legal effects of a real estate sale contract
A real estate sale contract is concluded in the form of a notarial deed.The seller undertakes to transfer ownership and deliver the property to the buyer, while the buyer undertakes to accept the property and pay the price to the seller. The essential elements of any sale contract are the subject matter and the price.
Any additional provisions can be agreed upon by the parties themselves within the freedom of contracts, as long as they do not contradict the nature of the legal relationship, the law, or the principles of social coexistence (Article 3531 of the Civil Code).
The subject matter of the sale contract must be precisely specified based on the land and mortgage register, and in the absence of the land and mortgage register - based on data from the land and building register. The price is the second essential element of the sale contract. It is crucial that each party’s performance is equivalent to the other’s. Therefore, it is important to specify the price, its amount, the method of payment and the payment date precisely in the contract.
This view was expressed in the judgment IX GC 117/17 of the District Court in Lublin of 20 July 2018, from which it follows that if the parties do not determine the deadline for making reciprocal performances in a mutual agreement, including the payment term for the price, then Article 488(1) of the Civil Code applies establishing the principle of simultaneous fulfilment of reciprocal performances.
The precise determination of the date for making reciprocal performances is a fundamental principle that provides certainty to parties engaged in legal transactions.
The principle of simultaneity of reciprocal performances, as regulated in Art. 488(1) of the Civil Code, means that performances under mutual agreements can be made simultaneously. Due to the specific nature of non-cash transactions, it is impossible to fulfil reciprocal performances at the same time. Therefore, it is assumed that the non-monetary performance should be fulfilled first, and the debtor of the monetary performance must be prepared to fulfil this obligation immediately upon receiving the non-monetary performance. Regarding the price in a sale contract, it is accepted as a rule that the payment claim becomes due once the seller has fulfilled their non-monetary performance, unless the parties have specified a different payment date in the sale contract (Judgment of the Court of Appeal in Katowice of 10 April 2019, ref. V Aga 358/18).
A notary drawing up a sale contract in the form of a notarial deed hears the same question from many clients: What are the legal consequences of a sale contract if the buyer fails to pay the sale price? And is such a contract invalid?
A contract for the sale of real estate concluded in the form of a notarial deed is not invalid due to the buyer's failure to pay the price, as the provision of Art. 157 of the Civil Code excludes the conclusion of a sales contract on condition or with the reservation of a time limit, and this results precisely from the need to ensure the safety of real estate transactions.
Certainty in legal trading means that it is necessary to have certainty as to who owns the real estate, otherwise, the same real estate could have several owners simultaneously under conditions precedent and dependent on a condition subsequent. These persons could continue to effectively transfer ownership of the real estate subject to payment of the price. There would be a problem of the disappearance of ownership, which would make ownership relations unstable and real estate transactions uncertain.
In this legal situation, a sale contract transfers ownership of the real estate to the buyer, with only the mutual performance obligations of the parties specified and secured in the content of the contract.
Therefore, in order to secure the obligation to pay the price and hand over the real estate, the parties declare their submission to enforcement pursuant to Art. 777(1)(4) of the Civil Procedure Code, which provides that the enforcement order is a notarial deed in which the debtor has submitted themselves to enforcement and which includes the obligation to pay a certain sum of money or to hand over things of the type and quantity specified in the deed, or the obligation to surrender an individually designated thing, if the deed specifies the time limit for performing that obligation or an event on which performance is conditioned.
A declaration of submission to enforcement submitted in the form of a notarial deed constitutes an enforcement order which, after an enforcement clause has been issued by a competent court, constitutes an enforcement title substituting a court judgement in proceedings for the payment of the sale price or in proceedings for the delivery of real estate. It facilitates the enforcement of mutual claims arising from the sale contract in court proceedings. However, it does not provide a 100% guarantee that the sale price will be paid. If the buyer has no assets to satisfy the payment of the sale price, enforcement is ineffective.