Most companies in Romania end up in the situation of having to collaborate with other companies in order to carry out their usual economic activity. For a good development of relations, there is the possibility of concluding a contract, a legal agreement assumed by the participating parties, which establishes the terms and conditions of the future collaboration. Such a document contains a series of useful information for the smooth running of relations, among which are the contractual clauses.

These elements are very important, because they determine the rights, obligations and responsibilities of the signatory parties. Non-compliance with the clauses can lead to significant problems and, for this reason, it is good for legal entities that conclude collaboration contracts with other companies to know the definition of these contractual clauses, the main types that can be used in practice and how to avoid non-compliance with these clauses contractual provisions.

1. Non-compliance with contractual clauses – general information

The contracts concluded between the companies operating in Romania are of particular importance, because they ensure a correct framework, so that the parties involved act appropriately. Such a document includes useful information: the parties involved with their identification data, the object of the contract specifying which services or products are involved, for how long the contract runs, what are the financial terms and how this contract can be terminated.

A significant part, but which is often lost sight of, is represented by the contractual clauses that provide additional rules so that difficult situations do not arise, in which the parties involved do not understand each other or do not respect their obligations.

1.1. What are contractual clauses and why are they important

The contractual clauses are significant elements of a contract concluded between two or more parties, having the role of ensuring a fair collaboration for everyone. These elements have the role of clarifying the terms of the agreement, preventing potential misunderstandings and protecting the interests of the signatory parties.

The clauses can refer to an extremely wide range of aspects, but the most often used are those regarding the object of the contract, the financial terms involved, the way to terminate the contract and the correct option for resolving disputes, as well as those regarding to the confidentiality involved.

Most business people want to have a fair contractual relationship, with benefits for all parties involved, that will run smoothly. An element that ensures these characteristics is represented by the introduction of different contractual clauses, which fulfill several decisive roles:

• Clarifies certain contractual elements, which could be misunderstood;
• They prevent the emergence of misunderstandings due to differences of vision on the contract;
• Offers legal protection to the parties involved in case one or more participating parties do not respect their duties and violate the agreement;
• With their help, certain risks can be anticipated, thus taking measures in advance to avoid unwanted situations;
• I establish performance and quality standards that must be met by the signatory parties;
• The presence of some clauses is stipulated in the legislation of the Romanian state, they also have the role of fulfilling legislative compliance;
• Provides trust between the signatory parties.

In order to fulfill these roles, it is necessary to draw up the contractual clauses, in such a way that some basic conditions are respected:

• Clauses should be formulated clearly and concisely so that there is no possibility of misinterpretations;
• The clauses must be detailed;
• The clauses must not violate the law and regulations in force;
• The clauses must be firm and explicitly binding;
• The clauses must cover as wide a range of possible situations as possible, anticipating unexpected events;
• The clauses must be adaptable, so that changes and adjustments can be made;
• The clauses must provide clear responsibilities and obligations of the parties;
• The clauses must specify the consequences of non-compliance with the contractual provisions.

1.2. Types of contractual clauses – what happens in case of their non-compliance

In the practice of concluding collaboration contracts between companies, a variety of contractual provisions can be used, the most common being the following:

• Those that refer to the object of the contract (description of the services and products provided, their quality and delivery standards);
• The financial clauses are those that specify the prices for services or products, which is the method of payment, how the exchange is invoiced, what penalties are paid in case of delay and what consequences may appear if the agreed deadlines are not respected;
• The confidentiality and data protection clauses refer to the approach to sensitive and personal information;
• The termination and termination clauses specify how the contract can be concluded before the agreed term and what are the consequences of such an event;
• Force majeure clauses refer to the management of exceptional situations;
• The dispute resolution clauses specify the way to resolve some misunderstandings, such as arbitration, mediation or appeal to the courts;
• Intellectual property clauses are those that specify and regulate the use of intellectual property;
• The insurance clauses specify which insurances are necessary to cover risks and potential damages;
• Exclusivity or non-competition clauses that prevent the parties from doing similar business or competing with each other.

If one or more of the signatory parties do not comply with the contractual clauses, more or less serious consequences may appear in accordance with the nature of the violation. These possible consequences include:

• The occurrence of legal disputes, which means that a signatory party can sue the other party in a court of law, asking for compensation or the fulfillment of contractual obligations;
• If a non-observed clause leads to financial losses, the injured party can claim damages in order to repair the losses;
• Non-compliance with the contractual provisions can lead to the receipt of penalties that usually manifest themselves in the form of obligations to make substantial payments;
• In serious cases, non-compliance with one or more clauses may lead to the suspension or even termination of the contract;
• Companies responsible for non-compliance with contractual conditions lose their credibility with customers or business partners;
• The party guilty of violating the clauses will pay the legal costs involved in resolving the disputes.

2. Non-compliance with a service contract – methods to avoid non-compliance with contractual clauses

Non-compliance with the service contract and the contractual clauses can have serious consequences, both for the party guilty of this event, as well as for the other parties participating in the contract, who find themselves in the situation of not being able to carry out their activities normally and record losses major financial.
In order to avoid the occurrence of such undesirable situations, economic specialists recommend using certain tools that reduce the chances of occurrence of undesirable events and, even if they occur, reduce the negative effects.

2.1. Civil liability insurance for non-compliance with contractual clauses

An ideal method that business people can use in order to protect themselves against unwanted situations, in which one or more contractual clauses are not respected, is to have a contractual civil liability insurance. Also known as malpractice insurance, this financial tool offers additional financial protection, in case one of the parties does not respect and does not fulfill its commitments by mistake. Such a contractual civil insurance is helpful, because it offers several advantages to companies that take it out:

• It covers the occurrence of unexpected risks, which lead to the impossibility of complying with contractual obligations. In this way, if the costs associated with the violation of the contractual clauses appear, either in the form of penalties or financial losses, the company offering the insurance policy covers these losses;
• Civil contract insurance provides financial protection in the event of loss of income, repair costs or other types of damage specified in the contract. With its help, the company is sheltered in the event of difficult situations that may endanger financial stability;
• The presence of this insurance leads, in most cases, to the avoidance of costly litigation. By means of it, a long process is avoided, which can end with the obligation to pay significant damages;
• Studies have shown that companies that have this type of insurance are more credible in front of business partners and customers. They will realize the company’s willingness to assume clear responsibilities in the event of unwanted events;
• In the case of concluding specific contracts, the law stipulates the existence of contractual civil liability as mandatory. The Civil Code stipulates that it is necessary to have an insurance of this kind in those instances where the risks are difficult to assess, and the compensations would be difficult to support, without the existence of the insurance.

2.2. The use of legal consulting and the alternative resolution of disputes in case of non-compliance with contractual clauses

In certain conditions, although all the necessary measures are taken, it is not possible to comply with all the contractual clauses, and situations appear that seem difficult to address. The tendency is for such events to be solved by appealing to justice, but the solution, although correct, must be avoided, because civil processes of this kind can drag on for years, which means economic losses for all parties involved.

Another solution that has proven to be of real help is to seek legal advice and alternative dispute resolution. Thus, through mediation or arbitration, you can save precious time and significant funds compared to the solution of the legal process. Moreover, such an option offers maximum chances of maintaining a solid business relationship, which does not happen in the case of appealing to a lawsuit. Another advantage that must be taken into account is that, through alternative solutions, the confidentiality of information can be preserved, an element that cannot be easily achieved through a process.

3. Non-compliance with contractual conditions – advice for companies facing the problem of non-compliance with contractual clauses

It would be ideal for business people to choose their partners, in such a way that they have the guarantee of the correctness of the development of a contractual relationship. Unfortunately, such an approach is not always possible. Most people involved in the business world, whether company owners or administrators, encounter unwanted events, such as non-compliance with contractual clauses by business partners or even non-compliance with the employment contract by employees. Both situations can be solved by following a complex and lasting way, but also an easy one, easier to implement.

In order to obtain the guarantee of an advantageous solution, the specialists have some recommendations that must be taken into account in case of non-compliance with the contractual clauses:

• The second tip that follows the identification of the unwanted situation is communication with the contractual party. In many cases, the error may not be intentional, and the business partner may be willing to resolve it as quickly as possible. This stage is essential, because solutions can be identified that can complete the situation in an amicable way;
• If the situation continues in an unfavorable way, it is useful to call on the services of a lawyer specialized in commercial law. The specialist knows what to do, because he has experience in the field;
• The partner who breached the contract must receive a written notification detailing the situation and requesting remediation or compensation as soon as possible;
• Before resorting to the legal way, alternative forms of dispute resolution, such as mediation or arbitration, must be used. These solutions are much faster and offer advantages to both parties involved;
• For the favorable resolution of the dispute, the persons involved must document the case as completely as possible. All written records, including communication with the disputing party, must be preserved for use in the event of a lawsuit.

In conclusion, non-compliance with contractual clauses is a situation with major negative potential for the parties involved in a contractual relationship, but there are useful methods that can minimize the effects.

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