The "trap" of the preliminary agreement

If you read this you have probably had experience with signing a preliminary agreement with Bulgarian developer. This agreement usually binds the developer with the obligation to finish the property and provide you with the title deed by certain deadline. Well, this seems too good to be true.

The preliminary agreement is regulated in only 1 article in the Agreements and Obligations Act and nowhere else:

19. (1) A preliminary contract preceding the conclusion of a final contract for which a notarial deed or notarial certification is required shall be concluded in writing.

(2) A preliminary contract shall contain provisions concerning the material terms of the final contract.

(3) Either party to a preliminary contract may bring an action for conclusion of the final contract. In this case the contract shall be deemed concluded as of the moment of entry into force of the ruling of the court.

In short, this is just written promise that the final agreement will be signed (i.e. title deed). Of course, the preliminary agreement for construction of property is more complicated than just ordinary preliminary agreement. The preliminary construction agreement consists of two basic contracts:

  • the ordinary preliminary agreement as per Art.19 of the Agreements and obligations act and
  • agreement of manufacture . It is also regulated in the Agreements and Obligations Act (you can read the regulation of this type of contract below)


258. Under the contract of manufacture the contractor shall be liable at his own risk to manufacture something in accordance with the other party's order, and the latter -- to pay a compensation.

259. Unless otherwise agreed the contractor shall manufacture what is ordered with means of his own.

260. The contractor must immediately inform the other party if the provided designs or supplied materials are unfit for the correct performance of the work, and ask for the necessary changes in the designs or for the supply of appropriate materials. If the other party fails to do so the contractor may renounce the contract.

If the contractor fails to provide the above warning, he shall be liable before the other party for the damages caused.

261. The contractor must perform the work in such a manner that it becomes fit for the usual or stipulated in the contract purpose.

The contractor who is performing the work with his own materials is responsible for good quality.

Where several persons have assumed the obligation to perform together certain work, they shall be liable jointly and severally, unless otherwise agreed.

262. The person ordering the work may check the performance of the contract at any time, provided he does not disturb the contractor.

(Amended, SG No. 12/1993). If it becomes evident that the contractor will not be able to perform the work on time or that he will not perform it in the way agreed upon or as due, the person ordering the work may avoid the contract and claim damages under the general rules.

263. The risk of chance loss or damage of the materials shall be borne by the party providing them, if the other party is not in default.

264. The person ordering the work must accept delivery of the work done in accordance with the contract.

Upon accepting delivery he shall examine the work and shall state all the objections for improper performance, except for such defects which cannot be revealed through the usual manner of acceptance of delivery or for such which are revealed only later. The person ordering the work shall inform the contractor of such defects immediately after they are discovered. This shall not be necessary when the contractor was aware of them.

If no such objections are raised, the work shall be deemed accepted.

265. If during the performance of the work the contractor has deviated from the order or if the work done has deficiencies, the person ordering the work may claim:

repair of the work within a stipulated by him period without payment;

covering of the expenses needed for the repair or a respective reduction of the compensation.

If the deviation from the order or the deficiencies are so material that the work is deemed unfit for its contractual or ordinary purpose the person ordering the work may avoid the contract.

These rights shall be extinguished by limitation within six months, and in case of construction work -- within five years.

266. The person ordering the work shall pay compensation for the accepted work. If the compensation is agreed upon on a unit price basis, its amount shall be determined upon acceptance of the work.

If in the course of the performance of the contract the duly determined prices of materials or labour change, the compensation shall be adjusted accordingly, even where it was agreed upon as a total sum.

(Paragraph 3, repealed, SG No. 12/1993).

267. If the performance of the work becomes impossible due to a reason neither party is liable for, the contractor has no right to compensation. If one part of the work was done and may be of use to the person ordering the work, the contractor is entitled to a respective part of the agreed compensation.

The contractor shall be entitled to compensation if the performance of the work has become entirely or partially impossible due to the unfitness of the materials or designs provided by the person ordering the work, and the contractor has duly notified him.

268. If there are reasonable grounds the person ordering the work may renounce the contract, regardless of the fact that the performance has begun, by paying the contractor for the costs incurred, the work done and the profit which he would have obtained from the performance of the work.

(Paragraph 2, repealed, SG No. 12/1993).

269. If the contractor dies or becomes unable to proceed with the work the contract shall be terminated, unless it was concluded with regard to the person of the contractor and his heirs agree to proceed with the work.

Upon the termination of the contract the person ordering the work shall pay for the work done and for the usefully invested materials in accordance with the contracted compensation.

So now you see that the essence of the preliminary agreement for buying offplan property is very complex. I will interpret the nature of the offplan property purchase agreement at a later stage.

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