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Delay payment of the goods

March 23, 2018, midnight

Delay payment of the goods

 

Material breach of contract constitutes one of the grounds for its termination at the request of one of the parties in court. In order for the failure or improper performance of obligation was found to be significant, it must possess in the aggregate the following characteristics:

1) the consequence of such action (or inaction) is the occurrence of damage to the other party;

2) the other party is deprived of substantially what it was entitled to expect under the contract (paragraph 2 of article 450 of the civil code).

At the legislative level, the interpretation of the term "significant degree" is not fixed. Therefore, in each specific case, the court on its own conviction evaluates and sets the "significance" of deprivation the fact that she was supposed to receive as a result of conclusion of the contract.

Non-payment of the goods (things) are not always recognized a fundamental breach of contract. We will try to understand the individual nuances of termination of the contract on this basis.

As a General rule, if the buyer does not pay for the goods (thing), the seller may at its option either require payment of the goods (things) or to refuse performance of the contract (paragraph 4 of article 486 of the civil code). A literal interpretation of this provision implies that it concerns only goods (things). However, this situation could equally apply to property rights to the sale of real property, unless otherwise arises from the content or nature of these rights and are provided for by special rules about purchase and sale of these objects of civil rights accordingly (article 454 of the civil code). If the buyer after receiving notice of the termination of the contract of purchase and sale and demands the return of the property, does not fulfill the latter, the seller is entitled under paragraph 2 of article 450 of the civil code to apply to the court for protection of their rights and interests. The fact of state registration of the transfer of ownership to the buyer of real estate and the fact of transfer of ownership of the share in the authorized capital of the limited liability company or of the shares is not an obstacle for termination of the contract according to section 2 of article 450 of the civil code (paragraph 65 of the Resolution of Plenum VS of the Russian Federation No. 10 of the Plenum of the Russian Federation No. 22 dated 29.04.2010, "On certain questions arising in judicial practice when resolving disputes relating to the protection of the right of ownership and other real rights"; the Resolution of Presidium of the Russian Federation of 11.10.2011 № 5950/11 on business № A40-66193/10-83-605).

At the same time, the seller of the goods (things) that have not received payment, it is necessary to consider that such disputes should follow the principle of "equivalence" is executed (unexecuted) of liabilities. In other words, if the court "violation of equivalence mutual consideration due to non-performance or improper performance of the duties of one of the parties, the party who transfers property, the right to demand the return of transferred to the other party to the extent that it violates agreed upon by the parties, the equivalence of mutual consideration. For example, if the buyer paid five instalments and only got two, upon termination of the contract he is entitled to demand either a refund of amounts paid for three batches of the product, or refund the entire payment, subject to the return of the goods" (p. 5 resolution of the Plenum of the Russian Federation dated 06.06.2014, № 35 "On the effects of avoidance"; the Decision of Arbitration court of the Moscow district from 14.04.2017, No. Ф05-3803/2017).

As for the evaluation of the "materiality" of breach of contract or "significant extent" of deprivation of things that the party expected at the conclusion of the contract, then there is a different jurisprudence. In some cases, the courts place particular emphasis on the fact that a long period of time of non-performance by the buyer of obligations on payment evidence of the materiality of the breach of a Treaty obligation (the Definition of the RF dated 10.04.2012 № VAS – 3535/12 in case number A50-5628/2011). In others, on the contrary, indicate that the absence of a material breach of the agreement is confirmed by omission of the seller for an extended period, expressed in the failure of the relevant requirements to the buyer (the Resolution of FAS of the Ural district from 03.08.2010, № F09-5978/10-C4). The latest trend of the Supreme Court in the decision of such question set forth in paragraph 8 of the Overview of court practice of the Supreme Court No. 5 (2017). The Supreme Court expressed the view that, if the fact of receipt by the seller no monetary amount for the sold property, an obvious fact is considered his deprivation of what he was entitled to expect under the contract.

In cases of termination of the contract at paragraph 2 of article 450 of the civil code is interesting given the chance of termination due to material breach of terms of payment as a result of making the buyer of funds to the notary Deposit. The courts take the position of the seller and do not recognize this method of calculation is appropriate in any of the following cases:

■ when there is no proof of the impossibility of transferring cash directly to the seller;

■ when the payment is made in a notary Deposit upon presentation of the claim (Decision of the Presidium of the SAC dated 23.06.2009 No. 4651/09).

In considering this question, I can not mention that if the seller refuses to accept performance under the contract of sale, then such action "threatens" him by getting refusal in satisfaction of requirements for termination of the agreement according to paragraph 2 of article 450 of the civil code of the Russian Federation (item 9 of the Information letter of the Presidium of SAC dated 05.05.1997, No. 14 "the Review of practice of resolution of disputes connected with the conclusion, modification and termination of contracts").

Summing up the above, we recommend you to minimise the risk of disputes about termination of the contract due to fundamental breach of terms of payment and incurring the burden of additional financial costs to provide in the contract of sale the transfer of ownership of the goods (thing) after payment.