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Contract Law
Croatia has a long tradition of well developed system of contract law, the use of which was not discontinued during the socialist period. After the independence the Law on Obligations, which is the basic contract law, was cleansed of ideological concepts and references to socialist enterprises. It now represents a sound base for further development. The system of contractual law was further improved with the introduction of the Law on Property in 1996, which added several new contractual forms and liberalized the treatment of secured transactions.
The current Law on Obligations does not specifically regulate certain contractual forms (e.g., factoring, leasing and franchising) developed in the market economies in Europe in the post-World War II period. Nevertheless such contracts are recognized and enforced, based on the principle of wide contractual freedom, on which the Law on Obligations has its foundation. These contracts might be included in a future revision of the law, but their absence does not represent an obstacle for business development in Croatia.
The principal reason for non-fulfillment of contractual obligations in Croatia is not within the legal system. The main problem for the emerging private sector is the massive blocking of payment accounts throughout the country, which results in non-payment under 80% of all contracts. In such circumstances the parties resort to various barter and other compensatory arrangements, which increases substantially the cost of doing business and contributes to the existing legal insecurity.
(Note: This information was taken from the Contracts chapter of the 2000 Croatia BizCLIR report. For more information, please see the report.)
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