Azerbaijan is experiencing increase in non-oil sector and in small and medium businesses. Meanwhile, in recent years lots of startups are coming up along with the co-working centers and startup incubators. In addition, media, filmmaking, entertainment and many other new and non-energy sectors are growing incredibly fast. In such an atmosphere lots of transactions and deals are made on a daily basis.
The major problem is, many deals and transactions are made without any official agreement or contract (sale-purchase, service, non-disclosure, rent and etc.) signed between any particular parties. Still many deals are made based on trust between the business partners, which makes them highly vulnerable to legal and business risks. We know many cases where services, intellectual properties (songs, projects, know-hows and etc.) and technologies are stolen because there were no contracts between the parties. In such a case, the party whose rights are violated gets a hard time to resolve the conflict and to restore his violated rights.
We believe there should be a trust between business partners, indeed. But, one should always make sure his/her rights are protected by the legislation and the government. If you ask, how to achieve this, the answer is very simple: you should always sign a contract with your counterparts while conducting a business. Shall you get into contractual relationship with other party and if the contract is made in accordance with the relevant laws of Azerbaijan Republic, that piece of paper will be a guardian of your rights.
So who we know that the contract is made correctly and what are the major guidelines in accordance with the legislation? In accordance with the legislation, civil contract shall have three major terms: Terms on scope of the contract, important and necessary terms of the contract that specified at the Civil Code, or any other terms requested by the respective party and pending an approval by the other party. There are many specific requirements on forms (verbal, written or notarized agreements), statutory provisions, payment terms, registrations requirements, warranty, termination options etc. on contracts and if a contract is not made in accordance with the relevant legislation it can be deemed invalid or void, which poses a huge risk to the parties. Further, the contracts or any provisions of contract that are in contradiction with the Civil Code will be void. The parties shall always make sure the major terms are in place in the contract and it complies with the statutory provisions of the law in order to avoid any potential risks.
In addition, one should take in mind that the official currency for monetary obligations is Azerbaijani manat and no other currency shall be used in the case if both sides of the contract are Azerbaijani persons. Shall the one party of the contract is foreign person; usage of foreign currency is allowed in accordance with the Civil Code of Azerbaijan Republic.
Consequently, the Civil Code of Azerbaijan Republic includes provisions that help damaged party to get indemnified and get their right restored. According to the clause 443.1 of the Civil Code, the party not performing its obligations and violating the terms of the contract shall indemnify damaged party against any such violation. Nevertheless, the Civil Code would protect damaged party’s rights, only in the case if contract provides for a liability for the mentioned violations and indemnification of the parties. It means, the parties shall include the clause of indemnification at the contract for making sure that the legislation will protect their rights against the breaching party. In many cases physical and legal persons do not use services of lawyers and miss such provisions at the contract which leads them to huge risks.
Therefore, we recommend having a contract in place for each important operation or transaction when doing a business and the most importantly, it’s highly recommended involving contract lawyers when negotiating, drafting or signing an important agreement.
This article was prepared as general information by the attorneys of Baku Attorneys & Consultants (BAC), Azerbaijani law firm. BAC is a full service law firm based in Baku and it has a strong team of highly experienced attorneys and consultants, specialized in rendering various expert services to foreign and local clients in Azerbaijan. Please, feel free to reach us via www.batco.az.