In disputes concerning unilateral amendment and termination of contracts, the principles of fairness, reasonableness, and prohibition of abuse of rights are of particular importance.

The plaintiff — LLP “C” filed a claim against LLP “A” and N.N. seeking termination of an exchange agreement, recognition of ownership rights to a land plot, and return of documents. By the decision of Court No. 2 of Aktau, Mangystau Region dated November 28, 2022, which was upheld by the ruling of the Judicial Panel for Civil Cases of the Mangystau Regional Court dated March 9, 2023, the claim was dismissed.

According to the case materials, on July 29, 2018, LLP “B” (subsequently LLP “C”) and LLP “A” entered into a joint activity agreement for construction, under which the plaintiff contributed a land plot and construction documentation. Subsequently, on August 11, 2020, the agreement was terminated by mutual consent of the parties. At the same time, LLP “B”, LLP “A”, and N.N. executed an exchange agreement, whereby LLP “B” (the plaintiff) transferred to LLP “A” ownership of a land plot valued at 263,507,557 tenge together with project documentation. In return, LLP “A” undertook to provide LLP “B” with commercial premises in the constructed building.

To secure the obligations, it was предусмотрено that N.N. would transfer real estate to LLP “B” under a sale agreement with a resolutive condition, granting the right to offset the amount of unfulfilled obligations of the developer against the purchase price of the collateral. The parties also agreed on the plaintiff’s right to claim commercial premises in kind and/or to foreclose on the collateral. Between LLP “B” and N.N., pledge agreements over 8 land plots, sale agreements for 17 residential houses, and a guarantee agreement were concluded.

Referring to the defendants’ failure to fulfill the obligation to transfer the premises by February 11, 2022, the plaintiff filed a claim with the court on May 31, 2022.

Upon consideration of the civil case, the court concluded that the plaintiff’s claims were unfounded, taking into account the degree of performance of the construction obligations by the defendant, as well as the interests of third parties involved in the project.

In refusing to initiate cassation review, the ruling of the judge of the Judicial Panel for Civil Cases of the Supreme Court of the Republic of Kazakhstan dated October 19, 2023 noted that construction of the 9-story building had reached the 7th floor, the plaintiff had not demonstrated that real measures were taken to exercise rights over the collateral, and that funds amounting to 673,573,000 tenge had been attracted from members of a housing construction cooperative. The cassation instance found that the refusal to satisfy the claim for contract termination complied with the principles of fairness and reasonableness (Part 5 of Article 6 of the Civil Procedure Code).

Jurisdiction

Jurisdiction over disputes on amendment and termination of contracts is determined by the provisions of Chapter 3 of the Civil Procedure Code. As a general rule, such disputes fall within the jurisdiction of the court at the location of the defendant (Article 29 of the CPC). The law also provides for jurisdiction of investment disputes (Parts 1–2 of Article 27 of the CPC), jurisdiction at the plaintiff’s choice where the place of performance is specified in the contract (Part 6 of Article 30 of the CPC), exclusive jurisdiction over rights to immovable property (Part 1 of Article 31 of the CPC), and contractual jurisdiction (Article 32 of the CPC).

Analysis of the studied cases shows that courts generally comply with the rules on territorial jurisdiction, although certain violations occur.

By the ruling of the judge of the Balkhash District Court of Almaty Region dated December 20, 2022, the claim of A.K. against LLP “B” for contract termination and recovery of money was returned. According to the case materials, the parties had concluded a contract for the manufacture and installation of windows and doors with prepayment. Referring to prolonged non-performance, the plaintiff filed the claim at the location of the defendant. However, the judge concluded that the dispute was not within the jurisdiction of that court and indicated that the claim could be filed at the place of conclusion or performance of the contract in the city of Almaty.

By the ruling of the Judicial Panel for Civil Cases of the Almaty Regional Court dated February 14, 2023, the decision of the first instance court was overturned and the case was remitted to the same court for consideration on the merits. The appellate instance noted that earlier, on December 29, 2021, the case had been transferred by Court No. 2 of the Auezov District of Almaty to the Balkhash District Court due to the established actual location of the defendant.

Thus, the conclusions of the first instance court on lack of jurisdiction did not comply with the law. Under the general rule of Part 1 of Article 29 of the CPC, a claim shall be filed at the location of the defendant. Moreover, in cases of alternative jurisdiction, the right to choose the venue is granted to the plaintiff.

State Duty

Article 35 of the Constitution of the Republic of Kazakhstan establishes the general obligation to pay taxes and other mandatory payments.

State duty rates in courts are determined by Article 610 of the Tax Code. As a general rule, for claims of a proprietary nature, the duty is calculated as a percentage of the claim amount.

According to Part 1 of Article 104 of the CPC, the claim value is determined. For example, in claims for early termination of a property lease (except residential lease), the claim value is calculated based on the total payments for the remaining term, but not exceeding three years.

At the same time, under subparagraph 7 of Article 610 of the Tax Code, for claims on amendment or termination of residential lease agreements, as well as for non-property claims or claims not subject to valuation, the state duty is set at 0.5 of the monthly calculation index (MCI).

In practice, claims for amendment or termination of contracts are generally treated as non-property claims. However, there is a need to harmonize the Civil Procedure Code and the Tax Code in this respect.

Where claims include both property and non-property demands (e.g., termination along with recovery of property or money), the state duty is paid separately for each type of claim.

Part 2 of Article 104 of the CPC requires the plaintiff to indicate the claim value. If it clearly does not correspond to the actual value, the court determines it.

Courts must carefully verify compliance with requirements on claim value and payment of state duty.

Attention!   

       Law and Law Law Law draws your attention to the fact that this document is basic and does not always meet the requirements of a particular situation. Our lawyers are ready to assist you in legal advice, drawing up any legal document suitable for your situation.  

 For more information, please contact a Lawyer / Attorney by phone: +7 (708) 971-78-58; +7 (700) 978 5755, +7 (700) 978 5085. 

Attorney at Law Almaty Lawyer Legal Services Legal Advice Civil Criminal Administrative Cases Disputes Protection Arbitration Law Firm Kazakhstan Law Office  Court Cases