The problem of non-fulfillment of an obligation is as old as the world. There is very important principle of a good faith. This principle speaks about the observance of agreements, about the observance of promises. Any obligation is a promise to do or not to do an act. In this sense, what is promised must be fulfilled. But this principle is a reaction to people’s behavior. We would like to believe that more often promises are fulfilled, but still there are situations when the counterparty does not fulfill the agreements, even if they are explicitly stated in the contract. In this article, we will look at the general requirements applicable to defaults under most types of named contracts and how to apply them.
General provisions
The basis of the requirements for our case is laid down in the general part of the Civil Code of the Russian Federation, namely in Article 12. All that is provided by the article — ways of protection of civil rights. The list is open, but such methods can be established only by law. We will tell you only about material methods, that is, we will omit restitution, invalidation of the transaction and so on under Article 12. We will consider exactly monetary claims, because often, it is the most effective way to restore economic justice and discipline the counterparty.
To such from the list of art. 12 can be attributed — compensation for damages and recovery of forfeit. Let’s say at once that compensation of moral damage in arbitration process, though theoretically possible, but practically it can be presented only hypothetically, because this provision protects the personal right of an individual, it cannot be applied to ephemeral legal entity. We will also omit the moment with fulfillment of the obligation in kind, because such methods of protection are provided for material things, but not to the sum of money in its usual sense.
Compensation of losses
Article 15 of the Civil Code elaborates on the meaning of the concept. «A person whose right has been violated may demand full compensation for losses...Losses are understood to be expenses...real damage...lost profit.»
If the contract does not provide for compensation not in a reduced amount, the person who is guilty of causing harm must compensate for these losses.
Losses are usually understood as real damage, i.e. loss or damage to property. Then it is possible to demand reimbursement of the value of the thing or its restoration to its original state.
Example: LLC «Kant» (recipient) and LLC «Hegel» (carrier) concluded a transportation contract. According to the contract, the carrier undertook to deliver 5 tons of various furniture, which was described in the specification, by several trucks. However, due to the guilty actions of the driver (he was drunk at the wheel, which was confirmed by the conclusion of the traffic police), one car went off the road and overturned, and the furniture was not recoverable after that.
In accordance with paragraph 1 and subparagraph 2 of paragraph 2 of Article 796 of the Civil Code, which interpolates the provisions of the general part, the carrier is obliged to reimburse the value of the goods, if it is impossible to restore it, and since the driver’s check for alcohol intoxication was the responsibility of the carrier, he can not refer to the impossibility of prevention.
Thus, the carrier will have to reimburse the full value of the lost furniture of the company.
But Art. 15 also specifies, a common type of damage — lost profits. In fact — the money that a person could have received if the obligation of his counterparty had been properly performed.
In the above example, LLC «Kant» should have transferred the lost furniture under the Purchase and Sale Agreement to another legal entity LLC «Fichte», but now it will not be able to do so and will incur losses not only for the lost furniture, but also for the benefit they would have gained by selling this furniture, as well as Kant Ltd. can charge the carrier and the costs of the claims of LLC «Fichte», since the non-performance would not have occurred if LLC «Hegel» had performed the obligation properly.
Forfeit
The concept of a penalty is regulated in Art. 330 of the Civil Code and in paragraph 60 of the Decree of the Plenum of the Supreme Court of the Russian Federation of 24.03.2016 N 7 «On the application by the courts of certain provisions of the Civil Code of the Russian Federation on liability for breach of obligations». Thus, a penalty is «a sum of money which the debtor is obliged to pay to the creditor in case of non-fulfillment or improper fulfillment of an obligation, in particular in case of delay in fulfillment.».
Several types of penalties can be distinguished. On the grounds of origin: legal and contractual. In other words, established by law or contract. You can determine the contractual penalty yourself by virtue of the freedom of contract, but also by law. The amount of such a penalty is equal to the key rate of the Central Bank.
According to the method of accrual, a fine and a penalty are distinguished. That is, a penalty in a fixed sum of money (fine) and periodically charged interest (penalty).
In relation to the losses caused to a person, there are: punitive penalty (losses can be recovered in excess of the penalty), offset (losses are recovered in excess of the amount provided for by the penalty), exceptional (only the penalty is recovered), alternative (at the choice of the creditor is recovered either the penalty or losses).
Let’s return to our example. The contract of carriage stipulates that in case of loss or damage to the cargo, the Carrier shall pay 10% of the value of each lost item or 15% of the cost of repairing each damaged item respectively.
In such a case, LLC «Hegel» would have to pay 10% of the amount of all the furniture that was in the truck. This is a penalty in the form of a punitive contractual penalty in a fixed amount.
Interest for the use of alienated funds
Separately I would like to single out interest for the use of stranger’s monetary funds due to the fact that it is applicable only to monetary obligations. In essence — lost profit, but they should not be identified. The logic of Article 395 and Article 317.1 of the Civil Code is that by withholding the funds from the debtor, the debtor deprives the creditor of the opportunity to dispose of the money and benefit from it, and therefore must compensate it.
The general rule is that interest is determined by the key rate of the Central Bank, otherwise it can be stipulated in the contract.
In our example it can be illustrated as follows. LLC «Fichte» transferred payment in the amount of 100% to LLC «Kant», but since the obligation was not fulfilled, LLC «Fichte» makes a claim for the return of interest for the use of funds from the day of delay in fulfillment of the obligation.
There can be many such cases, as well as their variations. It is never possible to accurately predetermine all possible claims against a counterparty, but these are the most popular and frequently used. If you have a legal problem with counterparties, please contact us, we will definitely help you!