22 November 2016 the Supreme Court of the Russian Federation (hereinafter – the “Supreme Court”) adopted Resolution “On some issues due to application of the general provisions of the Civil code of the Russian Federation on obligations and their performance”1 (hereinafter – the “Resolution”). The Resolution is focused on ensuring the uniformity of application practice of the general provisions of the Civil Code of the Russian Federation (hereinafter – the “Civil Code”) by courts.
The principal approaches to the usage of the general provisions of the Civil Code provided by the Resolution are as set forth below:
As a general rule, a creditor, who shall transfer the performance granted by the debtor, is not liable to other creditors for non-performance or improper performance of the obligation by the debtor. However, such creditor undertakes to inform on debtor’s delay, to collect all necessary evidence and also transfer the rights under the transaction with the debtor upon creditor’s request. If the debtor has performed the obligation, the creditor will be responsible to other creditors while transfer of the performed for the loss, shortage or damage of property received from the debtor. The expenses due to transfer of the performed to other creditors, are born by the creditor, who shall transfer the debtor’s performance.
The right on Unilateral refusal can be provided to any party to corporate agreement.
The Supreme Court also points out, that if the right on Unilateral refusal is not stipulated by law or contract, Unilateral refusal, made by one of the parties to a contract, does not entail legal consequences it was supposed to trigger. Legal consequences do not occur in case of violation of the right on Unilateral refusal implementation breach.
When executing the right on Unilateral refusal a party shall act reasonably and in good faith, taking into account rights and lawful interests of another party (clause 3 art. 307, clause 2 art. 450.1 of the Civil Code). Violation of this duty can entail denial of protection of the right on Unilateral refusal, including possibility of recognition the term granting such right as void.
Execution of the right on Unilateral refusal entails termination of the obligation as a result of contract termination. If for the execution of this right a fee was set, along with the extinguishment of the original obligation, an obligation to pay the prescribed sum of money is arisen.
In case of inadequacy of the fee for executing the right on Unilateral refusal and adverse effects thereto – the court is entitled to withhold the collection of such fee fully or in part.
In the Resolution the Supreme court confirmed the possibility of simultaneous application of the provisions on lawful use of funds interests’ accrual and also usage of art. 395 of the Civil Code in case of debtor’s delay to pay interests stipulated as a fee for the use of borrowed funds.
The Supreme Court pinpoints, that an obligation cannot be considered as secured, if it is secured only by the payment of a penalty.
In the event of the performance impossibility of one of the alternative duties due to a debtor’s fault, when the creditor is entitled to choose – the creditor is entitled at his own discretion to demand either damages caused by impossibility of performance or execution of another act remaining possible. In case of the performance impossibility of one of the alternative duties due to a creditor’s fault, when the debtor is entitled to choose – the debtor is released from the obligation performance.
Unless otherwise provided by law or contract, a creditor shall accept optional performance from a debtor even in case if the debtor delayed performance of the principal obligation.
Before full satisfaction will be received the creditor is entitled to demand initiation of bankruptcy proceedings of each joint debtor (for instance, principal debtor and guarantor) on the basis of the total amount of indebtedness.
Enforcement proceedings on joint collection in favour of one judgment creditor shall be merged into one consolidated enforcement proceedings, despite the fact that the creditor’s demands to his debtors are satisfied by different court rulings.
Satisfaction of creditor’s demand on joint collection entails termination of the enforcement proceedings (subclause 2 clause 1 art. 47 of the Federal Law “On enforcement proceeding”)2.
Date of monetary obligation performance (at noncash transactions) will be the moment of crediting funds to a correspondent account of the creditor’s bank. If the debtor and the creditor on this obligation are serviced by the same bank – from the moment of crediting funds to the creditor’s account in such bank.
The Resolution does not provide, that the parties can agree on a different date of monetary obligation performance (although, the Resolution does not prohibit such agreements). We assume, that this issue will be resolved given the provisions of the Resolution of Supreme Commercial Court of the Russian Federation No. 16 “On freedom of contract and its limits”. Said resolution essentially outlines discretionary nature of contract law rules.
Before the Resolution adoption, the case law provided, that the date of monetary obligation performance coincides with the moment of creditting funds to the account regardless of whether the creditor’s bank is different from the debtor’s bank3.
Monetary resources and securities, transferred to the notary deposit, are considered belonging to the creditor from the moment of receipt of said property from the deposit. The notary cannot return the property from the deposit to the debtor if the application of the property receipt is received from the creditor. In case of interest accrual in respect of deposited property, the right to receive such interest belongs to the recipient of the property.
The Supreme Court stipulates, that as a general rule counter performance is recognized a performance in any relations, if the obligations performance by one party is predetermined by the performance of another party obligations, regardless of order of fulfillment priority for the obligations provided by the parties. Further to the above conclusion, performance can be recognized as the counter performance almost in any bilateral contract.
The Supreme Court stresses, that despite the rule on bearing performance expenses by the debtor, expenses on the acceptance of the performance are born by the creditor. As an example of creditor’s expenses the Resolution sets expenses on mobile communications, sending of documents and using special software. Meanwhile additional expenses connected with the performance acceptance cannot be allocated on the creditor, if they were caused by the debtor’s acts.
Hence, the Resolution compiles previous case law conclusions and introduces position on the relatively new institutions of the law such as lawful interests, Unilateral refusal, creditors’ agreement on the order of claim settlement. It is worth mentioning that in the analyzed Resolution the Supreme Court:
1The Resolution of the Plenum of the Supreme Court of the Russian Federation dated 22 November 2016 No. 54 “On some questions of application of the general provisions on obligations and their performance of the Civil code of the Russian Federation”
2Federal Law dated 2 October 2007 No. 229-FZ “On enforcement proceeding”
3Ruling of the Federal Commercial Court for Moscow district dated 15.03.2013 in re No. А41-30901/12; Ruling of the Federal Commercial Court for Northwest district dated 16.01.2012 in re No. А66-3748/2011
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