Options under Belarusian law: new amendments to the Civil Code of the Republic of Belarus
This Saturday, 18.11.2023, amendments to the Civil Code of the Republic of Belarus were adopted. It is worth noting that these amendments are very progressive and have been implemented into Belarusian law in several institutions of Anglo-Saxon law, firmly established in the international turnover, and adopted by legislators and law enforcers in Russia and Europe many years ago.
In particular, the Civil Code introduced such legal mechanisms as an option to conclude a contract and an option contract. It should be recalled that the right to enter into such contracts was previously granted to HTP residents both among themselves and with third parties. Subsequently, such right was also granted to the resident companies of the Velikiy Kamen industrial park and the participants/shareholders of such companies in respect of shares/stakes in the authorized capital of such companies. Now, such an opportunity is granted to any entities, i.e. both legal entities and individuals.
In general, the amendments to the Belarusian Civil Code follow the wording of the acts that regulated activities in the HTP and the Velikiy Kamen industrial park, as well as the wording of the Russian Civil Code, distinguishing two types of such contracts: an option to conclude a contract and an option contract. The difference between them can be summarised in the table below.
| Option to conclude a contract | Option contract | |
| The first party (the party "granting the option") | Gives an irrevocable offer to the other party to conclude one or more contracts on the terms and conditions stipulated in the option to conclude a contract. In other words, at the other party’s request, the agreed contract is deemed to have been concluded. | At the other party’s , the party undertakes to perform specific actions (including payment of money, transfer, provision or acceptance of property, exclusive rights to the results of intellectual activity). |
| The second party (the party "receiving the option") | It is entitled, but not obliged, to accept the first party’s offer in the manner, time, and on the terms and conditions stipulated by the option to conclude a contract. At the same time, acceptance is allowed only upon the occurrence of a condition defined by such an option, including those depending on the will of one of the parties. In other words, the other party is entitled (but not obliged) to declare that the contract has been concluded. The declaration of acceptance may be limited in time. | The authorized party has the right, but not the obligation, to demand from the first party to perform specific actions (including payment of money, transfer, provision or acceptance of property, exclusive rights to the results of intellectual activity) within the term established by the option contract. The option contract is terminated if the authorized party fails to make a claim within the specified term. |
| Payment in favor of the first party | An option to conclude a contract may (but is not required to) be granted for a fee and/or other consideration. | The option contract may provide a fee for the right to make a claim. |
In other words, an option to conclude a contract is a mechanism for creating new obligations for the parties through the will of the "option holder" to conclude the contract. On the other hand, fn option contract is a mechanism for the realization of existing obligations at the request of one of the parties.
These changes will further simplify and streamline relations between the parties, including when concluding certain transactions. In particular, in M&A transactions they will open up more opportunities for the parties to build relationships with each other in some disputable situations when the parties can agree that one of the parties will withdraw from a joint project by accepting the previously given offer within the framework of an option to conclude a contract.
Assurances of Circumstances: New Amendments to the Civil Code of the Republic of Belarus
One of the institutions of Anglo-Saxon law, which has been implemented into the Civil Code of the Republic of Belarus, is the assurance of circumstances. In English law, the closest institution is representations and warranties.
The logic of this institution is that when concluding a contract, one party, to induce the other party to conclude that contract, assures it of specific circumstances that the other party cannot or does not want to verify independently. For example, the legislator indicates that assurances may be given regarding the following: the subject matter of the contract, the authority to conclude it, the compliance of the contract with the law applicable to it, the existence of the necessary special permits (licenses), its financial condition, the existence of rights to tangible or intangible assets or a third party. The list is not closed, and a party may give assurances in other circumstances.
At the same time, as in English law, where a breach of representations and warranties gives the right to recover damages and, in some cases, to withdraw from the contract, the Belarusian legislator points out that breach of assurances in the circumstances leads to a breach of contract:
- to the obligation of the party that gave the unreliable assurances to compensate the other party for real damage (but not lost profits) caused by the unreliability of the assurances;
- to the obligation of the party that gave false assurances to pay a penalty if the agreement of the parties provides for such penalty;
- the right of a party to which false assurances have been given to repudiate a contract, provided that such assurances were material to it.
At the same time, assurances in the circumstances are independent of the main contract, i.e., in case the contract, for the purpose of conclusion of which assurances were given, is recognized as unconcluded, invalid, or the fact of its nullity is established, the party that gave unreliable circumstances is not released from the obligation to compensate for real damage and lost profit.
Including such an institution will significantly simplify structuring those transactions for both businesses and citizens. In particular, in transactions, the parties will be able to rely more on the information provided by the other party because in case of the unreliability of such information provided in the form of assurances in the circumstances, the parties will at least be able to compensate their real damage caused by such false information, and at most to withdraw from the contract, which they entered into relying on unreliable assurances.
The changes will come into force on 19.11.2024.
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