HOW TO ENFORCE A CLAIM WITHOUT ANY COURT PROCEDURE IN HUNGARY?

17 August 2023

It is often the case that a Hungarian company owes money to a foreign creditor. In such a case, the foreign creditor may have more legal options (for instance a litigation, liquidation proceedings), however, these procedures can be lengthy, and involve significant costs before a creditor can obtain an enforceable judgment. In this article, we will explain how to enforce a claim without the above procedures.

1. Notarial deed in general

Unfortunately, few foreign businesses company know that if they have a contract with their Hungarian business partners that is certified by Hungarian Notary in a notarial deed, then the claim based on the contract (repayment of loan, purchase price, contractor's fee etc.) can be enforced in Hungary without any court procedure. How is this possible?

A contract certified in a notarial deed, if it meets the conditions laid down in the Hungarian Enforcement Act[1], can be directly enforced without litigation, liquidation procedure etc.

2. Enforcement based on contract certified in a notarial deed

Enforcement is possible pursuant to contract certified in a notarial deed if the claim included in the document is

1. subject to judicial enforcement (i.e.: almost all kind of contractual claim, we note that there are very few contractual claims that are not subject to enforcement e.g.: claims arising from unlicensed gambling, betting) and;
2. if the time limit for the performance of the claim has expired.

3. Mandatory elements of a contract certified in a notarial deed

To enforce a claim directly, the underlying contract certified in a notarial deed shall contain the following:

1. a commitment to provide services and consideration or a unilateral undertaking to provide services and consideration;
2. the names of the creditor and the debtor,
3. the object, quantity (amount) and title of the obligation,
4. the manner and time of performance.

4. Further contractual declarations

However, it is noted that if the claim is conditional upon the occurrence of a condition or a time based on the contract (e.g., sending a termination letter to the Debtor), the enforceability of the claim also requires that the occurrence of the condition or time be evidenced by also a public deed (notarial deed).

This means that if, for example, under the contract, the party has to send a termination letter to the Debtor in order to claim liquidated damages, this letter shall be also certified by the Hungarian Notary.

5. Enforcement a contract stipulated in a Hungarian Notarial Deed in the EU

It is noted that based on the Brussels Ia Regulation, contract certified in a notarial deed is enforceable not only in Hungary, but also in most EU member states.