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Signing a Contract with a Hungarian Company

Signing a Contract with a Hungarian Company

The new Hungarian Civil Code that was enabled in March 2014 changes the applicable regulations regarding common law relations. Among the most important changes brought to the system, a significant one refers to the Contract Law.

New contract types in Hungary

The new Hungarian Contract Law has adopted the Anglo-American notion of “trust” which makes it possible for one or more beneficiaries to own a property that can be transferred to a trustee and together with it new types of contract have been recognized by law. The types of contracts the new Hungarian Contract Law acknowledges are the distribution contract, the franchise contract, the factoring contract, the intermediation contract and the financial lease contract. These types of contracts existed before but they were not acknowledged by the law.

In terms of labor contracts the Hungarian Civil Code acknowledges the indefinite term contract (határozatlan időre szóló munkaszerződés), the fixed-term contract (határozott időre szóló munkaszerződés) and the assignment contract (vállalkozói szerződés).

The conclusion of a contract in Hungary

The principle of freedom of contract states that parties can conclude freely a contract deciding the terms and the content of a contract and impose specific rules. Contracts can be concluded in writing or orally. The Hungarian Contract Law also allows for contracts to be concluded by representatives of both parties if the necessary authorizations have been granted. The parties must work together and provide all relevant information not only during the contract but also throughout the negotiations. If any of the parties breaks his or her part of the obligations, the party breaching the agreement must compensate the other party according to the rules stipulated by the contract in such cases. If no such rules have been stipulated in the contract, the law of torts applies and the breaching party will be held accountable according to the legislation of this law.The law also stipulates that a contract can only be concluded if both parties agree to do so. The conclusion of a contract can be done by mutual and unanimous agreement. If there are any terms and conditions that do not apply in a contract, these must be stated clearly.

There is also the possibility for a contract to be concluded electronically but in this case, the party wishing to do so must offer the other party all the information about the technical steps when an electronic contract is signed. The party wanting to conclude an electronic contract must convey if the contract is done in writing or not, whether is it accessible, when and for how long, the language the contract will be concluded in and any other regulation that apply.

General terms of contracts in Hungary

The general terms of a Hungarian contract are the terms and conditions stated by the party enforcing those terms with the purpose of concluding a contract. The terms of a contract will become applicable only if the other party benefited from the explanations of those terms, was the given the time to accustom to them and if the terms are accepted by the party. If any other terms arise they must be explained and accepted by the second party upon the provision of all specific information. Parties are also allowed to modify, amend or take out any clauses in the contract by mutual agreement or demand the action to be taken in court.  Jus sanguinis, which in Latin translates as “the right of blood,” is the foundational basis of Hungarian nationality law. Therefore, naturalization or ancestry are both valid ways to get Hungarian citizenship. Obtaining citizenship has several advantages, such as visa-free travel inside the Schengen Zone, the ability to live and work anywhere in the EU, and access to Hungary’s publicly financed healthcare system. Our immigration attorneys can provide you with further information on becoming a citizen of this country.

Invalidity and termination of a contract in Hungary

Hungarian contract may be terminated if both parties agree to it or if one party decides to do so by making a legal declaration. The declaration can be a retroactive withdrawal or a future termination. The termination of a contract can also be settled in court. A contract is declared invalid if legal regulations have been breached, or if the conclusion of the contract was done under illegal circumstances.

If you want to set up a company and need details about the new Civil Code you can contact our law firm in Hungary.