Russian business law: the essentials. Отсутствует

circumstances shall be recognized as substantial when they have changed the contract to the extent that the contract would not have been concluded, or it would have been concluded on significantly different terms, if the parties could have reasonably foreseen these changes;

      – or in other cases provided by law or contract.

      Before applying to the court, the party intending to amend or terminate the contract shall comply with the rules of pre-trial procedures, which includes the submission of a proposal to the counterparty to amend or terminate the contract. The court shall consider the request to amend or terminate the contract, if the counterparty rejected such a proposal, or the response has not been received in due course. Non-compliance with the rules of pre-trial procedures shall result in leaving the claim without consideration (Article 148 of the Arbitration Procedural Code of the RF). This, however, does not deprive the claimant from the right to apply again after complying with those rules.

      1.2.2.2. Unilateral refusal to perform the contract

      The law or the contract may allow the parties to unilaterally refuse to perform the contract (or to exercise relevant rights). In this case, the party may inform the counterparty of its refusal to perform the contract (Article 450.1 of the CC of the RF). The contract is terminated from the moment such notice has been received, unless otherwise provided by law or stipulated in the contract. From that moment forward, the contract shall be deemed to be terminated or amended.

      1.2.2.3. The consequences of contract termination

      Upon termination of a contract, the obligations of the parties shall be terminated unless otherwise provided by law, or implied from the nature of the obligations (Article 453 of the CC of the RF). The parties do not have the right to demand the return of what was performed by them under an obligation, before the time of amendment or termination of a contract, unless otherwise provided by law, or agreed by the parties. In a situation where before the termination of the contract, one of the parties has performed its obligations but the counterparty has not, the rules of unjust enrichment apply to the relationship.

      The Opinion of the Plenum of the Supreme Court of Arbitration of the RF, ruled on the following stipulations, in clause 5 of Resolution No. 35, dated June 6, 2014.[52] According to this ruling, upon the termination of a contract, a party has the right to demand the return of property in the following circumstances:

      – the party has transferred some property to the counterparty’s property as a performance of the contract;

      – the counterparty has not performed its obligations properly or at all;

      – in this respect, the court has found the parties to be in violation of the equality of their performance.

      Moreover, all of the encumbrances (e.g. mortgage) of the returned property shall persist, which were existing at the time of being in the possession of the counterparty.

      1.2.3. Formal Requirements to the Contract

      According to Article 158 and Article 434 of the CC of the RF, all transactions, and particularly contracts, may be concluded in oral or written forms (simple or notarial). Contracts, in which at least one party is a legal person, shall be concluded in written form (Article 161 of CC of the RF), with the exception of the contracts which are performed at the moment of conclusion, or those directed at the performance of a written contract. These contracts may be concluded orally (Article 159 of CC of the RF).

      1.2.3.1. Simple written form of a contract

      A written contract may be concluded by the means of drawing up a document or exchanging several documents (letters, electronic communication, etc.). In the latter case, the channels of communication must allow for the exact determination that the documents come from the party of the contract. The written form of the contract is also deemed to be observed if the party receiving the offer has taken steps towards the performance of the contract.

      1.2.3.2. Contracts certified by notary

      For a range of contracts the legislation sets forth a requirement for notarial certification. Such a requirement, for example, exists for transactions related to the alienation of a share, or a portion of a share, in the charter capital of a limited liability company. The requirement of notarial certification of contracts may also be stipulated by the agreement of the parties. Transactions shall be certified by the notary, or an official having the right to take such notarial action. The procedure of notarial certification is set forth in theFundamental Principles of Legislation on Notariat dated February 11, 2003 No. 4462-.1.

      If the notarial certification of a transaction is required, the nonobservance thereof results in the transaction being void. If one of the parties to the transaction, however, fully or partially performed the contract, and the counterparty avoided notarial certification, the court may, upon the party’s request, declare the transaction as valid (Article 165 of the CC of RF).

      1.2.4. Security for the Performance of Contracts

      The main methods of securing the performance of obligations are set forth in the CC of the RF. Those methods include penalty, pledge, retention of property, surety, guarantee, earnest money, and security deposit. This list is non-exhaustive, and the parties have the right to stipulate in the contract other means of securing the performance of obligations.

      1.2.4.1. Penalty (Article 330–333 of the CC of the RF)

      A penalty is a monetary sum, determined by law or contract, that a debtor must pay to the creditor, in case of nonperformance or improper performance of an obligation.

      If a penalty subject to payment is clearly disproportionate to the consequences of the violation of an obligation, the court has the right to reduce the penalty. If the debtor is an entrepreneur, the court may reduce the amount of the penalty, only upon that person’s request. Furthermore, such a debtor must prove that the amount of the penalty stipulated in the contract may result in an unfair advantage to the creditor.

      The creditor is entitled to claim damages for the portion not covered by the penalty (Article 394 of CC of RF). The law or the contract may identify the following scenarios:

      – when only the penalty may be claimed and not the damages;

      – when in addition to the penalty the damages may be claimed in the full amount;

      – when the creditor may choose to claim either the penalty or the damages.

      1.2.4.2. Pledge (Articles 334–358.18 of CC of the RF)

      In the event of debtor’s nonperformance, or the improper performance of its obligations, the creditor (pledgee) has the right to receive satisfaction from the value of the pledged property, with priority over other creditors of the pledger.

      In cases defined by law, and according to the procedure prescribed therein, the pledgee may have his/her claim satisfied by means of transferring the pledged property to the pledgee. A pledge arises by virtue of a contract between the pledger and the pledgee, or on the basis of law.

      In the event that the rights on the pledged property have been transferred by the pledger to a third party, as a general rule, the pledge remains valid, with the exception of the following cases:

      – when the pledged property has been acquired for compensation by a person who did not know and could not have known that the property was the subject of a pledge (No. 2 of Clause 1 of Article 352 of the CC of the RF);

      – of the alienation of goods in commerce being the subject of a pledge (Clause 2 of Article 357of the CC of the RF).

      The CC of the RF contains general provisions on pledges, and provisions regulating specific types of pledge (pledge of goods in commerce, pledge of securities, pledge of the rights of the shareholders of legal persons, etc.). A mortgage (pledge of real estate) is regulated by a special federal law.[53]

      1.2.4.3. Retention of property (Article 359–360 of CC of the RF)

      In case of nonperformance

52

Resolution No. 35 of the Plenum of the Supreme Court of Arbitration of the RF, dated June 6, 2014, "On Consequences of the Termination of a Contract," // “ConsultantPlus” Legal Directory System

53

Federal Law No. 102-FZ “On Mortgage (pledge of real estate),” dated July 16, 1998, // “ConsultantPlus” Legal Directory System