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The conclusion of a contract forms the basis for any contractual relationship. In Austrian private law, a contract is concluded through the mutual agreement of the parties involved. This agreement requires an offer, which is confirmed by the other party through acceptance. Freedom of contract guarantees the parties that they can largely determine the content and conditions of their agreements themselves, as long as these do not violate legal regulations or public policy.

Freedom of contract

Freedom of contract is one of the central principles of Austrian contract law. It allows the parties to largely determine for themselves with whom they wish to conclude contracts. An essential component of freedom of contract is also the possibility to freely determine the content of the contract. There are no fundamentally rigid requirements as to which clauses or provisions a contract must contain. This means that the parties can negotiate issues such as price, performance, performance deadlines, or special conditions and set these out in the contract according to their own ideas. Only in individual cases are there protective provisions in favor of the economically weaker party, for example in consumer law or tenancy law.

Austrian law applies the principle of freedom of form. This means that contracts can generally be concluded in any form, as long as there are no legal formal requirements. The parties can decide whether to conclude their contract in writing, orally, or even by conclusive action. This flexibility makes it possible to adapt contracts to the respective situation and to make everyday life legally uncomplicated.

Written contracts offer clarity and legal certainty, as the agreements made are documented and can be easily traced later. Certain types of contracts, such as real estate purchase agreements or marriage contracts, must be concluded in writing to be valid. This formal requirement is intended to protect the parties from hasty decisions and to underline the importance of the transaction.

Most everyday contracts can also be concluded verbally.

A simple example of a verbal contract is the purchase of pastries in a bakery. The customer orders the pastries, the bakery hands them over, and the customer pays. The verbal contract is just as valid as a written contract, as long as there are no special formal requirements for the specific contract.

A contract can also be concluded through conclusive behavior if the actions of the parties clearly indicate that they agree on the content of the contract. Conclusive behavior is particularly common in everyday situations and allows contracts to be concluded easily without lengthy negotiations or written agreements.

A driver drives his car into a parking garage, parks his vehicle, and takes a ticket. This constitutes an offer by the garage operator to provide a parking space for a fee. The driver accepts this offer by taking the ticket and parking his car. The contract is concluded by the conduct of the parties. The driver undertakes to pay the parking fee and the garage operator provides the parking space.

A customer enters a supermarket, selects goods, and presents them at the checkout. The supermarket offers the goods at the marked prices, and the customer accepts this offer by purchasing and paying for the goods. The contract is concluded by the conclusive actions of the customer and the cashier: the customer receives the goods and the supermarket receives the agreed money.

Consensus – agreement of will

Central to freedom of contract is the agreement of will between the parties involved. A contract is only concluded when at least two persons declare their mutual consent to a legal transaction. This agreement is created by an offer that is confirmed by the other party through acceptance. It is crucial that both parties want the same transaction and are capable of acting.

Ms. A wants to sell her used bicycle. She offers it to Mr. B for 150 euros. Mr. B says, “Agreed, I'll buy it for 150 euros.” A and B agree that B will take the bicycle and A will receive the agreed amount in return. At this moment, the contract is concluded through the agreement of both parties: the rights and obligations of both parties are clear: A must hand over the bicycle and B must pay the 150 euros.

For a purchase contract to be concluded, the purchase price and the object of purchase must be clearly agreed upon. These two points form the essential components of the contract, without which no valid contract can be concluded. If there is no clear agreement on one of these points, there is no consensus. In this case, no legal purchase contract is concluded, even if the parties subjectively believe that they have reached an agreement. The decisive factor is objective agreement on the essential points, not the mere intention to conclude a contract.

Even apparent consent is not sufficient if one party simultaneously changes the content of the offer. In such a case, there is no acceptance, but rather a counteroffer. This must first be accepted by the other party in order for a contract to be concluded. Merely partial consent or acceptance under changed conditions therefore does not automatically lead to the conclusion of a contract, even if both sides subjectively assume that an agreement has been reached. The decisive factor is that the content of the offer and the acceptance must be identical.

The seller (S) and the buyer (B) are negotiating the purchase of a vehicle. During the conversation, S makes the following offer: “I will sell you this vehicle for EUR 5,000.” B replies: “Agreed. But for EUR 4,000.” At this moment, S is interrupted by another customer and does not respond immediately. Nevertheless, B assumes that S has accepted his terms and says: “Good. Then we have an agreement. I'll pick up the vehicle tomorrow.” S replies: “Wonderful. See you tomorrow.” Despite these seemingly conclusive words, there is no consensus on the purchase price, so ultimately no contract has been concluded.

The validity of the contract does not depend on the actual intention of the declarant, but on the objectively recognizable meaning of the declaration. The decisive factor is how an objective third party would understand the declaration under the given circumstances. Even if the declarant had a different intention, the declaration must be evaluated as it must be objectively understood from the perspective of the recipient of the declaration. An error regarding the content of a declaration therefore does not automatically mean that no contract is concluded.

A seller offers a buyer a high-quality computer with special features for sale by email. To save time, the seller uses a text template from a previous email and copies the product description and price into the new offer. However, due to a copy-and-paste error, he quotes a price that is 30% below the actual intended selling price. The seller does not notice this error and sends the email. The buyer reads the offer, finds the price attractive, and replies: “Agreed, I will buy the computer at the stated price.” From a legal perspective, the seller's offer is clear. The price and description of the computer are clearly stated, and the buyer was entitled to assume that this information was meant as it appeared in the email. The objective explanatory value of the message is decisive: an objective third party would have understood the seller's statement to mean that the offer was binding and the price stated was intended. The buyer understood the statement in this sense and accepted it without changes.

Nullity and contestability of contracts

Not all contracts concluded are automatically legally binding. In certain cases, contracts may either be contested by one party or be void. While contestation aims to have one party remove the contract, void contracts are considered invalid from the outset. The grounds for contestation or nullity are regulated by law and are intended to protect both the interests of the contracting parties and compliance with fundamental legal principles.

Error

Although the contract is valid, a contracting party who has made a mistake when concluding the contract has the option of contesting it on the grounds of mistake under certain conditions. The prerequisite for this is that the buyer caused the mistake (even if unintentionally) or should have recognized the mistake.

This would be the case if the price quoted for a high-quality computer is obviously too low and the buyer knew or should have known that there was an error. If the seller succeeds in contesting the contract, it is retroactively considered invalid. However, if the contestation is not made or fails, the seller is bound by the contract. In this case, the seller is obliged to deliver the computer at the price stated in the offer, even if this does not correspond to their actual intention.

This case shows that in contract law, the declared intention and the objective value of the declaration are decisive. An error in the declaration does not automatically render a contract invalid. The contract remains binding as long as the error is not successfully contested. This rule protects the recipient of a declaration from subsequent changes and ensures stability and reliability in business transactions. A contract can be contested if one party was mistaken when concluding the contract. However, this only applies to errors regarding the content of the contract or errors of declaration, not to the purpose of the contract. The error must either relate to the submission of the declaration or be material, i.e., it must affect a basis of the contract.

A seller quotes the price of a product too low due to a typing error. The buyer accepts the offer in good faith. The seller could contest the contract if the error was obvious and clearly noticeable. When contesting the contract, the interests of both parties are weighed up. It is examined whether the contractual partner of the party who made the error should have recognized the error and whether contesting the contract is in the interests of both parties. If the contestation is successful, the contract becomes retroactively invalid.

A contract can be contested if it was concluded under threat or through deception. In such cases, the will of one of the contracting parties was not freely formed, as it was influenced either by coercion or deliberate deception. The threatened or deceived contracting party can destroy the contract by unilateral declaration, but can also allow the contract to remain in force.

Both threats and deception deprive a contract of the basis of free and informed consent. The possibility of contesting the contract protects the affected party from the consequences of a contract that was concluded under unfair or unjust conditions. The legal regulation ensures that only contracts based on free will and correct information are valid.

Threats occur when a party is forced to agree to a contract through violence or the threat of disadvantage. This impairs the will of the threatened party to such an extent that they no longer have genuine freedom of choice.

A businessman is forced to sign a contract by being threatened with harm to himself or his family if he does not agree. In this case, the businessman did not enter into the contract of his own free will, but under duress. He can contest the contract as soon as the threat becomes known or its effect wears off.

In the case of deception or trickery, a contracting party is induced to conclude the contract by false statements or the deliberate concealment of essential information. The deceived party acts on the basis of a false impression of the terms of the contract, which was deliberately brought about by the other party.

A seller offers a car for sale and assures the potential buyer that the vehicle is accident-free. In fact, the car had already suffered significant accident damage, which the seller deliberately concealed. Once the buyer learns the truth, they can contest the contract because they entered into it under the false assumption that they were purchasing an accident-free vehicle.

Threats and deception can not only make a contract contestable in civil law, but can also be relevant in criminal law. A threat that so strongly influences a person's will that they conclude a contract against their actual will can be prosecuted as coercion or extortion under criminal law. Anyone who forces another person to perform a certain act through violence or the threat of serious harm is liable to prosecution. Deliberate deception used to induce another person to enter into a contract may also be relevant under criminal law. In many cases, deception falls under the offense of fraud if the deception is aimed at obtaining an unlawful financial advantage.

Prohibited, immoral, and impossible contracts

While freedom of contract is a central principle, there are exceptions that ensure that contracts are only valid if they do not violate legal requirements or public policy. Contracts that are legally impossible or prohibited or violate public policy are void and have no legal effect.

A contract is legally impossible if the subject matter of the contract cannot be fulfilled because it is not recognized by law. Such contracts are void because it is impossible from the outset to perform the agreed service in a legally effective manner.

Although the moon physically exists, its acquisition is excluded under applicable law because the moon is not a controllable object and international agreements such as the Outer Space Treaty prohibit this. This constitutes legal impossibility. The legal system excludes the moon from private ownership. Such a contract would therefore be void.

A contract that involves an illegal act is unconscionable. Such contracts contradict legal requirements and the fundamental values of society. The legal system cannot accept such contracts, as they would lead to illegal behavior being legitimized by contract law.

A person enters into a contract in which they offer to provide another person with ransomware software to encrypt third-party data and extort ransom money. This contract is unconscionable and void because it is based on a criminal act and violates the public interest.

A creditor instructs a person to beat a defaulting debtor “to a pulp” if they do not pay their debts. The contract stipulates that the person instructed will be paid a certain amount of money for carrying out the act. Such a contract is unconscionable and therefore void. The content of the contract violates the law because it promotes violence and bodily harm, which are criminal offenses.

A contract is unconscionable if it violates public policy, i.e., it violates fundamental moral and ethical values that are considered binding by society. The assessment of whether a contract is unconscionable is based on social values and fundamental legal principles. The aim of this regulation is to prevent contracts that lead to the exploitation or oppression of one party or otherwise cross moral or legal boundaries. Unconscionable contracts are void. This means that they have no legal effect and cannot be enforced. This regulation protects the contracting parties from unreasonable obligations and preserves the integrity of the legal and value system.

Such a contract cannot therefore be enforced. Even if the person commissioned carries out the act, they cannot claim the agreed amount. Similarly, the client could not take legal action against the commissioned perpetrator if they did not carry out the act. This protective mechanism prevents contract law from being abused to enforce illegal or morally reprehensible goals.

Contracts that unreasonably disadvantage one party or violate their fundamental rights are also unconscionable. This rule protects weaker contracting parties in particular, who may find themselves at a disadvantage due to economic, social, or personal circumstances. Such a contract is considered unconscionable if it is manifestly unbalanced and places a disproportionate burden on one party.

A contract obliges a person to work 16 hours a day, six days a week, without vacation. This agreement ignores fundamental labor rights and the protection of workers, which are enshrined in the legal system. It places a disproportionate burden on the person concerned and is therefore unconscionable and void.