Sales contracts in Luxembourg

The sales contract in Luxembourg and its legal framework

Sales contract

A sales contract is an agreement whereby one party, the seller, undertakes to deliver goods while the other, the buyer, undertakes to pay a price for them.

In Luxembourg, the sales contract is defined in article 1582 of the Luxembourg Civil Code, which describes it as “an agreement by which one party undertakes to deliver a good and the other to pay for it” and which “may be made by public or private deed.” In other words, it is an agreement in which the seller undertakes to transfer control and possession of the goods sold and the buyer undertakes to pay the agreed price.

The Luxembourg Civil Code is deeply influenced by French law as it was adopted during the Napoleonic occupation, so that the structure and rules on contracts including sales contracts are almost identical to the French Civil Code. Although initially the rules on contracts were practically identical, they have evolved, but the historical basis has allowed both legal systems to evolve in parallel and quite similarly in many aspects.

One of the main factors that has caused the evolution of both French and Luxembourg sales contracts is the changes required by European regulations. At the European level, Luxembourg must comply with EU directives designed to offer greater consumer protection and reduce legal differences between member states. An important example is Directive 2019/771, which regulates the conformity of goods sold to consumers by establishing minimum guarantees and uniform rights. Luxembourg has implemented these provisions by transposing them into national law and integrating them into the Civil Code and other local regulations.

Essential elements of the contract

The sales contract requires certain basic elements to be valid under Luxembourg law. These elements focus on the parties entering into the contract, the object of the contract, and the price agreed between the parties.

👥 Parties to the contract

The sales contract requires the existence of at least two parties, the seller and the buyer, and both must have the legal capacity to enter into a contract. In the case of a sales contract between legal entities, the parties involved must be company directors or employees with delegated powers.

Both parties must agree to the conditions established in the contract and freely and consciously consent to the execution of the contract. This implies that both parties clearly understand the terms of the contract and are not subject to any deception or coercion.

🎯 Object of the contract

The object of the contract, which refers to the good or right sold, must fulfill at least two characteristics: be lawful and determined or determinable.

Lawful: the object must be legal and not go against the law, morality or public order.
Definite or determinable: the good must exist at the time the contract is concluded or must be identifiable. This implies that even things that do not yet exist can be sold, such as unharvested crops or goods that have not yet been produced.

🏷️ Price

The last and no less important element is the price, which is an essential element in any sales contract and must meet three main requirements:

Be determined or determinable: the price must be agreed by the parties precisely at the time the contract is concluded. This can be fixed or variable, in which case it must be determinable by objective criteria such as a market price.
Consist of money: the price must include an economic consideration. If there is no exchange of money, the agreement could be classified as a barter contract rather than a sale.
Be fair and sincere: although the price is not required to correspond exactly to the market value, it must reflect a real agreement between the parties. A symbolic or fictitious price could call the validity of the contract into question.

Contract formalities and execution

In addition to the essential elements of sales contracts in Luxembourg mentioned in the previous point, there are the formalities associated with the contracts and the aspects related to their execution, such as the obligations of the parties and the transfer of ownership. Let's look at these points one by one.

Form of the contract

Among the legal requirements for sales contracts in Luxembourg, it is not stated anywhere that they have to be written, a sales contract can be tacit or oral, like when one buys bread at the bakery. There are, however, some exceptions, such as real estate, where the contract must be formalized by means of a public deed before a notary and be registered in a public registry, or other goods subject to legal registration, such as vehicles or aircraft.

In any case, drawing up a written contract is highly recommended, especially between legal entities or in transactions of a certain importance, as the written contract allows for better assurance of the transaction and has evidential value in case of litigation. In addition, it is also possible to add specific clauses not provided for by law. And in answer to the question of how to draw up a sales contract in Luxembourg, one must ensure that it contains at least:

The identity of the parties.
The precise nature of the object of the contract.
The date on which the contract comes into effect and the date on which it ends.
The date on which the service will be provided, in the case of a one-off service or purchase, or the duration of the contract, if the contract provides for periodic services.
The signature of the parties.

Obligations of the parties

In all sales contracts, both the seller and the buyer are subject to various obligations:

👨‍💼 On the part of the seller: the seller must deliver the goods in the agreed condition and within the agreed period and the delivery can be physical, that is to say, by delivering tangible goods, or symbolic, for example, by delivering documents proving ownership. In addition, the seller must deliver goods in accordance with the agreement and without hidden defects.
🛒 On the part of the buyer: the buyer must pay the price in the terms and deadlines agreed in the contract.

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Transfer of ownership

In sales contracts in Luxembourg, ownership of the goods is transferred at the moment the parties reach their agreement, even if the delivery of the goods or the payment of the price has not yet taken place, unless the parties agree otherwise. However, in the case of goods subject to specific formalities, such as real estate or registered goods, the transfer of ownership will not be fully effective against third parties until the formalities required by law have been completed.

For example:

When the sale and purchase contract involves real estate, the necessary formalities required by law imply that the contract must be formalized by means of a public deed before a notary and the document must be registered in the property registry.

It is also important to note that transfer of the goods at the charge of the seller does not imply an obligation to deliver. In principle, it is up to the buyer to collect the goods from the seller, although the sales contract may provide for an obligation to deliver at the seller's expense.

The terms and conditions (T&Cs)

The Terms and Conditions (T&Cs), usually referred to in French as CGV, are a document drawn up unilaterally by the seller whose main objective is to frame the contractual relations between a professional and their clients. Although they share with the sales contract the objective of adding rights and obligations to the parties not foreseen by law, the T&Cs have different characteristics and purposes.

On the one hand, the T&Cs represent a basic framework for the seller's activity and establish the default conditions of the relationship with customers. In general, they are a set of questions that customers ask themselves and they include the main mandatory legal provisions such as the payment period, the right of withdrawal, liability and respect for intellectual property. On the other hand, a sales contract is a specific agreement made with an individual customer for the sale of a particular good or service.

In Luxembourg, both the GCS and written contracts are optional, so that the contractual link can be established without any of these elements, with one of the two or with both. In general, the two documents are separated mainly for practical reasons, since the GCS are usually identical regardless of the sales contract that is concluded, while the contract may vary depending on the service and the customer.

For example:

When a good is purchased over the Internet, the GCS replace the contract and the payment of the price by the customer binds the parties in the contractual relationship. However, for the performance of a more complex service, such as the sale and installation of custom-made furniture, a contract may be concluded since the service sold is unique. In this case, the GCS could be integrated into the contract signed between the parties.

Dispute resolution

In Luxembourg, disputes over sales contracts can be resolved through the courts or alternative mechanisms. The competent courts depend on the case, the Magistrate's Court for minor disputes and the District Court for larger cases. The parties may claim for the enforcement of the contract, its annulment or compensation.

FAQ

Is a written sales contract mandatory in Luxembourg?

No, a written sales contract is not mandatory in Luxembourg for most transactions. Under Luxembourg law, sales contracts are generally consensual, which means they are legally binding as soon as the buyer and seller agree on the object of the sale and the price, even if the agreement is not documented in writing. However, for certain types of contracts, such as those involving real estate or other goods requiring registration, a written contract or notarial act is required to ensure the validity and enforceability of the agreement.

What happens if one party breaches the terms of a sales contract?

If one party breaches the terms of a sales contract in Luxembourg, the other party has several remedies available. They can request specific performance (enforcing the contract’s terms) or seek resolution/rescission of the contract, which terminates the agreement. Additionally, the non-breaching party may claim damages for financial or material losses caused by the breach.

Can CGV replace a formal sales contract in Luxembourg?

In certain situations, such as online sales or standardized transactions, the T&Cs may form the basis of the contract if they are accepted by the buyer. They do not replace a contract in the legal sense, but may be sufficient to govern the contractual relationship without a specific document being signed. For more complex sales, a formal contract is often recommended, with the T&Cs serving as a supplement.