The preliminary contract is a widely used instrument in Bulgarian practice — particularly in real estate transactions. Where one party refuses to proceed to the final contract, the other may bring a claim under Art. 19, para. 3 of the Obligations and Contracts Act (OCA) to have the preliminary contract declared final by the court. This article examines the conditions for such a claim, including the binding guidance issued by the Supreme Court of Cassation on the question of an unpaid purchase price.
1. Legal framework
A preliminary contract may be declared final by court order if it is valid and contains sufficient agreed terms for a valid final contract to be concluded (Art. 19, para. 3 OCA). Either party to a preliminary contract may bring such a claim.
2. Conditions for the claim to succeed
For the claim to be upheld, the preliminary contract must be valid — it must satisfy the requirements of Art. 19, paras. 1 and 2 OCA, meaning all statutory requirements for concluding the final contract must be met. For a preliminary contract for the sale of real property, this requires:
- the contract must contain sufficient terms for a valid final contract to be concluded;
- it must be established under Art. 363 of the Code of Civil Procedure (CCP) that the seller holds title to the property;
- the preliminary contract must not have been rescinded by either party.
Where the preliminary contract includes a condition — for example, the developer obtaining an occupancy permit (known as "Act 16") — and that condition has not yet been fulfilled, the court will refuse to declare the contract final until it is met. In such a case the claim is premature rather than unfounded.
3. Interpretive Decision No. 4/2020 of the Supreme Court of Cassation — unpaid price
Interpretive Decision No. 4/2020 of 9 May 2023 of the Supreme Court of Cassation (SCC), Joint Civil and Commercial Chambers, provides binding guidance on whether a claim under Art. 19, para. 3 OCA may succeed where the buyer has not paid the full agreed price.
The majority in the Civil and Commercial Chambers held that payment of the agreed price — even where the preliminary contract provides that it must precede conclusion of the final contract — is not an absolute precondition for the claim to succeed. Accordingly, the absence of full payment does not automatically result in dismissal.
In the words of the SCC: "A court seised of a claim under Art. 19, para. 3 OCA brought by a buyer who has not paid the full agreed price may declare final, pursuant to Art. 362, para. 1 CCP, a preliminary contract for the sale of property that contains a term providing for the final contract to be concluded after payment of the full price."
4. Two-week payment condition
Where the claim is upheld, the court orders that the final contract shall be deemed concluded on condition that the buyer pays the outstanding sum within two weeks of the judgment becoming final (Art. 362, para. 1 CCP). If the buyer fails to pay within that period, the judgment does not produce its property-law effect.
5. Culpable non-performance by the buyer
The SCC clarifies that even where the buyer's non-performance is established as culpable, this does not in itself bar the claim from succeeding, provided it has not resulted in the termination of the contractual relationship between the parties.
The reasoning is as follows: where the buyer is in default, the seller acquires the right to rescind the contract. If the seller has not exercised that right by notifying the buyer — either before the claim was filed or during the proceedings — both parties retain an interest in preserving the contractual relationship and achieving its ultimate purpose, namely the conclusion of the final contract. The dispute as to the exact amount of the price due is resolved by the court's judgment.
How we can help
We advise parties to preliminary contracts — both buyers and sellers — on the merits of bringing or contesting a claim under Art. 19, para. 3 OCA, and represent clients in proceedings before all court instances. Contact us for an assessment of your specific situation.
Note
This article is for general information only and does not constitute legal advice. Legislation changes over time — for current, binding guidance on your case, please contact us.