Disputes on the fulfillment of contractual obligations

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Disputes on the fulfillment of contractual obligations

21 December 2023

Disputes on the fulfillment of contractual obligations

The parties to civil law relations have increasingly resorted to judicial protection of violated rights, freedoms and legally protected interests, and disputes related to the conclusion, amendment, termination of an agreement (transaction) and the fulfillment of contractual obligations are among the most common in civil turnover and, accordingly, in the practice of the courts of the republic.

Terms of the contract, pre-contractual disputes, and enforcement of obligations under the contract

In accordance with Article 378 of the Civil Code, an agreement between two or more persons on the establishment, modification or termination of civil rights and obligations is recognized as a contract.

One of the basic principles of civil law is the principle of freedom of contract, enshrined in Article 2 of the Civil Code, by virtue of which civil law is based on the recognition of equality of participants in regulated relationships, inviolability of property, freedom of contract, the inadmissibility of arbitrary interference in private affairs, the need for the unhindered exercise of civil rights, ensuring the restoration of violated rights, their judicial protection.

The general provisions of the Civil Code on the freedom to conclude a contract fully apply to legal relations on the amendment and termination of the contract. There may be many conditions in each contract, and it is necessary to identify those of them without which the contract cannot be considered concluded. These are the essential terms of the contract.

The essential conditions determine its main content, and therefore an agreement must necessarily be reached on them.

Article 393 of the Civil Code does not provide a list of the essential terms of the contract, only their signs are mentioned in the general order.

There are two groups of conditions that are essential:

1) the terms of the subject of the contract. Without defining the subject of the contract, no contract can be considered concluded.;

2) conditions that are recognized as essential by law.

Such conditions may be determined by the Civil Code.

For example, the essential terms of a purchase and sale agreement are the name and quantity of the goods (Article 407 of the Civil Code), and the pledge agreement must specify, in addition to the item, its valuation, substance, amount, and term of performance of the obligation secured by the pledge (Article 307 of the Civil Code).

Specific essential conditions are also provided for in relation to an annuity agreement (Article 521 of the Civil Code), insurance (Article 826 of the Civil Code), and trust management of property (Article 886 of the Civil Code).

The recognition of the contract as not concluded due to the absence of essential conditions in it or due to the failure to reach an agreement on these 3 conditions entails the same consequences as when the transaction is declared invalid.

In addition, the Civil Code establishes specific actions indicating the intention to conclude a contract. The fulfillment of the terms of the contract specified in the offer (shipment of goods, provision of services, performance of work, payment of the corresponding amount, etc.) is considered acceptance, unless otherwise provided by law or specified in the offer (clause 3 of art.396 of the Civil Code).

Disputes between the parties arising at the conclusion of the contract are called pre-contractual.

The specifics of the consideration of pre-contractual disputes by the courts are established by Article 400 of the Civil Code, which states that in the cases provided for in paragraphs 2 and 3 of Article 399 of the Civil Code, as well as if the disagreements that arose at the conclusion of the contract were submitted to the court by agreement of the parties, the terms of the contract on which the parties had disagreements are determined in accordance with with the court's decision.

According to clause 1 of Article 390 of the Civil Code, under a preliminary agreement, the parties undertake to conclude in the future an agreement on the transfer of property, performance of works or provision of services (main agreement) on the terms stipulated in the preliminary agreement. According to paragraph 4 of the same article, the preliminary agreement specifies the time period in which the parties undertake to conclude the main agreement.

If the time limit is not specified in the preliminary agreement, the main agreement must be concluded within one year from the date of conclusion of the preliminary agreement.

Public contracts are of particular importance among binding contracts.

A public contract is an exception to the general principle of the dispositivity of civil law and the principle of freedom of contract, which determines the specifics of its legal regulation, the procedure and conditions of conclusion, and judicial protection of the violated rights of its participants.

The parties to the public agreement are a commercial organization and a consumer. The practical significance of distinguishing public contracts is that rules that differ from the general rules of contract law apply to public contracts. Such special rules applicable to public contracts include the following: - a commercial organization does not have the right to refuse to conclude a public contract if it is possible to provide the consumer with appropriate goods, services, or perform appropriate work for him. - in case of unjustified evasion of a commercial organization from concluding a public contract, the other party has the right to demand in court that this contract be concluded with it in accordance with the provisions that are mandatory when concluding the contract. - a commercial organization has no right to refuse preference to one person over another in relation to the conclusion of a public contract, except in cases where the law or other legal acts allow the provision of benefits for certain categories of consumers.

Termination and modification of contracts

Paragraph 1 of Article 401 of the Civil Code establishes a general rule, which also manifests the general principle of freedom of contract - amendment or termination of the contract is possible by agreement of the parties, unless otherwise provided by this Code, other legislative acts and the contract.

In the event that the parties cannot come to an agreement on the need to amend or terminate the contract, when unilateral withdrawal from the contract is not provided for, such consequences may occur by court decision, subject to mandatory compliance by the parties with the procedure provided for in Article 402 of the Civil Code.

In accordance with this rule, an agreement to amend or terminate a contract is made in the same form as the contract, unless otherwise provided by law, contract, or business practices.

Only after receiving the refusal of the other party to the proposal to amend or terminate the contract, or failure to receive a response within the time period specified in the proposal or established by law or contract, and in its absence - within thirty days, the claim for amendment or termination of the contract may be filed by the party in court.

Thus, when considering disputes on the amendment (termination) of contracts, it is necessary to verify that the parties comply with the mandatory pre-trial procedure outlined above.

Compliance with the pre-trial dispute resolution established by law

When accepting the statement of claim, the judge had to check whether the person concerned had the right to apply to the court for judicial protection and whether it was carried out in a certain procedural manner.

According to the law, one of the conditions for the right to file a claim, i.e. the right to initiate proceedings, is: the plaintiff's compliance with the procedure for preliminary pre-trial dispute resolution established by law for this category of cases and the possibility of applying this procedure has not been lost.

Judges should be careful when deciding whether to accept an application for trial. When considering claims for termination of contracts in connection with a significant violation of the terms of the contract by the other party, the courts should check the procedure for pre-trial dispute resolution, the possibility of which has not been lost.

By virtue of subparagraph 1 of part 1 of Article 154 of the CPC (as amended before January 1, 2016), the judge returns the statement of claim if the plaintiff has not complied with the procedure for preliminary pre-trial dispute resolution established by law for this category of cases and the possibility of applying this procedure has not been lost.

In accordance with Articles 272, 273 of the Civil Code, the obligation must be fulfilled properly, in accordance with the terms of the obligation and the requirements of the law. Unilateral refusal to fulfill an obligation is not allowed. In refusing to satisfy the plaintiff's claims regarding the recognition of the defendant as an unscrupulous participant in public procurement, the court of first instance proceeded from the fact that the plaintiff missed the deadline for filing a lawsuit to recognize the supplier as an unscrupulous participant in public procurement.

In the opinion of the court of appeal, the conclusion of the court of first instance is justified on the following grounds. Paragraph 2 of Article 178 of the Civil Code establishes that for certain types of claims, legislative acts may establish special limitation periods, shortened or longer than the general period.

Thus, by virtue of Article 11 of the Law of the Republic of Kazakhstan "On Public Procurement", the customer is obliged, no later than ten working days from the day when he became aware of the fact that a potential supplier violated the legislation of the Republic of Kazakhstan on public procurement, to send information about such a potential supplier to the authorized body and file a lawsuit to recognize such a potential supplier. an unscrupulous participant in public procurement.

Thus, by virtue of Clause 2 of Article 402 of the Civil Code, a claim to amend or terminate a contract may be filed by a party in court only after receiving a refusal from the other party to a proposal to amend or terminate the contract or failure to receive a response on time. Paragraph 17, paragraph 1, of Article 249 of the CPC (as amended before January 1, 2016) stipulates that the court leaves the application without consideration if the plaintiff has not complied with the mandatory procedure for preliminary pre-trial dispute resolution established by law for this category of cases and the possibility of applying this procedure has not been lost.

Taking into account the provisions of the law, which establishes the rule on the need to comply with a certain procedure when terminating a contract, the court of first instance, having established that the plaintiff had not completed the procedure for the preliminary settlement of disputes, had to leave the statement of claim without consideration.

Resolution of issues related to the jurisdiction and jurisdiction of cases

At the same time, the study of judicial acts issued by the courts indicates that the courts had questions when determining the jurisdiction of the court.

For example, OOO Elektrostroy filed a lawsuit against Impulsenergy LLP to recover the payment arrears for the goods delivered in accordance with the terms of contract No. 136837/68 dated 29.03.2012.

By the ruling of the Council of Ministers of East Kazakhstan Region dated February 25, 2015, the statement of claim was returned in accordance with the procedure provided for in paragraph 2 of Part 1 of Article 154 of the CPC (as amended before January 1, 2016), in view of the jurisdiction of the case to this court. The plaintiff disagreed with this definition and filed a private complaint.

By a ruling dated April 7, 2015, the Appellate Judicial Board for Civil and Administrative Cases of the East Kazakhstan Regional Court overturned the above ruling and sent the claim from the acceptance stage to the same court.

Canceling the court's ruling, the board pointed out that clause 7.3 of the agreement No. 136837/68 dated 29.03.2012, concluded between OOO Elektrostroy and LLP Impulse-Energy, stipulates that all disagreements arising between the parties involved in the agreement are resolved through negotiations, and if results are not achieved through the Arbitration Court at the buyer's location.

Article 34 of the CPC (as amended before January 1, 2016) defines the contractual jurisdiction of the dispute, according to which the parties may, by agreement among themselves, change the territorial jurisdiction of the case.

In this case, the agreement of the parties actually established territorial jurisdiction - at the location of the defendant.

The defendant, Impulse Energy LLP, is the buyer under contract No. 136837/68 dated 29.03.2012, respectively, the dispute is under the jurisdiction of the SMEC of East Kazakhstan Region, at its location.

Contract modification

For disputes about changing the terms of contracts, it is insignificant. This is primarily due to the fact that civil law gives priority to the termination of the contract, since according to Article 401 of the Civil Code, the grounds for changing and terminating the contract are similar. They mostly file lawsuits for changing the contract arising from housing and land legislation.

One of the problems is to distinguish the modification of the contract from its innovation.

In civil law, there is no clear understanding of the innovation and its relationship to the amendment of the contract. It should be noted that the problem of differentiation is of great practical importance.:

1) modification of the contract is possible against the will of one of the parties, and innovation is possible only by agreement.;

2) in case of amendment, the contract must comply with the legislation in force at the time of conclusion of the contract, and in case of innovation – at the time of the innovation;

3) a change in the contract entails a change in the specific terms of the contract, while an innovation entails the automatic termination of additional obligations.

In our opinion, not any change in the terms of the subject or the method of fulfilling the obligation is an innovation. An innovation agreement is proposed to be understood only as one that

1) explicitly establishes the replacement of the first obligation by the second, or

2) changes the type of contract (obligations from the purchase and sale are replaced by loan obligations). In other cases, the rules on innovation are not used, and the situation is considered as an amendment to the contract.

The difficult question is which legislation should be followed when making changes to the contract. We believe that if the parties only amend the agreement, then the rules in force at the time of the conclusion of the amended agreement apply. If an innovation is carried out, it is necessary to apply the rules in force at the time of the innovation, since the first contract is considered terminated.

According to Article 725 of the Civil Code, by agreement of the parties, any obligation arising from transactions of purchase and sale, lease of property or other grounds may be formalized by a loan agreement. The execution of the obligation in the loan agreement is carried out in compliance with the requirements for innovation (Article 372 of this Code) and is concluded in the form provided for in the loan agreement (Article 716 of this Code).

167 of the Labor Code is: failure to ensure the safety of property and other valuables transferred to the employee on the basis of a written agreement on assuming full financial responsibility; failure to ensure the safety of property and other valuables received by the employee under a report on a one-time document; failure to ensure the safety of property and other valuables received by the employee under a report on a one-time document; causing damage by illegal actions of an employee, confirmed in accordance with the procedure established by the legislation of the Republic of Kazakhstan.

At the same time, according to the meaning of the law, an employee must perform work directly related to the sale of property that was transferred to him under an act or other documents for carrying out trading activities.

Grounds for amendment and termination of the agreement

– these are circumstances, the occurrence of which entails a change or termination of the contract.

The material grounds should be recognized as life circumstances that entail the need for the parties to change or terminate the legal relationship. However, in order to amend or terminate the contract, there must be legal grounds that allow the parties to fulfill their desire to amend or terminate the contract in a certain way.

There should always be two legal grounds: a material legal one (a specific material basis provided for by law or contract, allowing the party to amend or terminate the contract in this situation) and a formal legal one (volitional actions of authorized persons directly entailing the amendment or termination of the contract: agreement of the parties, a court decision made at the request of the party, unilateral refusal). Modification and termination of the contract in the absence of the consent of one of the parties is allowed only in strictly defined cases. The Civil Code provides for judicial and non-judicial procedures.

However, the second one is an exception to the first one. In our opinion, such a priority cannot be considered justified. The main importance should be given to the material and legal grounds for changing and terminating the contract.

If there is a material and legal basis, both parties to the agreement know or should know that the procedure for changing and terminating this agreement may begin at any time. It is at the time of notification of the counterparty that the party having the material right to amend and terminate the contract must be considered to have exercised its right.

The law, as a general rule, requires a judicial procedure for changing and terminating a contract. In this case, the contract is considered terminated or amended only from the moment the court decision comes into force, and everything previously executed cannot be refunded.

Upon termination of the contract, it is possible to claim damages from a party that has significantly violated the contract, for example. But it is the bona fide party that will bear the burden of proving the existence and amount of damages, as well as the burden of executing a court decision. We believe that the way to unilaterally renounce the contract should be a priority. It is more acceptable, as it allows for a faster and more adequate response to changes in external circumstances, the parties are less dependent on the judicial system, and their relations become more dynamic and flexible.

The Civil Code itself, when regulating certain types of contracts, mainly proceeds from such a scheme of contract modification and termination. Judicial practice confirms that disputes between the parties arise not only on the issue of termination and amendment of the contract, but also on the issue of the consequences of such actions (this issue is discussed below).

The judicial procedure only unnecessarily complicates the process of exercising the right to amend and terminate the contract. It should be preserved only in rare cases, based on the specifics of specific obligations (for example, if the consumer citizen is the party refusing to amend or terminate the contract).

Termination of the contract

The legal basis for resolving these disputes is the general norms of civil legislation that define the concept and terms of a contract, the procedure for its conclusion, amendment and termination, contained in Chapters 22-24 of the Civil Code, as well as special norms governing the legal relations of the parties to certain types of contracts and included in the chapters of the Civil Code for certain types of obligations, as well as other legislative and legal acts.

Two concepts are distinguished in the Civil Code: "termination of the contract" and "unilateral refusal to perform the contract (renunciation of the contract)".

Termination of the contract may be carried out, in the absence of an agreement between the parties, only in court (art.401 CC).

Unilateral refusal to perform a contract is allowed only in cases stipulated by the Civil Code, other legislative acts and the agreement of the parties (art.404 of the Civil Code).

At the request of one of the parties, the contract may be amended or terminated by a court decision only:

1) in the event of a material breach of contract by the other party:

2) in other cases stipulated by this Code, other legislative acts or an agreement.

A violation of the contract by one of the parties is considered significant, which entails such damage to the other party that it is largely deprived of what it was entitled to expect when concluding the contract (paragraph 2 of Article 401 of the Civil Code).

These are mainly claims for termination in connection with a material violation by the other party or in other cases provided for by civil law or contract.

Based on the cases studied, the following conclusion can be drawn: a significant violation by the counterparty of the contract is the basis for its termination, if there is:

a) the fact of violation of the contract,

b) the fault of the counterparty,

c) significant damage to the person initiating the termination of the contract,

d) causal relationship: a violation leads to significant damage to a person.

I would like to emphasize that all these four elements must exist simultaneously. The absence or lack of evidence of at least one of them makes termination of the contract impossible.

Consequences of the amendment and termination of the contract

According to paragraph 1 of Article 403 of the Civil Code, upon termination of the contract, the obligations of the parties are terminated. It is well known that the termination of an obligation means the disappearance of the legal connectedness of its subjects, who, as a result of the termination of the obligation, lose the subjective rights and obligations that constitute the content of the legal relationship of obligation.

In this regard, upon termination of the contract, the obligation ceases to exist, and its participants are no longer bound by the rights and obligations that previously followed from it.

This means that the creditor no longer has the right to make any claims against the debtor based on this obligation.

The Russian doctrine of legal theory suggests the following solution to this conflict: the consequences caused by the termination of the contract occur in the future and, by virtue of the general rules of the law of obligations, does not release the debtor from the obligation to pay for the goods received before the termination of the contract.

Let's consider how paragraph 1 of Article 401 of the Civil Code is consistent with special norms of the Civil Code, for example, with paragraph 3 of Article 561 of the Civil Code, according to which, if the employer has not returned the hired property or returned it untimely, the landlord has the right to demand payment for the use of the property for the entire time of delay.

In this case, the agreement is terminated, however, the party has the right to collect the rent incurred after the termination of the contract.

According to paragraph 2 of Article 403 of the Civil Code, when a contract is amended, the obligations of the parties continue to apply in an amended form.

The material grounds for satisfying claims for changes to the terms of the contract are specified in Article 401 of the Civil Code. Along with a reference to the cases of possible termination and modification of the contract provided for in the Code, the law in question specifically identifies a case representing, in Article 401 of the Civil Code itself, "a significant breach of contract by the other party."

A certain difficulty in judicial practice has been caused by the application of paragraph 4 of Article 403 of the Civil Code, according to which the parties do not have the right to demand the return of what they performed under the obligation before the amendment or termination of the contract, unless otherwise provided by law or contract.

Since the latter could have been executed by the parties to a certain extent before the amendment or termination of the contract, the question arises about the fate of what had already been executed before the amendment or termination of the contract.

It should be noted that if the reason for termination of the contract was the non-fulfillment or improper fulfillment by one of the parties of its obligations, then in this case special norms of the Civil Code and individual laws provide for the right of the party to demand the return of what it performed under the contract, for example, paragraph 3 of Article 440 of the Civil Code, paragraph 3 of Article 451 of the Civil Code, paragraph 1 of Article 428 of the Civil Code.

However, unfortunately, these norms are not present in all institutions of contractual obligations.

From the point of view of protecting the interests of civil turnover, such a decision represents an undoubted way out of the current situation. However, such an approach cannot be considered legally legitimate.

Firstly, an obligation from unjustified enrichment cannot arise when the transfer of property takes place on the basis of a transaction or a legal act (Article 953 of the Civil Code).

Secondly, if we turn to judicial practice, comments, and the works of the drafters of the code, paragraph 3 of Article 954 of the Civil Code applies in the case when the party to the obligation has performed in an amount greater than that stipulated by the terms of the contract.

At the same time, we believe that the application of provisions on contractual obligations is permissible when considering issues related to the consequences of termination of the contract, when the law does not explicitly specify the return of the performed.

Fulfillment of contractual obligations

The dynamics of the established contractual legal relationship includes the execution of the contract as its separate stages.

The Civil Code does not contain general rules on the execution of contracts. In appropriate cases, regulation is carried out by the extensive chapter "Fulfillment of obligations". In addition, it is to the fulfillment of contractual obligations that the bulk of the special rules are devoted, which are contained in the chapters on certain types of contracts. The performance of a contract is expressed in the commission or abstention from performing actions that constitute its subject matter. When evaluating performance, it is taken into account whether the action was performed, and if so, how.

In the first case, we are talking about performance as such, and in the second, about its proper nature. Accordingly, the legislator distinguishes between non-fulfillment (1) and improper fulfillment (2).

When they talk about performance as such, they mean performing actions (abstaining from actions) in kind, or otherwise - actual performance. Accordingly, proper execution includes compliance with a set of requirements that determine who and to whom should perform the execution, as well as with what object, when, where and in what way it should be carried out.

The largest number of cases in this category is related to non-fulfillment of monetary obligations. At the same time, the parties confirm the fulfillment of obligations by an agreement (supply, contract, utilities, loan, lease, etc.) or a written receipt (loan agreement between citizens).

As a rule, these are claims for debt collection (in many cases, together with the principal debt, claims are made for penalties, damages, representative expenses, etc.) in the vast majority of such claims are justified and satisfied by the courts.

According to Article 282 of the Civil Code, by virtue of a monetary obligation, one person (the debtor) is obliged to pay money to another person (the creditor), and the creditor has the right to demand from the debtor the fulfillment of his obligation to pay money (loan money and other obligations).The obligations of the parties may arise not only from a written contract, but also from an oral agreement.

In this case, it is also necessary to take into account the requirements of art. 272 of the Civil Code, according to which, in the absence of a corresponding agreement between the parties, the obligation must be performed properly in accordance with the requirements of the law, as well as in accordance with business practices or other commonly imposed requirements.

In general, the practice of reviewing disputes related to debt collection based on written receipts and collecting a deposit, etc. It is stable, since when making a decision the court is guided by the evidence established during the consideration of the case, there are no problems with the application of substantive law in the above category of cases. However, there is an incorrect application of the norms of both substantive and procedural law.

Recovery of losses caused as a result of improper fulfillment of obligations arising from contractual legal relations

Proving damages is one of the most complex processes in the field of civil law relations.

Judicial practice in this area is experiencing difficulties due to the small amount of theoretical material, including legislative material. In this regard, various theoretical sources have been used in this work on the topic of "damages" with an emphasis on the interpretation and means of proving this concept in judicial practice.

Losses in civil law mean the negative consequences that occur in the property sphere of a participant in a civil legal relationship as a result of an offense committed by another participant.

Losses, in the terminology of the law, are damages caused by unlawful, usually culpable actions, which are subject to compensation in accordance with legal regulations.

Losses are those negative property consequences that one person has suffered as a result of another person's misconduct, and are a monetary assessment of the property damage.

The concept of losses is divided into two components: real damage and lost profits. The actual damage is: a) expenses incurred or expenses that will need to be incurred; b) loss or damage to property.

The plaintiff may not have any expenses yet, but he will have to bear them in order to restore his right.

The actual damage caused as a result of non-fulfillment of a contractual obligation may be expressed in the form of a sum of money paid.

Lost profits:

a) lost income;

b) income received by the counterparty who violated the right.

In all cases, the illegality of the conduct is a necessary basis for the recovery of damages as a result of the violation of the obligation.

In the civil legislation of the Republic of Kazakhstan, issues of breach of contract as grounds for compensation for damages are covered by the provisions of paragraph 1 of Article 350 of the Civil Code. This paragraph establishes that the debtor is obliged to compensate the creditor for losses caused by non-fulfillment or improper fulfillment of obligations.

On the recovery of penalties for non-fulfillment or improper fulfillment of contractual obligations

A penalty is a way of ensuring proper fulfillment of obligations and protection of civil rights.

In the Civil Code, it is provided for in the form of fines and penalties. A fine as a penalty is a sum of money determined by law or contract, which the debtor is obliged to pay to the creditor for non-fulfillment or improper fulfillment of the obligation. Unlike a penalty, a fine is a one-time recoverable amount.

A penalty is an amount of money paid by a party that has violated an obligation, determined by law or contract, which is calculated continuously, on an accrual basis.

A penalty can be contractual or legal (that is, directly stipulated in a particular law). If the amount of the legal penalty is increased or decreased by agreement of the parties, then in this case it passes from the category of legal to the category of contractual.