GILS Commercial contracts: Armenia
GENERAL CONTRACT LAW REGULATIONS
ARMENIA
1. Is it mandatory for a commercial contract to be governed by local law?
Legislation of the Republic of Armenia does not stipulate any restrictions regarding the governing law. Hence, the parties of the commercial contract are able to choose any other governing law.
2. What language applies to commercial contracts on the territory of the Country? Is it possible to establish the prevailing language?
There is no language restriction stipulated under RA legislation, unless the commercial contract is carried to governmental/state authorities or is under their control. The Contract can be drafted in any language and the prevailing language may be stipulated in case of multilingual contract.
3. Is it possible to use electronic signatures for the execution of commercial contracts between private entities?
The Civil Code of the RA gives the possibility of concluding a contract electronically. This can be done by exchanging an electronic message, document or data through electronic communication or other means of communication, including electronic data exchange on an electronic platform (website, electronic application or other similar means), by carrying out a clear action aimed at concluding the contract.
4. Are there any requirements to the form of a commercial contract? Are there any standard forms of commercial contracts?
The RA legislation does not stipulate mandatory or standard forms for commercial contracts. The parties may conclude any contract which is not contradicting RA legislation.
5. Are there any types of preliminary agreement or “gentleman’s agreement” in the Country?
According to RA legislation preliminary agreements might be concluded between parties. The preliminary agreement should be concluded in the same way as the main agreement. There is no widely spread practice concerning “gentleman’s agreement”, but in the legislation it is stipulated as verbal agreements.
6. What currency is allowed to be used for commercial contracts in the Country?
When a contract is concluded between non-resident legal entities, or if one of the parties is a non-resident, international currency may be specified. In other cases, the currency should be national.
7. Are there options for the limitation of liability of a party under the commercial contract?
According to the legislation of the Republic of Armenia, the parties may stipulate in the contract that only actual damages are subject to compensation, but not lost profits. Also, according to the legislation of the Republic of Armenia, the annual maximum amount of penalties may not exceed four times the bank interest rate set by the Central Bank of the Republic of Armenia (currently 48%), unless otherwise provided by law. The total amount of all penalties determined by the contract may not exceed the principal amount of the existing debt.
8. Is the concept of release from liability or indemnity enforceable in the Country?
A person who has failed to perform or improperly performed an obligation in the course of business activities shall be liable unless he proves that proper performance was impossible due to force majeure. Force majeure circumstances do not include, in particular, the violation of obligations by the debtor's counterparties, the absence of the necessary goods on the market or the debtor's necessary funds.
A preliminary agreement to exclude or limit liability for intentional breach of obligations is invalid.
9. Is there the concept of “consequential damages” in the Country? Can it be excluded from liability?
According to the legislation of the Republic of Armenia, a person whose right has been violated may demand full compensation for the damage caused to him, unless a smaller amount of damage is provided for by law or contract.
Damages are understood to mean expenses that a person whose right has been violated has made or will have to make to restore the violated right, loss or damage to his property (actual damage), as well as lost income that this person would have received under normal conditions of civil turnover if his right had not been violated (open lost profit).
10. Is the concept of “force majeure” recognized by the legislation and courts on the territory of the Country?
A person who has failed to perform or improperly performed an obligation in the course of business activities shall be liable unless he proves that proper performance was impossible due to force majeure. Force majeure circumstances do not include, in particular, the violation of obligations by the debtor's counterparties, the absence of the necessary goods on the market or the debtor's necessary funds.
11. Are export control provisions due to the economic sanctions specified by legislation and enforceable in the Country?
There are some sanctions related to the export of certain products, but there are no economic sanctions approved by the RA.
12. Is there a mandatory dispute resolution regime in the Country for commercial contracts?
The legislation of the Republic of Armenia does not provide for a mandatory dispute resolution regime, therefore the parties are free to choose a judicial or arbitration regime.
13. May the arbitration (local or foreign) be chosen by parties as a method of dispute resolution?
The parties may provide in the contract that all commercial disputes arising from civil legal relations may be referred to arbitration, both local and foreign.
An arbitration award rendered in the territory of the Republic of Armenia or in the territory of any other state that is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards would be recognized as binding.
Arbitration awards rendered outside the territory of the Republic of Armenia shall be recognized and enforced in the territory of the Republic of Armenia on the principle of reciprocity, in accordance with the legislation of Armenia and international treaties of the Republic of Armenia.
Author: Hasmik Martirosyan, Senior Lawyer
