A Mandatory Pre-Trial Dispute Resolution Procedure Is Established for Claims to Unilaterally Amend or Terminate a Contract Through the Courts
Paragraph 2 of Article 402 of the Civil Code establishes a mandatory pre-trial dispute resolution procedure for bringing a claim before a court to unilaterally amend or terminate a contract.
A claim to amend or terminate a contract may be filed with a court after the counterparty has refused the proposal to amend or terminate the contract or has failed to respond within the period specified in the proposal, by law, or by the contract, and, in the absence of such a period, upon expiry of thirty days. Failure to comply with the pre-trial dispute resolution requirement constitutes grounds for returning the statement of claim or leaving it without consideration (subparagraph 1) of part 1 of Article 152 and subparagraph 1) of Article 279 of the Civil Procedure Code). When deciding whether to accept claims for amendment or termination of a contract, courts must verify that the claimants have complied with the pre-trial dispute resolution requirement.
The claimant, K.S., filed a claim with the Taldykorgan City Court of the Zhetisu Region against Zh.T. seeking termination of a gift agreement. At the same time, the statement of claim was not accompanied by documents confirming that the claimant had sent the defendant a proposal to terminate the contract. After the civil proceedings were initiated, on December 28, 2023, the defendant filed an application seeking to have the claim left without consideration due to failure to comply with the pre-trial dispute resolution procedure. By a court ruling dated February 1, 2024, the claim was left without consideration pursuant to subparagraph 1) of Article 279 of the CPC, as it was established that the proposal to terminate the contract had been sent to an address other than the defendant's proper address.
When verifying the claimant's compliance with the pre-trial notification procedure concerning a proposal to amend or terminate a contract by agreement of the parties, attention should be paid to whether such proposal was sent to the proper address and whether there is confirmation of its delivery. Where the defendant has not received the pre-trial proposal despite the claimant having taken reasonable measures to notify the other party, the court may recognize the pre-trial procedure as having been complied with.
Where the claimant sends an out-of-court proposal to amend or terminate the contract after proceedings have already been initiated, the grounds for returning the claim or leaving it without consideration cease to exist. This conclusion may be supported by the fact that an additional condition for returning a claim (leaving it without consideration) on the ground of failure to conduct pre-trial dispute resolution is that the possibility of applying such procedure must still remain. Where the out-of-court procedure for amending or terminating the contract is carried out after the claim has been filed and the possibility of settling the dispute has thereby been exhausted, there is no need to return the claim or leave it without consideration.
Jurisdiction
The jurisdiction of disputes concerning the amendment and termination of contracts is determined by the provisions of Chapter 3 of the CPC. As a general rule, such disputes fall within the jurisdiction of the court at the defendant's place of residence or location (Article 29 of the CPC). In addition, the law provides for the jurisdiction of investment disputes (parts 1–2 of Article 27 of the CPC), jurisdiction at the claimant's choice for contracts specifying the place of performance (part 6 of Article 30 of the CPC), exclusive jurisdiction over disputes concerning rights to immovable property (part 1 of Article 31 of the CPC), as well as contractual jurisdiction (Article 32 of the CPC).
An analysis of the civil cases examined showed that, in general, the courts of the Republic comply with the requirements of the legislation concerning territorial jurisdiction. At the same time, there are individual violations concerning the jurisdiction of cases.
By a ruling of the judge of the Balkhash District Court of the Almaty Region dated December 20, 2022, the claim of A.K. against LLP “B” for termination of a contract and recovery of a monetary amount was returned. According to the materials of the civil case, the parties had entered into a contract for the manufacture and installation of windows and doors on the basis of advance payment. Referring to the prolonged breach of contractual obligations, claimant A.K. filed a claim with the court at the defendant's location. In the said ruling, the judge of the Balkhash District Court of the Almaty Region concluded that the dispute was not within the jurisdiction of that court, stating that the claim could be filed at the place where the contract had been concluded or performed, in the city of Almaty.
By a ruling of the Civil Cases Judicial Panel of the Almaty Regional Court dated February 14, 2023, the act of the court of first instance was set aside and the civil case was remitted to the same court for consideration on the merits. The appellate court proceeded from the fact that earlier, by a ruling of the District Court No. 2 of the Auezov District of Almaty dated December 29, 2021, the civil case concerning the claim of A.K. against LLP “B” for termination of the contract had been transferred for consideration according to jurisdiction to the Balkhash District Court of the Almaty Region, as the defendant's actual location had been established to be within that district.
Accordingly, the conclusions of the court of first instance that the dispute did not fall within the jurisdiction of the Balkhash District Court of the Almaty Region cannot be regarded as consistent with the requirements of law. Pursuant to the general rule established by part 1 of Article 29 of the CPC, a claim shall be filed with the court at the defendant's location. In the above-mentioned statement of claim, which was subsequently filed again with the Balkhash District Court, the claimant provided information indicating that the defendant was registered in that district. The judge's reference to the lack of jurisdiction of the dispute over that district court on the basis of part 9 of Article 30 of the CPC is contrary to the law governing jurisdiction at the claimant's choice. Where alternative jurisdiction applies, the right to choose the place where the civil case is to be heard is granted by law to the claimant.
State Duty
Article 35 of the Constitution of the Republic of Kazakhstan establishes the general requirement that payment of established taxes, fees, and other mandatory payments constitutes the duty and obligation of every person.
The rates of state duty payable in courts are established by Article 610 of the Tax Code. Pursuant to subparagraph 1) of paragraph 1 of Article 610 of the Tax Code, as a general rule, state duty on claims of a proprietary nature is charged as a percentage depending on the amount of the claim.
Part 1 of Article 104 of the CPC establishes the procedure for determining the value of a claim. In claims for early termination of a property lease (rental) agreement, except for residential tenancy, the value of the claim is determined by the aggregate of payments for the use of the property for the remaining term of the agreement (contract), but not more than for three years (subparagraph 10) of part 1 of the said Article).
At the same time, subparagraph 7) of Article 610 of the Tax Code provides that, for claims to amend or terminate a residential tenancy agreement, as well as for other claims of a non-proprietary nature or claims not subject to valuation, the state duty is payable in the amount of 0.5 monthly calculation index (hereinafter – MCI).
In general, judicial practice has developed an approach whereby claims for termination or amendment of a contract are recognized as claims of a non-proprietary nature or claims not subject to valuation. At the same time, from the perspective of improving legal regulation, the issue arises of bringing the CPC and the Tax Code into alignment with respect to claims for termination of lease agreements.
Claims for amendment and termination of contracts are often brought together with claims for the return of property and recovery of monetary amounts. In such cases, paragraph 5 of Regulatory Resolution No. 9 of the Supreme Court of the Republic of Kazakhstan dated December 25, 2006, “On the Application by Courts of the Legislation of the Republic of Kazakhstan on Court Costs in Civil Cases,” establishes that, for claims containing both proprietary and non-proprietary claims, the state duty shall be paid simultaneously, based on the amount established for each type of claim.
Part 2 of Article 104 of the CPC requires the claimant to specify the value of the claim. If the value stated is manifestly inconsistent with the actual value of the property sought to be recovered, the judge shall determine the value of the claim.
When resolving a dispute concerning the amendment or termination of a contract together with a claim for the recovery of property or monetary amounts, courts must duly verify the claimant's compliance with the requirement to specify the value of the claim, as well as the completeness of payment of the state duty for each claim.
Legislation
The principal regulatory legal acts applicable to the category of civil cases under review are:
The Constitution of the Republic of Kazakhstan dated August 30, 1995 (hereinafter – the Constitution);
The Civil Code of the Republic of Kazakhstan (General Part), adopted by the Supreme Council of the Republic of Kazakhstan on December 27, 1994; the Civil Code of the Republic of Kazakhstan (Special Part), adopted by the Parliament of the Republic of Kazakhstan on July 1, 1999 (hereinafter – the CC);
The Civil Procedure Code of the Republic of Kazakhstan dated November 3, 2015 (hereinafter – the CPC);
The Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use” dated December 27, 2017;
The Land Code of the Republic of Kazakhstan dated June 20, 2003;
The Code of the Republic of Kazakhstan “On Taxes and Other Obligatory Payments to the Budget” dated December 25, 2017 (hereinafter – the Tax Code);
The Law of the Republic of Kazakhstan “On Housing Relations” dated April 16, 1997;
The Law of the Republic of Kazakhstan “On Financial Leasing” dated July 5, 2000;
The Law of the Republic of Kazakhstan “On Protection of Consumer Rights” dated May 4, 2010;
Regulatory Resolution No. 9 of the Supreme Court of the Republic of Kazakhstan dated December 25, 2006, “On the Application by Courts of the Legislation of the Republic of Kazakhstan on Court Costs in Civil Cases”;
Regulatory Resolution No. 9 of the Supreme Court of the Republic of Kazakhstan dated July 18, 1997, “On Judicial Practice in Applying Legislation on Privatization by Citizens of Residential Premises from the State Housing Fund”;
Regulatory Resolution No. 7 of the Supreme Court of the Republic of Kazakhstan dated November 25, 2016, “On Judicial Practice in Considering Civil Cases Arising from Bank Loan Agreements.”
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