Breaking News

In review: contract formation in Denmark

All questions

Contract formation

Danish contract law operates with one fundamental starting point, which penetrates all aspects of formation, interpretation, dispute resolution remedies, etc: the contract stems from the parties’ mutual will or desire to perform obligations in respect of each other.

In sales of goods, Danish contracts used to have a reservation on Part II of the CISG; however, that reservation has now been lifted. Part II of the CISG is now an integrated part of Danish law.

Danish contract law is based on the principle of freedom of contract in commercial dealings. An agreement or contract is defined as a legally enforceable promise or agreement between two or more legal or natural persons. The contract or agreement comprises an offer and an acceptance of the offer. Denmark does not apply the principle of consideration.

An offer is a declaration of will that sets out obligations under which the offeror intends to be bound. The declaration becomes binding when it is sufficiently clear that the offeror making the declaration intends to be bound by it.

It is important to distinguish between an offer and an invitation to tender. An invitation to tender will often take the form of advertisements in a catalogue. In those instances, the customer is making the offer to purchase the advertised product. Case law in domestic cases has established that a price tag in a shop constitutes an offer and not an invitation to tender.

The offer becomes binding on the offeror when it becomes known to the offeree. Before this stage, the offeror can withdraw the offer. For the withdrawal to be effective, the notice of revocation must reach the offeree before or at the same time as the offer. As most commercial contracts in Denmark are done via email, it is, in practice, often impossible to have a relevant time slip between the dispatch of the offer and the offeree receiving the offer.

Outside the application of Part II of the CISG, Danish law does not recognise a right to revoke an offer that has been received by the offeree.

In order for a contract or agreement to be formed, the offer must be accepted. The acceptance should be the ‘mirror image’ of the offer.

In the absence of express terms of deadline for acceptance, Section 3 of the Contract Act states that the offer must be accepted within a reasonable period. If the offer is made orally and without a deadline for acceptance, Section 3(2) presumes that the offer must be accepted immediately.

The acceptance must correspond with the offer made. If the offer states, for example, that a quantity of products is offered at a certain price, and the acceptance refers to a lower quantity than offered, it becomes unclear whether the offer has been rejected or accepted partially or fully. Such acceptance will be subjected to contract interpretation.

In a situation where there is a problem with the ‘battle of forms’ (usually conflicting provisions in standard terms), Danish law has a preference for a ‘knock-out approach’.

If an offer is accepted after the deadline or the acceptance does not match the offer, the offeror is not bound by the acceptance, but the acceptance is considered a new offer.

There are no formal requirements in respect of contract formation. A contract or agreement does not need to be produced in writing; it can be created orally insofar as an offer was made and validly accepted. There is also no writing requirement in respect of subsequent alterations to an already existing contract.

Written and oral contracts and agreements are equally enforceable; however, for evidential purposes, it is considered wise to obtain written confirmation of an oral agreement.

Agreements can be entered into without formal exchange of offer and acceptance. For instance, Danish case law has established that a legal obligation can be derived from the parties’ actions, which means that Danish law acknowledges the existence of quasi-contractual obligations.