What is the liability for failure to fulfill obligations under the contract?

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Published: 06.11.2018

Reading time: 8 min

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A contract is an agreement between two or more people associated with the emergence, change, and termination of rights and obligations in civil law. The essence of the contract is the conditions under which the agreement comes into force.

Legal rules governing the terms of the contract
Liability for failure to comply with the provisions of the contract
Steps to take if the terms of the contract are not met

There are three types of legal terms:

Essential – the most important, that is, those that are indispensable for one party, and for the other are sufficient to conclude an agreement.
Ordinary – provisions that are provided for by laws and legal acts. They do not require approval; they are initially prescribed in legislation.
Random – included at the discretion of the parties (usually supplementing or changing the conditions).

If one of the requirements is not agreed upon, the contract is not concluded.

The document must contain:

Provisions on the subject of the agreement.
Provisions required by this agreement.
Provisions that are significant in legislation.
Provisions that are essential for one of the parties to the contract.

When concluding an agreement with a counterparty, additional documents may be required:

Copies of passport.
Copies of constituent documents.
Documents containing information about the organization.
Bank details.
Documents containing information including the postal address of the enterprise , telephone number.
Draft agreement in electronic form.
Copies of state registration certificate , etc.

According to Article 432 of the Civil Code, these requirements are essential. The party that suffers losses if the requirements are not met has the right to compensation for material and financial losses.

What is considered a failure to fulfill obligations under a contract under the Civil Code of the Russian Federation?

The concept of obligation is specified in Art. 307 Civil Code of the Russian Federation. This is an agreement between two or more participants, by virtue of which one of them must perform various actions in favor of the other, or, conversely, not perform them. The nature of actions (inaction) depends on the subject of the agreement. For example, under a sales contract, the seller must transfer the goods to the buyer, and under a service agreement, the contractor must provide services to the customer.

In any obligation there are at least two parties - the debtor and the creditor, which directly follows from Art. 308 Civil Code of the Russian Federation. Most of the obligations can be characterized as bilateral, that is, both parties have obligations (under the same sales contract, the seller transfers the goods, and the buyer transfers money for it, i.e. both are obligated).

Civil law presupposes that the parties must fulfill their obligations in good faith, strictly follow the terms of the contracts, and fulfill all the requirements stipulated by the agreement. This follows from the provisions of Art. 307 Civil Code of the Russian Federation.

For failure to fulfill obligations under the contract, the creditor has the right to demand performance in kind from the debtor, in court (Article 308.3 of the Civil Code of the Russian Federation). The existence of such a right follows from the principle of inadmissibility of unfair behavior in contractual relations. If for some reason performance in kind is impossible, then the creditor has the right to receive monetary compensation. In addition, by virtue of paragraph 2 of Art. 308.3 of the Civil Code of the Russian Federation, the debtor is held liable for violation of an obligation. Details about the measures of such liability are indicated in Chapter 25 of the Civil Code of the Russian Federation.

conclusions

If you do not terminate the contract according to the law, the customer will go to court and recover damages from you.
There are three ways to terminate a contract: unilaterally, by agreement of the parties and through the court.
The ability to terminate the contract unilaterally is the best situation. Notify the counterparty in writing, return the unearned money and the unfinished result - and the transaction is in the past.
The agreement between the parties implies that both parties agree to end the relationship. If the customer is against it, the work will have to be completed.
The opportunity to terminate the contract through the court arises if the customer significantly violated the terms of the contract or the apocalypse prevented the fulfillment of obligations.
In all contracts with clients, provide for your right to unilateral refusal. Write down specific reasons from your practice.

The article is current as of 01/28/2021

What is improper performance and how does it differ from non-performance?

Any obligation assumed by a party to a transaction must be fulfilled in accordance with the requirements of the law or agreement, in accordance with the requirements of Art. 309 of the Civil Code of the Russian Federation. Situations are possible when a party to a contract partially fulfills its obligations, but allows partial failure to fulfill obligations under the contract. This behavior can be characterized as partial or improper fulfillment of the terms of the transaction.

Let's give an example. A contract has been concluded. The contractor fulfills all the terms of the contract, builds a house for the customer, but does not meet the deadlines. This is improper execution. In this case, the creditor incurs losses, compensation for which he has the right to demand in full.

What are the consequences of failure to fulfill obligations under the contract provided by law?

As we indicated above, failure to comply with the terms of the transaction, or partial disregard of the requirements of the contract, entails losses for the injured party. As a general rule, it is possible to recover damages in full. The damages include two elements, as provided for in Art. 15 Civil Code of the Russian Federation. This is direct damage and lost profits.

Direct damage

Direct damage should be understood as expenses incurred by the injured party in connection with the failure to fulfill obligations under the contract by the counterparty.

Let's take the same example of building a house. The contractor does not meet deadlines, and therefore the customer cannot accept the project on time. This deprives him of the opportunity to begin using the building in a timely manner, in accordance with the agreements reached. As a result, he incurs losses, for example, spends on renting other housing.

Another example is a lease agreement, according to which the tenant must carry out routine repairs of the real estate transferred to him. As a result of failure to fulfill such an obligation, the property loses its properties and requires a significant investment of funds on the part of the lessor (owner of the property). Accordingly, such costs are recognized as losses.

Lost profit

Such losses are not possible expenses of the party to the transaction whose rights are violated by non-fulfillment of the contract, but lost income. The creditor would be able to receive them if the debtor complied with all the terms of the agreement.

The problem with collecting this type of damage lies in the fact that the amount of lost benefits cannot be determined. In this regard, the legislator has developed a mechanism for calculating such losses (clause 5 of Article 393 of the Civil Code of the Russian Federation).

An example of the calculation is given in paragraph 3 of the Resolution of the Plenum of the Armed Forces of the Russian Federation dated March 24, 2016 No. 7. It is indicated that in the case where, under a contract agreement, according to which the contractor was obliged to repair the customer’s store, but did not do it on time, the customer suffered losses. Their size can be determined by analyzing the customer's profit for a certain period. The customer must prove the fact of receiving a profit in a certain amount in a certain period, as well as the fact that the object (store) was supposed to be used for business purposes.

Penalty

In addition to those mentioned above and named in Art. 15 of the Civil Code of the Russian Federation for losses, the law provides for other types of liability. One of them is a penalty. The legislator mentions this type of responsibility in Art. 330 Civil Code of the Russian Federation. Thus, a penalty is a sum of money that must be paid to the creditor from the debtor if the obligations are not fulfilled as specified in the agreement or are not fulfilled at all.

The legislator provides the ratio of losses and penalties in Art. 394 Civil Code of the Russian Federation. According to this rule, if the contract or law provides for the payment of a penalty, losses are compensated in the part that is not covered by the penalty. This is a general rule.

There are also cases (if they are provided for by law or contract) when:

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It is possible to recover only penalties, but not losses.
It is possible to recover damages and penalties at the same time.
When the creditor himself decides what to collect - losses or penalties.

"Contractual" liability

The liability that is provided for in the contract to protect the interests of the company in case the counterparty fails to fulfill its obligations is called civil liability (Chapter 25 of the Civil Code of the Russian Federation). It may also be provided for by law.

For violation of contractual obligations, the counterparty can be required to compensate for losses, pay a penalty or interest for the use of someone else's funds.

Compensation for losses

The essence of compensation for damages is that the offender pays money or transfers some other property to the victim. As a result, at the expense of his property, the violator returns the property status of the victim to the state it was before the violation.

Losses are understood as property losses that a party has incurred due to the counterparty’s violation of its obligations under the contract. These include, in particular:

destruction of property;
damage, breakdown of property, deterioration of its appearance, quality, decrease in value;
expenses that the victim incurs to restore damaged property;
expenses that the victim will incur in the future to restore the violated right or property (for example, when purchasing new equipment, if repairing the damaged equipment is impossible or impractical), etc.

These losses reduce the victim's assets. These are called actual damages or direct losses.

If the counterparty does not fulfill its obligations, the other party to the contract will not receive what it expected. The failure to increase the property of the injured party is called lost profits.

attention

When legal disputes arise, it is not always possible to contact a highly qualified specialist. In this case, the new berator “We are going to court” will become an indispensable assistant. It contains answers to questions related to the pre-trial, judicial and enforcement processes, and provides recommendations on how to bring an unscrupulous counterparty to various types of liability. Particular attention is paid to the analysis of arbitration practice.

Show proof!

To receive compensation for losses incurred, you need to prove not only their existence, but also their size. This is the position of the courts (resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation and the Plenum of the Supreme Arbitration Court of the Russian Federation dated July 1, 1996 No. 6/8).

To support your claims, you must provide evidence and a reasonable estimate of the costs that have already been incurred or that are yet to be incurred.

Such evidence may be:

an agreement defining the amount of liability for breach of obligation;
act of assessing damage to property (goods, equipment);
cost estimate for eliminating deficiencies in goods, works, services, etc.

When demanding to recover lost income, it is necessary to prove that there was a real opportunity to receive it. Keep in mind that the court will also require written evidence of the possibility of making a profit. These may be agreements concluded with other companies or entrepreneurs, letters addressed to you with a proposal to conclude such agreements, protocols of intent, etc.

If you demand compensation for lost profits, the court, in turn, will require you to show what the amount of your claims consists of. At the same time, he will assess the amount of lost profits based on the principle of “reasonable costs”. For example, the amount of lost profits that the buyer has the right to demand from a supplier who has not fulfilled its obligations to supply goods should be calculated as follows: the price at which the buyer was going to sell the goods, minus the costs of sales.

In addition, you will need to prove that the future costs you are referring to are caused by a breach of a specific obligation. That is, show the court a causal connection between the violation and the costs that lie ahead in the future, as well as the amount of these costs. If you cannot convincingly prove the existence of such a connection, the court will refuse compensation for lost profits (Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation of September 24, 1996 No. 1611/96).

Collection of penalties

Collection of penalties is the most common method of compensation for losses. It has a number of advantages. Firstly, the amount of liability for violation is known already at the time of conclusion of the contract. Secondly, to collect a penalty, only the fact of a violation is sufficient (it is not necessary to prove the violation and the extent of its consequences, as in the case of compensation for losses). Thirdly, the parties themselves formulate the condition of the penalty (amount, relationship with losses, calculation procedure).

Payment of the penalty does not relieve the parties from fulfilling their obligations under the contract. The penalty can be established by agreement (contractual penalty), and also enshrined in a regulatory act (legal penalty).

The parties establish the contractual penalty by agreement and determine its size, calculation procedure, and relationship with losses. They have the right to either include the penalty in the contract itself or sign a separate agreement.

it is important

The parties have the right to determine the amount of the penalty at their own discretion. It must be reasonable and consistent with the consequences of breach of contract. Thus, a penalty in the amount of 10 percent of the debt amount for each day of delay in payment for goods, work or services is 3600 percent per annum, which exceeds all reasonable limits. In this case, the court will most likely reduce its size.

Interest on late payment

The most common type of violation of contractual obligations is the illegal use of other people's money. This happens if the party:

does not return money after the deadline for its return has arrived;
refuses to pay for goods delivered, work or services performed on time;
Having received an advance payment for goods, services or work, for a long time does not fulfill its obligations to supply goods, perform work or services.

If your counterparty has committed such a violation, you have the right to demand payment of interest on the entire amount of money that he illegally used.

To calculate the amount of interest, the bank interest rate (refinancing rate) is used.

As a rule, to calculate interest, they use the rate that was applied at the moment when the debtor party was obliged to fulfill its obligation - to return the money or pay for goods, services, or work.

If you have not agreed on the amount of interest in the contract, then the court itself can determine which discount rate to apply: the one in effect on the day the claim was filed or on the day the decision was made.

R. Avalyan , editor-in-chief of the berator “We are going to court”

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The guilt of the debtor as the basis for his liability

Liability for failure to fulfill obligations under the contract is possible only for guilty actions. At the same time, it should be noted that guilt is recognized as proven initially, that is, it is assumed (Article 401 of the Civil Code of the Russian Federation). The debtor must prove that the violation of the terms of the agreement was not his fault, and if he cannot prove this, he will be held liable under the law.

If the debtor committed violations in the course of his business activities, then he can be released from liability if he can prove that the violation was committed due to any circumstances that he could not overcome (this could be wars, force majeure, disasters, etc.). In paragraph 3 of Art. 401 of the Civil Code of the Russian Federation expressly states that such circumstances are not the lack of money to fulfill the contract or the shortage of goods on the market.

Unilateral divorce through court

Divorce through the court unilaterally occurs on a general basis - by filing a statement of claim for divorce (Article 21 of the RF IC).

The procedure includes several stages:

Collection of documents.
Formation of a statement of claim by the initiator.
Appeal and filing of papers in court.
Appearance at the court hearing.
Obtaining a decision from a judicial authority.
Obtaining a certificate that officially confirms the divorce.
Submission of the claim by the interested party at the place of registration of the defendant.

If the couple is registered and lives at the same address, then no problems will arise. However, if a woman lives, for example, in Chita, and her husband lives in Sochi, then she will have to travel far across the entire Russian Federation to send the papers.

A woman has the right to send papers to her place of registration if there are serious reasons for this. These usually include poor health or child care.

Apply to the magistrate's court: in the absence of disputes about children and property.

Contact a city or district court: if spouses want to divide acquired property worth more than 50,000 rubles, and in case of disagreements related to children.

Violation of the supply agreement

The supply contract is characterized by all types of responsibilities listed above. However, the supply agreement has specific features that need to be mentioned. So, according to the requirements of Art. 523 of the Civil Code of the Russian Federation, one of the parties to a transaction may terminate its execution on its own initiative, without the consent of the other party.

This is possible if the other party significantly violates the terms of the agreement.

On the part of the supplier, the following is considered a significant violation:

Violation of the delivery deadline (two or more times).
Delivery of low-quality products if the defects cannot be eliminated quickly and within a timeframe that suits the buyer.

If, due to these violations, the buyer had to buy goods from another supplier, then the person who committed the violation must compensate the difference in cost (if the goods were purchased at a higher price).

On the part of the buyer, gross violations are:

Violations of payment deadlines (two or more times).
Failure to accept properly delivered goods.

In such situations, the supplier has the right to receive the difference between the amount promised by the buyer and the amount he received from another person (since he was forced to sell the goods to others cheaper).

Thus, failure to fulfill obligations under the supply contract entails additional consequences for the violating parties.

Violation of the service agreement

Additional types of liability are provided for in case of failure to fulfill obligations under the service agreement. They are spelled out in Art. 723, 783 Civil Code of the Russian Federation.

If the contractor has provided poor-quality services, the customer has the right to demand:

Correct deficiencies.
Reduce price.
Request services from another provider and demand reimbursement of expenses.

If the above requirements are not met, then the customer may not pay for the service and receive compensation for losses in accordance with Art. 15 Civil Code of the Russian Federation.

Liability for failure to comply with the provisions of the contract

The standard measure of liability is compensation for losses (according to Chapter 25 of the Civil Code). The person who fails to fulfill the obligation must compensate for the loss. A loss is damage caused to a person by the unlawful actions of another person, or lost profit (in accordance with Article 15 of the Civil Code).

The next form of liability is a penalty - that is, a fine that is paid if the participant has not fulfilled the obligation or is late in fulfilling the contract.

Articles 309 and 310 of the Civil Code take into account that obligations between the parties must be fulfilled in accordance with laws, regulations, and otherwise in accordance with other requirements.

Prosecution is possible if there is a fact:

Failure to fulfill monetary obligations.
Evasion of refunds.
Delays in fulfillment of obligations.

If the contract specifies the amount of the penalty, it is returned in full. If losses exceed the amount of the penalty, then payment is made based on the established fine. Compensation for damage can be made voluntarily or by court decision. To prove the expenses incurred, it is necessary to provide a contract, statements, checks, payment documents that indicate the expenses incurred.

The guilty party is required to compensate for losses, pay fines and penalties, and accrue interest if the obligations were in cash. If the amount does not cover the loss, the injured party may demand reimbursement of the entire amount of expenses incurred.

Losses are determined by the price that existed in the place where the obligation must be fulfilled on the day the participant voluntarily satisfied the requirements under the contract. If the demand was not fulfilled - on the day the claim was filed.

In addition, the conditions for liability are identified:

The wrongfulness of the behavior and guilt of the party who did not fulfill the terms of the contract.
The presence of a loss in the property sector.
A causal relationship between a party’s unlawful behavior and negative property consequences.