Entrepreneurs, in the capacity of self-employed persons, make business deals with suppliers and subcontractors, among others. Entrepreneurs also make agreements with customers. These may be other companies (business-to-business) or consumers (business-to-consumer). The Consumer Protection Act only concerns contracts between entrepreneurs and consumers. For more information on contracts in consumer sales, see below under the heading Other useful information. This section includes a link to the website of the Finnish Competition and Consumer Authority.
An agreement is always a two-way legal act, which means that both parties must approve the agreement for it to become legally valid. Entrepreneurs should properly familiarise themselves with matters pertaining to contract law before entering into an agreement, because once an agreement has been made it cannot be altered by either one of the parties alone.
An agreement can also be made orally, but it is advisable to make a written agreement in order to reliably prove what was agreed on in the event of disputes.
The Finnish Contracts Act regulates the preparation of agreements, contractual authorisation, the invalidity of legal transactions and arbitrage. The Contracts Act is applied to business agreements, for example. The regulations do not apply to agreements in a specified form, such as property transactions.
Conclusion of an agreement
Both the contents and the form of agreements are largely free. However, legislation sets formal requirements for certain types of agreements, such as property transactions.
As a rule, it is not possible to annul an agreement, unless this is separately agreed on by granting the right to annul, for example. In addition, an agreement can be annulled in the distance and home selling contexts referred to in the Consumer Protection Act. For more information on distance selling, see below under the heading Other useful information. This section includes a link to the website of the Finnish Competition and Consumer Authority.
If one of the parties fails to adhere to the agreement, this act is considered a breach of contract. There are exceptions to the validity of a contract, such as force majeure, invalidity and arbitration of the agreement if it contains terms that are unreasonable to the other contracting party.
An agreement may be invalid if
the other contracting party is legally incapacitated
the agreement contains a defect of form,
the agreement is contrary to the law.
In unclear cases, interpretation of the terms of contract is regulated in the following order:
imperative legal provisions
contractual terms specified in the agreement
Authorisation and a legal person as a contracting party
An authorised person, i.e. a representative, has been authorised to conclude legal acts on another person's behalf. A legal person, such as a limited liability company or a general or limited partnership, must always act via representatives. The right to conclude an agreement binding on a company is based either on statutory right of representation (e.g. the managing director and board of directors of a limited liability company) or authorisation (including procuration).
Methods of authorisation:
written authorisation, such as for concluding an individual agreement, for which a voluntary declaration of intent by the principal is required
authorisation based on one’s position, such as the authorisation of a managing director or a salesperson of a store
authorisation per procuration, i.e. authorisation to sign.
A procuration can only be granted by an undertaking registered in the Trade Register. The holder of procuration may represent the principal in any business-related matters and sign the business name. The holder of procuration does not have the right to assign the company’s fixed assets or tenancy right, seek a mortgage on them or transfer the right of representation to another person.
When you are concluding a significant agreement with a legal person, you should find out who has the authority to represent the other contracting party. The authorisation to sign for the company can usually be verified in the extract from the trade register for the contracting party. The right to represent the company can be limited by agreement between partners; such a restriction must be entered in the trade register.
Sale of goods legislation
The Finnish Sale of Goods Act and the Convention on Contracts for International Sale of Goods (CISG) contain general provisions pertaining to the sale of movable property. The Sale of Goods Act and the CISG are largely identical in terms of content. You can learn more about the Act and convention under the section Other useful information.
The Sale of Goods Act applies to the sale of the following goods:
movable physical property, including liquids and animals
material or furnishings and fittings of real estate, as movable property
securities, such as shares and stock options
industrial property rights, such as trademark rights.
Consumer trade is, however, regulated by the Consumer Protection Act.
Verifying the background of your contracting partner
Especially when an entrepreneur is working with a new contracting partner, the future contracting party should be reviewed in detail by obtaining background information about the company. According to the Act on the Contractor's Obligations and Liability when Work is Contracted Out, a contractor is obligated to determine whether the partner company is registered in the prepayment, employer and VAT registers.
The necessary background information can be found in the Trade Register of the Finnish Patent and Registration Office, the Business Information System (BIS) and various credit information registers, for example.