Congratulations on completing your company setup! Setting up your company in Estonia is an exciting milestone, but it’s just the beginning. As you prepare to open bank accounts, hire staff, and finalise deals with suppliers and clients, ensuring your contracts for starting business are well-prepared and legally sound is crucial. In this article, we provide essential tips and legal insights to help you navigate the contract preparation process successfully, minimise risks, and establish strong business relationships.
Key considerations before starting negotiations
1. Know your partners
Understanding who your business partners are is fundamental. Conduct thorough background checks to ensure they are reliable and trustworthy. Once the background is clear and you are willing to start negotiations it’s good to know some basic legal topics before signing a contract.
2. Contract conclusion and form
Know when a contract is considered concluded and if a mandatory form applies. This ensures your contracts are legally binding and enforceable.
3. Authority to represent
Identify who has the authority to represent the company and sign on its behalf. This is typically a member of the management board. If there are multiple board members, joint representation might be required, as indicated in the business register. Anyone else signing must have a properly drafted and signed power of attorney.
4. Contract term
Decide whether a fixed-term or open-ended contract is more beneficial for your needs. This can impact the flexibility and duration of your business agreements.
5. Ending a contractual relationship
Understand the procedures and legal grounds for terminating contracts, including notice periods and termination conditions.
6. Protecting your rights
Know your rights and the legal remedies available if your partner breaches the contract. These may include demanding compensation, reducing the price, or withdrawing from the contract.
Legal basics before signing a contract
Before signing any contract, ensure it is signed by a duly authorized representative. Contracts can be entered into orally, in writing, or in another form if no specific format is required by law. However, the minimum recommended form is in writing. Some contracts, such as the sale of shares or real estate, require notarization in Estonia.
1. Signing practices
Although a contract is legally concluded by making and accepting offers, it is common practice to sign to make it effective. Digital signing using an ID card is widely used in Estonia.
2. Contract validity term
Consider the term of validity for your contracts. Decide which contracts should be for long-term partnerships without a fixed date and which should be for a specified fixed term. Employment contracts, for example, can only be signed for a limited period as a fixed term.
3. Ending contracts
Understand the termination grounds and notice periods for ending contracts. Legal remedies for breaches include demanding compensation, reducing the price, or withdrawing from the contract. Settling disputes amicably is recommended to avoid costly and time-consuming litigation, especially with international partners.
TOP 5 essential contracts for your business
- Employment contract or freelancer contract
- Service contract
- Non-Disclosure Agreement
- Loan contract
- Business premises rental agreement
By following these tips, you can ensure your business contracts are well-prepared, legally sound, and beneficial for your company’s success. Successfully navigating the complexities of business contracts is essential for the growth and stability of your company. By understanding your partners, ensuring proper authorization, and knowing the legal frameworks, you can protect your interests and foster strong business relationships. Use the available tools to conduct thorough background checks and always stay informed about the legal aspects of your contracts.
For further advice on your company’s needs, contact us. We offer consultation on contractual relationships and assistance with drafting business contracts.
