Fulfillment of contractual obligations under the Purchase and Sale Agreement
Validity (invalidity) of transactions
A civil law contract is one of the most common types of transactions involving citizens and legal entities. An agreement between two or more persons on the establishment, modification or termination of civil rights and obligations is recognized as a contract.
The legislation of the Republic of Kazakhstan proclaims the principle of freedom of contract, its content is disclosed in Article 380 of the Civil Code of the Republic of Kazakhstan.
A contract is considered concluded if an agreement has been reached between the parties on all essential terms of the contract in the form prescribed by law for the relevant type of contract. The legislator refers the subject matter of the contract, the condition of the product, the price of the product, and the deadlines to the essential conditions of the considered type of purchase and sale agreement.
Any voluntary agreement on all essential conditions must be clothed in the form prescribed by the legislator.
Depending on the subject of sale and its participants, the contract can be concluded both orally and in writing, while the legislator specifically establishes the obligation of writing in certain cases. The subject of most disputes is real estate transactions.
The emergence, modification and termination of rights (encumbrances of rights) to immovable property by virtue of Article 118 of the Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code) are subject to state registration in cases stipulated by the Civil Code and the Law of the Republic of Kazakhstan "On State Registration of Rights to Immovable Property and Transactions with it." Transactions subject to state registration in accordance with the legislation of the Republic of Kazakhstan are considered completed after their registration, unless otherwise provided by the laws of the Republic of Kazakhstan.
In this regard, transactions on the alienation of real estate must be carried out with the obligatory observance of a simple written form. In cases established by legislative acts or by agreement of the parties, written transactions are considered completed only after their notarization. Failure to comply with such a requirement entails the invalidity of the transaction with the consequences prescribed by law.
The current legislation provides for the right of the court to recognize the transaction as valid at the request of the interested party, if the transaction requiring notarization is actually executed by the parties or one of the parties, in its content does not contradict the law and does not violate the rights of third parties, the court has the right to recognize the transaction as valid (paragraph 2 of Article 154 of the Civil Code).
In accordance with Article 147 of the Civil Code, transactions are recognized as actions of citizens and legal entities aimed at establishing, changing or terminating civil rights and obligations. Since a transaction is a legitimate action, the purpose of the transaction should be to achieve legitimate results.
However, such results cannot be achieved if the legal requirements regarding at least one of the elements of the transaction are violated.:
1) to the form of the transaction;
2) the content of the transaction;
3) to the participants of the transaction;
4) to express their freedom of expression.
According to the rules of subparagraph 2) of paragraph 1 of Article 152 of the Civil Code, transactions in the amount of more than one hundred monthly calculation indices, with the exception of transactions executed at the very time of their commission, must be made in writing.
Failure to comply with a simple written form does not invalidate it, but it deprives the party in the event of a dispute to confirm its commission, content or execution by testimony.
The parties, however, have the right to confirm the commission, content or execution of the transaction with written or other evidence other than witness testimony.
In accordance with paragraph 3 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated July 16, 2007 No. 5 "On certain issues of dispute resolution related to the protection of ownership of housing", in case of non-compliance with the form of the transaction, the actual transaction may be confirmed by evidence other than testimony (for example, a receipt for the sale of housing and receipt of money, or by issuing a power of attorney for the right of alienation). Based on the requirements of Kazakh legislation, claims for recognition of a real estate purchase and sale transaction as valid can only be filed against a living person in compliance with the rules of jurisdiction provided for in Article 33 of the Civil Code, that is, at the location of the disputed real estate.
The same rules apply to cases where the defendant – seller's place of residence is not known, however, in this case, the defendant is notified by the court at the place of his last known place of residence in compliance with the rules of Article 135 of the Civil Procedure Code of the Republic of Kazakhstan (hereinafter – CPC).
In accordance with part 1 of Article 135 of the CPC, if the defendant's actual place of residence is unknown, the court proceeds to consider the case upon receipt by the court of a summons or other notice, summons with an inscription certifying their receipt by a housing maintenance organization, a local government body or the relevant executive body at the defendant's last known place of residence.
Unlike the considered disputes, which arose from contracts concluded in accordance with the procedure established by law and which gave rise to certain legal consequences in relation to the persons who committed them, they cause difficulties in considering disputes on the recognition of transactions as valid, transactions that were actually completed but not properly executed.
So, based on the meaning of the current legislation – Article 188 of the Civil Code, only the owner of the property who acquired this right in accordance with the requirements of Article 118 of the Civil Code and the Law of the Republic of Kazakhstan "On State Registration of Rights to Immovable Property and Transactions with it" has the right to dispose of immovable property from the moment of state registration.
If a transaction requiring notarization is actually executed by the parties or one of the parties, and its content does not contradict the law and does not violate the rights of third parties, the court may recognize the transaction as valid at the request of the interested party.
A transaction made by a person who does not have the right to own, use and dispose of immovable property cannot be recognized as valid.
Lawsuits for invalidation of transactions
The invalidity of a transaction means that an action performed in the form of a transaction does not have the qualities of a legal fact capable of generating the civil consequences desired by the subjects.
The transaction is considered invalid on the grounds established by law and other legal acts, by virtue of recognition as such by a court (disputed transaction) or independently of such recognition (void transaction).
Along with the requirement to declare the purchase and sale transactions invalid, the plaintiffs claim to bring the parties back to their original position. In case of invalidity of the purchase and sale transaction in accordance with paragraph 3 of Article 157 of the Civil Code, each of the parties is obliged to return to the other all received under the transaction, and if it is impossible to return in kind, reimburse the value of the property to be returned.
The rules of paragraph 8 of Article 157 of the Civil Code are as follows: "An invalid transaction does not entail legal consequences, except for those related to its invalidity, and is invalid from the moment of its commission, unless otherwise provided by the Civil Code, legislative acts, or follows from the substance or content of the transaction.
If, at the conclusion of the apartment purchase and sale agreement, the parties did not take actions aimed at completing the transaction, the apartment was not transferred to the buyer, the latter did not pay the seller the money for the apartment, then this indicates the imaginary nature of the transaction.
Beisenova G.Zh. appealed to the court with a claim against the defendants for invalidation of the apartment purchase and sale agreement, its state registration, and the registration of the apartment pledge.
In substantiation of the claims, it is indicated that she lived with the defendant D.A. Mukanov in a civil marriage, in order to obtain a loan from the bank, D.A. Mukanov offered to issue a purchase and sale agreement for an apartment belonging to her at the address: Taraz, Tonkurush, 5, sq. 38. On 29.01.2013, a purchase and sale agreement was concluded between them. Certified by a notary, U.S. Zhumagulov. Subsequently, D.A. Mukanov received a loan from Kazkommertsbank JSC in the amount of 1,300,000 tenge on 03/06/2013 to purchase a car.
He believes that the concluded contract of sale of the apartment is invalid due to its appearance, since the money for the apartment was not transferred, the plaintiff Beisenova G.Zh. remains to live in it with the children. By a statement dated 11/21/2013, the plaintiff's representative increased the requirements, and also filed a claim for invalidation of the apartment pledge agreement with Kazkommertsbank JSC.
By the decision of the Taraz City Court of December 3, 2013, the claim of G.Zh. Beisenova was satisfied. The contract dated 29.01.2013 for the purchase and sale of an apartment at the address: Taraz, Tonkurush, 5, sq. 38, concluded between the plaintiff Beisenova G.Zh. and the defendant Mukanov D.A., certified by notary Zhumagulov U.S., was declared invalid.
The pledge (mortgage) agreement for an apartment at the address: Taraz, Tonkurush, 5, sq. 38, concluded on 03/06/2013 between D.A. Mukanov and Kazkommertsbank JSC was declared invalid.
The state registration of the apartment purchase and sale agreement dated 29.01.2013 at the address: Taraz, Tonkurush, 5, sq. 38 for the defendant D.A. Mukanov and the state registration of the apartment pledge agreement dated 06.03.2013, concluded between D.A. Mukanov and Kazkommertsbank JSC, was declared invalid.
The state duty in the amount of 3,464 (three thousand four hundred and sixty-four) tenge, expenses for a representative in the amount of 75,000 (seventy-five thousand) tenge were collected from the defendant Mukanov D.A. in favor of Beisenova G.Zh.
The decision was amended by the decision of the Appellate Judicial Board for Civil and Administrative Cases of the Zhambyl Regional Court No. 2a-315/2014 dated March 12, 2014.
The court's decision regarding the satisfaction of the claims of Beisenova G.Zh. on the invalidation of the apartment pledge agreement, the state registration of the pledge agreement was canceled with the issuance of a new decision on the refusal to satisfy the claims in this part.
The state duty in the amount of 1,731 (one thousand seven hundred and thirty-one) tenge was collected from the defendant Mukanov Daniyar Arstanovich in favor of Beisenova Gulzhan Zhanysbaevna.
The rest of the court's decision remains unchanged. The Cassation judicial Board changed the decision of the court of appeal, canceling it in terms of making a new decision and upheld the decisions of the court of first instance.
By changing the decision, the court of appeal pointed out that the court of first instance, when considering the case, had not clarified the grounds for invalidating the pledge agreement challenged by the plaintiff. The grounds given by the plaintiff for the alleged first apartment purchase and sale transaction cannot be accepted as grounds for invalidating the pledge agreement or as consequences of the invalidity of the original transaction.
Moreover, this pledge agreement is a derivative of the main obligation, namely the loan agreement, which has not been challenged.
However, these conclusions of the court of appeal contradict the circumstances of the case.
The court of first instance reliably established that on 29.01.2013, an apartment purchase agreement was signed between the plaintiff Beisenova G.Zh. and the defendant Mukanov D.A., certified by notary Zhumagulov U.S. However, when concluding the apartment purchase agreement, the parties did not commit actions aimed at completing the transaction, the apartment was not transferred to Mukanov D.A., the latter did not pay the money for the apartment to the plaintiff Beisenova G.Zh., which indicates the imaginary nature of the transaction.
Subsequently, D.A. Mukanov received a loan from Kazkommertsbank JSC in the amount of 1,300,000 tenge on 03/06/2013 to purchase a car. And he concluded a mortgage agreement with Kazkommertsbank JSC on 03/06/2013, under which he pledged an apartment previously owned by plaintiff Beisenova G.Zh.
In accordance with paragraph 1 of Article 158 of the Civil Code, a transaction is invalid, the content of which does not comply with the requirements of the law, as well as committed with a purpose deliberately contrary to the principles of law and order or morality.
By virtue of Article 160 of the Civil Code, an imaginary transaction made only for appearance, without the intention of causing legal consequences, is invalid, if the transaction is made in order to cover up another transaction (fake), then the rules relating to the transaction that the parties really had in mind apply.
In accordance with paragraph 1 of Article 406 of the Civil Code, a purchase and sale agreement is a bilateral, paid, consensual and real contract. That is, the transfer of the goods to the ownership of the buyer is an essential condition of the contract of sale and testifies to its reality. Failure to comply with this condition will invalidate the contract.
In this case, the apartment was not actually transferred to the ownership of Mukanov D.A., as well as Beisenova G.Zh. money was not received for the apartment sold, which indicates the imaginary nature of this transaction, that it was made only for appearance, without the intention to cause legal consequences, which means it is invalid.
The appellate judicial board, agreeing with such conclusions of the court of first instance, at the same time recognized the pledge agreement as legitimate, i.e. refused to satisfy the claim in this part, although the judicial act that entered into force established that the owner of the disputed apartment is Beisenova G.Zh., who did not conclude the pledge agreement and did not receive the money in the loan., and Mukanov D. is not the owner of the apartment.
This pledge cannot in any way ensure the fulfillment of D. Mukanov's obligations to the Bank, since the owner of the disputed apartment is another person who has not accepted any obligation to the Bank.
In accordance with the provisions of articles 314, 321, issues of replacing the collateral or early fulfillment of obligations may be resolved. Therefore, the court of first instance correctly satisfied the plaintiff's claims regarding the pledge of the apartment.
Consideration of disputes related to the conclusion, modification, termination of contracts.
The grounds for amendment and termination of the contract are provided for in Article 401 of the Civil Code. In judicial practice, the most common problem is the assessment of evidence provided by the parties to confirm the conclusion of the contract and the interpretation of its terms, which is often due to insufficient design and content of individual terms of the contract.
Modification or termination of the contract is possible by agreement of the parties, unless otherwise provided by the Civil Code, other legislative acts and the contract. An agreement between the parties is the normal and most acceptable way to amend and terminate a contract, based on the principle of freedom of contract.
If 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, the occurrence of such consequences is possible 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 above-mentioned mandatory pre-trial procedure. At the stage of deciding whether to accept a statement of claim, the judge must check whether the person concerned has the right to apply to the court for judicial protection and whether it is carried out in a certain procedural manner.
According to the law, one of the conditions for the right to file a claim is that the plaintiff complies 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. According to paragraph 2 of Article 401 of the Civil Code, a contract may be changed or terminated by a court order in the event of a material violation of the contract by the other party.
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. The reason for the refusal to satisfy claims is often the groundlessness of the arguments of the claims, namely the lack of evidence of violation of the essential terms of the contract.
Regulatory and legal regulation of the legal relations in question:
-The Constitution of the Republic of Kazakhstan;
-The Civil Code of the Republic of Kazakhstan;
-Land Code of the Republic of Kazakhstan dated June 20, 2003 No. 442- 11;
- Environmental Code of the Republic of Kazakhstan dated January 09, 2007 No. 212-111;
-Water Code of the Republic of Kazakhstan dated July 09, 2003 No. 481-11;
- Forest Code of the Republic of Kazakhstan dated July 08, 2003 No. 477-11;
-The Law of the Republic of Kazakhstan dated 04/16/1997 "On Housing relations";
-The Law of the Republic of Kazakhstan "On mortgage of real estate" dated December 23, 1995 No. 2723;
-The Law of the Republic of Kazakhstan dated July 26, 2007 "On State Registration of rights to immovable Property and transactions with it";
- Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 5 dated 07/16/2007 "On certain issues of dispute Resolution related to the protection of Home Ownership";
- Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 9 dated July 18, 1997 "On the practice of applying legislation on the privatization of residential premises by citizens";
- Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 3 dated April 20, 2006 "On the practice of judicial review of disputes on the right to housing abandoned by the owner";
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