Buying property in Europe

According to the Civil Code of the Republic of Lithuania, a preliminary contract must be written. A preliminary contract which fails to meet the required conditions of its form shall be null and void.

A legal formalization of the initial agreement is optional. However, the parties may determine a stricter form of the contract than is required by the law. Agreements, which are set out in ordinary written form, may also be formed in the notarial form. 

A preliminary contract is not obligatory for the parties. However, if the parties sign a preliminary agreement and subsequently a party without due grounds avoids or refuses to enter into a principal contract, that party shall be bound to compensate the other party for inflicted damages. The damages in this case consist of negotiation-related costs that the party incurred (e.g. travel expenses, attorney’s fee, document preparation costs) and other expenses. However, the damages cannot be considered as loss of revenue. Liability for damages may arise if a refusal to sign a basic agreement was unfounded, and this responsibility may be applied to a party which is guilty of refusing to conclude an agreement. According to these provisions, the legislator seeks to protect the interests of the fair/wronged party. 

Yes, the parties signing the preliminary contract may pay an advance. This payment can have probative and payment functions. An advance payment is paid by the buyer to the seller. The party, which has paid an advance, may demand for its return for all cases of non-compliance with contractual obligations. The party, who received the advance, must return it to the buyer if the basic agreement was not signed. 

Both parties to a preliminary contract have a right of withdrawal. The party which refuses to enter into a basic contract has to pay damages to the other party if the refusal was ungrounded and the other party has incurred direct losses.