Gift as a contract and its specificities

   Each of us has been either a gift giver or receiver in our everyday lives, and most often we have been in both roles—either receiving or giving a gift. At that moment, we were probably unaware that we were entering into a bilateral contract, an unnamed, gratuitous, causal, unilaterally binding, formal, real contract… so many attributes for a contract that is not regulated by the positive law of the Republic of Serbia.

The term “unnamed,” yet so common in practice, indicates that a gift contract, with its essential elements, has not been included in the special part of the Law on Obligations, and this legal gap has persisted for quite some time. Namely, based on the Law on the Invalidity of Legal Provisions Passed Before April 6, 1944, and During Enemy Occupation, in the transitional period, until the subject of gifts is regulated by republican or provincial regulations, the rules of the Serbian Civil Code (hereinafter referred to as SCC), written by jurist and writer Jovan Hadžić, apply to gifts (and usufruct rights). The SCC was in force for a full 100 years, until 1946, when it was abolished, along with all laws of Serbia and pre-war Yugoslavia. As a result, gifts and usufruct rights remained outside legal regulation as a distinct, named contract. However, the general provisions of the Law on Obligations still apply to gifts, as a gift is a contract.

From its legal nature arise specific legal consequences that may affect its validity, as well as the possibility of terminating this contract.

Since it is a bilateral contract, the first question is who can be a contracting party? The donor can only be a person with full legal capacity, while the recipient can be a person without legal capacity. Exceptionally, the donor may also be a person with partial legal capacity (someone over the age of fifteen), but only in regard to property acquired through their earnings. If these conditions are not met, the gift contract is voidable, meaning that its validity can be contested by the interested party or their legal representative under legal conditions.

The gratuitousness of the gift contract means that the recipient does not owe the donor anything in return for the gift (except gratitude).

On the other hand, the essential elements of a gift contract are the subject of the gift and the intention to give (animus donandi). This specific feature of a gift contract—the intention to give, as a voluntary and conscious transfer of ownership over objects, rights, or the relinquishment of one’s right in favor of another without compensation—is a fundamental element of the gift contract. The intention to give may be based on various motives, but unlike other bilateral contracts, here the motive is so significant that if it is shown that there was no intent of generosity (such as love, friendship, gratitude) on the part of the donor, which must clearly derive from the contract as a key element, the gift contract can be declared null and void—nonexistent from the legal perspective. In such a case, the recipient would be required to return both the gift and any benefits gained from holding the gift without a legal basis.

Although Article 53, Paragraph 1 of the Law on Obligations stipulates that the reasons for entering into a contract do not affect its validity, in the case of contracts without compensation, such as a gift contract, the motive is relevant if invoked by the party who receives nothing in return for their giving (the donor).

Abuses of gift contracts are frequent, especially to evade tax obligations. However, the gift tax will not be imposed on the recipient only in exceptional cases (e.g., if the recipient and donor are related in the first degree, or if the value of the gift is below the tax-exempt amount prescribed by law).

The formality of the gift contract, its real nature, is not necessarily reflected in a written form (although that form is preferable), but for a gift to come into existence, the gift must be delivered to the recipient. The recipient can even demand the forced fulfillment of the gift contract (though the donor might then consider them “ungrateful”). Naturally, if the subject of the gift is real estate, the contract must be in writing and notarized by a competent public notary.

Another feature of the gift contract is the possibility of unilateral termination by the donor for justified reasons.

The most common reason for termination is the ingratitude of the recipient. This must be expressed and is determined on a case-by-case basis. Termination is declared by the donor, unilaterally, explicitly, and in writing, and often the court will decide on the termination, determining the existence and degree of ingratitude on the recipient’s part. The motive for making a gift is often driven by the donor’s affection for the recipient, so if the recipient displays ingratitude to a certain degree, the law recognizes this as a relevant fact that may affect the donor’s intention to give.

A gift can also be unilaterally terminated in the case of the donor’s impoverishment to the extent that they lack the necessary means of survival. There must be a high level of impoverishment, jeopardizing the donor’s material existence and that of those they are obligated to support.

Unlike most bilateral contracts, gifts can be challenged by third parties, such as the donor’s heirs and creditors (violation of the necessary share, Actio Pauliana).

A gift made to a spouse during the marriage, especially a valuable one, may be revoked in the event of the marriage ending in divorce or annulment.

So many specificities for such a common, yet legally undefined, contract. Sometimes it may seem like a good solution to bypass various legal “traps” by making a gift to someone, but the recipient must keep in mind that a gift, if not a genuine gift but rather a simulated contract, can indeed be revoked, both by the donor and their legal successors.