Civil Code Part II

CIVIL CODE OF THE RUSSIAN FEDERATION

(part two)

Adopted by the State Duma

Approved by the Federation Council

 

Date: 22 December 1995

 

Section IV. Individual types of obligations.

 

Chapter 30. Purchase and Sale

Chapter 31. Barter

Chapter 32. Donation

Chapter 33. Annuity and Lifelong Maintenance with Dependence

Chapter 34. Lease

Chapter 35. Renting of Living Accommodation

Chapter 36. Free Use

Chapter 37. Contract

Chapter 38. Performance of Research, Design and Technological Works

Chapter 39. Services Provided for Compensation

Chapter 40. Carriage

Chapter 41. Transport Forwarding

Chapter 42. Loan and Credit

Chapter 43. Financing Against Assignment of Monetary Claim

Chapter 44. Bank Deposit

Chapter 45. Bank Account

Chapter 46. Settlements

Chapter 47. Safekeeping

Chapter 48. Insurance

Chapter 49. Order

Chapter 50. Actions in Another's Interests Without Order

Chapter 51. Commission

Chapter 52. Agency Service

Chapter 53. Trust Management of Property

Chapter 54. Commercial Concession

Chapter 55. Society in Participation

Chapter 56. Public Promise of Reward

Chapter 57. Public Competition

Chapter 58. Holding of Games and Bets

Chapter 59. Obligations in Consequence of Causing of Harm

Chapter 60. Obligations in Consequence of Unjustified Enrichment

 

 

 

Chapter 30. Purchase and Sale

 

General Provisions on Purchase and Sale

Article 454. Sale Contract

1. Under a sale contract, one party (the seller) shall be obliged to transfer the ownership of the goods to the other party (the buyer) and the buyer shall be obliged to accept these goods and pay for them a sum of money (the price).

2. The provisions stipulated by the present paragraph shall apply to the purchase and sale of securities and currency valuables, unless special rules of the sale thereof have been established by law.

3. In the instances provided by the present Code or other law, the specifics in the purchase and sale of individual types of goods shall be determined by laws and other legal acts.

4. The provisions of the present paragraph shall apply to the sale of property rights, unless it follows otherwise from the contents and nature of these rights.

5. The provisions of the present paragraph shall apply to individual types of sale contracts (retail sale, delivery of goods, delivery of goods for State needs, contracting, power supply, sale of real estate, sale of an enterprise), unless otherwise provided by the rules of the present Code relating to these types of contracts.

Article 455. Contract Clause on Goods

1. The goods under a sale contract may include any things, provided the rules of Article 129 of the present Code are observed.

2. A contract may be concluded for the purchase and sale of goods available from the seller at the moment of concluding the contract, as well as goods that will be created or acquired by the seller in the future, unless otherwise established by law or follows from the nature of goods.

3. A clause in a sale contract relating to the goods shall be deemed to have been agreed, if the contract enables to determine the name and quantity of the goods.

Article 456. Duties of Seller with Respect to Transfer of Goods

1. The seller shall be obliged to transfer to the buyer the goods specified by the contract.

2. Unless otherwise provided by the contract, the seller shall be obliged, simultaneously with the transfer of the thing, to transfer to the buyer its accessories, and also related documents (technical passport, quality certificate, operating instruction, etc.) specified by a law, other legal acts, or contract.

Article 457. Time of Performance

1. The time for the seller to perform the duty to transfer the goods to the buyer shall be determined by the sale contract, and if the contract does not enable to determine this time - in accordance with the rules provided by Article 314 of the present Code.

2. A sale contract shall be deemed to have been concluded with the proviso that it be performed by a strictly specified time if it expressly follows from the contract that, should this term be violated, the buyer shall lose interest in the contract.

The seller shall have the right to execute such contract before the commencement or after the expiration of the term specified therein only with the buyer's consent.

Article 458. Moment of Performance by Seller of Duty to Transfer Goods

1. Unless otherwise provided by the sale contract, the seller's duty to transfer the goods to the buyer shall be deemed to have been performed at the moment when:

- the goods have been handed over to the buyer or the party specified by him if the contract has provided for the seller's duty to deliver the goods; and

- the goods have been placed at the buyer's disposal if the goods are to be handed over to the buyer or the party specified by him at the place of location of the goods. The goods shall be deemed to have been placed at the buyer's disposal when by the time specified by the contract the goods are ready for the transfer at the proper place and the buyer has been informed, in accordance with the contract terms and conditions, about the readiness of the goods for the transfer. The goods shall not be recognized as ready for the transfer if they have not been identified for the purposes of the contract by way of marking or in some other way.

2. In instances where the seller's duty to deliver the goods or transfer the goods at the location thereof to the buyer does not follow from the contract, the seller's duty to hand the goods over to the buyer shall be deemed to have been performed at the moment of delivering the goods to the carrier or organization engaged for delivering the goods to the buyer, unless otherwise provided by the contract.

Article 459. Transfer of Risk of Accidental Loss of Goods

1. Unless otherwise provided by the contract, the risk of accidental loss of or accidental damage to the goods shall pass to the buyer from the moment when, in accordance with a law or contract, the seller is deemed to have performed his duty to transfer the goods to the buyer.

2. The risk of accidental loss of or accidental damage to the goods sold while en route shall pass to the buyer from the moment of concluding the sale contract, unless otherwise provided by such contract or business customs.

The contract clause saying that the risk of accidental loss of or accidental damage to the goods shall pass to the buyer from the moment when the goods have been handed over to the first carrier, may at the buyer's demand be deemed invalid by a court if at the moment of concluding the contract the seller knew and should have known that the goods were lost or damaged and did not inform the buyer thereof.

Article 460. Seller's Duty to Transfer Goods Free of Rights of Third Parties

1. The seller shall be obliged to transfer the goods to the buyer free of any rights on the part of third parties, except in the instance where the buyer has agreed to accept the goods encumbered by the rights of third parties. The non-observance of this duty by the seller shall entitle the buyer to demand that the purchase price of the goods be reduced or the contract be cancelled, unless it will be proved that the buyer knew or should have known of the third parties' rights to these goods.

2. The rules provided by point 1 of the present Article shall accordingly apply also in the instance where third parties had claims with regard to the goods at the moment of transferring them to the buyer, of which the buyer was aware of, if these claims were subsequently deemed in the established procedure to be justified.

Article 461. Seller's Responsibility in Case of Withdrawal of Goods from Buyer

1. If goods are withdrawn from the buyer by third parties on the grounds which arose before the fulfilment of a contract, the seller shall be obliged to compensate the buyer for losses caused, unless he proves that the buyer knew or should have known about the presence of such grounds.

2. An agreement between the parties to release the seller from responsibility in the event that the acquired goods have been taken from the buyer at third parties' demand shall be invalid.

Article 462. Duties of Buyer and Seller in Case of Presentation of Claim for Withdrawal of Goods

1. If a third party upon the ground that has arisen prior to the execution of the sale contract presents to the buyer a claim for the withdrawal of goods, the buyer shall be obliged to involve the seller to participate in the case, whereas the seller shall be obliged to participate in the case on the buyer's side.

The buyer's failure to draw the seller to participation in the case shall release the seller from responsibility to the buyer if the seller proves that by having taken part in the case he could have prevented the withdrawal of sold goods from the buyer.

The seller who was invited by the buyer to take part in the case but never participated in it, shall be deprived of the right to prove the buyer's improper conduct of the case.

Article 463. Consequences of Failure to Perform Duty to Transfer Goods

1. If the seller refuses to transfer the sold goods to the buyer, the buyer shall have the right to refuse to execute the sale contract.

2. If the seller refuses to transfer a specified thing, the buyer shall have the right to present claims to the seller as provided by Article 398 of the present Code.

Article 464. Consequences of Failure to Perform Duty to Transfer Accessories and Documents Pertaining to Goods

If the seller has not transferred or refuses to transfer to the buyer the accessories or documents pertaining to the goods which he must transfer in accordance with a law, other legal acts, or sale contract (Article 456[2]), the buyer shall have the right to set a reasonable period of time for him to transfer them.

Should the seller fail to transfer the accessories or documents pertaining to the goods within the specified period, the buyer shall have the right to refuse the goods, unless otherwise provided by the contract.

Article 465. Quantity of Goods

1. The quantity of goods to be transferred to the buyer shall be specified by a sale contract in relevant measurement units or in terms of money. A clause specifying the quantity of goods may be agreed by establishing in the contract a procedure for the determination thereof.

2. If a sale contract does not enable to determine the quantity of goods to be transferred, the contract shall be deemed to have not been concluded.

Article 466. Consequences of Violation of Quantity Clause of Contract

1. If the seller in violation of the sale contract has transferred to the buyer a quantity of goods smaller than that specified by the contract, the buyer shall have the right, unless otherwise provided by the contract, either to demand that the vantage of goods be transferred or to refuse the goods transferred and refuse to pay therefore and, should the goods have already been paid for, to demand that the sum of money paid be returned.

2. If the seller has transferred to the buyer a quantity of goods exceeding that specified in the sale contract, the buyer shall be obliged to notify the seller thereof in the procedure provided by Article 483(1) of the present Code. If within a reasonable period of time from the receipt of the buyer's notification the seller fails to dispose of the goods in question, the buyer shall have the right, unless otherwise provided by the contract, to accept the entire quantity.

3. If the buyer has accepted a quantity of goods exceeding that specified in the sale contract (point 2 of the present Article), the additionally accepted goods shall be paid for at the price established for the goods accepted under contract, unless a different price has been determined by agreement of the parties.

Article 467. Assortment of Goods

1. If under a sale contract the goods are to be transferred in certain proportions by types, models, sizes, colours or other parameters (assortment), the seller shall be obliged to transfer to the buyer the assortment of goods agreed by the parties.

2. If the assortment has not been specified in the sale contract and the contract has not established a procedure to determine it, but it follows from the essence of the obligation that the goods must be transferred to the buyer in assortment, the seller shall have the right to transfer to the buyer the goods in assortment proceeding from the buyer's needs which were known to the seller at the moment of concluding the contract or he shall have the right to refuse to execute the contract.

Article 468. Consequences of Violation of Assortment Clause of Contract

1. If the seller transfers goods under contract in the assortment out of the accordance with the contract, the buyer shall have the right to refuse to accept them and pay for them and, should they have already been paid for, to demand that the sum of money paid be returned.

2. If the seller, alongside the goods whose assortment complies with the contract, has transferred to the buyer the goods in violation of the contract's assortment clause, the buyer shall have the right, at his discretion, to:

- accept the goods complying with the contractual assortment terms and refuse the rest of the goods;

- refuse all transferred goods;

- demand to replace the goods out of accordance with the assortment terms of the contract by goods in the assortment provided by the contract;

- accept all goods transferred.

3. When refusing the goods whose assortment does not correspond to the contract terms or presenting a demand for the replacement of goods inconsistent with the assortment clause of the contract, the buyer shall also have the right to refuse to pay for these goods and, should they have already been paid for, demand that the sum paid be returned.

4. The goods failing to comply with the assortment clause of the contract shall be deemed to have been accepted if the buyer within a reasonable period of time from the moment of receiving them has not informed the seller about his refusal to accept them.

5. If the buyer has not refused the goods whose assortment is out of accordance with the sale contract, he shall be obliged to pay for them at a price agreed upon with the seller. If the seller has failed to take necessary measures in order to agree the price within a reasonable period, the buyer shall pay for the goods at a price which as at the conclusion of the contract was ordinarily paid for similar goods under comparable circumstances.

6. The rules of the present Article shall apply, unless otherwise provided by the sale contract.

Article 469. Quality of Goods

1. The seller shall be obliged to transfer to the buyer the goods whose quality is in conformity with the sale contract.

2. If the quality of goods has not been specified in the contract, the seller shall be obliged to transfer to the buyer the goods fit for the purposes for which this type of goods is ordinarily used.

If, while concluding the contract, the seller was informed by the buyer about the specific purposes for which the goods were to be acquired, the seller shall be obliged to transfer to the buyer the goods fit for the use in accordance with these purposes.

3. When selling the goods by sample and/or description, the seller shall be obliged to transfer to the buyer the goods which come up to sample and/or answer the description.

4. If, in accordance with the procedure established by law, obligatory requirements have been provided for the quality of sold goods, the seller who engages in entrepreneurial activity shall be obliged to transfer to the buyer the goods meeting these obligatory requirements.

An agreement between the seller and the buyer may provide for the transfer of goods meeting more exacting quality requirements as compared with the obligatory requirements set according to the procedure established by law.

Article 470. Guarantee of Quality of Goods

1. The goods which the seller shall be obliged to transfer to the buyer must meet the requirements specified by Article 469 of the present Code at the time of the transfer thereof to the buyer, unless some other time to determine the compliance of the goods with these requirements has been provided by the sale contract and, during a reasonable period, they must be fit for the purposes for which this type of goods is ordinarily used.

2. In the event that a sale contract obligates the seller to provide quality guarantee for the goods, the seller shall be obliged to transfer to the buyer the goods which must meet the requirements provided by Article 469 of the present Code within a certain period of time established by contract (guarantee period).

3. Quality guarantee for the goods shall also extend to all of their components (complementary parts), unless otherwise provided by the sale contract.

Article 471. Calculation of Guarantee Period

1. A guarantee period shall commence from the moment of transferring the goods to the buyer (Article 457), unless otherwise provided by the sale contract.

2. If in view of the circumstances for which the seller is responsible the buyer has been deprived of the possibility to use the goods, for which a guarantee period has been established by the contract, the guarantee period shall not be counted until the elimination by the seller of the respective circumstances.

Unless otherwise provided by contract, a guarantee period shall be extended for a period during which the goods could not have been used because of defects revealed in them on condition that the seller has been notified about the defects in the goods according to the procedure established by Article 483 of the present Code.

3. Unless otherwise provided by the sale contract, a guarantee period for a complementary part shall be considered equal to the guarantee period for the prime product and its commencement shall coincide with the guarantee period for the prime product.

4. For the goods (complementary parts) transferred by the seller instead of the goods (complementary parts) in which defects were discovered during the guarantee period, a guarantee period shall be established equal in duration to that for the replaced goods, unless otherwise provided by the sale contract.

Article 472. Serviceable Life

1. A law, other legal acts, obligatory requirements of State standards, or other obligatory rules may set a period of time upon the expiration of which the goods shall be considered unfit to be used for their proper purpose (serviceable life).

2. The seller shall be obliged to transfer to the buyer the goods with a specified serviceable life so that they could be used for their purpose before the expiration of their serviceable life.

Article 473. Calculation of Serviceable Life of Goods

The serviceable life of goods shall be determined by a period of time calculated from the day of the manufacture thereof, during which the goods are fit for use, or by the date before the approach of which the goods are fit for use.

Article 474. Checking Quality of Goods

1. Checking the quality of goods may be prescribed by a law, other legal acts, obligatory requirements of State standards, or by a sale contract.

A procedure to check the quality of goods shall be established by a law, other legal acts, obligatory requirements of State standards, or contract. In instances where the checking procedure has been established by a law, other legal acts, or obligatory requirements of State standards, a procedure to check the quality of goods determined by a contract shall conform with these requirements.

2. If a procedure to check the quality of goods has not been established in accordance with point 1 of the present Article, the quality of goods shall be checked in conformity with business customs or other conditions ordinarily used for the control of the goods subject to the transfer under a sale contract.

3. If a law, other legal acts, obligatory requirements of State standards, or a sale contract provide for the seller's duty to check the quality of goods transferred to the buyer (testing, analysis, inspection, etc.), the seller must present to the buyer evidence proving that the quality of goods has been checked.

4. Both the seller and the buyer shall use the same procedure and other conditions when checking the quality of goods.

Article 475. Consequences of Transfer of Inadequate Quality Goods

1. If defects of the goods have not been stipulated by the seller, the buyer to whom inadequate quality goods were transferred shall have the right, at his discretion, to demand the following from the seller:

- commensurate reduction of the purchase price; and

- elimination of defects of the goods free of charge within a reasonable period of time; compensation of his expenses connected with the elimination of defects of the goods.

2. In case of a serious violation of requirements relating to the quality of goods (finding incurable defects, defects which cannot be removed without incommensurate expenses or labour hours or which are detected repeatedly or appear again after their removal, and other similar defects), the buyer shall have the right, at his discretion, to:

- refuse to execute the sale contract and demand that the sum of money paid for the goods be returned; and

- demand to replace the inadequate quality goods by goods complying with the contract.

3. The demands to eliminate defects or replace goods mentioned in points 1 and 2 of the present

Article may be presented by the buyer, unless it follows otherwise from the nature of goods or the essence of the obligation.

4. In the event that a portion of the goods in the complete set (Article 479) are of inadequate quality, the buyer shall have the right to exercise in respect of this portion of goods the rights mentioned in points 1 and 2 of the present Article.

5. The rules provided by the present Article shall apply, unless otherwise established by the present Code or other law.

Article 476. Defects of Goods for Which Seller is Responsible

1. The seller shall be responsible for defects of the goods if the buyer proves that the defects in the goods have appeared before the transfer thereof to the buyer or for reasons arisen prior to this moment.

2. As regards the goods for which a quality guarantee has been provided by the seller, the seller shall be responsible for defects of the goods if he proves that the defects have appeared in the goods after the transfer thereof to the buyer as a consequence of a violation by the buyer of the rules of use and storage of goods or of actions by third parties or force majeure.

Article 477. Time Limits to Reveal Defects in Transferred Goods

1. Unless otherwise provided by a law or sale contract, the buyer shall have the right to present demands concerning defects in the goods provided that they have been revealed within the time limits established by the present Article.

2. When no guarantee period or serviceable life has been established for the goods, demands concerning defects may be presented by the buyer on condition that defects in the sold goods have been revealed within a reasonable period of time, but not later than two years from the day of transferring the goods to the buyer or within a longer period where such period has been set by a law or sale contract. Time limits to find out defects in the goods subject to transportation or dispatch by mail shall be calculated from the date of receiving the goods at the place of destination.

3. If a guarantee period has been established for the goods, the buyer shall have the right to present demands connected with defects in the goods when these have been revealed during the guarantee period.

If a sale contract has stipulated a guarantee period for complementary parts shorter than that for the prime product, the buyer shall have the right to present demands concerning defects in a complementary part when these have been revealed during the guarantee period for the prime product.

If a contract has stipulated a guarantee period for a complementary part longer than the guarantee period for the prime product, the buyer shall have the right to present demands concerning defects in the goods if the defects in the complementary part have been revealed during the guarantee period therefore irrespective of the expiration of the guarantee period for the prime product.

4. As regards the goods for which a serviceable life has been established, the buyer shall have the right to present demands concerning defects of the goods if these have been revealed during the serviceable life of the goods.

5. In instances where a contract has provided for a guarantee period shorter than two years and defects in the goods have been revealed by the buyer upon the expiration of the guarantee period, but within two years from the day of transferring the goods to the buyer, the seller shall bear responsibility if the buyer proves that the defects in the goods appeared before the transfer of the goods to the buyer or for reasons arisen prior to this moment.

Article 478. Completeness of Goods

1. The seller shall be obliged to transfer to the buyer the goods in conformity with the completeness clauses of the sale contract.

2. If a sale contract has not determined the completeness of the goods, the seller shall be obliged to transfer to the buyer the goods whose completeness shall be determined by business customs or by other typically presented claims.

Article 479. Set of Goods

1. If a sale contract provides for the seller's duty to transfer to the buyer a certain selection of goods as a set (complete set of goods), the obligation shall be deemed to have been fulfilled from the moment of transferring all goods included in the set.

2. Unless otherwise provided by a sale contract and follows from the essence of the obligation, the seller shall be obliged to simultaneously transfer to the buyer all the goods included in the set.

Article 480. Consequences of Transfer of Incomplete Goods

1. In the event that incomplete goods have been transferred, the buyer shall have the right, at his discretion, to demand the following from the seller:

- commensurate reduction of the purchase price; and

- making the set of goods complete within a reasonable period.

2. If the seller has not within a reasonable period fulfilled the buyer's demand to make the goods complete, the buyer shall have the right, at his discretion, to:

- demand that incomplete goods be replaced by a complete set; and

- refuse to execute the contract and demand that the sum of money paid for them be returned.

3. Consequences provided by points 1 and 2 of the present Article shall also apply when the seller has violated the duty to transfer to the buyer a complete set of goods (Article 479), unless otherwise provided by the sale contract and follows from the essence of the obligation.

Article 481. Tare and Packing

1. Unless otherwise provided by a sale contract and follows from the essence of the obligation, the seller shall be obliged to transfer to the buyer the goods in tare and/or packing, except for the goods which do not require tarring and/or packing in view of their nature.

2. Unless a sale contract has specified the tare and packing requirements, the goods must be tarred and/or packed in a manner customary for this type of the goods, and in the absence thereof in a manner which ensures safety of this type of goods under normal storage and transportation conditions.

3. If the statutory procedure provides for obligatory tare and/or packing requirements, the seller who engages in entrepreneurial activity shall be obliged to transfer to the buyer the goods in tare and/or packing meeting these obligatory requirements.

Article 482. Consequences of Transferring Goods Without Tare and/or Packing or in Improper Tare and/or Packing

1. In the event that the goods subject to tarring and/or packing have been transferred to the buyer without tare and/or packing or in improper tare and/or packing, the buyer shall have the right to demand from the seller that the goods be tarred and/or packed or improper tare and/or packing be replaced, unless it follows otherwise from the essence of the obligation or the nature of the goods.

2. In instances specified by point 1 of the present Article the buyer shall have the right, instead of presenting to the seller the demands mentioned in this point, to present him other demands arising from the transfer of inadequate quality goods (Article 475).

Article 483. Notifying Seller about Improper Execution of Sale Contract

1. The buyer shall be obliged to notify the seller about a violation of contractual terms for the quantity, assortment, quality, completeness, tare and/or packing within a period of time provided by a law, other legal acts, or contract, and if such period has not been fixed - within a reasonable period after the violation of the respective contract term must have been revealed, proceeding from the nature and purpose of the goods.

2. Should the buyer fail to follow the rule mentioned by point 1 of the present

Article, the seller shall have the right to refuse completely or partially to satisfy the buyer's demands concerning the transfer of vantage to him, the replacement of goods inconsistent with the quality or assortment clauses of the sale contract, the elimination of defects of goods, making the goods complete or replacing incomplete goods by a complete set, the tarring and/or packing of goods or replacement of inadequate tare and/or packing if he proves that the buyer's failure to follow this rule has made it impossible to satisfy his demands or entails for the seller incommensurate expenses as compared with those he could have suffered should he have been timely informed about the violation of the contract.

3. If the seller knew or should have known that the goods transferred to the buyer did not comply with the sale contract terms and conditions, he shall not have the right to refer to the provisions of points 1 and 2 of the present Article.

Article 484. Duty of Buyer to Accept Goods

1. The buyer shall be obliged to accept the goods transferred to him by the seller, except in the instances where he has the right to demand to replace the goods or to refuse to execute the sale contract.

2. Unless otherwise provided by a law, other legal acts or sale contract, the buyer shall be obliged to perform acts which in accordance with typically presented demands are necessary on his part in order to ensure the transfer and receipt of respective goods.

3. In instances where the buyer in violation of a law, other legal acts or sale contract does not accept or refuses to accept the goods, the seller shall have the right to demand from the buyer that the goods be accepted or refuse to execute the contract.

Article 485. Price of Goods

1. The buyer shall be obliged to pay for the goods at the price set by the sale contract or, if it has not been specified by the contract and cannot be determined proceeding from its terms and conditions, at a price determined in accordance with Article 424(3) of the present Code, as well as perform the acts at his expense which in accordance with a law, other legal acts, contract or typically presented demands are necessary to make payment.

2. Where the price has been established depending on the weight of goods, it must be determined by net weight, unless otherwise provided by the sale contract.

3. If a sale contract provides that the price of goods shall be subject to revision depending on the indices underlying the price of goods (prime cost, expenses, etc.), but no procedure has been established to revise the price, the price shall be determined proceeding from the ratio of these indices as of the moment of concluding the contract and fulfilling the duty to transfer the goods. If the seller fails to fulfil the duty to transfer the goods in time, the price shall be determined proceeding from the ratio of these indices as of the moment of concluding the contract and the date of transferring the goods as provided by the contract and if such date has not been specified by the contract - as of the date determined in accordance with Article 314 of the present Code.

The rules laid down by this point shall apply, unless otherwise established by the present Code, other law, other legal acts, or contract, or follows from the essence of the obligation.

Article 486. Payment for Goods

1. The buyer shall be obliged to pay for the goods immediately before or after the goods have been transferred to him by the seller, unless otherwise provided by the present Code, other law, other legal acts or sale contract and follows from the essence of the obligation.

2. Unless a sale contract has provided for payment for the transferred goods by instalments, the buyer shall be obliged to pay the seller the full price of the transferred goods.

3. Should the buyer fail to pay in time for the goods transferred under a sale contract, the seller shall have the right to demand that the goods be paid for and interest be paid in accordance with Article 395 of the present Code.

4. If in violation of the sale contract the buyer refuses to accept and pay for the goods, the seller shall have the right, at his discretion, either to demand that the goods be paid or refuse to fulfil the contract.

5. In instances where a sale contract obligates the seller to transfer to the buyer not only goods which the buyer has not paid for, but also other goods, the seller shall have the right to stop transferring these goods until all previously transferred goods are fully paid for, unless otherwise provided by a law, other legal acts, or contract.

Article 487. Prepayment for Goods

1. In instances where a sale contract provides for the buyer's duty to pay the price of goods in full or partially before the transfer of the goods by the seller (prepayment), the buyer must pay at the time specified by the contract and if no such time has been specified in the contract - at the time determined in accordance with Article 314 of the present Code.

2. If the buyer fails to remedy the duty to pay for the goods in advance, the rules laid down in Article 328 of the present Code shall apply.

3. Should the seller who has received the prepayment sum fail to perform his duty to transfer the goods at a specified time (Article 457), the buyer shall have the right to demand that the goods he has paid for be transferred to him or the sum of prepayment for the goods not transferred by the seller be returned.

4. If the seller fails to perform the duty to transfer the prepaid goods and the sale contract has not provided otherwise, interest on the prepayment sum shall be paid in accordance with Article 395 of the present Code beginning from the day when, under contract, the goods should have been transferred and to the day when the goods have been transferred to the buyer or prepayment amount paid by him has been returned to him. A contract may provide for the seller's duty to pay interest on the prepayment sum beginning from the day of receiving this sum from the buyer.

Article 488. Payment for Goods Sold on Credit

1. If a sale contract provides for payment for the goods in a certain time after the transfer thereof to the buyer (sale of goods on credit), the buyer must pay at the time specified in the contract and if such time has not been specified in the contract - at the time determined in accordance with Article 314 of the present Code.

2. Should the seller fail to perform the duty to transfer the goods, the rules provided by Article 328 of the present Code shall apply.

3. If the buyer who has received the goods fails to perform the duty to pay therefore within the period specified by the sale contract, the seller shall have the right to demand that the goods transferred be paid for or the goods unpaid be returned.

4. If the buyer fails to perform the duty to pay for the transferred goods at the time specified in the contract and it has not been established otherwise by the present Code or sale contract, interest on the overdue amount shall be paid in accordance with Article 395 of the present Code beginning from the day when the goods should have been paid for to the day the buyer has paid for the goods.

A contract may provide for the buyer's duty to pay interest on the sum equivalent to the price of goods beginning from the day when the seller has transferred the goods.

5. Unless otherwise provided by a sale contract, from the moment the goods have been transferred to the buyer and until being paid for, the goods sold on credit shall be deemed to be in pledge with the seller in order to secure the performance by the buyer of his duty to pay for the goods.

Article 489. Payment for Goods by Instalments

1. A contract of credit sale of goods may provide for payment for the goods by instalments.

A contract of credit sale of goods with a clause on payment by instalments shall be deemed to have been concluded if, among other material terms and conditions of a sale contract, it has specified the price, procedure, time, and amounts of payment.

2. If within the period specified by the sale contract the buyer fails to pay an instalment for the goods sold on the instalment system and already transferred to him, the seller shall have the right, unless otherwise provided by the contract, to refuse to execute the contract and demand that the sold goods be returned, except in the instances where the sum of payments received from the buyer exceeds half the price of the goods.

3. The rules laid down in Article 488(2,4 and 5) of the present Code shall apply to a credit sale contract containing the instalment payment clause.

Article 490. Insurance of Goods

A sale contract may provide for the seller's or buyer's duty to insure goods.

In the event that the party obligated to insure goods fails to provide insurance in accordance with the contract terms and conditions, the other party shall have the right to insure the goods and demand from the defaulting party that insurance expenses be compensated or refuse to execute the contract.

Article 491. Reservation of Right of Property for Seller

In instances where a sale contract has provided that the right of property in the goods transferred to the buyer shall be reserved for the seller until the goods have been paid for or other circumstances have emerged, the buyer shall not have the right to alienate or somehow dispose of them until the right of property has passed to him, unless otherwise provided by a law or contract or follows from the purpose and nature of the goods.

In instances where by the time set in the contract the transferred goods have not been paid for or other circumstances have occurred under which the right of property shall pass to the buyer, the seller shall have the right to demand from the buyer to return the goods to him, unless otherwise provided by the contract.

Paragraph 2. Retail Purchase and Sale

Article 492. Retail Sale Contract

1. Under a retail sale contract, the seller who carries on entrepreneurial activity as a retailer shall undertake to transfer to the buyer the goods meant for personal, family, household, or other use not connected with entrepreneurial activity.

2. A retail sale contract shall be a public contract (Article 426).

3. Laws on protection of consumer rights and other legal acts adopted pursuant thereto shall apply to relations under a retail contract involving a buyer-citizen insofar as these are not regulated by the present Code.

Article 493. Form of Retail Sale Contract

Unless otherwise provided by a law or retail sale contract, including by stipulations of model forms or other standard forms adhered to by the buyer (Article 428), a retail sale contract shall be deemed to have been duly concluded from the moment when the seller has given the buyer a cash or sale receipt confirming payment for the goods. The absence of the aforesaid documents with the buyer shall not deprive him of the possibility to refer to testimony in order to confirm the conclusion of the contract and its terms and conditions.

Article 494. Public Offer of Goods

1. Proposing goods in advertisements, catalogues and descriptions thereof addressed to an indefinite group of persons shall be deemed to be a public offer (Article 437[2]), if it contains all material conditions of a retail sale contract.

2. Displaying goods at the place of sale (on counters, in shop windows, etc.), demonstrating their specimens or furnishing information about the goods offered for sale (descriptions, catalogues, pictures of goods, etc.) at the place of sale thereof shall be deemed to be a public offer irrespective of whether the price and other material conditions of a retail sale contract have been specified, except in the instance where the seller has expressly given to understand that the goods are not meant for sale.

Article 495. Furnishing Information about Goods to Buyer

1. The seller shall be obliged to furnish the buyer necessary and reliable information about goods offered for sale which must meet the requirements established by a law and other legal acts and ordinarily imposed in retail trade on the contents and methods of providing such information.

2. The buyer shall have the right, before concluding a retail sale contract, to inspect the goods and demand to check the properties or demonstrate the use of the goods in his presence, unless this is excluded in view of the nature of goods and is contrary to the rules accepted in retail trade.

3. If the buyer has been denied the possibility to immediately obtain at the place of sale information on goods specified in points 1 and 2 of the present Article, he shall have the right to demand that the seller compensate for losses caused by the unjustified evasion from the conclusion of a retail sale contract (Article 445[4]) and if the contract has been concluded - to demand that the sum paid for the goods be returned and other losses compensated.

4. The seller who has not afforded the possibility for the buyer to obtain relevant information about goods shall be responsible also for defects of goods appearing after the transfer thereof to the buyer, with respect to which the buyer will prove that they have appeared because he did not have such information.

Article 496. Sale of Goods on Condition of Acceptance Thereof by Buyer Within Definite Period

A retail sale contract may be concluded on condition that the buyer accepts the goods within a definite period determined by the contract, during which period these goods cannot be sold to another buyer.

Unless otherwise provided by contract, the buyer's non-appearance or non-performance of other actions necessary to accept the goods within the period of time specified in the contract may be treated by the seller as the buyer's refusal to execute the contract.

Additional expenses incurred by the seller in order to ensure the transfer of goods to the buyer within the period of time established by the contract shall be included in the price of goods, unless otherwise provided by a law, other legal acts, or contract.

Article 497. Sale of Goods by Sample

1. A retail sale contract may be concluded on the basis of the buyer's familiarization with a sample of goods (their description, a catalogue of goods, etc.) offered by the seller.

2. Unless otherwise provided by a law, other legal acts, or contract, a contract for retail sale of goods by sample shall be deemed to have been executed from the moment of delivering the goods to the place specified in the contract and if the place for the transfer of the goods has nor been specified by the contract - from the moment of delivering the goods to the buyer at the citizen's residence or the legal party's location.

3. Before the goods have been transferred, the buyer shall have the right to refuse to execute a retail sale contract on condition that he compensates the seller for necessary losses incurred in connection with the performance of actions to execute the contract.

Article 498. Sale of Goods Using Vending Machines

1. In instances where vending machines are used to sell goods, the owner of machines shall be obliged to advise the buyers about the seller of goods by placing on the machine or furnishing in any other way information for the buyers about the seller's name (firm name), place of location, office hours, as well as actions necessary for a buyer to receive goods.

2. A retail sale contract under which vending machines are to be used shall be deemed to have been concluded from the moment when the buyer has performed actions necessary to receive goods.

3. If the buyer is not given the goods he has paid for, the seller shall be obliged, at the buyer's demand, to immediately give the goods to the buyer or return the sum of money paid.

4. In instances where a machine is used to change money, acquire tokens of payment, or exchange currency, the retail sale rules shall apply, unless it follows otherwise from the essence of the obligation.

Article 499. Sale of Goods on Condition of Delivery Thereof to Buyer

1. If a retail sale contract has been concluded on condition that the goods be delivered to the buyer, the seller shall be obliged within the contract schedule to deliver the goods to the place specified by the buyer and if the place has not been specified by the buyer - to the place of residence of the citizen or location of the legal person who are the buyers.

2. A retail sale contract shall be deemed to have been executed from the moment of handing in the goods to the buyer or, in his absence, to any party who has presented the receipt or other document certifying the conclusion of the contract or execution of papers for the delivery of goods, unless otherwise provided by a law, other legal acts, or contract or follows from the essence of the obligation.

3. In the event that a contact has not specified the delivery time for goods to be handed in to the buyer, the goods must be delivered within a reasonable period after the receipt of the buyer's demand.

Article 500. Price and Payment for Goods

1. The buyer shall be obliged to pay for the goods at the price declared by the seller at the moment of concluding the retail sale contract, unless otherwise provided by a law, other legal acts or follows from the essence of the obligation.

2. In the event that a retail sale contract has provided for prepayment for goods (Article 487), the buyer's failure to pay for the goods within the contract schedule shall be recognized as the buyer's refusal to execute the contract, unless otherwise agreed by the parties.

3. The rules established in paragraph 1 of Article 488(4) of the present Code shall not apply to contracts for retail sale of goods on credit where the buyer must pay for the goods by instalments.

The buyer shall have the right to pay for the goods at any time within the contract schedule of payment for the goods by instalments.

Article 501. Sell-and-Lease Contract

A contract may provide that before the right of property in the goods has passed to the buyer (Article 491), the buyer shall be a hirer (lessee) of the goods transferred to him (sell-and-lease contract).

Unless otherwise provided by contract, the buyer shall become the owner of the goods from the moment of payment for the goods.

Article 502. Exchange of Goods

1. The buyer shall have the right, within 14 days from the moment of transferring non-food goods to him, unless a longer period has been declared by the seller, to exchange the goods bought at the place of purchase and other places declared by the seller for similar goods of other size, shape, dimensions, design, colour, or completeness, allowing for the difference in price, if any.

If the seller does not have goods necessary for exchange, the buyer shall have the right to return the acquired goods to the seller and receive the sum of money paid for them.

The buyer's demand to exchange or return the goods shall be satisfied if the goods have not been in use, their consumer quality has remained intact, and there is proof that they were acquired from this particular seller.

2. A list of goods not subject to exchange or return on the grounds mentioned in the present Article shall be determined according to the procedure established by a law or other legal acts.

Article 503. Rights of Buyer in Case of Sale of Inadequate Quality Goods to Him

1. The buyer to whom inadequate quality goods have been sold, unless their defects were stipulated by the seller, shall have the right to demand, at his discretion, that:

- the inadequate quality goods be replaced by those of adequate quality; and

- purchase price be commensurately reduced; and

- defects of the goods be eliminated immediately and free of charge; and

- costs of elimination of defects of the goods be compensated.

The buyer shall have the right to demand to replace highly technical or expensive goods in case of a serious violation of requirements relating to their quality (Article 475[2]).

2. If the buyer has found defects in the goods whose properties do not allow the removal thereof (foodstuffs, chemicals for household use, etc.), he shall have the right to demand, at his discretion, that either such goods be replaced by those of adequate quality or the purchase price be commensurately reduced.

3. Instead of presenting the demands mentioned in points 1 and 2 of the present Article, the buyer shall have the right to refuse to execute the retail sale contract or demand that the sum of money paid for the goods be returned.

In so doing, the buyer must return the inadequate quality goods at the seller's demand and expense.

When returning to the buyer the sum of money paid for the goods, the seller shall not have the right to deduct there-from the amount by which the price of the goods has reduced due to full or partial use of the goods, bad marketable state thereof, or other similar circumstances.

Article 504. Compensation of Price Difference in Case of Replacement of Goods, Reduction of Purchase Price and Return of Inadequate Quality Goods

1. When replacing inferior quality goods by goods of adequate quality complying with the retail sale contract, the seller shall not have the right to demand compensation for the difference between the contract price of goods and the price of goods existing at the moment when goods have been replaced or the court has awarded to replace them.

2. When inferior quality goods are replaced by similar goods of proper quality, but different in size, style, sort, or other features, the difference between the price of the replaced goods at the moment of replacement and the price of the goods transferred instead of the inadequate quality goods shall be subject to compensation.

If the buyer's demand has not been satisfied by the seller, the price of the goods to be replaced and the price of the goods transferred to replace them shall be determined as at the moment when the court has awarded the replacement thereof.

3. Should a demand to commensurately reduce the price of goods be presented, consideration shall be given to the price of goods as at the moment when the price reduction demand was presented, and if the buyer's demand has not been voluntarily satisfied - at the moment when the court has awarded adequate price reduction.

4. When returning inadequate quality goods to the seller, the buyer shall have the right to demand to compensate for the difference between the price of goods stipulated by the retail sale contract and the price of respective goods at the moment of voluntary satisfaction of his demand, and if the demand has not been voluntarily satisfied - at the moment of adjudication.

Article 505. Responsibility of Seller and Performance of Obligation in Kind

Should the seller fail to perform an obligation under a retail sale contract, the compensation of losses and payment of penalty shall not release the seller from the performance of the obligation in kind.

Paragraph 3. Delivery of Goods

Article 506. Delivery Contract

Under a delivery contract, the supplier, i.e. the seller engaged in entrepreneurial activity, shall undertake to hand over at a specified time or within a specified period the goods manufactured or purchased by him to the buyer for use in entrepreneurial activity or for other purposes not connected with personal, family, household, or other similar use.

Article 507. Settlement of Disputes When Concluding a Delivery Contract

1. If in the course of concluding a delivery contract, disputes over particular contractual terms and conditions have arisen between the parties, the party which has offered to conclude the contract and obtained an offer from the other party to negotiate these terms and conditions must, within 30 days from the day of receiving this offer, unless a different time has been established by law or agreed by the parties, take measures to adjust the respective terms and conditions of the contract or notify the other party in writing about the refusal to conclude it.

2. The party which has received an offer concerning the respective contract terms and conditions, but failed to take measures in order to adjust the terms and conditions of the delivery contract and has not informed the other party about the refusal to conclude the contract within the period specified by point 1 of the present Article, shall be obliged to compensate for losses caused by evasion from the adjustment of contractual terms and conditions.

Article 508. Periods of Delivery of Goods

1. In the event that the parties have provided for the delivery of goods by separate lots during the currency of the delivery contract, but the time for the delivery of separate lots (delivery periods) has not been specified therein, then the goods must be delivered in uniform lots on a monthly basis, unless it follows otherwise from a law, other legal acts, the essence of the obligation, or business customs.

2. In addition to the determination of delivery periods, a delivery contract may establish a schedule (decade, daily, hourly, etc.) for the delivery of goods.

3. Goods may be delivered before time with the buyer's consent thereto.

Goods delivered before time and accepted by the buyer shall be counted against the quantity of goods to be delivered in the next period.

Article 509. Procedure for Delivery of Goods

1. The delivery of goods shall be effected by the supplier by way of shipping (handing over) the goods to the buyer who is a party to the delivery contract or to the party specified as receiver in the contract.

2. In the event that a delivery contract provides for the buyer's right to give instructions to the supplier concerning the shipment (handing over) of goods to the receivers (shipment distribution list), the goods shall be shipped (handed over) to the receivers specified in the distribution list.

The contents of a shipment distribution list and the time for the buyer to send it to the supplier shall be determined by the contract. If the contract has not provided for the time to send the distribution list, it must be sent to the supplier not later than 30 days before the delivery period has commenced.

3. The buyer's failure to present the shipment distribution list within the specified period shall entitle the supplier either to refuse to execute the delivery contract or demand that the buyer pay for the goods. In addition, the supplier shall have the right to demand compensation for losses caused in connection with the failure to present the shipment distribution list.

Article 510. Delivery of Goods

1. The goods shall be delivered by the supplier by way of shipping them by a transport and on terms and conditions specified by the delivery contract.

In instances where a contract has not specified the type of transport and delivery terms, the right to choose a transport type or specify terms for the delivery of goods shall belong to the supplier, unless it follows otherwise from a law, other legal acts, the essence of the obligation, or business customs.

2. A delivery contract may provide for the receipt of goods by the buyer (receiver) at the supplier's place of location (collection of goods).

If the time to collect goods has not been provided by a contract, the goods shall be taken in by the buyer (receiver) within a reasonable period after the receipt of the supplier's notice about the readiness of goods.

Article 511. Making-Up of Short Delivery of Goods

1. A supplier who has made short delivery of goods in some of delivery periods shall be obliged to make up for the short-delivered quantity of goods in the next period (periods) within the currency of the delivery contract, unless otherwise provided by the contract.

2. In the event that the goods are shipped by the supplier to several receivers specified in the delivery contract or the buyer's shipment distribution list, the goods delivered to one receiver in excess of the quantity specified in the contract or distribution list shall not be counted as completion of short delivery to other receivers, unless otherwise provided by the contract.

3. The buyer shall have the right, after having informed the supplier, to refuse to accept the goods whose delivery has been delayed, unless otherwise provided by the delivery contract. The buyer shall be obliged to accept and pay for the goods delivered before the supplier has received the notice.

Article 512. Assortment of Goods to Complete Short Delivery

1. The assortment of goods whose short delivery is to be filled up, shall be determined by agreement of the parties. If no such agreement exists, the supplier shall be obliged to make up for the short-delivered quantity of goods in the assortment established for the period when the short delivery took place.

2. The delivery of goods of one description in excess of the quantity specified by the delivery contract shall not be counted against completion of goods of another description included in the same assortment and shall be filled up, except in instances where such delivery has been made with the buyer's preliminary consent in writing.

Article 513. Acceptance of Goods by Buyer

1. The buyer (receiver) shall take all necessary measures to ensure the acceptance of goods delivered under a delivery contract.

2. Goods accepted by the buyer (receiver) must be inspected by him within a period of time established by a law, other legal acts, delivery contract, or business customs.

Within the same period, the buyer (receiver) shall be obliged to check the quantity and quality of goods in the procedure established by a law, other legal acts, contract, or business customs, and immediately inform the supplier of discrepancies and shortages in goods found.

3. In the event that the delivered goods are to be collected from a carrier, the buyer (receiver) shall be obliged to check the conformity of goods with data indicated in transport and accompanying documents, as well as accept these goods from the carrier subject to the rules provided by the law or other legal acts regulating the activity of transport.

Article 514. Responsible Storage of Goods Not Accepted by Buyer

1. If in accordance with a law, other legal acts, or a delivery contract, the buyer refuses the goods transferred by the supplier, he shall be obliged to secure safety of these goods (responsible storage) and immediately notify the supplier.

2. The supplier shall be obliged to take away the goods accepted by the buyer (receiver) for responsible storage or dispose of them within a reasonable period of time.

If the supplier fails to dispose of the goods within this period, the buyer shall have the right to sell the goods or return them to the supplier.

3. All expenses suffered by the buyer in connection with the acceptance of goods for responsible storage, sale or return thereof to the supplier shall be subject to compensation by the supplier.

In this case, all receipts from the sale of goods less what is due to the buyer shall be transferred to the supplier.

4. In instances where the buyer does not accept the goods or refuses to accept them from the supplier for reasons not stipulated by a law, other legal acts, or contract, the supplier shall have the right to demand that the buyer pay for the goods.

Article 515. Collection of Goods

1. Where a delivery contract provides that the goods must be collected by the buyer (receiver) at the supplier's place of location (Article 510[2]), the buyer shall be obliged to inspect the transferred goods at the place of the transfer thereof, unless otherwise provided by a law, other legal acts, or follows from the essence of the obligation.

2. Failure of the buyer (receiver) to collect the goods within a period specified by the delivery contract and, should no such period exist, within a reasonable period after the receipt of the supplier's notice about the readiness of goods, shall entitle the buyer to refuse to execute the contract or demand from the buyer to pay for the goods.

Article 516. Payments for Delivered Goods

1. The buyer shall pay for the delivered goods subject to the procedure and form of payments provided by the delivery contract. If the procedure and form of payment has not been determined by agreement of the parties, settlements shall be effected by payment orders.

2. If a delivery contract has provided that the goods shall be paid by the buyer (receiver), and the latter has unjustifiably refused to pay or failed to pay within the period specified by the contract, the supplier shall have the right to demand that the buyer pay for the goods delivered.

3. In the event that a delivery contract provides for the delivery of goods by separate instalments included in a complete set, the goods shall be paid by the buyer after the shipment (collection) of the last instalment included in the set, unless otherwise provided by the contract.

Article 517. Tare and Packing

Unless otherwise provided by a delivery contract, the buyer (receiver) shall be obliged to return to the supplier the reusable tare and packing means in which the goods have arrived in a procedure and within a period established by a law, other legal acts, rules adopted pursuant thereto, or contract.

Other tare and packing of goods shall be returned to the supplier only in instances provided by a contract.

Article 518. Consequences of Delivering Inadequate Quality Goods

1. The buyer (receiver) to whom inadequate quality goods have been delivered shall have the right to present demands to the supplier as stipulated by Article 475 of the present Article, except in the instance where the supplier who has received the buyer's notice of defects in the delivered goods immediately replaces the delivered goods by goods of adequate quality.

2. The buyer (receiver) who is selling goods delivered to him by instalments shall have the right to demand, within a reasonable period, to replace the inadequate quality goods returned by the consumer, unless otherwise provided by the delivery contract.

Article 519. Consequences of Delivering Incomplete Goods

1. The buyer (receiver) to whom goods have been delivered in violation of the terms and conditions of the delivery contract and requirements of a law, other legal acts or requirements usually set for completeness, shall have the right to present demands to the supplier as provided by Article 480 of the present Code, except in the instance where the supplier, after having received the buyer's notice of the incompleteness of the delivered goods, immediately fills up the goods or replaces them by complete goods.

2. The buyer (receiver) who is selling goods by instalments shall have the right to demand that the incomplete goods returned by the consumer be replaced by complete ones within a reasonable period of time, unless otherwise provided by the delivery contract.

Article 520. Rights of Buyer in Case of Short Delivery of Goods or Failure to Meet Demands for Elimination of Defects in Goods or Completion Thereof

1. If the supplier has not delivered the quantity of goods specified by the delivery contract or has not fulfilled the buyer's demands concerning the replacement of inferior quality goods or completion of the quantity of goods within a specified period, the buyer shall have the right to acquire undelivered goods from other parties, charging all necessary and reasonable costs of the acquisition thereof to the supplier.

The buyer's expenses on the acquisition of goods from other parties in cases of a short-delivery thereof by the supplier or non-fulfillment of the buyer's demands to remove defects of the goods or make them up, shall be calculated according to the rules laid down in Article 524(1) of the present Code.

2. The buyer (receiver) shall have the right to refuse to pay for inadequate quality goods or incomplete goods and, if such goods have been paid for, demand that the sums paid be returned pending the elimination of defects and completion or replacement thereof.

Article 521. Penalty for Short Delivery or Delayed Delivery of Goods

A penalty established by a law or delivery contract for short delivery or delayed delivery of goods shall be collected from the supplier before the actual performance of the obligation under his duty to make up for short-delivered goods in subsequent delivery periods, unless a different procedure for penalty payment has been established by a law or contract.

Article 522. Discharge of Similar Obligations Under Several Delivery Contracts

1. In instances where similar goods are delivered by the supplier to the buyer simultaneously under several delivery contracts and the quantity of delivered goods is insufficient for the supplier's obligations under all the contracts to be discharged, the goods delivered must be counted against the fulfilment of the contract specified by the supplier when effecting the delivery or immediately after the delivery.

2. If the buyer has paid the supplier for similar goods received under several delivery contracts and the amount of payment is insufficient for the buyer's obligations under all the contracts to be discharged, the amount paid must be counted against the fulfilment of the contract specified by the buyer while paying for the goods or immediately after the payment.

3. If the supplier or buyer have not taken advantage of the rights granted to them by, respectively, points 1 and 2 of the present Article, the fulfilment of the obligation shall be counted against the discharge of obligations under the contract whose time of performance came earlier. If obligations under several contracts have been performed at the same time, the performance effected shall be counted proportionally against the discharge of obligations under all the contracts.

Article 523. Unilateral Refusal to Perform Delivery Contract

1. The unilateral refusal to perform a delivery contract (wholly or partially) or unilateral alteration thereof shall be permitted in the event of a serious breach of the contract by either party (paragraph 4 of Article 450).

2. A violation by the supplier of a delivery contract shall be presumed to be material in the following instances:

- delivery of inadequate quality goods with defects that cannot be removed within a period of time acceptable for the buyer; and

- repeated violation of the goods delivery schedule.

3. A violation by the buyer of a delivery contract shall be presumed to be material in the following instances:

- repeated violation of the schedule of payment for goods; and

- repeated failure to collect goods.

4. A delivery contract shall be deemed to have been altered or cancelled from the moment when one party has received the other party's notification about the unilateral refusal to perform the contract fully or partially, unless another term for the cancellation or alteration of the contract has been provided in the notification or determined by agreement of the parties.

Article 524. Calculation of Losses When Cancelling Contract

1. If within a reasonable period after the cancellation of the contract as a consequence of the seller's violation of the obligation the buyer has purchased goods instead of those stipulated by the contract from another party at a higher, though reasonable, price, the buyer may present a demand to the seller to compensate for losses in the form of the difference between the contractual price and the price under the transaction made instead.

2. If within a reasonable period after the cancellation of the contract as a consequence of the buyer's violation of the obligation the seller has sold the goods to another party at a price lower, though reasonable, than that stipulated by the contract, the seller may present a demand to the buyer to compensate for losses in the form of the difference between the contractual price and the price under the transaction made instead.

3. If after the cancellation of the contract for reasons mentioned in points 1 and 2 of the present

Article no transaction has been made instead of the cancelled contract and if there exists a current price for these particular goods, a party may demand to compensate for losses in the form of the difference between the contractual price and the current price as at the moment of the cancellation of the contract.

A current price shall be deemed to be the price usually collected under comparable circumstances for similar goods at the place where the goods were to be transferred. If no current price exists at this place, reference may be made to the current price used at another place which may serve as a reasonable substitution, with the difference in the costs of transportation of goods taken into account.

4. Satisfying the demands mentioned in points 1, 2, and 3 of the present Article shall not, according to Article 15 of the present Code, release the party which has not performed or has improperly performed the obligation from compensation of other losses caused to the other party.

Paragraph 4. Delivery of Goods for State Needs

Article 525. Grounds for Delivery of Goods for State Needs

1. Goods shall be delivered for State needs on the basis of a State contract for the delivery of goods for State needs, as well as contracts concluded pursuant thereto for the delivery of goods for State needs (Article 530[2]). As State needs shall be recognized statute-established exigencies of the Russian Federation or Russian Federation subjects funded from budgets and off-budget sources of financing.

2. The rules laid down for a delivery contract (Articles 506-523) shall apply to relations where goods are delivered for State needs, unless otherwise provided by the rules of the present Code.

The laws on delivery of goods for State needs shall apply to relations in delivering goods for State needs insofar as these are not regulated by this paragraph.

Article 526. State Contract for Delivery of Goods for State Needs

Under a State contract for the delivery of goods for State needs (hereafter: State contract), the supplier (contractor) shall undertake to transfer goods to the governmental customer or, on his instruction, to another party, while the governmental customer shall undertake to ensure payment for the delivered goods.

Article 527. Grounds for Conclusion of State Contract

1. A State contract shall be concluded on the basis of the governmental customer's order for delivery of goods for State needs accepted by the supplier (contractor).

2. Conclusion of a State contract shall be obligatory for the governmental customer who has placed an order accepted by the supplier (contractor).

3. Conclusion of a State contract shall be obligatory for the supplier (contractor) only in instances established by law and on condition that the governmental customer will compensate all losses which may be caused to the supplier (contractor) in connection with the execution of the State contract.

4. The condition on compensation of losses stipulated by point 2 of the present Article shall not apply to a State-owned enterprise.

5. If an order for delivery of goods for State needs is to be placed on a competition basis, the conclusion of a State contract with the supplier (contractor) declared the winner of the competition shall be obligatory for the governmental customer.

Article 528. Procedure for Conclusion of State Contract

1. A State contract shall be drafted by the governmental customer and sent to the supplier (contractor), unless otherwise provided by agreement between them.

2. The party which has received the State draft contract shall sign it not later that 30 days and return a copy of the State contract to the other party and, should disputes arise over the terms and conditions of the State contract, shall within the same period draw up a protocol of differences and send it and the signed State contract to the other party or notify the latter about the refusal to conclude the State contract.

3. The party which has received the State contract with the protocol of differences must within 30 days examine the differences, take measures to agree them with the other party and notify the other party about the acceptance of the State contract in its wording or about the decline of the protocol of differences.

In the event that the protocol of differences is declined or this period has expired, the unsettled differences in respect of the State contract whose conclusion is obligatory for one of the parties may be not later than 30 days submitted to a court for disposal.

4. In the event that a State contract is concluded based on the results of the competition for the placement of an order for delivery of goods for State needs, the State contract must be concluded not later than 20 days from the day of holding the competition.

5. If the party for which the conclusion of the State contract is obligatory evades from the conclusion thereof, the other party shall have the right to have recourse to a court with a demand to coerce the other party to conclude the State contract.

Article 529. Conclusion of Contract for Delivery of Goods for State Needs

1. If a State contract provides that goods are to be delivered by the supplier (contractor) to the buyer specified by the governmental customer under contracts for delivery of goods for State needs, the governmental customer shall not later than 30 days from the day of signing the State contract send a notice to the supplier (contractor) and the buyer about the assignment of the buyer for the supplier (contractor).

The notice about the assignment of the buyer for the supplier (contractor) issued by the governmental customer in accordance with the State contract shall serve as the basis for concluding the contract for delivery of goods for State needs.

2. The supplier (contractor) shall be obliged to send a draft contract for delivery of goods for State needs to the buyer specified in the assignment notice not later than 30 days from the day of receiving the notice from the governmental customer, unless a different procedure for preparing the draft contract has been provided by the State contract or if the draft contract has not been presented to the buyer.

3. The party which has received the draft contract for delivery of goods for State needs shall sign it and return a copy to the other party within 30 days from the day of receiving the draft and, should differences arise concerning the terms and conditions of the contract, the party shall within the same period draw up a protocol of differences and send it and the signed contract to the other party.

4. The party which has received the signed draft contract for delivery of goods for State needs and the protocol of differences must within 30 days examine the differences, take measures to agree the contract terms and conditions with the other party and notify the other party about the acceptance of the contract in its wording or about the decline of the protocol of differences. The unsettled differences may within a 30 day period be submitted by the interested party to a court for disposal.

5. If the supplier (contractor) evades from concluding a contract for delivery of goods for State needs, the buyer shall have the right to have recourse to a court with a demand to coerce the supplier (contractor) to conclude the contract on terms and conditions of the draft contract developed by the buyer.

Article 530. Refusal of Buyer to Conclude Contract for Delivery of Goods for State Needs

1. The buyer shall have the right to wholly or partially refuse the goods specified in the assignment notice and refuse to conclude a contract for the delivery thereof.

In this case, the supplier (contractor) must immediately inform the governmental customer and shall have the right to demand from him a notice of assignment to another buyer.

2. The governmental customer not later than 30 days from the day of receiving the notification from the supplier (contractor) shall either issue a notice about the assignment of another buyer to him or send the supplier (contractor) a shipment distribution list with the indication as to the receiver of goods or inform about his consent to accept and pay for the goods.

3. Should the governmental customer fail to perform the duties mentioned in point 2 of the present Article, the supplier (contractor) shall have the right either to demand from the governmental customer to accept and pay for the goods or sell the goods at his discretion, charging reasonable expenses connected with the sale thereof to the governmental customer.

Article 531. Execution of State Contract

1. In instances where in conformity with the terms and conditions of a State contract goods are delivered directly to the governmental customer or, on his instruction (shipment distribution list), to another party (receiver), relations of the parties with respect to the execution of the State contract shall be regulated by the rules laid down in Articles 506-523 of the present Code.

2. In instances where goods for State needs are delivered to receivers named in the shipment distribution list, payment for goods shall be made by the governmental customer, unless a different procedure for settlements has been provided by the State contract.

Article 532. Payment for Goods Under Contract for Delivery of Goods for State Needs

When goods are delivered to buyers under contracts for delivery of goods for State needs, goods shall be paid by the buyers at prices determined in accordance with a State contract, unless a different procedure to determine prices and make payments has been provided by the State contract.

When a buyer pays for goods under a contract of delivery of goods for State needs, the governmental customer shall be deemed to be a guarantor for this obligation of the buyer (Articles 361-367).

Article 533. Compensation of Losses Caused in Connection with Execution or Cancellation of State Contract

1. Unless otherwise provided by the laws on delivery of goods for State needs or by a State contract, losses caused to the supplier (contractor) in connection with the execution of a State contract (Article 527[2]) shall be subject to compensation by the governmental customer not later than 30 days after the day of transferring the goods under the State contract.

2. In the event that losses caused to the supplier (contractor) in connection with the execution of a State contract are not compensated in accordance with the State contract, the supplier (contractor) shall have the right to refuse to execute the State contract and demand that losses caused by the cancellation of the State contract be compensated.

3. When a State contract is cancelled for the reasons specified in point 2 of the present Article, the supplier shall have the right to refuse to execute the contract for delivery of goods for State needs.

Losses caused to the buyer by such refusal of the supplier shall be compensated by the governmental customer.

Article 534. Refusal by Governmental Customer of Goods Delivered Under State Contract

In instances specified by law the governmental customer shall have the right to wholly or partially refuse the goods whose delivery has been provided by a State contract on condition that losses caused to the supplier by such refusal be compensated.

If the refusal by the governmental customer of goods whose delivery was provided by a State contract, has entailed the cancellation or alteration of the contract for delivery of goods for State needs, losses caused to the buyer by such cancellation or alteration shall be compensated by the governmental customer.

Paragraph 5. Contracting

Article 535. Contracting Agreement

1. Under a contracting agreement, the agricultural producer shall undertake to transfer the agricultural produce grown (produced) by him to the purveyor, i.e. the party who buys such produce for processing or sale.

2. Relations under a contracting agreement not regulated by the rules of the present paragraph shall be subject to the rules laid down for a delivery contract (Articles 506-524) and, where appropriate, to those for a contract of delivery of goods for State needs (Article 525-534).

Article 536. Duties of Purveyor

1. Unless otherwise provided by a contracting agreement, the purveyor shall be obliged to accept agricultural produce from the producer at the place of its location and ensure its transportation.

2. In the event that agricultural produce is accepted at the place of the purveyor's location or the place specified by him, the purveyor shall not have the right to refuse to accept the agricultural produce which complies with the terms and conditions of the contracting agreement and which has been transferred to the purveyor within the period stipulated by the contract.

3. A contracting agreement may provide for the duty of the purveyor who effects the processing of agricultural produce to return to the producer, at the latter's demand, the waste remaining after the processing of agricultural produce to be paid at a price stipulated by the contract.

Article 537. Duties of Agricultural Producer

1. An agricultural producer shall be obliged to transfer the agricultural produce grown (produced) by him to the purveyor in the quantity and assortment specified by the contracting agreement.

Article 538. Responsibility of Agricultural Producer

An agricultural producer who has failed to perform or has improperly performed the obligation shall bear responsibility, should he be found guilty.

Paragraph 6. Power Supply

Article 539. Power Supply Contract

1. Under a power supply contract, the power supplier shall undertake to provide power for the subscriber (user) through the connected supply line, while the subscriber shall undertake to pay for the power supplied, as well as observe the regime of its consumption specified by the contract, ensure operational safety of power networks under his control and good condition of the devices and equipment used by him and having to do with energy consumption.

2. A power supply contract shall be concluded with a subscriber if he has a power-receiving facility which meets the established technical requirements and is connected to the networks of the power supplier, and other necessary equipment, as well as if power consumption recording is ensured.

3. To relations under a power supply contract not regulated by the present Code shall apply the laws and other legal acts relating to power supply, as well as obligatory rules adopted pursuant thereto.

Article 540. Conclusion and Prolongation of Power Supply Contract

1. If a subscriber under a power supply contract is a citizen who consumes power for residential use, the contract shall be deemed to have been concluded from the moment of the first actual connection of the subscriber to the operating supply line according to the established procedure.

Unless otherwise provided by agreement of the parties, such contract shall be deemed to be concluded for indefinite period of time and may be altered or cancelled on the grounds specified by Article 546 of the present Code.

2. A power supply contract concluded for a certain period shall be deemed to be extended for the same period and on the same terms and conditions, if before the expiration of its validity term neither party has declared the termination or alteration thereof or the conclusion of a new contract.

3. If prior to the expiration of contract validity either party has proposed to conclude a new contract, relations of the parties until the new contract is concluded shall be regulated by the previously concluded contract.

Article 541. Quantity of Power

1. A power supplier shall be obliged to supply power to a subscriber via the connected supply line in quantity stipulated in the power supply contract and with observance of the supply regime agreed by the parties. The quantity of power supplied by the power supplier and used by the subscriber shall be determined according to the records of its actual consumption.

2. A power supply contract may provide for the subscriber's right to change the contract-stipulated quantity of power received by him on condition that he compensates expenses suffered by the power supplier in connection with supplying the quantity of power not specified in the contract.

3. If a subscriber under a power supply contract is a citizen consuming power for residential use, he shall have the right to use power in any quantity necessary for him.

Article 542. Quality of Power

1. The quality of power provided by a power supplier must meet requirements established by State standards and other mandatory rules or stipulated by a power supply contract.

2. Should a power supplier violate power quality requirements, the subscriber shall have the right to refuse to pay for such power. In this event, the power supplier shall have the right to demand that the subscriber compensate for what the subscriber has unjustifiably saved as a consequence of using this power (Article 1105[2])

Article 543. Duties of Buyer Relating to Maintenance and Operation of Networks, Devices and Equipment

1. A subscriber shall be obliged to ensure proper technical condition and safety of power networks, devices and equipment used, observe the established power consumption regime, as well as immediately inform the power supplier about accidents, fires, malfunctions in power recording devices and other faults caused by the use of power.

2. If a subscriber under a power supply contract is a citizen consuming power for residential use, the duty to ensure proper technical condition and safety of power networks, and also power consumption recorders, shall be imposed on the power supplier, unless otherwise established by a law or other legal acts.

3. Requirements relating to technical condition and operation of power networks, devices and equipment, as well as a procedure to control the observance thereof, shall be determined by a law, other legal acts, and in accordance with mandatory rules adopted pursuant thereto.

Article 544. Payment for Power

1. Payment for power shall be made for the quantity of power actually received by a subscriber according to power recording data, unless otherwise provided by a law, other legal acts, or agreement of the parties.

2. A procedure to pay for power shall be determined by a law, other legal acts, or agreement of the parties.

Article 545. Sub-subscriber

A subscriber may transmit power received by him from a power supplier via the connected power line to another party (sub-subscriber) only with the power supplier's consent.

Article 546. Alteration and Cancellation of Power Supply Contract

1. If a subscriber under a power supply contract is a citizen consuming power for residential use, he shall have the right to unilaterally cancel the contract on condition that he informs the power supplier thereof and fully pays for the power used.

If a subscriber under a power supply contract is a legal person, the power supplier shall have the right to unilaterally refuse to execute the contract on the grounds specified by Article 523 of the present Code, except in instances established by a law or other legal acts.

2. An interruption, cessation, or limitation of power supply shall be permitted by agreement of the parties, except in instances where unsatisfactory condition of the subscriber's power plants as certified by a State power supervisory agency threatens an accident or constitutes a threat to citizens' life and health. A power supplier must warn the subscriber about the interruption, cessation, or limitation of power supply.

3. An interruption, cessation, or limitation of power supply without the agreement with the subscriber and respective notification thereof shall be permitted in the event of necessity to take urgent measures in order to prevent or eliminate an accident within the power supplier's system provided that the subscriber is immediately informed thereof.

Article 547. Responsibility Under Power Supply Contract

1. If obligations under a power supply contract have not been performed or have been performed improperly, the party which has violated the obligation shall be obliged to compensate for the damage caused thereby (Article 15[2]).

2. If a regulation of power consumption regime performed on the basis of a law or other legal acts has resulted in an interruption of power supply to a subscriber, the power supplier shall bear responsibility for the nonfulfillment or improper fulfilment of contract obligations should he be found guilty.

Article 548. Application of Power Supply Rules to Other Contracts

1. The rules laid down in Articles 539-547 of the present Code shall apply to relations connected with heat power supply via a connected supply line, unless otherwise established by a law or other legal acts.

2. Unless otherwise established by a law, other legal acts, or follows from the essence of the obligation, the rules relating to a power supply contract (Articles 539-547) shall apply to relations connected with supplying oil and oil-based products, water and other commodities via a connected supply line.

Paragraph 7. Sale of Real Estate

Article 549. Real Estate Sale Contract

1. Under a contract for purchase and sale of real estate (real estate sale contract), the seller shall undertake to transfer a land plot, building, structure, apartment, or other immovables into the buyer's ownership (Article 130).

2. The rules provided by the present paragraph shall apply to the sale of enterprises insofar as otherwise established by the rules relating to a contract for sale of an enterprise (Articles 559-566).

Article 550. Form of Real Estate Sale Contract

A real estate sale contract shall be concluded in writing by way of drawing up one document signed by the parties (Article 434[2]).

Non-observance of the form of a real estate sale contract shall entail its invalidity.

Article 551. State Registration of Transfer of Ownership of Real Estate

1. The transfer to the buyer of the right of ownership of real estate under a real estate sale contract shall be subject to State registration.

2. The execution by the parties of a real estate sale contract prior to the State registration of ownership transfer shall not be a ground for a change in their relations with third parties.

3. In the event that either party evades from State registration of the transfer of ownership of real estate, a court shall have the right, at the other party's demand, to award the State registration of the transfer of ownership. The party which has unjustifiably evaded from State registration of the transfer of ownership of property must compensate the other party for losses caused by the delay in registration.

Article 552. Rights to Land Area When Selling Building, Structure or Other Real Estate Located Thereon

1. If a contract provides for the sale of a building, structure, or other real estate to the buyer simultaneously with the transfer of ownership of such real estate, the rights shall be transferred to that part of the land plot which is occupied by this real estate and is necessary for the use thereof.

2. In the event that the seller is the owner of a land plot where the real estate being sold is situated, the right of ownership shall be transferred to the buyer or he shall be granted the right to lease or other right to the respective part of the land plot stipulated by the real estate sale contract.

If the contract has not specified a right to the respective land area transferred to the buyer, the ownership of the part of the land plot which is occupied by the real estate and is necessary for the use thereof shall pass to the buyer.

3. The sale of real estate situated on a land plot not belonging to the seller by right of ownership shall be permitted without the consent of the owner of this plot, if this is not contrary to the terms and conditions of using this plot as established by a law or contract.

When such real estate has been sold, the buyer shall acquire the right to use the respective part of the land plot on the same terms and conditions as the seller of real estate does.

Article 553. Rights to Real Estate When Selling Land Plot

In the event that a land plot on which a building, structure or other immovables belonging to the seller are situated, is sold without the transfer of this real estate into the buyer's ownership, the seller shall reserve the right to use the part of the land plot which is occupied by the real estate and is necessary for the use thereof on terms and conditions stipulated by the sale contract.

If terms for using the respective part of the land plot have not been specified by the contract of sale thereof, the seller shall retain the right of limited use (servitude) of the part of the land plot which is occupied by the real estate and is necessary for the use thereof in conformity with its purpose.

Article 554. Determination of Object in Real Estate Sale Contract

A real estate sale contract must contain information enabling to explicitly identify the real estate subject to the transfer to the buyer under contract, including information specifying the location of real estate on the respective land plot or as part of other real estate.

Should this information be absent in the contract, the clause on the real estate subject to the transfer shall be deemed to have not been agreed by the parties and the respective contract shall not be deemed to have been concluded.

Article 555. Price in Real Estate Sale Contract

1. A real estate sale contract must stipulate the price of this property.

Should the real estate's price clause agreed by the parties in writing be absent in the contract, the contract for the sale thereof shall be deemed to have not been concluded. In this case, the price determination rules provided by Article 424(3) of the present Code shall not apply.

2. Unless otherwise provided by a law or real estate sale contract, the contractual price of a building, structure or other real estate situated on the land plot shall include the price of the respective part of the land plot transferred together with this real estate or the right thereto.

3. In instances where the price of real estate in a real estate sale contract is established per area unit or other measures of the real estate size, the total price of such real estate subject to payment shall be determined proceeding from the actual size of the real estate transferred to the buyer.

Article 556. Transfer of Real Estate

1. Real estate shall be transferred by the seller and accepted by the buyer on the basis of a deed of conveyance signed by the parties or of other transfer certificate.

Unless otherwise provided by a law or contract, the seller's obligation to transfer the real estate to the buyer shall be deemed to have been fulfilled after the handing of this property to the buyer and the signing by the party of a respective document certifying the transfer.

Evasion by either party from signing the document confirming the transfer of real estate on contract terms and condition shall be deemed to be a refusal, respectively, by the seller to perform the duty to transfer the real estate and by the buyer - the duty to accept the real estate.

2. The acceptance by the buyer of real estate which does not comply with the terms of a real estate sale contract, including when such non-compliance has been stipulated in the document certifying the transfer of real estate, shall not be a ground for the release of the seller from responsibility for the improper execution of the contract.

Article 557. Consequences of Transfer of Inadequate Quality Real Estate

In the event that the seller has transferred to the buyer real estate which does not comply with the clauses of the real estate sale contract concerning the quality thereof, the rules of Article 475 of the present Code shall apply, except for the provisions on the buyer's right to demand replacement of inadequate quality goods by goods complying with the contract.

Article 558. Particulars of Selling Living Accommodation

1. A material condition in a contract for sale of a dwelling house, apartment, part of a dwelling house or apartment resided by the parties who, under law, retain the right to use this living accommodation after it has been acquired by the buyer, shall be the list of these parties specifying their rights to use the living accommodation sold.

2. A contract of sale of a dwelling house, apartment, part of a dwelling house or apartment shall be subject to State registration and shall be deemed to have been concluded from the moment of such registration.

Paragraph 8. Sale of Enterprise

Article 559. Contract for Sale of Enterprise

1. Under a contract for sale of an enterprise, the seller shall undertake to transfer the enterprise as a whole, as a property complex (Article 132), except for the rights and duties which the seller shall not have the right to transfer to other parties.

2. The rights to a firm name, trademark, service mark, and other means of individualization of the seller and his goods, works, and services, as well as his licensed rights to use such individualization means, shall pass to the buyer, unless otherwise provided by contract.

3. The seller's rights obtained by him on the basis of an authorization (license) to run the respective activity shall not be subject to the transfer to the buyer of an enterprise, unless otherwise established by a law or other legal acts. The transfer to the buyer, as part of the enterprise, of obligations which the buyer cannot fulfil if he has no such authorization (license), shall not release the seller from respective obligations to creditors. Should they fail to fulfil such obligations, the seller and the buyer shall bear joint responsibility to creditors.

Article 568. Form and State Registration of Contract of Sale of Enterprise

1. A contract for sale of an enterprise shall be concluded in writing by way of drawing up one document signed by the parties (Article 434[2]), with the documents specified in Article 561(2) of the present Code appended without fail thereto.

2. Non-observance of the form of a contract for sale of an enterprise shall entail its invalidity.

3. A contract for sale of an enterprise shall be subject to State registration and shall be deemed to have been concluded from the moment of such registration.

Article 561. Certification of Composition of Sold Enterprise

1. The composition and value of an enterprise being sold shall be determined in a contract for sale of the enterprise on the basis of a complete inventory of the enterprise carried out according to the rules established for such inventory.

2. Prior to the signing of a contract for sale of an enterprise, the parties must draw up and examine the following: inventory report, accounting balance sheet, opinion by an independent auditor on the composition and value of the enterprise, as well as the list of all debts (liabilities) included in the composition of the enterprise with the indication as to the creditors, nature, amount, and term of their claims.

The property, rights and duties mentioned in the aforesaid documents shall be subject to the transfer by the seller to the buyer, unless it follows otherwise from the rules of Article 559 of the present Code or established by agreement of the parties.

Article 562. Rights of Creditors in Case of Sale of Enterprise

1. Before an enterprise has been transferred to the buyer, the creditors under obligations included as part of the enterprise being sold must be notified in writing of the sale thereof by one of the parties to the contract of sale of the enterprise.

2. A creditor who has failed to inform the seller or buyer in writing about his consent as to the transfer of the debt, shall have the right within three months from the day of receiving the notice of sale of the enterprise to demand either the termination or fulfilment of the obligation before time and compensation by the seller of losses caused thereby, or the deeming of the contract for sale of the enterprise to be null and void on the whole or in a respective part thereof.

3. A creditor who has not been informed about the sale of the enterprise according to the procedure provided by point 1 of the present Article, may bring a suit for the satisfaction of claims provided by point 2 of the present Article within a year from the day when he learnt or should have learnt about the transfer of the enterprise by the seller to the buyer.

4. After the transfer of the enterprise to the buyer, the seller and buyer shall bear joint responsibility for the debts included as part of the enterprise's composition and which may be transferred to the buyer without a creditor's consent.

Article 563. Transfer of Enterprise

1. An enterprise shall be transferred by the seller to the buyer on the basis of a deed of conveyance which contains information on the structure of the enterprise and on the notification of creditors about the sale of the enterprise, as well as information about defects discovered in the transferred property, and the list of property with regard to which the seller has failed to fulfil the duty to transfer in view of the loss thereof.

The preparation of an enterprise for the transfer, including the drawing-up and submission of the deed of conveyance for signing, shall be the seller's duty and be effected at his cost, unless otherwise provided by contract.

2. An enterprise shall be deemed to have been transferred to the buyer from the day of signing the deed of conveyance by both parties.

From this moment, the risk of accidental loss or accidental damage to the property transferred as part of the enterprise shall pass to the buyer.

Article 564. Transfer of Right of Ownership of Enterprise

1. The right of ownership of an enterprise shall pass to the buyer from the moment of State registration of this right.

2. Unless otherwise provided by a contract for sale of an enterprise, the ownership of the enterprise shall pass to the buyer and be subject to State registration immediately after the transfer of the enterprise to the buyer (Article 563).

3. In instances where a contract provides for the reservation for the seller of the ownership of the enterprise transferred to the buyer until the enterprise has been paid for or other circumstances have occurred, the buyer shall have the right, until the ownership have passed to him, to dispose of the property and rights included as part of the transferred enterprise to the extent to which it is necessary for the purposes the enterprise has been acquired for.

Article 565. Consequences of Transfer and Acceptance of Enterprise with Defects

1. Consequences of the transfer of an enterprise by the seller and acceptance thereof by the buyer on the basis of the deed of conveyance in the event that the composition of the enterprise is out of accordance with that stipulated by the contract for sale thereof, including in respect of the quality of property transferred, shall be determined proceeding from the rules of Articles 460-462, 466, 469, 475, and 479 of the present Code, unless it follows otherwise from the contract and provided by points 2-4 of the present Article.

2. In the event that an enterprise has been transferred and accepted by the deed of conveyance containing information about defects discovered in the enterprise and the property lost (Article 563[1]), the buyer shall have the right to demand that the purchase price of the enterprise be correspondingly reduced, unless the right to present other claims in such instances has been provided by the contract for sale of the enterprise.

3. The buyer shall have the right to demand a reduction in the purchase price if the seller's debts (obligations) not mentioned in the contract for sale of the enterprise or deed of conveyance have been transferred to him as part of the enterprise, unless the seller proves that the buyer knew about such debts (obligations) at the moment of concluding the contract and transfer of the enterprise.

4. The buyer shall have the right to demand in a legal procedure that the contract for sale of the enterprise be cancelled or altered and everything performed by the parties under contract be returned, if it has been established that the enterprise is unfit for the purposes mentioned in the sale contract in view of defects for which the seller is responsible and which the seller has not removed on the terms and conditions, in the procedure, and within the period of time stipulated in accordance with the present Code, other laws, other legal acts or contract, or it is impossible to remove such defects.

Article 566. Application to Contract for Sale of Enterprise of Rules Regulating Consequences of Invalidity of Deals and Alteration or Cancellation of Contract

The rules of the present Code regulating consequences of the invalidity of deals and the alteration or cancellation of a contract for sale of an enterprise which provide for the return or recovery in kind of what has been received under contract from one or both parties, shall apply to a contract of sale of an enterprise, unless such consequences substantially violate the rights and statute-protected interests of creditors of the seller and buyer or other parties and are contrary to the public interests.

 

Chapter 31. Barter

 

Article 567. Barter Agreement

1. Under a barter agreement, each of the parties shall undertake to transfer certain goods into the other party's ownership in exchange for other goods.

2. Accordingly, the rules of purchase and sale (Chapter 30) shall apply to a barter agreement, unless this is contrary to the rules of the present Article and the essence of barter. In this case, either party shall be deemed to be a seller of goods which it undertakes to sell and a buyer of goods which it undertakes to accept in exchange.

Article 568. Prices and Costs Under Barter Agreement

1. Unless it follows otherwise from a barter agreement, the goods subject to exchange shall be presumed to be of equal value, while costs of their transfer and acceptance shall in each case be paid by the party which bears respective duties.

2. In the event that, under a barter agreement, the goods are recognized not to be of equal value, the party obligated to transfer the goods whose price is lower than that of the goods provided for the exchange must pay the price difference immediately before or after the performance of its duty to transfer the goods, unless a different payment procedure has been provided by the agreement.

Article 569. Counter Performance of Obligation to Transfer Goods Under Barter Agreement

In the event that, under a barter agreement, the periods for the transfer of goods do not coincide, the rule on counter performance of obligations (Article 328) shall apply to the performance of the duty to transfer goods by the party which must transfer the goods after goods have been transferred by the other party.

Article 570. Transfer of Property in Goods Exchanged

Unless otherwise provided by a law or barter agreement, the right of property in exchanged goods shall simultaneously pass to the parties acting as buyers under a barter agreement after the fulfilment by both parties of obligations to transfer respective goods.

Article 571. Responsibility for Withdrawal of Goods

The party from which a third party has withdrawn the goods acquired under a barter agreement shall have the right, should the grounds mentioned in Article 461 of the present Article be present, to demand from the other party that the goods received by the latter in exchange be returned and/or losses be compensated.

 

Chapter 32. Donation

 

Article 572. Donation Contract

1. Under a donation contract, one party (donor) shall transfer free of charge or undertake to transfer to the other party (donee) a thing into ownership, or a property right (claim) to himself or a third party or shall release or undertake to release it from a property duty with regard to himself or a third party.

Should a counter transfer of a thing or right or a counter obligation be present, the contract shall not be deemed a donation. The rules established in Article 170(2) of the present Code shall apply to such a contract.

2. A promise to transfer a thing or property right to someone free of charge or relieve someone from a property duty (promise of donation) shall be recognized by a donation contract and shall be binding on the promising party, if the promise has been duly made in writing (Article 574[2]) and contains an explicit intent to effect in the future a gratuitous transfer of the thing or right to a particular person or relieve him or her from the property duty.

A promise to donate one's entire property or part of one's entire property without specifying the particular object of donation in the form of a thing, right, or release from a duty shall be null and void.

3. A contract which provides for the transfer of a gift to the donee after the donor's death shall be null and void.

The rules of civil legislation on inheritance shall apply to this type of donation.

Article 573. Donee's Refusal to Accept Gift

1. A donee shall have the right to refuse the gift at any time before the transfer thereof to him. In this case, the donation contract shall be deemed to be cancelled.

2. If a donation contract has been concluded in writing, the refusal of the gift must be formalized in writing as well. If a donation contract has been registered (Article 574[3]), the refusal to accept the gift shall also be subject to State registration.

3. If a donation contract has been concluded in writing, the donor shall have the right to demand from the donee to compensate for the actual loss caused by a refusal to accept the gift.

Article 574. Form of Donation Contract

1. Donation accompanied by the transfer of the gift to the donee may be effected orally, except in the instances specified by points 2 and 3 of the present Article.

The transfer of a gift shall be effected by way of handing it over, by symbolic transfer (handing the keys and the like), or by handing documents certifying the right thereto.

2. A contract for donation of movable property shall be effected in writing in instances where:

- the donor is a legal person and the gift's value is higher than five times the statutory minimum monthly wage; and

- the contract contains a promise to donate in the future.

In the instances specified in this point an orally concluded donation contract shall be null and void.

3. A contract for donation of real estate shall be subject to State registration.

Article 575. Prohibition of Donation

Except for usual gifts whose value does not exceed five statutory minimum monthly wages, no donation shall be permitted:

1) in the name of minors and citizens deemed to be incapable by their lawful representatives;

2) to employees of medical and educational institutions, social protection institutions and other similar institutions - by citizens staying there for medical treatment, care, or upbringing, or by spouses or relatives of these citizens;

3) to governmental and municipal employees in connection with their official position or in connection with the performance by them of their official duties;

4) in relations between commercial organizations.

Article 576. Limitations on Donation

1. A legal person owning a thing by right of economic jurisdiction or operative management shall have the right to donate it with the owner's consent, unless otherwise provided by law. This limitation shall not extend to usual gifts of low value.

2. Donation of property in common joint ownership shall be permitted with the consent of all participants in the joint property with the observance of the rules established by Article 253 of the present Code.

3. Donation of the donor's right to a claim against a third party shall be effected with the observance of the rules provided by Articles 382-386, 388, and 389 of the present Code.

4. Donation by way of performing, instead of the donee, his duty with respect to a third party shall be effected with the observance of the rules established by Article 313(1) of the present Code.

Donation by way of the transfer by the donor of the donee's debt to a third party to himself shall be effected with the observance of the rules established by Article 391 and 392 of the present Code.

5. A letter of attorney for a representative to make donation which does not specify the donee and the donated object shall be null and void.

Article 577. Refusal to Execute Donation Contract

1. A donor shall have the right to refuse to execute the contract containing a promise to transfer to the donee a thing or right or to release the donee from a property duty in the future, if after the conclusion of the contract the donor's property or marital status or health condition has changed to a degree that the execution of the contract under new circumstances may bring about a substantial deterioration of his living standard.

2. A donor shall have the right to refuse to execute the contract obtaining a promise to transfer to the donee a thing or right or to release the donee from a property duty in the future for the reasons which entitle him to cancel donation (Article 578[1]).

3. A refusal by a donor to execute a donation contract on the grounds specified by points 1 and 2 of the present Article shall not entitle the donee to demand that losses be compensated.

Article 578. Abrogation of Donation

1. A donor shall have the right to abrogate donation, if the donee has made an attempt upon his life, the life of any of his family members or close relatives or has deliberately inflicted bodily injuries to the donor.

In the event that a donee has deliberately taken the donor's life, the right to demand abrogation of donation in a court shall belong to the donor's heirs.

2. A donor shall have the right to demand to abrogate donation in a legal procedure, if the donee's treatment of the donated thing which is of high non-property value for the donor creates a threat of irrevocable loss thereof.

3. Upon an interested party's demand, a court may abrogate the donation made by an individual entrepreneur or legal person in violation of provisions of the law on insolvency (bankruptcy) from the funds connected with his entrepreneurial activity within six months preceding the declaration of such person as being insolvent (bankrupt).

4. A donation contract may stipulate the donor's right to cancel donation in the event that he outlives the donee.

5. Should donation be abrogated, the donee shall be obliged to return the donated thing, if it has survived in kind by the moment of abrogating the donation.

Article 579. Instances Where Refusal to Execute Donation Contract and Abrogation of Donation are Impossible

The rules on refusal to execute a donation contract (Article 577) and abrogation of donation (Article 578) shall not apply to usual gifts of low value.

Article 580. Consequences of Causing Damage Because of Defects of Donated Thing

The damage caused to the donee citizen's life, health, or property as a consequence of defects of the donated thing shall be subject to compensation by the donor in accordance with the rules provided by Article 59 of the present Code, if it has been proved that these defects appeared before the transfer of the thing to the donee, that they are not obvious, and that the donor, though being aware of them, had not warn the donee about them.

Article 581. Succession in Case of Promise to Donate

1. The rights of a donee to whom a gift has been promised under a donation contract shall not pass to his heirs (successors), unless otherwise provided by the donation contract.

2. The duties of a donor who has promised to donate shall pass to his heirs (successors), unless otherwise provided by the donation contract.

Article 582. Endowments

1. An endowment shall be deemed to be donation of a thing or right for generally beneficial purposes.

Endowments may be contributed to citizens, medical and educational institutions, social protection institutions and other similar institutions, charitable, scientific, and higher education institutions, foundations, museums and other cultural institutions, social and religious organizations, as well as to the State and other civil-law subjects mentioned in Article 124 of the present Code.

2. No one's permission or consent shall be required to accept an endowment.

3. The endowment of property to a citizen must be, and in case of legal persons, may be conditioned by the endower with regard to the use of this property for a definite purpose. If no such condition is present, the endowment of property to a citizen shall be deemed to be a usual donation, and in all other instances the endowed property shall be used by the donee in accordance with the purpose of the property.

A legal person accepting an endowment for whose use a certain purpose has been established must keep separate records of all operations in using the endowed property.

4. If the use of the endowed property in accordance with the purpose specified by the endower is impossible as a consequence of changes in circumstances, it may be used for other purpose only with the endower's consent, and in case of the endowing citizen's death or liquidation of the endowing legal person - by a court decision.

5. The use of the endowed property out of accordance with the purpose specified by the endower or the change of this purpose in violation of the rules laid down in point 4 of the present Article shall entitle the endower, his heirs or other successor to demand to cancel the endowment.

6. Articles 578 and 581 of the present Code shall not apply to endowments.

 

Chapter 33. Annuity and Lifelong Maintenance with Dependence

 

Paragraph 1. General Provisions on Annuity and Lifelong Maintenance with Dependence

Article 583. Annuity Contract

1. Under an annuity contract, one party (annuitant) shall transfer property into the ownership of the other party (annuity payer), and the annuity payer shall undertake, in exchange for the property received, to periodically pay annuity to the annuitant in the form of a certain sum of money or provision of means to maintain him in other form.

2. Under an annuity contract, it shall be permitted to establish a duty of paying the annuity without time-limit (permanent annuity) or during the annuitant's lifetime (life annuity). A life annuity may be established on conditions of lifelong maintenance of a citizen as a dependent.

Article 584. Form of Annuity Contract

An annuity contract shall be subject to notarial certification. An annuity contract providing for the alienation of real estate for annuity payment shall also be subject to State registration.

Article 585. Property Alienation for Annuity Payment

1. Property alienated in order to pay annuity may be transferred by the annuitant into the annuity payer's ownership for a compensation or free of charge.

2. In the event that an annuity contract provides for the transfer of property for a compensation, the rules on purchase and sale (Chapter 30) shall apply, whereas in the event that such property is transferred free of charge - the rules of a donation contract (Chapter 32) shall apply insofar as otherwise established by the rules of the present Article and is not contrary to the essence of the annuity contract.

Article 586. Encumbrance of Real Estate with Annuity

1. An annuity shall encumber a land plot, enterprise, building, structure, or other real estate transferred for annuity payment. In the event of the alienation of such property by the annuity payer, his obligations under the annuity contract shall pass to the acquirer of the property.

2. The person who has transferred the annuity-encumbered real estate into another person's ownership shall bear subsidiary responsibility with him (Article 399) at the annuitant's demands arising in connection with a violation of the annuity contract, unless the present Code, other law or contract have provided for joint responsibility for this obligation.

Article 587. Securing Annuity Payment

1. When transferring a land plot or other real estate for annuity payment, the annuitant shall acquire the right to pledge this property as security of the annuity payer's obligation.

2. A material condition in a contract which provides for the transfer of a sum of money or other movables for annuity payment shall be a condition establishing the annuity payer's duty to secure the performance of his duty (Article 329) or to insure the risk of responsibility for non-fulfilment or improper fulfilment of these obligations in favour of the annuitant.

3. Should the annuity payer fail to fulfil the obligations provided by point 2 of the present Article, as well as in the event of the loss of security or deterioration of its conditions due to circumstances beyond the annuitant's responsibility, the annuitant shall have the right to cancel the annuity contract and demand compensation of losses caused by the cancellation of the contract.

Article 588. Responsibility for Delay in Annuity Payment

For a delay in annuity payment the annuity payer shall pay to the annuitant interest as provided by Article 395 of the present Code, unless a different amount of interest has been established by the annuity contract.

Paragraph 2. Permanent Annuity

Article 589. Receiver of Permanent Annuity

1. Only citizens, and also non-profit organizations, may be receivers of permanent annuity, if this meets the purposes of their activity and is not contrary to a law.

2. The annuitant's rights under an annuity contract may be transferred to the persons specified in point 1 of the present Article by way of cession or be inherited or transferred in a succession procedure in case of reorganization of legal persons, unless otherwise provided by a law or contract.

Article 590. Form and Size of Permanent Annuity

1. A permanent annuity shall be paid in cash in an amount established by contract.

A permanent annuity contract may provide for annuity payment by way of providing things, performing works, or rendering services equivalent in value to the monetary amount of annuity.

2. Unless otherwise provided by a permanent annuity contract, the amount of annuity paid shall be increased in proportion with the increase in the statutory minimum monthly wage.

Article 591. Term for Permanent Annuity Payment

Unless otherwise provided by a permanent annuity contract, the permanent annuity shall be paid at the end of each calendar quarter.

Article 592. Payer's Right to Buy Permanent Annuity Out

1. A permanent annuity payer shall have the right to refuse further annuity payment through buying it out.

2. Such a refusal shall be valid on condition that it has been declared by the payer in writing not later than three months before the termination of annuity payment or a longer period established by the permanent annuity contract. In this event, the obligation to pay annuity shall not terminate until the entire buy-out amount has been received by the annuitant, unless a different buy-out procedure has been provided by contract.

3. The condition in a permanent annuity contract stipulating the permanent annuity payer's refusal of the right to buy it out shall be null and void.

A contract may provide that the right to buy the permanent annuity out may not be exercised during the annuitant's lifetime or another period not exceeding thirty years from the moment of concluding the contract.

Article 593. Buying Out Permanent Annuity on Demand of Annuitant

A receiver of permanent annuity shall have the right to demand that the payer buy out the annuity in instances where:

- the annuity payer has delayed payment thereof for more than one year, unless otherwise provided by the permanent annuity contract; and

- the annuity payer has violated his obligations with regard to securing annuity payment (Article 587); and

- the annuity payer has been deemed insolvent or other circumstances have arisen expressly confirming that the annuity will not be paid in the amount and within the period established by contract; and

- the real estate transferred to receive annuity payment has passed into the ownership in common or has been divided between several persons; and

- in other instances specified by contract.

Article 594. Price to Buy Permanent Annuity Out

1. In the instances specified by Articles 592 and 593, permanent annuity shall be bought out at a price determined by the permanent annuity contract.

2. Where there is no clause on the buy-out price in a permanent annuity contract, under which the property has been transferred for a compensation against permanent annuity payment, the buy-out shall be effected at a price corresponding to the annual sum of payable annuity.

3. Where there is no clause on the buy-out price in a permanent annuity contract, under which the property has been transferred free of charge against annuity payment, the buy-out price, alongside the annual sum of annuity payments, shall also include the price of the transferred property determined by the rules of Article 424(3) of the present Code.

Article 595. Risk of Accidental Loss of Property Transferred For Permanent Annuity Payment

1. The risk of accidental loss of or accidental damage to the property transferred for permanent annuity payment shall be borne by the annuity payer.

2. In the event of accidental loss of or accidental damage to the property transferred for a compensation against permanent annuity payment, the payer shall have the right to demand that, respectively, the obligation to pay annuity be terminated or terms and conditions to pay it be changed.

Paragraph 3. Life Annuity

Article 596. Receiver of Life Annuity

1. A life annuity may be established for the lifetime of a citizen who transfers property to receive annuity payment or for the lifetime of another citizen specified by him.

2. It shall be permitted to establish life annuity in favour of several citizens whose shares in the right to receive annuity are deemed to be equal, unless otherwise provided by a life annuity contract.

In the event of the death of one of the annuitants, his share in the right to receive annuity shall pass to the annuitants surviving him, unless otherwise provided by the life annuity contract, and in the event of the death of the last annuitant the obligation to pay annuity shall terminate.

3. A contract establishing life annuity in favour of the citizen who had died by the moment of concluding the contract shall be null and void.

Article 597. Size of Life Annuity

1. Life annuity shall be determined in a contract as a sum of money periodically paid to the annuitant during his life.

2. When calculated on a monthly basis, the size of life annuity determined in a contract must be not less than the statutory minimum monthly wage, and in the instances stipulated by Article 318 of the present Code it shall be subject to an increase.

Article 598. Term for Life Annuity Payment

Unless otherwise provided by a life annuity contract, life annuity shall be paid at the end of each calendar month.

Article 599. Cancellation of Life Annuity Contract on Annuitant's Demand

1. In the event of a serious violation of a life annuity contract by the payer, the annuitant shall have the right to demand from the annuity payer to buy the annuity out on the terms and conditions specified by Article 594 of the present Code or cancel the contract and compensate for losses.

2. If an apartment, dwelling house or other property have been alienated free of charge against life annuity payment, the annuitant shall have the right, in the event of a serious violation of the contract by the annuity payer, to demand that this property be returned and the value thereof be counted against the price of buying the annuity out.

Article 600. Risk of Accidental Loss of Property Transferred For Life Annuity Payment

Accidental loss of or accidental damage to the property transferred for life annuity payment shall not release the annuity payer from the obligation to pay it on the terms and conditions provided by the life annuity contract.

 

 

Paragraph 4. Life Maintenance of Dependent

Article 601. Contract for Lifelong Maintenance of Dependent

1. Under a contract of lifelong maintenance of a dependent, the annuitant-citizen shall transfer the dwelling house, apartment, land plot, or other real estate belonging to him into the ownership of the annuity payer who shall undertake to provide lifelong maintenance for the citizen and/or a third party (parties) specified by him as dependents.

2. The rules on life annuity shall apply to a contract of lifelong maintenance of a dependent, unless otherwise provided by the rules of this paragraph.

Article 602. Duty to Provide Maintenance of Dependent

1. The annuity payer's obligation to provide maintenance of a dependent may include satisfaction of needs for living space, food and clothing and, if so required by the citizen's health condition, nursing of him as well. A contract of lifelong maintenance of a dependent may also provide for payment by the annuity payer for burial services.

2. A contract for lifelong maintenance of a dependent must specify the overall value of maintaining the dependent. The overall value of maintenance per month may not be less than twice the statutory minimum monthly wage.

3. When settling a dispute between the parties over the limits of maintenance which is provided or must be provided to a citizen, a court must be guided by principles of faith and reason.

Article 603. Replacement of Lifelong Maintenance by Periodic Payments

A contract for lifelong maintenance of a dependent may provide for the possibility to replace maintenance of a dependent in kind by periodic money payments during the life of the citizen.

Article 604. Alienation and Use of Property Transferred for Ensuring Lifelong Maintenance

An annuity payer shall have the right to alienate, pledge or otherwise encumber the real estate transferred to him to provide lifelong maintenance only with the annuitant's preliminary consent.

An annuity payer must take necessary measures to prevent a reduction in the value of the aforesaid property as a result of the use thereof when providing lifelong maintenance for a dependent.

Article 605. Termination of Lifelong Maintenance of Dependent

1. The obligation to provide lifelong maintenance of a dependent shall terminate with the annuitant's death.

2. In the event of a serious violation by the annuity payer of his obligations, the annuitant shall have the right to demand that the real estate transferred for the provision of lifelong maintenance be returned or the buy-out price be paid to him on the terms and conditions specified by Article 594 of the present Code. The annuity payer in this case shall not have the right to demand compensation of expenses suffered in connection with the maintenance of the annuitant.

Chapter 34. Lease

 

Paragraph 1. General Provisions on Lease

Article 606. Lease Contract

Under a lease (property letting) contract, the lessor (lease grantor) shall undertake to transfer a property to the lessee (lease grantee) for a compensation into temporary possession and use or for temporary use.

The fruits, products, and revenues collected by the lessee as a result of using the leased property under contract shall be his property.

Article 607. Objects of Lease

1. A lease may be taken of land plots and other separate natural objects, enterprises and other property complexes, buildings, structures, transport vehicles, and other things which do not lose their natural properties in the process of using them (inconsumable things).

A law may specify the types of property whose lease-out shall not be permitted or shall be limited.

2. A law may establish particulars for letting land plots and other separate natural objects on lease.

3. A lease contract must contain information enabling to expressly identify the property to be transferred to a lessee as a lease object. Should such information be absent in a contract, the clause on the object to be let on lease shall be deemed not to have been agreed by the parties, and the respective contract - not to have been concluded.

Article 608. Lessor

The right to lease property out shall belong to its owner. Also, persons authorized by a law or owner to lease property out may be lessors.

Article 609. Form and State Registration of Lease Contract

1. A lease contract for a period of over a year, and irrespective of its validity term if at least one of the parties is a legal person, must be concluded in writing.

2. A contract for the lease of real estate shall be subject to State registration, unless otherwise provided by law.

3. A property lease contract providing for the subsequent transfer of the ownership of this property to the lessee (Article 624), shall be concluded in the form stipulated for a contract of purchase/sale of such property.

Article 620. Duration of Lease Contract

1. A lease contract shall be concluded for a period determined by the contract.

2. If lease duration has not been specified in the contract, the lease contract shall be deemed to have been concluded for indefinite period of time.

In this event, either party shall have the right to refuse the contract at any time after having warned the other party thereof a month in advance or three months if real estate is under lease. A law or contract may establish a different time for warning about the termination of the lease contract concluded for indefinite period of time.

3. A law may establish maximum (limit) durations of a contract for particular lease types, as well as for the lease of particular types of property. In these instances, if the lease period has not been specified in a contract and neither party has refused the contract before the expiration of the statutory limit period, the contract shall terminate upon the expiration of the limit period.

A lease contract concluded for a period longer than the statutory limit period shall be deemed to have been concluded for a period equal to the limit period of time.

Article 611. Providing Property to Lessee

1. A lessor shall be obliged to give property to a lessee in a condition meeting the lease contract stipulations and functional purpose of the property.

2. The property shall be leased out together with all its accessories and related documents (technical passport, quality certificate, etc.), unless otherwise provided by contract.

If such accessories and documents have not been handed over, and without them the lessee cannot use the property for the purpose thereof or to a considerable extent has been deprived of what he could count on when concluding the contract, he may demand that the lessor provide such accessories and documents to him or cancel the contract, as well as compensate for losses.

3. If the lessor has failed to provide the leased property to the lessee within the period specified in the lease contract or within a reasonable period if this has not been specified in the contract, the lessee shall have the right to demand this property from him in accordance with Article 398 of the present Code and that losses caused by the delay in the execution be compensated or demand the cancellation of the contract and compensation of losses caused by the non-fulfillment thereof.

Article 612. Lessor's Responsibility for Defects of Leased Property

1. The lessor shall be responsible for the defects of leased property which impede wholly or partially the use thereof, even if he did not know about these defects when concluding the lease contract.

Should such defects be discovered, the lessee shall have the right, at his discretion, to:

- demand from the lessor to remove defects of property free of charge, or commensurately reduce the rental, or compensate him the cost of removing defects of property; and

- directly deduct from the rental the amount of expenses incurred to remove particular defects, having first informed the lessor thereof; and

- demand the cancellation of the contract before time.

The lessor informed about the lessee's demands or about his intent to remove defects of property at the lessor's expense, may immediately replace the property given the lessee by other similar property in proper condition or remove defects of property free of charge.

If satisfaction of the lessee's demands or deduction by him of expenses on the removal of defects from rent does not cover the losses caused to the lessee, he shall have the right to demand compensation for the uncovered part of losses.

3. The lessor shall not be responsible for the defects of leased property which were stipulated by him when concluding the lease contract or were known to the lessee beforehand or should have been discovered by the lessee during the inspection of property or checking of its serviceability when concluding the contract or taking the property on lease.

Article 613. Rights of Third Persons to Leased Property

Letting property on lease shall not be a ground for the termination or alteration of third persons' rights to this property.

When concluding a lease contract, the lessor shall be obliged to warn the lessee about all rights of third persons to the property being leased out (servitude, pledge right, etc.). Non-fulfillment by the lessor of this duty shall entitle the lessee to demand a reduction in rental or cancellation of the contract and compensation of losses.

Article 614. Rental

1. A lessee shall be obliged to timely make payment for the use of property (rental).

A procedure, terms and conditions to pay rental shall be determined by the lease contract. If these have not been specified by contract, it shall be deemed that the procedure, terms and conditions have been established which are usually applied when leasing similar property under comparable circumstances.

2. Rental shall be established for the entire leased property as a whole or separately for each of its component parts in the form of:

1) payments of fixed amount made periodically or all at once; and

2) a specified share of products, fruits, or revenues collected from the use of leased property; and

3) provision by the lessee of certain services; and

4) transfer by the lessor of a thing stipulated by contract into the lessee's ownership or on lease; and

5) imposition on the lessee of contract-stipulated expenses to improve leased property.

In a lease contract the parties may provide for a combination of the aforementioned forms of rental or other forms of rental payment.

3. Unless otherwise provided by contract, the rental amount may altered by agreement of the parties during the contract schedule, but not more than once a year. A law may provide for other minimum period to revise the rental amount for particular lease types, as well as for lease of particular types of property.

2. Unless otherwise provided by law, a lessee shall have the right to demand a commensurate reduction of rental, if in view of circumstances he is not responsible for, the usage conditions stipulated by the lease contract or the condition of property have substantially deteriorated.

5. Unless otherwise provided by a lease contract, in the event of a serious violation by the lessee of the rental payment term, the lessor shall have the right to demand from him that rental be paid before time within a period specified by the lessor. In this event, the lessor shall not have the right to demand that rental be paid before time for more than two periods in succession.

Article 615. Use of Leased Property

1. A lessee shall be obliged to use leased property in accordance with the terms and conditions of the lease contract, and if these have not been specified in the contract, in accordance with the purpose of property.

2. A lessee shall have the right, by the lessor's consent, to let the leased property on sublease (subletting) and transfer his rights and duties under the lease contract to another person (re-lease), give the leased property for free use, as well as pledge the lease rights and contribute them as his share in the authorized capital of economic partnerships and societies or as share in a production cooperative, unless otherwise provided by the present Code, other law, or other legal acts. In the aforesaid instances, except for re-lease, the lessee shall remain responsible under contract to the lessor.

A sublease contract may not be concluded for a period longer than that of lease contract.

The rules on lease contracts shall apply to a sublease contract, unless otherwise established by a law or other legal acts.

3. If a lessee uses property out of accordance with the contractual terms and conditions or the purpose of property, the lessor shall have the right to demand that the contract be cancelled and losses compensated.

Article 616. Duties of Parties to Maintain Leased Property

1. A lessor shall be obliged to effect at his expense major overhaul of the property let on lease, unless otherwise provided by a law, other legal acts, or lease contract.

Major overhaul must be effected within the contract schedule, and if it has not been specified by the contract or caused by urgent necessity - within a reasonable period of time.

Violation by the lessor of the duty to effect major overhaul shall confer the lessee the right, at his discretion, to:

- effect major overhaul stipulated by the contract or caused by urgent necessity and exact from the lessor the repair cost or count it against rental payment; and

- demand a commensurate reduction of rental; and

- demand to cancel the contract and compensate for losses.

2. A lessee shall be obliged to keep property in good condition, effect current repair at his expense, and bear expenses on the maintenance of property, unless otherwise established by a law or lease contract.

Article 617. Maintaining Lease Contract in Force in Event of Change of Parties

1. The transfer of the right of ownership (economic jurisdiction, operative management, inheritable possession for life) to a property let to another person on lease shall not be a ground for changing or cancelling a lease contract.

2. In the event of the death of the citizen holding real estate on lease, his rights and duties under lease contract shall pass to the heir, unless otherwise provided by a law or contract.

The lessor shall not have the right to refuse such heir to enter into the contract for the remaining period of validity thereof, except when the conclusion of the contract was conditioned by personal qualities of the lessee.

Article 618. Termination of Sublease Contract in Event of Termination of Lease Contract Before Time

1. Unless otherwise provided by the lease contract, the termination of the lease contract before time shall entail the termination of the sublease contract concluded pursuant thereto. The sublessee in this case shall have the right to conclude a contract for leasing the property he used under sublease contract within the remaining sublease time on terms and conditions corresponding to those of the terminated lease contract.

2. If a lease contract is null and void for the reasons stipulated by the present Code, sublease contracts concluded pursuant thereto shall also be null and void.

Article 619. Cancellation of Contract Before Time on Lessor's Demand

At the lessor's demand, a court may cancel a lease contract before time in instances where the lessee:

1) has used property with a serious violation of contract terms and conditions or the purpose of property or with repeated violations;

2) has substantially deteriorated the property;

3) has not paid rental two times in succession upon the expiration of the contract payment schedule;

4) has not effected major overhaul of property within the period specified by the lease contract and, should it be absent in the contract, within a reasonable period in instances where in accordance with a law, other legal acts or contract the performance of major overhaul is the lessee's duty.

A lease contract may also provide for other grounds for the contract to be cancelled on the lessor's demand in accordance with Article 450(2) of the present Code.

A lessor shall have the right to demand that the contract be cancelled before time only after he has sent a written notice to the lessee urging him to fulfil his obligation within a reasonable period.

Article 620. Cancellation of Contract Before Time on Lessee's Demand

At the lessee's demand, a court may cancel a lease contract before time in instances where:

1) the lessor has not afforded property for use by the lessee or has created obstacles for the use thereof in conformity with contract terms and conditions or the purpose of property;

2) the property transferred to the lessee has defects which impede the use thereof and were not stipulated by the lessor when concluding the contract, were unknown to the lessee beforehand and should not have been discovered by the lessee during the inspection of property or checking of its serviceability when concluding the contract;

3) the lessor has neglected his duty to effect major overhaul of property within the period specified by the lease contract and, should it be absent in the contract, within a reasonable period;

4) the property, in view of circumstances which the lessee is not responsible for, proves to be unfit for use.

A lease contract may also establish other grounds for the contract to be cancelled before time on the lessee's demand in accordance with Article 450(2) of the present Code.

Article 621. Lessee's Priority Right to Conclude Lease Contract for New Term

1. Unless otherwise provided by a law or lease contract, a lessee who was properly performing his duties shall, upon the expiration of the contract and all other things being equal, enjoy the right of priority over other persons to conclude a lease contract for a new term. The lessee shall be obliged to notify the lessor in writing about his wish to conclude such contract within a period specified in the lease contract and, should such period is not specified in the contract, within a reasonable period before the termination of the contract.

When a lease contract is concluded for a new term, the contract terms and conditions may be altered by agreement of the parties.

If the lessor refused to conclude with the lessee a contract for a new term, but within a year from the day of expiration of the contract with him has concluded a lease contract with another person, the lessee shall have the right, at his discretion, to demand in a court to transfer to him the rights and duties under the concluded contract and compensate losses caused by the refusal to resume the lease contract with him or only compensate such losses.

2. If the lessee continues to use property after the contract term has expired and there are no objections on the lessor's part, the contract shall be deemed to have been resumed on the same terms and conditions for indefinite period of time (Article 610).

 

Article 622. Return of Leased Property to Lessor

After the lease contract has terminated, the lessee shall be obliged to return to the lessor property in its original condition, normal wear and tear allowed for, or in a condition stipulated by the contract.

If the lessee has not returned the leased property or has delayed to return it at proper time, the lessor shall have the right to demand that rental be paid for the entire delay time. If the aforesaid payment does not cover losses caused to the lessor, he may demand compensation thereof.

If a contract provides for a penalty for untimely return of leased property, losses may be recovered in full in addition to the penalty, unless otherwise provided by contract.

Article 623. Improvements of Leased Property

1. Separable improvements of leased property made by a lessee shall be his property, unless otherwise provided by the lease contract.

2. In the event that a lessee has made, at his expense and with the lessor's consent, improvements of property inseparable from the property without a detriment thereto, the lessee shall have the right to a compensation of the cost of these improvements upon the termination of the contract, unless otherwise provided by the lease contract.

3. The cost of inseparable improvements in leased property made by a lessee without the lessor's consent shall not be subject to compensation, unless otherwise provided by law.

4. Improvements, both separable and inseparable, in leased property made at the expense of depreciation deductions from this property shall be the lessor's property.

Article 624. Buying Leased Property Out

1. A law or lease contract may provide that leased property shall pass into the lessee's ownership upon the expiration of lease term or prior to the expiration thereof provided that the lessee has paid the entire buy-out sum stipulated by the contract.

2. If no condition on buying leased property out has been stipulated in the lease contract, this may be established by an additional agreement of the parties who in this event shall have the right to agree to include the previously paid rental in the buy-out price.

3. A law may specify instances where buying leased property out shall be prohibited.

Article 625. Particulars of Individual Lease Types and Lease of Individual Types of Property

The regulations provided by the present paragraph shall apply to individual types of lease contract or to lease contracts for individual types of property (hire, lease of transport vehicles, lease of buildings and structures, lease of enterprises, financial lease), unless otherwise established by the rules of the present Code on these contracts.

 

Paragraph 2. Hire

Article 626. Hire Contract

1. Under a hire contract, a lessor whose permanent entrepreneurial activity is to lease property out shall undertake to transfer movable property into the lessee's temporary possession and use for a charge.

The property provided under a hire contract shall be used for consumer purposes, unless otherwise provided by the contract or follows from the essence of the obligation.

2. A hire contract shall be concluded in writing.

3. A hire contract shall be a public contract (Article 426).

Article 627. Hire Contract Duration

1. A hire contract shall be concluded for a period of up to one year.

2. The rules on the resumption of a lease contract for indefinite period and on a lessee's priority right to resume the lease contract (Article 621) shall not apply to a hire contract.

3. A lessee shall have the right to refuse the hire contract at any time, having warned the lessor in writing about his intention not less than ten days before.

Article 628. Providing Property to Lessee

A lessor who has concluded a hire contract shall be obliged, in the lessee's presence, to check the serviceability of the property let on lease, as well as instruct the lessee on the rules to operate the property or give him written instructions as to the use of this property.

Article 629. Removal of Defects of Property Let on Lease

1. If a lessee has found defects in leased property which impede completely or partially the use thereof, the lessor shall be obliged, within a ten-day period from the day of the lessee's declaration of defects, unless a shorter period has been established by the hire contract, to remove defects of property on the spot or replace the particular property by similar property in proper condition.

2. If defects in leased property have resulted from a violation by the lessee of rules of operation and maintenance of property, the lessee shall pay to the lessor the cost of repair and transportation of property.

Article 630. Rental under Hire Contract

1. A rental under a hire contract shall be established in the form of fixed payments made periodically or all at once.

2. In the event that a lessee returns the property before time, the lessor shall return to him the respective part of rental received, counting it from the day following the day on which property has been actually returned.

3. Rental debt shall be collected from a lessee without fail on the basis of a notary's executive note.

 

 

Article 631. Use of Leased Property

1. Major and maintenance overhaul of property let on lease under a hire contract shall be the lessor's duty.

2. Letting of property provided to a lessee under a hire contract on sublease, the transfer by him of his rights and duties under the hire contract to another person, letting this property for free use, the pledging of lease rights and payment thereof as property contribution to economic partnerships and companies or as share contribution to production cooperatives shall not be permitted.

Paragraph 3. Lease of Transport Vehicles

1. Lease of Transport Vehicles with Provision of Control and Operation Services

Article 632. Contract for Lease of Transport Vehicle with Crew

Under a contract for leasing (affreighting for a term) a transport vehicle and crew, the lessor shall transfer to the lessee a transport vehicle for a compensation into temporary possession and use and provide, at his expense, control and operation services for it.

The rules on the resumption of a lease contract for indefinite period and a lessor's priority right to conclude a lease contract for a new term (Article 621) shall not apply to a contract for the lease a transport vehicle with crew.

Article 633. Form of Contract for Leasing Transport Vehicle with Crew

A contract to lease a transport vehicle with crew must be concluded in writing irrespective of its term. The rules on the registration of lease contracts provided by Article 609(2) shall not apply to such contract.

Article 634. Lessor's Duty to Maintain Transport Vehicle

Throughout the term of the contract for leasing a transport vehicle and crew, the lessor shall be obliged to maintain the proper condition of the leased transport vehicle, including effectuation of maintenance and major overhauls and provision of necessary accessories.

Article 635. Lessor's Duties Relating to Control and Operation of Transport Vehicle

The services provided by a lessor to a lessee to control and operate a transport vehicle must ensure its normal and safe operation in accordance with the lease purposes specified in the contract. A contract for the lease of a transport vehicle and crew may provide for a wider range of services rendered to a lessee.

The make-up of crew for a transport vehicle and its qualification must meet the rules, obligatory for the parties, and contract conditions and, if such requirements have not been established by the obligatory rules, the rules of usual practice of operating this type of transport vehicle and contract conditions.

The crew members shall be the lessor's employees. They shall obey the lessor's instructions concerning the control and operation and the lessee's instructions concerning commercial use of the transport vehicle.

Unless otherwise provided by the lease contract, disbursements on paying for crew members' services, as well as on maintenance thereof shall be borne by the lessor.

Article 636. Lessee's Duty to Pay Expenses Connected with Commercial Use of Transport Vehicle

Unless otherwise provided by the contract for leasing a transport vehicle and crew, the lessee shall bear expenses arising in connection with commercial use of the transport vehicle, including expenses on paying for fuel and other materials consumed in the process of operation, and on payment of charges.

Article 637. Insuring Transport Vehicle

Unless otherwise provided by the contract for leasing a transport vehicle and crew, the duty to insure the vehicle and/or insure the responsibility for a damage which may be caused by him or in connection with the operation thereof, shall be placed on the lessee in instances where such insurance is mandatory by virtue of law or contract.

Article 638. Contracts with Third Persons to Use Transport Vehicle

1. Unless otherwise provided by the contract for leasing a transport vehicle and crew, the lessee shall have the right, without the lessor's consent, to let the transport vehicle on sublease.

2. Within the framework of effecting commercial use of the leased transport vehicle, the lessee shall have the right, without the lessor's consent and in his own name, to conclude with third persons carriage contracts and other contracts, if these are not contrary to the purposes of the vehicle specified in the contract and, if such purposes have not been set, to the function of the transport vehicle.

Article 639. Responsibility for Damage Caused to Transport Vehicle

In the event of the loss of or damage to the leased transport vehicle, the lessee shall be obliged to compensate the lessor for losses caused, if the latter proves that the loss of or damage to the vehicle occurred owing to circumstances for which the lessee is responsible under a law or lease contract.

Article 640. Responsibility for Damage Caused by Transport Vehicle

Responsibility for a damage caused to third persons by a leased transport vehicle, its mechanisms, gears, and equipment, shall be borne by the lessor in accordance with the rules provided by Article 59 of the present Code. He shall have the right to have recourse against the lessee for compensation of the sums paid to third persons, if he proves that the damage occurred through the lessee's fault.

Article 641. Particulars of Leasing Individual Types of Transport Vehicle

Transport charters and codes may establish particular rules, other than those provided by this paragraph, for leasing individual types of transport vehicles with the provision of control and operation services.

2. Lease of Transport Vehicle without Provision of Control and Operation Services

Article 642. Contract for Leasing Transport Vehicle Without Crew

Under a contract for leasing a transport vehicle without crew, the lessor shall transfer the transport vehicle to the lessee for a compensation into temporary possession and use without providing control and operation services.

The rules on the resumption of a lease contract for indefinite period of time and on the lessee's priority right to conclude a lease contract for a new term (Article 621) shall not apply to contract for leasing a transport vehicle without crew.

Article 643. Form of Contract for Leasing Transport Vehicle Without Crew

A contract to lease a transport vehicle without crew must be concluded in writing irrespective of its term. The rules on the registration of lease contracts provided by Article 609(2) of the present Code shall not apply to such contract.

Article 644. Lessee's Duty to Maintain Transport Vehicle

Throughout the term of the contract for leasing a transport vehicle without crew, the lessee shall be obliged to maintain the proper condition of the leased vehicle, including effectuation of maintenance and major overhaul.

Article 645. Lessee's Duties Relating to Control and Operation of Transport Vehicle

The lessee shall effect on his own the control of the leased transport vehicle and operation thereof, both commercial and technical.

Article 646. Lessee's Duty to Pay Cost of Maintenance of Transport Vehicle

Unless otherwise provided by the contract to lease a transport vehicle without crew, the lessee shall bear expenses on the maintenance of the leased vehicle, insurance thereof, including insurance of his responsibility, and also expenses arising in connection with the operation thereof.

Article 647. Contracts with Third Persons to Use Transport Vehicle

1. Unless otherwise provided by the contract to lease a transport vehicle without crew, the lessee shall have the right, without the lessor's consent, to let the leased transport vehicle on sublease on terms and conditions of a contract for leasing a transport vehicle with or without crew.

2. A lessee shall have the right, without the lessor's consent and in his own name, to conclude with third persons carriage contracts and other contracts, if these are not contrary to the purposes of using the vehicle specified in the lease contract and, if such purposes have not been set, to the function of the transport vehicle.

Article 648. Responsibility for Damage Caused by Transport Vehicle

Responsibility for a damage caused to third persons by a transport vehicle, its mechanisms, gears, and equipment, shall be borne by the lessee in accordance with the rules of Chapter 59 of the present Code.

 

 

Article 649. Particulars of Leasing Individual Types of Transport Vehicle

Transport charters and codes may establish particular rules, other than those provided by the present paragraph, for leasing individual types of transport vehicles without the provision of control and operation services.

Paragraph 4. Lease of Buildings and Structures

Article 650. Contract to Lease Building or Structure

1. Under a contract for leasing a building or structure, the lessor shall undertake to transfer the building or structure into the lessee's temporary possession and use or for temporary use.

2. The rules of the present paragraph shall apply to the lease of enterprises, unless otherwise provided by the rules of the present Code on the lease of an enterprise.

Article 651. Form and State Registration of Contract for Lease of Building or Structure

1. A contract for leasing a building or structure shall be concluded in writing by way of drawing up one document signed by the parties (Article 434[2]).

The failure to observe the form of a contract to lease a building or structure shall entail its invalidity.

2. A contract for leasing a building or structure concluded for a term not less than a year shall be subject to State registration and shall be deemed to have been concluded from the moment of such registration.

Article 652. Rights to Land Plot When Leasing Building or Structure Located Thereon

1. Under a contract for the lease of a building or structure, simultaneously with the transfer to the lessee of the rights to possess and use such immovable property, the rights shall be transferred to that part of the land plot which is occupied by this immovable property and is necessary for the use thereof.

2. In the event that the lessor is the owner of a land plot where the building or structure being leased out is situated, the lessee shall be granted the lease right or other contract-stipulated right to the respective part of the land plot.

If the right to a respective land plot to be transferred to the lessee has not been established by contract, the right to use the part of the land plot which is occupied by the building or structure and is necessary for the use thereof in conformity with its purpose, shall pass to the lessee for the term of leasing the building or structure.

3. The lease of a building or structure located on a land plot which does not belong to the lessor by right of ownership, shall be permitted without the consent of the owner of this plot, if this is not contrary to the conditions of using such plot established by a law or contract with the owner of the land plot.

 

Article 653. Reservation by Leaseholder of Building or Structure of Right to Use Land Plot at Sale Thereof

In instances where a land plot on which a leased building or structure is situated, is sold to another person, the leaseholder of this building or structure shall reserve the right to use the part of the land plot which is occupied by the building or structure and is necessary for the use thereof on the terms and conditions effective prior to the sale of the land plot.

Article 654. Rental Size

1. A contract for leasing a building or structure must provide for the rental size. Where there is no clause on rental size agreed by the parties in writing, the contract to lease a building or structure shall be deemed not to have been concluded. In this event, the rules for price determination provided by Article 424(3) of the present Code shall not apply.

2. The charge for the use of a building or structure established in the contract for leasing the building or structure shall include payment for the use of the land plot where it is situated or the respective part of the plot transferred therewith, unless otherwise provided by a law or contract.

3. In instances where a rental for a building or structure has been established in the contract per unit area of the building (structure) or other measure of its size, the rental shall be determined proceeding from the actual size of the building or structure transferred to the lessee.

Article 655. Transfer of Building or Structure

1. A building or structure shall be transferred by the lessor and accepted by the lessee on the basis of a deed of conveyance or other transfer document signed by the parties.

Unless otherwise provided by a law or contract for the lease of a building or structure, the lessor's duty to transfer the building or structure to the lessee shall be deemed to be performed after it has been given the lessee for use and possession and the respective transfer document has been signed by the parties.

Evasion by either party from the signing of the document certifying the transfer of the building or structure on contractual terms and conditions shall be considered a refusal, respectively, by the lessor to perform the duty to transfer the property and by the lessee - to accept the property.

2. When the contract for leasing a building or structure is terminated, the leased building or structure must be returned to the lessor with the observation of the rules provided by point 1 of the present Article.

Paragraph 5. Lease of Enterprises

Article 656. Contract for Lease of Enterprise

1. Under a contract for the lease of an enterprise as a whole, as a property complex used to effect entrepreneurial activity, the lessor shall undertake to provide to the lessee for a compensation into his temporary possession and use land plots, buildings, structures, equipment, and other fixed assets forming part of the enterprise; transfer - according to the procedure, on the terms and within the limits determined by contract - reserves of raw material, fuel, materials, and other circulating assets, the rights, other than the lessor's property rights connected with the enterprise, to use land, water and other natural resources, buildings, structures and equipment, the rights to designations individualizing the activity of the enterprise and other exclusive rights; as well as cede him the rights to claim and transfer to him debts relating to the enterprise. The transfer of rights to possess and use the property in the ownership of other persons, including land and other natural resources, shall be effected according to the procedure provided by a law and other legal acts.

2. The lessor's rights obtained by him on the basis of an authorization (license) to conduct the respective activity shall not be subject to the transfer to the lessee, unless otherwise provided by a law or other legal acts. The inclusion of obligations, which cannot be fulfilled by the lessee if he has no such authorization (license), into the structure of the enterprise transferred under contract shall not release the lessor from respective obligations to creditors.

Article 657. Rights of Creditors in Event Enterprise is Leased

1. Creditors under the obligations forming part of the enterprise must be informed by the lessor in writing about the transfer of the enterprise for lease prior to the transfer thereof to the lessee.

2. A creditor who has not informed the lessor in writing about his consent as to the transfer of debt shall have the right, within three months from the day of receiving the notice about the letting of the enterprise on lease, to demand to terminate or perform the obligation before time and compensate for losses caused thereby.

3. A creditor who was not informed about the letting of the enterprise on lease according to the procedure provided by point 1 of the present Article, may lodge a claim for the satisfaction of demands specified by point 2 of the present Article within a year from the day when he learnt or should have learnt about the letting of the enterprise on lease.

4. After an enterprise has been leased out, the lessor and the lessee shall bear joint responsibility for the included debts of the enterprise which were transferred to the lessee without the creditor's consent.

Article 658. Form and State Registration of Contract for Lease of Enterprise

1. A contract to lease an enterprise shall be concluded in writing by way of drawing up one document signed by the parties (Article 434[2]).

2. A contract for the lease of an enterprise shall be subject to State registration and be deemed to have been concluded from the moment of such registration.

3. The non-observance of the form of a contract for the lease of an enterprise shall entail its invalidity.

Article 659. Transfer of Leased Enterprise

An enterprise shall be transferred to the lessee by a deed of conveyance.

The preparation of the enterprise for the transfer, including the drawing-up and submission of the deed of conveyance for the signing, shall be the lessor's duty and be effected at his cost, unless otherwise provided by the contract for leasing the enterprise.

Article 660. Use of Property of Leased Enterprise

Unless otherwise provided by the contract for the lease of an enterprise, the lessee shall have the right without the lessor's consent to sell, exchange, give for temporary use or lend material valuables from the leased enterprise's property, let them on sublease and transfer his rights and duties under lease contract relating to such valuables to another person on condition that this will not entail a reduction in the value of the enterprise and violate other provisions of the contract for leasing the enterprise. The aforesaid procedure shall not apply to land and other natural resources, and also in other instances specified by law.

Unless otherwise provided by the contract for the lease of an enterprise, the lessee shall have the right without the lessor's consent to introduce changes in the structure of the leased property complex, carry out the reconstruction, expansion, and re-equipment increasing the value thereof.

Article 661. Lessee's Duties to Maintain Enterprise and Pay Costs of Operation Thereof

1. A leaseholder of an enterprise shall be obliged throughout the validity term of the lease contract to maintain the enterprise in proper technical condition, including effectuation of maintenance and major overhaul.

2. Expenses connected with the operation of a leased enterprise and also with insurance payments for the leased enterprise shall be placed on the lessee, unless otherwise provided by contract.

Article 662. Introduction by Lessee of Improvements in Leased Enterprise

The leaseholder of an enterprise shall have the right to demand that inseparable improvements in the leased property be compensated him irrespective of the lessor's authorization, unless otherwise provided by the contract for the lease of the enterprise.

The lessor may be released by a court from the duty to compensate the lessee for the value of such improvements, if he proves that the lessee's expenses on these improvements increase the value of the leased asset incommensurately to the improvement of its quality and/or service properties or that the principles of faith and reason have been violated when such improvements were made.

Article 663. Application to Contract for Lease of Enterprise of Rules on Consequences of Invalidity of Transactions, Change or Cancellation of Contract

The rules of the present Code relating to consequences of the invalidity of transactions, on the alteration or cancellation of a contract which provide for the return or exaction in kind of the received under contract from one or both parties, shall apply to a contract for the lease of an enterprise, unless such consequences substantially violate the rights and statute-protected interests of creditors of the lessor and lessee, other persons and contravene the public interests.

Article 664. Return of Leased Enterprise

After the termination of the contract for leasing an enterprise, the leased property complex must be returned to the lessor with the observance of the rules provided by Article 656, 657 and 659 of the present Code. The preparation of the enterprise for the transfer to the lessor, including the drawing-up and submission of the deed of conveyance for the signing, shall in this case be the lessee's duty and be effected at his cost, unless otherwise provided by contract.

Paragraph 6. Financial Lease (Leasing)

Article 665. Financial Lease Contract

Under a financial lease contract (leasing contract), the lessor shall undertake to acquire into ownership the property specified by the lessee from a seller named by him and give this property to the lessee for a compensation into temporary possession and use for entrepreneurial purposes. The lessor in this case shall not bear responsibility for the choice of the leased object and the seller.

A financial lease contract may provide that the seller and the acquired property shall be chosen by the lessor.

Article 666. Object of Financial Lease Contract

Any inconsumable things used for entrepreneurial activity, except for land plots and other natural objects, may be the object of a financial lease contract.

Article 667. Notifying Seller About Letting Property on Lease

When acquiring property for the lessee, the lessor must notify the seller that the property is meant for leasing it out to a certain person.

Article 668. Transfer to Lessee of Object of Financial Lease Contract

Unless otherwise provided by the financial lease contract, the property which is the object of the contract shall be transferred by the seller directly to the lessee at the latter's place of location.

2. In the event that the property which is the object a financial lease contract has not been transferred to the lessee within the period specified in this contract and, if such period has not been specified in the contract, within a reasonable period of time, the lessee shall have the right to demand cancellation of the contract and compensation of losses, if the delay was caused owing to circumstances for which the lessor is responsible.

Article 669. Transfer to Lessee of Risk of Accidental Loss of or Accidental Damage to Property

The risk of accidental loss of or accidental damage to the leased property shall pass to the lessee at the moment of transferring the leased property to him, unless otherwise provided by the financial lease contract.

Article 670. Seller's Responsibility

1. The lessee shall have the right to present directly to the lessor of the property which is the object of the financial lease contract, claims arising from the sale contract concluded between the seller and the lessor, notably with respect to the quality and completeness of property, its delivery schedule, and in other instances of improper performance of the contract by the seller. In this event, the lessee shall have the rights and bear the duties provided by the present Code for the buyer, except for the duty to pay for the acquired property as if he were a party to the contract for the sale of the aforesaid property. However, the lessee may not cancel the sale contract with the seller without the lessor's consent.

In relations with the seller, the lessee and the lessor shall act as joint creditors (Article 326).

2. Unless otherwise provided by the financial lease contract, the lessor shall not be responsible to the lessee for the execution by the seller of claims arising from the sale contract, except in instances where responsibility for the choice of a seller lies with the lessor. In the latter event, the lessee shall have the right, at his discretion, to present claims arising from the sale contract both to the seller of property directly and to the lessor who shall bear joint responsibility.

 

Chapter 35. Renting of Living Accommodation

 

Article 671. Contract to Rent Living Accommodation

1. Under a contract to rent a living accommodation, one party, i.e. the owner of the living accommodation or the person authorized by him (lessor), shall undertake to transfer the living accommodation to the other party (renter) for a compensation for possession and use for the purpose of residing therein.

2. A living accommodation may be granted to legal persons for possession and/or use on the basis of a tenancy contract or other contract. A legal entity may use a living accommodation only as a place of residence of citizens.

Article 672. Contract to Rent Living Accommodation in State and Municipal Residential Fund Meant for Social Use

1. In State and municipal residential fund meant for social use, living accommodations shall be granted to citizens on the basis of a contract for social renting of a living accommodation.

2. Members of a renter's family who reside together with him in a living accommodation rented under a social renting contract shall, equally with the renter, enjoy all the rights and bear all the duties under the contract for renting of the accommodation.

At the demand of a renter or members of his family, a contract may be concluded with one of the family members. In the event of the renter's death or his moving out of the living accommodation, a contract shall be concluded with one of the family members residing in the accommodation.

3. A contract for social renting of a living accommodation shall be concluded on the grounds, on the terms and conditions and according to the procedure provided by housing legislation. The rules of Articles 674,675, 678, 680, 685, and 685(1-3) of the present Code shall apply to such a contract. Other provisions of the present Code shall apply to a contract for social renting of a living accommodation, unless otherwise provided by housing legislation.

Article 673. Object of Contract to Rent Living Accommodation

1. An isolated living accommodation fit for permanent stay (apartment, dwelling house, part of an apartment or dwelling house) may be the object of a contract for renting a living accommodation.

The fitness of a living accommodation for residence shall be determined according to the procedure provided by housing legislation.

2. A renter of a living accommodation in an apartment house, alongside with the use of the living accommodation, shall have the right to use property specified in Article 290 of the present Code.

Article 674. Form of Contract to Rent Living Accommodation

A contract to rent a living accommodation shall be concluded in writing.

Article 675. Validity of Contract of Renting Living Accommodation in Event of Transfer of Ownership of Living Accommodation

The transfer of the right of ownership to a living accommodation occupied under a renting contract shall not entail the cancellation or alteration of the contract of renting the living accommodation. In this event, a new owner shall become the lessor on the terms and conditions of the previously concluded renting contract.

Article 676. Duties of Lessor of Living Accommodation

1. The lessor shall be obliged to transfer to the renter unoccupied living accommodation in a condition fit for living in it.

2. The lessor shall be obliged to effect proper operation of the dwelling house where rented living accommodation is situated, provide or ensure provision of necessary public services to the renter for a compensation, ensure the performance of repairs of common property of the apartment house and service facilities situated in the living accommodation.

Article 677. Renter and Citizens Permanently Residing with Him

1. Only a citizen may be a renter under a contract of renting a living accommodation.

2. Citizens who permanently reside with the renter in a living accommodation must be listed in the contract. If no such information is given in the contract, these citizens shall be lodged in accordance with the rules of Article 679 of the present Code.

Citizens permanently residing together with the renter shall have the rights, equal to his, to use the living accommodation. Relations between the renter and such citizens shall be determined by law.

3. The renter shall bear responsibility to the lessor for the actions committed by citizens permanently residing with him which break terms and conditions of the contract to rent the living accommodation.

4. Citizens permanently residing with the renter may, after having warned the lessor, contract with the renter that all the citizens permanently residing in the living accommodation shall, together with the renter, bear joint responsibility to the lessor. In this case, such citizens shall be co-renters.

Article 678. Duties of Renter of Living accommodation

A renter shall be obliged to use the living accommodation only for residence, ensure safe keeping of the living accommodation and maintain it in proper condition.

A renter shall not have the right to make rearrangement and reconstruction of the living accommodation without the lessor's consent.

A renter shall be obliged to timely pay rental for the living accommodation. Unless otherwise provided by contract, the renter shall be obliged to independently make payments for public utilities.

Article 679. Installing Citizens Who Permanently Reside with Tenant

By consent of the lessor, renter and citizens permanently residing with him, other citizens may be permitted to move in the living accommodation as persons permanently residing together with the renter. No such consent shall be required when lodging infant children in.

Installing shall be permitted on condition that requirements of legislation relating to the ration of floor space per capita are met, except in instances of lodging infant children in.

Article 680. Temporary Residents

By mutual consent and with preliminary notification of the lessor, a renter and citizens permanently residing with him shall have the right to permit temporary residents (users) to occupy the living accommodation free of charge. The lessor may forbid temporary residents to live there if requirements of legislation concerning the ration of floor space per capita are not observed. The time-limit for temporary residents to stay may not exceed six months.

Temporary residents shall not have autonomous right to use a living accommodation. Responsibility to the lessor for their actions shall be borne by the renter.

Temporary residents shall be obliged to vacate the living accommodation upon the expiration of the dwelling period agreed with them and, if the period has not been agreed, not later than seven days from the day when the respective demand was presented by the renter or any citizens permanently residing with him.

Article 681. Repair of Living Accommodation Given in Rent

1. Current repair of a living accommodation given in rent shall be the renter's duty, unless otherwise provided by the contract to rent the living accommodation.

2. Major overhaul of a living accommodation given in rent shall be the lessor's duty, unless otherwise provided by the contract to rent the living accommodation.

3. Re-equipment of a dwelling house where a rented living accommodation is located in the event that such re-equipment substantially changes the conditions of using the living accommodation, shall not be permitted without the renter's consent.

Article 682. Rental for Living Accommodation

1. The size of rental for a living accommodation shall be established by agreement of the parties in a contract for renting the living accommodation. If maximum size of rental for the living accommodation has been established in accordance with a law, the contractual rental shall not exceed this size.

2. Unilateral change of rental for a living accommodation shall not be permitted, except in instances specified by a law or contract.

3. A rental for a living accommodation must be paid by a renter within the period of time specified by the contract of renting the living accommodation. If the period of time has not been provided by contract, rental must be paid by the renter every month according to the procedure established by the Housing Code of the Russian Federation.

Article 683. Term in Contract of Renting Living Accommodation

1. A contract to rent a living accommodation shall be concluded for a term of not longer than 5 years. If the term has not been specified in the contract, the contract shall be deemed to have been concluded for 5 years.

2. Unless otherwise provided by contract, the rules of Articles 677(2), 680, 684-686, and paragraph 4 of Article 687(2) of the present Code shall not apply to a contract of renting a living accommodation concluded for a term shorter than 1 year (short-term renting).

Article 684. Renter's Priority Right to Conclude Contract for New Term

Upon the expiration of the term of the contract to rent the living accommodation the renter shall have the right of priority to conclude a contract for renting the living accommodation for a new term.

Not later than 3 months before the expiration of the term of the contract to rent a living accommodation the lessor must offer the renter to conclude a contract on the same or other terms and conditions or warn the renter about the refusal to extend the contract in connection with a decision not to let the living accommodation during at least one year. If the lessor failed to perform this duty and the renter did not refuse to extend the contract, the contract shall be deemed to have been prolonged on the same terms and conditions.

When agreeing upon the contract terms and conditions, the renter shall not have the right to demand to increase the number of persons permanently residing with him under the contract of renting the living accommodation.

If the lessor has refused to extend the contract in connection with a decision not to let the accommodation, but within a year after the expiration of the term of his contract with the renter has concluded a contract of renting the living accommodation with another person, the renter shall have the right to demand that such contract be deemed invalid and/or losses caused by the refusal to resume the contract with him be compensated.

Article 685. Subletting of Living Accommodation

1. Under a contract to sublet a living accommodation, the renter, with the lessor's consent, shall transfer partially or wholly the living accommodation rented by him to a subrenter for temporary use. The subrenter shall not acquire autonomous right to use the living accommodation. The renter shall remain responsible to the lessor under the contract of renting the living accommodation.

2. A contract of subletting a living accommodation may be concluded on condition that requirements of legislation concerning the ration of floor space per capita be observed.

3. A contract to sublet a living accommodation shall be on a compensation basis.

4. The term of a contract to sublet a living accommodation may not be longer than that of renting the living accommodation.

5. The termination of a contract of renting a living accommodation shall simultaneously terminate the contract of subletting the living accommodation.

6. The rules on the priority right to conclude a contract for a new term shall not extend to a contract for subletting a living accommodation.

Article 686. Change of Renter in Contract to Rent Living Accommodation

1. On the demand of the renter or other citizens permanently residing with him, and with the lessor's consent, the renter in the contract of renting the living accommodation may be replaced by one of the citizens of age who permanently reside with the renter.

2. In the event of the renter's death or if he moves out from the living accommodation, the contract shall continue to be effective on the same terms and conditions, while one of the citizens permanently residing with the renter shall become the renter by mutual agreement between them. If such agreement has not been reached, all the citizens permanently residing in the living accommodation shall become co-renters.

Article 687. Cancellation of Contract to Rent Living Accommodation

1. A renter of a living accommodation shall have the right, by consent of other citizens permanently residing with him, to cancel the renting contract at any time with the written notification of the lessor thereof three months in advance.

2. A contract to rent a living accommodation may be canceled in a legal procedure on the lessor's demand in instances where:

- the renter fails to pay rental for the living accommodation for six months, unless a longer period has been specified by contract, or in case of a short-term renting - if he fails to pay more than twice upon the expiration of the payment period established by contract;

- the living accommodation is destroyed or damaged by the renter or other citizens for whose actions he is responsible.

By the court decision the renter may be given a period of time not longer than a year in order to eliminate violations which have served as grounds to cancel the contract of renting the living accommodation. If within the period established by the court the renter fails to eliminate the violations made or take all necessary measures to eliminate them, the court upon the second application from the lessor shall rule to cancel the contract for renting the living accommodation. At the renter's request in this case, the court in the decision to cancel the contract may stay judgment for a period not longer than a year.

3. A contract to rent a living accommodation may be cancelled in a legal procedure on the demand of either party under contract:

- if the accommodation ceases to be fit for permanent stay, as well as when it is in emergency condition;

- in other instances specified by housing legislation.

4. If a renter of a living accommodation or other citizens for whose actions he is responsible use the living accommodation for undue purpose or systematically break the neighbours' rights and interests, the lessor may warn the renter about the necessity to eliminate a violation.

If after the warning has been made the renter or other citizens for whose actions he is responsible continue to use the living accommodation for undue purpose or violate the neighbours' rights and interests, the lessor shall have the right to cancel the contract of renting the living accommodation in a legal procedure. In this case, the rules provided by paragraph 4 of point 2 of the present Article shall apply.

Article 688. Consequences of Cancellation of Contract to Rent Living Accommodation

In the event that the contract to rent the living accommodation is cancelled, the renter and other citizens residing in the living accommodation by the time of cancelling the contract shall be subject to eviction from the living accommodation on the basis of the court decision.

 

Chapter 36. Free Use

 

Article 689. Free Use Contract

1. Under a free use contract (loan contract), one party (lender) shall undertake to transfer or transfers a thing for temporary free use to the other party (borrower), while the latter shall undertake to return the same thing in a condition it was when received by him, with normal wear and tear allowed for, or in a condition specified by contract.

2. Respectively, the rules of Article 607, Article 610(1) and paragraph 1 of Article 610(2), Article 615(1, 3), Article 621(2), and Article 623(1, 3) of the present Code shall apply to a free use contract.

Article 690. Lender

1. The right to transfer a thing for free use shall belong to its owner and other persons authorized thereto by law or the owner.

2. A commercial organization shall not have the right to transfer property for free use to a person who is its founder, participant, director, member of its management or control bodies.

 

Article 691. Providing Thing for Free Use

1. The lender shall be obliged to give the thing in a condition complying with the terms of the free use contract and its purpose.

2. A thing shall be given for free use together with all its accessories and related documents (operating instruction, technical passport, etc.), unless otherwise provided by contract.

If such accessories and documents have not been transferred, but without them the thing cannot be used for its purpose or its use considerably loses in value for the borrower, the latter shall have the right to demand that such accessories and documents be provided to him or the contract be cancelled and the actual damage suffered by him be compensated.

Article 692. Consequences of Failure to Provide Thing for Free Use

If the lender does not transfer the thing to the borrower, the latter shall have the right to demand that the free use contract be cancelled and the actual damage suffered by him be compensated.

Article 693. Responsibility for Defects of Thing Transferred for Free Use

1. The lender shall be responsible for defects of the thing which he deliberately or through brazen imprudence has not stipulated when concluding the free use contract.

When discovering such defects, the borrower shall have the right at his discretion to demand from the lender to eliminate defects of the thing free of charge or compensate his expenses on the removal of defects in the thing or cancel the contract before time and compensate the actual damage suffered by him.

2. The lender informed about the borrower's demands or his intention to eliminate defects of the thing at the lender's expense may immediately replace the defective thing by a similar thing in the proper condition.

3. The lender shall not be responsible for defects of the thing which were stipulated by him when concluding the contract or were known to the borrower in good time or should have been detected by the borrower during the inspection of the thing or checking of its serviceability when the contract was concluded or the thing was transferred.

Article 694. Rights of Third Persons to Thing Transferred for Free Use

The transfer of a thing for free use shall not serve as a ground for the alteration or termination of third persons' rights to this thing.

While concluding the free use contract, the lender shall be obliged to warn the borrower about all rights of third persons to this thing (servitude, pledge right, etc.). Non-fulfilment of this duty shall confer to the borrower the right to demand cancellation of the contract and compensation of the actual damage suffered by him.

Article 695. Borrower's Duties to Maintain Thing

The borrower shall be obliged to keep the thing obtained for free use in serviceable condition, including the conduct of running repair and major overhaul, and bear all expenses on the maintenance thereof, unless otherwise provided by the free use contract.

Article 696. Risk of Accidental Loss of or Accidental Damage to Thing

The borrower shall bear the risk of accidental loss of or accidental damage to the thing obtained for free use if the thing has been lost or damaged in connection with his having used the thing out of accordance with the free use contract or transferred it to a third person without the lender's consent. The borrower shall also bear the risk of accidental loss of or accidental damage to the thing if, taking into account the actual circumstances, he could prevent the loss or damage thereof by sacrificing his thing, but has chosen to preserve his thing.

Article 697. Responsibility for Damage Caused to Third Person as Result of Use of Thing

The lender shall be responsible for damage caused to a third person as a result of the use of the thing if he proves that the damage has been caused as a consequence of premeditation or gross imprudence on the part of the borrower or the person who happened to have the thing by the lender's consent.

Article 698. Cancellation of Free Use Contract Before Time

1. The lender shall have the right to demand to cancel the free use contract before time in instances where the borrower:

- uses the thing out of accordance with the contract or the purpose of the thing; and

- fails to perform his duties to keep the thing in serviceable condition or to maintain it; and

- substantially deteriorates the condition of the thing; and

- has transferred the thing to a third person without the lender's consent.

2. The borrower shall have the right to demand to cancel the free use contract before time:

- when discovering defects which make normal use of the thing impossible or burdensome and the presence of which he was not aware of or could not be aware at the moment of concluding the contract; and

- if the thing, by virtue of circumstances beyond his responsibility, has proved to be in a condition unfit for the use; and

- if, while concluding the contract, the lender has not warned him about the rights of third persons to the thing to be transferred; and

- when the lender fails to perform his duty to transfer the thing or its accessories or related documents.

Article 699. Refusal of Free Use Contract

1. Either party shall have the right at any time to refuse the free use contract concluded without specifying its validity term, by notifying the other party thereof a month in advance, unless other period for notification has been provided by contract.

2. Unless otherwise provided by contract, the borrower shall have the right at any time to refuse the fixed-term contract according to the procedure provided by point 1 of the present Article.

Article 700. Change of Parties to Free Use Contract

1. The lender shall have the right to alienate the thing and transfer it to a third person for paid use. In this event, the rights under the previously concluded free use contract shall pass to the new owner or user, while his rights with respect to the thing shall be encumbered with the borrower's rights.

2. In the event of the citizen-lender's death or reorganization or liquidation of the lending legal person the lender's rights and duties under the free use contract shall pass to the heir (successor) or to the third person to whom the ownership of the thing or other right on the basis of which the thing was transferred for free use has passed.

In the event that the lending legal person is reorganized, its rights and duties under contract shall pass to the legal person which is its successor, unless otherwise provided by contract.

Article 701. Termination of Free Use Contract

The free use contract shall terminate in the event of the citizen-borrower's death or liquidation of the borrowing legal person, unless otherwise provided by contract.

 

Chapter 37. Contract

 

Paragraph 1. General Provision on Contract

Article 702. Contract Agreement

1. Under a contract agreement, one party (contractor) shall undertake to perform a certain job to the order of the other party (customer) and submit its result to the customer, while the customer shall undertake to accept the result of the job and pay for it.

2. The provisions stipulated by the present paragraph shall apply to a contract agreement (consumer service contract, building contract, design and research contract, contract works for State needs), unless otherwise provided by the rules of the present Code for these types of agreement.

Article 703. Works Performed Under Contract Agreement

1. A contract agreement shall be concluded for the manufacturing or processing (treatment) of a thing or for the performance of other work with the transfer of the result thereof to the customer.

2. Under a contract agreement concluded to manufacture a thing, the contractor shall transfer the rights thereto to the customer.

3. Unless otherwise provided by contract, the contractor shall independently determine methods for executing the customer's task.

 

Article 704. Performance of Work at Contractor's Cost

1. Unless otherwise provided by a contract agreement, the work shall be performed at the contractor's cost, i.e. using his materials, efforts, and resources.

2. The contractor shall be responsible for improper quality of materials and equipment supplied by him, as well as for providing materials and equipment encumbered by third persons' rights.

Article 705. Distribution of Risks Among Parties

1. Unless otherwise provided by the present Code, other laws or contract agreement:

- the risk of accidental loss of or accidental damage to materials, equipment, the thing transferred for processing (treatment), or other property used to execute the contract shall be borne by the party which has provided them; and

- the risk of accidental loss of or accidental damage to the result of the work performed shall be borne by the contractor until the acceptance thereof by the customer.

2. In the event that the transfer or acceptance of the work result has been delayed, the risks mentioned in point 1 of the present Article shall be borne by the party responsible for the delay.

Article 706. General Contractor and Subcontractor

1. Unless the contractor's duty to perform contractual work personally follows from a law or contract agreement, the contractor shall have the right to engage other persons (subcontractors) to fulfil his obligations. In this event, the contractor shall act as the general contractor.

2. A contractor who has involved a subcontractor in order to execute a contract agreement in violation of point 1 of the present Article or contract shall bear responsibility to the customer for losses caused by the participation of the subcontractor in the execution of the contract.

3. The general contractor shall be responsible to the customer for consequences of the failure to fulfil or for improper fulfilment of obligations by the subcontractor in accordance with the rules of Article 313(1) and Article 403 of the present Code, and be responsible to the subcontractor for the customer's failure to fulfil or for improper fulfilment of obligations under the contract agreement.

Unless otherwise provided by a law or contract, the customer and subcontractor shall not have the right to present each other claims connected with a violation of contracts concluded by each of them with the general contractor.

4. By the general contractor's consent, the customer shall have the right to conclude contracts with other persons for the performance of individual works. In this event, the aforesaid persons shall be responsible directly to the customer for the failure to perform or for improper performance of the work.

 

Article 707. Participation of Several Persons in Performance of Work

1. If two or more persons act simultaneously on the contractor's part and the object of obligation is inseparable, they shall be deemed joint debtors in relation to the customer and, respectively, joint creditors.

2. Should the object of obligation be separable, as well as in other instances specified by a law, other legal acts or contract, each person mentioned in point 1 of the present Article shall acquire the rights and bear duties with respect to the customer within the limits of his share (Article 321).

Article 708. Schedule for Performance of Work

1. A contract agreement shall specify the initial and final dates to perform the work. By agreement between the parties, the contract may also provide for time periods to carry out individual work stages (intermediate periods).

Unless otherwise established by a law, other legal acts or provided by contract, the contractor shall be responsible for a violation of both the initial, final, and intermediate periods in executing the work.

2. The initial, final, and intermediate periods specified in a contract for the performance of work may be changed in the instances and procedure provided by contract.

3. Consequences of a delay in the performance as mentioned in Article 405(2) of the present Code shall take effect when the final period to execute the work is violated.

Article 709. Work Price

1. A contract agreement shall specify the price of the work to be performed or methods to determine it. Should relevant clauses be absent in the contract, the price shall be determined in accordance with Article 424(3) of the present Code.

2. A contract agreement price shall include compensation of the contractor's expenses and remuneration due to him.

3. The price of a work may be determined by way of preparing an estimate.

In the event that a work is performed following an estimate calculated by the contractor, the estimate shall take force and become part of the contract agreement from the moment it has been confirmed by the customer.

4. The price of a work (estimate) may be approximate or fixed. If no other directions are given in the contract agreement, the work price shall be deemed to be fixed.

5. If necessity has arisen to perform additional works and, for that reason, to substantially exceed approximately estimated work price, the contractor shall be obliged to inform the customer thereof in good time. The customer who does not agree to the exceeding of the work price specified in the contract agreement shall have the right to refuse the agreement. In this event, the contractor may demand from the customer that the price be paid to him for the part of work already performed.

The contractor who has not timely warned the customer about the necessity to exceed the work price stated in the agreement shall be obliged to execute the agreement, reserving the right to pay contractual price for the work.

6. The contractor shall not have the right to demand to increase the fixed price, while the customer - to decrease it, including in the instance where at the moment of concluding the contract agreement a possibility to foresee the entire volume of works to be performed or expenses necessary therefor was excluded.

In the event of a considerable growth in the value of materials and equipment supplied by the contractor, as well as of services provided by third persons to him which could not be foreseen when the agreement was concluded, the contractor shall have the right to demand that the set price be increased and, should the customer refuse to meet this demand, the contract be cancelled in accordance with Article 451 of the present Code.

Article 710. Saving by Contractor

1. In instances where actual expenses of the contractor have turned out to be lower than those taken allowed for when determining the work price, the contractor shall retain the right to pay for works at the price provided by the contract agreement, unless the customer proves that the economizing by the contractor has affected the quality of works performed.

2. A contract agreement may provide for the distribution among the parties of the economies obtained by the contractor.

Article 711. Procedure to Pay for Work

1. Unless the contract agreement has provided for preliminary payment for the work performed or for individual stages thereof, the customer shall be obliged to pay the customer the stipulated price after the final submission of work results on condition that the work was performed properly and within the agreed period or, by the customer's consent, ahead of the schedule.

2. The contractor shall have the right to demand that an advance or caution money be paid to him only in instances and in the amount specified in a law or contract agreement.

Article 712. Contractor's Right of Withholding

Should the customer fail to fulfil the duty to pay the set price or other price due to the contractor in connection with the completion of the contract agreement, the contractor shall have the right in accordance with Articles 359 and 360 of the present Code to withhold the results of the work, as well as equipment belonging to the customer, the thing transferred for processing (treatment), the remainder of non-used material, and other property of the customer he had in possession until the respective amounts are paid by the customer.

Article 713. Performance of Work Using Customer's Material

1. The contractor shall sparingly and thriftily use material provided by the customer and after the completion of the work to present to the customer a report on material used, as well as return the remainder thereof or, by the customer's consent, reduce the work price taking into account the value of non-used material remaining with the contractor.

2. If the result of the work has not been attained or the result attained has proved to have defects which make it unfit for the use specified in the contract agreement or, if the respective clause is absent in the agreement, unfit for normal use, the contractor shall have the right to demand that the work performed by him be paid for.

3. The contractor may exercise the right mentioned in point 2 of the present Article if he proves that defects in material could not be detected during the duly performed acceptance by the contractor of this material.

Article 714. Contractor's Responsibility for Failure to Preserve Property Provided by Customer

The contractor shall bear responsibility for the failure to preserve customer-provided material, equipment, thing transferred for processing (treatment), or other property which the contractor had in possession in connection with the execution of contract agreement.

Article 715. Customer's Rights during Performance of Work by Contractor

1. The customer shall have the right to check at any time the course and quality of the work performed by the contractor, without interfering in his activity.

2. If the contractor has not timely proceeded to the execution of the contract agreement or is so much slow in performing the work that its completion by the deadline becomes obviously impossible, the customer shall have the right to refuse to execute the agreement and demand compensation of losses.

3. If it becomes obvious during the performance of the work that it will not be properly done, the customer shall have the right to appoint a reasonable period of time for the contractor to eliminate defects and, should the contractor fail to meet this demand within the appointed period, to refuse the contract agreement or charge another person with correction of the work at the contractor's cost, as well as demand compensation of losses.

Article 716. Circumstances about Which Contractor Shall be Obliged to Warn Customer

1. The contractor shall be obliged to immediately warn the customer and, pending the receipt of instructions from him, suspend performing the work if he has discovered:

- the unfitness or poor quality of customer-provided material, equipment, technical documentation, or thing transferred for processing (treatment); and

- eventual consequences, unfavourable for the customer, of following his instructions concerning the way to perform the work; and

- other circumstances beyond the contractor's control which threaten the fitness or stability of the results of the work performed or make it impossible to complete it on time.

2. The contractor who has not warned the customer about the circumstances mentioned in point 1 of the present Article or has proceeded with the job not waiting for the expiration of the period specified in the agreement or, if such period has not been specified, a reasonable period for a response to the warning, or despite the timely instruction from the customer to stop the work, shall not have the right to refer to the aforementioned circumstances, should respective demands be presented to him or to the customer by him.

3. If, despite the timely and justified warning from the contractor about the circumstances mentioned in point 1 of the present Article, the customer fails, within a reasonable period, to replace unworkable or low-quality material, equipment, technical documentation, or thing transferred for processing (treatment), correct his instructions concerning the way of performing the work or take other necessary measures to prevent circumstances threatening its fitness, the contractor shall have the right to refuse to execute the contract agreement and demand that losses caused by the termination thereof be compensated.

Article 717. Customer's Refusal to Execute Contract Agreement

Unless otherwise provided by the contract agreement, the customer may refuse to execute the agreement before the work results have been submitted to him, after having paid to the contractor the part of the set price proportionally to the part of work performed prior to the receipt of the notice about the customer's refusal to execute the agreement. The customer shall also be obliged to compensate the contractor for losses caused by the termination of the contract agreement within the limits of the difference between the price set for the entire work and the part of price paid for the work already performed.

Article 718. Customer's Assistance

1. In the instances, extent, and procedure provided by the contract agreement the customer shall be obliged to render assistance to the contractor in the performance of the work.

Should the customer fail to fulfil this duty, the contractor shall have the right to demand compensation of losses suffered, including additional expenses caused by downtime, or postponement of the time to complete the work or an increase in the work price stipulated in the agreement.

2. In instances where the performance of the work under the contract agreement has become impossible through the customer's actions or negligence, the contractor shall retain the right to be paid the price specified in the agreement for the part of work already performed.

Article 719. Non-Fulfilment by Customer of Counter Duties under Contract Agreement

1. The contractor shall have the right not to proceed to the work and to suspend the work already in progress in instances where the violation by the customer of his duties under the contract agreement, notably non-provision of material, equipment, technical documentation, or thing subject to processing (treatment), impedes the execution of the agreement by the contractor, as well as in the presence of circumstances which expressly evidence that the aforesaid duties will not be fulfilled within the specified period (Article 328).

2. Unless otherwise provided by the contract agreement, the contractor in the presence of circumstances mentioned in point 1 of the present Article shall have the right to refuse to execute the agreement and demand compensation of losses.

Article 720. Acceptance by Customer of Work Performed by Contractor

1. The contractor shall be obliged within the period of time and according to the procedure provided by the contract agreement to examine and accept in the contractor's presence the work performed (its result) and, should recessions from the contract deteriorating the work result or other defects in the work be discovered, immediately inform the contractor thereof.

2. The customer who has discovered defects in the work when accepting it shall have the right to refer to them if these defects or a possibility for subsequent presentation of a demand to eliminate them have been stipulated in the acceptance statement or other document certifying the acceptance.

3. Unless otherwise provided by the contract agreement, the customer who has accepted the work without inspection shall be deprived of the right to refer to defects in the work which could have been detected in it by normal acceptance method (evident defects).

4. The customer who after the acceptance of the work has discovered in it recessions from the contract agreement or other defects which could not have been discovered by normal acceptance method (hidden defects), including those deliberately concealed by the contractor, shall be obliged to inform the contractor thereof within a reasonable period of time after the discovery thereof.

5. Should a dispute arise between the customer and contractor over defects in the work performed or reasons thereof, an expert examination must be appointed on demand of either party. The cost of examination shall be borne by the contractor, except in instances where the examination has shown there were no violations of the contract agreement on the part of the contractor or no causality between the contractor's actions and defects discovered. In the aforesaid instances, the cost of examination shall be borne by the party who demanded to appoint expert examination and if it was appointed by agreement between the parties - by both parties in equal parts.

6. Unless otherwise provided by the contract agreement, should the customer evade from accepting the work performed, the contractor shall have the right to sell the result of the work in a month from the day on which it must have been transferred under contract to the customer and on condition that he has subsequently warned the customer twice, and to deposit the money earned, less all payments due to the contractor, in the customer's name according to the procedure provided by Article 327 of the present Code.

7. If the evasion by the customer from accepting the work performed has entailed a delay in the submission of the work, the risk of accidental loss of the manufactured (processed or treated) thing shall be deemed to have passed to the customer at the moment when the thing must have been submitted.

Article 721. Work Quality

1. The quality of the work performed by the contractor must comply with contract agreement terms and, should contract terms be absent or incomplete, with requirements usually set for the respective types of work. Unless otherwise provided by a law, other legal acts or contract, the result of the work performed shall at the moment of the transfer thereof to the customer have qualities specified in the contract agreement or determined by usually set requirements, and within a reasonable period of time be fit for the use specified by the agreement and if such use has not been specified by the agreement - for normal use of a result of this type of work.

2. If a law, other legal acts or a procedure established by them have provided for mandatory requirements for a work performed under a contract agreement, the contractor who acts as a entrepreneur shall be obliged to perform the work, meeting these mandatory requirements.

The contractor may assume a duty under contract to perform the work meeting higher quality requirements than those established as mandatory for the parties.

Article 722. Guarantee for Work Quality

1. In the event that a law, other legal act, contract agreement or business customs provide for a guarantee period for the work result, the work result must meet the contract quality terms during the entire guarantee period (Article 721[1]).

2. The guarantee for the quality of work result shall extend to everything constituting the work result, unless otherwise provided by the contract agreement.

Article 723. Contractor's Responsibility for Improper Quality of Work

1. In instances where the work has been performed by the contractor with recessions from the contract agreement which have deteriorated the work result or with other defects which make it unfit for the use specified in the agreement or, should relevant unfitness clause be absent in the agreement, for normal use, the customer shall have the right at his discretion, unless otherwise established by a law or agreement, to demand from the contractor:

- to eliminate defects free of charge within a reasonable period of time; and

- to commensurately decrease the price set for the work; and

- to compensate his expenses on the elimination of defects where the customer's right to eliminate them has been provided in the contract agreement (Article 397).

2. Instead of removing defects, the contractor shall have the right to perform the work once again free of charge and with compensation to the customer of losses caused by delay in execution. In this event, the customer shall be obliged to return to the contractor the work result transferred to him earlier if the nature of the work allows such return.

3. If recessions in the work from contract agreement terms or other defects in the work result have not been eliminated within the reasonable period set by the customer or if they are material and irremovable, the customer shall have the right to refuse to execute the agreement and demand compensation of losses caused.

4. A provision in the contract agreement on the exemption of the contractor from responsibility for certain defects shall not release him from responsibility if it has been proved that such defects appeared as a consequence of the contractor's faulty actions or lack of actions.

5. The contractor who has provided material to perform the work shall be responsible for its quality according to the rules on the seller's responsibility for inadequate-quality goods (Article 475).

Article 724. Time-Limits to Discover Inadequate Quality of Work Result

1. Unless otherwise established by a law or contract agreement, the customer shall have the right to present claims in connection with inadequate quality of the work result provided that it has been identified within the period of time established by the present Article.

2. If no guarantee period has been established for the work result, requirements connected with defects in the work result may be presented by the customer on condition that they have been found within a reasonable period of time, but not later than two years from the day of transferring the work result, unless other time-limits have been established by a law, agreement, or business customs.

3. The customer shall have the right to present claims connected with defects in work results discovered during the guarantee period.

4. In the event that a guarantee period specified by a contract agreement is less than two years and defects of work results have been discovered by the customer after the expiration of the guarantee period, but within two years from the moment specified by point 5 of the present Article, the contractor shall bear responsibility if the customer proves that defects appeared before the transfer of the work result to the customer or for reasons which arose prior to that moment.

5. Unless otherwise provided by a contract agreement, a guarantee period (Article 722[1]) shall commence from the moment when the result of the work performed was accepted or should have been accepted by the customer.

6. Accordingly, the rules contained in Article 471(2 and 4) of the present Code shall apply to calculation of a guarantee period under a contract agreement, unless otherwise provided by a law, other legal acts, agreement of the parties or follows from particulars of a contract agreement.

 

 

Article 725. Limitation of Actions for Inadequate Quality of Work

1. Limitation period for claims lodged in connection with inadequate quality of a work performed under a contract agreement shall make up one year and, as far as buildings and structures are concerned, shall be determined according to the rules of Article 196 of the present Code.

2. If under the contract agreement the work result has been accepted by the customer in parts, the limitation period shall begin to run from the day of accepting the work result as a whole.

3. If a law, other legal acts or contract agreement have established a guarantee period and if the application concerning defects of the work result has been filed within the guarantee period, the limitation period mentioned in point 1 of the present Article shall commence from the day of declaring the defects.

Article 726. Contractor's Duty to Provide Information to Customer

Together with the work result, the contractor shall be obliged to convey to the customer information on the operation or other use of the subject of the contract agreement if so provided by the agreement or if the nature of information is such that without it the work result cannot be used for the purposes specified in the agreement.

Article 727. Confidentiality of Information Received by Parties

If a party, thanks to the fulfilment of its obligation under a contract agreement, has received from the other party information on new solutions and technical knowledge, including those not protected by law, as well as information which can be considered a commercial secret (Article 139), the party which has received such information shall not have the right to disclose it to third persons without the other party's consent.

A procedure and conditions to use such information shall be determined by agreement of the parties.

Article 728. Return by Contractor of Property Transferred by Customer

In instances where on the basis of Article 715(2) or Article 723(3) of the present Code the customer dissolves the contract agreement, the contractor shall be obliged to return materials, equipment, the thing transferred for processing (treatment), and other property provided by the customer or to hand them over to a person named by the customer or, if this proves impossible, compensate for the value of materials, equipment and other property.

Article 729. Consequences of Termination of Contract Agreement before Acceptance of Work Result

In the event that a contract agreement is terminated on the grounds provided by a law or contract before the acceptance by the customer of the result of the work performed by the contractor (Article 720[1]), the customer shall have the right to demand that the result of unfinished work be transferred to him, with compensation of expenses incurred by the contractor.

 

Paragraph 2. Consumer Service Contract

Article 730. Consumer Service Contract Agreement

1. Under a consumer service contract agreement, the contractor engaged in respective entrepreneurial activity shall undertake to perform to the citizen's (customer's) order a certain work meant to satisfy everyday-life or other personal needs of the customer, while the customer shall undertake to accept and pay for the work.

2. A consumer service contract shall be a public contract (Article 426).

3. The Law on protection of consumer rights and other legal acts adopted pursuant thereto shall apply to relations under a consumer service contract where not regulated by the present Code.

Article 731. Guarantees for Customer's Rights

1. The contractor shall not have the right to thrust on the customer the inclusion of additional work or service in the consumer service contract. The customer shall have the right to refuse to pay for the work or service not provided by contract.

2. The customer shall have the right at any time before the acceptance of the work to refuse to execute the consumer service contract, having paid the contractor part of the set price in proportion to the part of work performed prior to the notification about the refusal to execute the contract and having compensated the contractor for expenses incurred prior to this moment in order to execute the contract if they are not included in the aforesaid part of the work price. The provisions of the contract which deprive the contractor of this right shall be null and void.

Article 732. Providing Information to Customer on Work Offered

1. The contractor shall be obliged before the conclusion of the consumer service contract to provide information to the customer about the work offered, its types and peculiarities, the price and payment form, as well as give the customer, at his request, other information pertaining to the contract and respective work. If it is of importance in view of the work character, the contractor must specify for the customer a particular person who will perform the work.

2. The customer shall have the right to demand cancellation of the concluded consumer service contract without paying for the work already done, as well as without compensating losses in instances where as a consequence of incomplete or unreliable information obtained from the contractor a contract has been concluded for the performance of a work which lacks the qualities meant by the customer.

Article 733. Performance of Work from Contractor's Material

1. If a work under a consumer service contract is to be performed from the contractor's material, the material shall be paid for by the customer when concluding the contract in full or in the amount specified in the contract with the final settlement after the customer has received the work completed by the contractor.

According to the contract, material may be supplied by the contractor on credit, including on condition that the customer will pay for material by instalments.

2. After a consumer service contract has been concluded, a change in the price of material provided by the contractor shall not entail recalculation.

Article 734. Performance of Work from Customer's Material

If a work under a consumer service contract is to be performed from the customer's material, the receipt or other document issued by the contractor to the customer when the contract is concluded must contain the exact name, description and price of material as agreed upon by the parties. The evaluation of material in the receipt or other similar document may be subsequently disputed in court by the customer.

Article 735. Price of and Payment for Work

The work price in a consumer service contract shall be determined by agreement of the parties and may not be higher than that established or regulated by appropriate government agencies. By the customer's consent, the work may be paid for by him when the contract is concluded or by advance payment.

Article 736. Warning Customer about Conditions of Using Work Performed

When submitting the work to the customer, the contractor shall be obliged to inform him about requirements to be met for effective and safe use of the work result, as well as about possible consequences for the customer and other persons of failure to observe the respective requirements.

Article 737. Consequences of Discovery of Defects in Work Performed

1. In the event that defects have been discovered during the acceptance of the work result or use thereof, the customer may at his discretion within the standard period provided by Article 725 of the present Code or, if a guarantee period exists, within the latter period to exercise one of the rights provided by Article 723 of the present Code or demand that the work be performed once more and free of charge or that expenses spent to remove defects at his own cost or by involving third persons be compensated.

2. A demand to remove gratis such defects from the result of a work performed under a consumer service contract which may create a threat for the life and health of the customer or other persons may be presented by the customer or his successor within 10 days from the moment of accepting the work result, unless a longer period (service life) has been provided in accordance with the statute-established procedure. Such demand may be presented irrespective of when these defects have been detected, including after the guarantee period has expired.

3. Should the contractor fail to meet the demand mentioned in point 2 of the present Article, the customer shall have the right within the same period of time to demand to return the part of the price paid for the work or compensate expenses incurred in connection with the elimination of defects by the customer at his own cost or by involving third persons.

 

Article 738. Consequences of Customer's Failure to Take Work Result

In the event that the customer fails to come and take the result of work performed or otherwise evades from the acceptance thereof, the contractor shall have the right, after having warned the customer in writing and upon the expiration of two months from the day of such warning, to sell the work result at a reasonable price and deposit the earnings, less all payments due to the contractor, according to the procedure provided by Article 327 of the present Code.

Article 739. Customer's Rights in Event of Improper Performance or Non-Performance of Work under Consumer Service Contract

In the event that the work under the consumer service contract has been improperly performed or not performed at all, the customer may exercise the rights granted to a buyer in accordance with Articles 503-505 of the present Code.

Paragraph 3. Building Contract

Article 740. Building Contract Agreement

1. Under a building contract agreement, the contractor shall undertake within the contract schedule to build a certain project or perform other construction works to the customer's order, while the customer shall undertake to create necessary conditions for the contractor to perform works, accept their result, and pay the stipulated price.

2. A building contract agreement shall be concluded for the construction or reconstruction of an enterprise, building (including a dwelling house), structure or other project, as well as for the performance of erection, setting-up, start-up and adjustment, and other works inseparable of the project under construction. The rules on a building contract agreement shall also apply to works connected with the overhaul of buildings and structures, unless otherwise provided by contract.

In instances specified by the contract agreement, the contractor shall assume the duty to ensure operation of the project during the period of time specified in the agreement after it has been accepted by the customer.

3. In instances where works under a building contract agreement are performed in order to satisfy the citizen's (customer's) everyday-life or other personal needs, the rules of Paragraph 2 of the present Chapter on customer's rights under a consumer service contract shall respectively apply to such agreement.

Article 741. Distribution of Risk Among Parties

1. The risk of accidental loss of or accidental damage to the construction project which is the subject-matter of the building contract agreement shall be borne by the contractor until the acceptance of this project by the customer.

2. If, before accepted by the customer, the construction project has perished or has been damaged as a consequence of the poor quality of material (parts, modules) or equipment provided by the customer or execution of the customer's erroneous instructions, the contractor shall have the right to demand that the total price of works set by the estimate calculation be paid, provided that he has fulfilled the duties specified in Article 716(1) of the present Code.

Article 742. Insuring Construction Project

1. A building contract agreement may impose the duty to insure respective risks on the party bearing the risk of accidental loss of or accidental damage to the construction project, material, and other property used in construction, or responsibility for causing harm to other persons during construction work.

The party on which the duty to insure is imposed must present evidence to the other party that it has concluded an insurance contract on the terms stipulated by the building contract agreement, including information about the insurer, the size of insurance sum and insured risks.

2. The insurance shall not release the respective party from the duty to take necessary measures in order to prevent the occurrence of an insured accident.

Article 743. Technical Documentation and Estimate

1. The contractor shall be obliged to carry out construction and related works in accordance with technical documentation, which determines the amount and contents of works and other requirements set thereto, and the estimate determining the price of works.

Unless otherwise specified in the building contract agreement, the contractor is expected to be obliged to perform all the works listed in technical documentation and estimate.

2. A building contract agreement must specify which of the parties and within what period of time must provide the respective documentation.

3. The contractor who in the process of building has found works not included in technical documentation and thus had to perform additional works and increase the estimate price of construction shall be obliged to inform the customer thereof.

Should no reply from the customer come to his message during 10 days, unless a different period has been provided therefore by law or building contract agreement, the contractor shall be obliged to suspend respective works, charging the losses caused by the downtime to the customer's account. The customer shall be released from compensation of these losses if he proves there was no need to carry out additional works.

4. The contractor who has failed to fulfil the duties specified by point 3 of the present Article shall be deprived of the right to demand from the customer to pay for the extra work performed by him and compensate losses caused thereby, unless he proves the necessity for immediate actions in the customer's interest, notably that the suspension of works could have led to the loss or damage of the construction project.

5. With the customer's consent as to the performance of and payment for additional works, the contractor shall have the right to refuse to perform them only in instances where they do not fall within the sphere of the contractor's professional activity or cannot be performed by the contractor for reasons beyond his control.

Article 744. Introducing Changes in Technical Documentation

1. The customer shall have the right to introduce changes in technical documentation on condition that the cost of extra work caused thereby does not exceed 10 percent of the total construction cost specified in the estimate and that the character of works as provided in the building contract agreement remains unchanged.

2. Changes more comprehensive than those specified in point 1 of the present Article shall be introduced in technical documentation on the basis of an additional estimate agreed upon by the parties.

3. In accordance with Article 450 of the present Code, the contractor shall have the right to demand to revise the estimate if for reasons out of his control the cost of works has exceeded the estimate by no less than 10%.

4. The contractor shall have the right to demand compensation of reasonable expenses incurred by him in connection with the identification and elimination of defects in technical documentation.

Article 745. Provision of Materials and Equipment for Construction

1. The duty to provide the construction with materials, including parts and modules, or equipment shall be placed on the contractor, unless the building contract agreement has provided that the customer shall wholly or partially ensure provision of construction.

2. The party whose duty is to provide construction shall be responsible for the discovered impossibility to use materials or equipment supplied by him without deteriorating the quality of woks performed, unless he proves that the impossibility to use was caused by circumstances for which the other party is responsible.

3. If using materials or equipment supplied by the customer has been found impossible without deteriorating the quality of works performed and if the customer refuses to replace them, the contractor shall have the right to refuse the building contract agreement and demand from the customer to pay the contract price in proportion to the part of the work already performed.

Article 746. Payment for Works

1. The customer shall pay for the works completed by the contractor in the amount determined by the estimate, within the time period and according to the procedure established by law or building contract agreement. If no respective directions are provided by law or contract, payment for the works shall be effected in accordance with Article 711 of the present Code.

2. A building contract agreement may provide for payment for the works all at once after the acceptance of the project by the customer.

Article 747. Customer's Additional Duties Under Building Contract Agreement

1. The customer shall be obliged to timely provide a land plot for construction. The area and condition of the provided land plot must comply with the terms contained in the building contract agreement and, if no such terms have been specified, ensure the timely commencement of works, their normal progress and completion on time.

2. In instances and according to the procedure provided by the building contract agreement, the customer shall be obliged to transfer for the use by the contractor buildings and structures necessary for the performance of works, ensure transportation of cargoes to his address, temporary installation of energy, water and steam supply lines, and provide other services.

3. Payment for services provided by the customer as mentioned in point 2 of the present Article shall be made in instances and on terms and conditions specified by the building contract agreement.

Article 748. Control and Supervision by Customer Over Performance of Works Under Building Contract Agreement

1. The customer shall have the right to exert control and supervision over the progress and quality of works being performed, the observance of the schedule to perform them, the quality of materials supplied by the contractor, as well as the correct use by the contractor of customer's materials, without interfering, however, in the operative and economic activity of the contractor.

2. The customer who, while exerting control and supervision over the performance of works, has found recessions from the terms of the building contract agreement which may deteriorate the quality of works or other defects in them, shall be obliged to immediately state them to the contractor. The customer who has not made such statement shall lose the right to subsequently refer to defects discovered by him.

3. The contractor shall be obliged to follow the customer's instructions in the course of construction if such instructions are not contrary to the terms of the building contract agreement and cannot be judged as interference in the contractor's operative and economic activity.

4. The contractor who has performed the works improperly shall not have the right to refer to the fact that the customer has not exercised control and supervision over the performance thereof, except in instances where the duty to exert such control and supervision is placed on the contractor by law.

Article 749. Participation of Engineer (Engineering Organization) in Exercise of Rights and Fulfilment of Duties of Customer

For the purposes of exerting control and supervision over the construction and making decisions in his name in relations with the contractor, the customer may independently without the contractor's consent to conclude a contract with a respective engineer (engineering organization) for the provision of this type of services to the customer. In this event, functions of such engineer (engineering organization) connected with consequences of his actions for the contractor shall be defined in the building contract agreement.

 

 

Article 750. Cooperation of Parties to Building Contract Agreement

1. If during the construction and performance of works related therewith, hindrances have arisen impending the proper execution of the building contract agreement, either party shall be obliged to take all possible and reasonable measures to remove such hindrances. The party which has not fulfilled this duty shall lose the right to compensation of losses caused by failure to remove respective hindrances.

2. Expenses of a party connected with the fulfilment of the duties specified in point 1 of the present Article shall be subject to compensation by the other party in instances where this has been provided by the building contract agreement.

Article 751. Contractor's Duties to Protect Environment and Ensure Safety of Construction Works

1. The contractor, while conducting the construction and the works related therewith, shall be obliged to meet the requirements of a law and other legal acts concerning the protection of environment and safety of construction works.

The contractor shall be responsible for a violation of the aforesaid requirements.

2. The contractor shall not have the right to use in the course of construction materials and equipment supplied by the customer or follow his instructions if this may lead to the violation of requirements, binding on both parties, relating to the environment protection and safety of construction works.

Article 752. Consequences of Temporary Closedown of Construction

1. If for reasons out of control of the parties the works under the building contract agreement have been suspended and the construction project closed down, the customer shall be obliged to pay the contractor in full for the period before the closedown and also compensate expenses caused by the necessity to stop the work and close down the construction project, with the offset of advantages which the contractor has obtained or could have obtained as a consequence of the work stoppage.

Article 753. Acceptance of Work

1. The customer who has received a notice from the contractor about the readiness for acceptance of the result of works completed under the building contract agreement or, if so provided by the agreement, a completed stage of construction, shall be obliged to immediately proceed to the acceptance thereof.

2. The customer shall organize and effect acceptance of the work result at his expense, unless otherwise provided by the building contract agreement.

In instances specified by a law or other legal acts, representatives of government authorities and local self-government agencies must take part in the acceptance of the work result.

3. The customer who has preliminary accepted the result of the individual work stage shall bear the risk of consequences of the loss or damage of the work result which have occurred not through the contractor's fault.

4. The submission of the work result by the contractor and the acceptance thereof by the customer shall be formalized by a certificate signed by both parties. Should one of the parties refuse to sign the certificate, a respective note thereof shall be made on it and the certificate shall be signed by the other party.

The unilateral acceptance certificate may be deemed invalid by a court only if it recognizes the reasons for refusal to sign the certificate as justified.

5. In instances where this is provided by a law or building contract agreement or follows from the nature of works performed under contract, the acceptance of the result of works must be preceded by preliminary tests. In these instances, the works may be accepted only if the results of preliminary tests are positive.

The customer shall have the right to refuse to accept the result of works if he has discovered defects which exclude its possible use for the purpose specified in the building contract agreement and which cannot be removed by the contractor or customer.

Article 754. Contractor's Responsibility for Quality of Works

1. The contractor shall bear responsibility to the customer for recessions from the requirements provided in technical documentation and construction norms and rules binding on the parties, as well as for the failure to attain the indices in the construction project specified in technical documentation, including such as production output of the enterprise.

In the event that a building or structure is to be reconstructed (renewed, rebuilt, restored, etc.), responsibility for the reduction or loss of strength, stability, or reliability of the building, structure or a part thereof shall be placed on the contractor.

2. The contractor shall not be responsible for minor recessions from technical documentation made by him without the customer's consent if he proves that they have not affected the quality of the construction project.

Article 755. Quality Guarantee in Building Contract Agreement

1. Unless otherwise provided by the building contract agreement, the contractor shall guarantee the attainment by the construction project of indices specified in technical documentation and the possibility to operate the project in accordance with the building contract agreement during the guarantee period. The statutory guarantee period may be extended by agreement of the parties.

2. The contractor shall bear responsibility for shortcomings (defects) discovered during the guarantee period, unless he proves that they have originated as a consequence of normal wear and tear of the project or parts thereof, its mis-operation or wrong operating instructions for it developed by the customer himself or third persons involved by him, the improper repair of the project made by the customer himself or third persons involved by him.

3. The guarantee period shall terminate for the entire period during which the project could not be used as a consequence of defects for which the contractor is responsible.

4. If defects mentioned in Article 754(1) of the present Code have been discovered during the guarantee period, the customer shall be obliged to inform the contractor thereof within a reasonable period of time after the discovery thereof.

Article 756. Period to Discover Inadequate Quality of Construction Works

In the event that claims are presented in connection with inadequate quality of the work result, the rules provided by Article 724(1-5) of the present Code shall apply.

In this case, the time limit to discover defects shall be five years in accordance with Article 724(2 and 4) of the present Code.

Article 757. Removing Defects at Customer's Expense

1. A building contract agreement may provide for the contractor's duty to remove, at the customer's demand and expense, defects for which the contractor is not responsible.

2. The contractor shall have the right to refuse to fulfil the duty mentioned in point 1 of the present Articles in instances where the removal of defects is not directly connected with the contract subject-matter or cannot be effected by the contractor for reasons beyond his control.

Paragraph 4. Contract for Performance of Design and Research Works

Article 758. Contract Agreement for Performance of Design and Research Works

Under a contract for the performance of design and research works, the contractor (designer, researcher) shall undertake to develop technical documentation and/or perform research work to the customer's order, while the customer shall undertake to accept and pay for the result thereof.

Article 759. Initial Data for Performance of Design and Research Works

1. Under a contract agreement to perform design and research works, the customer shall be obliged to transfer to the contractor a design task, as well as other initial data necessary to prepare technical documentation. The task to perform design works may be prepared by the contractor to the customer's order. In this event, the task shall become binding on the parties from the moment of approval thereof by the customer.

2. The contractor shall be obliged to meet the requirements contained in the task and other initial data in order to carry out design and research works and shall have the right to recess from them only by the customer's consent.

Article 760. Contractor's Duties

1. Under a contract agreement for the performance of design and research works, the contractor shall be obliged to:

- carry out the works in accordance with the agreement, the task and other initial design data; and

- coordinate ready technical documentation with the customer or, if necessary and together with the customer, with competent government authorities and local self-government agencies; and

- transfer ready technical documentation and results of research work to the customer.

The contractor shall not have the right to transfer technical documentation to third persons without the customer's consent.

2. The contractor under a contract agreement for the performance of design and research works shall guarantee to the customer that third persons have no rights to impede the performance of works or restrict the performance thereof on the basis of technical documentation prepared by the contractor.

Article 761. Contractor's Responsibility for Improper Performance of Design and Research Works

1. The contractor under a contract agreement for the performance of design and research works shall bear responsibility for improper preparation of technical documentation and performance of research work, including defects subsequently discovered in the course of construction, as well as in the course of operation of the construction project created on the basis of technical documentation and research work data.

2. If defects have been discovered in technical documentation or research works, the contractor shall be obliged on the customer's demand to alter technical documentation and, accordingly, carry out necessary additional research, as well as compensate the customer for losses caused, unless otherwise provided by a law or contract agreement for the performance of design and research works.

Article 762. Customer's Duties

Under a contract agreement for the performance of design and research works, the customer shall be obliged, unless otherwise provided by contract, to:

- pay the contractor the set price in full after the completion of all works or pay for it in parts after the completion of individual work stages; and

- use technical documentation received from the contractor only for the purposes provided by the agreement, not to transfer technical documentation to third persons or disclose data contained therein without the contractor's consent; and

- render assistance to the contractor in performing design and research works in the amount and on conditions specified by contract; and

- participate together with the contractor in coordinating technical documentation with respective government authorities and local self-government agencies; and

- compensate the contractor for additional expenses caused by a change in initial data for the performance of design and research works due to circumstances out of the contractor's control; and

- involve the contractor to participation in the case where a claim has been lodged by a third person against the customer in connection with defects in prepared technical documentation or research works performed.

 

Paragraph 5. Contract Works for State Needs

Article 763. State Contract to Perform Contract Works for State Needs

1. Building contract works (Article 740), design and research works (Article 758) meant to satisfy needs of the Russian Federation or a Russian Federation subject and financed from respective budgets and off-budget sources shall be effected on the basis of a state contract for the performance of contract works for State needs.

2. Under a State contract for the performance of contract works for State needs (hereafter: State contract), the contractor shall undertake to perform construction, design, and other works related with construction and repair of production and non-production projects and transfer them to the government customer, while the government customer shall undertake to accept the performed works and pay for them or ensure payment therefore.

Article 764. Parties to State Contract

Under a State contract, a government agency having necessary investment resources or an organization entitled by a government agency to dispose of such resource shall act as the government customer, while a legal person or a citizen shall act as the contractor.

Article 765. Grounds and Procedure to Conclude State Contract

The grounds and procedure to conclude a State contract shall be determined in accordance with the provisions of Articles 527 and 528 of the present Code.

Article 766. Contents of State Contract

1. A State contract must contain provisions on the amount and price of the work to be done, the time to begin and complete it, the amount and procedure to finance and pay for the work, and ways to ensure the fulfilment of duties by the parties.

2. In the event where a State contract is concluded based on the results of a competition held to place the order for contract works for State needs, the terms and conditions of the State contract shall be determined in accordance with the declared conditions of the competition and the offer submitted for the competition by the contractor recognized to be the competition winner.

Article 767. Change of State Contract

1. If respective government agencies have in the established procedure reduced respective budget resources appropriated to finance contract works, the parties must agree upon new schedule and, if necessary, also other terms and conditions to perform the works.

The contractor shall have the right to demand from the government customer to compensate losses caused by such change in the schedule for the performance of works.

2. Unless otherwise provided by law, changes in a State contract not connected with the circumstances mentioned in point 1 of the present Article shall be effected by agreement of the parties.

 

Article 768. Legal Regulation of State Contract

The Law on contracts for State needs shall apply to relations under State contracts for the performance of contract works for State needs insofar as not regulated by the present Code.

 

Chapter 38. Performance of Research, Design and Technological Works

 

Article 769. Contracts for Performance of Research, Design and Technological Works

1. Under a contract for the performance of research works, the performer shall undertake to do the research specified in the customer's technical task, and under a contract for the performance of design and technological works - to develop a model (sample, specimen) of an article, design documentation for it, or a new technology, while the customer shall undertake to accept the work and pay for it.

2. A contract with a performer may embrace either the entire cycle of conducting research, developing and producing models or its individual stages (elements).

3. Unless otherwise provided by a law or contract, the risk of accidental impossibility to execute contracts for the performance of research, design, and technological works shall be borne by the customer.

4. Terms and conditions of contracts for the performance of research, design, and technological works must conform with the laws and other legal acts on exclusive rights (intellectual property).

Article 770. Performance of Works

1. The performer shall be obliged to conduct research personally. He shall have the right to involve third persons in executing the research contract only by the customer's consent.

2. When carrying out design or technological works, the performer shall have the right to involve third persons in executing it, unless otherwise provided by contract. The rules on the general contractor and subcontractor (Article 706) shall apply to relations of the performer with third persons.

Article 771. Confidentiality of Information Constituting Subject-Matter of Contract

1. Unless otherwise provided by contracts for the performance of research, design, and technological works, the parties shall be obliged to ensure confidentiality of information relating to the subject-matter of the contract, the course of performance thereof, and results obtained. The amount of information recognized to be confidential shall be determined in the contract.

2. Either party shall promise to publish information obtained while performing the work and deemed to be confidential only by the other party's consent.

 

Article 772. Rights of Parties to Work Results

1. The parties to contracts for the performance of research, design, and technological works shall have the right to use work results, including legally protectable ones, within the limits and on conditions provided by contract.

2. Unless otherwise provided by contract, the customer shall have the right to use work results, including those legally protectable, transferred to him by the performer, while the performer shall have the right to use for personal needs work results obtained by him.

Article 773. Performer's Duties

The performer in contracts for the performance of research, design and technological works shall be obliged to:

- carry out works in accordance with the technical task agreed on with the customer and transfer their results to the customer when provided by the contract; and

- negotiate with the customer the necessity to use protected results of intellectual property belonging to third persons and acquire rights to use them; and

- at his expense and on his own, remove defects made in completed works through a fault of his which may entail departures from the technical and economic parameters specified in the technical task or contract; and

- immediately inform the customer about the revealed impossibility to obtain expected results or about inexpediency to continue the work; and

- guarantee to the customer the transfer of results obtained under contract which do not violate the rights of third parsons.

Article 774. Customer's Duties

1. The customer in contracts for the performance of research, design and technological works shall be obliged to:

- furnish the performer with information necessary for the performance of the work; and

- accept results of completed works and pay for them.

2. The contract may also to provide for the customer's duty to provide the technical task for the performer and negotiate with him the program (technical and economic parameters) or subject-matter of works.

Article 775. Consequences of Impossibility to Attain Research Results

If in the course of research the attainment of results proves impossible due to circumstances beyond the performer's control, the customer shall be obliged to pay the price of works performed before it was found impossible to obtain the results stipulated by the research contract, but not higher than the respective part of work price specified in the contract.

Article 776. Consequences of Impossibility to Continue Design and Technological Works

If in the course of conducting design and technological works the continuation of works proves impossible or inexpedient not the performer's fault, the customer shall be obliged to pay the expenses incurred by the performer.

Article 777. Performer's Responsibility for Violation of Contract

1. The performer shall bear responsibility to the customer for a violation of contracts for the performance of research, design and technological works, unless he proves that such violation has happened not through the performer's fault (Article 401[1]).

2. The performer shall be obliged to compensate losses caused by him to the customer within the limits of the price of works in which defects have been revealed, if the contract has provided that they shall be subject to compensation within the limits of the overall price of works under contract. Lost profit shall be subject to compensation in instances specified by contract.

Article 778. Legal Regulation of Contracts for Performance of Research, Design and Technological Works

The rules of Articles 708, 709 and 738 of the present Code shall apply, respectively, to work schedules and price, as well as to consequences of the customer's failure to come and receive work results.

The rules of Articles 763-768 of the present Code shall apply to State contracts for the performance of research, design and technological works for State needs.

 

Chapter 39. Services Provided for Compensation

 

Article 779. Contract for Provision of Services for Compensation

1. Under a contract for the provision of services for compensation, the performer shall undertake to provide services (to perform certain acts or carry out certain activity), while the customer shall undertake to pay for the services.

2. The rules of the present Chapter shall apply to contracts for providing communications, medical, veterinary, audit, advisory, information, tourist, and other services, except for the services provided under contracts specified by Chapters 37, 38, 40, 41, 44, 45, 46, 47, 49, 51, and 53 of the present Code.

Article 780. Execution of Contract for Provision of Services for Compensation

Unless otherwise provided by a contract for providing services for compensation, the performer shall be obliged to provide services personally.

Article 781. Payment for Services

1. The customer shall be obliged to pay for services provided to him within the period of time and according to the procedure specified in the contract for the provision of services for compensation.

2. If execution becomes impossible through a fault of the customer, the services shall be paid for in full, unless otherwise provided by a law or contract for the provision of services for compensation.

3. In the event that the impossibility to execute has arisen owing to circumstances neither party is responsible for, the customer shall compensate the performer for expenses actually incurred by him, unless otherwise provided by a law or contract for the provision of services for compensation.

Article 782. Unilateral Refusal to Execute Contract for Provision of Services for Compensation

1. The customer shall have the right to refuse to execute the contract for the provision of paid services on condition that he pays the performer for expenses actually incurred by the latter.

3. The performer shall have the right to refuse to fulfil duties under the contract for the provision of services for compensation only on condition that he fully compensates the customer for losses.

Article 783. Legal Regulation of Contract for Provision of Services for Compensation

The general provisions on the procedure (Articles 702-729) and provisions on a consumer service contract (Article 730-739) shall apply to a contract for the provision of services for compensation, unless this is contrary to Articles 779-782 of the present Code, as well as to particular nature of the subject-matter of a contract for the provision of services for compensation.

 

Chapter 40. Carriage

 

Article 784. General Provisions on Carriage

1. The carriage of goods, passengers and baggage shall be effected on the basis of a carriage contract.

2. The general conditions of carriage shall be determined by transport regulations and codes, other laws and rules issued pursuant thereto.

Conditions for carriage of goods, passengers and baggage by individual types of transport, as well as responsibility of the parties for these services, shall be determined by agreement of the parties, unless otherwise provided by the present Code, transport regulations and codes, other laws and rules issued pursuant thereto.

Article 785. Contract of Cargo Carriage

1. Under a contract of cargo carriage, the carrier shall undertake to deliver the cargo entrusted to him by the consignor to the point of destination and hand it over to the person authorized to receive the cargo (consignee), while the consignor shall undertake to pay the established price for the carriage of cargo.

2. The conclusion of a cargo carriage contract shall be confirmed by drawing up and issuing the consignment note (bill of lading or other freight document required by respective transport regulations or codes) to the consignor.

 

 

Article 786. Contract of Passenger Carriage

1. Under a contract of passenger carriage, the carrier shall undertake to convey a passenger to the point of destination and, should baggage be registered by the passenger, deliver baggage to the point of destination and hand it over to the person authorized to receive the baggage; the passenger shall undertake to pay the established fare and, if baggage has been registered, a charge for baggage carriage.

2. The conclusion of a passenger carriage contract shall be certified by a ticket and the registration of baggage by the passenger - by a baggage ticket.

Passenger ticket and baggage ticket forms shall be established according to the procedure provided by transport regulations and codes.

3. The passenger shall have the right according to the procedure provided by respective transport regulations or code:

- to carry children with him free of charge or on other easy terms; and

- to freely convey with him hand baggage within the limits of established norms; and

- to check his baggage for carriage at tariff price.

Article 787. Contract of Affreightment

1. Under a contract of affreightment (charter-party), one party (owner) shall undertake to let the other party (charterer) for a charge the whole or part of capacity of one or several transport vehicles for one or several trips in order to carry goods, passengers and baggage.

A procedure to conclude a contract of affreightment, as well as a form for the aforesaid contract shall be established by transport regulations and codes.

Interrelations of transport organizations in carrying goods, passengers and baggage by different types of transport where a single transport document is used (through mixed service), as well as a procedure to organize these services shall be determined by an agreement between the respective carriers concluded in accordance with the law on through mixed (combined) services.

Article 789. Carriage by Common-Use Transport

1. Transportation effected by a commercial organization shall be deemed to be carriage by common-use transport if it follows from a law, other legal acts or authorization (license) issued to this organization that this organization is obliged to carry goods, passengers and baggage at the request of any citizen or legal entity.

The list of organizations bound to provide services deemed to be carriage by common-use transport shall be published according to the established procedure.

2. A contract of carriage by common-use transport shall be a public contract (Article 426).

 

Article 790. Payment for Carriage

1. A charge set by agreement of the parties shall be collected for carriage of goods, passengers and baggage, unless otherwise provided by a law or other legal acts.

2. A charge for carriage of goods, passengers and baggage by common-use transport shall be determined on the basis of tariffs approved according to the procedure established by transport regulations and codes.

3. Works and services performed by the carrier at the cargo owner's demand and not covered by tariffs shall be paid for as agreed by the parties.

4. The carrier shall have the right to retain cargo and baggage transferred to him for carriage as security of payment for carriage and other related payments due to him (Articles 359, 360), unless otherwise established by a law, other legal acts, contract of carriage or follows from the essence of the obligation.

5. In instances where a law or other legal acts have established privileges or preferences relating to payment for carriage of goods, passengers and baggage, expenses incurred in this connection shall be compensated by the transport organization from funds of the respective budget.

Article 791. Providing Transport Vehicles, Loading and Unloading of Goods

1. The carrier shall be obliged to bring up to the consignor for loading serviceable transport vehicles fit for carriage of respective goods at the time specified in the application (order) accepted from him, in contract of carriage, or contract for the organization of carriage.

The consignor shall have the right to refuse the offered transport vehicles unfit for carriage of respective goods.

2. Loading (unloading) of goods shall be effected by a transport organization or the consignor (consignee) according to the procedure specified in the contract with the observance of provisions established by transport regulations and codes and rules issued pursuant thereto.

3. Loading (unloading) of goods effected at the expense and by means of the consignor (consignee) must be carried out within the time period specified in the contract if such period has not been set by transport regulations and codes and rules issued pursuant thereto.

Article 792. Time of Delivery of Goods, Passenger and Baggage

The carrier shall be obliged to deliver goods, a passenger or baggage to the point of destination at the time specified according to the procedure provided by transport regulations and codes or within a reasonable period if no such time has been specified.

Article 793. Responsibility for Violation of Carriage Obligations

1. In the event that obligations relating to carriage are not fulfilled or are fulfilled improperly, the parties shall bear responsibility as established by the present Code, transport regulations and codes, as well as by agreement of the parties.

2. Agreements of transport organizations with passengers and cargo owners concerning the limitation or abolishment of the statutory responsibility of the carrier shall be null and void, except in instances where the possibility of such agreements during cargo carriage has been provided by transport regulations and codes.

Article 794. Carrier's Responsibility for Failure to Bring Up Transport Vehicles and Consignor's for Non-Use of Offered Transport Vehicles

1. Both the carrier for the failure to bring up transport vehicles for cargo carriage in compliance with the accepted application (order) or other contract, and the consignor for the non-delivery of goods or non-use of offered transport vehicles for other reasons shall bear responsibility as established by transport regulations and codes, as well as by agreement of the parties.

2. The carrier and consignor shall be released from responsibility for non-delivery of transport vehicles or non-use thereof if this has happened as a consequence of:

- force majeure, as well as other acts of God (fires, sand- or snow-drifts, floods) or military actions; and

- termination or limitation of cargo carriage in certain directions established according to the procedure provided by the respective transport regulations or code; and

- in other instances specified by transport regulations and codes.

Article 795. Carrier's Responsibility for Delaying Passenger's Departure

1. For a delay in the departure of the transport vehicle carrying the passenger or delay in the arrival of such transport vehicle at the point of destination (except for carriage in city and suburb traffic), the carrier shall pay the passenger a penalty in the amount established by a respective transport regulations or code, unless he proves that the delay has occurred as a consequence of force majeure, removal of a malfunction in transport vehicles threatening the passengers' life and health, or other circumstances beyond the carrier's control.

2. In the event that the passenger has refused carriage because of the delay in the departure of the transport vehicle, the carrier shall be obliged to return the fare to the passenger.

Article 796. Carrier's Responsibility for Loss, Shortage, Damage (Deterioration) of Goods or Baggage

1. The carrier shall be responsible for the failure to preserve goods or baggage which has occurred after the acceptance thereof for carriage and before the delivery to the consignee, to the person authorized by him or the person authorized to receive baggage, unless he proves that the loss, shortage or damage (deterioration) of goods or baggage has occurred as a consequence of circumstances which the carrier could not prevent and whose elimination was out of his control.

2. Damage caused while carrying goods or baggage shall be compensated by the carrier:

- in the event of the loss or shortage of goods or baggage: in the amount of the value of lost or missing goods or baggage; and

- in the event of a damage to (deterioration of) goods or baggage: in the amount of the sum by which their value has fallen, and should it be impossible to restore the damaged goods or baggage - in the amount of their value; and

- in the event of the loss of goods or baggage checked for carriage with the declaration of their value: in the amount of the declared value of goods or baggage.

The value of goods or baggage shall be determined proceeding from the price thereof indicated in the seller's bill or specified in the contract or, if no bill exists or the price has not been specified in the contract, proceeding from the price usually collected for similar goods under comparable circumstances.

3. In addition to the compensation for the established disadvantage caused by the loss, shortage or damage (deterioration) of goods or baggage, the carrier shall return to the consignor (consignee) the charge collected for carriage of the lost, missing, damaged or deteriorated goods or baggage if this charge has not been included in the value of goods.

4. Documents describing the reasons for the failure to preserve goods or baggage (carrier's statement, report of general form, etc.) unilaterally prepared by the carrier shall be subject, in the event of a dispute, to appraisal by the court, together with other documents certifying the circumstances which may serve as the ground for responsibility of the carrier, consignor or consignee of goods or baggage.

Article 797. Claims and Actions for Cargo Carriage

1. Before bringing against the carrier an action arising from cargo carriage, he must be presented a claim according to the procedure provided by the respective transport regulations or code.

2. An action against the carrier may be brought by the consignor or consignee in the event of the carrier's complete or partial refusal to meet the claim or if no reply is received from the carrier within a 30-day period.

3. Limitation period for demands arising from cargo carriage shall be established to be a year from the moment determined in accordance with transport regulations and codes.

Article 798. Contracts for Organization of Carriage

In the event that regular cargo carriage is needed, the carrier and cargo owner may conclude long-term contracts for the organization of carriage.

Under a contract for the organization of cargo carriage, the carrier shall undertake to accept and the cargo owner - to deliver for carriage a stipulated amount of goods within the established period of time. A contract for the organization of cargo carriage shall determine amounts, terms and other conditions for providing transport vehicles and delivering goods for carriage, a procedure for settlement of accounts, as well as other terms and conditions for the organization of carriage.

Article 799.Contracts Between Transport Organizations

Organizations using different types of transport may conclude between themselves contracts for the organization of activity to ensure cargo carriage (general agreements, contracts for centralized import (export) of goods, and others).

A procedure to conclude such contracts shall be determined by transport regulations and codes, other laws and other legal acts.

Article 800. Carrier's Responsibility for Causing Damage to Passenger's Life and Health

The carrier's responsibility for damage caused to the passenger's life or health shall be determined in accordance with the rules of Chapter 59 of the present Code, unless a graver responsibility of the carrier has been provided by a law or carriage contract.

 

Chapter 41. Transport Forwarding

 

Article 801. Contract of Transport Forwarding

1. Under a contract of transport forwarding, one party (forwarder) shall undertake for a consideration and at the cost of the other party (customer: consignor or consignee) to perform or to organize the performance of services connected with cargo carriage and specified by the contract of transport forwarding.

A contract of transport forwarding may provide for the forwarder's duty to organize cargo carriage by the transport and route chosen by the forwarder or customer, the carrier's duty to conclude a contract (contracts) of cargo carriage in the customer's or his own name, ensure the dispatch and receipt of goods, as well as other duties connected with carriage.

As additional services, a contract of transport forwarding may provide for the execution of operations necessary for cargo delivery such as obtaining documents required for export or import, going through customs and other formalities, checking the quantity and condition of goods, their loading and unloading, paying duties, charges and other expenses placed on the customer, storing goods, receiving them at the point of destination, as well as performing other operations and services specified by contract.

2. The rules of the present Article shall apply also to instances where under the contract the forwarder's duties are fulfilled by the carrier.

3. Conditions to execute a transport forwarding contract shall be determined by agreement of the parties, unless otherwise established by the law on transport forwarding activity, other laws or other legal acts.

Article 802. Form of Transport Forwarding Contract

1. A contract of transport forwarding shall be concluded in writing.

2. The customer must give the forwarder a power of attorney if this is required for the fulfilment of his duties.

Article 803. Forwarder's Responsibility Under Transport Forwarding Contract

For the non-fulfilment or improper fulfilment of duties under the contract of transport forwarding, the forwarder shall bear responsibility on the grounds and to the extent determined in accordance with the rules of Chapter 25 of the present Code.

If the forwarder proves that the violation of the obligation has been caused by the improper execution of carriage contracts, the forwarder's responsibility to the customer shall be determined according to the same rules under which the respective carrier is responsible to the forwarder.

Article 804. Documents and Other Information Furnished to Forwarder

1. The customer shall be obliged to furnish the forwarder with documents and other information about the properties of goods, conditions for their carriage, as well as other information necessary for the forwarder to fulfil the duty provided by the contract of transport forwarding.

2. The forwarder shall be obliged to tell the customer about defects discovered in the obtained information and, should information be incomplete, request necessary additional data from the customer.

3. In the event that the customer fails to furnish necessary information, the forwarder shall have the right not to proceed to the fulfilment of respective duties until such information has been furnished.

4. The customer shall bear responsibility for losses caused to the forwarder in connection with the violation of the duty to furnish information mentioned in point 1 of the present Article.

Article 805. Fulfilment of Forwarder's Duties by Third Person

Unless it follows from the contract of transport forwarding that the forwarder must fulfil his duties personally, the forwarder shall have the right to involve other persons in fulfilling his duties.

Placing the fulfilment of the duty on a third person shall not release the forwarder from responsibility to the customer for the execution of the contract.

Article 806. Unilateral Refusal to Execute Contract of Transport Forwarding

Either party shall have the right to refuse to execute the contract of transport forwarding, having warned the other party thereof within a reasonable period of time.

In the event of the unilateral refusal to execute the contract, the party which has declared the refusal shall compensate the other party for losses caused by the dissolution of the contract.

 

Chapter 42. Loan and Credit

 

Paragraph 1. Loan

Article 807. Loan Contract

1. Under a loan contract, one party (lender) shall transfer money or other generic things into the ownership of the other party (borrower), while the borrower shall undertake to return to the lender the same sum of money (loan value) or the equal quantity of other things of the same genus and quality obtained by him.

A loan contract shall be deemed to have been concluded from the moment of transferring money or other things.

2. Foreign currency and currency valuables may be the subject of a loan contract on the territory of the Russian Federation with the observance of the rules of Articles 140, 141 and 317 of the present Code.

Article 808. Form of Loan Contract

1. A loan contract must be concluded between citizens in writing if its sum exceeds at least ten times the statutory minimum monthly wage, and regardless of the sum if the lender is a legal entity.

2. A loan contract and its terms may be confirmed by way of presenting the borrower's receipt or other document certifying that the lender has transferred to him a certain sum of money or a certain number of things.

Article 809. Interest Under Loan Contract

1. Unless otherwise provided by a law or loan contract, the lender shall have the right to receive from the borrower interest on the loan sum at the rate and according to the procedure determined by contract. If the contract has no clause on the rate of interest, its rate shall be determined by the bank interest rate (refinancing rate) existing at the borrower's place of residence or, if the lender is a legal entity, at the place of its location on the day when the borrower pays the sum of debt or a respective part thereof.

2. In the absence of some other agreement, interest shall be paid once a month until the day of returning the sum of loan.

3. A loan contract shall be presupposed to be interest-free, unless otherwise expressly provided therein, in instances where:

- the contract has been concluded between citizens for the sum not exceeding fifty times the statutory minimum monthly wage and it is not connected with the conduct of entrepreneurial activity at least by one of the parties; and

- generic things rather than money are transferred to the borrower under the contract.

Article 810. Borrower's Duty to Return Sum of Loan

1. The borrower shall be obliged to return to the lender the received loan value within the time period and according to the procedure provided by the loan contract.

In instances where the time to return the loan has not been specified by contract or has been determined by the moment of being called for, the sum of loan must be returned by the borrower within 30 days from the day the lender has presented a demand therefore, unless otherwise provided by contract.

2. Unless otherwise provided by the loan contract, the sum of interest-free loan may be returned by the borrower before time.

The sum of loan lent at interest may be returned before time by the lender's consent.

3. Unless otherwise provided by the loan contract, the sum of loan shall be deemed to have been returned at the moment of transferring it to the lender or entering the respective funds to his bank account.

Article 811. Consequences of Violation by Borrower of Loan Contract

1. Unless otherwise provided by a law or loan contract, in instances where the borrower has not returned the sum of loan on time, interest on this sum shall be subject to payment at the rate provided by Article 395(1) of the present Code from the day when it must have been returned until the day of the return thereof to the lender irrespective of interest payment provided by Article 809(1) of the present Code.

2. If the loan contract has provided for the return of loan in parts (by instalments) and the borrower has violated the time established for the return of the regular loan part, the lender shall have the right to demand that the entire remaining sum of loan and interest due be returned before time.

Article 812. Contesting Loan Contract

1. The borrower shall have the right to contest the loan contract for lack of money by proving that the money or other things have not been actually obtained by him from the lender or have been obtained in a smaller amount than that specified in the contract.

2. If a loan contract must be executed in writing (Article 808), contesting it for lack of money by way of giving evidence shall not be permitted, except in instances where the contract has been concluded under the effect of fraud, violation, threat, ill-mentioned agreement of the borrower's representative with the lender, or adverse circumstances.

3. If in the course of contestation of the loan contract by the borrower for lack of money it is established that the money or other things actually have not been obtained from the lender, the loan contract shall be deemed not to have been concluded. If the money or things have been actually obtained by the borrower from the lender in a smaller amount than specified in the contract, the contract shall be deemed to have been concluded for this amount of money or number of things.

Article 813. Consequences of Loss of Security of Borrower's Obligations

Should the borrower fail to fulfil the duties provided by the loan contract with respect to security for the return of the loan sum, as well as in the event of the loss or deterioration of its conditions due to circumstances the lender is not responsible for, the lender shall have the right to demand from the borrower to return the sum of loan and pay interest due before time, unless otherwise provided by contract.

Article 814. Purpose-Oriented Loan

1. If a loan contract has been concluded on condition that the borrower will use the obtained means for certain purposes (purpose-oriented loan), the borrower shall be obliged to ensure the possibility for the lender to exercise control over the intended use of the loan sum.

2. If the borrower fails to fulfil the conditions of the loan contract on the purpose-oriented use of the loan sum and also if he has violated the duties provided by point 1 of the present Article, the lender shall have the right to demand from the borrower that the sum of loan be returned and interest due be paid before time, unless otherwise provided by contract.

Article 815. Bill

In instances where in accordance with the agreement of the parties the borrower has issued a bill certifying the unconditional obligation of the bill giver (ordinary bill) or other payer named in the bill (transfer bill) to pay the borrowed sums of money at maturity as specified by the bill, relations of the parties with respect to the bill shall be regulated by the law on transfer and ordinary bills.

The rules of the present paragraph may apply to these relations from the moment of issuing the bill insofar as they are not contrary to the law on transfer and ordinary bills.

Article 816. Bond

In instances provided by a law or other legal acts, a loan contract nay be concluded by way of issuing and selling bonds.

A bond shall be deemed to be a security certifying its holder's right to receive the nominal value of the bond or other property equivalent within the period of time specified therein from the person who has issued the bond. A bond shall also entitle its holder to receive interest fixed therein on the nominal value of the bond or other property rights.

The rules of the present paragraph shall apply to relations between the person who has issued the bond and the holder thereof insofar as not otherwise provided by a law or according to the procedure established by it.

Article 817. State Loan Contract

1. Under a State loan contract, the Russian Federation or a Russian Federation subject shall act as the borrower, while a citizen or legal entity shall act as the lender.

2. State loans shall be voluntary.

3. A State loan contract shall be concluded by way of the acquisition by the lender of emitted State bonds or other State securities certifying the lender's right to receive from the borrower monetary funds lent to him or, depending on loan conditions, other property, set interest or other property rights within the time period specified by conditions of loan issue.

4. Changing conditions of the issued loan shall not be permitted.

5. The rules on a State loan contract shall, respectively, apply to loans issued by a municipality.

 

 

 

Article 818. Innovation of Debt into Loan Liability

1. By agreement of the parties, the debt which has arisen from the purchase/sale, lease of property or other ground may be replaced by a loan liability.

The debt shall be replaced by a loan liability with the observance of requirements concerning innovation (Article 414) and in the form provided for the conclusion of a loan contract (Article 808).

Paragraph 2. Credit

Article 819. Credit Contract

1. Under a credit contract, a bank or other credit organization (creditor) shall undertake to grant the borrower monetary funds (credit) in the amount and on the terms and conditions stipulated by contract, while the borrower shall undertake to return the obtained sum of money and pay interest on it.

2. The rules provided by paragraph 1 of the present Chapter shall apply to relations under a credit contract, unless otherwise provided by the rules of the present paragraph or follows from the essence of a credit contract.

Article 820. Form of Credit Contract

A credit contract must be concluded in writing.

The failure to observe the written form shall entail invalidity of a credit contract. Such contract shall be deemed null and void.

Article 821. Refusal to Allow or Obtain Credit

1. The creditor shall have the right to refuse completely or partially to allow the credit stipulated by the credit contract in the presence of circumstances which explicitly testify that the sum of money given the borrower will not be returned on time.

2. The borrower shall have the right to refuse to obtain the credit completely or partially, having warned the creditor thereof before the time specified by contract for the granting of credit, unless otherwise provided by a law, other legal acts or credit contract.

3. If the borrower has violated the duty to use the credit for the purpose specified by the credit contract (Article 814), the creditor also shall have the right to refuse further crediting of the borrower under the contract.

Paragraph 3. Commodity and Commercial Credit

Article 822. Commodity Credit

The parties may conclude a contract providing for the duty of one party to transfer generic things to the other party (commodity credit contract). The rules of paragraph 2 of the present Article shall apply to such contract, unless otherwise provided by such contract or follows from the essence of the obligation.

Provisions on the quantity, assortment, completeness, quality, tare and/or packing of offered things must be observed in conformity with the rules on a contract of sale of goods (Article 465-485), unless otherwise provided by a commodity credit contract.

Article 823. Commercial Credit

1. Contracts whose execution is connected with transferring sums of money or other generic things into the other party's ownership may provide for the granting of credit, including in the form of an advance, prepayment, deferral, and instalment payment for goods, works or services (commercial credit), unless otherwise provided by law.

2. Respectively, the rules of the present Chapter shall apply to a commercial credit, unless otherwise provided by the rules on the contract from which the respective obligation has arisen and if this is not contrary to the essence of such obligation.

 

Chapter 43. Financing Against Assignment of Monetary Claim

 

Article 824. Contract of Financing Against Assignment of Monetary Claim

1. Under a contract of financing against the assignment of a monetary claim (cession), one party (financial agent) shall transfer or undertake to transfer monetary funds to the other party (customer) on a security of a monetary claim of the customer (creditor) against a third person (debtor), which claim arises from the delivery of goods, performance of works or provision of services by the customer to the third person, while the customer shall assign or undertake to assign this monetary claim to the financial agent.

A monetary claim against the debtor may also be assigned by the customer to the financial agent in order to ensure the fulfilment of the customer's obligation to the financial agent.

2. The financial agent's obligations under a contract of financing against the assignment of a monetary claim may include book keeping for the customer, as well as provision of other financial services to the customer connected with monetary claims subject to assignment.

Article 825. Financial Agent

Banks and other credit organizations, as well as other commercial organizations having an authorization (license) to conduct such type of activity, may act as financial agents in concluding contracts of financing against the assignment of a monetary claim.

Article 826. Monetary Claim Assigned in Order to Procure Financing

1. Both a monetary claim whose maturity has already come (current claim) and the right to receive monetary funds which will arise in the future (future claim) may be subject to assignment on which the financing is to be provided.

A monetary claim subject to assignment must be defined in a contract of the customer with the financial agent in such a way that it could be identified as current claim at the moment of concluding the contract and as future claim not later than the moment of its origin.

2. If a future monetary claim is to be assigned, it shall be deemed to have passed to the financial agent after the arising of the right itself to receive from the debtor monetary funds that are subject-matter of the assignment provided by contract. If assignment of a monetary claim is conditioned by a certain event, it shall take force after the commencement of this event.

No additional formalization shall be required for the assignment of a monetary claim in such instances.

Article 827. Customer's Responsibility to Financial Agent

1. Unless otherwise provided by a contract of financing against the assignment of a monetary claim, the customer shall bear responsibility to the financial agent for the validity of the monetary claim subject to assignment.

2. A monetary claim subject to assignment shall be deemed valid if the customer has the right to transfer the monetary claim and at the moment of assigning this claim he knows of no circumstances which entitle the debtor not to settle it.

3. The customer shall not be responsible for the non-fulfilment or improper fulfilment by the debtor of the claim subject to assignment in the event that it has been presented by the financial agent for execution, unless otherwise provided by the contract between the customer and financial agent.

Article 828. Invalidity of Prohibition to Assign Monetary Claim

1. The assignment of a monetary claim to the financial agent shall be valid even if there exists an agreement between the customer and his debtor concerning the prohibition or limitation thereof.

2. The provision laid down by point 1 of the present Article shall not release the customer from obligations or responsibility to the debtor in connection with the assignment of the claim in violation of the existing agreement between them concerning the prohibition or limitation thereof.

Article 829. Further Assignment of Monetary Claim

Unless otherwise provided by a contract of financing against the assignment of a monetary claim, further assignment of a monetary claim by the financial agent shall not be permitted.

Respectively, if further assignment of a monetary claim is allowed by a contract, the provisions of the present Chapter shall apply to it.

Article 830. Execution of Monetary Claim by Debtor to Financial Agent

1. The debtor shall be obliged to make payment to the financial agent on condition that he has received from the customer or financial agent a written notice about assigning the monetary claim to this particular financial agent and that the monetary claim subject to execution, as well as the financial agent to whom payment is to be made, have been specified in the notice.

2. At the debtor's request, the financial agent shall be obliged to present evidence to the debtor that the assignment of the monetary claim to the financial agent did take place. Should the financial agent fail to fulfil this duty, the debtor shall have the right to make payment to the customer under this claim in fulfilment of his obligation to the latter.

3. The execution of a monetary claim by the debtor to the financial agent in accordance with the rules of the present Article shall release the debtor from the respective obligation to the customer.

Article 831. Rights of Financial Agent to Sums Received from Debtor

1. If in accordance with the terms of a contract of financing against the assignment of a monetary claim the customer is financed through the purchase of this claim from him by the financial agent, the latter shall acquire the right to all sums he will receive from the debtor in execution of this claim, while the customer shall not bear responsibility to the financial agent for the fact that the sums received by him have proved smaller than the price at which the agent purchased the claim.

2. If a monetary claim has been assigned to the financial agent for the purposes of ensuring him the fulfilment of the customer's obligation and unless otherwise provided by the contract of financing against the assignment of the monetary claim, the financial agent shall be obliged to submit a report to the customer and transfer him the sum in excess of the customer's debt secured by the assignment of the claim. If monetary funds received by the financial agent from the debtor have proved less than the customer's debt amount secured by the assignment of the claim, the customer shall remain responsible to the financial agent for the rest of the debt.

Article 832. Debtor's Counter Claims

1. In the event that the financial agent has demanded from the debtor to make payment, the debtor shall have the right in accordance with Articles 410-412 of the present Code to present to the set-off his monetary claims based on the contract with the customer which the debtor already had by the time when he has received a notice about the assignment of the claim to the financial agent.

2. Claims which the debtor could have presented to the customer in connection with the violation by the latter of the agreement on the prohibition or limitation of the assignment of claims, shall not have force in relation to the financial agent.

Article 833. Return to Debtor of Sums Received by Financial Agent

1. In the event that the customer has violated his obligations under the contract concluded with the debtor, the latter shall not have the right to demand from the financial agent to return the sums already paid to him under the claim which had passed to the financial agent if the debtor has the right to receive such sums directly from the customer.

2. The debtor who has the right to receive directly from the customer the sums paid to the financial agent as a result of the assignment of the claim shall, nevertheless, have the right to demand that these sums be returned by the financial agent if proven that the latter has not fulfilled his obligation to effect payment promised to the customer or has made such payment being aware of the violation by the customer of the obligation to the debtor under which the payment connected with the assignment of the claim must be made.

Chapter 44. Bank Deposit

 

Article 834. Bank Deposit Contract

1. Under a bank deposit contract, one party (bank) which has accepted a sum of money (deposit) received from or for the other party (depositor), shall undertake to return the sum of deposit and pay interest on it on conditions and according to the procedure specified by contract.

2. A bank deposit contract where a citizen is the depositor shall be deemed to be a public contract (Article 426).

3. The rules on a bank account contract (Chapter 45) shall apply to relations of the bank and depositor with respect to the account to which the deposit has been entered, unless otherwise provided by the rules of the present Chapter or follows from the essence of a bank deposit contract.

Legal persons shall not have the right to transfer to other persons monetary funds available on deposits.

4. The rules of the present Chapter relating to banks shall also apply to other credit organizations accepting, with the authority of law, deposits from legal entities.

Article 835. Right to Attract Monetary Funds to Deposits

1. The right to attract monetary funds to deposits shall be enjoyed by banks to which this right has been granted in accordance with the authorization (license) issued according to the statutory procedure.

2. In the event that a deposit from the citizen has been accepted by the person having no right thereto, or with a violation of the statutory procedure or of bank rules adopted pursuant thereto, the depositor may demand that the sum of deposit be immediately returned and also percent on it be paid as provided by Article 395 of the present Code and all losses caused to the depositor in excess of the interest rate be compensated.

If such person has accepted a legal person's monetary funds on terms and conditions of a bank deposit contract, such contract shall be regarded as null and void (Article 168).

3. Unless otherwise established by law, the consequences provided by point 2 of the present Article shall also apply in instances of:

- attracting money resources of citizens and legal persons by way of selling them stocks and other securities whose issue has been deemed unlawful; and

- attracting money resources of citizens to deposits on a security of bills or other securities which exclude the receipt of the deposit by their holders at call and the exercise by the depositor of other rights provided by the rules of the present Chapter.

Article 836. Form of Bank Deposit Contract

1. A bank deposit contract shall be concluded in writing.

The written form of a bank deposit contract shall be deemed to be observed if the entering of the deposit has been certified by the savings book, savings or deposit certificate or other document issued by the bank to the depositor and meeting the requirements provided by law for such documents or bank rules established pursuant thereto and business customs used in banking practice.

2. The non-observance of the written form of a bank deposit contract shall entail the invalidity of this contract. Such contract shall be null and void.

Article 837. Types of Deposits

1. A bank deposit contract shall be concluded on condition that the deposit be paid at first call (call deposit) or on condition that the deposit be returned upon the expiration of the length of time specified by contract (time deposit).

A contract may provide for the placement of deposits on other return conditions not contrary to the law.

2. Under any type of a bank deposit contract, the bank shall be obliged to pay the sum of deposit or part thereof at the depositor's call, except for deposits placed by legal entities on return conditions other than those provided by contract.

A contract clause on the refusal by the citizen of the right to receive the deposit at call shall be null and void.

3. In instances where a time deposit or a deposit other than a call deposit is returned to the depositor at his call before time or the commencement of other circumstances specified in the bank deposit contract, interest on the deposit shall be paid at a rate corresponding to the rate of interest paid by the bank on call deposits, unless a different rate of interest has been provided by contract.

4. In instances where the depositor does not demand to return the sum of time deposit upon the expiration of the time period or to return the sum of deposit placed on other return conditions after the commencement of circumstances specified by contract, the contract shall be deemed to be prolonged on call deposit conditions, unless otherwise provided by contract.

Article 838. Interest on Deposit

1. The bank shall pay the depositor interest on the sum of deposit at the rate determined by the bank deposit contract.

If there is no clause in the contract on the rate of interest to be paid, the bank shall be obliged to pay interest at the rate determined in accordance with Article 809(1) of the present Code.

2. Unless otherwise provided by the bank deposit contract, the bank shall have the right to change the rate of interest paid on call deposits.

Should the bank reduce the rate of interest, the new rate of interest shall apply to deposits placed before the depositors have been notified about a reduction in the rate of interest upon the expiration of a month from the moment of respective notification, unless otherwise provided by contract.

3. The rate of interest determined by the bank deposit contract on the deposit made by the citizen on condition that it be paid upon the expiration of a certain length of time or after the commencement of circumstances provided by contract, may not be unilaterally reduced by the bank, unless otherwise provided by law. Under a contract for such bank deposit concluded by the bank with a legal entity, the rate of interest may not be changed unilaterally, unless otherwise provided by a law or contract.

Article 839. Procedure to Calculate and Pay Interest on Deposit

1. Interest on the sum of bank deposit shall be calculated beginning from the day following the day on which it has come to the bank and to the day preceding the return thereof to the depositor or the writing thereof off the depositor's account on other grounds.

2. Unless otherwise provided by the bank deposit contract, interest on the sum of bank deposit shall be paid to the depositor on his call at the end of each quarter irrespective of the sum of deposit, while interest uncalled during this period shall increase the sum of deposit on which interest is calculated.

When a deposit is to be returned, all interest calculated by this moment shall be paid.

Article 840. Guaranteeing Return of Deposit

1. Banks shall be obliged to guarantee the return of citizens' deposits by way of mandatory insurance and also in other ways in instances specified by law.

The return of citizens' deposits by banks in whose authorized capital over fifty percent of stock or shares belongs to the Russian Federation and/or Russian Federation subjects, as well as municipalities, shall additionally be guaranteed by their joint responsibility for a depositor's claims against a bank according to the procedure provided by Article 399 of the present Code.

2. Ways for the bank to guarantee the return of deposits of legal entities shall be determined by the bank deposit contract.

3. When concluding a bank deposit contract, the bank shall be obliged to furnish the depositor information about guarantees for the return of his deposit.

4. If the bank fails to fulfil duties provided by a law or bank deposit contract with respect to guaranteeing the return of the deposit, as well as in the event that the security has been lost or conditions thereof deteriorated, the depositor shall have the right to demand from the bank to immediately return the sum of deposit, pay interest on it at the rate determined in accordance with Article 809(1) of the present Article and compensate for losses caused.

Article 841. Placement by Third Persons of Monetary Funds to Depositor's Account

Unless otherwise provided by the bank deposit contract, the monetary funds shall be entered to the deposit account which has been received by the bank to the depositor's account from third persons, with all necessary information as to his deposit account indicated. It should be implied in this case that the depositor has expressed his consent to receive monetary funds from such persons, having furnished them necessary information about his deposit account.

Article 842. Deposits To Benefit of Third Persons

1. A deposit may be placed with the bank to a certain third person's account. Unless otherwise provided by the bank deposit contract, such person shall acquire a depositor's rights from the moment he has presented to the bank his first demand based on these rights or otherwise expressed to the bank his intention to use such rights.

Specifying the name of a citizen (Article 19) or that of a legal entity (Article 54) in whose favour the deposit is being made shall be a material condition of the respective bank deposit contract.

A bank deposit contract to the benefit of the citizen who has died by the moment of concluding the contract or the legal entity which did not exist by that moment shall be null and void.

2. Before the third person has expressed intention to use a depositor's rights, the person who concluded the bank deposit contract may use a depositor's rights with respect to the monetary funds placed by him to the deposit account.

3. The rules on a contract to the benefit of a third person (Article 430) shall apply to a bank deposit contract to the benefit of a third person, unless this is contrary to the rules of the present Article and the essence of the bank deposit.

Article 843. Savings Book

1. Unless otherwise provided by agreement of the parties, the conclusion of a bank deposit contract with the citizen and the placement of monetary funds to his deposit account shall be certified by a savings book. A bank deposit contract may provide for the issue of a registered savings book or that to bearer. A bearer savings book shall be a security.

A savings book shall specify and certify the name and location of the bank (Article 54) and if the deposit has been made with its branch - those of the respective branch, the number of the deposit account, as well as all the sums of monetary funds entered into the account, all the sums written off the account, and the rest of monetary funds on the account by the moment of presenting the savings book at the bank.

Unless a different condition of the deposit has been proved, information about the deposit specified in the savings book shall serve as a ground to make settlements between the bank and depositor with respect to the deposit.

2. Payment of the deposit and interest on it and fulfilment of the depositor's instructions concerning the transfer of monetary funds from the deposit account to other persons shall be effected by the bank on presentation of the savings book.

Should the bearer savings book be lost or its condition become unfit for presentation, the bank at the customer's request shall issue him a new savings book.

The rights relating to a bearer savings book shall be reinstated according to the procedure provided for bearer securities (Article 148).

Article 844. Savings (Deposit) Certificate

1. A savings (deposit) certificate shall be a security certifying the sum of deposit placed with the bank and the rights of the depositor (certificate holder) to receive upon the expiration of an agreed period of time the sum of deposit and interest specified in the certificate at the bank which has issued the certificate or at any branch of this bank.

2. Savings (deposit) certificates may be to bearer or registered.

3. In the event that a savings (deposit) certificate is presented to payment before time, the bank shall pay the sum of deposit and interest paid on call deposits, unless a different rate has been established by the conditions of the certificate.

 

Chapter 45. Bank Account

 

Article 845. Bank Account Contract

1. Under a bank account contract, the bank shall undertake to accept and enter monetary funds paid to the account opened for the customer (account's owner), follow the customer's instructions concerning the transfer and payment of respective sums from the account, and perform other operations on the account.

2. The bank may use monetary funds available on the account if it guarantees the customer's right to freely dispose of these funds.

3. The bank shall not have the right to determine and control directions of using the customer's monetary funds and put other limitations not provided by a law or bank account contract on his right to dispose of monetary funds at his discretion.

4. The rules of the present Chapter relating to banks shall also apply to other credit organizations concluding and executing bank account contracts in accordance with the granted authorization (license).

Article 846. Conclusion of Bank Account Contract

1. When a bank account contract is concluded, an account with the bank shall be opened for the customer or the person specified by him on the conditions agreed upon by the parties.

2. The bank shall be obliged to conclude a bank account contract with the customer who has approached it with a proposition to open an account on terms and conditions declared by the bank for this type of accounts and meeting the requirements provided by a law and banking rules laid down pursuant to it.

The bank shall not have the right to refuse to open an account the performance of respective operations on which has been provided by a law, by the bank's constituent documents and the authorization (license) issued to it, except in instances where such refusal is caused by the impossibility by the bank to take for banking services or is permitted by a law or other legal acts.

If the bank has unjustifiably evaded from concluding a bank account contract, the customer shall have the right to lodge against it claims provided by Article 445(4) of the present Code.

Article 847. Certifying Right to Dispose of Monetary Funds Available on Account

1. The rights of persons who in the customer's name fulfil instructions concerning the transfer and payment of money from the account shall be certified by the customer by way of submitting to the bank the documents specified by a law, banking rules established pursuant thereto, and bank account contract.

2. The customer may instruct the bank to write monetary funds off the account at the third persons' demand, including the demand connected with the performance by the customer of his obligations to these persons. The bank shall accept these instructions on condition that all necessary information is given therein in writing allowing, when a respective demand is presented, to identify the person entitled to present it.

3. A contract may provide for the certification of rights to dispose of monetary funds available on the account with the help of electronic means of payment or other instruments where use is made of analogues of the signature in one's own hand (Article 160[2]), codes, passwords, and other means confirming that the instruction is given by the person authorized to do so.

Article 848. Operations on Account Performed by Bank

The bank shall be obliged to perform for the customer operations provided for this type of account by a law, banking rules established pursuant thereto, and business customs used in banking practice, unless otherwise provided by the bank account contract.

Article 849. Time of Operations on Account

The bank shall be obliged to enter monetary funds received to the customer's account not later than the day following the day on which the respective payment document is received, unless a shorter period is provided by the bank account contract.

The bank shall be obliged, when ordered by the customer, to pay or transfer the customer's monetary funds from the account not later than the day following the day on which the respective payment document is received by the bank, unless other periods have been provided by a law, banking rules issued pursuant thereto, or bank account contract.

Article 850. Crediting of Account

1. In instances where in accordance with the bank account contract the bank makes payments from the account despite the lack of monetary funds (crediting of the account), the bank shall be deemed to have granted to the customer a credit for the respective amount from the day of making such payment.

2. The rights and duties of the parties connected with the crediting of the account shall be determined by the rules on loan and credit (Chapter 42), unless otherwise provided by the bank account contract.

Article 851. Payment for Bank's Expenses on Operations on Account

1. In instances specified by the bank account contract the customer shall pay the bank for the performance of operations with monetary funds available on the account.

2. A charge for the bank's services provided by point 1 of the present Article may be collected by the bank upon the expiry of each quarter from the customer's monetary funds available on the account, unless otherwise provided by the bank account contract.

Article 852. Interest on Use by Bank of Monetary Funds Available on Account

1. Unless otherwise provided by the bank account contract, for the use of monetary funds available on the customer's account the bank shall pay interest whose sum is to be entered into the account.

The sum of interest shall be entered to the account within the length of time specified by contract or, if no such time has been specified by contract, at the end of each quarter.

2. The interest mentioned in point 1 of the present Article shall be paid by the bank at a rate determined by the bank account contract or, in the absence of the respective clause in the contract, at a rate usually paid by the bank on call deposits (Article 838).

Article 853. Set-Off of Counter Claims of Bank and Customer with Respect to Account

Monetary claims of the bank against the customer connected with the crediting of the account (Article 850) and payment for the bank's services (Article 851), as well as the customer's claims against the bank concerning payment of interest for the use of monetary funds (Article 852) shall be terminated by their set-off (Article 410), unless otherwise provided by the bank account contract.

The aforesaid claims shall be set-off by the bank. The bank shall be obliged to inform the customer about the completed set-off according to the procedure and within the period of time specified by contract or, if the respective terms have not been agreed by the parties, according to the procedure and within the period of time normal in banking practice for providing information to customers about the condition of monetary funds on the respective account.

Article 854. Grounds for Writing Monetary Funds Off Account

1. Writing monetary funds off an account shall be effected by the bank on the basis of the customer's instruction.

2. In the absence of the customer's instruction, the write-off of monetary funds available on the account shall be permitted by the court decision, and also in instances established by a law or specified by the contract between the bank and the customer.

 

Article 855. Priority in Writing Monetary Funds Off Account

1. Should an account contain monetary funds whose amount is sufficient in order to meet all the claims presented against the account, these funds shall be written off the account in the order of receiving the customer's instructions and other documents pertaining to the write-off (calendar priority), unless otherwise provided by law.

2. Should monetary funds on the account be insufficient to meet all the claims presented against it, monetary funds shall be written off in the following order of priority:

- first, the write-off shall be effected to satisfy executive documents which provide for the transfer or payment of monetary funds from the account in order to meet claims for compensation for harm caused to life and health, as well as claims for the recovery of alimony;

- second, the write-off shall be effected to satisfy executive documents which provide for the transfer or payment of monetary funds in order to settle severance pays and remunerations of labour with persons employed under labour agreements, including under contracts, and royalty payments under author's contracts;

- third, the write-off shall be effected on payment documents which provide for the transfer or payment of monetary funds in order to settle remunerations of labour with persons employed under labour agreements (contracts), as well as deductions to the Pension Fund of the Russian Federation, the Social Insurance Fund of the Russian Federation and the State Fund for Employment of the Population of the Russian Federation and funds of compulsory medical insurance;

- fourth, writing-off shall be effected on payment documents which provide for deductions to the budget and off-budget funds; *)

- fifth, writing-off shall be effected on executive documents which provide for the satisfaction of other monetary claims; *)

- sixth, writing-off shall be effected with respect to other payment documents in the order of calendar priority. *)

Writing monetary funds off the account in the event of claims belonging to one priority shall be effected in the order of calendar priority in which documents are received.

Article 856. Bank's Responsibility for Improper Performance of Operations on Account

Should monetary funds received for the customer be improperly entered to the account or unjustifiably written off the account by the bank, and also if the bank fails to follow the customer's instructions concerning the transfer of monetary funds from the account or payment thereof from the account, the bank shall be obliged to pay interest on this sum according to the procedure and at the rate provided by Article 395 of the present Code.

Article 857. Banking secrecy

1. The bank shall guarantee the privacy of a bank account and bank deposit, operations on an account, and information about the customer.

2. Information which constitutes a banking secret may be furnished only to customers themselves or their representatives. Such information may be presented to State agencies and their officials exclusively in the instances and according to the procedure provided by law.

3. Should the bank divulge information which is a banking secret, the customer whose rights have been violated shall have the right to demand from the bank to compensate for losses caused.

Article 858. Limitation on Disposition of Account

Any limitation of the customer's rights to dispose of monetary funds available on the account shall not be permitted, except for the arrest of monetary funds available on the account or suspension of operations on the account in instances provided by law.

Article 859. Cancellation of Bank Account Contract

1. A bank account contract shall be cancelled at any time upon the application from the customer.

2. At the bank's demand, a bank account contract may be dissolved by the court in the following instances:

- when the sum of money deposited on the customer's account proves smaller than the minimum amount provided by banking rules or contract if such sum has not been replenished within a month from the day on which the bank was warned thereof; and

- if no operations on this account have been performed during a year, unless otherwise provided by contract.

3. The rest of money on the account shall be paid to the customer or, by his order, transferred to another account not later than seven days after the receipt of the respective written application from the customer.

4. The cancellation of the bank account contract shall be a ground for the closing of the customer's account.

Article 860. Accounts of Banks

The rules of the present Article shall extend to correspondent accounts, correspondent subaccounts, other accounts of banks, unless otherwise provided by a law, other legal acts, or bank rules established pursuant thereto.

 

Chapter 46. Settlements

 

Paragraph 1. General Provisions on Settlements

Article 861. Cash and Clearing Settlements

1. Settlements with the participation of citizens not connected with the conduct by them of entrepreneurial activity may be effected in cash (Article 140) with no limitation on the sum or as clearing settlements.

2. Settlements between legal persons, as well as settlements with the participation of citizens connected with the conduct by them of entrepreneurial activity shall be effected as clearing payments. Settlements between these persons may also be made in cash, unless otherwise established by law.

3. Clearing shall be effected via banks and other credit organizations (hereafter: banks) where respective accounts are open, unless it follows otherwise from a law or conditioned by the used form of settlement.

Article 862. Form of Clearing Settlements

1. Within the clearing system, settlements shall be permitted with the help of payment orders, letters of credit, checks, collection payments, as well as in other forms of settlement provided by a law, banking rules established pursuant thereto, and business customs used in banking practice.

2. The parties to a contract shall have the right to choose and establish in the contract any form of settlement mentioned in point 1 of the present Article.

Paragraph 2. Settlements by Payment Orders

Article 863. General Provisions on Settlements by Payment Orders

1. When payment orders are used in settlements, the bank shall be obliged, to the payer's order and from funds on his account, to remit a certain sum of money to the account of a person specified by the payer at one or another bank within a period provided by a law or within a period established pursuant thereto, unless a shorter period has been specified by the bank account contract or determined by business customs used in banking practice.

2. The rules of the present paragraph shall apply to relations connected with the transfer of monetary funds via a bank by a person who has no account with this particular bank, unless otherwise provided by a law, banking rules established pursuant thereto, or follows from the essence of these relations.

3. A procedure to effect settlements by payment orders shall be regulated by a law, as well as by banking rules established pursuant thereto and business customs used in banking practice.

Article 864. Conditions for Bank to Execute Payment Order

1. The content of a payment order and payment documents submitted therewith and their form must conform with the requirements provided by a law and banking rules established pursuant thereto.

2. Should a payment order fail to meet the requirements mentioned in point 1 of the present Article, the bank may request to clarify the content of the order. Such request must be submitted to the payer immediately after the receipt of the order. Should no reply be received within a period provided by a law or by banking rules established pursuant thereto or in the absence thereof, within a reasonable period, the bank may neglect to execute the order and return it to the payer, unless otherwise provided by a law, banking rules established pursuant thereto, or contract between the bank and the payer.

3. The payer's order shall be executed by the bank if money is available on the payer's account, unless otherwise provided by contract between the payer and the bank. Orders shall be executed by the bank with the observance of the priority in writing monetary funds off the account (Article 855).

Article 865. Execution of Order

1. The bank which has accepted a payer's payment order, shall be obliged to transfer a respective sum of money to the payee's bank so that it could be entered to the account of the person specified in the order within the period of time established by Article 863(1) of the present Code.

2. The bank shall have the right to involve other banks in the performance of operations for the transfer of monetary resources to the account specified in the customer's order.

3. The bank shall be obliged to immediately inform the payer at his demand about the execution of the order. A procedure to make out and requirements relating to the content of a notification about the execution of the order shall be determined by a law, banking rules established pursuant thereto, or agreement of the parties.

Article 866. Responsibility for Non-Execution or Improper Execution of Order

1. In the event that the customer's order has not been executed or has been improperly executed, the bank shall bear responsibility on the grounds and to the extent provided by Chapter 25 of the present Code.

2. When the failure to execute or improper execution of the order has occurred in connection with a violation of the rules on the performance of settlement operations by a bank employed to execute the payer's order, the responsibility provided by point 1 of the present Article may be placed by a court on this bank.

3. If a violation of the rules on the performance by the bank of settlement operations has entailed an unjustifiable withdrawal of monetary funds, the bank shall be obliged to pay interest according to the procedure and at the rate provided by Article 395 of the present Article.

Paragraph 3. Settlements by Letter of Credit

Article 867. General Provisions on Settlements by Letter of Credit

1. When a letter of credit is used for settlements, the bank acting on behalf of the payer and in accordance with his instruction to open a letter of credit (issuing bank) shall be obliged to make payments to the payee or pay, honour, or discount a transfer bill, or authorize another bank (executive bank) to make payments to the payee or pay, honour, or discount the transfer bill.

The rules on executive banks shall apply to the issuing bank effecting payments to the payee or paying, honouring, or discounting a transfer bill.

2. In the event that a covered (deposited) letter of credit is opened, the issuing bank while opening it shall be obliged, at the payer's cost or the cost of the credit granted to him, to transfer the sum of the letter of credit (cover) at the disposal of the executive bank for the entire validity period of the issuing bank's obligation.

In the event that an uncovered (guaranteed) letter of credit is opened, the executive bank shall be granted the right to write the total sum of the letter of credit off the issuing bank's account kept with it.

3. A procedure to effect settlements by a letter of credit shall be regulated by a law, and also by banking rules established pursuant thereto and by business customs used in banking practice.

Article 868. Revocable Letter of Credit

1. A letter of credit shall be deemed revocable if it can be changed or cancelled by the issuing bank without preliminary notice from the payee. Cancelling a letter of credit shall not create for the issuing bank any obligations to the payee.

2. The executive bank shall be obliged to make payment or other operations on a letter of credit if by the moment of performing them it has not received a notice about a change or cancellation of the letter of credit.

3. A letter of credit shall be revocable, unless otherwise expressly stated in its text.

Article 869. Irrevocable Letter of Credit

1. A letter of credit shall be deemed irrevocable if it cannot be cancelled without the payee's consent.

2. At the request of the issuing bank, the executive bank participating in carrying out an operation with a letter of credit may confirm the irrevocable letter of credit (confirmed letter of credit). Such confirmation means that the executive bank shall assume an obligation, additionally to that of the issuing bank, to effect payment in accordance with conditions of the letter of credit.

An irrevocable letter of credit confirmed by the executive bank may not be changed or cancelled without the consent of the executive bank.

Article 870. Execution of Letter of Credit

1. For a letter of credit to be executed, the payee shall submit to the executive bank documents confirming the fulfilment of all conditions of the letter of credit. If at least one of these conditions has not been observed, the letter of credit shall not be executed.

2. If the executive bank has effected payment or other operation in accordance with conditions of a letter of credit, the issuing bank shall be obliged to compensate it for expenses suffered. The aforesaid expenses, as well as all other expenses of the issuing bank connected with the execution of the letter of credit, shall be recovered by the payer.

Article 871. Refusal to Accept Documents

1. If the executive bank refuses to accept documents which in appearance do not conform to conditions of the letter of credit, it shall be obliged to immediately inform the payee and the issuing bank thereof and specify reasons for the refusal.

2. If after the receipt of the documents accepted by the executive bank, the issuing bank believes that in their appearance they do not conform to conditions of the letter of credit, it shall have the right to refuse to accept them and demand from the executive bank the amount paid to the payee in violation of conditions of the letter of credit and in case of an uncovered letter of credit, to refuse to return the sums paid.

Article 872. Bank's Responsibility for Violating Conditions of Letter of Credit

1. Responsibility for violating conditions of a letter of credit shall be born by the issuing bank to the payer and by the executive bank to the issuing bank, except in instances specified by the present Article.

2. In the event of an unjustified refusal by the executive bank to pay monetary funds on a covered or confirmed letter of credit, responsibility to the payee may be placed on the executive bank.

3. In the event that the executive bank has wrongly paid money on a covered or confirmed letter of credit in consequence of a violation of conditions of the letter of credit, responsibility to the payer may be placed on the executive bank.

Article 873. Closing of Letter of Credit

1. The closing of a letter of credit at the executive bank shall be effected:

- upon the expiration of the validity of the letter of credit; and

- upon the payee's application with his refusal to use the letter of credit till the expiration of its validity if the possibility of such refusal has been provided by conditions of the letter of credit; and

- at the payer's demand to revoke the letter of credit completely or partially, if conditions of the letter of credit allow such revocation.

The executive bank must inform the issuing bank about the closing of the letter of credit.

2. The unused amount of a covered letter of credit shall be subject to return to the issuing bank immediately and simultaneously with the closing of the letter of credit. The issuing bank shall be obliged to enter the returned sums to the payer's account from which the money has been deposited.

Paragraph 4. Collection Settlements

Article 874. General Provisions on Collection Settlements

1. When effecting collection settlements, the bank (issuing bank) shall undertake to the customer's order and at his cost to take actions in order to obtain payment and/or acceptance of payment.

2. The issuing bank which has received an order from the customer shall have the right to draw another bank (executive bank) to the execution thereof.

A procedure to effect collection settlements shall be regulated by a law, by banking rules established pursuant thereto, and by business customs used in banking practice.

3. If the customer's order has not been executed or has been improperly executed, the issuing bank shall bear responsibility to him on the grounds and to the extent provided by Chapter 25 of the present Code.

If the failure to execute or improper execution of the customer's order has occurred in connection with a violation by the executive bank of the rules on the performance of settlement operations, responsibility to the customer may be placed on this bank.

Article 875. Execution of Collection Order

1. If some document is missing or if documents differ in appearance from the standard collection order, the executive bank shall be obliged to immediately inform about this the person from whom the collection order was received. If the defects specified remain unremoved, the bank shall have the right to return the documents without execution.

2. Documents shall be presented to the payer in the same form in which they were received, except for the notes and inscriptions by banks necessary to formalize the collection procedure.

3. If documents are to be paid at sight, the executive bank must ensure presentation for payment immediately after the receipt of the collection order.

If documents are to be paid on other date, then for the executive bank to obtain the payer's acceptance it must present the documents for acceptance immediately after the receipt of the collection order, while the request for payment must be made not later than the maturity date specified in the document.

4. Partial payments may be accepted in instances where this has been established by banking rules or a special authorization is given in the collection order.

5. The received (collected) sums must be immediately transferred by the executive bank at the disposal of the issuing bank which shall be obliged to enter these sums to the customer's account. The executive bank shall have the right to deduct from the collected sums a commission and reimbursement due to it.

Article 876. Notifying About Operations Performed

1. If payment and/or acceptance have not been received, the executive bank shall be obliged to immediately notify the issuing bank about reasons for non-payment or refusal of acceptance.

The issuing bank shall be obliged to immediately inform the customer thereof and request from him instructions concerning further actions.

2. If no instructions on further actions have been received within the period established by banking rules or in the absence of such, within a reasonable period, the executive bank shall have the right to return the documents to the issuing bank.

Paragraph 5. Settlements by Checks

Article 877. General Provisions on Settlements by Checks

1. A check shall be deemed to be a security containing the check issuer's unconditional order to the bank to pay the sum specified therein to the check holder.

2. Only the bank where the issuer holds funds which he has the right to dispose of by way of drawing checks, may be named as payer for a check.

3. Revoking a check prior to the expiration of the term to present it shall not be permitted.

4. Issuing a check shall not acquit the pecuniary liability in execution of which it has been issued.

5. A procedure and conditions to use checks in payment transactions shall be regulated by the present Code and, where not regulated by it, by other laws and banking rules established pursuant thereto.

Article 878. Requisites of Check

1. A check must contain:

1) the designation "check" included in the text of the document; and

2) an order to the payer to pay a certain sum of money; and

3) the payer's name and indication as to the account from which payment is to be made; and

4) indication as to the payment currency; and

5) date and place of drawing up the check; and

6) signature of the person who has drawn the check, i.e. the issuer.

The absence in the document of any of the aforementioned requisites shall invalidate it as a check.

A check containing no indication as to the place where it has been drawn up shall be deemed to have been signed at the place of location of the issuer.

A statement of interest shall be deemed to be not written.

2. The form of a check and procedure to fill it in shall be determined by a law and banking rules established pursuant thereto.

Article 879. Payment for Check

1. A check shall be paid for from the issuer's funds.

If funds are deposited, a procedure and conditions to deposit funds in order to cover a check shall be established by banking rules.

2. A check shall be subject to payment by the payer on condition that it has been presented for payment within the time period established by law.

3. The payer for a check shall be obliged by all means within his reach to make sure that the document is genuine and also that the bearer of the check is a person authorized to deal with it.

When paying for an endorsed check, the payer shall be obliged to verify the correctness of endorsements, but not the signatures of endorsers.

4. Losses arising from payment by the payer for a forged, stolen or lost check shall be placed on the payer or issuer depending on who is in fault for having caused them.

5. The person who has paid for a check shall have the right to demand that the check and a voucher for payment be handed over to him.

Article 880. Transfer of Rights Relating to Check

1. The transfer of rights relating to a check shall be effected according to the procedure established by Article 146 of the present Code with the observance of the rules laid down by the present Article.

2. A non-negotiable check shall not be subject to transfer.

3. On a negotiable check, an endorsement for the payer shall have force as a voucher for payment.

An endorsement made by the payer shall be invalid.

The person possessing a negotiable check obtained by endorsement shall be deemed its lawful owner if he bases his right on an uninterrupted series of endorsements.

Article 881. Guarantee of Payment

1. Payment for a check may be guaranteed completely or partially by means of an aval.

A guarantee of payment for a check (aval) may be given by any person, except by the payer.

2. An aval shall be put down on the face side of a check or on additional sheet by way of inscribing "Regard as aval" and stating by whom and for whom it has been issued. If no recipient is indicated, the aval shall be deemed to have been given for the check issuer.

An aval shall be signed by the guarantor, with the place of his residence and date of executing the inscription indicated, and if the guarantor is a legal person - with the place of its location and date of executing the inscription indicated.

3. The guarantor shall be as much responsible as the person for whom he has given the aval.

His obligation shall remain in force even if the obligation he has guaranteed proves invalid for any reason other than the failure to observe the form.

4. The guarantor who has paid for a check shall acquire the rights arising from the check against the person for whom he has given guarantee and against those who are obliged to the latter.

Article 882. Collection of Check

1. Submitting a check for collection to the issuer's bank in order to obtain payment shall be deemed to be a presentation of the check for payment.

Payment for a check shall be effected according to the procedure established by Article 875 of the present Code.

2. Funds on a collected check shall be entered to the issuer's account after the receipt of payment from the payer, unless otherwise provided by a contract between the check holder and the bank.

Article 883. Certification of Refusal to Pay for Check

1. Refusal to pay for a check must be certified by one of the following means:

1) a protest lodged by a notary or an equivalent statement drawn up according to the procedure established by law;

2) the payer's note on the check stating the refusal to pay for it, with the date of presenting the check for payment indicated;

3) a note by the collecting bank, the date indicated, saying that the check has been drawn on time and has not been paid for.

2. A protest or equivalent statement must be filed before the expiration of the term for the presentation of the check.

If a check was presented on the last day of the term, a protest or equivalent statement may be filed on the next working day.

Article 884. Notification About Non-Payment for Check

The check holder shall be obliged to notify his endorser and check issuer about non-payment during two working days following the day on which the protest or equivalent statement was made.

Each endorser, within two working days following the day of receiving the notification, must bring the notification received by him to the notice of his endorser. Within the same period a notification shall be sent to the person who has given aval for this person.

The person who has not sent the notification within the aforementioned period shall not lose his rights. He shall compensate for losses which may arise in consequence of the failure to notify about non-payment for the check. The amount of losses to be compensated may not exceed the sum of the check.

Article 885. Consequences of Non-Payment for Check

1. Should the payer refuse to pay for the check, the holder shall have the right at his discretion to lodge a claim against one, several or all persons liable with respect to the check (issuer, guarantors, endorsers) who shall bear joint responsibility to him.

2. The check holder shall have the right to demand from the aforesaid persons to pay the sum of the check, his expenses incurred to obtain payment, as well as interest in accordance with Article 395(1) of the present Code.

The same right shall belong to the person liable with respect to the check after he has paid for the check.

3. The holder's claim against persons mentioned in point 1 of the present Article may be presented within six months from the day on which the term to present the check for payment terminates. Recourses by obliged persons against one another shall be acquitted upon the expiration of six months when the respective obliged person has satisfied the recourse or from the day the claim was presented to him.

 

 

 

 

Chapter 47. Safekeeping

 

Paragraph 1. General Provisions on Safekeeping

Article 886. Contract of Safekeeping

1. Under a contract of safekeeping, one party (depositary) shall undertake to keep a thing transferred to him by the other party (depositor) and to return this thing intact.

2. A contract of safekeeping where the depositary is a commercial organization or a non-commercial organization engaged in safekeeping as one of the lines of its professional activity (professional depositary), may provide for the depositary's duty to accept a thing from a depositor for keeping on the date specified by contract.

Article 887. Form of Contract of Safekeeping

1. A contract of safekeeping must be concluded in writing in instances specified in Article 161 of the present Code. Observing the written form is required for a safekeeping contract between citizens (Article 161[1.1]) if the value of a thing transferred for keeping exceeds at least ten times the statutory minimum monthly wage.

A contract of safekeeping providing for the depositary's duty to accept a thing for keeping must be concluded in writing irrespective of who are participants in this contract and what is the value of the thing transferred for keeping.

The transfer of a thing in cases of emergency (fire, acts of God, sudden disease, threat of aggression, and so forth) may be proved by testimony.

2. A simple written form of a contract of safekeeping shall be deemed to be observed if the acceptance of the thing for keeping is certified by the depositary by way of issuing to the depositor:

- a deposit receipt, ticket, certificate, or other document signed by the depositary; and

- a numbered counter (number) or other token certifying the acceptance of things for keeping if such form of confirming the acceptance of things for keeping is provided by a law or other legal act or is usual for a particular type of safekeeping.

2. The failure to observe a simple written form of a contract of safekeeping shall not deprive the parties of the right to refer to testimony in case of a dispute over the identity of the thing accepted for keeping and the thing returned by the depositary.

Article 888. Performance of Duty to Accept Thing for Keeping

1. The depositary who under a contract of safekeeping has assumed the duty to accept a thing for keeping (Article 886[2]) shall not have the right to demand that this thing be transferred to him for keeping.

However, the depositor who has not transferred a thing for keeping within the period of time stipulated by contract, shall bear responsibility to the depositary for losses caused in connection with the failed safekeeping, unless otherwise provided by a law or contract of safekeeping. The depositor shall be released from this responsibility if within a reasonable period of time he has declared to the depositary the refusal of his services.

2. Unless otherwise provided by the contract of safekeeping, the depositary shall be released from the duty to accept a thing for keeping if the thing is not transferred to him within the period specified by contract.

Article 889. Duration of Safekeeping

1. The depositary shall be obliged to keep a thing during the period of time stipulated by the contract of safekeeping.

2. If duration of safekeeping has not been specified by contract and cannot be determined from its conditions, the depositary shall be obliged to keep the thing until called for by its depositor.

3. If duration of safekeeping has been determined by the moment when the depositor will call for the thing, the depositary shall have the right upon the expiration of the period for keeping the thing, which is usual under these particular circumstances, to demand from the depositor to take the thing back, giving him a reasonable time to do so. The depositor's failure to perform this duty shall entail consequences provided by Article 899 of the present Code.

Article 890. Keeping Things Without Individualization

In instances directly specified by a contract of safekeeping, things accepted for keeping from one depositor may be mixed with things of the same kind and quality of other depositors (keeping without individualization). An equal quantity or the quantity of things of the same kind and quality stipulated by the parties shall be returned to the depositor.

Article 891. Depositary's Duty to Ensure Safety of Thing

1. The depositary shall be obliged to take all measures provided by the contract of safekeeping in order to ensure safety of the thing transferred for keeping.

If a contract contains no clauses on such measures or if such clauses are incomplete, the depositary shall also be obliged to take measures to preserve the thing which are adequate to business customs and the essence of the obligation, including to the properties of the thing transferred for keeping, unless the necessity to take these measures has been excluded by contract.

2. To preserve the thing transferred to him for keeping, the depositary must in all events take measures whose obligatoriness is provided by a law, other legal acts or according to the procedure established by them (fire-preventive, sanitary, protective and so forth).

3. If safekeeping is free of charge, the depositary shall be obliged to take as much care of the thing accepted for keeping as of his own things.

Article 892. Use of Thing Accepted for Keeping

The depositary shall not have the right without the depositor's consent to use the thing transferred for keeping, as well as provide possibility to third persons to use the thing, except in the instance where the use of the deposited thing is necessary for its safety and is not contrary to the contract of safekeeping.

Article 893. Change in Conditions of Safekeeping

1. Should necessity arise to change the conditions of keeping the thing specified by the contract of safekeeping, the depositary shall be obliged to immediately inform the depositor thereof and await his reply.

2. If changing the conditions of keeping is necessary in order to eliminate the threat of loss, shortage or damage to the thing, the depositary shall have the right to change the mode, place, and other conditions of safekeeping without waiting for the depositor's reply.

3. If during safekeeping there has arisen a real threat of deterioration of the thing or if the thing has already undergone deterioration or circumstances have arisen which deny ensuring its preservation and if it cannot be expected that the depositor takes measures on time, the depositary shall have the right on his own authority to sell the thing or part thereof at a price existing at the place of safekeeping. If the aforementioned circumstances have arisen for reasons the depositary is not responsible for, he shall have the right to compensate his sale expenses from the purchase price.

Article 894. Keeping Things with Dangerous Properties

1. Things that are highly inflammable, dangerously explosive or generally dangerous by their very nature, if the depositor while depositing them has not warned the depositary about these properties, may be at any time rendered safe or destroyed by the depositary without compensating the depositor for losses. The depositor shall be responsible for losses caused to the depositary and third persons in connection with keeping such things.

When things with dangerous properties are deposited with a professional depositary, the rules provided by paragraph 1 of this point shall apply in the instance where such things have been deposited under wrong name, and the depositary while accepting them could not assure himself of their dangerous properties by visual inspection.

In the event of the safekeeping for hire in instances provided by this point, a remuneration paid for keeping things shall not be returned, and if it has not been paid, the depositary may recover it in full.

2. If things accepted with the depositary's knowledge and consent and mentioned in paragraph 1 of point 1 of the present Article have become, despite the observance of conditions of keeping them, dangerous for people around or for property of the depositary or of third persons and if circumstances do not allow the depositary to demand from the depositor to immediately take them away or if he does not meet this demand, these things may be rendered harmless or destroyed by the depositary without compensating the depositor for losses. The depositor in this case shall not be responsible to the depositary and third persons for losses caused in connection with the safekeeping of these things.

Article 895. Transfer of Thing to Third Person for Safekeeping

Unless otherwise provided by the contract of safekeeping, the depositary shall not have the right without the depositor's consent to transfer the thing to a third person for keeping, except in instances when he is forced thereto by circumstances in the interests of the depositor and has no possibility to obtain his consent.

The depositary shall be obliged to inform the depositor about the transfer of the thing to a third person for safekeeping.

When a thing is transferred to a third person for keeping, conditions of the contract between the depositor and the original depositary shall retain force and the latter shall be as much responsible for actions of the third person to whom he has transferred the thing for keeping as for his own.

Article 896. Remuneration for Safekeeping

1. A remuneration for safekeeping must be paid to the depositary at the end of the safekeeping period, and if payment for safekeeping has been stipulated by periods, it must be paid by respective instalments at the end of each period.

2. If payment of the remuneration for safekeeping has been delayed for more than half the period for which it must be paid, the depositary shall have the right to refuse to execute the contract and demand from the depositor to immediately take the deposited thing.

3. If safekeeping is terminated before the expiration of the stipulated period due to circumstances the depositary is not responsible for, he shall have the right to a commensurable part of remuneration or to the entire sum of remuneration in the instance provided by Article 894(1) of the present Code.

If safekeeping is terminated before time in view of circumstances for which the depositary is responsible, he shall not have the right to demand remuneration for safekeeping and must return to the depositor the sums received in account of the remuneration.

4. If upon the expiration of the safekeeping period the thing in keeping has not been taken back by the depositor, he shall be obliged to pay a commensurate remuneration to the depositary for further keeping. This rule shall also apply to the instance where the depositor is obliged to take the thing before the expiration of the safekeeping period.

5. The rules of the present Article shall apply, unless otherwise provided by a contract of safekeeping.

Article 897. Compensation of Costs of Safekeeping

1. Unless otherwise provided by the contract of safekeeping, the depositary's costs of keeping the thing shall be included in the remuneration for safekeeping.

2. In the event of a free safekeeping, the depositor shall be obliged to compensate the depositary for expenses incurred by him in order to keep the thing, unless otherwise provided by a law or contract of safekeeping.

Article 898. Extraordinary Expenses on Safekeeping

1. Expenses on keeping the thing which exceed normal cost of this type and which the parties could not foresee when concluding the contract of safekeeping (extraordinary expenses) shall be compensated to the depositary if the depositor has given consent to these expenses or approved them afterwards, as well as in other instances provided by a law, other legal acts, or contract.

2. If necessity arises to incur extraordinary expenses, the depositary shall be obliged to inquire the depositor's consent to these expenses. If the depositor has not informed about his disagreement within the period of time specified by the depositor or within a period it normally takes to reply, he shall be deemed to have given his consent to extraordinary expenses.

In the event that the depositary has incurred extraordinary expenses on the safekeeping without having received the depositor's consent to these expenses, though this was possible under circumstances, and the depositor has not approved them afterwards, the depositary may demand compensation of extraordinary expenses only within the limits of the damage that could have been caused to the thing, had these expenses not been incurred.

3. Unless otherwise provided by the contract of safekeeping, extraordinary expenses shall be compensated in addition to the remuneration for safekeeping.

Article 899. Depositor's Duty to Take Thing Back

1. Upon the expiration of the stipulated safekeeping period or the period of time given by the depositary to take the thing back on the basis of Article 889(3) of the present Code, the depositor shall be obliged to immediately take the deposited thing.

2. Should the depositor fail to perform his duty to take back the thing transferred for safekeeping, including when he evades from obtaining the thing, the depositary shall have the right, unless otherwise provided by the contract of safekeeping and after he has warned the depositor in writing, to sell the thing on his own authority at a price existing at the place of keeping, and if estimated price of the thing exceeds one hundred of statutory minimum monthly wages - to sell it at auction according to the procedure provided by Articles 447--449 of the present Code.

The sum raised from the sale of the thing shall be transferred to the depositor less the sums due to the depositary, including his expenses on the sale of the thing.

Article 900. Depositary's Duty to Return Thing

1. The depositary shall be obliged to return to the depositor or the person specified by him as receiver the same thing which was deposited by him, unless the safekeeping without individualization has been provided by contract (Article 890).

2. A thing must be returned by the depositary in the condition it was accepted for safekeeping, taking into account its natural degradation, natural loss or other change owing to its natural properties.

3. Simultaneously with the return of the thing, the depositary shall be obliged to transfer the fruits and earnings obtained during the keeping thereof, unless otherwise provided by the contract of safekeeping.

 

Article 901. Grounds of Depositary's Responsibility

1. The depositary shall be responsible for the loss, shortage or damage to things accepted for safekeeping on the grounds provided by Article 401 of the present Code.

A professional depositary shall be responsible for the loss, shortage or damage to things, unless he proves that the loss, shortage or damage have occurred in consequence of force-majeure or properties of the thing, of which the depositary while accepting it for keeping did not know and should not have known, or as a result of the depositor's intention or gross negligence.

2. For the loss, shortage or damage to things accepted for safekeeping occurring after the commencement of depositor's duty to take these things back (Article 899[1]), the depositary shall be responsible only if there is intention or gross negligence on his part.

Article 902. Extent of Depositary's Responsibility

1. Losses caused to the depositor by the loss, shortage or damage of things shall be compensated by the depositary in accordance with Article 393 of the present Code, unless otherwise provided by a law or contract of safekeeping.

2. When safekeeping is free, losses caused to the depositor by the loss, shortage or damage of things shall be compensated:

1) for the loss or shortage of things: in the amount of the value of lost or missing things;

2) for damage to things: in the amount of the sum by which their value has decreased.

3. If as a result of a damage for which the depositary is responsible, the quality of the thing has changed to the extent that it cannot be used for the original purpose, the depositor shall have the right to refuse it and demand from the depositary to compensate the value of this thing, as well as other losses, unless otherwise provided by a law or contract of safekeeping.

Article 903. Compensation of Losses Caused to Depositary

The depositor shall be obliged to compensate the depositary for losses caused by properties of the deposited thing if the depositary while accepting the thing for keeping did not know or should not have known about these properties.

Article 904. Termination of Safekeeping at Depositor's Demand

The depositary shall be obliged at the depositor's first demand to return the thing accepted for keeping, even if the term of keeping it specified by contract has not yet expired.

Article 905. Application of General Provisions on Safekeeping to Its Individual Types

The general provisions on safekeeping (Articles 886-904) shall apply to its individual types, unless otherwise provided by the rules on individual types of safekeeping contained in Articles 907-926 of the present Code and in other laws.

Article 906. Safekeeping by Operation of Law

The rules of the present Chapter shall apply to safekeeping obligations arising by operation of law, unless other rules have been established by law.

Paragraph 2. Storage in Warehouse

Article 907. Contract of Warehousing

1. Under a contract of warehousing, the warehouse (depositary) shall undertake to store for a remuneration goods transferred to it by the owner of goods (depositor) and to return these goods intact.

A warehouse shall be deemed to be an organization which engages in storage of goods and provision of services related with storage as its entrepreneurial activity.

2. The written form of a warehousing contract shall be deemed to be observed if the conclusion thereof and acceptance of goods to the warehouse is certified by a warehouse document (Article 912).

Article 908. Storage of Goods by General-Use Warehouse

1. A warehouse shall be deemed to be a general-use warehouse if it follows from a law, other legal acts and from the authorization (license) issued to this commercial organization that it is obliged to accept goods for storage from any owner of goods.

2. A contract of warehousing concluded by a general-use warehouse shall be deemed to be a public contract (Article 426).

Article 909. Checking Goods When Accepted by Warehouse and During Storage

1. Unless otherwise provided by the contract of warehousing, the warehouse while accepting goods for storage shall be obliged at its cost to check goods and determine their quantity (number of units or packages or their measure, i.e. weight or volume) and external condition.

2. The warehouse shall be obliged to provide possibility for the owner of goods to inspect goods or their specimens when stored without individualization, collect samples and take measures necessary to ensure safety of goods.

Article 910. Changing Storage Conditions and Condition of Goods

1. If ensuring safety of goods requires to change conditions of storage thereof, the warehouse shall have the right to independently take necessary measures. It shall be obliged, however, to inform the owner of goods about measures it has taken if it was necessary to substantially change the conditions of storage of goods stipulated by the contract of warehousing.

2. If during storage period a damage to goods has been discovered which exceeds the extent agreed in the contract of warehousing or the usual norms of natural deterioration, the warehouse shall be obliged immediately to draw up a report and notify the owner of goods thereof.

 

 

Article 911. Checking Quantity and Condition of Goods When Returning Them to Owner of Goods

1. The owner of goods and the warehouse shall each have the right to demand to inspect and check the quantity of goods when these are returned. Expenses caused thereby shall be born by the party which has demanded inspection of goods and checking of their quantity.

2. If goods, while being returned by the warehouse to the owner of goods, have not been examined or checked jointly by them, a statement of the shortage or damage to goods as a consequence of improper storage thereof must be made to the warehouse in writing at the moment of receiving the goods and in case of a shortage or damage which could not be discovered by usual procedure of accepting the goods - within 3 days after the receipt thereof.

In the absence of a statement mentioned in paragraph 1 of this point, it shall be considered, unless proven otherwise, that the goods have been returned by the warehouse in accordance with the terms of the warehousing contract.

Article 912. Warehouse Documents

1. To confirm the acceptance of goods for storage, the warehouse shall issue one of the following warehouse documents:

- double warehouse certificate; and

- simple warehouse certificate; and

- warehouse receipt.

2. A double warehouse certificate consists of two parts, a warehouse certificate and certificate of pledge (warrant), which can be separated from one another.

3. A double warehouse certificate, each of its two parts, and a simple warehouse certificate shall be securities.

4. Goods accepted for storage by a double or simple warehouse certificate, may during the storage period thereof be the object of pledge by way of pledging the respective certificate.

Article 913. Double Warehouse Certificate

1. In each part of a double warehouse certificate the following shall be equally indicated:

1) name and place of location of the warehouse which has accepted the goods for storage;

2) current number of the warehouse certificate according to the warehouse register;

3) name of the legal person or citizen from whom the goods have been accepted for storage, as well as place of location (residence) of the owner of the goods;

4) name and quantity of goods accepted for storage, i.e. number of units and/or packages and/or measure (weight, volume) of goods;

5) period of time for which the goods have been accepted for storage if such period has been set, or an indication that the goods have been accepted for storage until called;

6) amount of remuneration for storage or tariffs on whose basis it is to be calculated and a procedure to pay for storage;

7) date of issuing the warehouse certificate.

Both parts of the double warehouse certificate must bear identical signatures of the authorized person and stamps of the warehouse.

2. A document which does not meet the requirements of the present Article shall not be a double warehouse certificate.

Article 914. Rights of Holders of Warehouse Certificate and Certificate of Pledge

1. The holder of a warehouse certificate and certificate of pledge shall have the right to fully dispose of goods stored in the warehouse.

2. The holder of the warehouse certificate separated from the certificate of pledge shall have the right to dispose of goods, but cannot take them from the warehouse until having repaid the credit granted on the certificate of pledge.

3. The holder of a certificate of pledge other than the holder of a warehouse certificate shall have the right to pledge goods in the amount of the credit granted by the certificate of pledge and interest on it. If goods are pledged, a respective note shall be made on the warehouse certificate.

Article 915. Transfer of Warehouse Certificate and Certificate of Pledge

A warehouse certificate and certificate of pledge may be transferred, together or separately, by endorsements.

Article 916. Delivery of Goods by Double Warehouse Certificate

1. The warehouse shall deliver goods to the holder of the warehouse certificate and certificate of pledge (double warehouse certificate) only in exchange for these two certificates together.

2. Goods shall be delivered by the warehouse to the holder of the warehouse certificate who does not have the certificate of pledge but has recovered the sum of debt on it, only in exchange for the warehouse certificate appended with the receipt confirming payment of the entire sum of debt on certificate of pledge.

3. The warehouse which, contrary to the requirements of the present Article, has delivered goods to the holder of the warehouse certificate who does not have the certificate of pledge and has not paid the sum of debt on it, shall bear responsibility to the holder of the certificate of pledge for payment of the entire debt sum secured by it.

4. The holder of the warehouse certificate and certificate of pledge shall have the right to demand that the goods be released in parts. In this case, new certificates for the goods remaining in the warehouse shall be given him in exchange for the original certificates.

 

Article 917. Simple Warehouse Certificate

1. A simple warehouse certificate shall be issued to bearer.

2. A simple warehouse certificate must contain information mentioned in point 1(1, 2, 4-7) and last paragraph of Article 913 of the present Code, as well as an indications that it has been issued to bearer.

3. A document which does not meet the requirements of the present Article shall not be a simple warehouse certificate.

Article 918. Storing Things with Right to Dispose of Them

If it follows from a law, other legal acts or contract that the warehouse may dispose of deposited goods, the rules of Chapter 42 of the present Code on loan shall apply to relations of the parties except that the time and place to return goods shall be determined by the rules of the present Chapter.

Paragraph 3. Special Types of Safekeeping

Article 919. Safekeeping at Pawnshop

1. A contract for the safekeeping at a pawnshop of things belonging to a citizen shall be a public contract (Article 426).

2. The conclusion of a contract for the safekeeping at a pawnshop shall be certified by a bearer trust receipt issued by the pawnshop to the depositor.

3. A thing deposited with a pawnshop shall be valuated by agreement of the parties in accordance with prices for things of this type and quality usually set in trade at the moment and place of accepting them for safekeeping.

4. The pawnshop, at its cost and in favour of the depositor, shall be obliged to insure deposited things in the full amount of their valuation made in accordance with point 3 of the present Article.

Article 920. Things Uncalled from Pawnshop

1. If a thing deposited with the pawnshop has not been called for by the depositor within the period of time stipulated by agreement with the pawnshop, the pawnshop shall be obliged to keep it during two months, collecting for this a charge provided by the contract of safekeeping. At the end of this period, the uncalled thing may be sold by the pawnshop according to the procedure established by Article 358(5) of the present Code.

2. The cost of safekeeping and other payments due to the pawnshop shall be recovered from the sum raised from the sale of the uncalled thing. The remainder of the sum shall be returned by the pawnshop to the depositor.

Article 921. Safe Custody at Bank

1. A bank may accept for safekeeping securities, precious metals and stones, other valuable articles and valuables, including documents.

2. The conclusion of a contract of safe custody with a bank shall be certified by a bearer trust document issued by the bank to the depositor, the presentation of which document shall be the ground for delivering the deposited valuables to the depositor.

 

Article 922. Keeping Valuables in Individual Bank Safe

1. A contract of safe custody with a bank may provide for the use by the depositor (customer) or provision to him of an individual bank safe (bank cell, isolated room in the bank) guarded by the bank for keeping his valuables in custody.

Under a contract for keeping valuables in an individual bank safe, the customer shall be given the right to independently place valuables in the safe and take them from the safe, for which purpose he must be given the safe key and a card allowing to identify the customer or other token or document certifying the customer's rights to have access to the safe and its contents.

The contract terms and conditions may provide for the customer's right to work in the bank with valuables kept in an individual safe.

2. Under a contract of safe custody of valuables at a bank with the use by the customer of an individual bank safe, the bank shall accept from the customer valuables to be kept in the safe, exercise control over the placement thereof by the customer in the safe and withdrawal from the safe, and return them to the customer after the withdrawal.

3. Under a contract of safe custody of valuables at a bank with the provision to the customer of an individual bank safe, the bank shall ensure possibility for the customer to place valuables in the safe and take them from the safe without anyone's control, including on the part of the bank.

The bank shall be obliged to exercise control over the access to the room where the safe assigned to the customer is situated.

Unless otherwise provided by the contract of safety custody of valuables at the bank with the provision to the customer of an individual bank safe, the bank shall be released from responsibility for the failure to preserve the contents of the safe if it proves that, under custody conditions, the access of anyone to the safe without the customer's knowledge was impossible or became possible in consequence of force-majeure.

4. The rules of the present Code on lease contracts shall apply to a contract for the provision of a bank safe to another person for use without the bank's responsibility for the contents of the safe.

Article 923. Safekeeping in Checkrooms of Transport Organizations

1. General-use checkrooms in charge of transport organizations shall be obliged to accept for safekeeping things of passengers and other citizens irrespective of whether or not they have traveling documents. A contract for the safekeeping of things in checkrooms of transport organizations shall be deemed to be a public contract (Article 426).

2. To confirm the acceptance of a thing for safekeeping in a checkroom (except for automatic baggage cells), the depositor shall be given a receipt or numbered token. Should a receipt or token be lost, the thing deposited in the checkroom shall be delivered to the depositor upon the presentation of evidence proving that the thing belongs to him.

3. The period of time during which the checkroom is obliged to keep things shall be determined by the rules established in accordance with paragraph 2 of Article 784(2) of the present Code, unless a longer period has been established by agreement of the parties. Things uncalled within the aforesaid period must be kept by the checkroom for another 30 days. At the end of this period, the uncalled things may be sold according to the procedure provided by Article 899(2) of the present Code.

4. Losses of the depositor in consequence of the loss, shortage or damage of things deposited in the checkroom shall be, within the amount of the value estimated by the depositor when depositing them, compensated by the depositary within 24 hours from the moment when a demand to compensate them was presented.

Article 924. Safekeeping in Cloakrooms of Organizations

1. Safekeeping in cloakrooms of organizations shall be presumed to be free of charge, unless a remuneration for keeping has been stipulated or expressly conditioned when depositing things.

The depositary of a thing left with the cloakroom, irrespective of whether safekeeping is free or for hire, shall be obliged to take all measures provided by Article 891(1, 2) of the present Code to ensure safety of the thing.

2. The rules of the present Article shall also apply to the safekeeping of outer clothing, headgears, and other similar things left by citizens without depositing them at places assigned for these purposes in organizations and transport vehicles.

Article 925. Safekeeping at Hotel

1. A hotel, as depositary and without a special agreement thereto with the person residing in it (guest), shall be responsible for the loss, shortage or damage of things brought into the hotel, except for money, other currency valuables, securities and other valuable articles.

A thing shall be deemed to be brought into a hotel if it has been entrusted to hotel employees or placed in a hotel room or other place meant for this purpose.

2. The hotel shall be responsible for the loss of money, other currency valuables, securities and other valuables articles of the guest on condition that they have been accepted by the hotel for safekeeping or placed by the guest in an individual safe provided by the hotel irrespective of whether this safe is in his room or in other hotel room. The hotel shall be released from responsibility for the non-preservation of the contents of such safe if it proves that, under safekeeping conditions, the access by anyone to the safe without the guest's knowledge was impossible or became possible owing to force-majeure.

3. The guest who has discovered the loss, shortage or damage of his things shall be obliged to immediately declare this to the hotel management. Otherwise, the hotel shall be released from responsibility for the non-preservation of things.

4. The statement made by the hotel that it does not assume responsibility for the non-preservation of guests' things shall not release it from responsibility.

5. Respectively, the rules of the present Article shall apply to the safekeeping of things of citizens at motels, rest homes, holiday hotels, sanatoriums, bath-houses, and other similar organizations.

Article 926. Safekeeping of Things Being Object of Dispute (Sequestration)

1. Under a contract of sequestration, two or more persons between whom a dispute over the right to a thing has arisen, shall transfer the thing to a third person who assumes the duty, upon the settlement of the dispute, to return the thing to the person to whom it will be awarded by the court decision or by agreement of all the parties involved in the dispute (contractual sequestration).

2. A thing which is the object of a dispute between two or more persons may be transferred for safekeeping in a sequestration procedure by the court decision (judicial sequestration).

Both a person appointed by court and a person chosen by mutual consent of the contending parties may be the depositary in the event of judicial sequestration. The depositary's consent shall be required in both cases, unless otherwise provided by law.

3. Both movables and immovables may be transferred for safekeeping in a sequestration procedure.

4. The depositary who keeps a thing in a sequestration procedure shall have the right to a remuneration at the cost of the contending parties, unless otherwise provided by contract or the court decision which has established sequestration.

 

Chapter 48. Insurance

 

Article 927. Voluntary and Obligatory Insurance

1. Insurance shall be effected on the basis of contracts of property or personal insurance concluded by a citizen or legal person (the insured) with an insurance organization (insurer).

A contract of personal insurance shall be a public contract (Article 426).

2. In instances where a law imposes on persons specified in it the duty to insure as insurers life, health or property of other persons or one's civil liability to other persons at one's own cost or the cost of interested persons (obligatory insurance), insurance shall be effected by way of concluding contracts in accordance with the rules of the present Chapter. Insurance contracts concluded on terms and conditions offered by the insured shall not be binding on insurers.

3. A law may provide for instances of obligatory insurance of citizens' life, health and property at the expense of resources appropriated from a respective budget (obligatory State insurance).

Article 928. Interests Whose Insurance Shall Not Be Permitted

1. Insuring unlawful interests shall not be permitted.

2. It shall not be permitted to insure losses incurred by the participation in games, lotteries and bets.

3. It shall not be permitted to insure expenses which a person may be forced to incur in order to release hostages.

4. Terms and conditions of insurance contracts which are contrary to points 1-3 of the present Article shall be null and void.

Article 929. Contract of Property Insurance

1. Under a contract of property insurance, one party (insurer) shall undertake for a charge stipulated by the contract (insurance premium) at the onset of an event specified in the contract (insured event) to compensate the other party (the insured) or other person in whose favour the contract has been concluded (beneficiary) for losses caused to the insured property in consequence of this event or losses in connection with other property interests of the insured (to pay insurance indemnity) within the limits of a sum determined by contract (insurance sum).

2. Under a contract of non-property insurance, the following property interests may, in particular, be insured:

1) the risk of loss, shortage or damage of a certain property (Article 930);

2) the risk of responsibility under obligations arising in consequence of causing harm to life, health or property of other persons, and in instances provided by a law - also responsibility under contracts, i.e. the risk of civil liability (Article 931 and 932);

3) the risk of losses incurred in entrepreneurial activity through the violation by the entrepreneur's contractors of their obligations or a change in conditions of this activity for reasons beyond the entrepreneur's control, including the risk of failure to receive expected profits, i.e. businessman's risk (Article 933).

Article 930. Insurance of Property

1. Property may be insured under an insurance contract for the benefit of the person (the insured or beneficiary) who on the basis of a law, other legal act or contract is interested in preserving this property.

2. A contract of property insurance concluded when the insured or beneficiary has no interest in preserving the insured property shall be null and void.

3. A contract of property insurance in favour of a beneficiary may be concluded without specifying the name of the beneficiary (insurance "at the proper person's expense").

When such contract is concluded, the insured shall be given an insurance policy to bearer. To exercise their rights under such contract, the insured or beneficiary must present this policy to the insurer.

 

 

Article 931. Insuring Responsibility for Causing Harm

1. Under a contract for insuring the risk of responsibility under obligations arising in consequence of the causing of harm to life, health or property of other persons, there may be insured the risk of responsibility of the insured himself or other person on whom such responsibility may be placed.

2. The person whose risk of responsibility for the causing of harm has been insured must be named in the insurance contract. If this person is not named in the contract, the risk of responsibility of the insured himself shall be deemed to have been insured.

3. A contract for insuring the risk of responsibility for the causing of harm shall be deemed to have been concluded for the benefit of persons to whom harm may be caused (beneficiaries), even if the contract was concluded for the benefit of the insured or other person who are responsible for the causing of harm; or it was not specified in the contract in whose favour it was concluded.

4. In the event that responsibility for the causing of harm has been insured because the insurance thereof is obligatory, as well as in other instances specified by a law or contract of insuring such responsibility, the person in whose favour the insurance contract is deemed to have been concluded shall have the right to present a demand directly to the insurer concerning compensation for harm within limits of the insurance sum.

Article 932. Insuring Responsibility Under Contract

1. Insuring the risk of responsibility for the violation of a contract shall be permitted in instances provided by law.

2. Under a contract of insuring the risk of responsibility for the violation of a contract, only the risk of responsibility of the insured himself may be insured. An insurance contract which fails to meet this requirement shall be null and void.

3. The risk of responsibility for the violation of a contract shall be deemed to be insured in favour of the party to whom, under terms and conditions of this contract, the insured must bear respective responsibility, i.e. beneficiary, even if the insurance contract has been concluded in favour of other person or its has not been specified in it for whose benefit it was concluded.

Article 933. Insuring Businessman's Risk

Under a contract of insuring businessman's risk, only businessman's risk of the insured himself and only in his favour may be insured.

A contract of insuring businessman's risk of a person who is not the insured shall be null and void.

A contract of insuring businessman's risk for the benefit of a person who is not the insured shall be deemed to be concluded in favour of the insured.

Article 934. Contract of Personal Insurance

1. Under a contract of personal insurance, one party (insurer) shall undertake, for a charge stipulated by contract (insurance premium) and to be paid by the other party (the insured), to pay all at once or periodically a sum stipulated by contract (insurance sum) in the event that harm has been caused to life or health of the insured himself or other citizen named in the contract (insured person), a certain age has been reached by him, or other event specified by contract has occurred in his life (insured event).

The right to obtain the insurance sum shall belong to the person in whose favour the contract has been concluded.

2. A contract of personal insurance shall be deemed to be concluded in favour of the insured person, unless another person was named in the contract as beneficiary. In the event of the death of a person insured under a contract which does not name another beneficiary, heirs of the insured person shall be recognized as beneficiaries.

A contract of personal insurance in favour of a person who is not the insured person, including in favour of an insured who is not the insured person, may be concluded only by the written consent of the insured person. If such consent is not given, the contract may be deemed to be invalid at the suit instituted by the insured person or in the event of the death of this person - at the suit brought by his heirs.

Article 935. Obligatory Insurance

1. A law may impose on persons specified in it the duty to insure:

- life, health or property of other persons mentioned in the law in the event that harm is caused to their life, health or property; and

- the risk of one's civil liability which may arise in consequence of the causing of harm to life, health or property of other persons or the violation of contracts with other persons.

2. The duty to insure one's own life or health may not be imposed on a citizen by law.

3. In instances provided by law or according to the procedure established by it, the duty to insure property may be placed on legal persons which have State- or municipality-owned property in their economic jurisdiction or operative management.

4. In instances where the duty to insure does not follow from a law, but is based on a contract, including the duty to insure property on the basis of a contract with the owner of the property or constituent documents of a legal person which is the owner of the property, such insurance shall not be obligatory in the sense of the present Article and shall not entail consequences provided by Article 937 of the present Code.

Article 936. Effecting Obligatory Insurance

1. Obligatory insurance shall be effected by way of concluding an insurance contract between a person on whom the duty of such insurance is imposed (the insured) and an insurer.

2. Obligatory insurance shall be effected at the expense of the insured, except for the obligatory insurance of passengers which may be effected at their expense in instances provided by law.

3. Objects subject to obligatory insurance, risks against which they must be insured, and minimum amounts of insurance sums shall be determined by a law or in instances provided by Article 935(3) of the present Code - by a law or according to the procedure established by it.

Article 937. Consequences of Violating Rules on Obligatory Insurance

1. A person whose obligatory insurance is provided by law shall have the right, if he knows that insurance has not been effected, to demand in a judicial procedure that it be effected by the person on whom the duty to insure has been imposed.

2. If the person with whom the duty to insure lies has not effected it or concluded an insurance contract on terms which aggravate the beneficiary's position when compared with statute-established conditions, he shall bear responsibility to the beneficiary, should the insured event occur, on the same conditions on which the insurance indemnity must have been paid in the event of properly effected insurance.

3. The sums unjustifiably saved by the person, on whom the duty to insure was imposed, thanks to the fact that he has not fulfilled this duty or has fulfilled it improperly, shall be recovered at the suit by State insurance supervision agencies to the revenue of the Russian Federation with the calculation of interest on these sums in accordance with Article 395 of the present Code.

Article 938. Insurer

Legal persons having authorizations (licences) to conduct a respective type of insurance may conclude insurance contracts as insurers.

The requirements which insurance organizations must comply with and a procedure to license their activity and exercise State supervision over this activity shall be determined by laws on insurance.

Article 939. Fulfilment of Duties Under Insurance Contract by Insured and Beneficiary

1. The conclusion of an insurance contract in favour of a beneficiary, including when the latter is an insured person, shall not release the insured from fulfilling duties under this contract, unless otherwise provided by contract or the duties of the insured have been fulfilled by the person in whose favour the contract was concluded.

2. The insurer shall have the right to demand from the beneficiary, including when the latter is an insured person, to fulfil duties under the insurance contract, including the duties placed on the insured but not fulfilled by him, when the beneficiary has presented demands to pay the insurance indemnity under a contract of property insurance or the insurance sum under a contract of personal insurance. The beneficiary shall bear the risk of non-fulfilment or improper fulfilment of the duties which must have been fulfilled earlier.

Article 940. Form of Insurance Contract

1. An insurance contract must be concluded in writing.

The failure to observe the written form shall entail invalidity of an insurance contract, except for a contract of obligatory State insurance (Article 969).

2. An insurance contract may be concluded by drawing up one document (Article 434[2]) or through the delivery by the insurer to the insured, upon the latter's written or verbal application, of an insurance policy (voucher, certificate, receipt) signed by the insurer.

In the latter instance, consent of the insured to conclude a contract on terms and conditions offered by the insurer shall be confirmed by the acceptance from the insurer of documents mentioned in paragraph one of this point.

3. When concluding an insurance contract, the insurer shall have the right to use standard forms of contract (insurance policy) developed by him or by an association of insurers for individual types of insurance.

Article 941. Insurance by General Policy

1. Systematic insurance of various lots of homogeneous property (goods, cargoes, etc.) on similar conditions during a certain period of time may, by agreement of the insured with the insurer, effected on the basis of one insurance contract, i.e. general insurance policy.

2. With regard to each lot of property covered by a general policy, the insured shall be obliged to provide to the insurer information stipulated by such policy within a period of time specified by it and if it has not been specified, immediately after the receipt thereof. The insured shall not be relieved from this duty even if by the moment of receiving such information the likelihood of losses subject to compensation by the insurer has already passed.

3. At the demand of the insured, the insurer shall be obliged to issue insurance policies for individual lots of property covered by the general policy.

Should the content of an insurance policy fail to comply with the general policy, preference shall be given to the insurance policy.

Article 942. Material Condition of Insurance Contract

1. When concluding a contract of property insurance, the insured and insurer must reach agreement concerning:

1) a certain property or other property interest which is the object of insurance;

2) the nature of the event to be insured if it occurs (insured event);

3) the size of insurance sum;

4) validity term of the contract.

2. When concluding a contract of personal insurance, the insured and insurer must reach agreement concerning:

1) the insured person;

2) the nature of the event to be insured if it occurs in the life of the insured person (insured event);

3) the size of the insurance sum;

4) validity term of the contract.

Article 943. Determination of Conditions of Insurance Contract in Insurance Rules

1. Terms and conditions on which an insurance contract is concluded may be determined in standard rules of insurance of a respective type adopted, approved or confirmed by the insurer or an association of insurers (insurance rules).

2. Terms and conditions contained in insurance rules and not included in the text of an insurance contract (insurance policy) shall be binding on the insured (beneficiary), if the contract (insurance policy) expressly refers to the application of such rules and the rules themselves are stated in the same document as the contract is or on its back side or are appended thereto. In the latter event, the handing of insurance rules to the insured, when a contract is being concluded, must be certified by an entry in the contract.

3. When concluding an insurance contract, the insured and the insurer may come to an agreement on changing or excluding individual provisions of insurance rules and on supplementing the rules.

4. In defence of his interests, the insured (beneficiary) shall have the right to refer to the rules of insurance of a respective type to which there is reference in the insurance contract (insurance policy), even if these rules are not binding on him by operation of the present Article.

Article 944. Information Provided by Insured When Concluding Insurance Contract

1. When concluding an insurance contract, the insured shall be obliged to communicate circumstances to the insurer which are known to the insured and which are of material significance for determining the likelihood of the insured event and the extent of possible losses due to the occurrence thereof (Insurance risk), if these circumstances are not known and must not be known to the insurer.

Circumstances shall be deemed to be material if they have been expressly stipulated by the insurer in the standard form of insurance contract (insurance policy) or in his written inquiry.

2. If an insurance contract has been concluded when no replies have been given by the insured to some questions of the insurer, the insurer may not subsequently demand to cancel the contract or recognize it as invalid on the ground that respective circumstances were not communicated by the insured.

3. If after the conclusion of an insurance contract it will be established that the insured has communicated to the insurer information, known to be false, about the circumstances mentioned in point 1 of the present Article, the insurer shall have the right to demand that the contract be deemed invalid and the consequences provided by Article 179(2) of the present Code be applied.

The insurer may not demand to deem an insurance contract to be invalid if circumstances which the insured has failed to mention exist no longer.

 

Article 945. Insurer's Right to Estimate Insurance Risk

1. When concluding a contract of property insurance, the insurer shall have the right to inspect the property to be insured and, if necessary, appoint an expert examination in order to find out its actual value.

2. When concluding a contract of personal insurance, the insurer shall have the right to make an examination of the person to be insured in order to establish his actual health condition.

3. An estimate of insurance risk made by the insurer on the basis of the present Article shall not be binding on the insured who shall have the right to prove something different.

Article 946. Insurance Secrecy

The insurer shall not have the right to divulge information obtained by him as a result of his professional activity about the insured, insured person and beneficiary, their health condition, as well as their status. For the violation of insurance secrecy, the insurer shall bear responsibility under the rules provided by Article 139 or Article 150 of the present Code commensurately with the category of violated rights and character of the violation.

Article 947. Insurance Sum

1. The sum within the limits of which the insurer assumes to pay insurance indemnity under a contract of property insurance or which he undertakes to pay under a contract of personal insurance (insurance sum) shall be determined by agreement of the insured with the insurer in accordance with the rules provided by the present Article.

2. When property or businessman's risk is to be insured, unless otherwise provided by the insurance contract, the insurance sum must not exceed their actual value (insured value). Such value shall be deemed to be:

- for property: its actual value at the place of its location on the day of concluding an insurance contract; and

- for businessman's risk: losses incurred in entrepreneurial activity which the insured could be expected to have suffered, should the insured event have occurred.

3. In contracts of personal insurance and contracts of insuring civil liability, the insurance sum shall be determined by the parties at their discretion.

Article 940. Contesting Insurance Value of Property

Insurance value of property stated in an insurance contract may not be contested afterwards, except when the insurer who before concluding a contract had failed to take advantage of his right to estimate insurance risk (Article 945[1]) was deliberately deluded concerning this value.

Article 949. Incomplete Property Insurance

If in a contract of property insurance or contract of insuring businessman's risk the insurance sum has been established lower than the insured value, the insurer upon the onset of the insured event shall be obliged to compensate the insured (beneficiary) for part of losses suffered by the latter in proportion to the ratio of the insurance sum to the insured value.

A contract may provide for a higher amount of insurance indemnity, but not higher than the insured value.

Article 950. Additional Property Insurance

1. In the event that property or businessman's risk has been insured in the amount of the insured value only, the insured (beneficiary) shall have the right to effect additional insurance, including with another insurer, but so that the total insurance sum under all insurance contracts did not exceed the insured value.

2. The failure to observe the provisions of point 1 of the present Article shall entail consequences provided by Article 951(4) of the present Code.

Article 951. Consequences of Insurance in Excess of Insured Value

1. If the insurance sum stated in a contract of insuring property or businessman's risk exceeds the insured value, the contract shall be null and void in the part of the insurance sum which exceeds the insured value.

In this case, the overpaid insurance premium shall be subject to return.

2. If under an insurance contract the insurance sum is paid by instalments and if by the moment of establishing circumstances mentioned in point 1 of the present Article it has not been paid in full, the remaining instalment insurance premiums must be paid in the amount reduced in proportion to the reduction of the insurance sum.

3. If raising the insurance sum too high in an insurance contract is a consequence of fraud on the part of the insured, the insurer shall have the right to demand that the contract be deemed invalid and that losses caused thereby be compensated to him in the amount exceeding the sum of the insurance premium obtained by him from the insured.

4. The rules provided in points 1-3 of the present Article shall, respectively, apply also in the instance where the insurance sum has exceeded the insured value as a result of insuring one and the same object with two or more insurers (double insurance).

The sum of insurance indemnity subject to payment in this case by each of the insurers shall be reduced in proportion to the reduction in the original insurance sum under the respective insurance contract.

Article 952. Property Insurance Against Various Insurance Risks

1. Property and businessman's risk may be insured against various insurance risks both under single or separate insurance contracts, including under contracts with different insurers.

In these instances, exceeding the total insurance sum under all contracts over the insured value shall be permitted.

2. If the duty of insurers to pay insurance indemnity for the same consequences of the same insured event when it occurs follows from two or more contracts concluded in accordance with point 1 of the present Article, the rules provided by Article 951(4) of the present Code shall apply to such contracts in respective part thereof.

 

Article 953. Co-insurance

An object of insurance may be insured under one insurance contract jointly by several insurers (co-insurance). If the rights and duties of each of the insurers have not been determined in such contract, they shall bear joint responsibility to the insured (beneficiary) for payment of insurance indemnity under a contract of property insurance or insurance sum under a contract of personal insurance.

Article 954. Insurance Premium and Insurance Instalments

1. By an insurance premium shall be understood a charge for insurance which the insured (beneficiary) shall be obliged to pay the insurer according to the procedure and within the period of time established by an insurance contract.

2. When determining the amount of the insurance premium subject to payment under an insurance contract, the insurer shall have the right to apply insurance tariffs developed by him which determine the premium collected on a unit of insurance sum, taking into account the insurance object and the nature of insurance risk.

In instances specified by law the amount of insurance premium shall be determined in accordance with insurance tariffs established or regulated by State insurance supervision agencies.

3. If an insurance contract provides for payment of the insurance premium by instalments, the contract may determine consequences for non-payment of insurance instalments within the established period of time.

4. If the insured event occurred before an outstanding instalment premium was paid, the insurer shall have the right to credit the delayed insurance instalment when determining the amount of insurance indemnity payable under a contract of property insurance or insurance sum payable under a contract of personal insurance.

Article 955. Replacement of Insured Person

1. In the event that under a contract of insuring the risk of responsibility for the causing of harm (Article 931) the responsibility of a person other than the insured has been insured, the latter shall have the right, unless otherwise provided by contract, at any time before the onset of the insured event to replace this person by another one, having warned the insure thereof in writing.

2. An insured person named in a contract of personal insurance may be replaced by the insured only by consent of the insured person himself and the insurer.

Article 956. Replacement of Beneficiary

The insured shall have the right to replace a beneficiary named in the insurance contract by another person, having notified the insurer thereof in writing. The replacement of a beneficiary under a contract of personal insurance appointed by consent of the insured person (Article 934[2]) shall be permitted only by consent of this person.

A beneficiary may not be replaced by another person after he has fulfilled some of the duties under the insurance contract or has presented a demand to the insurer concerning payment of insurance indemnity or insurance sum.

Article 957. Attachment of Insurance Contract

1. An insurance contract, unless otherwise provided in it, shall take force at the moment of paying the insurance premium or first instalment thereof.

2. Insurance stipulated by an insurance contract shall extend to insured events which occur after the insurance contract has entered into force, unless a different time for the insurance attachment has been provided in the contract.

Article 958. Terminating Insurance Contract Before Time

1. An insurance contract shall be terminated before the commencement of the period for which it has been concluded if after it has entered into force the likelihood of the insured event has passed and the existence of the insured event ceased in view of circumstances other than the insured event. In particular, such circumstance include:

- the loss of the insured property for reasons other than the onset of the insured event; and

- termination, according to the established procedure, of entrepreneurial activity by the person who has insured businessman's risk or risk of civil liability connected with this activity.

2. The insured (beneficiary) shall have the right to refuse the insurance contract at any time, if by the moment of the refusal the likelihood of the insured event has not passed in view circumstances mentioned in point 1 of the present Article.

3. When an insurance contract is terminated before time in view of circumstances mentioned in point 1 of the present Article, the insurer shall have the right to a part of the insurance premium in proportion to the period time during which insurance was effective.

If the insured (beneficiary) refuses the insurance contract before time, the insurance premium paid to the insurer shall not be returned, unless otherwise provided by contract.

Article 959. Consequences of Growth of Insurance Risk During Validity Term of Insurance Contract

1. During the validity term of a contract of property insurance, the insured (beneficiary) shall be obliged to immediately inform the insurer about material changes he learnt to have occurred in the circumstances which were reported to the insurer when concluding the contract, if these changes can bring about a considerable growth of insurance risk.

As material changes shall in any event be recognized those stipulated in an insurance contract (insurance policy) and in insurance rules handed to the insured.

2. The insurer notified of the circumstances entailing a greater insurance risk shall have the right to demand that the terms and conditions of the insurance contract be changed or an additional insurance premium be paid commensurately with the growth of risk.

If the insured (beneficiary) objects to the change in the terms and conditions of the insurance contract or payment of additional insurance premium, the insurer shall have the right to demand cancellation of the contract in accordance with the rules provided by Chapter 29 of the present Code.

3. Should the insured or beneficiary fail to fulfil the duty provided in point 1 of the present Article, the insurer shall have the right to demand dissolution of the insurance contract and compensation of losses caused by the dissolution of the contract (Article 453[5]).

4. The insurer shall not have the right to demand dissolution of the contract, if the circumstances entailing a growth of insurance risk have already passed.

5. In the event of personal insurance, consequences of a change in insurance risk during the validity term of an insurance contract mentioned in points 2 and 3 of the present Article may be effective only if they have been expressly stipulated in the contract.

Article 960. Passing Rights to Insured Property to Another Person

If rights to an insured property pass from the person for whose benefit an insurance contract has been concluded to another person, the rights and duties under this contract shall pass to the person to whom the rights to the property have passed, except in instances of compulsory withdrawal of property on grounds mentioned in Article 235(2) of the present Code and renunciation of right of ownership (Article 236).

The person to whom the rights to the insured property have passed must immediately inform the insurer thereof in writing.

Article 961. Notification of Insurer About Onset of Insured Event

1. The insured under a contract of property insurance after he has learnt about the onset of the insured event shall be obliged to immediately notify the insurer or his representative about the onset thereof. If the contract has provided for the time and/or manner of notification, it must be made within the stipulated period of time and in the manner specified in the contract.

The same duty shall lie with the beneficiary who knows about the conclusion of an insurance contract for his benefit if he is going to exercise the right to insurance indemnity.

2. The failure to observe the duty provided by point 1 of the present Article shall entitle the insurer to refuse to pay insurance indemnity, unless proven that the insurer has learnt in good time about the onset of the insured event or that the insurer's knowledge thereof could not tell on his duty to pay insurance indemnity.

3. The rules provided by points 1 and 2 of the present Article shall, respectively, apply to a contract of personal insurance, if the insured event is the death of the insured person or the causing of harm to his health. In this event, the period of time established by contract for notifying the insurer may not be less than 30 days.

Article 962. Reducing Losses Caused by Insured Event

1. Should the insured event occur which has been stipulated by a contract of property insurance, the insured shall be obliged to take measures, reasonable and available under circumstances, in order to reduce eventual losses.

When taking such measures, the insured must follow the insurer's instructions if these were given the insured.

2. Expenses on reducing losses subject to compensation by the insurer, if such losses were necessary or incurred in order to follow the insurer's instructions, must be compensated by the insurer, even if the respective measures have proved unsuccessful.

Such expenses shall be compensated in proportion to the ratio of the insurance sum to the insured value irrespective of the fact that, being added to the compensation of other losses, they may exceed the insured value.

3. The insurer shall be released from compensation of losses which have arisen in consequence of the fact that the insured has not intentionally taken measures, reasonable and available to him, in order to reduce eventual losses.

Article 963. Consequences of Onset of Insured Event Through Fault of Insured, Beneficiary, or Insured Person

1. The insurer shall be released from paying insurance indemnity or insurance sum if the insured event has occurred in consequence of an intention of the insured, beneficiary or insured person, except in instances provided by points 2 and 3 of the present Article.

A law may provide for instances where the insurer shall be released from paying insurance indemnity under contracts of property insurance at the onset of the insured event in consequence of a gross negligence of the insured of beneficiary.

2. The insurer shall not be released from paying insurance indemnity under a contract of insuring civil liability for the causing of harm to life and health, if harm has been caused through a fault of the person liable therefore.

3. The insurer shall not be released from paying insurance sum which under a contract of personal insurance is subject to payment in the event of the death of the insured person if his death has occurred in consequence of suicide and by this time the insurance contract has been in effect during not less than two years.

Article 964. Grounds for Releasing Insurer from Paying Insurance Indemnity and Insurance Sum

1. Unless otherwise provided by a law or insurance contract, the insurer shall be released from paying insurance indemnity and insurance sum when the insured event has occurred in consequence of:

- impact of a nuclear explosion, radiation or radioactive contamination; and

- civil war, any public disturbances or strikes.

2. Unless otherwise provided by a contract of property insurance, the insurer shall be released from paying insurance indemnity for losses arisen in consequence of the withdrawal, confiscation, requisition, arrest, or destruction of the insured property by the order of State authorities.

Article 965. Passage of Rights to Compensation of Damage from Insured to Insurer (Subrogation)

1. Unless otherwise provided by a contract of property insurance, the right of claim which the insured (beneficiary) has against the person responsible for losses compensated as a result of insurance shall pass to the insurer who has paid insurance indemnity within the limits of the sum paid. However, the contract clause which excludes the passing to the insurer of the right of claim against the person who has deliberately caused losses shall be null and void.

2. The right of claim passed to the insurer shall be exercised by him with the observance of the rules regulating relations between the insured (beneficiary) and the person responsible for losses.

3. The insured (beneficiary) shall be obliged to transfer to the insurer all documents and proofs and communicate to him all information necessary for the insurer to exercise the right of claim which has passed to him.

4. If the insured (beneficiary) has renounced his right of claim against the person responsible for losses compensated by the insurer or the exercise of this right has become impossible through a fault of the insured (beneficiary), the insurer shall be released from paying insurance indemnity completely or in respective part and shall have the right to demand to return the overpaid sum of indemnity.

Article 966. Limitation for Claims Connected with Property Insurance

An action in connection with claims arising from a contract of property insurance may be filed during two years.

Article 967. Reinsurance

1. The risk of payment of insurance indemnity or insurance sum assumed by the insurer under an insurance contract may be insured by him wholly or partially with another insurer (insurers) under a reinsurance contract concluded with the latter.

2. The rules provided by the present Article for the application to insurance of businessman's risk shall apply to a reinsurance contract, unless otherwise provided by a reinsurance contract. In this case, the insurer under an insurance contract (prime contract) who has concluded a reinsurance contract shall be deemed to be the insured in the latter contract.

3. In the event of reinsurance, the insurer under the prime insurance contract shall remain responsible to the insured for payment of insurance indemnity or insurance sum.

4. Consecutive conclusion of two or more reinsurance contracts shall be permitted.

 

 

Article 968. Mutual Insurance

1. Citizens and legal persons may insure their property and other property interests mentioned in Article 929(2) of the present Code on a mutual basis by pooling funds necessary to this end in mutual insurance societies.

2. Mutual insurance societies shall effect insurance of property and other property interests of their members and shall be non-profit organizations.

Peculiarities of legal status of mutual insurance societies and conditions of their activity shall be determined by the law on mutual insurance in accordance with the present Code.

3. Insurance by societies of mutual insurance of property and other property interests of their members shall be effected directly on the basis of membership, unless the conclusion of insurance contracts has been provided in these instances by a society's constituent documents.

The rules provided by the present Chapter shall apply to insurance relations between a mutual insurance society and its members, unless otherwise provided by the law on mutual insurance, constituent documents of a respective society, or by insurance rules established by it.

4. Effecting obligatory insurance by way of mutual insurance shall be permitted in instances specified by the law on mutual insurance.

5. A mutual insurance society may as insurer effect insurance of interests of persons who are not members of the society, if such insurance activity has been provided by its constituent documents, if the society has been formed as a commercial organization, if it has an authorization (licence) to effect a respective type of insurance and meets other requirements established by the law on the organization of insurance business.

Insuring interests of persons who are not members of a mutual insurance society shall be effected by the society on the basis of insurance contracts in accordance with the rules provided by the present Chapter.

Article 969. Obligatory State Insurance

1. In order to ensure the social interests of citizens and interests of the State, a law may establish obligatory State insurance of life, health and property for certain categories of public employees.

Obligatory State insurance shall be effected at the expense of funds appropriated for these purposes from a respective budget to ministries and other federal executive agencies (insurers).

2. Obligatory State insurance shall be effected directly on the basis of laws and other legal acts on such insurance by State insurance organizations or other State organizations specified in them (insurers) or on the basis of insurance contracts concluded by insurers and the insured in accordance with these acts.

3. Obligatory State insurance shall be paid for to insurers in the amount determined by a law or other legal acts on such insurance.

4. The rules provided by the present Chapter shall apply to obligatory State insurance, unless otherwise provided by laws and other legal; acts on such insurance or follows from the essence of respective insurance relations.

Article 970. Application of General Insurance Rules to Special Types of Insurance

The rules provided by the present Chapter shall apply to relations in insuring foreign investments against non-commercial risks, to marine insurance, medical insurance, insurance of bank deposits and insurance of pensions insofar as otherwise established by the laws on these types of insurance.

 

Chapter 49. Order

 

Article 971. Contract of Order

1. Under a contract of order, one party (attorney in fact) shall undertake to perform certain legal actions in the name and at the cost of the other party (entruster). The rights and duties under a transaction made by the attorney shall arise directly with the entruster.

2. A contract of order may be concluded with an indication as to the length of time during which the attorney has the right to act on the entruster's behalf or without such indication.

Article 972. Remuneration for Attorney

1. The entruster shall be obliged to pay a remuneration to the attorney if this is provided by a law, other legal acts or contract of order.

In instances where a contract of order is connected with the conduct of entrepreneurial activity by both parties or by one of them, the entruster shall be obliged to pay a remuneration to the attorney, unless otherwise provided by contract.

2. If a contract of order for hire has not specified the amount of remuneration or the procedure to pay it, the remuneration shall be paid after the execution of the order in the amount determined in accordance with Article 424(3) of the present Code.

3. In order to secure his claims under a contract of order, the attorney acting as a commercial representative (Article 184[1]) shall have the right under Article 359 of the present Code to withhold things situated with him and subject to transfer to the entruster.

Article 973. Executing Order in Accordance with Entruster's Instructions

1. The attorney shall be obliged to follow the entruster's instructions in executing an order he was given. The entruster's instructions must be lawful, feasible and concrete.

2. The attorney shall have the right to deviate from instructions of the entruster if under circumstances this is necessary in the interests of the entruster and the attorney could not inquire the entruster or has not received a reply to his inquiry within a reasonable period of time. The attorney shall be obliged to notify the entruster about deviations made as soon as notifying becomes possible.

3. The attorney acting as a commercial representative (Article 184[1]) may be entitled by the entruster to deviate from instructions of the entruster in his interests without a preliminary inquiry thereof. The commercial representative in this case shall be obliged within a reasonable period to notify the entruster about deviations made, unless otherwise provided by the contract of order.

Article 974. Attorney's Duties

The attorney shall be obliged to:

- personally execute an order given him, except in instances mentioned in Article 976 of the present Code; and

- inform the entruster at his demand about the course of executing the order; and

- transfer to the entruster without a delay all earnings from transactions made in execution of the order; and

- after the execution of the order or in the event of the termination of the contract of order before the execution thereof: return to the entruster the power of attorney whose validity term has not expired and submit an account with source documents enclosed if this is required by the contract conditions or nature of the order.

Article 975. Entruster's Duties

1. The entruster shall be obliged to issue to the attorney a power of attorney (powers of attorney) to perform legal actions provided by the contract of order, except in instances provided by paragraph 2 of Article 182(1) of the present Code.

2. Unless otherwise provided by contract, the entruster shall be obliged to:

- compensate the attorney for expenses incurred; and

- provide the attorney with funds necessary to execute the order.

3. The entruster shall be obliged without a delay to accept from the attorney everything executed by him under the contract of order.

4. The entruster shall be obliged to pay a remuneration to the attorney, if in accordance with Article 972 of the present Code the contract of order is for hire.

Article 976. Transfer of Power of Attorney to Execute Order

1. The entruster shall have the right to transfer the power of attorney to execute an order to another person (substitute) only in instances and on terms and conditions provided by Article 187 of the present Code.

2. The entruster shall have the right to reject a substitute chosen by the attorney.

3. If a likely substitute of the attorney has ben named in a contract of order, the attorney shall be responsible neither for the choice of him not the management of business by him.

If the right of the entruster to transfer the power of attorney to execute an order to another person has not been stipulated in the contract or it has been stipulated but a substitute has not been named in it, the entruster shall be responsible for the choice of a substitute.

Article 977. Terminating Contract of Order

1. A contract of order shall be terminated in consequence of:

- the cancellation of the order by the entruster; and

- the refusal on the part of the attorney in fact; and

- the death of the entruster or attorney, the deeming of one of them to be incapable, partially capable or missing.

2. The entruster shall have the right to cancel the order, and the attorney - to refuse it at any time. An agreement on the refusal of this right shall be null and void.

3. The party refusing a contract of order which provides for the acting of the attorney as a commercial representative, must notify the other party about the termination of the contract not later than 30 days, unless a longer period has been provided by contract.

Should a legal person which is a commercial attorney be reorganized, the entruster shall have the right to cancel the order without such preliminary notification.

Article 978. Consequences of Terminating Contract of Order

1. If a contract of order is terminated before the order has been completely executed by the attorney, the entruster shall be obliged to compensate the attorney for expenses incurred while executing the order and if a remuneration was due to the attorney, also pay him the remuneration commensurately with the work done by him. This rule shall not be applied to execution by the attorney of the order after he has learnt or must have learnt about the termination of the order.

2. The cancellation of the order by the entruster shall be a ground for compensation of losses caused to the attorney by the termination of the contract of order, except in instances of terminating a contract which provides for the acting of the attorney as a commercial representative.

3. The refusal by the attorney to execute the entruster's order shall be a ground for compensation of losses caused to the entruster by the termination of the contract of order, except in instances of the refusal on the part of the attorney under circumstances where the entruster is devoid of the possibility to otherwise secure his interests, as well as the refusal to execute a contract which provides for the acting of the attorney as a commercial representative.

Article 979. Duties of Attorney's Heirs and Liquidator of Legal Entity Which is Attorney

In the event of the death of the attorney, his heirs shall be obliged to notify the entruster about the termination of the contract of order and take measures necessary to protect the entruster's property, notably, preserve his things and documents, and then transfer this property to the entruster.

The same duty shall lie with the liquidator of a legal person operating as attorney in fact.

 

Chapter 50. Actions in Another's Interests Without Order

 

Article 980. Conditions for Acting in Another's Interests

1. Actions taken without an order, other instruction or preliminary promised consent from the interested person in order to prevent harm to his personality or property, fulfil his obligation or in his other lawful interests (actions in another's interests) must be performed proceeding from obvious advantage or benefit and actual or possible intentions of the interested person and with care and circumspection necessary under circumstances.

2. The rules provided by the present Chapter shall not apply to actions in the interest of other persons performed by State or municipal agencies for which such actions are one of the purposes of their activity.

Article 981. Notifying Interested Person of Actions in His Interest

1. The person acting in another's interest shall be obliged at the earliest opportunity to inform the interested person thereof and wait within a reasonable period of time for his decision concerning approval or disapproval of actions taken, unless such waiting entails a serious damage for the interested person.

2. Notifying the interested person about actions in his interest shall not be required if these actions are taken in his presence.

Article 982. Consequences of Approval by Interested Person of Actions in His Interest

If the person in whose interest actions are taken without his order approves of these actions, the rules on a contract of order or other contract answering the nature of actions taken shall apply to further relations of the parties, even if the approval was verbal.

Article 983. Consequences of Disapproval by Interested Person of Actions in His Interest

1. Actions in another's interests performed after it became known to the performer that they were not approved by the interested person, shall not entail for the latter obligations with respect to either the performer of these actions or third persons.

2. Actions aimed to prevent danger to life of a person who found himself in danger shall be permitted against the will of this person, and performing the duty to maintain somebody shall be permitted against the will of the person on whom this duty was placed.

Article 984. Compensation for Losses to Person Who Acted in Another's Interest

1. Necessary expenses and other actual damage incurred by the person who has acted in another's interest shall in accordance with the rules provided by the present Chapter be subject to compensation by the interested person, except for expenses caused by actions mentioned in Article 983(1) of the present Code.

The right to compensation of necessary expenses and other actual damage shall also be retained in the instance where actions in another's interest have not led to the expected result. However, in the event that damage to property of another person has been prevented, the amount of compensation shall not exceed the value of the property.

2. Expenses and other losses of the person who has acted in another's interest suffered by him in connection with actions taken after the receipt of the approval from the interested person (Article 982) shall be compensated according to the rules on a respective type of contract.

Article 985. Remuneration for Actions in Another's Interest

The person whose actions in another's interest have led to a result positive for the interested person shall have the right to obtain a remuneration if such right has been provided by a law, an agreement with the interested person, or business customs.

Article 986. Consequences of Transaction in Another's Interest

The duties under a transaction concluded in another's interest shall pass to the person in whose interest it was effected provided that he has approved this transaction and the other party does not object to such passing or, while concluding the transaction, knew or must have known that the transaction was closed in another's interest.

When duties under such a transaction pass to the person in whose interests it was concluded, the rights under this transactions shall also be transferred to the latter.

Article 987. Unjustified Enrichment in Consequence of Actions in Another's Interests

The rules provided by Chapter 60 of the present Code shall apply if actions not aiming directly at ensuring the interests of another person, including when the person who performed them wrongly believed that he was acting in his own interest, have led to an unjustified enrichment of another person.

Article 988. Compensation for Harm Caused by Actions in Another's Interest

Relations in the event of compensating for harm caused to the interested person or third persons by actions in another's interests shall be regulated by the rules provided by Chapter 59 of the present Code.

Article 989. Account of Person Who Acted in Another's Interest

A person who has acted in another's interest shall be obliged to present to the person in whose interest such actions were performed an account stating profits gained and expenses and other losses suffered.

 

Chapter 51. Commission

 

Article 990. Commission Contract

1. Under a commission contract, one party (commission agent) shall be obliged by order of the other party (client) and for a remuneration to effect one or more transactions in his own name, but at the client's cost.

The commission agent shall acquire the rights and become obliged under a transaction concluded by the commission agent with a third person, even if the client was named in the transaction or entered into immediate relations with the third person in order to effect the transaction.

2. A commission contract may be concluded for a definite period of time or without its validity term specified, with or without an indication as to the territory to execute it on, with the client's obligation not to grant to third persons the right to effect the transactions in his interests and at his cost with the execution of which the commission agent was been commissioned or without such obligation, with or without conditions with regard to the range of goods which are the commission object.

3. A law or other legal acts may provide for particulars for individual types of commission contract.

Article 991. Payment of Commission

1. The client shall be obliged to pay a remuneration to the commission agent and in the event that the commission agent has assumed to guarantee the effectuation of a transaction by a third person (del credere), also an additional remuneration in the amount and according to the procedure established in the commission contract.

If a contract has not specified the amount of remuneration or procedure to pay it and if the amount of remuneration cannot be established proceeding from the contract conditions, remuneration shall be paid after the execution of the commission contract in the amount determined in accordance with Article 424(3) of the present Code.

2. If a commission contract has not been executed for reasons within the client's control, the commission agent shall retain the right to a commission, as well as to compensation for expenses incurred.

Article 992. Execution of Commission Order

The commission agent shall be obliged to execute the order he has assumed for execution on conditions most advantageous for the client in accordance with the client's instructions and if such instructions are absent in the contract, in accordance with business customs or other typically set requirements.

In the event that the commission agent has effected a transaction on conditions more advantageous than those specified by the client, the additional profit shall be equally divided between the client and the commission agent, unless otherwise provided by agreement of the parties.

Article 993. Responsibility for Failure to Effect Transaction Concluded for Client

1. The commission agent shall not be responsible to the client for the failure by a third person to effect the transaction concluded with him at the client's cost, except in instances where the commission agent was not circumspect enough in choosing this person or assumed to guarantee the execution of the transaction (del credere).

2. Should the third person fail to effect the transaction concluded by the commission agent with him, the commission agent shall be obliged to immediately inform the client thereof, collect all necessary proofs, as well as, at the client's demand, transfer to him the rights relating to such transaction with the observance of the rules on the assignment of a claim (Articles 382-386, 388, 389).

3. The assignment to the client of the rights relating to a transaction on the basis of point 2 of the present Article shall be permitted irrespective of the commission agent's agreement with a third person which prohibits or limits such assignment. This shall not release the commission agent from responsibility to the third person in connection with the assignment of the right in violation of the agreement on the prohibition or limitation thereof.

Article 994. Subcommission

1. Unless otherwise provided by the commission contract, the commission agent shall have the right, in order to execute this contract, to conclude a subcommission contract with another person, while remaining responsible to the client for the subcommission agent's actions.

Under a subcommission contract, the commission agent shall acquire the client's rights and duties in relation to the subcommission agent.

2. Until the commission contract is terminated, the client shall not have the right without the commission agent's consent to enter into direct relations with the subcommission agent, unless otherwise provided by the commission contract.

Article 995. Deviation from Client's Instructions

1. The commission agent shall have the right to depart from instruction of the client, if under circumstances this is necessary in the client's interests and the commission agent could not send a preliminary inquiry to the client or has not received a reply to his inquiry within a reasonable period of time. The commission agent shall be obliged to notify the client about deviations made as soon as notifying becomes possible.

The client may grant the commission agent acting as an entrepreneur the right to depart from his instructions without a preliminary inquiry. In this case, the commission agent shall be obliged within a reasonable period to inform the client about deviations made, unless otherwise provided by the commission contract.

2. The commission agent who has sold property at a price lower than that agreed with the client shall be obliged to compensate for the difference to the latter, unless he proves that he had no possibility to sell the property at the agreed price and that selling at the lower price prevented even greater losses. In the instance when the commission agent was obliged to preliminary inquire the client, the commission agent must also prove that he had no possibility to obtain the client's preliminary consent to depart from his instructions.

3. If the commission agent has bought property at a price higher than that agreed with the client, the client who does not wish to accept such purchase shall be obliged to declare this to the commission agent within a reasonable period after the receipt from him of the notice about the conclusion of the transaction with a third person. Otherwise, the purchase shall be deemed to have been accepted by the client.

If the commission agent has informed that he accepts the price difference to his account, the client shall not have the right to refuse the transaction concluded for him.

Article 996. Rights to Things That Are Commission Object

1. Things received by the commission agent from the client or acquired by the commission agent at the client's expense shall be the property of the latter.

2. The commission agent shall have the right in accordance with Article 359 of the present Code to withhold things situated with him which are subject to transfer to the client or a person specified by the client as a security for his claims under the commission contract.

Should the client be declared insolvent (bankrupt), the aforementioned right of the commission agent shall terminate and his claims against the client within the value of things which he was withholding shall be satisfied in accordance with Article 360 of the present Code equally with the claims secured by pledge.

Article 997. Satisfying Commission Agent's Claims from Sums Due to Client

The commission agent shall have the right in accordance with Article 410 of the Code to withhold sums due to him under the commission contract from all sums received by him at the client's cost. However, the client's creditors who enjoy priority over the commission agent with respect to satisfaction of their claims shall not be deprived of the right to satisfaction of these claims from the sums withheld by the commission agent.

Article 998. Commission Agent's Responsibility for Loss, Shortage or Damage of Client's Property

1. The commission agent shall be responsible to the client for the loss, shortage or damage of the client's property situated with him.

2. If when the property sent by the client is being accepted by the commission agent or when it has been delivered to the commission agent for the client, damage or shortage is discovered in this property which can be detected by visual inspection, as well as in the event that someone has caused damage to the client's property situated with the commission agent, the commission agent shall be obliged to take measures to protect the client's rights, collect all necessary proofs and immediately inform the client about everything.

3. The commission agent who has not insured the client's property situated with him shall be responsible for this only in instances when the client has instructed him to insure the property at the client's expense or when insuring this property by the commission agent was provided by the commission contract or business customs.

 

 

Article 999. Commission Agent's Account

After he has executed the order, the commission agent shall be obliged to submit to the client an account and transfer all commissions obtained under the contract. The client who has objections with regard to the account must inform the commission agent about them within 30 days from the day of receiving the account, unless a different period was established by agreement of the parties. Otherwise, in the absence of another agreement, the account shall be deemed to have been accepted.

Article 1000. Acceptance by Client of Performed Under Commission Contract

The client shall be obliged to:

- accept from the commission agent everything performed under the commission contract; and

- inspect the property acquired by the commission agent for him and immediately inform the latter about defects discovered in this property; and

- release the commission agent from obligations to the third person engaged by him for the execution of the commission order.

Article 1001. Compensating for Expenses Incurred to Execute Commission Order

Apart from paying the commission and also an additional del credere commission in particular cases, the client shall be obliged to compensate the commission agent for sums spent by him on the execution of the commission order.

The commission agent shall not have the right to compensation of expenses incurred to store the client's property situated with him, unless otherwise established by a law or in the commission contract.

Article 1002. Termination of Commission Contract

A commission contract shall be terminated in consequence of:

- the refusal by the client to execute the contract; and

- the refusal by the commission agent to execute the contract in instances provided by a law or contract; and

- the death of the commission agent, the deeming of him to be incapable, partially capable or missing; and

- the recognition of an individual entrepreneur operating as commission agent to be insolvent (bankrupt).

Should a commission agent be declared to be insolvent (bankrupt), his rights and duties relating to transactions concluded by him for the client in execution of the instructions from the latter shall pass to the client.

Article 1003. Cancellation of Commission Order by Client

1. The client shall have the right at any time to refuse to execute a commission contract by cancelling the order given to the commission agent.

The commission agent shall have the right to demand compensation for losses caused by the cancellation of the order.

2. In the event that a commission contract was concluded without specifying its validity term, the client must notify the commission agent about the termination of the contract not later than 30 days in advance, unless a longer period has been provided by contract.

In this event, the client shall be obliged to pay the commission agent a remuneration for the transactions effected by him before the termination of the contract, as well as compensate the commission agent for expenses incurred by him before the termination of the contract.

3. When cancelling his order, the client shall be obliged within the period established by the commission contract or immediately if such period has not been established to dispose of his property being in charge of the commission agent. If the client fails to fulfil this duty, the commission agent shall have the right to deposit the property for safekeeping at the client's cost or sell it at a price as advantageous for the client as possible.

Article 1004. Refusal by Commission Agent to Execute Commission Contract

1. The commission agent shall not have the right, unless otherwise provided by the commission contract, to refuse to execute it, except when the contract was concluded without specifying its validity term. In this event, the commission agent shall be obliged to notify the client about the termination of the contract not later than 30 days in advance, unless a longer period has been provided by contract.

The commission agent shall be obliged to take measures necessary to ensure safety of the client's property.

2. The client must dispose of his property being in charge of the commission agent within 15 days from the day of receiving a notice about the refusal by the commission agent to execute the order, unless a different period was provided by the commission contract. If he fails to fulfil this duty, the commission agent shall have the right to deposit the property for safekeeping at the client's cost or sell it at a price as advantageous for the client as possible.

Unless otherwise provided by a commission contract, the commission agent who has refused to execute the order shall preserve the right to a commission for transactions effected by him before the termination of the contract, as well as to compensation for expenses incurred by that moment.

 

Chapter 52. Agency Service

 

Article 1005. Contract of Agency

1. Under a contract of agency, one party (agent) shall undertake for a remuneration to effect by order of the other party (principal) legal and other actions in his own name, but at the principal's cost or in the name and at the cost of the principal.

The agent shall acquire the rights and become obliged with respect to the transaction effected by the agent with a third person in his own name and the principal's cost, even if the principal was named in the transaction or entered into direct relations with the third person in order to effect the transaction.

The principal shall directly acquire the rights and duties relating to the transaction effected by the agent with a third person in the name and at the cost of the principal.

2. In instances where a contract of agency concluded in writing has provided for general powers for the agent to effect transactions in the name of the principal, the latter in his relations with a third person shall not have the right to refer to the absence of due powers granted to the agent, unless he proves that the third person knew or must have known about the agent's limited powers.

3. A contract of agency may be concluded for a definite period of time or without specifying its validity term.

4. A law may provide for particulars for individual types of contract of agency.

Article 1006. Agent's Remuneration

The principal shall be obliged to pay a remuneration to the agent in the amount and according to the procedure established in the contract of agency.

If the amount of remuneration to the agent has not been provided in the contract of agency or it cannot be determined proceeding from the contract conditions, remuneration shall be paid in the amount determined in accordance with Article 424(3) of the present Code.

If a contract does not contain provisions on the procedure to pay a remuneration to the agent, the principal shall be obliged to pay remuneration within a week from the moment when the agent presented him an account for the past period, unless a different procedure to pay remuneration follows from the essence of the contract or business customs.

Article 1007. Limitations by Contract of Agency of Rights of Principal and Agent

1. A contract of agency may provide for the principal's duty not to conclude similar contracts of agency with other agents operating on the territory specified in the contract or refrain from the conduct on this territory of autonomous activity similar to the activity which is the subject-matter of the contract of agency.

2. A contract of agency may provide for the agent's duty not to conclude with other principals similar contracts of agency which must be executed on the territory completely or partially coinciding with the territory specified in the contract.

3. Conditions of a contract of agency shall be void if they entitle the agent to sell goods, perform works or provide services exclusively for a certain category of buyers (customers) or exclusively for buyers (customers) who have their place of location or place of residence on the territory specified in the contract.

 

Article 1008. Agent's Accounts

1. In the course of executing the contract of agency, the agent shall be obliged to submit accounts to the principal in the order and periods provided by the contract. Should respective clauses be absent in the contract, accounts shall be submitted by the agent as the contract is executed by him or at the end of contract validity term.

2. Unless otherwise provided by the contract of agency, the agent's account must be appended with necessary proofs as to the expenses incurred by the agent at the principal's cost.

3. The principal who has objections concerning the agent's account must inform the agent about them within 30 days from the day of receiving the account, unless a different period was provided by agreement of the parties. Otherwise, the account shall be deemed to have been accepted by the principal.

Article 1009. Subcontract of Agency

1. Unless otherwise provided by the contract of agency, the agent shall have the right, in order to execute the contract, to conclude a subcontract of agency with another person, while remaining responsible to the principal for the subagent's actions. A contract of agency may provide for the agent's duty to conclude a subcontract of agency with or without the stipulation of particular terms and conditions of such contract.

2. A subagent shall not have the right to conclude with third persons transactions in the name of the person who is the principal under the contract of agency, except in instances where in accordance with Article 187(1) of the Code the subagent may act on the basis of the transferred power of attorney.

A procedure and consequences of such transfer of the power of attorney shall be determined by the rules provided by Article 976 of the present Code.

Article 1010. Termination of Contract of Agency

A contract of agency shall be terminated in consequence of:

- the refusal by one of the parties to execute the contract concluded without specifying its validity term; and

- the death of the agent, the deeming of him to be incapable, partially capable or missing; and

- the recognition of an individual entrepreneur operating as agent to be insolvent (bankrupt).

Article 1011. Application of Rules on Contracts of Order and Commission Contracts to Agency Relations

The rules provided by Chapter 49 or Chapter 51 of the present Code shall, respectively, apply to relations ensuing from a contract of agency depending on whether the agent under conditions of this contract acts in the principal's name or in his own name, unless these rules are contrary to provisions of the present Chapter or the essence of a contract of agency.

Chapter 53. Trust Management of Property

 

Article 1012. Contract of Trust Management of Property

1. Under a contract of trust management of property, one party (founder of management) shall transfer property for trust management to the other party (trust manager) for a certain period of time, while the other party shall undertake to manage this property in the interests of the management founder or a person specified by him (beneficiary).

The transfer of property to trust management shall not entail the transfer of the right of ownership thereof to the trust manager.

2. While effecting trust management of property, the trust manager shall have the right to perform with respect to this property any legal and practical actions in the beneficiary's interests in accordance with the contract of trust management.

A law or contract may provide for limitations on some actions relating to trust management of property.

3. The trust manager shall in his own name effect transactions with property transferred to trust management, specifying thereby that he is acting as such manager. This condition shall be deemed to have been observed, if in the event of performing actions which do not require formalization in writing the other party was informed about the performance thereof by the trust manager as such and a note "T.M." was made in written documents after the name of the trust manager.

In the absence of a statement about operation of the trust manager as such, the trust manager shall become obliged personally to third persons and shall be responsible to them only with property belonging to him.

Article 1013. Object of Trust Management

1. Objects of trust management may include enterprises and other property complexes, detached objects relating to real estate, securities, rights certified by paperless securities, exclusive rights, and other property.

2. Money may not be an independent object of trust management, except in instances provided by law.

3. Property being in economic jurisdiction or operative management may not be transferred to trust management. The transfer to trust management of property being in economic jurisdiction or operative management is only possible after the liquidation of the legal person which has had the property in its economic jurisdiction or operative management or the termination of the right of economic jurisdiction or operative management of property and the return thereof into the owner's possession for other reasons provided by law.

Article 1014. Founder of Management

The owner of property or other person in instances provided by Article 1026 of the present Code shall be the founder of management.

 

Article 1015. Trust Manager

1. An individual entrepreneur or commercial organization, except for a unitary enterprise, may be the trust manager.

In instances where trust management of property is exercised on the grounds provided by law, a citizen who is not an entrepreneur or a non-commercial organization, except for an institution, may act as trust manager.

2. Property shall not be subject to transfer for trust management to a State agency or local self-government agency.

3. A trust manager may not be a beneficiary under a contract of trust management of property.

Article 1016. Material Conditions of Contract of Trust Management of Property

1. A contract of trust management of property must specify:

- the composition of the property transferred to trust management; and

- the name of a legal person or citizen in whose interest management of property (founder of management or beneficiary) is to be effected; and

- the amount and form of remuneration to the manager, if payment of remuneration has been provided by contract; and

- the validity term of the contract.

2. A contract of trust management of property shall be concluded for a period not longer than 5 years. Other time limits for which a contract may be concluded, may be provided by a law for individual types of property transferred to trust management.

If neither party declared the termination of the contract at the end of its validity term, it shall be deemed to have been extended for the same period and on the same terms and conditions which were provided by the contract.

Article 1017. Form of Contract of Trust Management of Property

1. A contract of trust management of property must be concluded in writing.

2. A contract of trust management of real estate must be concluded in the form provided for a contract of sale of real estate. The transfer of real estate to trust management shall be subject to State registration according to the same procedure as the transfer of the right of ownership of this property.

3. The failure to observe the form of a contract of trust management of property or the requirement to register the transfer of real estate to trust management shall entail invalidity of the contract.

Article 1018. Separation of Property Being in Trust Management

1. Property transferred to trust management shall be separated from other property of the founder of management, as well as from property of the trust manager. This property shall be reflected in a separate balance sheet of the trust manager and an independent accounting shall be effected for it. A separate bank account shall be opened for settlements relating to trust management activity.

2. The recovery of property transferred to trust management for debts of the founder of management shall not be permitted, except in the event of insolvency (bankruptcy) of this person. Should the founder of management become insolvent (bankrupt), trust management of this property shall be terminated and it shall be included in stock to be sold up.

Article 1019. Transfer of Property Encumbered with Pledge to Trust Management

1. The transfer of pledged property to trust management shall not deprive the pledgee of the right to recover this property.

2. The trust manager must be warned about the encumbrance with pledge of the property transferred to him for trust management. If the trust manager did not know or must not have known about the encumbrance with pledge of the property transferred to him for trust management, he shall have the right to demand in court that the contract of trust management of property be dissolved and remuneration for a year due to him under the contract be paid him.

Article 1020. Rights and Duties of Trust Manager

1. The trust manager shall, within the limits provided by law or contract of trust management of property, exercise the powers of an owner with respect to the property transferred to trust management. The trust manager shall dispose of real estate in instances specified by the contract of trust management.

2. The rights acquired by the trust manager as a result of his actions in effecting trust management of property shall be included in the composition of the property transferred to trust management. The duties arising as a result of such actions shall be fulfilled at the cost of this property.

3. To protect the rights to property which is in trust management, the trust manager shall have the right to demand to completely exclude violations of his rights (Articles 301, 302, 304, 305).

4. The trust manager shall submit to the founder of management and beneficiary an account of his activity within the period and according to the procedure established by the contract of trust management of property.

Article 1021. Transfer of Trust Management of Property

1. The trust manager shall exercise trust management of property personally, except in instances provided by point 2 of the present Article.

2. The trust manager may entrust another person with the performance in the trust manager's name of actions necessary for the management of property if he was empowered thereto by the contract of trust management of property or has obtained the founder's consent thereto in writing or has been forced thereto by circumstances in order to secure the interests of the founder of management or beneficiary and, in doing so, had no possibility to receive instructions from the founder of management within a reasonable period of time.

The trust manager shall be as responsible for actions of the attorney chosen by him as for his own actions.

Article 1022. Responsibility of Trust Manager

1. The trust manager who has not manifested due care for the interests of the beneficiary or founder of management during trust management of property shall compensate the beneficiary for the profit lost over the period of trust management of property and the founder of management, for losses caused by the loss of or damage to the property, its natural wear and tear taken into account, and also profits missed.

The trust manager shall bear responsibility for losses caused, unless he proves that these losses occurred in consequence of force-majeure or actions of the beneficiary or founder of management.

2. Obligations relating to a transaction effected by the trust manager with the exceeding of powers granted to him or with a violation of limitations established for him, shall be born by the trust manager personally. If third persons who have participated in the transaction did not know or must not have known about the exceeding of powers or of established limitations, the arisen obligations shall be subject to execution according to the procedure established by point 3 of the present Article. The founder of management may in this event demand from the trust manager to compensate for losses suffered by him.

3. Debts under obligations which have arisen in connection with trust management of property shall be repaid at the cost of this property. Should this property be insufficient, recourse may be taken on property of the trust manager and, should this property be also insufficient, on the property of the founder of management which was not transferred to trust management.

4. A contract of trust management of property may provide for the granting of pledge by the trust manager as security of compensation for losses which may be caused to the founder of management or beneficiary by improper execution of the contract of trust management.

Article 1023. Remuneration to Trust Manager

The trust manager shall have the right to a remuneration provided by the contract of trust management of property, as well as to compensation for necessary expenses incurred by him while exercising trust management of property at the expense of the income derived from the use of this property.

Article 1024. Termination of Contract of Trust Management of Property

1. A contract of trust management of property shall be terminated in consequence of:

- the death of the citizen who is beneficiary, or liquidation of the legal person-beneficiary, unless otherwise provided by contract; and

- the refusal by the beneficiary to obtain advantages under the contract, unless otherwise provided by contract;

- the death of the citizen acting as trust manager, the deeming of him to be incapable, partially capable or missing, as well as recognition of an individual entrepreneur to be insolvent (bankrupt); and

- the refusal by the trust manager or founder of management to effect trust management in connection with the impossibility for the trust manager to exercise trust management personally; and

- the refusal by the founder of management of the contract for reasons other than that mentioned in paragraph 5 of this point provided that remuneration stipulated by contract has been paid to the trust manager; and

- the deeming of the citizen-entrepreneur who is the founder of management to be insolvent (bankrupt).

2. In the event of the refusal by one of the parties to a contract of trust management of property, the other party must be notified thereof 3 months before the termination of the contract, unless other notification period was provided by contract.

3. Should a contract of trust management be terminated, the property being in trust management shall be transferred to the founder of management, unless otherwise provided by contract.

Article 1025. Transfer of Securities to Trust Management

If securities are transferred to trust management, a provision may be made as to the pooling of securities transferred to trust management by different persons.

Powers of the trust manager relating to the disposal of securities shall be determined in the contract of trust management.

Particulars of trust management of securities shall be determined by law.

The rules of the present Article shall, respectively, apply to the rights certified by paperless securities (Article 149).

Article 1026. Trust Management of Property on Grounds Provided by Law

1. Trust management of property may also be established:

- in consequence of the necessity to permanently manage a ward's property in instances provided by Article 38 of the present Code; and

- on the basis of a will which appoints the performer of the will (executor); and

- for other reasons provided by law.

2. The rules provided by the present Article shall, respectively, apply to relations connected with trust management of property established on the grounds mentioned in point 1 of the present Article, unless otherwise provided by law or follows from the essence of such relations.

In instances where trust management of property was established on the grounds mentioned in point 1 of the present Article, the rights of the founder of management provided by the rules of the present Article shall, respectively, belong to the agency of trusteeship and guardianship, the performer of the will (executor) or other person specified in a law.

 

 

 

Chapter 54. Commercial Concession

 

Article 1027. Contract of Commercial Concession

1. Under a contract of commercial concession, one party (holder of rights) shall undertake to grant to the other party (user) for a remuneration and for a term or without specifying the term the right to use in the user's entrepreneurial activity a complex of exclusive rights belonging to the holder of rights, including the right to the firm name and/or commercial designation of the holder of rights, protected commercial information, as well as other objects of exclusive rights provided by contract such as the trademark, service mark, etc.

2. A contract of commercial concession shall provide for the use, within certain limits, of a complex of exclusive rights, business reputation and commercial experience of the holder of rights (establishing, in particular, the minimum and/or maximum limits for such use), with or without specifying the territory where these are to be used in a certain sphere of entrepreneurial activity (sale of goods obtained from the holder of rights or produced by the user, conduct of other trade activity, performance of works, provision of services).

3. Commercial organizations and citizens registered as individual entrepreneurs may act as parties to a contact of commercial concession.

Article 1028. Form and Registration of Contract of Commercial Concession

1. A contract of commercial concession must be concluded in writing.

The failure to observe the written form shall entail invalidity thereof. Such contract shall be deemed null and void.

2. A contract of commercial concession shall be registered by the agency which has registered the legal person or individual entrepreneur acting under the contract as the holder of rights.

If the holder of rights has been registered as a legal person or individual entrepreneur in a foreign State, a contract of commercial concession shall be registered by the agency which has registered the legal person or individual entrepreneur who acts as user.

In relations with third persons the parties to a contract of commercial concession shall have the right to refer to the contract only from the moment of its registration.

A contract of commercial concession for the use of an object protected under patent legislation shall be subject to registration also with a federal executive agency in the field of patents and trademarks. The failure to meet this requirement shall make a contract null and void.

Article 1029. Commercial Subconcession

1. A contract of commercial concession may provide for the user's right to permit other persons to use the complex of exclusive rights granted to him or part of this complex on subconcession terms and conditions agreed by him with the holder of rights or determined in the contract of commercial concession. The contract may provide for the user's right to grant within a certain period to a certain number of persons the right to use the aforementioned rights on subconcession terms and conditions.

A contract of commercial subconcession may not be concluded for a period longer than that of the contract of commercial concession on whose basis it was concluded.

2. If a contract of commercial concession is invalid, contracts of commercial subconcession concluded on the basis thereof shall also be invalid.

3. Unless otherwise provided by a contract of commercial concession concluded for a certain period, should it be terminated before time, the rights and duties of the secondary holder of rights under a contract of commercial subconcession (user under the contract of commercial concession) shall pass to the holder of rights, unless he refuses to assume the rights and duties under this contract. This rule shall, respectively, apply when a contract of commercial concession concluded without specifying its validity term is dissolved.

4. The user shall bear subsidiary responsibility for harm caused to the holder of rights through actions of secondary users, unless otherwise provided by the contract of commercial concession.

5. The rules on a contract of commercial concession provided by the present Chapter shall apply to a contract of commercial subconcession, unless it follows otherwise from particulars of subconcession.

Article 1030. Remuneration under Contract of Commercial Concession

A remuneration under a contract of commercial concession may be paid by the user to the holder of rights in the form of fixed single or periodic payments, deductions from earnings, mark-up on the wholesale price of the goods transferred by the holder of rights for resale, or in other form provided by contract.

Article 1031. Duties of Holder of Rights

1. The holder of rights shall be obliged to:

- transfer to the user technical and commercial documentation and furnish other information necessary to the user in order to exercise the rights granted him under the contract of commercial concession, as well as instruct the user and his employees on problems connected with the exercise of these rights; and

- issue to the user licenses provided by contract, having formalized them according to the established procedure.

2. Unless otherwise provided by the contract of commercial concession, the holder of rights shall be obliged to:

- ensure registration of the contract of commercial concession (Article 1028[2]); and

- render constant technical and consulting assistance to the user in the training and improvement of skills of employees; and

- control the quality of goods (works, services) produced (performed, provided) by the user on the basis of the contract of commercial concession.

Article 1032. User's Duties

Taking into account the character and particulars of activity conducted by the user under a contract of commercial concession, the user shall be obliged to:

- use the firm name and/or commercial designation of the holder of rights in the manner specified in the contract while conducting the activity provided by contract; and

- ensure conformity of the quality of goods produced, works performed and services provided by him on the basis of the contract with the quality of goods produced, works performed and services provided by the holder of rights himself; and

- follow instructions and directions of the holder of rights aimed at ensuring conformity of the character, methods and conditions of using the complex of exclusive rights with those practiced by the holder of rights in using it, including instructions concerning the internal and external design of commercial premises used by the user while exercising the rights granted him under the contract; and

- provide to buyers (customers) all additional services which they could rely upon when buying (ordering) goods (work, service) directly from the holder of rights; and

- not divulge know-how of the holder of rights and other confidential commercial information obtained from him;

- grant a stipulated number of subconcessions if such duty is provided by contract; and

- inform buyers (customers) in a manner most unequivocal for them that he uses the firm name, commercial designation, trademark, service mark, or other individualization means in pursuance of the contract of commercial concession.

Article 1033. Restriction of Rights of Parties to Contract of Commercial Concession

1. A contract of commercial concession may provide for restricting the rights of the parties to this contract, notably:

- an obligation of the holder of rights not to grant other persons similar complexes of exclusive rights for use on the territory assigned to the user or refrain from similar activity conducted by himself on this territory; and

- the user's obligation not to compete with the holder of rights on the territory to which the effect of the contract of commercial concession extends in relation to entrepreneurial activity conducted by the user with the use of exclusive rights belonging to the holder of rights; and

- the refusal by the user to obtain similar rights under contracts of commercial concession from competitors (potential competitors) of the holder of rights; and

- the user's obligation to agree with the holder of rights the place of location of commercial premises used while exercising exclusive rights granted under the contract, as well as their internal and external design.

Restrictive conditions may be deemed to be invalid at the demand of an antimonopoly agency or other interested person, if these conditions are contrary to antimonopoly legislation considering the situation at the respective market and economic position of the parties.

2. Such conditions restricting the rights of the parties under a contract of commercial concession shall be null and void by whose operation:

- the holder of rights has the right to determine a price for the user to sell goods or a price of works (services) performed (provided) by the user or establish the upper or lower limit of these prices; and

- the user has the right to sell goods, perform works or provide services exclusively to a definite category of buyers (customers) or exclusively to buyers (customers) who have their place of location (residence) on the territory specified in the contract.

Article 1034. Responsibility of Holder of Rights Relating to Claims Presented to User

The holder of rights shall bear subsidiary responsibility with respect to claims presented to the user concerning the non-conformity of the quality of goods (works, services) sold (performed, provided) by the user under the contract of commercial concession.

With respect to claims presented to the user as manufacturer of products (goods) of the holder of rights, the holder of rights shall bear joint responsibility with the user.

Article 1035. User's Rights to Conclude Contract of Commercial Concession for New Term

1. After the validity term of the contract of commercial concession has expired, the user who has properly fulfilled his duties shall have the right to conclude a contract for a new term on the same terms and conditions.

2. The holder of rights shall have the right to refuse to conclude a contract of commercial concession for a new term on condition that during three years from the day of the expiration of the validity term of this particular contract he will not conclude similar contracts of commercial concession with other persons or agree to conclude similar contracts of commercial subconcession whose effect will extend to the same territory where the terminated contract was in effect. If prior to the expiration of a three-year period the holder of rights wishes to grant somebody the same rights which were granted to the user under the terminated contract, he shall be obliged to offer to the user to conclude a new contract or compensate for losses suffered by him. When a new contract is concluded, its terms and conditions must be no less favorable for the user than those of the terminated contract.

Article 1036. Changing Contract of Commercial Concession

A contract of commercial concession may be changed in accordance with the rules provided by Chapter 29 of the present Code.

In relations with third persons the parties to a contract of commercial concession shall have the right to refer to the change of the contract only from the moment of registration of such change according to the procedure established by Article 1028(2) of the present Code, unless they prove that a third person knew or must have known earlier about the change of the contract.

Article 1037. Termination of Contract of Commercial Concession

1. Either party to a contract of commercial concession concluded without specifying its validity term shall have the right at any time to refuse the contract, having informed the other party thereof six months in advance, unless a longer period has been provided by contract.

2. The termination before time of a contract of commercial concession concluded with its validity term specified, as well as the dissolution of a contract concluded without specifying its term, shall be subject to registration according to the procedure established by Article 1028(2) of the present Code.

3. In the event of the termination of the rights to the firm name and commercial designation belonging to the holder of rights without the substitution thereof with new similar rights, the contract of commercial concession shall be terminated.

4. Should the holder of rights or the user be declared insolvent (bankrupt), the contract of commercial concession shall be terminated.

Article 1038. Retaining Contract of Commercial Concession in Effect in Event of Change of Parties

1. The transfer to another person of an exclusive right from the complex of exclusive rights granted to the user shall not be a ground for the change or dissolution of the contract of commercial concession. The new holder of rights shall become a party to this contract with respect to the rights and duties relating to the transferred exclusive right.

In the event of the death of the holder of rights, his rights and duties under a contract of commercial concession shall pass to the heir provided he has been registered or will register as an individual entrepreneur within six months from the day when the inheritance was opened. Otherwise, the contract shall be terminated.

The exercise of the rights and fulfilment of the duties of the deceased holder of rights shall be effected by a manager appointed by the notary until the heir has assumed these rights and duties or until the registration of the heir as an individual entrepreneur.

Article 1039. Consequences of Change in Firm Name or Commercial Designation of Holder of Rights

In the event that the holder of rights has changed his firm name or commercial designation, with the right to use them included in the complex of exclusive rights, the contract of commercial concession shall be effective with respect to the new firm name or commercial designation of the holder of rights, unless the user demands to dissolve the contract and compensate for losses. Should the contract continue to be in effect, the user shall have the right to demand a commensurate reduction of the remuneration due to the holder of rights.

Article 1040. Consequences of Termination of Exclusive Right Use of Which Was Granted Under Contract of Commercial Concession

If during the validity term of a contract of commercial concession the term of an exclusive right the use of which was granted under this contract has expired or such right has been terminated for other reason, the contract of commercial concession shall continue to be in effect, except for the provisions relating to the terminated right, while the user, unless otherwise provided by contract, shall have the right to demand a commensurate reduction of the remuneration due to the holder of rights.

Should the rights to the firm name or commercial designation belonging to the holder of rights terminate, consequences provided by Article 1037(2) and 1039 of the present Code shall enter into force.

 

Chapter 55. Society in Participation

 

Article 1041. Contract of Society in Participation

1. Under a contract of a society in participation (joint activity contract), two or more persons (partners) shall undertake to combine their contributions and operate jointly without forming a legal person for profit-making or achievement of other purpose not contrary to law.

2. Only individual entrepreneurs and/or commercial organizations may be parties to a contract of a society in participation concluded in order to conduct entrepreneurial activity.

Article 1042. Contributions of Partners

1. A contribution of a partner shall be deemed to be anything he has contributed to the joint business, including money, other property, professional and other knowledge, experience and skills, as well as business reputation and business ties.

2. Contributions of partners shall be presupposed to be equal in value, unless it follows otherwise from the contract of a society in participation or actual circumstances. Monetary evaluation of the contribution of a partner shall be made by agreement between the partners.

Article 1043. Common Property of Partners

1. The property contributed by the partners which they have owned by virtue of the right of ownership, as well as products manufactured as the result of joint activity and fruits and revenues obtained from such activity shall be deemed to be their collectively shared property, unless otherwise established by law or the contract of a society in participation or follows from the essence of the obligation.

The property contributed by the partners which they have owned on the grounds other than the right of ownership shall be used in the interests of all partners and, along with the property in their common ownership, shall constitute common property of the partners.

2. The conduct of book keeping relating to the common property of the partners may be entrusted to one of the legal persons participating in the contract of a society in participation.

3. Common property of the partners shall be used by their mutual consent or, should they fail to reach agreement, according to the procedure established by a court.

4. Duties of the partners with respect to the maintenance of common property and a procedure to compensate for losses connected with the fulfilment of these duties shall be determined by the contract of a society in participation.

Article 1044. Conduct of Joint Business of Partners

1. When conducting joint business, each partner shall have the right to act in the name of all partners, unless it has been established by the contract of a society in participation that the conduct of business shall be effected by particular partners or jointly by all partners to the contract of a society in participation.

If business is conducted collectively, effecting every transaction shall require consent of all partners.

2. In relations with third persons, the power of a partner to effect transactions in the name of all partners shall be certified by a power of attorney issued to him by other partners or by the contract of a society in participation executed in writing.

3. In relations with third persons, the partners may not refer to the restrictions of the rights of the partner, who has effected a transaction, relating to conducting joint business of the partners, except in instances where they will prove that at the moment of concluding the transaction the third person knew or must have known about the existence of such restrictions.

4. A partner who has concluded a transaction in the name of all partners with respect to whom his right to conduct joint business of the partners has been restricted or who has concluded transactions in the interests of all partners in his own name, may demand that expenses incurred by him at his cost be compensated if there were sufficient grounds to believe that these transactions were necessary in the interest of all partners. The partners who have suffered losses in consequence of such transactions shall have the right to demand compensation thereof.

5. Decisions concerning common affairs of the partners shall be made by the partners by mutual agreement, unless otherwise provided by the contract of a society in participation.

Article 1045. Right of Partner to Information

Each partner, irrespective of whether he has been authorized to conduct joint business of the partners, shall have the right to familiarize himself with all documentation relating to the conduct of business. The refusal of this right or restriction thereof, including by agreement of the partners, shall be null and void.

Article 1046. Common Expenses and Losses of Partners

A procedure to cover expenses and losses connected with joint activity of the partners shall be determined by their agreement. Should they fail to reach such agreement, each partner shall bear expenses and losses in proportion to the value of his contribution to the joint business.

An agreement which completely releases anyone of the partners from the participation in covering common expenses or losses shall be null and void.

Article 1047. Responsibility of Partners Under Common Obligations

1. If a contract of a society in participation is not connected with the conduct by its participants of entrepreneurial activity, each partner shall be responsible for common contractual obligations with all his property in proportion to the value of his contribution to the joint business.

The partner shall bear joint responsibility for common obligations which have not arisen from the contract.

2. If a contract of a society in participation is not connected with the conduct by its participants of entrepreneurial activity, the partners shall be responsible for all common obligations irrespective of the grounds for their rise.

Article 1048. Distribution of Profit

The profit raised by the partners as a result of their joint activity shall be distributed in proportion to the value of contributions of the partners to the joint business, unless otherwise provided by the contract of a society in participation or other agreement of the partners. An agreement on the exclusion of any of the partners from sharing profits shall be null and void.

Article 1049. Separation of Partner's Share at Demand of His Creditor

The creditor of a participant in a contract of a society in participation shall have the right to demand that his share in common property be separated in accordance with Article 255 of the present Code.

Article 1050. Termination of Contract of Society in Participation

1. A contract of a society in participation shall be terminated in consequence of:

- the declaration of a partner to be incapable, partially capable or missing, unless the contract of a society in participation or subsequent agreement provided for retaining the contract in effect in relations between the other partners; and

- the declaration of some of the partners to be insolvent (bankrupt) with the exception mentioned in paragraph 2 of this point; and

- the death of a partner or liquidation or reorganization of the legal person participating in the contract of a society in participation, unless retaining the contract in effect in relations between the other partners or substitution of the deceased partner (liquidated or reorganized legal person) by his heirs (successors) was provided by contract or subsequent agreement; and

- the refusal by any of the partners of further participation in the unlimited contract of a society in participation, with the exception mentioned in paragraph 2 of this point;

- the dissolution of the contract of a society in participation, concluded with its validity term specified, at the demand of one of the partners in relations between him and the other partners with the exception mentioned in paragraph 2 of this point; and

- the expiration of the validity term of the contract of society in participation; and

- partition of a partner's share at the demand of his creditor, with the exception mentioned in paragraph 2 of this point.

2. When a contract of a society in participation is terminated, the things transferred to common ownership and/or use of the partners shall be returned without a remuneration to the partners who contributed them, unless otherwise provided by contract.

From the moment of terminating the contract of a society in participation its participants shall bear joint responsibility for the unfulfilled common obligations with respect to third persons.

The property which has been in common ownership of the partners and the common rights of claim which have arisen with them shall be separated according to the procedure established by Article 252 of the present Code.

A partner who has contributed a specific thing to common property shall have the right, should the contract of a society in participation be terminated, to demand in a judicial procedure that the thing be returned to him provided that the interests of other partners and the creditors have been observed.

Article 1051. Refusal of Contract of Society in Participation of Unlimited Duration

The refusal by a partner of the contract of a society in participation of unlimited duration must be made by him not later than 3 months prior to his presupposed withdrawal from the contract.

An agreement concerning the restriction of the right to refuse the contract of a society in participation of unlimited duration shall be null and void.

Article 1052. Dissolution of Contract of Society in Participation at Demand of Party

Alongside the grounds mentioned in Article 450(2)of the present Code, a party to a contract of a society in participation concluded with its term or purpose specified as a condition for the dissolution, shall have the right to demand to dissolve the contract in relations between him and other partners for a good reason with compensation to the other partners for damage caused by the dissolution of the contract.

Article 1053. Responsibility of Partner with Respect to Whom Contract of Society in Participation Was Dissolved

In the event that the contract of a society in participation has not been terminated as a result of the declaration by one of the participants to refuse to continue further participation in it or the dissolution of the contract at the demand of one of the partners, the person whose participation in the contract has terminated shall be responsible to third persons with respect to common obligations which arose during the period of his participation in the contract as if he had remained a participant in the contract of a society in participation.

Article 1054. Private Partnership

1. A contract of a society in participation may provide that its existence shall not be disclosed to third persons (private partnership). To such contract shall apply the rules provided by the present Chapter on a contract of a society in participation, unless otherwise provided by the present Article or follows from the essence of a private partnership.

2. In relations with third persons, each participant in a private partnership shall be responsible with all his property for transactions which he has concluded in his own name in common interests of the partners.

3. In relations between the partners, obligations which have arisen in the process of their joint activity shall be deemed to be common.

 

Chapter 56. Public Promise of Reward

 

Article 1055. Duty To Pay Reward

1. The person who has publicly announced payment of a monetary remuneration or other reward (payment of a reward) to the one who will perform the lawful action specified in the announcement within the period of time specified therein, shall be obliged to pay the promised reward to anyone who has performed the respective action, notably, has found a thing lost or communicated necessary information to the person who has announced a reward.

2. The duty to pay a reward shall arise on condition that the promise of the reward enables to establish by whom it has been promised. The person who has responded to the promise shall have the right to demand a written confirmation of the promise and bear the risk of consequences of the failure to present this demand if it turns out that the announcement of the promise has not been actually made by the person named in it.

3. If the amount of reward has not been specified in a publicly made promise of reward, it shall be determined by agreement with the person who has promised the reward or by a court, should a dispute arise.

4. The duty to pay the reward shall arise irrespective of whether the respective action has been performed in connection with the announcement made or independently of it.

5. If the action specified in the announcement has been performed by several persons, the right to get the reward shall be acquired by the one of them who was first to perform the respective action.

If the announced action has been performed by two or more persons and it is impossible to determine who was first to perform the respective action, as well as when the action has been simultaneously performed by two or persons, the reward shall be divided between them equally or in other proportion provided by agreement between them.

6. Unless otherwise provided by the announcement of a reward and follows from the nature of the action specified in it, the conformity of the performed action with the requirements contained in the announcement shall be determined by the person who has publicly promised the reward or by a court in the event of a dispute.

Article 1056. Cancellation of Public Promise of Reward

1. The person who has publicly announced payment of a reward shall have the right in the same form to refuse the promise he has given, except when the inadmissibility of a refusal has been provided in or follows from the announcement itself and a definite period of time has been assigned therein to perform the action for which the reward has been promised or if by the moment of announcing the refusal, one or more persons who responded have already performed the action specified in the announcement.

2. The cancellation of the publicly made promise of a reward shall not release the person who has announced the reward from compensation within the amount of the announced reward to those who responded for expenses incurred by them in connection with the performance of the action specified in the announcement.

 

Chapter 57. Public Competition

 

Article 1057. Organizing Public Competition

1. The person who has publicly announced a monetary remuneration or other reward (payment of a reward) for the best performance of a work or achievement of other results (public competition) must pay (deliver) the stipulated reward to the one who in accordance with the conditions of holding the competition has been recognized as the winner thereof.

2. A public competition must be directed towards achieving some socially useful objectives.

3. A public competition may be open, i.e. when the offer by the organizer of the competition to take part in it is addressed to all interested persons by means of an announcement in the press or other mass media; or it may be closed, i.e. when the offer to take part in the competition is sent to a certain group of persons at the choice of the organizer of the competition.

An open competition may be conditioned by preliminary qualification of its participants when the organizer of the competition makes a preliminary selection of the persons wishing to take part in it.

4. An announcement of a public competition must contain, at least, conditions specifying the essence of the task; criteria and procedure to estimate the results of the work or other achievements; place, date and procedure for the presentation thereof; amount and form of reward; as well as procedure and time to announce the results of the competition.

5. The rules provided by the present Article shall apply to a public competition containing the obligation to conclude a contract with the winner of the competition, unless otherwise provided by Articles 447-449 of the present Code.

Article 1058. Changing Conditions and Cancelling Public Competition

1. The person who has announced a public competition shall have the right to change its conditions or cancel the competition only during the first half of the period established for presenting the works.

2. A notice about a change in conditions or cancellation of the competition must be made in the same manner in which the competition was announced.

3. Should conditions of a competition be changed or competition cancelled, the person who has announced the competition must compensate for expenses incurred by any person who has performed the work specified in the announcement before he learnt or must have learnt about the change in conditions of the competition or cancellation thereof.

The person who has announced a competition shall be released from the duty to compensate for expenses if he proves that the given work was performed not in connection with the competition, notably, before the announcement of the competition or was earlier known to be at variance with the competition conditions.

4. If the requirements mentioned in points 1 and 2 of the present Article have been violated while changing conditions of the competition or cancelling it, the person who announced the competition must pay the reward to those who have performed the work meeting the conditions specified in the announcement.

Article 1059. Decision to Pay Reward

1. The decision on payment of the reward must be made and informed to the participants in a public competition according to the procedure and within the period of time established in the announcement of the competition.

2. If the results specified in the announcement have been attained in the work jointly performed by two or more persons, the reward shall be distributed in accordance with the agreement reached between them. If such agreement has not been reached, a procedure to distribute the reward shall be determined by a court.

Article 1060. Use of Works of Science, Literature and Art Conferred Reward

If the subject-matter of a public competition is the creation of a work of science, literature or art and unless otherwise provided by the competition conditions, the person who has announced the competition shall acquire the priority right to conclude with the author of the worked conferred the stipulated reward a contract for the use of the work with payment of a respective remuneration therefore to the author.

 

 

Article 1061. Return of Submitted Works to Participants in Public Competition

The person who has announced a public competition shall be obliged to return the works remained without a reward to the participants in the competition, unless otherwise provided by the announcement of the competition or follows for the nature of the work performed.

 

Chapter 58. Holding of Games and Bets

 

Article 1062. Claims Connected with Organization of Games and Bets and Participation in Them

Claims of citizens and legal persons connected with the organization of games and bets or participation in them shall not be subject to judicial defence, except for claims of the persons who have taken part in games or bets under the effect of fraud, violation, threat or ill-intentioned agreement of their representative with the organizer of the games or bet, as well as claims mentioned in Article 1063(5) of the present Code.

Article 1063. Holding of Lotteries, Sweepstakes and Other Games by State and Municipality or by Their Authorization

1. Relations between organizers of lotteries, sweepstakes (mutual bets) and other games of chance, i.e. the Russian Federation, Russian Federation subjects, municipalities, persons who obtained authorizations (licenses) from an authorized State or municipal agency, and participants in the games shall be based on a contract.

2. In instances provided by the rules of organization of games, a contract between the organizers and participants of games shall be formalized by the issue of a lottery ticket, receipt or other document.

3. An offer to conclude a contract provided by point 1 of the present Article must include conditions on the time of holding the games and a procedure to determine the prize and its amount.

Should the organizer of the games refuse to hold them at the established time, the participants in the games shall have the right to demand from their organizer to compensate for actual damage caused by the cancellation of the games or postponement thereof.

4. The persons who in accordance with the conditions of holding a lottery, sweepstakes or other games have been recognized the winners must be paid by the organizer of the games the prize in the amount, form (monetary or in kind) and period of time provided by the conditions of holding the games or if the period was not specified in these conditions, not later than 10 days from the moment of determining the results of the games.

5. Should the organizer of the games fail to fulfil the duty mentioned in point 4 of the present Article, the participant who has won in the lottery, sweepstake or other games shall have the right to demand from the organizer of the games that the prize be paid, as well losses caused by the violation of the contract on the part of the organizer be compensated.

Chapter 59. Obligations in Consequence of Causing of Harm

 

Paragraph 1. General Provisions on Compensation for Harm

Article 1064. General Grounds for Responsibility for Causing of Harm

1. Harm caused to the personality or property of a citizen, as well as harm caused to property of a legal person shall be subject to compensation in full by the person who has caused the harm.

A law may place the duty to compensate for harm on a person who is not the causer of harm.

A law or contract may provide for the duty of the causer of harm to pay compensation to the victim in excess of the compensation for harm.

2. The person who has caused harm shall be released from compensating for harm, if he proves that the harm has not been caused through a fault of his. A law may also provide for compensation for harm in the absence of the harm causers fault.

3. Harm caused through a lawful action shall be subject to compensation in instances provided by law.

Compensating for harm may be rejected if the harm was caused at the request or by consent of the victim and the actions of the harm causer have not violated moral principles of society.

Article 1065. Preventing Causing of Harm

1. The danger of causing harm in the future may be a ground for a claim to prohibit the activity which has created such danger.

2. If the harm caused has resulted from the operation of an enterprise, structure or from other production activity which continues to cause harm or threatens with new harm, a court shall have the right to oblige the defendant, apart from compensating for harm, to suspend or stop the respective activity.

A court may refuse a claim for the suspension or cessation of the respective activity only if the suspension or cessation thereof is contrary to public interests. The refusal to suspend or stop such activity shall not deprive the victims of the right to compensation for the harm caused by this activity.

Article 1066. Causing of Harm While Putting Up Necessary Defence

The harm caused while putting up necessary defence shall not be subject to compensation, unless, in so doing, its limits have been exceeded.

Article 1067. Causing of Harm in Case of Emergency

The harm caused in case of emergency, i.e. in order to eliminate a danger threatening the harm causer himself or other persons if this danger could not under circumstances be eliminated by other means, must be compensated by the person who has caused the harm.

Considering the circumstances in which such harm was caused, a court may impose the duty to compensate for it on the third person in whose interests the harm was caused or release wholly or partially both this person and the harm causer from compensation for harm.

Article 1068. Responsibility of Legal Entity or Citizen for Harm Caused by Their Employee

1. A legal person or citizen shall compensate for the harm caused by their employee while performing his labour (ministerial, official) duties.

As applied to the rules provided by the present Chapter, citizens shall be deemed to be employees if they carry out a work on the basis of a labour agreement (contract), including citizens who carry out a work under a civil-law contract, if, in so doing, they acted or must have acted following the task of the respective legal person or citizen and under his control over safe performance of works.

2. Economic partnerships and production cooperatives shall compensate for the harm caused by their participants (members) while the latter were conducting entrepreneurial, productive or other activity of the partnership or cooperative.

Article 1069. Responsibility for Harm Caused by State Agencies, Local Self-Government Agencies and Also by Their Officials

The harm caused to a citizen or legal person as a result of unlawful actions (lack of actions) by State agencies, local self-government agencies or officials of these agencies, including as a result of the issue by a State agency or local self-government agency of a legal act which does not comply with a law or other legal act, shall be subject to compensation. The harm shall be compensated, respectively, from the treasury of the Russian Federation, the treasury of a Russian Federation subject, or from municipal treasury.

Article 1070. Responsibility for Harm Caused by Unlawful Actions of Inquest, Preliminary Investigation, Public Prosecutor's and Judicial Agencies

1. The harm caused to a citizen as a result of unlawful conviction, unlawful call to criminal responsibility, unlawful custody or the written promise not to leave applied as a suppression measure, or unlawful imposition of an administrative penalty in the form of arrest or corrective labour shall be compensated in full at the expense of the Russian Federation treasury and in instances provided by law, from the treasury of a Russian Federation subject or municipal treasury according to the statute-established procedure irrespective of the fault of officials from inquest, preliminary investigation, public prosecutor's or judicial agencies.

2. The harm caused to a citizen or legal person as a result of unlawful activity of inquest and preliminary investigation agencies or public procurator's offices which have not entailed consequences mentioned in point 1 of the present Article shall be compensated on the grounds and according to the procedure provided by Article 1069 of the present Code. Harm caused while administering justice shall be compensated if the judge's fault has been established by the court verdict which has come into legal force.

Article 1071. Agencies and Persons Acting in Name of Treasury When Compensating for Harm at Expense Thereof

In instances where in accordance with the present Code or other laws the harm caused is subject to compensation at the expense of the Russian Federation treasury, the treasury of a Russian Federation subject or municipal treasury, the respective financial agencies shall act in the name of the treasury, unless in accordance with Article 125(3) of the present Code this duty has been imposed on another agency, legal person or citizen.

Article 1072. Compensation for Harm by Person Who Has Insured his Responsibility

A legal person or a citizen who has insured his responsibility in a voluntary or obligatory insurance procedure for the benefit of the victim (Articles 931, 935[1]) in the event that the insurance indemnity is insufficient in order to fully compensate for the harm caused, shall compensate the difference between the insurance indemnity and actual size of damage.

Article 1073. Responsibility for Harm Caused by Minors Under Fourteen Years of Age

1. The harm caused by a minor who has not reached fourteen years of age (under-age) shall be the responsibility of his parents (adopters) or trustees, unless they prove that the harm has occurred through no fault of theirs.

2. If a minor needing trusteeship has been situated in a respective nurturing and treatment institution, institution of social protection of the populace or other similar institution which by operation of law is his trustee (Article 35), this institution shall be obliged to compensate for the harm caused by the minor, unless it proves that the harm has occurred through no fault of the institution.

3. If a minor has caused harm while being under supervision of the educational, nurturing, treatment or other institution obliged to supervise him or of the person exercising supervision on a contract basis, this institution or person shall be responsible for the harm, unless it (he) proves that the harm has occurred though no fault of the institution (person) while exercising supervision.

4. The duty of parents (adopters), educational, nurturing, treatment and other institutions to compensate for the harm caused by a minor shall not terminate after the minor has come of age or obtained property sufficient to compensate for the harm.

If parents (adopters), trustees or other citizens mentioned in point 3 of the present Article have died or do not have enough resources to compensate for the harm caused to the victim's life or health, while the harm causer himself who has become fully capable possesses such resources, the court considering the property status of the victim and the harm causer, as well as other circumstances, shall have the right to award full or partial compensation for the harm at the expense of the harm causer himself.

 

 

Article 1074. Responsibility for Harm Caused by Minors from Fourteen to Eighteen Years of Age

1. Minors in age from fourteen to eighteen years shall bear responsibility of their own on the usual terms for the harm caused.

2. In the event that a minor in age from fourteen to eighteen years has no income or other property sufficient for compensation for harm, the harm must be compensated in full or deficient amount of compensation must be paid by his parents (adopters) or trustees, unless they prove that the harm has occurred through no fault of theirs.

If a minor in age from fourteen to eighteen years needing guardianship has been situated in a respective nurturing and treatment institution, institution of social protection of the populace or other similar institution which by operation of law is his guardian (Article 35), this institution shall be obliged to compensate for the harm in full or pay deficient amount of compensation, unless it proves that the harm has occurred through no fault of the institution.

3. The duty of parents (adopters), guardian and the respective institution to compensate for the harm caused by a minor in age from fourteen to eighteen years shall terminate after the harm causer has come of age or when before coming of age he has acquired income or other property sufficient to compensate for the harm or when before coming of age he has acquired active capacity.

Article 1075. Responsibility of Parents Deprived of Parental Rights for Harm Caused By Minor

A court may impose on a parent deprived of parental rights responsibility for the harm caused by his under-age child during three years from the deprivation of the parent of parental rights if behaviour of the child entailing the causing of harm has resulted from improper exercise of parental duties.

Article 1076. Responsibility for Harm Caused by Citizen Deemed to Be Incapable

1. Harm caused by a citizen who has been deemed incapable shall be compensated by his trustee or organization obligated to supervise him, unless they prove that the harm has occurred through no fault of theirs.

2. The duty of the trustee or supervising organization to compensate for the harm caused by a citizen deemed incapable shall not terminate, should he be subsequently recognized to be capable.

3. If the trustee has died or does not have enough resources to compensate for the harm caused to the victim's life or health, while the harm causer himself possesses such resources, the court considering the property status of the victim and the harm causer, as well as other circumstances, shall have the right to award compensation in full or in part at the expense of the harm causer himself.

 

 

Article 1077. Responsibility for Harm Caused by Citizen Deemed to Be Partially Capable

Harm caused by a citizen who has been limited in capacity in consequence of alcohol or drug abuse shall be compensated by the harm causer himself.

Article 1078. Responsibility for Harm Caused by Citizen Unable to Understand Significance of His Actions

1. A capable citizen or a minor in age from fourteen to eighteen years who has caused harm in a state when he could not understand the significance of his actions or control them shall not be responsible for the harm caused by him.

If harm has been caused to the victim's life or health, the court considering the property status of the victim and the harm causer, as well as other circumstances, may impose the duty to compensate for the harm fully or partially upon the harm causer himself.

2. The harm causer shall not be released from responsibility if he has driven himself into the state in which he could not understand the significance of his actions or control them by taking spirits or drugs or in other way.

3. If harm has been caused by a person who could not understand the significance of his actions or control them in consequence of mental disorder, the duty to compensate for the harm may be imposed by a court on his able-bodied spouse, parents or children of age living together with him who knew about the mental disorder in the harm causer but have not raised the question of deeming him to be incapable.

Article 1079. Responsibility for Harm Caused by Activity Creating Increased Danger to People Around

1. Legal persons and persons whose activity is connected with an increased danger to people around (use of transport vehicles, mechanisms, high voltage electricity, nuclear power, explosives, strong poisons, etc.) shall be obliged to compensate for the harm caused by the source of increased danger, unless they prove that the harm has occurred in consequence of force-majeure or the victim's intention. The owner of a source of increased danger may be released by a court from responsibility wholly or partially also on the grounds provided by Article 1083(2) and (3) of the present Code.

The duty to compensate for harm shall by placed on a legal person or a citizen who possesses a source of increased danger by right of ownership, economic jurisdiction or operative management or on other lawful ground (by right of lease, power of attorney for the right to drive a transport vehicle, by operation of an order issued by a respective agency for the transfer to him of a source of increased danger, etc.).

2. The owner of a source of increased danger shall not be responsible for harm caused by this source if he proves that the source was taken from his possession as a result of unlawful actions by other persons. Responsibility for harm caused by the source of increased danger in such instances shall be born by the persons who have illegally seized the source. Should the owner of the source of increased danger be guilty of the unlawful withdrawal of the source from his possession, responsibility may be imposed both on the owner and the person who has unlawfully seized the source of increased danger.

3. Owners of sources of increased danger shall bear joint responsibility for harm caused to third persons as a result of the interaction of these sources (collision of transport vehicles, etc.) on the grounds provided by point 1 of the present Article.

Harm caused as a result of the interaction of sources of increased danger to their owners shall be compensated on the usual terms (Article 1064).

Article 1080. Responsibility for Jointly Caused Harm

Persons who have jointly caused harm shall bear joint responsibility to the victim.

Upon the application of the victim and in his interests a court shall have the right to place on the persons who have jointly caused harm responsibility in shares, having determined them in accordance with the rules provided by Article 1081(2) of the present Code.

Article 1081. Right of Recourse Against Person Who Has Caused Harm

1. The person who has compensated for the harm caused by another person (by an employee while performing his official, ministerial or other work duties, by a person who was driving a vehicle, etc) shall have the right to a counter claim (recourse) against this person in the amount of compensation paid, unless a different amount has been established by law.

2. The harm causer who has compensated for the jointly caused harm shall have the right to demand from each of the other harm causers a share of the compensation paid to the victim in the amount corresponding to the degree of fault of this harm causer. If it is impossible to determine the degree of fault, the shares shall be deemed to be equal.

3. The Russian Federation, a Russian Federation subject or a municipality, if they have compensated for the harm caused by an official of inquest, preliminary investigation, public prosecutor's or judicial agencies (Article 1070[1]), shall have the right of recourse against this person when his fault has been established by the court verdict which has entered into legal force.

4. Persons who have compensated for harm on grounds mentioned in Articles 1073-1076 of the present Code shall not have the right of recourse against the person who has caused the harm.

Article 1082. Procedures to Compensate for Harm

When satisfying a claim for compensation for harm, the court proceeding from circumstances shall obligate the person responsible for the causing of harm to compensate for the harm in kind (provide a thing of the same kind and quality, repair the damaged thing, etc.) or compensate for losses caused (Article 15[2]).

Article 1083. Allowing for Fault of Victim and Property Status of Person Who Has Caused Harm

1. Harm which has occurred in consequence of an intention on the part of the victim shall not be subject to compensation.

2. If gross negligence of the victim himself has favoured the occurrence or growth of the harm, the amount of compensation must be reduced depending on the degree of fault of the victim and the harm causer.

In the event of gross negligence on the part of the victim and in the absence of fault on the part of the harm causer in instances where his responsibility arises irrespective of the fault, the amount of compensation must be reduced or compensation for harm may be refused, unless otherwise provided by law. Should harm be caused to the victim's life or health, refusing to compensate for the harm shall not be permitted.

The victim's fault shall not be taken into account in the event of compensating for additional expenses (Article 1085[1]), for harm in connection with the breadwinner's death (Article 1089), as well as for burial expenses (Article 1094).

3. A court may reduce the amount of compensation for the harm caused by a citizen, taking into account his property status, except in instances where harm has been caused by an intentionally committed action.

Paragraph 2. Compensation for Harm Caused to Life or Health of Citizen

Article 1084. Compensation for Harm Caused to Life or Health of Citizen While Fulfilling Contractual or Other Obligations

Harm caused to life or health of a citizen when he was fulfilling his contractual obligations, as well as duties relating to military service, militia service and other respective duties, shall be compensated according to the rules provided by the present Chapter, unless a higher degree of responsibility has been provided by a law or contract.

Article 1085. Amount and Nature of Compensation for Harm Caused by Damage to Health

1. When a mutilation or other damage to a citizen's health has been caused, compensation must be made for the earnings (income) lost by the victim which he had or could have, as well as for additionally incurred expenses caused by the damage to his health, including expenses on medical treatment, nourishing diet, purchase of medicines, prosthetics, nursing by another person, sanatorium and spa treatment, acquisition of special transport vehicles, training for another profession, if it has been established that the victim needs these types of assistance and care and does not have the right to get them free of charge.

2. When determining the earnings (income) lost, the disability pension assigned to the victim in connection with the mutilation or other damage to health, and equally other pensions, benefits and other similar payments assigned both prior to and after the causing of damage to health, shall not be taken into consideration and shall not entail a reduction in the amount of compensation for the harm (not be counted towards compensation for the harm). The earnings (income) obtained by the victim after his health has been damaged also shall not be counted towards compensation for the harm.

3. The extent and amount of compensation for harm due to the victim in accordance with the present Article may be increased by a law or contract.

Article 1086. Determination of Earnings (Income) Lost As Result of Damage to Health

1. The amount of earnings (income) subject to compensation to the victim shall be determined as a percentage of his average monthly earnings (income) before the mutilation or other damage to health or before the loss by him of ability to work commensurately with the extent to which his professional fitness has been lost or in the absence of professional fitness, the extent to which his general ability to work has been lost.

2. The victim's earnings (income) shall include all types of payments, subject to income tax, for his labour under labour agreements and civil-law contracts both at the place of his regular employment and places of extra jobs. Non-recurrent payments, notably, compensation for an unused vacation or severance pay, shall not be taken into account. Allowances paid for the period of temporary disability or maternity leave shall be counted. Receipts from entrepreneurial activity, as well as royalties, shall be included in the composition of the lost earnings, receipts from entrepreneurial activity being included on the basis of information from the tax inspectorate.

All types of earnings (income) shall be counted in amounts calculated before tax.

3. The average monthly earnings (income) of the victim shall be calculated by dividing by twelve the total sum of his earnings (income) for the twelve working months preceding to the damage to health. If by the time the harm was caused the victim had worked less than twelve months, the average monthly earnings (income) shall be calculated by dividing the total sum of earnings (income) for the number of months actually worked before the damage to health occurred by the number of these months.

The months not completely worked by the victim shall at his discretion be substituted by preceding months completely worked or shall be excluded from the calculation, should the substitution be impossible.

4. If at the moment when harm was caused the victim was jobless, either the earnings before the dismissal or a usual amount of remuneration to an employee of similar qualification in this particular locality, but not less that 5 times the statutory minimum monthly wage, shall be counted at his discretion.

5. If before the causing of a mutilation or other damage to the victim's health, his earnings (income) had undergone stable changes which had improved his property status (his earnings for the post occupied had been increased, he had been transferred to a better paid job, he had taken a job after the graduation from an educational institution as a full-time graduate and in other instances where the stability of the change or prospects for a change in remunerating the victim's labour has been proved), only the earnings (income) he had obtained or must have obtained after the respective change shall be taken into account when determining his average monthly earnings (income).

 

 

Article 1087. Compensation for Harm When Damaging Health of Person Under Age

1. In the event of a mutilation or other damage to health of a person under age who has not reached fourteen years (minor) and does not have earnings (income), the person responsible for the causing of harm shall be obliged to compensate for expenses caused by the damage to health.

2. When the victim has reached fourteen years of age, as well as in the event that harm was caused to a minor in age from fourteen to eighteen years who does not have earnings (income), the person responsible for the causing of harm shall also be obliged to compensate, apart from additional expenses caused by the damage to health, for the harm connected with the loss or decrease in his ability to work, proceeding from the 5-fold statutory minimum monthly wage.

3. If by the time his health was damaged a minor had had earnings, the harm shall be compensated proceeding from the amount of these earnings, but not less that 5 times the statutory minimum monthly wage.

4. After starting his labour activity, the minor to whose health harm was caused shall have the right to demand to increase the amount of compensation for the harm, proceeding from the earnings obtained, but not less than the amount of remuneration established for the post occupied by him or the earnings of an employee of similar qualification at the place of his employment.

Article 1088. Compensation for Harm to Persons Who Have Suffered Damage as a Result of Death of Breadwinner

1. In the event of the death of the victim (breadwinner), the right to compensation for harm shall be enjoyed by:

- children incapable of work and other persons who were dependent on the deceased or who by the day of his death had had the right to obtain support from him; and

- the child of the deceased born after his death; and

- one of the parents, the spouse or other family member, irrespective of his ability to work, who is jobless and is taking care of the children, grandchildren, brothers and sisters of the deceased who were dependent on him and have not reached fourteen years of age or have reached the aforesaid age, but according to medical opinion need attendance of other persons in view of their health condition; and

- persons who were dependent on the deceased and have become disabled within five years after his death.

One the parents, the spouse or a family member who is not working and is taking care of the children, grandchildren, brothers and sisters of the deceased and has become disabled during the attendance period, shall retain the right to compensation for harm after he has ceased caring of these persons.

2. Harm shall be compensated to:

- under-age persons until they have reached eighteen years of age; and

- students older than eighteen years until the graduation from educational institutions as full-time graduates, but not older than 23 years of age; and

- women older than 50 years and men older than 60 years - for life; and

- invalids for the invalidity period; and

- one of the parents, the spouse or other family member occupied with caring of the children, grandchildren, brothers and sisters of the deceased who were dependent on him until they have reached fourteen years of age or a change has occurred in their health condition.

Article 1089. Amount of Compensation for Harm Suffered in Event of Breadwinner's Death

1. Persons having the right to compensation for harm in connection with the breadwinner's death shall be compensated in the amount of the share in the earnings (income) of the deceased determined according to the rules of Article 1086 of the present Code which they were obtaining or had the right to obtain for their maintenance during his lifetime. When compensation for harm to these people is determined, the receipts of the deceased, apart from his earnings (income), shall include pensions, life annuity and other similar payments obtained by him during his lifetime.

2. When the amount of compensation for harm is determined, pensions granted to persons in connection with the breadwinner's death, and equally other types of pensions assigned both prior to and after the breadwinner's death, as well as the earnings (income) and scholarship obtained by these persons shall not be counted towards compensation for harm to them.

3. The amount of compensation established for each of those having the right to compensation for harm in connection with the breadwinner's death shall not be subject to subsequent recalculation, except in instances of:

- the birth of a child after the breadwinner's death; and

- the assignment or termination of compensation payment to persons occupied with caring for the children, grandchildren, brothers and sisters of the deceased breadwinner.

The amount of compensation may be increased by a law or contract.

Article 1090. Subsequent Change of Amount of Compensation for Harm

1. The victim who has partially lost his ability to work shall have the right at any time to demand from the person, on whom the duty to compensate for the harm was imposed, a respective increase of the amount of his compensation if the victim's ability to work has subsequently declined in connection with the damage caused to his health in comparison with the ability he had by the moment when compensation for the harm was awarded to him.

2. The person on whom the duty to compensate for the harm caused to the victim's health was imposed shall have the right to demand a commensurate decrease of compensation amount if the victim's ability to work has grown in comparison with that he had by the moment of awarding compensation for the harm.

3. The victim shall have the right to demand to increase the amount of compensation for harm if the property status of the citizen, on whom the duty to compensate for the harm was imposed, has improved, whereas the amount of compensation was reduced in accordance with Article 1083(3) of the present Code.

4. At the demand of the citizen who has caused harm, the court may reduce the amount of compensation for the harm if his property status has worsened in connection with invalidity or his reaching pension age as compared with the status at the moment of awarding compensation for the harm, except in instances where harm was caused by an intentionally committed action.

Article 1091. Increase of Amount of Compensation for Harm in Connection with Rise in Cost of Living and Increase of Minimum Wage Amount

1. Should the cost of living rise, the sums of compensation paid by a citizen for the harm caused to the victim's life or health shall be subject to indexation according to the established procedure.

2. Should the minimum wage level be raised according to the procedure established by law, the sums of compensation for the lost earnings (income) and of other payments awarded in connection with damage to health or death of the victim shall be increased in proportion to the increase of the statutory minimum wage amount (Article 318).

Article 1092. Payments to Compensate for Harm

1. Compensation for the harm caused by the victim's decreased ability to work or by his death shall be effected by monthly payments.

In the presence of valid reasons, a court considering possibilities of the harm causer may, at the demand of the citizen having the right to compensation for harm, award him to make payments due all at once, but not more than for three years at a time..

2. The sums in compensation for additional expenses (Article 1085[1]) may be awarded to be paid in the future within the time period determined on the basis of an opinion by medical experts, and also when it is necessary to pay in advance for the cost of respective services and property, including the purchase of a place in a sanatorium, payment of fare, and payment for special transport vehicles.

Article 1093. Compensation for Harm in Event of Termination of Legal Person

1. In the event of the reorganization of the legal person recognized in the established procedure to be responsible for the harm caused to life or health, the duty to make respective payments shall be assumed by his successor. Also, demands to compensate for harm shall be presented to him.

2. In the event of the liquidation of the legal person recognized in the established procedure to be responsible for the harm caused to life or health, the respective payments must be capitalized in order to pay them to the victim according to the rules established by a law or other legal acts.

A law or other legal acts may also specify other instances where payments may be capitalized.

Article 1094. Compensation for Burial Expenses

Persons responsible for the harm caused by the victim's death shall be obliged to compensate for necessary burial expenses to the person who has incurred these expenses.

A burial allowance obtained by citizens who have suffered these expenses shall not be reckoned towards compensation for the harm.

Paragraph 3. Compensation for Harm Caused in Consequence of Defects in Goods, Works or Services

Article 1095. Grounds for Compensation for Harm Caused in Consequence of Defects in Goods, Works or Services

The harm caused to a citizen's life, health or property or to property of a legal person in consequence of defects in the design, recipe or other defects of goods, works or services, as well as in consequence of unreliable or insufficient information about the goods (work, service), shall be subject to compensation by the seller or manufacturer of the goods or by the person who has performed a work or provided a service (performer) irrespective of their fault and of whether or not the victim had contractual relations with them.

The rules provided by the present Article shall apply only in instances where goods are bought (work is performed or service is provided) for consumer purposes and not for use in entrepreneurial activity.

Article 1096. Persons Responsible for Harm Caused in Consequence of Defects in Goods, Work or Service

1. At the victim's discretion, the harm caused in consequence of defects in goods shall be subject to compensation either by the seller or by the manufacturer of the goods.

2. The harm caused in consequence of defects in a work or service shall be subject to compensation by the person who has performed the work or provided the service (performer).

3. The harm caused in consequence of the failure to provide complete or reliable information about the goods (work, service) shall be subject to compensation by persons mentioned in points 1 and 2 of the present Article.

Article 1097. Time to Compensate for Harm Caused as Result of Defects in Goods, Work or Service

1. The harm caused in consequence of defects in goods, works or services shall be subject to compensation if it has arisen during the fitness period established for the goods (works, services) and if fitness period has not been established, within 10 days from the day of producing the goods (works, services).

2. Beyond the time limits mentioned in point 1 of the present Article, harm shall be subject to compensation if:

- fitness period has not been established in violation of the requirements of law; and

- the person to whom the goods were sold, the work performed or the service provided was not warned about necessary actions to be taken upon the expiration of fitness period and about eventual consequences of the failure to perform the aforementioned actions.

Article 1098. Grounds for Release from Responsibility for Harm Caused in Consequence of Defects in Goods, Works or Services

The seller or manufacturer of goods, performer of a work or service shall be released from responsibility if he proves that the harm has arisen in consequence of force-majeure or violation by the consumer of the rules established for the use of goods, results of work or service or their storage.

Paragraph 4. Compensation for Moral Harm

Article 1099. General Provisions

1. The grounds for and the amount of compensation to a citizen for moral harm shall be determined by the rules provided by the present Chapter and Article 151 of the present Code.

2. Moral harm caused by actions (lack of actions) violating a citizen's property rights shall be subject to compensation in instances provided by law.

3. Compensation for moral harm shall be effected irrespective of the property harm subject to compensation.

Article 1100. Grounds for Compensation for Moral Harm

Compensation for moral harm shall be effected irrespective of the harm causer's fault in instances where:

- the harm was caused to a citizen's life or health by a source of increased danger; and

- the harm was caused to a citizen as a result of unlawful conviction, unlawful call to criminal responsibility, unlawfully taking him into custody or demanding a written promise not to leave applied as suppression measures, unlawful imposition of an administrative penalty in the form of arrest or corrective labour; and

- the harm was caused by the dissemination of information discrediting the honour, dignity and business reputation; and

- in other instances provided by law.

Article 1101. Procedure and Amount of Compensation for Moral Harm

1. Compensation for moral harm shall be effected in a monetary form.

2. The amount of compensation for moral harm shall be determined by a court depending on the nature of physical and moral suffering caused to the victim, as well as the degree of fault of the harm causer in instances where the fault is a ground for compensation for harm. When determining the amount of compensation for harm, the requirements of reason and justice must be taken into consideration.

The nature of physical and moral suffering shall be judged by a court with consideration for actual circumstances under which moral harm was caused and for individual peculiarities of the victim.

Chapter 60. Obligations in Consequence of Unjustified Enrichment

 

Article 1102. Duty to Return Unjustified Enrichment

1. The person who without grounds established by a law, other legal acts or transaction has acquired or saved property (acquirer) at the expense of another person (victim) shall be obliged to return to the latter the unjustly acquired or saved property (unjustified enrichment), except in instances provided by Article 1109 of the present Code.

2. The rules provided by the present Chapter shall apply irrespective of whether the unjustified enrichment resulted from the behaviour of the acquirer of property, the victim himself or third persons or occurred against their will.

Article 1103. Relationship Between Requirements to Return Unjustified Enrichment and Requirements to Protect Civil Rights

Unless otherwise established by the present Code, other laws or legal acts or follows from the essence of respective relations, the rules provided by the present Chapter shall also be subject to application to the requirements concerning:

1) the return of the executed under an invalid transaction;

2) reclamation by the owner of property from another's unlawful possession;

3) the claim by one party to an obligation against the other party for the return of the executed in connection with this obligation;

4) compensation for harm, including the one caused by mala fide behaviour of the enriched person.

Article 1104. Return of Unjustified Enrichment in Kind

1. The property constituting the acquirer's unjustified enrichment must be returned to the victim in kind.

2. The acquirer shall be responsible to the victim for any, including accidental, shortage or deterioration of unjustly acquired or saved property which have occurred after he learnt or must have learnt about the unjust nature of enrichment. Until such moment he shall be responsible only for intention and gross negligence.

Article 1105. Compensation for Value of Unjustified Enrichment

1. If it is impossible to return the unjustly acquired or saved property in kind, the acquirer must compensate the victim for the actual value of this property effective at the moment of the acquisition thereof, as well as for losses caused by subsequent change in the value of the property, unless the acquirer has compensated for its value immediately after he learnt about the unjust nature of enrichment.

2. The person who has temporarily used another's property without intending to acquire it or another's services must compensate the victim for what he has saved in consequence of such use at a price existing on the date when the use was terminated and at the place where it was going on.

Article 1106. Consequences of Unjustified Transfer of Right to Another Person

The person who by way of ceding a claim or otherwise has transferred a right belonging to him to another person on the basis of a non-existing or invalid obligation shall have the right to demand to restore the former situation, including the return to him of documents certifying the right transferred.

Article 1107. Compensating Victim for Profits Missed

1. The person who has unjustly obtained or saved property shall be obliged to return or compensate the victim for all profits he has derived or must have derived from this property from the moment he learnt or must have learnt about the unjust character of enrichment.

2. Interest on the sum of unjustified pecuniary enrichment shall be charged for the use of another's funds (Article 395) from the time when the acquirer learnt or must have learnt about the unjust character of obtaining or saving monetary funds.

Article 1108. Compensation for Expenses on Property Subject to Return

When returning the unjustly obtained or saved property (Article 1104) or compensating for the value thereof (Article 1105), the acquirer shall have the right to demand from the victim to compensate for expenses necessary for the maintenance and preservation of the property from the time from which he was obliged to return profits (Article 1106) with the offset of advantages obtained by him. The right to compensation for expenses shall be lost when the acquirer was deliberately holding the property subject to return.

Article 1109. Unjustified Enrichment Not Subject to Return

The following shall not be subject to return as unjustified enrichment:

1) property transferred in fulfilment of an obligation before the time to fulfil has come, unless otherwise provided by the obligation;

2) property transferred in fulfilment of an obligation upon the expiration of the limitation period;

3) wage and salary and equated payments, pensions, allowances, scholarships, compensation for the harm caused to life or health, alimony and other sums of money granted to a citizen as a means of subsistence in the absence of mala fides on his part and an error in calculation;

4) sums of money and other property provided in fulfilment of a non-existing obligation if the acquirer proves that the person demanding to return the property knew about the absence of the obligation or provided the property for charity purposes.

 

President of the Russian Federation B. Yeltsin

Moscow, Kremlin

26 January 1996