In this article, legal experts of Company in Estonia OÜ give an overview of the information that you need to know before entering into a notarized contract in Estonia.
A notary in Estonia is a holder of office in public law, an independent official to whom the state has delegated the duty of ensuring the security of legal relationships and prevention of legal disputes. The main field of activity of notaries is the certification of transactions in civil matters on the request of natural persons and legal entities.
Notarization in Estonia enhances the protection of individuals’ rights and confidence in legal matters. The purpose of certification is to ensure the stability of relations between persons, and thus to prevent possible subsequent legal disputes. Below is a brief description of the work of notaries given on the website of the Estonian Chamber of Notaries.
Notary’s obligation to clarify
There are unfortunately cases when, despite the participation of a notary in entering into a contract, a party subsequently suffers damage precisely because of the clauses stipulated in the contract. In general, it can be assumed that when entering into a notarized contract, the parties understand and are clear about all their rights and obligations, since when concluding a notarized contract, the notary has the obligation to clarify. However, how extensive is the duty of a notary to clarify, and what should be considered before entering into a notarized contract?
Subsection 18 (1) of the Notaries Act stipulates that the notary must explain to the parties the meaning of the transaction, its legal consequences and various possibilities of concluding the transaction. At the same time, the notary must ensure that there are no mistakes and doubts about the transaction, and that the interests of an inexperienced and unaware participant are not infringed. Subsection 2 of the same article says that if the notary has doubts about the compliance of the transaction with the law and the actual will of the participants, the notary must discuss it with the participants.
The Supreme Court of Estonia (in its decision No. 3-2-1-17-15) explained that during the certification of the transaction, the notary is obliged to inform the parties, including about the consequences of the requested transaction, and to warn them about relevant legal risks. Also, the notary must in an unbiased form explain the possibilities how to achieve the result that best corresponds to the will of the participants. As the competent state official, it is the duty of the notary to ensure that the content of the transaction can be clearly and unambiguously determined at a later date. At the same time, the Supreme Court noted that the purpose of the requirement for notarization of the transaction can be both the protection of the parties to the transaction from ill-considered actions, that is, a preventive function, and their consulting.
Thus, the obligation of the notary to explain, which is implicit in the law, is quite broad and should include, among other things, a warning to the parties if the contract seems ill-conceived to the notary. The foregoing shall ensure that the parties enter into only such contracts, the contents and potential risks of which are well known to them. Unfortunately, case law shows that this is not always the case.
However, the above is not the only reason why a notarized contract does not provide the parties with the protection one would hope for. In Estonia, it is still common to enter into so-called ostensible transactions. An ostensible transaction is a transaction in relation to which the parties have agreed that the manifestations of intention that they made to carry out that transaction do not have the legal consequences corresponding to the volition that was manifested – for the reason that the parties intend to create an impression of the transaction’s existence, or to conceal the transaction they actually intend to carry out.
In other words, a transaction is ostensible if a contract with one content is deliberately entered into, which for some reason is more beneficial to the parties, but in fact the parties are referring to another transaction.
The type of transaction that is most often ostensible is purchase and sale transactions. With the purpose of avoiding the payment of income tax on the income from the sale, often a gift agreement is concluded with a notary. At first glance, this may seem like a good plan, but in the event of a dispute, it will be very difficult for the injured party to prove what the real will of the parties was.
Without knowing the actual goals and intentions of the parties to the transaction, the notary cannot advise the parties when exercising their will, warn about the risks arising from the current law, explain the consequences of the requested transaction or prove the content of the will. Therefore, it is important that the parties disclose reliable information when notarizing the transaction and do not hide its actual content. In that case, the rights of the parties would be better protected in possible legal proceedings.
The duty of a notary to provide clarifications is quite broad and detailed, but nevertheless it should not be assumed that a notarized contract will protect in the event of any dispute. It is always worth making sure that all clauses of the contract are understood, and if necessary, clarify unclear places. It is also worth being honest with a public notary and disclosing only reliable information to ensure the best protection of your rights.
If you are interested in a notarial transaction, contact the representatives of the Company in Estonia OÜ, and we will help you to book time to a notary and support you throughout the process.