening morality when concluding conditional contracts, regardless whether it is about a suspensive condition or a resolutory condition, is addressed in the Supreme Court of Cassation’s Ruling No. 7 of 19 April 2017 on Commercial Case No. 53312/2015, First Civil Division, namely: „The condition is a legal fact which can be included in the category of legal events, and therefore it is inadmissible to conclude contracts under a condition which is entirely depending on the will of one party – the so-called purely testamentary conditions, as these call into question the intention to become legally bound and the existence of the contract itself”. Per argumentum a contrario (as appeal from the contrary) and provided that the condition is not made entirely dependent on one party, a contract made under a resolutory condition which constitutes action or inaction of one of the parties will be valid and will cause legal consequences.

Since the condition is a legal fact which can be included in the category of legal events, it will also be possible, theoretically, to conclude a contract under a resolutory condition, constituting action or inaction of the parties. In such case the condition would belong to the category of relative legal events – “…natural moral law is the result of volitional human conduct; however, in the respective legal relationship this conduct is important precisely as an event”1.

A similar viewpoint is also upheld in the practice of the Supreme Court of Cassation – in Rulings passed under Article 290 of the Civil Code of Procedure. In the above-mentioned Ruling No. 7 of 19 April 2017 of the Supreme Court of Cassation on Commercial Case No. 53312/2015, First Civil Division, the following viewpoint is adopted: “…if the fulfillment of the condition is subject also to the actions of the debtor himself, the fulfillment of the obligation which is enforceable by such condition should be considered to depend on the will and ability of the debtor as well”. The Supreme Court of Cassation’s Ruling No. 15 of 22 December 2016, on Commercial Case No. 2404/2014, First Civil Division, also supports this assertion: “…the stipulation that the contracting authority will pay when the latter gets paid in its capacity of a contractor is not null and void, but should be applied by interpreting the prerequisites which the parties referred to when negotiating the stipulation”. The practice of the Supreme Court of Cassation concerning the application of the provision of Art. 25, para 1, sentence 2 of the Obligations and Contracts Act, concerning the condition as a modality, is also adopted in Ruling No. 161 of 19 July 2018 of the Supreme Court of Cassation: ” … without the need to further elaborate the answers given, which are also relevant to the legal question posed in the present case and are related to the application of the introduced legal fiction as to the fulfilment of a condition the performance of which has been set by the parties as a precondition to performing a specific contractual obligation. The assessment as to whether it is a condition stipulated in the contract and the fulfilment of which does not depend on the will of the parties – a casual condition, or a future event depending on the will of one of the parties – a testamentary condition, should in any case be derived from the relevant stipulation in the contract, expressing the condition. Or, the assessment of the legal characteristics of the condition as modality of the contractual agreement is always conditioned by the matching counter declarations of the will of the parties, as expressed in the contract.”

Among the reasons for the Supreme Court of Cassation’s Ruling No. 15 of 22 April 2014 on Commercial Case No. 46/2013, Second Commercial Division, the following is stated, however, presenting the following arguments for the applicability of Art. 69, para 2 of the Obligations and Contracts Act to such a case of a condition agreed, namely that: “The admissibility of such stipulation derives from the principle of freedom of contract embraced in Article 9 of the Obligations and Contracts Act and applicable by virtue of the provision of Article 288 of the Commercial Act referring to commercial transactions. The parties’ agreement that an obligation will become enforceable following some future uncertain event (condition), the fulfillment of which is premised also on the actions of the debtor himself, should be considered as depending on the will and ability of the debtor”.

The Supreme Court of Cassation uses terminology such as the “will” and the “actions” of the debtor, i.e. the will and the actions of a party to the contract, which terminology leads up to the conclusion that an action or an inaction of the respective party to the legal relationship is meant.
Can such action or inaction of one of the parties, however, constitute non-performance of the contract?

It should not be possible to agree on a condition which will result in non-performance by one of the parties to the contract, as the condition is part of the contract’s non-essential content. This principle is upheld by Ruling No. 77 of 8 July 2009 of the Supreme Court of Cassation on Commercial Case No. 2/2009, First Commercial Division – it concerns an insurance contract and is discussing whether a specific clause in the insurance contract is valid, which clause stipulates that the non-payment of a portion of the insurance premium in due time results in termination of the legal relationship. According to the said Ruling: “Failing to pay a portion of the insurance premium in due time is not a resolutory condition but a fact which is relevant to the agreed manner of contract termination.”

Another argument in support of this thesis is that the provision of Article 87, paragraph 1 of the Obligations and Contracts Act requires the debtor to be allowed a sufficient period of time for the performance of the debtor’s obligations, by giving a notice stating that after the expiration of this period the creditor will consider the contract canceled, i.e. such notice is deemed necessary in any case before the contract is canceled, and Article 87, paragraph 2 of the Obligations and Contracts Act even provides for the written form of the notice for any contract made in writing. Therefore, there is no way to agree on a resolutory condition which constitutes non-performance of the contract, because under a resolutory condition the relevant legal consequences caused by the contract will be dropped retroactively without the need to give notice.

The more recent case law of the Supreme Court of Cassation has also been upholding that non-performance under a contract does not constitute a resolutory condition – according to Ruling No. 111 of 2016 of the Supreme Court of Cassation on Commercial Case No. 1839/2015, Second Commercial Division: “The obligation for putting the site into operation, as undertaken by the buyer under the privatization contract, does not constitute an agreed condition. The condition is a non-essential element of the contract’s content and no such condition has been agreed by the parties, and in view of the specific nature of the privatization contract, the performances agreed upon are an essential element. The culpable non-fulfillment of the buyer’s obligations determines the buyer’s liability for non-fulfillment, and the provision of Art. 25, para. 1 of the Obligations and Contracts Act is relevant to the validity of the contract in the case that a future uncertain event is agreed as a condition”.

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