OBLIGATIONS UNDER THE SUPPLY AGREEMENT

   Legal relations related to the conclusion, amendment, and termination of the delivery contract are regulated by chapter 25, paragraph 3 of the Civil Code.

    Delivery is one of the most common business contracts.

Therefore, the supply contract can be considered an entrepreneurial contract. In the Civil Code, the supply contract is combined along with other contracts, namely purchase and sale, retail sale, contracting, energy supply, sale of an enterprise in one chapter - "Purchase and sale".

The only thing that unites supply and purchase and sale,

- this is their legal goal, i.e. the focus on the transfer of ownership or other derivative property rights on the terms of compensation and irrevocability.

All other signs fundamentally distinguish delivery from purchase and sale. The first feature of the supply contract is that a special subjective composition is provided for this contract.

The supplier should always be an entrepreneur, i.e. it can be either a commercial legal entity, or a non-profit legal entity engaged in entrepreneurial activities to achieve its statutory goals, or a citizen entrepreneur, or contractual associations of legal entities (corporations, consortia, etc.)

The supplier can either produce the corresponding product itself, or purchase it from its counterparties for subsequent sale. However, if the seller carries out business activities for the supply of goods at retail, the relations of the parties are regulated by the rules on retail sale.

All this follows from the norm of the Civil Code, which defines the concept of a supply contract.

According to Article 458 of the Civil Code, under a supply contract, the seller (supplier), who is an entrepreneur, undertakes to transfer the goods produced or purchased by him to the buyer for use in entrepreneurial activities or for other purposes within a specified period or time.: not related to personal, family, home, or other similar uses.

The buyer can also only be an entrepreneur, which follows from the nature of the transferred goods and the purpose of the transfer, i.e. the goods are transferred for business use or for purposes other than personal use.

The object of delivery also has specific features. It is a commodity, understood in a broad sense as a material object, a product of labor that has a consumer value and is manufactured for sale on the market.

The object of purchase and sale can be any thing, and when delivered, it must be suitable for business use. From the point of view of the sale of goods on the market, special requirements are imposed on the objects of supply in the interests of potential consumers, which include mandatory certification of goods, as well as confirmation of the legality of the origin of the goods (for example: certificate, consignment notes, acts of shipment and acceptance of goods), which accompany the goods up to its retail sale.

Another feature of the delivery contract is the deadlines for its execution, which are set out in the contract. In addition, in cases where the transfer of goods is not carried out as a result of a single action, but takes place over a certain period of time (for example: in separate batches, over several months, a year), a feature of the delivery contract is the continuing nature of the legal relations between the parties.

The periods and delivery procedure are provided for in Articles 461, 462 of the Civil Code.

In accordance with the provision of Article 474 of the Civil Code, a penalty may be charged for non-delivery of goods or delay in delivery of goods from the date specified in the contract until the date of actual fulfillment of the obligation, unless another penalty procedure is established by legislative acts or the contract.

Thus, this provision provides for the responsibility of the supplier. The norms of the Civil Code on delivery do not contain norms providing for the buyer's responsibility in terms of payment under the contract.

This is explained by the fact that delivery is one of the types of sale, therefore, the general provisions on purchase and sale contained in the norms of Articles 406-444 of the Civil Code apply to delivery.

This is clearly stated in paragraph 5 of Article 406 of the Civil Code. This rule states that the provisions provided for in this paragraph shall apply to certain types of purchase and sale agreements (retail sale, supply of goods, energy supply, contracting, sale of an enterprise), unless otherwise provided for by the rules of this Code on contracts of these types.

Articles 293-295 of the Civil Code provide for general rules on liability for breach of an obligation, one of which is the collection of a penalty. According to Article 293 of the Civil Code, a penalty (fine, fine) is a monetary amount determined by law or contract, which the debtor is obliged to pay to the creditor in case of non-fulfillment or improper fulfillment of the obligation, in particular in case of late fulfillment.

Upon request for payment of a penalty, the creditor is not obliged to prove the damage caused to him. According to article 294, a penalty agreement must be made in writing, regardless of the form of the main obligation. Failure to comply with the written form will invalidate the penalty agreement.

According to Article 295 of the Civil Code, the creditor has the right to demand payment of a penalty determined by law (legal penalty), regardless of whether the obligation to pay it is provided for by agreement of the parties. It follows from the above-mentioned provisions of the law that the delivery contract may include a condition on the buyer's liability for late payment in the form of a penalty.

A legal penalty is subject to recovery at the request of the buyer (creditor) if the contract concluded between the parties does not provide for such a method of securing the obligation.

The payment procedure for the goods is provided for in the provision of Article 439 of the Civil Code. In accordance with paragraph 3 of this article, if the buyer does not pay for the goods transferred in accordance with the contract, the seller has the right to demand payment for the goods and payment of a penalty for using other people's money (Article 353 of this Code).

By the decision of the specialized interdistrict Economic Court of the East Kazakhstan region (No. 2-3788-15), the claims of Pizza Blues Firm LLP against IP Achilov D.U. for debt collection in the amount of 7,779,463 tenge, penalties in the amount of 895,748 tenge were partially satisfied, the debt amount was collected in full, and the penalty was collected in the amount of 100,000 tenge.

It follows from the content of this court decision that on 03/01/2011, the parties concluded a supply agreement No. 5-P (hereinafter referred to as Agreement No. 5–P), under the terms of which the defendant undertook to supply the plaintiff with vegetables in an assortment in the amount of 4,000,000 tenge, and the plaintiff accepted and paid their cost. On 11.10.2012, an additional agreement to Contract No. 5-P was signed between the parties, according to which the total debt of the defendant to the plaintiff as of 11.10.2012 amounts to 1,557,990 tenge, and a fine of 50% amounts to 778,995 tenge. The total amount of debt and fine is 2,336,985 tenge. On 03/01/2012, the parties concluded a supply agreement No. 14 (hereinafter referred to as Agreement No. 14), under the terms of which the defendant undertook to supply the plaintiff with vegetables in an assortment in the amount of 4,578,000 tenge, and the plaintiff accepted and paid their cost. On 11.10.2012, an additional agreement to Contract No. 14 was signed between the parties, according to which the total debt of the defendant to the plaintiff as of 11.10.2012 amounts to 4,578,000 tenge, and a fine of 50% amounts to 2,289,000 tenge.

The total amount of debt and fine is 6,867,000 tenge. At the same time, additional agreements stipulated that the defendant would carry out additional delivery of products for the amounts owed and the fine.

Thus, as of 11.10.2012, the defendant assumed obligations to supply the plaintiff with vegetables in the assortment for a total amount of 9,203,985 tenge. For the same amount, he signed a reconciliation report with the plaintiff. For the period 2013-2014, the defendant supplied the plaintiff with products in the amount of 1,424,522 tenge, which is confirmed by the reconciliation acts of mutual settlements signed by the parties as of 31.12.2013, 31.03.2014. In this regard, the debt decreased to 7,779,463 tenge.

Taking into account these circumstances, the claim regarding debt collection was fully satisfied by the court. According to paragraph 1 of Article 353 of the Civil Code, a penalty is payable for the misuse of other people's money as a result of non-fulfillment of a monetary obligation or delay in their payment, or their unjustified receipt or saving at the expense of another person.

The amount of the penalty is calculated based on the official refinancing rate of the National Bank of the Republic of Kazakhstan on the day of fulfillment of the monetary obligation or its corresponding part.

When collecting a debt in court, the court may satisfy the creditor's claim based on the official refinancing rate of the National Bank of the Republic of 7 Kazakhstan on the day of filing the claim or on the day of the decision, or on the day of the actual payment at the creditor's choice. These rules apply unless a different amount of the penalty is established by legislative acts or an agreement.

According to the calculation of the plaintiff, the amount of the penalty (legal penalty) for 701 days of delay amounted to 895,748 tenge. According to Article 297 of the Civil Code, if the penalty to be paid (fine, fine) is excessively large in comparison with the creditor's losses, the court has the right to reduce the penalty (fine, fine), taking into account the degree of fulfillment of the obligation by the debtor and the interests of the debtor and the creditor that deserve attention. The court considered that the amount of the penalty was excessively large, since the plaintiff had not collected the debt in court for a long time, thereby increasing its size.

It was also taken into account that the defendant's liability had been increased by penalties. Taking into account these circumstances of the case, as well as based on the provisions of the above-mentioned rules of law, the amount of the penalty was reduced by the court to 100,000 tenge.

It follows from the content of this court decision that on 03/01/2011, the parties concluded a supply agreement No. 5-P (hereinafter referred to as Agreement No. 5–P), under the terms of which the defendant undertook to supply the plaintiff with vegetables in an assortment in the amount of 4,000,000 tenge, and the plaintiff accepted and paid their cost. On 11.10.2012, an additional agreement to Contract No. 5-P was signed between the parties, according to which the total debt of the defendant to the plaintiff as of 11.10.2012 amounts to 1,557,990 tenge, and a fine of 50% amounts to 778,995 tenge. The total amount of debt and fine is 2,336,985 tenge. On 03/01/2012, the parties concluded a supply agreement No. 14 (hereinafter referred to as Agreement No. 14), under the terms of which the defendant undertook to supply the plaintiff with vegetables in an assortment in the amount of 4,578,000 tenge, and the plaintiff accepted and paid their cost. On 11.10.2012, an additional agreement to Contract No. 14 was signed between the parties, according to which the total debt of the defendant to the plaintiff as of 11.10.2012 amounts to 4,578,000 tenge, and a fine of 50% amounts to 2,289,000 tenge.

The total amount of debt and fine is 6,867,000 tenge. At the same time, additional agreements stipulated that the defendant would carry out additional delivery of products for the amounts owed and the fine.

Thus, as of 11.10.2012, the defendant assumed obligations to supply the plaintiff with vegetables in the assortment for a total amount of 9,203,985 tenge. For the same amount, he signed a reconciliation report with the plaintiff. For the period 2013-2014, the defendant supplied the plaintiff with products in the amount of 1,424,522 tenge, which is confirmed by the reconciliation acts of mutual settlements signed by the parties as of 31.12.2013, 31.03.2014. In this regard, the debt decreased to 7,779,463 tenge.

Taking into account these circumstances, the claim regarding debt collection was fully satisfied by the court. According to paragraph 1 of Article 353 of the Civil Code, a penalty is payable for the misuse of other people's money as a result of non-fulfillment of a monetary obligation or delay in their payment, or their unjustified receipt or saving at the expense of another person.

The amount of the penalty is calculated based on the official refinancing rate of the National Bank of the Republic of Kazakhstan on the day of fulfillment of the monetary obligation or its corresponding part.

When collecting a debt in court, the court may satisfy the creditor's claim based on the official refinancing rate of the National Bank of the Republic of 7 Kazakhstan on the day of filing the claim or on the day of the decision, or on the day of the actual payment at the creditor's choice. These rules apply unless a different amount of the penalty is established by legislative acts or an agreement.

According to the calculation of the plaintiff, the amount of the penalty (legal penalty) for 701 days of delay amounted to 895,748 tenge. According to Article 297 of the Civil Code, if the penalty to be paid (fine, fine) is excessively large in comparison with the creditor's losses, the court has the right to reduce the penalty (fine, fine), taking into account the degree of fulfillment of the obligation by the debtor and the interests of the debtor and the creditor that deserve attention. The court considered that the amount of the penalty was excessively large, since the plaintiff had not collected the debt in court for a long time, thereby increasing its size.

It was also taken into account that the defendant's liability had been increased by penalties. Taking into account these circumstances of the case, as well as based on the provisions of the above-mentioned rules of law, the amount of the penalty was reduced by the court to 100,000 tenge.

The specialized interdistrict Economic Court of the East Kazakhstan region has satisfied the claim of SemeyOtdelStroy LLP against Firm Asia LLP (No.2-4870-15) for debt collection in the amount of 550,400 tenge for the supply of ready-mixed concrete of various brands.

A penalty in the amount of 100,000 tenge was also collected from the amount accrued in accordance with clause 5.1 of the agreement for late payment in the amount of 0.1% of the amount owed for each day of delay in the amount of 153,562 tenge. In reducing the amount of the penalty, the court was guided by Articles 297 and 364 of the Civil Code, which provide for the procedure for reducing the amount of the penalty.

Advance payment for the goods, as well as the procedure for refunding such an amount are provided for in Article 440 of the Civil Code. In accordance with paragraph 2 of Article 440 of the Civil Code, in cases where the seller, who has received the amount of advance payment, does not fulfill his obligations to transfer the goods within the prescribed period (Article 409 of this Code), the buyer has the right to demand the transfer of the paid goods or the refund of the amount of advance payment for goods not transferred by the seller.

SemeyVector Asia LLP filed a lawsuit against Transoil Trading LLC for debt collection in the amount of 5,850 euros, indicating that under the contract the defendant undertook to supply soybeans in the amount of 5,000 tons in separate batches. The prepayment for the product in the amount of 5850 euros has been made, but the product has not been delivered, as well as the above prepayment has not been returned. By the decision of the specialized interdistrict economic court of the East Kazakhstan region, the claim was satisfied, the prepayment amount was recovered from the defendant in favor of the plaintiff in equivalent tenge, since the case materials proved that the currency of the contract was determined in euros, the cost was 1,500,000 euros.

The parties also determined that 30% 8 of the invoice amount will be paid within 3 business days before shipment of the goods. In fact, the prepayment was made, but the product was not delivered. According to subparagraph 7.5 of the Agreement, the parties agreed that in case of non-delivery and non-delivery of the goods on time, the seller must, within 30 calendar days from the date of the delay in delivery, refund the amount of the advance payment in full, or refund the amount for which the goods were not delivered.

In satisfying the claim, the court referred to Article 272 of the Civil Code, whereas the procedure for refunding the amount of advance payment, as indicated above, is regulated by Chapter 25 of the special part of the Civil Code. According to paragraph 4 of Article 440 of the Civil Code, in cases where the seller does not fulfill the obligation to transfer the pre-paid goods and nothing else is provided for in the purchase agreement, a penalty is payable for the amount of the advance payment in accordance with Article 353 of this Code from the day when the transfer of the goods was to be made under the contract until the day of the transfer of the goods to the buyer or refund to him the amount previously paid by him.

The contract may provide for the obligation of the seller to pay a penalty for the amount of the advance payment from the date of receipt of this amount. In this case, the buyer did not claim a penalty, so the decision was made within the limits of the claimed claim, and the amount of advance payment for the goods was collected.

When considering cases of this category, the norms are subject to application.:

The Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code);

The Law of the Republic of Kazakhstan "On Public Procurement" (hereinafter – the Law on Public Procurement);

regulatory rulings of the Supreme Court of the Republic of Kazakhstan:

No. 21 of December 13, 2001 "On the preparation of civil cases for trial";

No. 2 of March 20, 2003 "On the application by courts of certain norms of civil procedure legislation";

No. 5 of July 11, 2003 "On the court decision",

No. 5 dated December 14, 2012 "On the application of legislation on public procurement by Courts".

Attention!

      The Law and Law Law Firm draws your attention to the fact that this document is basic and does not always meet the requirements of a specific situation. Our lawyers are ready to assist you in drafting any legal document that suits your situation.

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

 Constitution Law Code Standard Decree Order Decision Resolution Lawyer Almaty Lawyer Legal service Legal advice Civil Criminal Administrative cases Disputes Defense Arbitration Law Company Kazakhstan Law Firm Court Cases