This article will discuss the issue of compensation for losses by citizens and legal entities, making up for the damage caused to them, which is a common issue in modern society. Losses for any person or organization can arise completely unexpectedly.
Our civil lawyers are ready to deal with damages and compensate for all losses from the actions of unscrupulous members of society; our civil lawyers have extensive experience and practice in this area.
Procedure for compensation of losses
To compensate for losses caused, it is necessary to determine the following aspects:
- fact of damage . This may be a violation of contractual obligations, causing harm to health, material values, etc.
- a causal relationship between the damage caused and the actions (or inaction) of the person from whom compensation for losses will be required.
- amount of damages . The amount of losses incurred is determined on the basis of documented expenses (for example, documents on treatment or repairs). If the damage has already been caused, but in fact the costs of restoring the violated right have not yet been incurred, then you can justify the required amount with estimate documentation or a concluded agreement with the institution with a price list.
IMPORTANT : lost profits are also included in compensation for damages, but it is more difficult to justify the need for recovery and the amount of expected but not received income. It is necessary to provide evidence of the reality of obtaining benefits if the right had not been violated.
After determining the relevant facts and collecting all the documents, it is necessary to file a claim against the tortfeasor. An attempt to resolve a dispute pre-trial always plays a positive role in legal proceedings.
If we do not receive a response or the claim is not satisfied, we will file a statement of claim in court.
Types of damages and methods of proving them
Losses can be direct and indirect, nominal and real, material and moral (moral damage). To hold a person liable for damages, it is necessary to prove:
- existence of losses and their size;
- unlawful behavior causing harm;
- the causal connection between the illegality of behavior and the losses incurred (No. A40-49046/11).
“The presence of this or that element is an evaluative concept. This remains a major problem. When considering the issue of recovery of damages, the court may take into account the degree of foreseeability of losses for the defendant, the reasonableness of the measures taken by the guilty party to prevent losses, the behavior of the plaintiff himself, which contributed or did not prevent the infliction of losses, and similar subjective circumstances,” says the senior lawyer, Head of the Bankruptcy Department of the Law Firm "Consult" Sorokin and Partners Irina Zorina.
Before calculating the amount of damages, it is necessary to ensure that there is a supporting evidence base. “Reliable evidence will be primary documentation that substantiates the initial data. The courts are wary of other documentation and can only accept it in aggregate,” says Elena Dmitrieva, lawyer at the Law Firm Nadmitov, Ivanov and Partners. For example, the reconciliation act itself does not prove the implementation of a business transaction, since it is not a primary accounting document, but it can be accepted together with other documentation containing information about the debtor’s debt (No. Ф05-11573/2019).
Losses are also divided into actual damage and lost profits. Real damage is the expenses that a person has incurred or will have to incur to restore his violated rights, loss or damage to his property. Lost profits are lost income that this person would have received under normal conditions of civil transactions if his right had not been violated (Article 15 of the Civil Code).
Documentary evidence is sufficient to prove actual damage. For example, a check for repairs. “It is more difficult to prove the amount of lost profits, since lost income is hypothetical. When determining the amount of lost profits, the courts take into account the measures taken by the person to obtain it, and the preparations made for this purpose,” said Elena Rybalchenko, a lawyer at the St. Petersburg corporate practice of Pepelyaev Group. The claimant of lost profits must prove that the possibility of receiving income actually existed, but only the actions of the defendant became an obstacle to this (No. 305-ES16-18600, No. A56-39362/2017, No. A56-8167/2019). “There is a practice of establishing the amount of lost profits by ordering a forensic examination. It is advisable to use an examination not only to confirm the amount of losses, but also the cause-and-effect relationship between the losses and the actions of the defendant,” says Anton Tomilin, head of the bankruptcy practice of Mitra LLC.
Limitations on Damages
Guaranteed freedom of contract allows citizens to enter into contracts on any terms, as long as these terms do not contradict the law. Thus, limitation of damages is possible either by the terms of the contract or by the law itself.
Certain branches of law limit the amount of liability for damage. For example, compensation for losses by an employee should not exceed his average monthly earnings. Even if the contract specifies a different amount of compensation for damages, the mandatory rule of law will apply.
Also, the amount of damages may be specified in the contract itself. For example, damages caused are subject to compensation, but not more than 10% of the amount under the contract. Or the amount of compensation may be specified as a fixed amount. Also, contractual obligations often separately limit the type of losses subject to compensation - compensation only for actual damage.
Exemption from damages
A person whose actions or inactions caused damage may be released from liability and compensation for damages if they can prove the absence of intent to cause damage and provide evidence of due diligence in performing their actions.
Also, a criterion influencing the release of a person from compensation for losses is force majeure. This criterion is difficult to prove and must have such aspects as inevitability, extremeness, exclusivity, the fact that the parties could not foresee the occurrence of these consequences in their activities. These circumstances may include natural phenomena (such as floods, earthquakes), various military operations, mass diseases, etc.
In addition, after the force majeure circumstances have ended, the debtor must begin to fulfill his obligation. If it is impossible, he is obliged to notify the counterparty about this.
The concept of dishonesty and unreasonableness
According to paragraph 3 of Art. 53 of the Civil Code of the Russian Federation, a person who, by virtue of the law, another legal act or the constituent document of a legal entity, is authorized to act on its behalf (hereinafter referred to as the director), must act in the interests of the legal entity he represents in good faith and reasonably.
The concept of conscientious and reasonable behavior is not disclosed in the legislation. However, paragraph 4 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated July 30, 2013 No. 62[1] states that conscientiousness and reasonableness in the performance of the duties assigned to the director consist in taking necessary and sufficient measures to achieve the goals of activity for which the legal entity was created, in including in the proper performance of public legal duties assigned to a legal entity by current legislation.
Meanwhile, directors do not always act this way. Based on paragraph 2 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 62, we will describe the dishonest actions (inaction) of the director and accompany them with examples of judicial practice.
Paragraph 3 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 62 indicates the unreasonable actions of the director.
Limitation periods for damages
When filing a claim for damages, it is important to take into account the deadlines provided for by current civil legislation.
The limitation period begins to count from the moment when a person’s right was violated or from the moment when a person could and should have learned about the violation of his right.
The general statute of limitations for claims for damages is three years. But, as with all rules, there is an exception. Compensation for losses in cases of voidable transactions must be sent within one year.
Losses claimed after the expiration date are not subject to recovery.
If the statute of limitations for damages has expired, it is necessary to analyze whether there are circumstances that can renew the statute of limitations (for example, illness of the applicant, unlawful actions of third parties, etc.)
Claim for damages
The claim is made in writing in any form.
Please provide the following information:
- name or full name of the person to whom you are applying to recover damages
- your name or full name indicating the address, telephone number, email at which you can be contacted
- circumstances that preceded the onset of consequences in the form of damages
- clearly defined requirements and legal norms on which they are based
- amount of damages that require compensation
- instructions to go to court if the claim is not satisfied within the prescribed period
- date of writing the complaint
The claim can be submitted in person, by courier or sent by mail.
If you want to transfer a claim to a counterparty, be sure to personally make a copy of the claim, on which a representative of the counterparty must leave a note indicating when, by whom and on the basis of what authority this claim was received.
If sent by mail, it would be optimal to send it by registered mail with notification or by a valuable letter with a list of the contents.
If a future application for recovery of damages is considered by an arbitration court, then the claim procedure is mandatory.
USEFUL : watch a video with advice from a lawyer on filing a claim for damages
Effective recovery of losses
In the context of an economic crisis, a claim for damages as an opportunity to compensate for the creditor’s losses becomes particularly relevant.
It is known that violation of the terms of a contract is often an economically more profitable model of behavior, and the rules of private law are designed to restore the balance of interests.
A common type of damages are losses arising from the violation or termination of a contract, the terms of which have been violated.
Within the meaning of Art. 15 and 393 of the Civil Code of the Russian Federation, the creditor is obliged to provide evidence confirming the existence of his losses, justify with a reasonable degree of certainty their size and the causal relationship between the non-fulfillment or improper fulfillment of the obligation by the debtor and the resulting losses. The debtor has the right to raise objections regarding the amount of losses and provide evidence that the creditor could have reduced the losses, but did not take reasonable measures to do so (Article 404 of the Civil Code).
In terms of causation, the debtor is liable only for losses that are a consequence of the violation and can be reasonably foreseen at the time of conclusion of the contract; the recovery of other damages remains a big question.
If the creditor has not taken reasonable steps to mitigate the loss, the amount may still be reduced. The standard of good faith behavior of the creditor, taking into account its capabilities, is individual in each specific case.
In a commercial contract, the creditor’s guilt in violating the contract does not need to be established. If a party entered into an agreement not for the purpose of making a profit, the decision on the application of liability measures according to the rules of paragraph 1 of Art. 401 of the Civil Code will depend on whether the person’s activity during which the obligation was violated can be considered as entrepreneurial activity. If the contract is concluded by an individual or a non-profit organization for the purpose of making a profit, liability will arise even in the absence of fault.
In the case of a commercial contract, liability in the form of compensation for damages for breach of contract can be avoided only if the failure to perform is due to force majeure circumstances.
Of course, many are concerned about the question of whether the situation with the Covid-19 pandemic is a force majeure event, and how sanctions will be applied for violation of contractual obligations.
In my opinion, the pandemic meets the criteria of force majeure.
However, recognition of a pandemic as a force majeure circumstance cannot be universal for all categories of debtors - regardless of the type of their activity and the conditions for its implementation, including the region in which the organization operates, due to which the presence of force majeure circumstances must be established taking into account the circumstances of a particular case (including the deadline for fulfilling the obligation, the nature of the unfulfilled obligation, the reasonableness and good faith of the debtor’s actions, etc.).
To be released from liability, force majeure must entail the impossibility of fulfilling the obligation (clause 3 of Article 401 of the Civil Code). Provisions of Art. 416–417 of the Code interpret it as a complete impossibility, and therefore the obligation is terminated and the party to the contract has the right to demand compensation for losses from government agencies and local governments (Article 417 of the Civil Code).
At the same time, these norms do not regulate what to do if it is possible to fulfill an obligation, but this requires disproportionate costs and risks? A puzzling situation arises when it is not possible to accurately determine whether the coronavirus pandemic constitutes a force majeure event in a particular case. It is also necessary to pay attention to the terms of the force majeure agreement, since the norm of clause 3 of Art. 401 of the Civil Code provides for the release of the debtor from liability, unless otherwise provided by law and contract.
There is a more difficult way - changing the terms of the contract or terminating it in court in accordance with Art. 451 of the Civil Code due to a significant change in the circumstances from which the parties proceeded when making a transaction. This rule is precisely about the case when the fulfillment of obligations is possible in principle, but violates the property interest to such an extent that the party who entered into the contract is deprived of what it had the right to count on.
A significant change in circumstances in accordance with Art. 451 of the Civil Code is fundamentally different from the impossibility of performance due to force majeure circumstances. In the first case, a court decision is necessary, in the second, the obligation terminates itself.
Especially to create illusions about the possibility of changing the contract under Art. 451 of the Civil Code, I believe, is not worth it, since judicial practice on this issue is conservative. But perhaps in the case of the coronavirus pandemic it will turn out differently.
There is also a rule that allows you to recover damages when a violation is only suspected (foreseeable violation) - for example, damages resulting from repudiation of a contract when there is a real threat of violation. When the creditor understands the reality of the threat of violation of obligations in the future, he has the right to withdraw from the contract and recover damages in accordance with clause 2 of Art. 328 Civil Code.
Damages may be recovered for lawful actions. Yes, Art. 711 and 782 of the Civil Code stipulate that the contractor has the right to withdraw from the contract, but is obliged to compensate the customer for losses. The laws also define cases of compensation for losses for lawful actions on the part of state authorities or local governments.
Claim for damages
Filing a claim in court is one of the tools for protecting violated rights.
The conditional statement of claim can be divided into three parts:
1. “Introductory” - which indicates:
- name and location of the court you are applying to
- name (or full name), tax identification number and location of the Plaintiff
- name (or full name), tax identification number and location of the Defendant
- amount of claims
- amount of state duty
2. “Descriptive” - part of the statement of claim in which it is necessary to tell the court in detail and consistently about the controversial situation that has arisen, the occurrence of losses, the actions or inaction of the defendant that led to the consequences. Remember that it is unacceptable to use profanity or emotional expressions in the statement of claim. All circumstances must be indicated consistently and contain a link to evidence confirming them, and also be confirmed by the rules of law. The calculation of the amount of damages must be extremely accurate and clear for consideration by the court.
3. The “final” part of the statement of claim contains:
- direct claims of the plaintiff against the defendant.
- list of documents attached to the statement of claim
- date of application and signature of the applicant.
To exercise your rights in court and be confident in a positive outcome in the case of recovery of damages, use the help of a qualified lawyer when writing a statement of claim.
USEFUL : watch a video with advice from a lawyer on filing a claim in court for damages
Conditions for indemnification
Damage can be expressed in two forms - material and moral. Material damage is of a property nature, i.e. for example, situations related to damage to private property or refusal to transfer something under a contract (For example, the most common case arises with debt obligations - a claim for the collection of funds is a constant issue for consideration in court). Based on judicial practice, we can conclude that bona fide compensation for losses caused by the guilty party is extremely rare. Often, citizens and organizations have to compensate for damage in court, with the involvement of qualified lawyers.
Recovery of moral damages as a separate type of damage to health and personality:
As statistics show, the most common claims are for the recovery of moral damages, and there is extensive practice of such legal situations, for example, in the matter of recovery of moral damages and material damage caused to health in an accident. Moral damage is non-property in nature, it includes violation of human rights in the field of business reputation, as well as such terms as honor and dignity, or the infliction of mental harm to the victim by the actions of the guilty person.
The amount of compensation for moral damage depends on the amount of harm caused by the actions of the perpetrator, the category of private rights and freedoms that were damaged. Compensation for moral damage is the most difficult matter; this issue has many pitfalls, and legal intervention cannot be avoided here; this will greatly increase the likelihood of successful recovery. Based on practice, it is clear that the court’s assessment of moral damage occurs at a maximum of 10% of the amount requested by the plaintiff.
There are also statistics according to which indicators for the recovery of moral damages are increasing in a positive direction. An important role in resolving such situations is played by the business reputation, integrity, professionalism and business qualities of a lawyer. It is advisable to have a good evidence base on the fact of causing moral damage; if it is available, the likelihood of effective recovery increases.
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What expenses will the developer not be able to recover from the contractor?
Situation 1. The shareholder sent a claim to the developer to correct construction defects in the apartment transferred under the share participation agreement.
Since the developer ignored the claim, the shareholder went to court. By a court decision, the developer was charged with material damage in the amount of 25 thousand rubles caused in connection with the elimination of defects in the apartment, compensation for moral damage in the amount of 10 thousand rubles, a fine in the amount of 17.5 thousand rubles, and the cost of conducting an assessment in the amount of 5 thousand rubles, state duties in the amount of 1.8 thousand rubles. The developer first turned to the general contractor and then to the court to claim compensation for losses. At the same time, the developer referred to a clause in the contract, according to which the general contractor is obliged to eliminate at his own expense defects discovered during the five-year warranty period.
The arbitrators recalled that a person demanding compensation for losses must prove the fact of their infliction and the amount, improper fulfillment of contractual obligations, as well as the existence of a cause-and-effect relationship between the losses incurred and the actions of the person through whose fault they arose. There is no cause-and-effect relationship between the unlawful actions of the general contractor (poor quality of construction work) and the developer’s expenses in terms of payment of a fine to the participant, reimbursement of expenses for conducting an examination and state duty. The fact is that the developer, by virtue of the provisions of the Law of the Russian Federation of 02/07/1992 No. 2300-1 “On the Protection of Consumer Rights,” was obliged to take measures to resolve the dispute and compensate the citizen for losses without bringing the dispute to trial. Bringing a dispute against an injured citizen on the part of the developer to consideration in court and reimbursement to the shareholder of expenses associated with the consideration of the case by a court of general jurisdiction cannot be qualified as losses. By virtue of clause 6 of Art. 13 of the said law, a fine in the amount of 50% of the amount awarded by the court in favor of the consumer is collected by the court only in the event of failure to voluntarily satisfy the consumer’s requirements. Accordingly, such a requirement was subject to satisfaction by the developer and is his business risk, and therefore cannot be attributed to losses caused by the general contractor. As a result of the latter, they were obliged to compensate the developer only for material damage in the amount of 25 thousand rubles that arose in connection with the elimination of construction defects (Resolution of the AS VSO dated 06/04/2015 in case No. A58-5728/2014).
Situation 2. The developer and the general contractor, having entered into a general contract for the construction of a residential building, agreed that the developer would finance the purchase of a tower crane for the construction by transferring funds to the general contractor’s bank account. In this case, the delivery, installation and installation of the crane on site, and its maintenance during the work are paid for by the general contractor who acquires ownership of the crane. The following was also agreed:
- the advance amount transferred to the general contractor for the purchase of the crane is withheld by the developer from the cost of the work performed by the general contractor;
- the general contractor compensates the developer for the costs of paying bank interest accrued on the amount of the advance payment provided for the purchase of the crane by deducting the compensation amounts from the cost of the work performed;
- If the parties terminate the contract, the general contractor returns the balance of funds received for the purchase of the crane.
The developer took out a loan from the bank and transferred money to the general contractor to purchase the crane.
Subsequently, by agreement of the parties, the general contract agreement was terminated. Due to the failure to repay the debt for the crane, the developer demanded a debt in the amount of 8.5 million rubles. judicially.
Then the developer filed a new lawsuit in court, demanding to oblige the general contractor to compensate for losses associated with the payment of interest to the bank under the loan agreement. However, the developer was denied this request. The court rejected the developer's argument that the obligation to pay interest arose through the fault of the general contractor, who did not provide the construction of the facility with the necessary equipment (crane). The arbitrators pointed out: the developer’s assumption of loan obligations to the bank was not necessary, was due to the decision of the developer himself and was not related to the illegal actions of the general contractor. Therefore, there is no reason to attribute the costs of repaying interest on the loan to the latter (Resolution of the AS Far Eastern Military District dated January 28, 2015 No. F03-5901/2014).
