1. 1 Russian Contract Law

2. 2 Civil Code on international contracts History Before 1917 revolution – Civil Code and Commercial Code 1922 – 1 st Russian Civil Code 1964 – 2 nd Russian Civil Code (based on Fundamental Principles which were the same for all Soviet Republics) 1994, 1995, 2001- 3 rd part, 2006 – 4 th part of Civil Code (consequently part 1, 2, 3,4)

3. 3 Russian Civil Code’ structure The CC structure follows a pattern common to European civil codes, in particular the German Civil Code In accordance with the Constitution civil legislation is in the jurisdiction of the Russian Federation

4. 4 Russian Civil Code First part – covered general principles of civil law, business organizations, general principles on contractual and other obligations Second part – covered 26 specific types of contracts, liability for causing harm, and unjust enrichment Third part –deals with inheritance law and private international law (legal relations that have a foreign element) Fourth part – deals with intellectual and industrial property, especially with contracts of transfer technology Individual laws – Law on joint-stock company, Law on companies with limited liability

5. 5 Russian Civil Code 1 st part – begins with basic provisions on civil legislation: article 2: 1)Civil legislation determines the legal status of the participants in civil commerce, the bases for the origin and the procedure for the exercise of the right of ownership and other rights in thins, of exclusive rights to the results of intellectual activity (intelectuaI property), regulated contractual and other obligations and also other property relations based upon equality, autonomy of will, and the property independence of the participants. It regulates also objects of civil law rights, transactions and representation, limitation of actions, general provisions on obligations and general provisions on contracts

6. 6 Russian Civil Code 2)Civil legislation is not applied to property relations based on administrative or other authoritative subordination of one party to another, including tax and other financial and administrative relations 3)Most CC norms are of dispositive character, that means these norms are applied unless the parties specifies different terms. It there is no agreement of parties, the contract is rules by the dispositive norm

7. 7 Russian Civil Code Article 7 – civil legislation and the norms of International Law: 1.Generally recognized principles and norms of international law and the international treaties of the Russian Federation are, in accordance with the Constitution of the RF, a constituent part of the legal system of the RF 2.International treaties of the RF are applied to relations regulating by CC directly 3. If an international treaty of the RF establishes rules other than those that are provided by civil legislation, the rules of the international treaty are applied This is confirmed by art. 5 of the federal law “On international agreements of the RF”, July 15, 1995

8. 8 Basic principles of Russian contract law The system: Transactions, including invalidity (art. 153- 181) General provisions on obligations (art. 307- 419), General provisions on contract (art. 420- 453), and Specific contracts (sale of goods and others)

9. 9 Commercial (enterpreneurial) activity Art. 2 CC: independent, at one’s own risk, activity aimed at systematic profit from using property, selling goods, performing works, or providing services by legal entities or private persons registered in manner specified by the law Art. 421 CC: basic principle – freedom of the contract: parties are free to conclude a contract both specified and not specified in the CC, terms of a contract are determined by the parties themselves. They may also conclude contracts containing elements of various contracts provided for by the law (mixed contracts) Second basic principle: the priority of the law over the contract: the contract must meet the rules, obligatory for both parties declared by the law or other legislative act current at the date of its signing. A contract that does not meet the law is considered as void, as a rule

10. 10 Concluding a contract Form of international contract: art. 1209 CC- in accordance with Russian law: the form of foreign economic transaction in which at least one of the parties is a Russian legal person, shall be subject, regardless of the place where the transaction is made, to Russian law Failure to follow this rule will lead to the invalidity of the transaction (art.162.3)

11. 11 Fulfillment of contract obligations Art.309 CC: obligations must be fulfilled properly according to the terms of a contract and the requirements of the law, and in case of absence of such requirements, according to commercial customs Proper fulfillment of the contract means it is done to the right person. In due time, in the right place, in the right manner, by the right person

12. 12 Specific performance of an obligation New rule art. 396 CC: The debtor besides covering losses has to fulfill specific performance of the obligation, unless the law and the contract state differently. If the debtor has not started fulfilling the contract, paying the penalty and the losses release him from performance of the obligation in kind

13. 13 Remedies: damages Art.393.1 CC: in case of not fulfilling or improper fulfilling the obligations, the debtor must compensate the creditor’s losses which shall be determined in accordance with art. 15 CC: real damage (actual loss), and lost profit Art. 393.2,3 provides for rules for evaluation damages

14. 14 Remedies in case of delay in delivery or non-delivery Art. 330 CC: Penalty clause - if contracting parties include in their contract penalty clause, the buyer is entitled to claim and agreed sum of money in case of non-performance or improper performance of an obligation, in particular, in case of delay of performance Art.333 CC: if a penalty is clearly disproportionate to consequences of violation of an obligation, a court (including international arbitration) has the right to reduce a penalty. Art. 394 CC: if a penalty is provided for non-performance or improper performance of an obligation, then damages shall be compensated in the part non covered by penalty Difference with liquidated damages under English, French, Polish, Bulgarien, etc. law: they are exclusive of any other remedy for delay or non-conformity of the goods

15. 15 Changing and avoidance of the contract Art. 450: change and rescission of a contract are possible by agreement of the parties, unless otherwise provided by the CC, other statutes or contract Upon demand of one of the parties, a court have the right to declare the contract avoided in case of: 1)substantional breach of the contract by other party, 2)in other cases provided by the CC, other statutes, or contract (in particular, art.451)

16. 16 Strict liability in commercial contracts Art. 401 CC sets strict liability up to force majeure, that is unexpected and extraordinary circumstances unavoidable under the given conditions Such circumstances do not include, in particular, violation of obligations by the contract partner of the debtor, nor the debtor’s lack of the necessary monetary assets

17. 17 Sale of goods, delivery of goods Chapter 30 CC, structure: § 1. General provisions, art. 454-491 § 2. Retail sale, art. 492-505 § 3. Delivery of the goods, art. 506-524, § 4. Delivery for State needs, art. 525-534 § 5. Procurement, art. 535-538 § 6. Energy supply, art. 539-548 § 7. Sale of Immovable, art. 549-558 § 8. Sale of Enterprise, art. 559-566 § 9. Barter, art. 567-571 § 10. Gift, art. 572-582 §

18. 18 Delivery of goods Rules of § 1 are applied unless the rules of § 3 state differently – priority of § 3 over § 1 According to delivery contract, a seller (supplier) – conducting business (entrepreunerial) activity accepts the obligation to transfer within agreed time periods goods manufactured or purchased by him to the buyer for use in business or for other purposes not connected with personal, home other like use

19. 19 Delivery of goods Art. 508 CC: Delivery may be carried by installments, and their time of delivery may be specified in the contract in various ways, in case the time is not specified by the contract, the goods must be delivered in equal installments monthly, unless otherwise follows from a statute, other legal acts, the nature of obligation, or the commercial custom In case the goods are nor delivered within the stipulated period of time the seller is obliged to deliver these goods in the later period (511) Art. 510 CC: Delivery of the goods: 1)Delivery shall be made by the seller by shipping them on transport provided by the contract and on the terms determined in the contract 2)In case there is no indication on type of transport or terms of delivery, the seller has the right to select the means of transport or to determine terms of delivery 3)The contract may provide for the receipt of the goods by the buyer at the location of the seller

20. 20 Delivery of the goods Art. 513 CC: the buyer is obliged to take all necessary measures for acceptance of the goods (checking the quality and quantity, immediately notifying the defects) Art. 523 CC: unilateral avoidance of a contract in case of fundamental breach of the contract in case of violence by the seller or by the buyer their obligations

21. 21 Delegation Chapter 49 CC, art. 971-979: one party (a delegate) is obliged to take specific legal actions in the name and at the expense of the other party (a delegant), all rights and duties arise directly for the delegate The instructions of the delegant must be lawful and concrete Remuneration: both parties determines it in the contract Delegate’s duties: to personally perform the task delegated to him, to report to the other party on his demand all information on the performance of the task, upon performing the delegated task – to return to the delegant a power of attorney Delegant’ s duties: to issue to the delegate a power of attorney, to reimburse him for costs incurred, to provide him with the funs necessary for the performance of the delegated task, to accept for the delegate everything performed by him, pay the remuneration

22. 22 Delegation A contract of delegation shall be terminated by either party at any time as a result of: 1)cancellation of the delegated task by the delegant, 2)withdrawal by the delegate The corresponding party must notify the other party of the termination of the contract at least thirty days in advance, unless the contract provides for a longer period Consequences: the delegant shall compensate another party the costs incurred by him and to pay a remuneration in proportion to the work ha has done; the delegate shall compensate to another party losses cause to him by the termination of the contract

23. 23 Commission Agency Chapter 51, art. 990-1004: under a contract of commission agency the commission agent, on delegation from the commission principal, for remuneration has the duty to conclude one or several transactions in his own name but at the expense of the commission principal Under the transaction concluded by the commission agent with a third person, the commission agent shall acquire rights and become liable, although the commission principal was named in the transaction Remuneration: as it is determined in the contract, including an additional remuneration in the case when the commission agent has undertaken a guarantee for the fulfillment of a transaction by third person

24. 24 Commission Liability of a commission agent before the commission principal for non-fulfillment of a transaction concluded for him: Commission agent is responsible in two case: when commission agent did not exercise the necessary care in selection of the third person and or undertook a guaranty for the fulfillment of the transaction (del credere) Special case: Responsibility of a commission agent for loss or shortage of the property of the commission principal: a commission agent is obliged to take appropriate measures to protect the rights of the commission principal, to collect the necessary evidence

25. 25 Commission Assignment of rights to a commission principal is allowed regardless of another agreement with the third party, but the commission agent remains liable to third person in this situation Rights to goods: the goods received by the commission agent from the commission principal or acquired by the commission agent at the expense of the commission principal are owed by the latter

26. 26 Commission Termination of the contract: 1)the commission principal has the right, at any time, terminate the contract, the commission agent in this case has the right for losses caused by this termination 2)the commission agent has no right, unless otherwise provided by the contract, to terminate it, with the exception when the contract has been concluded without indication of the period of its effectiveness, in this case commission agent must notify the principal nor less that thirty days in advance, and the principal is obliged to pay to the agent the corresponding remuneration and to compensate for expenses borne by him until the termination of the contract

27. 27 Agency Chapter 52 CC, art. 1005-1011: under an agency contract one party, the agent has the duty for remuneration to take, on delegation from the other party (the principal), legal or other actions in his own name, but at expense of the principal, or in the name and at the expense of the principal The rules provided by Chapter 49 or Chapter 51 CC shall be applied respectively to the relations arising from the agency contract depending upon whether the agent act under the terms of the contract in the name of the principal or in his own name, unless these rules contradict the provision of this Chapter

28. 28 Agency Special rules for agency: limitations of rights of the principle and agent: 1.Principal’s obligation of the principal not to make similar contract with other agents acting in the territory specified in the contract (exclusive right) or to refrain from conducting within this territory the independent activity of the same kind 2. Agent’s obligation not to make with other principals similar contracts that must be performed within the territory specified in the contract BUT: Terms of agency contract by virtue of which the agent shall have the right to sell the goods, perform works or render services exclusively for a certain category of buyers (customers) or exclusively for buyers (customers) having their place of business o place of residence within a territory specified in the contract are void