Even in the case of apparently simple documents there can be a surprising number of mistakes which may result in a lot of headache for the parties. We hereby point out the typical errors which the creators of documents tend to make either due to incompetence, ignorance or by trying to save money. All these mistakes, however, can quite easily be avoided.
There are common instances where the parties conclude a wrong agreement while trying to regulate their mutual relations. For example, it is quite usual that the parties try to regulate an employment relation with a contractor or service agreement. While Employment Contracts Act is applied to employment contracts, which provides rights and obligations to both the employer and the employee, Law of Obligations Act is applied to contractor and service agreements, which leaves the parties quite free to determine their obligations and also mostly allows the parties to deviate upon mutual agreement from the provisions of the law.
It should be noted in the case of the example above that even if the parties have concluded a contractor or service agreement but their actual relation is an employment relation, such agreement is nevertheless considered as employment contract and Employment Contracts Act is applied.
Wrong document format
In drafting any document or agreement it must be first determined whether a mandatory format is required by the law. For example, the law provides that all agreements aimed at the transfer of the ownership of an immovable property must be authenticated by a notary. Therefore also a preliminary agreement for the sale of immovable must be notarised and failure to comply with such format requirement results in such agreement being void.
While usually the parties are in error regarding the stricter format requirement where simple written agreement is concluded instead of notarised agreement or oral agreement is concluded instead of written, there are also instances where parties intend to conclude a notarised agreement when in fact written or oral would be enough. This cannot strictly be considered as a mistake but it could result in unnecessary expense both in time and money.
Lack of right of representation
If a legal entity is party to a document then the private person signing the document on behalf of the legal entity must have legal grounds for such representation either deriving from law or in the form of power of attorney. Valid representation right is also required if a private person is party to a document and such document is signed by another private person in his/her behalf.
For example, a management board member of a company has representation right deriving from law, and also the parent of a minor or the guardian of a person with restricted legal capacity. Representation right deriving from a transaction is granted by one person to another by providing a respective power of attorney.
In granting a power of attorney it must be noted that in case a mandatory format is provided by law to a transaction then the power of attorney provided for such transaction must also be granted in the same format.
In case a transaction has been executed through a representative without the right of representation then such transaction is void unless the person on whose behalf the person without the right of representation entered into the transaction subsequently ratifies the transaction.
In practice there occurs frequently situations where an area manager or division head concludes agreements on behalf of his/her company without having have received an actual power of attorney from the company. In such case the company usually approves the transactions, but in reality risks arise for both the representative and the principal.
Obsolete and inappropriate content
For the purpose of cost saving a lot of random document templates from internet are being used. Such templates may cover the initial needs at the first glance but there is always the risk that they include obsolete provisions, are not fully in compliance with the law or do not really include the sections required in the specific case.
If parties have concluded an agreement containing content that does not meet the requirements of the specific case or which is downright in conflict with the valid law, it results in potential risk that the parties will spend a lot of time and money in the future for disputes and interpretation of the agreement. Therefore it is good to think through what the agreement should regulate, which are the provisions necessary for both parties and then draft or adjust an agreement specifically for the given relation between the parties.
In Avokaado you can always ask from the Intercom chat what kind of agreement you should conclude — you do not have to spend time for modification of old templates or searching the internet for suitable agreement. In Avokaado there is information included with each document on when to use it and you can also find answers to frequently asked questions. In order to create the document the user will answer questions resulting in creation of a document specifically for the needs of the given user. Answering of the questions has been made easy, the tooltips next to the questions explain further the contents, court practice and other circumstances related to the questions. When the questions have been answered the Avokaado system creates the document momentarily.
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Originally published at https://avokaado.io on July 19, 2017.