Termination of a contract and unilateral refusal to perform it: distinguish, not mix

Grounds and procedure for termination of the contract

Termination of a contract is one of the topics that gives rise to an inexhaustible variety of practical situations.
There is enough material on it. However, this does not in any way reduce the number of interested parties in the professional judgments and assistance offered on the topic of termination of the contract. This conclusion is confirmed by Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated June 6, 2014 No. 35 “On the consequences of termination of the contract” (hereinafter referred to as the Resolution). I detailed my comments on the draft of this act in another material. It is also logical that the relevance of the rules on termination of a contract to any contract allows them to be applied to those only if in some cases there are corresponding special rules (for example, Article 328, Article 405, Article 523, Article 781 of the Civil Code of the Russian Federation). This means that if there are no grounds or procedure for its termination in the relevant chapter of a specific type of civil law contract, then general rules will necessarily apply.

It is precisely in order to remember and correctly apply these general rules, and to get rid of a number of misconceptions associated with the termination of a contract, that I have prepared this material.

The law distinguishes between termination of a contract (Articles 450-453 of the Civil Code of the Russian Federation) and refusal to fulfill an obligation (Article 310 of the Civil Code of the Russian Federation). Despite the identity of the legal consequences of termination of a contract and refusal to fulfill an obligation that arose from the contract, the grounds and procedure for performing the necessary actions differ.

Differences in the legal regulation of the basis and procedure for terminating a contract and refusing to fulfill an obligation lead to the fact that:

a party that is mistaken in interpreting the terms of a contract or the norms of the law will choose the wrong path for its actions, including choosing the wrong method of protecting civil rights. The consequence of this will be both denial of protection of rights and financial losses. This will also be accompanied by unnecessary use of available time and material resources.
the erring party will not receive the desired legal effect. Consequence - the contract, for example, will continue to be in force, and the counterparty to the contract will be able to demand fulfillment of the obligation, compensation for losses, or will choose other options.

Let me remind you here that the interpretation of the terms of the contract is carried out using Art. 431 Civil Code of the Russian Federation. If, as a result of grammatical interpretation, it is not possible to understand the content of the terms of the agreement, then the actual will of the parties to the agreement must be clarified, taking into account the purpose of the agreement. Accordingly, the purpose of the contract must be determinable or determined in advance.

Indicative is the Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation of February 16, 2010 No. 13057/09 in case No. A40-87811/08-147-655 (also called the “Mesopotamia” case). In it, the highest court considered that the will of the parties, taking into account the purpose of the contract, when including in it the condition of unilateral termination of the contract, was aimed at repudiating the obligation. Therefore, actions to unilaterally terminate the contract were recognized as lawful.

Although there is no oil, Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated March 14, 2014 No. 16 “On freedom of contract and its limits” added kerosene to the fire. For example, clause 11. “When resolving disputes arising from contracts, in the event that the terms of the contract are unclear and it is impossible to establish the actual common will of the parties, taking into account the purpose of the contract. the court’s interpretation of the terms of the agreement must be in favor of the counterparty of the party who prepared the draft agreement or proposed the wording of the relevant terms.”

A great move, in my opinion. All that remains is to collect and preserve evidence indicating on whose initiative this or that condition appeared in the contract.

By the way, when interpreting the conditions, it is also worth separating the recognition of the right to unilateral refusal of an obligation from the option “a party has the right to demand unilateral termination of the contract.” He is just as wrong.

So, by now it is possible and necessary to recognize that the expected legal effect from a party’s action is possible only with the correct and correct choice of behavior (termination of a contract or waiver of an obligation).

Therefore, termination of a contract and waiver of an obligation are not the same thing.

For example, if the concluded contract contains the right of the party to the contract to refuse the obligation, and she declares termination of the contract, then she will be disappointed.

The reasons for disappointment are hidden in the disposition of the provisions of Art. 450 Civil Code of the Russian Federation.

Termination of the contract is possible by agreement of the parties. Quite a “boring” foundation. The parties are united in their desires and, if they want, they can terminate all their obligations by agreeing to terminate the contract. But there are also some nuances here, which are also reflected in the Resolution. For example, a question regarding warranty obligations.

I would also like to draw your attention to the fact that this Resolution makes it possible to establish the consequences of termination of a contract other than those provided for by law within the limits of general restrictions on freedom of contract.

Termination of the contract is possible by court decision. This means that termination of the rights and obligations of the parties is impossible without going to court.

In my opinion, the terms of contracts regarding “unilateral termination of the contract” should be interpreted only as a statement of the possibility of filing a claim in court for termination of the contract. Stupidity or obvious machinations of enemies. Choose for yourself. But a mistake in choosing the right condition should have negative consequences (except for the case provided for in paragraph 11 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated March 14, 2014 No. 16 “On freedom of contract and its limits”).

The legislator does not indicate that termination of a contract, namely termination, and not the use of other legal institutions, can be carried out without going to court.

After one of the elements of the procedure for terminating a contract in the absence of agreement of the parties on this becomes clear, I will move on to the grounds themselves.

The grounds for termination of the contract are also specified in the Civil Code of the Russian Federation ( Part 2 of Article 450 of the Civil Code of the Russian Federation ). Termination of the contract is permissible in one of the following cases:

in case of a significant breach of contract by the other party;
in other cases provided for by the Civil Code of the Russian Federation, other laws or an agreement.

The definition of the materiality of a breach of contract is also given by law - a violation of the contract by one of the parties is considered material, which entails such damage for the other party that it is largely deprived of what it had the right to count on when concluding the contract (Article 450 of the Civil Code of the Russian Federation).

It is possible that when proving materiality, it will be easier and easier for the plaintiff if there is evidence that clearly and definitely indicates that each party understands what is received under this agreement (the party expected to receive it).

Also, a case provided for by the Civil Code of the Russian Federation is a significant change in circumstances (Article 451 of the Civil Code of the Russian Federation). We will post separate material on this basis in more detail in the future.

Accordingly, after determining the court as the only body with competence to terminate the contract and the cases when this can be done, let’s turn our attention to the procedure itself. Article 452 of the Civil Code of the Russian Federation indicated that an application to court for termination of a contract can be made after sending a pre-trial demand to the counterparty and the expiration of a month, unless otherwise provided by the contract.

If the counterparty comes to court, bypassing what is stated in the law, then he can only wait for the case to be left without consideration (for example, clause 5 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated February 11, 2002 No. 66 “Review of the practice of resolving disputes related to rent” , p. 60 Resolution of the Plenum of the Armed Forces of the Russian Federation and the Plenum of the Supreme Arbitration Court of the Russian Federation dated July 1, 1996 No. 6/8 “On some issues related to the application of part one of the Civil Code of the Russian Federation” , Resolution of the FAS ZSO dated 02/18/2014 in case No. A70-5156/ 2013).

The agreement can be terminated on the grounds provided for in the law, other legal act or agreement. For example, according to the law, any contract can be terminated through court if there is a significant breach of the contract by the other party. Most often, the grounds for termination of a contract are indicated in the provisions of the Civil Code of the Russian Federation on a specific type of contract or in the contract itself. These may be grounds for either unilateral refusal of the contract or for its termination through the court.

1. On what grounds can a contract be terminated unilaterally out of court? A contract can be terminated unilaterally on the same grounds that give the right to refuse to fulfill obligations. This is explained by the fact that the general provisions on obligations also apply to obligations that arose from an agreement (clause 1 of Article 307.1 of the Civil Code of the Russian Federation). The grounds for refusal of a contract may be established by law or other legal act, as well as by contract. However, if only one of the parties conducts business activities, then the refusal can only be granted to its counterparty (Clause 2 of Article 310 of the Civil Code of the Russian Federation). Please note how the grounds for refusal of the contract are formulated. Usually, the right to a reasoned refusal is allowed, which is associated with a violation of the contract by the counterparty or due to the occurrence of other circumstances. In this case, you can cancel the contract if the specified circumstances occur. But the refusal may not be due to anything (unmotivated refusal). In such a situation, you can refuse to fulfill the contract at any time without giving reasons. 2. On what grounds can a contract be terminated through court? The following grounds can be distinguished:

significant violation of the contract by the other party (clause 2 of Article 450 of the Civil Code of the Russian Federation). The breach may be said to be fundamental in law or contract. For example, the parties may agree that a supplier's failure to deliver by more than five business days constitutes a material breach. In this case, to terminate the contract, you need to prove that the counterparty supplier committed this violation. If the violation is not named in the law or contract as a basis for termination, then it is necessary to prove to the court what the materiality of such a violation is;
other violation provided for by law or contract (clause 2 of article 450 of the Civil Code of the Russian Federation). For example, such violations of the lease agreement are provided for in paragraph 3 of Art. 611 and art. 620 Civil Code of the Russian Federation. In this case, it is not necessary to prove whether the violation is significant;
the occurrence of other circumstances provided for by law or agreement that are not related to the violation of the agreement (clause 2 of article 450 of the Civil Code of the Russian Federation). For example, in the contract the parties may provide for such a basis as the counterparty changing the price unilaterally;
significant change in circumstances (clause 1 of Article 451 of the Civil Code of the Russian Federation). There is little chance of terminating the contract on this basis, since it is very difficult to prove such a change.

3. When the parties can terminate the contract by mutual agreement As a general rule, the parties can agree to terminate the contract at any time before its expiration (clause 1 of Article 450 of the Civil Code of the Russian Federation). In this case, the basis for termination of the contract will be the mutual consent of the parties. Such consent is not enough to terminate a contract concluded in favor of a third party (in particular, a property insurance contract concluded not in favor of the policyholder), who expressed to the debtor the intention to exercise his right under the contract. To terminate such an agreement, you must additionally obtain the consent of a third party, unless otherwise provided by law, other legal acts or agreement (clause 2 of Article 430 of the Civil Code of the Russian Federation). To terminate a multilateral agreement, the consent of not all parties, but the majority, may be sufficient, if this is allowed by the business agreement and is not prohibited by law (Clause 1 of Article 450 of the Civil Code of the Russian Federation). 4. Is it possible to terminate a contract after its expiration? You can terminate a contract whose validity period has expired only if two conditions are simultaneously met:

obligations under it were not fulfilled properly and (or) within the prescribed period;
The contract or law does not provide that the expiration of its validity term terminates the obligations of the parties (clause 3 of Article 425 of the Civil Code of the Russian Federation).

Such an agreement will be valid until the end of the fulfillment of obligations specified in it. For a lease agreement, for example, this is the moment when the property is returned to the lessor at the end of the lease term or when the tenant has paid payment for the entire lease period (if, according to the agreement, it is paid at the end of use of the object). If the lease term is not specified in the agreement, it will be considered concluded for an indefinite period and each party will be able to cancel the agreement at any time by notifying the counterparty in advance. However, the expiration of the contract in some cases entails the termination of the obligation. For example, a guarantee agreement is considered fulfilled upon expiration of its validity period (Definition of the Supreme Court of the Russian Federation dated November 24, 2015 N 89-КГ15-13). When terminating an existing contract with an expired term, take into account the general grounds and procedure for terminating the contract.

Termination of the contract unilaterally

Elena Ivanova, analyst of government and commercial tenders
DIRECTUM
The general rule of civil law is that termination of a contract must occur by mutual agreement of the parties. This rule coincides with the rules for concluding and changing the terms of the contract. If termination is the initiative of one of the parties, then there must be compelling justifications and conditions for such actions. The laws of the Russian Federation prescribe the legal basis for this possibility.

Termination of the contract is regulated by Articles 450-453 of the Civil Code of the Russian Federation

.
Note that there may be not only termination, but also termination of the contract due to waiver of existing obligations. These issues are regulated by Article 310 of the Civil Code of the Russian Federation
.

Possibilities for unilateral termination are sometimes written into the text of the contract. This usually implies that there has been a material breach of the terms of the agreement. If the conditions for early termination of obligations are not specified in the contract, then you should be guided by the requirements of the laws of the Russian Federation.

Inappropriate consumer behavior: is it possible to unilaterally withdraw from a contract?

How does Russian legislation regulate the issue of unilateral out-of-court refusal of an organization to provide services to a consumer? Is it possible to include in a contract with citizen-consumers a condition for unilateral out-of-court repudiation of the contract in the event of a significant violation of its terms by consumers? What are the consequences of unilateral out-of-court repudiation of a contract? What ways can you protect yourself from such consumer behavior? We will try to answer these questions in this article.

In practice, the question often arises: does an organization that provides paid services in accordance with the rules governing the conclusion of public contracts have the right to refuse out of court to fulfill its obligations under the contract in the event of a significant violation of its terms by a citizen-consumer (client)? First of all, it is necessary to stipulate in advance that by a significant violation of the terms of obligations under the contract on the part of a citizen-consumer, this article means inappropriate blatant consumer behavior that violates the internal order of the organization and/or public order and generally accepted norms of morality and behavior and creates a threat of economic damage activities of the organization and its business reputation, as well as physical and moral harm to other clients. Upon initial consideration of this problem, it seems reasonable to assume that a legal entity or individual entrepreneur has every reason for a unilateral extrajudicial refusal to fulfill obligations under the contract if the above grounds are present. At the same time, based on an analysis of legislation and judicial practice, unilateral extrajudicial refusal of a contract by a legal entity or individual entrepreneur is recognized as illegal.

According to para.
2 p. 2 art. 310 of the Civil Code of the Russian Federation, in relations between a consumer and an organization, the right to unilaterally withdraw from a contract can only be granted to a person engaged in entrepreneurial activity if this right is provided for by law or other legal act.
If we use as an example an agreement for the provision of paid services, which is quite common in the provision of medical services, then the norm of Art.
782 of the Civil Code of the Russian Federation contains a direct indication of the possibility of unilateral refusal to fulfill obligations under a service agreement on both the part of the customer and the contractor. It would seem that in the norms of the Civil Code of the Russian Federation (i.e. in the federal law) there is a direct indication of the right of the parties to unmotivatedly, out of court, refuse to fulfill a contract for the provision of services for a fee, without any grounds related to a significant violation of obligations under the contract
, however , unfortunately, everything is not so simple.
The problem is that the activities of legal entities and individual entrepreneurs selling goods, providing services or performing relevant work for consumer citizens are subject to the provisions of the Civil Code of the Russian Federation and the Law “On the Protection of Consumer Rights”, which regulate the rules for concluding and executing public contracts. This means that a person engaged in entrepreneurial or other income-generating activities cannot refuse to enter into an agreement if it is possible to provide the consumer with the relevant goods, services, or perform the relevant work for him
(with some exceptions provided for in the by-laws of the federal executive authorities).
If an organization enters into a public contract by its nature with consumer citizens, then unilaterally, out of court, renounce the contract in accordance with Art.
310, 782 of the Civil Code of the Russian Federation is impossible even if there is a significant violation of the terms of the contract on the part of the citizen-consumer. According to the courts of general jurisdiction and the Constitutional Court of the Russian Federation,
the existence of the right of organizations to unilateral extrajudicial refusal would actually neutralize the nature of the public contract as such.
In the Law “On the Protection of Consumer Rights”, only a citizen-consumer has the right to unilateral refusal in consumer relations, while the corresponding rule on the right of a legal entity or individual entrepreneur to unilateral refusal is not provided for in this law (at the same time, this is not directly prohibited ).
According to para. 2 clause 11 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated November 22, 2021 No. 54 “On some issues of application of the general provisions of the Russian Civil Code on the fulfillment of obligations” in the case of concluding a public contract, the right to unilateral refusal to fulfill an obligation can be granted by the contract only to that party for which the conclusion of this agreement was not mandatory
(i.e.
exclusively to the consumer
).
An analysis of judicial practice demonstrates that the courts, in all cases of unilateral motivated out-of-court refusal to fulfill obligations under a contract in consumer relations between organizations and citizens, refuse to recognize such a refusal as legal
(for example, the Appeal ruling of the Moscow City Court dated November 18, 2015 in case No. 33-42930/2015, Appeal ruling of the St. Petersburg City Court dated April 14, 2015 No. 33-5411/2015 in case No. 2-3633/2014).
Thus, an organization that provides services according to the rules established for concluding public contracts should not include in the contract a condition on the possibility of unilateral out-of-court refusal (either indicating specific violations on the part of the consumer or without indicating them).
Organizational and legal form of “a person engaged in entrepreneurial or other income-generating activities”

It is worth noting that in accordance with the position of the Constitutional Court of the Russian Federation, set out in the ruling of June 6, 2002 No. 115-O, the organizational and legal form of carrying out activities when concluding and executing a public contract does not matter. In other words, regardless of whether an organization in civil circulation acts as a state institution, an autonomous non-profit organization, a limited liability company, etc., all rules regarding the conclusion and execution of a public contract fully apply to legal entities with any organizational structure. -legal form, as well as for individual entrepreneurs. And understanding this rule is extremely important, since in the provisions of Art. 426 of the Civil Code of the Russian Federation refers to “a person engaged in entrepreneurial or other income-generating activities” and one can incorrectly conclude that this norm applies exclusively to commercial organizations.

Consequences of unilateral “extrajudicial” refusal of the contract

Unilateral extrajudicial refusal in contracts with consumer citizens is unacceptable; such a unilateral refusal does not entail the legal consequences that it is intended for and is illegal (Appeal ruling of the Moscow City Court dated November 18, 2015 in case No. 33-42930/2015). If the fact of unilateral refusal to fulfill obligations under the contract is proven, the citizen-consumer has the right to demand from the organization in court:

To recover compensation for moral damages for violation of contractual obligations;
Interest on the use of someone else's money for the period of failure to provide the relevant services under the contract;
The court, in turn, is obliged to collect a fine from the organization in the amount of 50% of the amount of satisfied claims and oblige the organization to fulfill its obligations under the contract (if the contract has not expired).

Ways to protect the rights of organizations

So, the inclusion in a contract of conditions for unilateral extrajudicial repudiation of the contract is unlawful, therefore an organization cannot repudiate the contract out of court, but this does not mean that the organization cannot take other measures to protect its rights under the contract: a legal entity or an individual entrepreneur can always go to court with a claim to terminate the contract in connection with its significant violation by a citizen-consumer. The algorithm of actions in this situation is as follows:

Before going to court with a claim to terminate the contract, the organization must first send the client a proposal to conclude an agreement to terminate the contract out of court.
If a citizen refuses to sign the agreement, the organization has the right to go to court with a demand to terminate the contract, as well as to recover damages if the client’s actions caused damage to the organization’s property (for example, medical equipment).
In court, it is necessary to prove the fact that the consumer committed actions that violated the internal operating procedures of the organization and/or public order and generally accepted standards of morality and behavior, as well as the cause-and-effect relationship between the actions taken and the threat of causing (or actual causing) economic damage and damage to the business reputation of the organization . In addition, in court you can refer to the need to ensure the safety of all clients.

As evidence to substantiate the plaintiff’s position in court, you can present internal memos from the organization’s employees, explanations from other clients
in order to record in writing the fact of a violation on the part of the citizen-consumer.
All circumstances indicating the materiality of the violation of obligations under the contract on the part of the citizen-consumer must be reflected both in the agreement on termination of the contract and in the statement of claim.
It is also important not to forget to properly settle the settlement with the client in order to avoid incurring additional expenses in the event of claims for payment of interest under Art.
395 of the Civil Code of the Russian Federation for illegal retention of other people's funds. The most correct option in this case seems to be settlement with the consumer through depositing funds with the court during the trial. The question also arises, what to do if the consumer again contacts your organization for the provision of services in the event of termination of the contract in court? After all, according to paragraph 3 of Art. 426 of the Civil Code of the Russian Federation, as a general rule, regardless of the circumstances, an organization cannot refuse a consumer to conclude an agreement, and in case of refusal to conclude an agreement, the consumer has the right to file a claim for compulsion to conclude an agreement (clause 4 of Article 445 of the Civil Code of the Russian Federation). It seems that the organization has the right to refuse to provide services to the citizen-consumer from the organization’s employees at Art. 10 of the Civil Code of the Russian Federation (in court or out of court). The actions of a citizen-consumer in this situation can most likely be qualified as an abuse of law, meaning a prohibition on the exercise of civil rights solely with the intention of causing harm to another person, actions in circumvention of the law for an unlawful purpose, as well as other deliberately dishonest exercise of civil rights.

What is the difference between unilateral termination of a contract and refusal to fulfill an obligation?

“Either party has the right to terminate the contract unilaterally by sending written notice” - this wording is often used in contracts, but it is fraught with legal risks.

Art.
450 of the Civil Code of the Russian Federation
provides for two ways to terminate a contract, but for one of the methods it uses a general term (termination):

termination of the contract at the request of one of the parties, i.e. unilateral termination of the contract;
unilateral refusal to fulfill the contract.

The difference between these two methods is the procedure for termination. The first method of termination (termination at the request of one of the parties) is in court (under clause 2 of Article 450 of the Civil Code of the Russian Federation), and the second method (unilateral refusal to fulfill the contract) is out of court (under clause 3 of Article 450 of the Civil Code RF).

If it is not obvious from the text of the contract which method of terminating the contract the parties have agreed upon, the court will be forced to interpret the will of the parties, and this is always risky, because it is unpredictable.

There are often cases when one party sends the other a notice of termination of the contract, believing that this has terminated the contract, but a few months later the other party files a lawsuit to recover payment under the contract, because the termination procedure was not completed and wins the case.

Thus, if the parties to the contract wish to provide for the possibility of unilateral termination of the contract without a trial, by simple notification, then it is better to use the wording “unilateral refusal to perform the contract” in the contract.

In addition, these terms have different legal implications.

If we mean unilateral termination of the contract, then, despite the court act that has entered into legal force, the second party has the right to demand that the counterparty fulfill its obligations.

But a unilateral refusal to fulfill obligations excludes such authority.

The Supreme Court allowed penalties for early termination of the contract

The Supreme Court of the Russian Federation released this year’s first review of its judicial practice[], approved by the Presidium of the Supreme Court on April 13. The 125-page review examines the practice of both the Presidium and all judicial chambers of the Supreme Court, as well as provides explanations on a number of problematic aspects of the proceedings, and analyzes the practice of international treaty bodies of the UN and the European Court of Human Rights.

In particular, the section devoted to the practice of the judicial panel on economic disputes examines the resolution of disputes arising from property legal relations; disputes arising from obligations; disputes arising from public legal relations; procedural issues.

Thus, regarding one of the cases, the Supreme Court notes that the parties have the right to stipulate in the lease agreement the amount of compensation that must be paid by one of the parties in the event of an unmotivated unilateral refusal to fulfill the agreement.

The tenant filed a lawsuit against the landlord to invalidate the clause in the contract providing for the landlord to withhold the full amount of the deposit as a penalty in the event of the tenant’s early termination of the lease agreement. The Moscow Arbitration Court, guided by the provisions of paragraph 3 of Article 450, Article 330 of the Civil Code of the Russian Federation, satisfied the stated requirements due to the fact that the establishment in the contract of a fine for unilateral refusal to fulfill the contract contradicts the legal nature of the penalty as a measure of liability applied for violation of civil rights. right Since unilateral early termination of a contract is not a civil violation (improper fulfillment of obligations), but is conditioned by the tenant’s exercise of the rights granted by the contract, the courts recognized the corresponding condition of the contract as contrary to the norms of civil law. The 9th AAS and the Moscow District Arbitration Court supported the findings of the trial court.

The Judicial Collegium of the Supreme Court overturned the judicial acts of the lower courts and refused to satisfy the claim on the following grounds. The provisions of Articles 619, 620 of the Civil Code of the Russian Federation do not contain a prohibition on early termination of a lease agreement on other grounds not provided for in these legal norms, and therefore the parties, when concluding an agreement, have the right to establish the grounds for early termination of the agreement and the conditions for such termination. In particular, the right to unilateral refusal to fulfill an obligation related to the implementation of entrepreneurial activities by its parties may be conditioned, by agreement of the parties, on the need to pay a certain amount of money to the other party to the obligation.

The disputed clause of the agreement provides for the possibility of unilaterally terminating the agreement before its expiration on any other grounds other than those expressly specified in the agreement, however, the condition for such termination is for the tenant to retain the deposit by the lessor, and for the lessor to pay the deposit in double amount. In accordance with Article 329 of the Civil Code of the Russian Federation, the fulfillment of obligations can be ensured by a penalty, a pledge, retention of the debtor’s property, a surety, a bank guarantee, a deposit and other methods provided for by law or contract. In this case, the deposit was paid and retained by the lessor as a guarantee of the proper fulfillment by the lessee of his obligations under the contract, which does not contradict the provisions of this legal norm. Thus, the parties have determined the procedure for terminating the contract, which provides for a special condition for early unmotivated unilateral termination of the contract, which does not contradict the provisions of Articles 329, 421 of the Civil Code of the Russian Federation.

Since the retention of the deposit by the lessor is not related to the parties’ violation of contractual obligations, and in the presence of certain circumstances is a condition for termination of the contract, the courts’ qualification of the deposit amount as a penalty is based on an erroneous interpretation of the law. In this case, the parties, when concluding the contract, determined the amount of compensation that should be paid by one of the parties upon cancellation of the contract. The fact that such compensation is called a fine in the contract does not change its essence, which is not to hold liable the party who decided to terminate the contract early, but, on the contrary, to provide the opportunity to terminate the contract without giving any reasons to either party.

Since the Civil Code of the Russian Federation allows for any methods of securing obligations provided for by law or contract, there are no grounds for invalidating the disputed clause of the contract in terms of the condition providing for the lessor’s right to withhold the deposit as a penalty for early termination of the contract, aimed at ensuring the tenant’s fulfillment of the terms of the contract and guaranteeing the legitimate interests of the landlord during its execution (definition No. 305-ES15-6784).

————

[1] Review of judicial practice of the Supreme Court of the Russian Federation No. 1 (2016).

Grounds for unilateral termination of the contract

The first basis is as follows: if the law or agreement provides for the option of unilateral termination of a contract, such a contract is considered terminated.

The second reason is a significant violation of the terms of the transaction by the second party.

The legislator defines a significant violation as a situation when one party may suffer such damage that it may lose everything that it planned to receive during the transaction.

The third ground is a significant change in circumstances. This means that circumstances have changed in such a way that if the parties could have foreseen this, the contract would not have been signed at all.

This is a list of grounds that can be applied to all transactions. However, the provisions of the Civil Code also provide for special cases for each specific agreement.

Significant change in circumstances as a reason for termination of the contract

It's no secret that when concluding transactions, each party tries to calculate all the risks for themselves and get the maximum profit. A striking example of this is the possibility of unilateral termination of the contract, but it is quite possible that one of the parties will be satisfied with everything and refuse to terminate. Then the other party will have to go to court.

In accordance with Art. 451 of the Civil Code of the Russian Federation, in connection with a significant change in circumstances, the contract may be terminated or amended by the court at the request of the interested party if the following conditions are simultaneously present:

At the time of concluding the contract, the parties assumed that such a change in circumstances would not occur;
The change in circumstances was caused by reasons that the interested party could not overcome after their occurrence with the degree of care and prudence that was required of it by the nature of the contract and the conditions of turnover;
Execution of the contract without changing its terms would so violate the relationship of property interests of the parties corresponding to the contract and would entail such damage for the interested party that it would largely lose what it had the right to count on when concluding the contract;
It does not follow from business customs or the essence of the contract that the risk of changes in circumstances is borne by the interested party.

Due to the current situation in the country, more and more organizations are trying to terminate the contract due to the unstable financial situation. Is it possible, referring to the financial crisis as a significant change in circumstances, to terminate or change this agreement in court on the basis of Art. 451 of the Civil Code of the Russian Federation? Let's consider.

Due to the crisis, the company went bankrupt and is unable to fulfill its obligations under the contract to the counterparty. It is quite difficult to convince the court that the consequences of the financial and economic crisis may affect the ability of a party to a contract to fulfill its obligations. Judicial practice does not give a clear answer to the question of whether it is possible to change or terminate a contract, citing the financial crisis as the reason for a significant change in circumstances. However, in each specific case it is necessary to prove that it was because of the financial crisis that all of the above conditions arose.

Unilateral termination of the contract: algorithm of actions

There are 2 options for unilateral termination of the contract:

We select the basis for termination of the contract and draw up a notice. As a general rule, it is sent to the counterparty, and the party that sent it waits for a response. You don’t have to wait long: either within the period specified in the contract or notice, or within 30 days.

If they respond to your notice and agree to terminate the contract, a termination agreement must be drawn up.

The legislator clearly states that the agreement to terminate the contract must be drawn up in the same form as the contract itself. There are no further requirements for this document, from which we can conclude that it is drawn up in any form and its content depends only on the will of the parties.

Result: the agreement was signed, the contract was terminated.

Judicial. If you sent a notice of termination to the counterparty, and he does not respond within the prescribed period, then you have the right to file an application with the court.

Thus, unilateral termination of the contract is possible. Moreover, due to recent events in the financial sector, this option for terminating relationships has become quite widespread. In order to competently carry out this legal action, it is worth studying judicial practice in more detail.

You can minimize risks when working with counterparties by automating contractual activities.

Grounds for refusal to perform the contract

Unilateral termination of the contract is possible only in situations provided for by current legislation. They are grouped as follows:

cases when both or one of the parties to the agreement, at their own discretion, wants to refuse its execution. In this case, the initiator assumes certain additional obligations.
cases when the contract is terminated due to the counterparty’s failure to fulfill its obligations.
events that are associated with the occurrence of circumstances unforeseen by one of the parties to the contract and independent of its will.
cases when the counterparty is unable to fully or partially fulfill its obligations.
agreements that have special specifics, and termination of the contract is provided exclusively unilaterally: unlimited, fiduciary, etc.

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Termination of the contract at the initiative of one party

GENERAL PROVISIONS

Russian legislation, in addition to the termination of a contract by agreement of the parties, in which the parties act by mutual agreement, provides for the termination of a contract at the initiative of one party.

The initiator of termination of the concluded contract is only one party, while the other party does not take any active part.

The rules on unilateral termination are mandatory in nature, despite the fact that in the case of termination by agreement of the parties, the parties are given fairly broad freedom to act at their own discretion, guided by the principle of discretion, which is the basis of the rules on such termination.

Current Russian legislation provides for two types of termination of a contract at the initiative of one party:

termination of the contract without recourse to the courts;

termination of the contract in court.

PROCEDURE FOR TERMINATION OF THE AGREEMENT AT THE INITIATIVE OF ONE PARTY

Judicial procedure for unilateral termination of a contract

The peculiarity of termination of a contract at the initiative of one party is that such termination is generally permitted in court. For such termination there must be grounds specified in the law, only in this case the business entity as a party to the contract will have the legal right to present a demand for termination of the contract in court.

It is imperative to follow the pre-trial procedure for resolving the dispute. The pre-trial procedure for resolving a dispute is an important stage in the process of terminating a contract, the absence of which entails an unconditional refusal to consider the claims of the party that expressed its intention to terminate the contract.

The main idea, according to which the legislator introduced the obligation to comply with such a procedure, is to provide the parties to a terminated contract, usually a broken one, with the opportunity to resolve all disagreements that have arisen peacefully through negotiations.

Regarding the necessity and mandatory compliance with such a procedure, there are positions of the highest courts, which are based on the approach in which the party terminating the contract must provide all available and possible evidence that it has taken all measures to resolve the dispute peacefully.

However, the pre-trial settlement procedure is currently quite formal and consists of the following. The party intending to terminate the contract sends the violating party a document, which can be in different forms: a claim, a proposal, outlining its demands and offering a peaceful settlement. Such a document specifies the deadline for providing a response to such a proposal or claim, after which the party has the right to file a claim in court. In this case, it does not matter whether the peaceful settlement is refused by the violating party, or whether no response is received from it at all. Of legal significance is the fact that the potential plaintiff sends a document in which a peaceful settlement of disagreements will be proposed, as well as the expiration of the deadline for a response.

The deadline for providing a response to a proposal for some types of contracts is determined by law, for example, for a supply contract. The deadline may be provided for in the agreement between the parties or in the text of the document being sent. In this case, it is important that the period must be reasonable for this type of legal relationship. Regarding those cases where a period was not provided for anywhere, such a period, as a general rule, is thirty days.

After following the pre-trial settlement procedure, the party wishing to terminate the contract unilaterally applies to the court with a demand for such termination.

Judicial practice develops in such a way that if all the requirements are met, and the grounds for such termination actually exist, a decision is made to terminate with all the ensuing consequences, for example, compensation for losses.

The presence of grounds for unilateral termination of the contract is of decisive importance. In most cases, this basis is a significant violation of the contract by one of the parties.

Extrajudicial procedure for unilateral termination of a contract

The out-of-court procedure for resolving a dispute, unlike the judicial procedure for resolving a dispute, is quite simple. A party who wishes to terminate a contract may be given the right to terminate the contract at his own request by notifying the other party without resorting to judicial authorities. The essence of this termination procedure is the complete unilateral refusal of one party to the contract to perform. In the Civil Code of the Russian Federation, the extrajudicial procedure for terminating a contract is referred to as a refusal of the contract.

However, this procedure does not apply to all contracts concluded between the parties, but only in certain cases and to certain types of legal relations. In case of unilateral refusal of the contract in full, if such refusal is allowed, the contract is considered terminated. At the same time, such unilateral termination may be provided for by law, and in some cases in the contract itself.

For example, the landlord has such an opportunity in the following cases:

the tenant uses the property with a significant violation of the terms of the contract or the purpose of the property or with repeated violations;
the tenant significantly degrades the property;
the tenant fails to pay rent more than two times in a row after the expiration of the payment period established by the contract;
does not carry out major repairs of the property within the terms established by the lease agreement, or, if they are not included in the agreement, within a reasonable time.

There are some requirements. The landlord has a duty to give written warning to the tenant that he must comply with the statutory obligations within a reasonable time. Only after sending such a warning can the lessor request early termination of the contract.

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The procedure for unilateral refusal to fulfill a contract

If there are grounds for terminating the contract, it is possible to refuse to perform it unilaterally. To do this, you must send a corresponding notification to the counterparty.

It is advisable to provide the notification in writing. It must specifically indicate the intention - termination of the contract, indicating the wording of the law and references to the contract.

It is important to keep documents confirming the sending of the notice and the fact of its delivery to the counterparty, since the contract is terminated from the moment the opposite party receives the notice. This could be a postal receipt, a postal notification with a list of attachments, etc.

It is worth keeping in mind that in some cases it is necessary to pay a fee to the counterparty for a unilateral refusal.