One of the examples of breach of contract specifically mentioned in the Civil Code is the case when one party fails to fulfil their contractual obligation consisting of making a legal declaration.
Such contractual obligations are most common when the performance of the contract requires an act of registration (e.g. registration in the land registry) or when a contractual relationship needs to be modified in order to achieve the objective of the contract containing the obligation to make a legal declaration (e.g. amendment of the articles of association of a condominium).
Unlike other breaches of contract, in the event of the failure to make a legal declaration, the entitled party may not request the court to order the obligated party to perform their obligation. Instead, the entitled party may request the court to supplement the legal declaration required by the contract, i.e. to make the legal declaration instead of the originally obliged party. In this case, the court's judgment will have the legal effect which was originally intended by the omitted legal declaration.
In civil proceedings for the supplementation of legal declarations, the court examines whether the contract in question actually contains the obligation which has allegedly been breached (similarly to proceedings for claims based on other breaches of contract). In particular, the court examines whether such obligation was actually undertaken, and, if so, what was the exact content of the obligation to make a legal declaration undertaken by the defendant.
Previous case law (EBH 2008. 1787.) was relatively strict on this subject, since courts considered the contract breached only if the exact content of the legal declaration in question was specified in the contract, and if such a specific declaration was omitted by the obligated party. In line with this logic, courts only allowed for the supplementation of the legal declaration with such specified content. In practice, this meant that if the specific text of the legal declaration could not be found in the contract, the court dismissed the plaintiff's claim to request the supplementation of the legal declaration.
This approach has resulted in very difficult situations in cases where one party undertook to make a legal declaration at a later point in time (e.g. during the performance of the contract), but the specific content of the legal declaration could not be determined at the time when the undertaking was made, or at least not in sufficient detail. A typical example of such a scenario is the building-in of attic space in apartment buildings. In such cases, an investor has only a rough idea of the building parts to be constructed when purchasing the attic space, since they begin planning and obtaining official permits only after the successful purchase. After the completion of the construction works and obtaining the occupancy authorization, the condominium's articles of association must be amended in order to indicate the new independent units and parts of the building, and to register them in the land registry. However, it is not possible to include the text of the amended articles of association and the completely accurate parameters reflecting the future situation in the original sale and purchase agreement, since such information is not available at the time when the agreement is concluded. Regardless of these circumstances, the referenced case law would have required these parameters to be included in the original sale and purchase agreement.
As a result of this discrepancy, investors often found themselves in an extremely difficult position if they wished to obtain a court judgement to supplement the condominium owners' legal declaration required to amend the condominium's articles of association, in the absence of cooperation from the condominium owners. The situation could not be mitigated by the general cooperation obligations specified in the sale and purchase agreement (which were based on the information available at the time of its conclusion), or by other specifically named cooperation obligations. The apartments that were actually built were not (and could not have been) included in the sale and purchase agreement with the exact parameters specified in the occupancy authorization and thus intended to be included in the condominium’s articles of association. As a result, the court did not supplement the legal declarations in such cases.
It appears that the Supreme Court also recognized the above-detailed anomalies, which required extremely precise contractual content to enforce performance when supplementing a legal declaration with a judgment, compared to what would be expected in the case of enforcing other contractual obligations. The Supreme Court appears to be softening its previous approach with its precedent-setting review decision published under no. BH 2024. 133. In this decision, the Supreme Court considers the existence of a commitment to make a legal declaration to be ascertainable on the basis of the following circumstances – even in lack of an explicit commitment – (i) the entire content and context of the contract, (ii) the purpose of the contract and the intended use of the parties' services, and (iii) the actual contractual (transactional) intent.
In my opinion, it is becoming less and less realistic in increasingly complex investment structures and legal transactions to ensure that all legal declarations necessary during the performance of a contract and for the achievement of the contractual objective are available with precise content – and can thus become part of the contract – at the time when the contract is concluded. As a result, it is justified to relax judicial practice in line with the aforementioned decision of the Supreme Court. This would allow courts to not only supplement legal declarations with precisely defined content in the contract, but to also supplement legal declarations determined by the purpose of the contract and the transactional intention of the parties.