Formalism in contractual business relations in the context of transformation: The case of Lithuania

Abstract

In line with other Central and Eastern European (CEE) countries, Lithuania is undergoing a transition from the socialistic economy to the market economy. This process results in numerous transformations in different areas of social life. This article analyses transformations in one of such areas - contractual business relations. Soviet legal system was featuring excessive formalism. In the transition to the market economy, legislative basis has been replaced in Lithuania, but formalistic thinking has rooted both in businessmen and in case law. The article contains a comparative analysis of Soviet contract law and new Lithuanian contract law, displays the problems faced by business and courts in practice in the transitional period. Examples in this article show that businessmen stiffer millions of losses due to defining the moment of coming into force of a contract from formalistic positions, giving too much prominence to the formal contents of the contract and insufficient caring of general principles of law and morals: good faith, justice, common sense, and other criteria.