Last update12:12:22 PM

Back You are here: Home Legal and Finance Legal Rescinding a Contract: Three Important Steps

Rescinding a Contract: Three Important Steps

An overview of the steps that one has to take when things have gone wrong in a contractual relation under Bulgarian law, i.e. when the opposite party is in breach of the signed contract or has failed to fulfil its obligations and you want to rescind the agreement and seek remedy. In the current property market situation in Bulgaria, in most cases of rescission of a contract, buyers are trying to get out of signed Preliminary Contracts for purchase of real estate such as apartments in a holiday complex, where the developer is in substantial delay to complete the construction or has failed to complete with the promised quality.

Below we address some hypothetical situations in order to give you an idea of the process if the competent jurisdiction is the Bulgarian court.

However, before taking this route it is highly recommended that you entrust your case to an experienced and independent lawyer whose job will be not only to guide you through the process, but before all, to conduct a review of your specific case and to advise you, whether you are the rightful party and are entitled to withdraw from the contract.

In our experience, very often common sense and your logical conclusions deviate from the legal side of a dispute.

I.    First step – rescinding of the contract.

Once your solicitor advises you that you are entitled under the contractual provisions and factual circumstances to rightfully withdraw from your contract and demand full refund plus compensation and/or penalties if such are due, you have to rescind it in the most efficient and provable manner. There is one way to do it – by way of the so-called ‘Notary Invitation’.

The Notary Invitation represents a notice, addressed to the opposite party, in which you present briefly the facts that lead to your decision and most importantly you: (i) declare that you rescind the contract, and (ii) demand refund of the paid moneys and any penalties that may be due. The most characteristic feature of this notice is that it is delivered through a notary public – an official with delegated powers to record events and occurrences and create evidence in the form of official documents.

If the notary invitation is properly delivered in compliance with all legal requirements, it acquires official evidential force before the court, thus preventing the opposite party from stating that it had never been notified of the rescission or invited to refund the paid moneys. It is advisable that all your actions must always be performed in the most efficient way from the point of view of future court proceedings. The notary invitation has to be professionally prepared so that it abides by any requirements as to its content, form and manner of delivery, which may be contained in the contract that will be rescinded or in the applicable law – the correct address of the opposite party (which may differ from the one, stated in the contract) has to be complied with, the respective legal or contractual ground for rescission has to be noted, the claimed amount has to be precisely assessed and calculated. The notary charges, related to the delivery of the notary invitation are about EUR 20 – 30.

Once the notary invitation is duly delivered to the correct person and address, it produces a rescission effect immediately or within a certain period of time, depending on the specific case and contract. Note that sometimes, if the contract contains specific clauses, the rescission effect may not occur, if within a certain period the opposite party fulfills its obligations.

But you must also be aware of the legal force of this notary invitation and that if you change your mind and decide to finalise the deal, that would only be possible if the opposite party also prefers this, regardless of whether the contract had been rescinded or not.

ІІ. Second step – initiation of court proceedings

It is again suggested that this procedure is mainly applied to Preliminary Real Estate Purchase Contracts in which the developer is in default. It is well known that most developers are quite reluctant to admit any default on their part in delaying to fulfil their obligations. They are even more unwilling to refund any moneys they have already received, not to mention payment of any compensations and penalties that may be due on top of the refund. In this situation, the next step following the Notary Invitation is delivered and following the expiry of the terms, determined for voluntary refund, is inevitably to initiate court proceedings. The contract has been duly rescinded, the paid instalments are due back, but are not refunded so this right has to be protected and effected through the relevant Bulgarian court.

The procedure starts with filing of a civil action before the court, which contains full description of the case, the failure of the opposite party to fulfill its obligations, the due rescission of the contract and the failure of the opposite party to refund the due sums within the term given in the Notary Invitation. At the end the writ must contain an explicit demand – what is the amount claimed and preferably – on what legal ground. The claim must be well grounded, consistent and supported with written evidence (as comprehensive as possible).

The filing of the writ involves certain expenses. The main one is the state court charge, which is payable in advance, upon filing of the writ and is currently 4% of the total interest of the action or the claimed amount. During the court proceedings you may also incur some additional expenses such as for official translation of written evidence, expert witness’s reports, travel expenses, in case the defendant is not based in the city where your lawyer is based  (according to the Bulgarian civil procedure rules the case is heard by the court in the main seat of the defendant), etc. When the court case is decided, the court charge is collected from the lost party.

Our legal system has three court instances. The first instance may take from one to two and in some more complicated cases or if one of the parties (or its attorneys) has fragile health (!?) – even more than two years. The second and the third instance are normally much more expeditious.


Like everywhere else, court proceedings are governed by strict procedural rules, which have to be complied with. The new Civil Procedure Code made the process even more formal and increased the requirements related to presenting evidence by binding them with short preclusive terms – for example upon filing of the civil action, you have to support it with all written evidence you have and you wish to use.

You are also obliged to point out all oral evidence you are about to use (the witnesses you wish to be called and testify). Failure to do so may prevent you from further replenishment of the case with evidence. Although the facts and the law are on your side, sometimes the formal procedural omissions may cost you the case. Therefore, you have to rely on an experienced lawyer, well acquainted with these rules.

III.    Third step – not obligatory but so useful.

The length of the court proceedings and the current world financial crunch, which has affected Bulgarian business as well, may put you in a very unfortunate situation. Even though you have won the case, at the end of the day you find out that the defendant had stripped itself from its assets and it is difficult to get remedy for the damages you have sustained.

Therefore, it is highly recommended, in order to “secure” an outcome of your civil action, to conduct a special, preliminary procedure, called security procedure.

This procedure may be defined as subsidiary to the main claim. It is initiated with a security application filed before the court, by way of which the applicant (future claimant) demands the court to attach certain assets (real estates, bank accounts, movables) of the opposite party (future defendant), which will secure the future claimant during the period of the main litigation. Thus, regardless of what changes occur in the financial status of the future defendant, the attached assets will guarantee that the judgment is successfully enforced.

Like the main claim, the security application must be very exhaustive and supported will every possible evidence so that it convinces the court that the future claim is “grounded on the balance of probabilities”, so the serious harming of the future defendant’s rights, which the restraint will cause, is justified enough. Yet, because during the first instance of this procedure the future defendant is unable to defend itself and present its own point of view and its own objections and evidence (see below), very often the court rules in favour of the applicant and allows the requested restraint, but only under the condition that the applicant deposits a “guarantee”, normally to the amount of 10% of the material interest on the future main claim.

This is not a charge or a court fee and is fully refundable upon winning the main court case – it serves as additional evidence that the intentions of the applicant are serious and not simply aiming to harm the future defendant. Yet, you have to be prepared to dispose of such amount. The court fees and expenses on the security procedure are not so significant.

This procedure takes less time, compared to the main one, because it involves maximum two phases – first instance and second instance, in case any of the parties appeals against the ruling of the court of first instance. Besides, the security proceedings are held behind closed doors – they are not held in open sessions where both parties would be able to present their position and evidence.

The main objective is to surprise the future defendant with the attachment before the latter attempts to dispose of its assets and harm the claimant’s interests. The judge passes a Definition in a closed session, solely on the basis of the security application and the evidence, enclosed by the applicant, without the presence of the parties and without oral or written pleadings. Only after the attachment is actually imposed, the future defendant is notified and may appeal against it, but by that time the attachment will already be in force. Both the first and eventually the second instance of this procedure are conducted in short terms in order to further the efficiency and timeliness of the outcome. After the end of the first instance you will be given a certain time period by the judge to file the main claim, otherwise the attachment will be withdrawn.

So, as a summary, given that you have a good case you have three main steps to take – to rescind the contract, to secure your claim, and to initiate a court case for protection of your rights. And be patient!

Roumen V Petrov
Asya Mandjukova

GPNG Law Firm, Sofia, Bulgaria