Civil Code Part I

 

THE CIVIL CODE OF THE RUSSIAN FEDERATION

PART ONE

(as amended and added to of 8 July 1999)

Adopted by the State Duma 21 October 1994

SECTION I. GENERAL

Subsection I. GENERAL PROVISIONS

Chapter 1.Civil Legislation

Article 1. Basic principles of civil legislation.

1. Civil legislation proceeds from recognizing the equality of participants in relations regulated thereby, inviolability of property, freedom of contract, inadmissibility of someone’s intervention in private affairs, necessity for civil rights to be freely exercised, ensuring restoration of violated rights and their judicial protection.

2. Citizens (individuals) and legal persons acquire and exercise their civil rights willfully and to their benefit. They are free to set their rights and responsibilities on a contractual basis and to stipulate new contract terms and conditions unless these are contrary to legislation.

Civil rights can be restricted on the basis of federal law and only to the extent deemed necessary to protect foundations of constitutional order, morality, health, rights and lawful interests of other people and to ensure national defence and security of the state.

3. Goods, services and financial resources can freely move within the entire territory of the Russian Federation.

Restrictions as to the movement of goods and services can be imposed in accordance with federal law if so required for the purposes of ensuring security, protection of people’s lives and health, conservation of nature and protection of cultural values.

Article 2. Relationships regulated by civil legislation.

1. Civil legislation defines the legal status of participants in civil circulation, grounds for the rise and order for the exercise of property right and other real rights, exclusive rights to the results of intellectual work (intellectual property), regulates contractual and other obligations, as well as other proprietary and related personal non-propriety relations based on the equality, autonomy of will and propriety independence of their participants.

Participants in relations regulated by civil legislation include citizens and legal persons. Also, the Russian Federation, Russian Federation subjects and municipal formations can participate in relations regulated by civil legislation (article 124).

Civil legislation regulates relations between persons engaged in entrepreneurial activities or participating in them where it proceeds from the concept that an activity is entrepreneurial if it is carried on independently and at one’s own risk and is aimed at regular profit-making through using property, selling goods, performing jobs and providing services by persons registered in this quality according to the procedure established by the law.

The rules laid down by civil legislation apply to relations in which foreign citizens and foreign legal persons are participants unless otherwise provided for by federal law.

2. Inalienable human rights and freedoms and other immaterial goods are protected by civil legislation unless it follows differently from the nature of these immaterial goods.

3. Civil legislation does not apply to property relations based on administrative or other authoritative subordination of one party to another, including tax and other financial relations unless otherwise stipulated by the legislation.

Article 3. Civil legislation and other acts containing civil law norms.

1. According to the Russian Federation Constitution, civil legislation falls within competence of the Russian Federation.

2. Civil legislation consists of this Code and other federal laws adopted in line with it (hereafter referred to as "laws") which regulate relations specified in pts. 1 and 2, art. 2 of this Code.

Civil law norms contained in other laws must be in conformity with this Code.

3. Relations specified in pts. 1 and 2, article 2 of this Code can also be regulated by Russian Federation Presidential edicts which must not contravene this Code and other laws.

4. On the basis and in fulfillment of this Code, other laws and Russian Federation Presidential edicts, the Russian Federation government has the right to pass enactments containing civil law norms.

5. If a Russian Federation Presidential edict or Russian Federation governmental enactment conflicts with this Code or some other law, this Code or relevant law shall be applied.

6. Operation and application of the civil law norms contained in Russian Federation {residential edicts and Russian Federation governmental enactments (hereafter referred to as "other legal acts) are determined by the rules set in this chapter.

7. Ministries and other executive federal agencies can issue acts containing civil law norms only in the cases and within the limits specified by this Code, other laws and other legal acts.

Article 4. Duration of civil legislation.

1. Civil legislation acts are not retroactive and apply to relations arising after they have come into effect.

A law applies to relations which had arisen prior to its coming into effect only in the instances immediately provided for by the law.

2. As to the relations arising before a civil legislation act comes into effect, the latter applies to the rights and duties which arise after its enactment. The parties’ relations under a contract signed before the civil legislation act comes into effect are regulated according to article 422 of this Code.

Article 5. Customs in business practice.

1. A custom in business practice is recognized to be a rule of behavior not provided for by the legislation that has long developed and been in wide use in some business field regardless of whether or not it has been recorded in a document.

2. Business practice customs conflicting with the legislation or contract provisions that are binding on the parties to appropriate relations shall not be applied.

Article 6. Application of civil legislation by analogy.

1. In the cases where relations specified by pts. 1 and 2 in article 2 of this Code are not directly regulated by the legislation or by the parties’ agreement and there is no applicable business custom, civil legislation regulating similar relations (analogy of the statute) is applied to such relations unless this is contrary to their essence.

2. If it is impossible to use the statute analogy, the parties’ rights and duties are determined proceeding from general principles and tenor of civil legislation (analogy of the law), as well as requirements of conscientious, reason and justice.

Article 7. Civil legislation and international law norms.

1. Universally recognized principles and norms of international law and international agreements signed by the Russian Federation are, according to the Russian Federation Constitution, part of Russian Federation’s legal system.

2. International agreements of the Russian Federation are directly applicable to relations mentioned in pts. 1 and 2, article 2 of this Code except in the cases when it follows from the international agreement that its application requires issuing a national act.

If an international agreement of the Russian Federation establishes rules differing from those provided for by civil legislation, then the international agreement rules shall apply.

Chapter 2 Arising of civil rights and duties, exercise and protection of civil rights.

Article 8. Grounds for the arising of civil rights and duties.

1. Civil rights and duties arise from the grounds provided for by the law and other legal acts, as well as from actions of citizens and legal persons which, though not stipulated by the law and such acts, give rise to civil rights and duties by virtue of general principles and tenor of civil legislation.

Accordingly, civil rights and duties arise:

1) from contracts and other transactions provided for by the law, as well as contracts and other transactions that, not being provided for by the law, do not contravene it;

2) from acts by state agencies and local self-government bodies stipulated by the law as grounds for the rise of civil rights and duties;

3) from a judicial decision that has established civil rights and duties;

4) as the result of acquiring property on grounds permitted by the law;

5) as the result of creating works of science, literature, art, inventions and other products of intellectual activity;

6) on account of damage inflicted on some other person;

7) on account of unjust enrichment;

8) on account of other actions by citizens and legal persons;

9) on account of events to which the law or other legal act relates the ensuing of civil and legal consequences.

2. Property rights that are subject to state registration arise from the time the proper property rights have been registered unless otherwise stipulated by the law.

Article 9. Exercise of civil rights.

1. Citizens and legal persons exercise at their discretion the civil rights belonging to them.

2. Refusal by citizens and legal persons to exercise their rights does not entail termination of these rights except in the cases specified by the law.

Article 10. Limits for the exercise of civil rights.

1. Citizens and legal persons are banned from actions undertaken exclusively with the intention of inflicting damage on other persons, as well as from the misuse of a right in any other form.

The use of civil rights for the purposes of setting bounds to competition, as well as the abuse of domination on the market are not permitted.

2. If the requirements specified in pt. 1 of this article are not observed, the court of law or court of arbitration can deny the person protecting the right belonging to him.

3. In the cases when the law makes protection of civil rights dependent on whether these rights have been exercised reasonably and conscientiously, reasonable actions and conscientious of participants in civil relations at law are presupposed.

Article 11. Judicial protection of civil rights.

1. Protection of violated or disputed civil rights is carried out by the court of law, court of arbitration or arbitration tribunal (hereafter referred to as "court") according to the jurisdiction for cases laid down by procedural legislation.

2. Protecting civil rights administrative is possible only in the cases specified by the law. An administrative made decision can be appealed to the court.

Article 12. Ways of protecting civil rights.

Civil rights can be protected by way of:

- recognizing the right;

- restoring the status quo as it existed before the breach of the right and preventing actions that violate the right or create a threat of its violation;

- recognizing a disputable transaction as invalid and applying consequences of its invalidity, applying consequences of invalidity of the null transaction;

- recognizing an act of the state agency or local self-government body as invalid;

- self-protection of the right;

- adjudging to the execution of the duty;

- compensating for losses;

- enforcing a penalty;

- undoing moral damage;

- terminating or changing the legal relation;

- non-use by the court of the law-conflicting act issued by a state agency or local self-government body;

- other methods provided for by the law.

Article 13. Nullifying acts of state agencies or local self-government body.

A non-statutory act issued by a state agency or local self-government body, as well as a statutory act in the cases specified by the law which do not comply with the law or other legal acts and violate civil rights and law-protected interests of the citizen or legal person can be judged by the court as invalid.

If the court nullifies the act, the violated right is to be restored or protected some other way provided for by article 12 of this Code.

Article 14. Self-protection of civil rights.

Self-protection of civil rights is permissible.

Self-protection methods should be adequate to the breach and never surpass the scope of actions required to prevent it.

Article 15. Compensating for losses.

1. The person whose right has been violated can demand that the losses inflicted on him be compensated for, unless the law or contract stipulates a smaller recovery.

2. Losses imply the expenses that the person whose right had been violated incurred or will have to incur in order to restore the violated right, the loss or damage of his property (actual damage), as well as lost revenues this person could have received under normal conditions of civil circulation, had his right not been violated (lost profit).

If the right-breaker made gains in consequence of this, the victim has the right to demand that, besides other losses, the lost profit be recovered in the amount no less than such gains.

Article 16. Compensating for losses caused by state agencies and local self-government bodies.

Losses inflicted upon the citizen or legal person as a result of unlawful actions (lack of actions) by state agencies, local self-government bodies or officials thereof, including the issuance of acts by state agencies or local self-government bodies at variance with the law or other legal act, are to be refunded by the Russian Federation, corresponding Russian Federation subject or municipal unit.

Subsection 2. PERSONS

Chapter 3 Citizens (individuals)

Article 17. Person’s legal capacity.

1. All citizens are equally recognized as having capacity to enjoy civil rights and carry out duties (citizen’s legal capacity).

2. The citizen’s legal capacity arises with his birth and ends with his death.

Article 18. Essence of citizens’ legal capacity.

Citizens may possess property as of the right of ownership; inherit and bequeath property; run business or any other activity unforbidden by the law; create legal persons independently or jointly with other citizens or legal persons; conduct any lawful transactions and assume obligations; choose places of residence; hold copyright in works of science, literature and art, inventions and other products of intellectual activity protected by the law; have other property and personal non-property rights.

Article 19. Citizen’s name.

1. The citizen acquires and exercises rights and duties under his name, including the surname and first name, as well as patronymic, unless otherwise follows from the law or national tradition.

In the cases and pursuant to the procedure specified by the law, the citizen may use a pseudonym (fictitious name).

2. The citizen has the right to change his name according to the legally established procedure. The citizen’s changing his name is no ground for the termination or change in his rights and duties acquired under the former name.

The citizen shall take all necessary measures to inform his debtors and creditors of the change in his name and shall run the risk of consequences caused by these persons’ unawareness of the change in his name.

The citizen who has changed his name has the right to demand that appropriate changes be entered at his expense into the documents registered in his former name.

3. The citizen’s birthname, as well as the change in his name are subject to registration according to the procedure established for certificates of registration.

4. Acquiring the rights and duties under the name of other persons is not allowed.

5. The damage inflicted on the citizen as a result of unlawfully using his name is subject to the repair under this Code.

If the citizen’s name is misspelled or used in the way or form that injure his honor, dignity or business reputation, the rules provided for by article 152 of this Code shall be applied.

Article 20. Citizen’s place of residence.

1. The citizen’s place of residence is considered the place where the citizen permanently or predominantly resides.

2. Place of residence for minors under the age of fourteen or the citizens under the guardianship is recognized to be the place of residence of their legitimate representatives, i.e. parents, adopters or guardians.

Article 21. Citizen’s active capacity.

1. The citizen’s capacity in using his actions to acquire and exercise civil rights, create civil duties for himself and realize them (citizen’s active capacity) arises in full measure at the time of his majority, i.e. upon his reaching the age of eighteen.

2. In the case where the law allows marriage before legal age, the citizen under the age of eighteen acquires active capacity in full measure from the time of marriage.

Active capacity ensuing from the marriage is still fully retained when the marriage is dissolved before the age of eighteen is reached.

If the court recognizes a marriage invalid, it can make a decision to deprive the under-age spouse of active capacity beginning from the time set by the court.

Article 22. Inadmissibility of depriving and restricting citizen’s legal and active capacity.

1. Nobody can be restricted in his legal and active capacity in any way, except in the cases and according to the procedure established by the law.

2. Non-observance of conditions and procedure established by the law for restricting citizens’ capacity or their right to engage in business or other activity entails nullification of the act of a governmental or other body where the restriction in question is laid down.

3. The citizen’s complete or partial waiver of legal or active capacity, as well as other deals aimed at restricting legal or active capacity are null, except in the cases where such deals are permitted by the law.

Article 23. Citizen’s business activity.

1. The citizen has the right to engage in business activity without creating a legal person beginning from the date of his official registration as an individual entrepreneur.

2. The head of a peasant enterprise (farm) who farms without establishing a legal person (article 257) is considered an enterpriser from the date his enterprise (farm) is officially registered.

3. Respectively, the citizens’ business activities exercised without creating a legal person fall under the rules of this Code which regulate activities of legal persons that are commercial organizations unless it follows differently from the law, other legal acts or the nature of legal relations.

4. The citizen who runs his business without creating a legal person and breaks the requirements specified in pt. 1 of this article has no right, in what regards the deals made by him, to refer to the fact that he is not an entrepreneur. The court can apply to such deals the rules of this Code dealing with obligations associated with running business activities.

Article 24. Citizen’s proprietary responsibility.

The citizen is responsible for his obligations with all the property belonging to him, except for the property which can not be recovered according to the law.

The list of citizens’ unrecoverable property is established by civil procedural legislation.

Article 25. Individual entrepreneur’s insolvency (bankruptcy).

1. An individual entrepreneur who is unable to meet his creditors’ claims associated with his running a business may be declared by the court’s decision to be insolvent (bankrupt). Once such decision is made, his registration as an individual entrepreneur becomes invalid.

2. During the procedure of declaring an individual entrepreneur bankrupt, his creditors also have the right to lay claims on obligations that are not associated with business operation. Claims of the said creditors not filed in this order remain in force after the procedure of bankruptcy of the individual entrepreneur is over.

3. When individual entrepreneur is declared bankrupt, the claims of his creditors are satisfied out of the cost of his recoverable property in the following order of priority:

first of all, claims of the citizens to whom the entrepreneur is responsible for having damaged their life or health, as well as alimony claims, are redressed through the capitalization of appropriate periodical payments;

second, severance and wage payments to those employed under labor agreements, including contracts, and royalty payments under author’s contracts are settled;

third, creditors’ claims secured by mortgage of the individual entrepreneur’s property are allowed;

fourth, liabilities in compulsory payments to the budget and to off-budget funds are cleared off;

fifth, settlements with other creditors are made according to the law.

4. After the settlements with creditors are competed, individual entrepreneur declared to be bankrupt is freed from meeting his remaining obligations associated with his business activity and from other claims laid for the execution and allowed for while declaring the entrepreneur a bankrupt.

Claims of the citizens to whom the person declared to be bankrupt is responsible for having damaged their life or health, as well as other claims of personal character remain in force.

5. Grounds and procedure for the court to declare an individual entrepreneur bankrupt or for his declaration of his bankruptcy are established by the law on insolvency (bankruptcy).

Article 26. Active capacity of juveniles at the age of fourteen to eighteen.

1. Juveniles of fourteen to eighteen years old make deals, except those mentioned in pt. 2 of this article, by written consent thereto from their lawful representatives, i.e. parents, adopters or guardian.

The deal made by such juvenile is also valid when consent in writing is subsequently given by his parents, adopters or guardian.

2. Juveniles of fourteen to eighteen have the right, on their own and without consent from their parents, adopters or guardian, to:

1) dispose of their wages, grants and other earnings;

2) exercise the rights of the author of a work of science, literature or art, an invention or other product of their intellectual activity protected by the law;

3) according to the law, make deposits in credit institutions and dispose of them;

4) make minor ordinary deals and other transactions provided for by pt. 2, article 28 of this Code.

Upon reaching the age of sixteen, juveniles also have the right to be members of cooperatives according to the law on cooperatives.

3. Juveniles of fourteen to eighteen bear, on their own, responsibility for the deals made by them under pts. 1 and 2 of this article. They are responsible according to this Code for the damage inflicted by them.

4. Given sufficient reason and upon petitioning from the parents, adoptors or guardian or guardianship and trusteeship body, the court can restrict or deprive the juvenile of fourteen to eighteen of the right to independently dispose of his wage, grant or other earnings, except in the cases where such juvenile has acquired full capacity according to pt. 2, article 21 or article 27 of this Code.

Article 27. Emancipation.

1. A juvenile who has reached the age of sixteen can be declared fully capable if he works under a labor agreement, including under a contract, or engages in business activity by consent from his parents, adopters or guardian.

Declaring a juvenile fully capable (emancipation) is made by decision of a guardianship and trusteeship body with consent from both parents, adopters or guardian or by the court’s decision if no such consent is available.

2. Parents, adopters and guardian bear no responsibility for the emancipated juvenile’s obligations, in particular those arising from his inflicting a damage .

Article 28. Minors’ active capacity.

1. Only parents, adopters or guardians can make transactions, except those specified in pt. 2 of this article, on behalf of juveniles under fourteen (minors).

The rules provided for by pts. 2 and 3 in article 37 of this Code apply to the deals made by the juvenile’s lawful representatives with his property.

2. Minors at the age of six to fourteen have the right to make on their own:

1) minor ordinary deals;

2) deals aimed at gratuitous profit-making for which no notarization or official registration is required;

3) deals for the disposal of resources provided by a lawful representative or, by consent from the latter, a third party for a specific purpose or free disposal.

3. The minor’s parents, adopters or guardians bear proprietary responsibility for his deals, including those closed by him on his own, unless they prove that the obligation has been broken through no fault of theirs. According to the law, these persons are also responsible for the damage caused by the minor.

Article 29. Recognizing the citizen’s incapacity.

1. The citizen who cannot grasp the meaning of his actions or master them because of mental disorder may be recognized by the court as being incapable according to the procedure established by civil procedural legislation, in which case his guardianship is appointed.

2. Deals on behalf of the citizen declared incapable are made by his guardian.

3. If the grounds on which the citizen was declared incapable no longer exist, the court recognizes him capable and his guardianship is recalled by the court’s decision.

Article 30. Restriction of the citizen’s active capacity.

1. The citizen who runs his family into difficult economic condition through his alcohol or drug abuse can be restricted by the court in his active capacity according to the procedure established by civil procedural legislation, in which case his guardianship is appointed.

He has the right to make minor ordinary deals.

He may make other transactions, as well as receive his wage, pension and other income and dispose of them only by consent from his guardian. However, such citizen bears proprietary responsibility for the deals closed by him or the damage he has inflicted.

2. If the grounds on which the citizen’s capacity was restricted no longer exist, the court recalls his capacity restriction. The guardianship of the citizen is cancelled by the court’s decision.

Article 31. Guardianship and trusteeship.

1. Guardianship and trusteeship is established in order to protect the rights and interests of incapable or partially incapable citizens. Guardianship and trusteeship of juveniles is also established for the purposes of their upbringing. Relevant rights and duties of guardians and trustees are defined by the law on marriage and family.

2. Guardians and trustees stand up for the rights and duties of their wards in relations with any persons, including in courts, without special authorization.

3. Guardianship and trusteeship of juveniles is set up when they have no parents or adopters, when the court deprives parents of their parental rights, as well as in the cases where such citizens have for other reasons been left without parents’ care, in particular when the parents evade bringing them up or protecting their rights and interests.

Article 32. Guardianship.

1. Guardianship is instituted for minors, as well as the citizens declared by the court incapable owing to mental disorder.

2. Guardians are representatives of their wards by act of law and make all necessary transactions on their behalf and in their interests.

Article 33. Trusteeship.

1. Trusteeship is instituted for juveniles at the age of fourteen to eighteen, as well as the citizens restricted by the court in active capability on the ground of their alcohol or drug abuse.

2. Trustees give consent to making the transactions which citizens under the trusteeship have no right to close on their own.

Trustees assist their wards in exercising their rights and carrying on their duties, as well as protect them against abuses on the part of third parties.

Article 34. Guardianship and trusteeship bodies.

1. Local self-government bodies are guardianship and trusteeship bodies.

2. Within three days after the decision on recognizing the citizen incapable or restricting his capability comes into effect, the court must notify the guardianship and trusteeship body at such citizen’s location about this decision so that he could be placed under guardianship and trusteeship.

3. The guardianship and trusteeship body at wards’ location supervises their guardians’ and trustees’ activities.

Article 35. Guardians and trustees.

1. A guardian or trustee is appointed by the guardianship and trusteeship body at the location of the person who needs to be in ward within a month from the date when the said bodies were notified of the need to place the citizen under guardianship or trusteeship. Given noteworthy circumstances, the guardian or trustee may be appointed by the guardianship and trusteeship body at the guardian’s (trustee’s) location. If no guardian or trustee has been appointed for the person in need of guardianship or trusteeship, the guardianship and trusteeship body is charged with guardian’s or trustee’s duties.

Appointing a guardian or trustee can be appealed in court by interested persons.

2. Only actively capable citizens of age can be appointed as guardians and trustees. The citizens deprived of parental rights cannot be appointed as guardians or trustees.

3. The guardian or trustee can be appointed only by his consent. In addition, his moral and other personal qualities must be taken into account, as well as his aptitude to perform guardian’s or trustee’s duties, relationship existing between him and the ward and, if possible, the ward’s own wish.

4. Appropriate educational and medical establishments, establishments for the population’s social protection or other similar establishments are guardians and trustees for the citizens in need of guardianship or trusteeship who abide or have been placed in them.

Article 36. Performance of their duties by guardians and trustees.

1. Duties of guardianship and trusteeship are performed free of charge, except in the cases provided for by the law.

2. Guardians and trustees of under-age citizens must live together with their wards. Separate residence of the guardian and the ward who has attained the age of sixteen is allowed by consent from the guardianship and trusteeship body provided that this will not affect unfavorably the upbringing and protection of the ward’s rights and interests.

Guardians and trustees must inform guardianship and trusteeship bodies about the change in their place of residence.

3. Guardians and trustees must see to keeping their wards, providing care and medical treatment to them, protect their rights and interests.

Guardians and trustees of minors must take care of their education and upbringing.

4. The duties mentioned in pt. 3 of this article are not imposed on guardians of the citizens of age restricted by the court in their active capacity.

5. If the grounds no longer exist which accounted for the citizen’s being declared incapable or partially capable due to his alcohol or drug abuse, the guardian or trustee must move for his ward to be recognized actively capable and the guardianship or trusteeship lifted.

Article 37. Disposal of the ward’s property.

1. The ward’s earnings, including those due to him from his property management and except for the income which the ward is free to dispose of himself, shall be spent by the guardian or trustee solely in the ward’s interests and with preliminary permission from the guardianship and trusteeship body.

No preliminary permission from the guardianship and trusteeship body is required for the guard or trustee to incur expenses necessary to keep the ward from the sums due to the ward as his income.

2. Without preliminary consent from the guardianship and trusteeship body, the guardian has no right to make and the trustee give consent to make alienation transactions, including the exchange or donation of the ward’s property, its leasing (hiring out), giving it for free use or pledging, deals resulting in the renunciation of the ward’s rights, partition of his property or withdrawal of its parts, as well as any other deals bringing about the diminution in the ward’s property.

The procedure for managing the ward’s property is established by the law.

3. The guardian, trustee, their spouses and next of kin have no right to bargain with the ward, except for the transfer of property to the ward as a donation or for free use, as well as represent the ward when striking deals or conducting cases between the ward and the guardian’s spouse or the trustee and their close relatives.

Article 38. Trust management of the ward’s property.

1. If there is a need to permanently manage the ward’s immovable and valuable movable property, the guardianship and trusteeship body concludes an agreement with the manager appointed by this body concerning the trust management of such property. In this case, the guardian or trustee retains his powers over the ward’s property which has not been placed under trust management.

In exercising his competence as manager for the ward’s property, the manager comes within jurisdiction of the rules provided for by pts. 2 and 3 in article 37 of this Code.

2. Trust management of the ward’s property is terminated on the grounds provided for by the law for terminating an agreement about trust property management, as well as in the cases when guardianship and trusteeship is lifted.

Article 39. Release and dismissal of guardians and trustees from exercising their duties.

1. The guardianship and trusteeship body releases the guardian or trustee from the exercise of his duties when a juvenile is either returned to his parents or adopted.

When the ward is placed in an appropriate educational or medical establishment, an establishment for the population’s social protection or other similar establishment, the guardianship and trusteeship body releases the earlier appointed guardian or trustee from the exercise of his duties unless this is contrary to the ward’s interests.

2. Given reasonable excuses (disease, changes in the property status, lack of mutual understanding with the ward, etc.) and at his request, the guardian or trustee can be released from exercising his duties.

3. If the guardian or trustee does not properly discharge his duties, including his misusing the guardianship or trusteeship status in quest for profit or leaving his ward without surveillance and due help, the guardianship and trusteeship body can dismiss the guardian or trustee from exercising his duties and take necessary steps in order to bring the guilty citizen to account as established by the law.

Article 40. Termination of guardianship and trusteeship.

1. Guardianship and trusteeship of citizens of age is terminated when the court decides for the recognition of the ward’s capacity or lifting his capacity restriction upon the application from the guardian, trustee or the guardianship and trusteeship body.

2. When an under-age ward reaches the age of fourteen, his guardianship expires and the citizen who was his guardian becomes the trustee of the under-age without an additional decision thereto.

3. Trusteeship of the under-age terminates without a special decision upon the under-age ward’s attaining the age of eighteen, as well as after his marriage and in other cases when he acquires full capacity before majority (pt. 2, article 21 and article 27).

Article 41. Patronage over actively capable citizens.

1. At the request of the major actively capable citizen who, for health reasons, is unable to independently exercise and protect his rights and carry out his duties, he can be placed under the trusteeship in the form of patronage.

2. The trustee (assistant) for the major capable citizen can be appointed by the guardianship and trusteeship body only by consent from such citizen.

3. The property belonging to the major capable ward is disposed of by the trustee (assistant) on the basis of a commission or trust management agreement signed with the ward. Deals of common character and other deals aimed at maintaining and satisfying daily-life needs of the ward are made by his trustee (assistant) by the ward’s consent.

4. Patronage over the actively capable citizen of age established according to pt. 1 of this article is terminated at the patronized citizen’s request.

The trustee (assistant) of the patronized citizen is released from his duties in the cases specified by article 39 of this Code.

Article 42. Recognizing the citizen to be missing.

Upon the application from interested persons, the court can recognize the citizen to be missing if, during a year, there has been no information at the place of his residence about his whereabouts.

If it is impossible to establish the day when the last information about the missing was received, the period of time for the missing to be declared as such is taken to begin from the first day of the month following that in which the last information about the missing was heard and, at the failure to establish this month, the first of January of the next year.

Article 43. Consequences of recognizing the citizen to be missing.

1. If the property of the citizen recognized to be missing requires permanent management, the court can decide to transfer it to the person chosen by the guardianship and trusteeship body and acting on the basis of a trust management agreement signed with this body.

This property is used to pay allowances to the citizens whom the missing must support, as well as debts on other liabilities of the missing are repaid.

2. The guardianship and trusteeship body can appoint a manager for the missing citizen’s property prior to the expiration of one year from the day of receiving the last information about his whereabouts.

3. The consequences of recognizing the person to be missing not provided for by this article are determined by the law.

Article 44. Reversing the decision about recognizing the citizen to be missing.

In the case when the citizen recognized to be missing turns up or his whereabouts becomes known, the court recalls its decision about his recognition as missing. Management of this citizen’s property is abolished on the basis of the court’s decision.

Article 45. Declaring the citizen to be dead.

1. The citizen can be declared by the court to be dead if, at the place of his residence, there has been no information about his whereabouts over five years, and if he has disappeared under the circumstances posing a threat to his life or giving reason to presume his death from some misadventure, he can be declared dead within six months.

2. A serviceman or other citizen who has been reported missing in connection with military actions can be declared by the court to be dead no earlier than two years after the completion of military actions.

3. The day of death of the citizen declared to be dead is considered the day when the court’s judgement declaring him dead comes into legal force. Declaring the death of the citizen who has disappeared under the circumstances posing a threat to his life or giving reason to presume his death from some misadventure, the court can recognize the day on which he supposedly lost his life as the day of his death.

Article 46. Consequences of the appearance of the citizen declared to be dead.

1. Should the citizen declared to be dead turn up or his whereabouts be found out, the court reverses its judgement on declaring him dead.

2. Irrespective of the time of his appearance, the citizen can demand from any person to return the remaining property passed on to this person free of charge after the citizen had been declared dead, except in the cases specified by pt. 3 in article 302 of this Code.

The persons to whom the property belonging to the citizen declared to be dead was passed on under profit-making deals, must return him this property if it can be proved that, while buying the property, they knew that the citizen declared to be dead was actually alive. If such property cannot be returned in kind, its cost shall be refunded.

Article 47. Civil registration.

1. The following events are subject to civil registration:

1) birth;

2) marriage;

3) divorce;

4) adoption as a son (as a daughter);

5) establishing paternity;

6) change in the name;

7) death of the citizen.

2. Civil registration is made by registry offices through making appropriate entries in civil registration books (records) and issuing certificates to citizens on the basis of these entries.

3. Corrections and alterations in records are made by registry offices provided there are sufficient grounds thereto and no disputes between persons concerned.

Should a dispute arise between parties concerned or a registry office refuse to make corrections or alterations in records, the dispute shall be settled by the court.

Entries in documents of registration shall be removed or renewed by a registry office on the basis of the court decision.

4. Offices to deal with civil registration in compliance with the procedure for civil registration, the procedure for changing, renewing and removing entries in records, the forms of records and certificates, as well as the procedure for and duration of keeping records are specified by the law on documents of registration.

Chapter 4. Legal Persons

I. General provisions

Article 48. Concept of a legal person.

1. A legal person is recognized to be an organization which has a separate property it either owns or has under administrative control or operational management, which is responsible for its obligations with this property and can, on its behalf, acquire and exercise proprietary and other non-proprietary rights, perform duties, be plaintiff and defendant before the court.

Legal persons must have a balance or budget of their own.

2. As participants in the formation of a legal person’s property, its founders (partners) can have rights in personam to this legal person or rights in rem to its property.

Legal persons to which their participants have rights in personam include economic partnerships and companies, producers’ and consumers’ cooperatives.

Legal persons whose founders have the right in rem or other real right to its property include state-owned and municipal unitary enterprises, including subsidiary enterprises, as well as establishments funded by the owner.

3. Legal persons to which their founders (partners) have no proprietary rights include public and religious organizations (associations), charitable and other foundations, corporations of legal persons (associations and unions).

Article 49. Legal capacity of legal persons.

1. A legal person can have civil rights meeting the objectives of activity set in its constituent documents and assume duties related to this activity.

Commercial organizations, except unitary enterprises and other types of organizations specified by law, can enjoy civil rights and carry out civil duties that are necessary in order to run any types of activity not prohibited by law.

A legal person can engage in some types of activities whose list is specified by law only on receiving a special permit (license).

2. A legal person can be restricted in its rights only in the cases and according to the procedure provided for by law. Decision on the restriction of rights can be appealed by the legal person before the court.

3. Legal person’s capacity arises at the moment of its creation (pt. 2 of article 51) and ceases at the moment of its final liquidation (pt. 8 of article 63).

The right of a legal person to run an activity which is to be licensed arises from the moment of receiving such license or at a date indicated therein and ceases upon the expiration of its validity unless otherwise established by law or other legal acts.

Article 50. Commercial and non-profit organizations.

1. Legal persons may include organizations pursuing profit-making as main objective of their activity (commercial organizations) or those which do not set profit-making as such objective and do not distribute derived profits among their partners (non-profit organizations).

2. Legal persons which are commercial organizations can be created in the form of economic partnerships and companies, production cooperatives, state-owned and municipal unitary enterprises.

3. Legal persons which are non-profit organizations can be created in the form of consumer cooperatives, public or religious organizations (associations), establishments financed by the owner, charitable and other foundations, as well as in other forms provided for by law.

Non-profit organizations can run a business activity only so far as this serves attaining the objectives they are created for and is in conformity with these objectives.

4. It is allowed to create corporations of commercial and/or non-profit organizations in the form of associations and unions.

Article 51. Official registration of legal persons.

1. A legal person is subject to official registration with bodies of justice according to the procedure established by law on the registration of legal persons. Officially registered information, including firm’s names for commercial organizations, is included in the unified state register of legal persons open for examination by any member of the public.

Non-observance of the procedure established by law for creating a legal person or non-conformity of its constituent documents with the law entails denial of a legal person’s official registration. Registration cannot be denied on the ground that creating a legal person is allegedly inexpedient.

Denial of official registration, as well as evading such registration can be appealed against before the court.

2. A legal person is considered created beginning from the moment of its official registration.

Article 52. Legal person’s constituent documents.

1. A legal person acts on the basis of either its articles or its memorandum of association and articles or only memorandum of association. In the cases specified by law, a legal person which is not a commercial organization can act on the basis of the general regulation concerning this type of organizations.

Legal person’s memorandum of association is signed and the articles approved by its founders (partners).

A legal person created according to this Code by one founder shall act on the basis of the articles approved by this founder.

2. Legal person’s memorandum of association must set down the name for the legal person, its location, rules for administering its activities, as well as contain other information required by law from specific type of legal persons. Memorandums of non-profit organizations and unitary enterprises, as well as some commercial organizations in the cases specified by law must define the subject and objectives of the legal person’s activity. The subject and specific objectives of a commercial organization’s activity can also be laid down in memorandum of association in the cases where this is not required by law.

In memorandum of association, founders undertake to create a legal person, set down the order of joint steps to be taken to create it, terms and conditions of assigning their property to it and of participation in its activities. The memorandum also settles conditions and procedure for distributing profits and losses among partners, the way in which the legal person shall be managed, withdrawal of the founders (partners) from it.

3. Changes in constituent documents become valid for third parties from the moment of their official registration or, in the cases specified by law, from the moment of notifying the governmental registration office of these changes. However, legal persons and their founders (partners) have no right to refer to the failure to register such changes in their relations with the third parties which acted taking these changes into account.

Article 53. Legal person’s bodies.

1. A legal person acquires civil rights and assumes civil duties through its bodies which act in accordance with the law, other legal acts and constituent documents.

Procedure for the appointment or election of legal person’s bodies is established by law or constituent documents.

2. In the cases specified by law, a legal person can acquire civil rights and assume civil duties through its participants.

3. The person that by virtue of law or constituent documents of a legal person acts on its behalf must do this conscientiously and reasonably in the interests of the legal person it represents. On demand from the founders (partners) of the legal person, it must recover the losses it has inflicted on the legal person unless otherwise provided for by law or agreement.

Article 54. Legal person’s name and location.

1. A legal person has its own name containing an indication as to its organizational-legal form. Names of non-profit organizations, as well as unitary enterprises and, in the cases specified by law, other commercial organizations must be implicated of the character of the legal person’s activity.

2. Location of a legal person is determined by the place of its official registration unless otherwise established in the legal person’s constituent documents in conformity with the law.

3. Legal person’s name and location are to be indicated in its constituent documents.

4. A legal person which is a commercial organization must have its firm’s name.

A legal person whose firm’s name is registered according to the established procedure has the exclusive right to use it.

A person which unlawfully uses other registered firm’s name must, on demand from the holder of the exclusive right to this firm’s name, stop using it and repay the inflicted losses.

Procedure for the registration and use of firm’s names is established by law and other legal acts according to this Code.

Article 55. Representative agencies and branches.

1. A representative agency is an autonomous division of a legal person situated outside its location which represents and protects the legal person’s interests.

2. A branch is an autonomous division of a legal person situated outside its location which performs all or part of its functions, including representation functions.

3. Representative agencies and branches are not legal persons. They are vested with property by their founding legal person and act on the basis of regulations approved thereby.

Heads of representative agencies and branches are appointed by the legal person and act on the basis of its letter of attorney.

Representative agencies and branches must be indicated in constituent documents of their founding legal person.

Article 56. Legal person’s responsibility.

1. Legal persons, except for establishments funded by the owner, are responsible for their obligations with all the property belonging to them.

2. State-owned enterprises and establishments funded by their owner are responsible for their obligations according to the procedure and on conditions provided for by pt. 5 in article 113, by articles 115 and 120 of this Code.

3. The founder (partner) of a legal person or the owner of its property bears no responsibility for the legal person’s obligations, while the legal person bears no responsibility for the obligations of the founder (partner) or owner, except in the cases specified by this Code or legal person’s constituent documents.

If insolvency (bankruptcy) of the legal person is caused by the founders (partners), the owner of legal person’s property or other persons entitled to issue instructions binding on this legal person or able to determine its actions in some other manner, subsidiary responsibility for its obligations can be imposed on such persons in the event of insufficiency of legal person’s property.

Article 57. Legal person’s reorganization.

1. A legal person can be reorganized (merged, affiliated, divided, separated, transformed) by decision of its founders (partners) or of the legal person’s body empowered thereto by constituent documents.

2. In the cases established by law, reorganization of a legal person in the form of its division or separation of one or several legal persons from it is carried out by decision of authorized government bodies or by court decision.

If a legal person’s founders (partners), the body authorized by them or legal person’s body authorized for the reorganization by its constituent documents fail to reorganize the legal person within the period of time set in the authorized government body’s decision, the court, at the suit of this government body, appoints an outside manager for the legal person and commissions him to reorganize this legal person. Beginning from his appointment, the outside manager is delegated the power to run the legal person’s business. The outside manager sues and is sued on behalf of the legal person, makes up a split-up balance sheet and refers it to court together with the constituent documents of legal persons created in consequence of reorganization. Approval of these documents by court is a ground for official registration of the new formed legal persons.

3. In the cases specified by law, reorganization of legal persons in the form of merger, affiliation or transformation can be carried out only by consent from authorized government bodies.

4. A legal person is considered reorganized beginning from the official registration of the new legal persons, except in the cases of reorganization in the form of affiliation.

When a legal person is reorganized by way of affiliating another legal person to it, the former is considered reorganized from the moment an entry is made in the unified state register of legal persons stating the cessation of the affiliated legal person’s activity.

Article 58. Succession in reorganizing legal persons.

1. When legal persons are merged, the status of each of them passes to the new arisen legal person according to the deed of conveyance.

2. When a legal person is affiliated to another legal person, the status of the affiliated legal person passes to the latter according to the deed of conveyance.

3. When a legal person is divided, its status passes to the new created legal persons according to the split-up balance sheet.

4. When one or more legal persons separate from a legal person, each of them receives the status of the reorganized legal person according to the split-up balance sheet.

5. When one type of legal person is transformed into another type of legal person (the change in organizational-legal form), the reorganized legal person’s status pass to the new created legal person according to the deed of conveyance.

Article 59. Deed of conveyance and split-up balance sheet.

1. The deed of conveyance and split-up balance sheet must contain provisions on succession for all obligations of the reorganized legal person in relation to all its creditors and debtors, including obligations contested by the parties.

2. The deed of conveyance and split-up balance sheet are approved by the legal person’s founders (partners) or the body which has made a decision to reorganize legal persons and are submitted together with constituent documents for official registration of new created legal persons or for introducing changes in constituent documents of the existing legal persons.

Non-submittance of, respectively, the deed of conveyance or split-up balance sheet together with constituent documents, as well as the absence therein of provisions concerning the succession of the reorganized legal person’s obligations entails denial of official registration of the new created legal persons.

Article 60. Guarantees for the rights of creditors of legal persons under reorganization.

1. Legal person’s founders (partners) or the body which has made a decision to reorganize the legal person shall notify the reorganized legal person’s creditors about the occurrence in writing.

2. The creditor of the reorganized legal person has the right to demand that obligations for which this legal person is obligated to be either canceled or fulfilled ahead of time and his losses be recompensed.

3. If the split-up balance sheet does not make it possible to determine a successor for the reorganized legal person, the new created legal persons shall bear joint responsibility for the reorganized legal person’s obligations to its creditors.

Article 61. Liquidation of a legal person.

1. Liquidation of a legal person entails its cessation without the transfer of rights and liabilities to other persons by way of succession.

2. A legal person can be liquidated:

by decision of its founders (partners) or the legal person’s body authorized thereto by its constituent documents in connection with, among other things, the expiration of the period of time this legal person was created for, the achievement of the objective it was founded for or invalidation by court of the legal person’s registration in view of the breaches of law or other legal acts committed during its creation if these breaches are unremovable;

by court decision in the event of engaging in activity without proper permit (license) or in activity prohibited by law or accomplished with other repeated or gross violations of law or other legal acts or when a public or religious organization (association), charitable or other foundation regularly engages in an activity which is contrary to its statutory goals, as well as in other cases provided for by this Code.

3. A claim for a legal person’s liquidation upon the grounds mentioned in pt. 2 of this article can be referred to court by the government body or local self-government body entitled by law to lodge such claim.

In its decision about a legal person’s liquidation, the court can rule to impose the duty of liquidating the legal person on its founders (partners) or the body authorized by its constituent documents to liquidate the legal person.

4. A legal person which is a commercial organization or operates as a consumer cooperative, charitable or other foundation can also be liquidated according to article 65 of this Code when declared insolvent (bankrupt).

If the assets of such legal person are insufficient to meet creditors’ claims, it can be liquidated only according to the procedure established by article 65 of this Code.

Provisions concerning liquidation of legal persons because of their insolvency (bankruptcy) do not apply to state-owned enterprises.

Article 62. Responsibilities of the person making a decision on a legal person’s liquidation.

1. Legal person’s founders (partners) or the body which make a decision to liquidate the legal person must immediately give notice of this in writing to the body conducting registration of legal persons. The latter enters information into the unified state register of legal persons stating that the given legal person is in the process of liquidation.

2. Legal person’s founders (partners) or the body which have made a decision to liquidate the legal person, upon agreement with the body conducting official registration of legal persons, appoint a liquidation commission (liquidator) and establish liquidation procedure and period of time according to this Code.

3. Once a liquidation commission has been appointed, it is given power to fully manage the legal person. Liquidation commission appears in court on behalf of the liquidated legal person.

Article 63. Procedure for liquidating legal persons.

1. Liquidation commission places with organs of the press which publish information on official registration of the legal person, a publication announcing its liquidation and the procedure and term for its creditors to lay their claims. This term cannot be longer than two months from the time the publication about liquidation appeared.

Liquidation commission shall take measures to find out creditors and collect debts receivable, as well as inform creditors in writing about the legal person’s liquidation.

2. After the term for creditors to lay their claims is over, liquidation commission prepares an interim liquidation statement containing information about the composition of the liquidated legal person’s property, the list of claims laid by creditors and results of their consideration.

The interim liquidation statement is to be approved by the legal person’s founders (partners) or body participating in making the decision to liquidate the legal person with further approval by the body conducting official registration of legal persons.

3. If available funds of the liquidated legal person (except establishments) are insufficient to meet creditors’ claims, liquidation commission sells the legal person’s property by open auction according to the procedure established for the execution of court decisions.

4. The sums of money due to the liquidated legal person’s creditors are paid by liquidation commission in the order of priority set by article 64 of this Code and according to the interim liquidation statement beginning from the date of its approval, except for the creditors of the fifth turn who are paid off upon the expiration of a month from the date of approving the interim liquidation statement.

5. After the settlements with creditors are over, liquidation commission makes up a liquidation balance sheet which is approved by the legal person’s founders (partners) or body participating in making the decision to liquidate the legal person agreed upon with the body conducting official registration of legal persons.

6. Should a liquidated state-owned enterprise lack property and a liquidated establishment be short of cash resources to meet creditors’ claims, the latter have the right to apply to court demanding that the rest of claims be satisfied at the cost of the owner of property of this enterprise or establishment.

7. The rest of the legal person’s property remaining after creditors’ claims have been met is transferred to its founders (partners) having right in rem to this property or right in personam to this legal person unless otherwise provided for by law, other legal acts or constituent documents of the legal person.

8. Liquidation of a legal person is considered completed and the legal person nonexistent after an entry about this is made in the unified state register of legal persons.

Article 64. Meeting creditors’ claims.

1. While liquidating a legal person, its creditors’ claims shall be met in the following order of priority:

- first of all, claims of the citizens to whom the liquidated legal person is responsible for having inflicted damage to the their life or health shall be satisfied through the capitalization of appropriate periodical payments;

- second, severance and wage payments to those employed under labor agreements, including under contracts, and royalty payments under author’s contracts are settled;

- third, creditors’ claims to obligations secured by mortgaging the liquidated legal person’s property are allowed;

- fourth, indebtedness in compulsory payments to the budget and to off-budget funds is cleared off;

- fifth, settlements with other creditors are made according to the law.

When banks or other credit institutions are liquidated, satisfaction shall be first given to demands of citizens who are creditors of banks or other credit institutions involving funds of citizens. (The paragraph has been added according to Federal Act of the Russian Federation No. 18-FZ of 20 February 1996. Effective from 24 February 1996).

2. Claims of each turn shall be satisfied after the claims of the preceding turn have been fully met.

3. If a liquidated legal person’s property is insufficient, it is distributed among creditors of the corresponding turn proportionally to the sums of the claims to be satisfied unless otherwise established by law.

4. Should liquidation commission deny satisfying creditor’s claims or evade their examination, the creditor has the right to file a suit with the court against the liquidation commission before the legal person’s liquidation balance sheet is approved. The court can rule to satisfy creditor’s claims out of the cost of the remaining property of the liquidated legal person.

5. Creditor’s claims laid after the expiration of the time set by liquidation commission for their submission shall be satisfied from the liquidated legal person’s property left after the timely-laid creditors’ claims have been met.

6. Creditors’ claims unsatisfied for the lack of the liquidated legal person’s property are considered acquitted. Also acquitted are considered creditors’ claims unrecognized by liquidation commission if the creditor has not sued at law, as well as the claims satisfaction of which is denied to the creditor by court decision.

Article 65. Legal person’s insolvency (bankruptcy).

1. A legal person which is a commercial organization, except a state-owned enterprise, as well as legal person acting in the form of a consumer cooperative or charitable or any other foundation can be recognized insolvent (bankrupt) by court decision if it is unable to meet creditors’ claims.

Recognizing a legal person insolvent (bankrupt) entails its liquidation.

2. A legal person which is a commercial organization, as well as legal person acting in the form of a consumer cooperative or charitable or other foundation can, jointly with creditors, make a decision to declare its bankruptcy and voluntary liquidation.

3. Grounds for the court to recognize a legal person bankrupt or for the latter to declare its bankruptcy, as well as the procedure for liquidating such legal person are established by the law on insolvency (bankruptcy). Creditors’ claims shall be met in the order of priority laid down by pt.1 in article 64 of this Code.

II. Economic partnerships and companies

1. General
Article 66. Basic provisions on economic partnerships and companies.

1. Commercial organizations are recognized to be economic partnerships and companies if their authorized (pooled) capital is divided into stocks (contributions) of their founders (partners). The property created from the founders’ (partners’) contributions, as well as produced and acquired by the economic partnership or company in the course of its operation belongs to it by right of property.

In the cases specified by this Code, an economic partnership can be created by one person who becomes its sole partner.

2. Economic partnerships can be created in the form of a general partnership and a limited partnership (commandite partnership).

3. Economic societies can be created in the form of a joint-stock company, a limited- or additional-liability company.

4. Individual entrepreneurs and/or commercial organizations can be partners in general partnerships and general partners in limited partnerships.

Citizens and legal persons can be partners in economic societies and contributors to limited partnerships.

Government bodies and local self-government bodies cannot be partners in economic societies and contributors to limited partnerships unless otherwise provided for by law.

Establishments funded by owners can be partners in economic societies and contributors to partnerships by the owner’s consent unless otherwise provided for by law.

The law can forbid or restrict the participation of some categories of citizens in economic partnerships and companies, except in public stock companies.

5. Economic partnerships and companies can be founders (partners) of other economic partnerships and companies, except in the cases specified by this Code and other laws.

6. A contribution to the property of an economic partnership or company can be made in money, securities, other things or property rights or other rights which can be estimated in terms of money.

Money value of the contribution by a partner in an economic society is estimated upon agreement between the society’s founders (partners) and shall be subject to independent expert examination in the cases specified by law.

7. Economic partnerships, as well as limited- and additional-liability companies have no right to issue stocks.

Article 67. Status of partners in an economic partnership or company.

1. Partners in an economic partnership or company have a right to:

- take part in business management of the partnership or company, except in the cases specified by pt. 2 in article 84 of this Code and by the law on joint-stock companies;

- receive information about operations run by the partnership or company and have access to its books and other documents according to the procedure established by its constituent documents;

- take part in distribution of profits;

in the event of liquidation of the partnership or company:

- receive part of the property left after settlements with creditors or its equivalent value.

Partners in an economic partnership or company can enjoy other rights provided for by this Code, the laws on economic persons, constituent documents of a partnership or company.

2. Partners in an economic partnership or company are bound:

- to make contributions according to the procedure, in sizes, ways and terms provided for by constituent documents;

- not to disclose confidential information about the partnership’s or company’s operations.

Partners in an economic partnership or company can also bear other responsibilities provided for by constituent documents.

Article 68. Transformation of economic partnerships and companies.

1. Economic partnerships and companies of one type can be transformed into economic partnerships and companies of other type or into production cooperatives by decision of the general meeting of partners according to the procedure established by this Code.

2. When a partnership is transformed into a company, each general partner who has become a partner (stockholder) in the company shall bear a two-year long subsidiary responsibility with all his property for the obligations which have passed to the company from the partnership. Alienation by the former partner of the shares (stocks) formerly owned by him does not relieve him of such responsibility. The rules stated in this paragraph are respectively effective when a partnership is transformed into a production cooperative.

2. General partnerships
Article 69. Basic provisions on general partnerships.

1. A partnership is recognized to be general if its participants (general partners), in accordance with the agreement signed by them, engage in a business activity on behalf of the partnership and are responsible for its obligations with the property belonging to them.

2. A person can be a partner in only one general partnership.

3. The firm’s name of a general partnership shall contain either names (titles) of all its partners and the words "general partnership" or the name (title) of one or more partners with the words "and company" and "general partnership" added.

Article 70. General partnership’s memorandum of association.

1. A general partnership is created and acts on the basis of its memorandum of association. The memorandum of association shall be signed by all its participants.

2. Besides the information referred to in pt.2, article 52 of this Code, a general partnership’s memorandum of association shall contain clauses on the size and composition of the partnership’s pooled capital; the size and procedure for changing each partner’s share in the pooled capital; the size, composition, time and procedure for partners to make contributions; partners’ responsibility for the violation of their obligations as contributors.

Article 71. Management in a general partnership.

1. A general partnership’s operation shall be managed by common consent of all partners. The partnership’s memorandum of association can envisage the instances where decision is to be made a majority vote of partners.

2. Each partner in a general partnership has one vote unless a different procedure for determining the number of its partners’ votes is provided for by the memorandum of association.

3. Each partner, irrespective of whether or not he is authorized to manage the partnership business, has the right to familiarize himself with any business management documents. Denial of this right or its restriction, even if agreed upon by the partnership members, is null and void.

Article 72. General partnership’s business management.

1. Each partner in a general partnership has the right to act on behalf of the partnership unless the memorandum of association establishes that all of its partners run business jointly or that concrete partners are in charge of management.

If the partnership business is run jointly, consent of all its partners is required to strike every deal.

If managing the partnership business is entrusted by its partners to one or more of them, other partners shall obtain a letter of attorney from the partner (partners) entrusted with management in order to make deals.

In relations with third parties, a partnership has no right to refer to the memorandum provisions restricting powers of partnership members, except in the cases where the partnership can prove that the third party knew or must have been fully aware at the moment of bargaining that the partnership member had no right to act on behalf of the partnership.

2. Authority to run partnership business entrusted to one or several partners can be lifted by the court on demand of one or more other members of the partnership provided there are sound reasons thereto, in particular, on account of a gross violation by the authorized person (persons) of his duties or when he has turned out to be unable to run business wisely. On the basis of court decision, necessary changes are introduced in the partnership’s memorandum of association.

Article 73. Duties of a general partnership’s member.

1. A partner in a general partnership shall participate in its activities in accordance with clauses of its memorandum of association.

2. A partner in a general partnership must pay at least half of his contribution to the partnership’s pooled capital by the time of its registration. The rest must be paid by the member within the time limits set by the memorandum of association. If the member fails to comply with the above obligation, he shall pay to the partnership a ten percent interest per annum of the unpaid contribution and recover the incurred losses unless other sanctions are provided for by the memorandum of association.

3. Without consent from other partners, a member of the general partnership has no right, on his own behalf and in his own interests or third party’s interests, to make deals similar to those falling within the scope of the partnership’s activities.

Should this rule be infringed, the partnership has the right, at its discretion, to demand that such member repay the losses inflicted on the partnership or transfer to the partnership the entire profit made under such deals.

Article 74. Distribution of general partnership’s profits and losses.

1. Profits and losses of a general partnership are distributed among its partners proportionally to their shares in the pooled capital unless otherwise provided for by the memorandum of association or other agreement between the partners. Agreements on excluding any member of the partnership from participation in profits or losses are unlawful.

2. If, as a result of the losses incurred by the partnership, the value of its net assets becomes lower than the size of its pooled capital, the profit made by the partnership is not distributed among its partners until net assets surpass the size of pooled capital.

Article 75. Responsibility of partners for the general partnership’s obligations.

1. Partners in a general partnership shall jointly bear subsidiary responsibility with all their property for the partnership’s obligations.

2. A partner in a general partnership who is not its founder shall be equally responsible for the obligations arising before his joining the partnership.

A partner retiring from a partnership is responsible, equally with the remaining partners, for the partnership’s obligations arising before his retirement within the next two years beginning from the day when the partnership’s business report is approved for the year in which he retired from the partnership.

3. An agreement between partnership members on restricting or disclaiming the responsibility provided for in this article shall be null and void.

Article 76. Changes in membership of a general partnership.

1. If some of a general partnership’s members retire or die, if one of them is recognized to be missing, incapable or partially capable or insolvent (bankrupt), if reorganization proceedings have been initiated by court decision against one of the partners, if a legal person participating in the partnership is liquidated or if the creditor of one of the partners takes recourse on the part of property equivalent to his share in pooled capital - in all of these cases the partnership can continue its operation if this is provided for by the partnership’s memorandum of association or by agreement between the remaining partners.

2. Partners in a general partnership have the right to demand judicially the expulsion of anyone of the partners from the partnership by remaining partners’ unanimous decision and if there are serious grounds thereto, in particular, on account of a gross violation by this partner of his obligations or when he turns out to be unable to run business reasonably.

Article 77. Withdrawal of a partner from general partnership.

1. A partner in a general partnership has the right to withdraw from it by declaring his refusal to be a member of the partnership.

Refusal of membership in a general partnership which was established without its duration specified must be filed by the partner no less than six months before his actual withdrawal from the partnership. Earlier refusal of membership in a general partnership established for a specific period of time can be allowed only on a reasonable excuse.

2. Agreement between partnership members on denying the right to withdraw from the partnership shall be null and void.

Article 78. Consequences of a partner’s withdrawal from general partnership.

1. A partner who has withdrawn from the general partnership shall be paid the value of the portion in the partnership’s property equivalent to this partner’s share in pooled capital unless otherwise provided for by the memorandum of association. By agreement between the withdrawing partner and the remaining partners, payment of the property value can be substituted by receiving the property in kind.

The portion of partnership property or its value due to the withdrawing partner is determined from the balance sheet prepared as of the moment of his withdrawal, except in the case specified in article 80 of this Code.

2. In the event of the death of a general partnership’s member, his heir can join the general partnership only by other partners’ consent.

The legal person which is a successor to the reorganized legal person participating in the general partnership has the right to join the partnership by other partners’ consent unless otherwise provided for by the partnership’s memorandum of association.

Settlements with the heir (successor) who has not joined the partnership shall be made according to pt. 1 of this article. The heir (successor) to a general partnership’s member is responsible to third parties for the partnership’s obligations - for which the retired partner would have been responsible according to pt. 2 in article 75 of this Code - commensurately to the retired partner’s property passed on to him.

3. If one of partners withdraws from a partnership, the shares of the remaining partners in the partnership’s pooled capital grow accordingly unless otherwise provided for by the memorandum of association or other agreement between the partners.

Article 79. Transfer of a partner’s share in the partnership pooled capital.

A partner in a general partnership has the right, by other partners’ consent, to transfer his share in the pooled capital or its part to other member of the partnership or third person.

When the share (part of the share) is transferred to some other person, the rights belonging to the transferor of the share (part of the share) pass on fully or partially to the transferee. The transferee of the share (part of the share) is responsible for the partnership’s obligations according to the procedure established by the first paragraph of pt. 2 in article 75 of this Code.

Transfer of the whole share to other person by the partnership member ceases his membership in the partnership and entails the consequences provided for by pt. 2 in article 75 of this Code.

Article 80. Taking recourse on a partner’s share in a general partnership’s pooled capital.

Taking recourse on a partner’s share in a general partnership’s pooled capital for the partner’s own debts is allowed only if he lacks other property to cover for his debts. Such partner’s creditors have the right to demand from the general partnership that a portion of the partnership property equivalent to the debtor’s share in the pooled capital be allotted for the purpose of taking recourse on this property. The portion of partnership property to be allotted or its value is determined from the balance sheet prepared as of the moment the creditors file claim for the allotment.

Taking recourse on the property equivalent to the partner’s share in the general partnership’s pooled capital ceases his membership in the partnership and brings about the consequences specified by the second paragraph of pt. 2 in article 75 of this Code.

Article 81. Liquidation of general partnerships.

A general partnership is liquidated for the reasons specified in article 61 of this Code, as well as in the case where only one partner remains in the partnership. Such partner has the right, within six months from the day he became the only partner in the partnership, to transform such partnership into an economic society according to the procedure established by this Code.

A general partnership shall also be liquidated in the cases specified in pt. 1, article 76 of this Code unless the partnership’s memorandum of association or an agreement between the remaining partners provides for the continuation of the partnership.

3. Limited partnerships
Article 82. Basic provisions on a limited partnership

1. A limited partnership (commandite partnership) is recognized to be a partnership which, besides partners who run business on the partnership’s behalf and bear responsibility with their property for the partnership’s obligations (general partners), includes one or more contributing partners (commanditaires) who run the risk, within the amounts of contributions they paid, of losses associated with the partnership’s business and do not share in the management of the partnership.

2. The status of general partners in a limited partnership and their responsibility for the partnership’s obligations are determined by the rules of this Code concerning partners in a general partnership.

3. A person can be a general partner only in one limited partnership.

A general partnership’s member cannot be general partner in a limited partnership.

A general partner in a limited partnership cannot be a member of a general partnership.

4. The firm’s name of a limited partnership must contain either names (titles) of all general partners and the words "limited partnership" or "commandite partnership" or the name of at least one general partner with the words "and company" added and the words "limited partnership" or "commandite partnership".

If the name of a contributor is included in the firm’s name of a limited partnership, such contributor becomes its general partner.

5. The rules of this Code for a general partnership apply to a limited partnership inasmuch as they are not contrary to the rules of this Code for a limited partnership.

Article 83. Limited partnership’s memorandum of association.

1. A limited partnership is created and acts on the basis of its memorandum of association. The memorandum of association shall be signed by all general partners.

2. A limited partnership’s memorandum of association shall contain, besides the information referred to in pt. 2 of article 52 of this Code, clauses on the size and composition of the partnership’s pooled capital; the size and procedure for changing shares of each general partner in pooled capital; the size, composition, time and procedure for general partners to pay contributions, their responsibility for the breach of obligation to pay contributions; the total size of contributions made by contributors.

Article 84. Administration and business management in a limited partnership.

1. A limited partnership’s operation shall be administered by general partners. A system for general partners to administer and run business of such partnership is established by them according to the rules of this Code for a general partnership.

2. Contributors have no right to share in the administration and business management of a limited partnership and act on its behalf but by a letter of attorney. They have no right to contest actions of general partners in respect to the partnership’s administration and management.

Article 85. Status of a limited partnership’s contributor.

1. A limited partnership’s contributor must pay a contribution to the pooled capital. Contribution payment shall be certified by a participation certificate issued by the partnership to the contributor.

2. Contributor to a limited partnership has the right to:

1) receive the portion of the partnership’s profit due to him for his share in pooled capital according to the procedure established by the memorandum of association;

2) familiarize himself with the partnership’s annual reports and balance sheets;

3) at the end of fiscal year: withdraw from the partnership and receive his contribution according to the procedure established by the memorandum of association;

4) transfer his share in the pooled capital or its part to other contributor or third person. Contributors shall have right of priority over third persons to buy a share (its part) conformably to the conditions and procedure provided for by pt. 2 in article 93 of this Code. Transferring the whole share to other person ceases the contributor’s participation in the partnership.

The partnership’s memorandum of association can also provide for other rights for contributors.

Article 86. Liquidation of limited partnerships.

1. A limited partnership shall be liquidated if all participating contributors withdraw from it. However, in lieu of the liquidation, general partners have the Right to transform the limited partnership into a general partnership.

A limited partnership shall also be liquidated on the grounds valid for the liquidation of a general partnership (article 81). However, a limited partnership continues if at least one general partner and one contributor remain with it.

2. When a limited partnership is liquidated, including in the event of bankruptcy, its contributors have right of priority over general partners to receive their contributions for the partnership property left after creditors’ claims have been met.

The partnership’s property remaining thereafter is distributed among general partners and contributors proportionally to their shares in the partnership’s pooled capital unless a different procedure is established by the memorandum of association or agreement between general partners and contributors.

4. A company with a limited liability
Article 87. Basic provisions on a company with a limited liability

1. A company with a limited liability is recognized to be a company established by one or more persons, the authorized capital of which is divided into stocks of the sizes set by its constituent documents; partners in a company with a limited liability are not responsible for its obligations and run the risk, commensurably to the value of contributions they made, of losses associated with the company’s activity.

The company partners who have not paid contributions in full, bear joint responsibility for its obligations commensurably with the value of the part of contribution unpaid by each partner.

2. The firm’s name of a company with a limited liability shall contain the company’s name and the words "limited(-liability)".

3. Legal status of a company with a limited liability and the status of its partners are laid down by this Code and the law on companies with a limited liability.

Specific features of legal condition of credit institutions created in the form of limited liability companies, rights and obligations of participants thereof shall also be determined by acts regulating the activities of credit institutions (the paragraph has been added from #M12293 0 6351744 33736 18700879 12367960 1532009799 45355 14239401 34638 422529994614 July 1999 by the Federal Act No 138-FZ of 8 July 1999#S).

Article 88. Partners in a company with a limited liability.

1. The number of partners in a company with a limited liability shall not exceed the limit set by the law on companies with a limited liability. Otherwise, it is subject to the transformation into a joint-stock company within a year and, upon the expiration of this period, to the liquidation by court decision unless the number of its partners decreases to the limit set by the law.

2. A company with a limited liability cannot have other one-person economic person as its only partner.

Article 89. Constituent documents of companies with a limited liability.

1. Constituent documents of a company with a limited liability shall include a memorandum of association signed by its founders and the articles approved by them. If a company is established by one person, the company’s constituent document is its articles.

2. Besides the information referred to in pt.2, article 52 of this Code, constituent documents of a company with a limited liability shall contain clauses on the size of the company’s authorized capital; the size of each partner’s stock; the size, composition, time and procedure for partners to pay contributions and partners’ responsibility for violating the obligation to make contributions; the make-up and competence of the company management bodies and procedure for their decision-making, including on issues to be decided unanimously or by qualified majority, as well as other information provided for by the law on companies with a limited liability.

Article 90. Authorized capital of companies with a limited liability.

1. Authorized capital of a company with a limited liability is made up of the values of contributions made by its partners.

Authorized capital determines the minimal size of the company’s property which guarantees its creditors’ interests. The amount of the company’s authorized capital cannot be lower than that set by the law on companies with a limited liability.

2. It shall not be admitted to exempt a partner in a company with a limited liability from the obligation to make contribution to the company’s authorized capital, including by way of offsetting claims to the company, except for the cases provided by law (the clause is in the wording enforced from #M12293 0 6351744 33736 18700879 12367960 1532009799 45355 14239401 34638 422529994614 July 1999 by the Federal Act No 138-FZ of 8 July 1999#S).

3. No less than half the authorized capital of a company with a limited liability must be paid by its partners as of the moment of the company’s registration.

The rest of unpaid authorized capital of the company shall be paid by its partners within a year of the company’s operation.

Should this obligation be violated, the company must either announce a reduction of its authorized capital and register the reduction according to the established procedure or cease its existence by way of liquidation.

4. If upon the expiration of the second year or each subsequent fiscal year the value of a company’s with a limited liability net assets proves less than its authorized capital, the company must announce a reduction of its authorized capital and register the reduction according to the established procedure. If the value of the company’s aforementioned assets is below the minimal size set by the law for an authorized capital, such company is subject to liquidation.

5. Reduction in an authorized capital of a company with a limited liability is allowed only after all its creditors have been notified of the occurrence. In this case, the latter have the right to demand that the company’s obligations in question be stopped or fulfilled ahead of time and their losses be recovered.

Rights and obligations of creditors of credit institutions created in the form of limitae liability companies shall also be determined by acts regulating the activities of credit institutions (the paragraph has been added from #M12293 1 6351744 33736 18700879 12367960 1532009799 45355 14239401 34638 422529994614 July 1999 by the Federal Act No 138-FZ of 8 July 1999#S).

6. Increasing the company’s authorized capital is allowed after all its partners have paid their contributions in full.

Article 91. Management in companies with a limited liability.

1. The supreme organ of a company with a limited liability is the general meeting of its partners.

In a company with a limited liability, an executive (collective and/or personal) body is created to manage its current operation which is accountable to the general meeting of its partners. The company’s personal- management body can be also elected from non-partners of the company.

2. The competence of company managerial bodies, as well as procedure for them to make decisions and act on the company’s behalf, shall be defined in accordance with this Code, the law on companies with a limited liability and the company articles.

3. It is the exclusive competence of the general meeting of partners in a company with a limited liability to:

1) change the company articles, change the size of its authorized capital;

2) form executive bodies of the company and revoke their powers ahead of time;

3) approve the company’s annual reports and accounting balance sheets and distribute its profits and losses;

4) take the decision to reorganize or liquidate the company;

5) elect the company’s auditing commission (auditor).

Solving other issues can also be referred by the law on companies with a limited liability to the exclusive competence of the general meeting.

Dealing with the issues which fall within the exclusive competence of the general meeting of partners in the company cannot be passed to the company’s executive body.

4. To verify and advise of the correctness of the annual accounting of a company with a limited liability, the company has a right to employ a professional auditor who is not bound by proprietary interests with the company or its partners (external auditing). The company’s annual accounting can also be audited on demand from any of its partners.

Procedure for auditing the company’s activity is established by law and the company articles.

5. Companies are not required to publish business reports (public reporting), except in the cases specified by the law on companies with a limited liability.

Article 92. Reorganization and liquidation of companies with a limited liability.

1. A company with a limited liability can be voluntarily reorganized or liquidated by unanimous decision of its partners.

Other grounds for the company’s reorganization and liquidation, as well as the reorganization and liquidation procedure are established by this Code and other laws.

2. A company with a limited liability has the right to transform into a joint-stock company or production cooperative.

Article 93. Transfer of a share in the authorized capital of the company with a limited liability to other persons.

1. A partner in a company with a limited liability has the right to sell or cede in some other way his share in the company’s authorized capital or part of his share to one or more partners of the same company.

2. A partner in a company can alienate his share (its part) in favor of third persons unless otherwise provided for by the company articles.

Partners in a company have priority right to buy a partner’s share (its part) proportionally to the sizes of their shares unless a different procedure to exercise this right is provided for by the company articles or agreement between its partners. In the case where company partners do not avail themselves of their priority right within a month from the day of notification or within other period of time set by the company articles or agreement between its partners, the partner’s share can be alienated in favor of a third person.

3. If, under the articles of the company with a limited liability, the partner’s share (its part) cannot be alienated in favor of third persons and other company partners refuse to buy it, the company must pay its actual value to the partner or give him equivalent property in kind.

4. Until fully paid for, only the share of a company with a limited liability partner which has been already paid for can be alienated.

5. If a company with a limited liability buys its partner’s share (its part), it must either sell it to other partners or third persons within a period of time and according to the procedure provided for by the law on companies with a limited liability and by the company constituent documents or cut its authorized capital according to pts. 4 and 5 in article 90 of this Code.

6. Shares in an authorized capital of a company with a limited liability pass on to the heirs of citizens and successors to legal persons who are partners in the company unless the company constituent documents provide that such passing can be allowed only by consent of other company partners. Refusal to give consent to the passing of the share entails the obligation for the company to pay its actual value to the heirs (successors) or give them equivalent property in kind according to the procedure and on the conditions provided for by the law on companies with a limited liability and the company constituent documents.

Article 94. Withdrawal of a company with a limited liability partner from the company.

A company with a limited liability partner has the right to withdraw from the company at any time regardless of other partners’ consent. In this case, the value of property portion equivalent to his share in the company’s authorized capital must be paid to him according to the procedure, in the form and within the period of time provided for by the law on companies with a limited liability and by the company’s constituent documents.

5. Additional-liability company
Article 95. Basic provisions on additional-liability companies

1. An additional-liability company is recognized to be a company established by one or more persons, the authorized capital of which is divided into stocks of the sizes determined by its constituent documents; partners in such company bear joint responsibility for its obligations with their property in multiple of the value of their contributions, equal for all partners and determined by the company constituent documents. Should one of the partners go bankrupt, his responsibility for the company’s obligations shall be distributed among other partners proportionally to their contributions unless a different procedure for responsibility distribution is provided for by the company’s constituent documents.

2. The firm’s name of an additional-liability company shall contain the company’s name and the words "additional-liability".

3. The rules of this Code for a company with a limited liability shall apply to an additional-liability company unless otherwise provided for by this article.

6. Joint-stock company
Article 96. Basic provisions on a joint-stock company

1. A joint-stock company is recognized to be a company the authorized capital of which is divided into a certain number of units of stocks; partners in a joint-stock company (stockholders) bear no responsibility for its obligations and run the risk, within the value of stocks belonging to them, of losses associated with the company’s activity.

Stockholders who have not paid for stocks in full shall bear joint responsibility for the joint-stock company’s obligations within the limits of the unpaid value of stocks belonging to them.

2. The firm’s name of a joint-stock company shall contain its name and an indication that this is a joint-stock company.

3. Legal status of a joint-stock company and the status of stockholders shall be defined in accordance with this Code and the law on stock companies.

Specific legal status of joint-stock companies created by privatizing state-owned and municipal enterprises shall also be defined by the laws and other legal acts on the privatization of these enterprises.

Specific features of legal condition of credit institutions created in the form of joint-stock companies, rights and obligations of their shareholders shall also be determined by acts regulating the activities of credit institutions (the paragraph has been added from 14 July 1999 by the Federal Act No 138-FZ of 8 July 1999).

Article 97. Public and close joint-stock companies.

1. A joint-stock company whose partners can alienate the stocks belonging to them without other partners’ consent is considered a public joint-stock company. Such joint-stock company has the right to organize a public subscription to the stocks issued by it and freely sell them on the conditions established by the law and other legal acts.

Each year, public joint-stock companies must publish, to the notice of public at large, their annual reports, accounting balance sheets and profit-and-loss accounts.

2. A joint-stock company whose stocks are distributed only among its founders or other predetermined circle of persons is considered a close joint-stock company. Such company has no right to hold a public subscription to the stocks issued by it or somehow offer them for sale to an unlimited circle of persons.

Stockholders of a close joint-stock company have right of priority in buying stocks sold by other stockholders of this company.

The number of partners in a close joint-stock company shall not exceed the number set by the law on joint-stock companies; otherwise, it is subject to the transformation into a public joint-stock company within a year and, upon the expiration of this period, to judicial liquidation unless their number decreases to the limit established by law.

In the cases specified by the law on joint-stock companies, a close joint-stock company may have to publish, to the notice of public at large, the documents referred to in pt. 1 of this article.

Article 98. Formation of a joint-stock company.

1. A joint-stock company’s founders enter into an agreement defining the order of arrangements to be jointly made to create a company, the size of the company’s authorized capital, categories of stocks issued and procedure for their placement, as well as other conditions provided for by the law on joint-stock companies.

A joint-stock company formation agreement shall be made up in writing.

2. Founders of a joint-stock company bear joint responsibility for the obligations which arise prior to the company’s registration.

The company bears responsibility for the founders’ obligations associated with its formation only in the case of subsequent approval of their actions by the general meeting of stockholders.

3. A joint-stock company’s constituent document is its articles approved by the founders.

Apart from the information referred to in pt. 2, article 52 of this Code, the articles of a joint-stock company shall contain clauses on categories of stocks issued by the company; their par value and quantity; the size of the company’s authorized capital; stockholders’ rights; the composition and competence of the company management bodies and procedure for their decision-making, including on issues to be decided unanimously or by qualified majority. The joint-stock company’s articles must also contain other information referred to by the law on joint-stock companies.

4. Procedure for taking other steps aimed at creating a joint-stock company, including the competence of the general meeting, is defined by the law on joint-stock companies.

5. Particulars in creating joint-stock companies by privatizing state-owned and municipal enterprises are determined by the laws and other legal acts on the privatization of these enterprises.

6. A joint-stock company can be created by one person or consist of one person in the case where one stockholder buys stocks of the company. Information thereof must be contained in the company articles, registered and published to the notice of public at large.

A joint-stock company cannot have as a sole partner some other one-person economic person.

Article 99. Authorized capital of a joint-stock company.

1. A joint-stock company’s authorized capital is made up of the par value of the company’s stocks bought by its stockholders.

The company’s authorized capital determines the minimal size of the company property which guarantees its creditors’ interests. It cannot be lower than the size provided for by the law on joint-stock companies.

2. A stockholder cannot be released from the obligation to pay for the company’s stocks, including the release from this obligation by way of offsetting claims to the company.

3. Public subscription to a joint-stock company’s stocks is not allowed until its authorized capital is fully paid. When a joint-stock company is established, all its stocks must be distributed among the founders.

4. If, at the end of the second and each subsequent fiscal year, the value of the company’s net assets proves less than the authorized capital, the company must declare a reduction of its authorized capital and register it according to the established procedure. If the value of the company’s aforementioned assets turns to be lower than the minimal size established by law for an authorized capital (pt.1 of this article), the company is subject to liquidation.

5. The law or the company articles can restrict the quantity, total par value of stocks or maximal number of votes belonging to one stockholder.

Article 100. Increasing a joint-stock company’s authorized capital.

1. By decision of the general meeting of stockholders, a joint-stock company has the right to increase its authorized capital through raising the par value of stocks or issuing additional stocks.

2. Increasing the joint-stock company’s authorized capital is allowed after its full payment. The company is not allowed to increase its authorized capital for the purpose of recovering the losses incurred.

3. In the cases specified by the law on join-stock companies, the company articles can provide for the priority right of stockholders who are in possession of general (ordinary) stocks or other voting stocks to buy stocks additionally issued by the company.

Article 101. Reducing a joint-stock company’s authorized capital.

1. By decision of the general meeting of stockholders, a joint-stock company has the right to reduce its authorized capital through lowering the par value of stocks or buying part of stocks in order to cut their total number.

The company’s authorized capital can be reduced after notifying all its creditors according to the procedure established by the law on joint-stock companies. In this case, the company’s creditors have the right to demand that the company’s obligations in question be either stopped or fulfilled ahead of time and their losses be recovered.

Rights and obligations of creditors of credit institutions created in the form of joint-stock companies shall also be determined by acts regulating the activities of credit institutions (the paragraph has been added from #M12293 0 6351744 33736 18700879 12367960 1532009799 45355 14239401 34638 422529994614 July 1999 by the Federal Act No 138-FZ of 8 July 1999#S).

2. Reducing a joint-stock company’s authorized capital through buying and repaying for part of stocks is allowed if such possibility is provided for by the company articles.

Article 102. Restrictions on the issue of securities and payment of dividends of a joint-stock company.

1. The share of preferred stocks in a joint-stock company’s total authorized capital shall not exceed twenty-five percent.

2. A joint-stock company has the right to issue bonds for the sum in excess of its authorized capital or the security provided to the company by third persons for these purposes after the authorized capital has been fully paid. If no security is provided, the issue of bonds is allowed no sooner than the third year of the company’s existence provided its two annual balance sheets have been duly validated by that time.

3. A joint-stock company has no right to announce and pay dividends:

- until the entire authorized capital has been fully paid;

- if the value of net assets in a joint-stock company is lower than its authorized capital and reserve fund or becomes lower than their size as a result of paying dividends.

Article 103. Management in a joint-stock company.

1. The supreme management body in a joint-stock company is the general meeting of its stockholders.

It is the exclusive competence of the general meeting of stockholders to:

1) change the company articles, including changes in its authorized capital;

2) elect members for the company’s board of directors (supervisory council) and auditing commission (auditor) and revoke their powers ahead of time;

3) form the company’s executive bodies and revoke their powers ahead of time unless the company articles refer settling these issues to the competence of the board of directors (supervisory council);

4) approve the company’s annual reports, accounting balance sheets, profit-and-loss accounts and distribute its profits and losses;

5) make a decision on reorganizing or liquidating the company.

The law on joint-stock companies can also refer settling other issues to the exclusive competence of the general meeting of stockholders.

The issues falling, under the law, within the exclusive competence of the general meeting of stockholders cannot be passed thereby to the company’s executive bodies for consideration.

2. A board of directors (supervisory council) shall be created in companies with more than fifty stockholders.

In the case where a board of directors (supervisory council) is created, the company articles shall define its exclusive competence in accordance with the law on joint-stock companies. The issues related by the articles to the exclusive competence of the board of directors (supervisory council) cannot be passed thereby to the company’s executive bodies for consideration.

3. The company’s executive body can be collective (board of management, directorate) and/or personal (director, general director). It manages the company’s current activities and is accountable to the board of directors (supervisory council) and the general meeting of stockholders.

It is the competence of the company’s executive body to deal with all issues which are outside the exclusive competence of other managerial bodies in the company established by law or the company articles.

By decision of the general meeting of stockholders, the powers of the company executive body can be transferred, under agreement, to other commercial organization or individual entrepreneur (manager).

4. Competence of the joint-stock company’s executive bodies, as well as procedure for them to make decisions and act on the company’s behalf is determined by the law on joint-stock companies and the company articles in accordance with this Code.

5. A joint-stock company obligated under this Code or the law on joint-stock companies to publish, to the notice of public at large, the documents mentioned in pt.1, article 97 of this Code, shall annually employ a professional auditor not bound by proprietary interests with the company or its partners for the auditing and advising of the correctness of its annual financial accounting.

The audit of business activities of a company, including that obligated to publish the aforementioned documents to the notice of general public, shall be carried out any time on demand from stockholders whose aggregate stock in the authorized capital is ten or more percent.

Procedure to audit a company’s activity is established by law and the company articles.

Article 104. Reorganization and liquidation of a joint-stock company

1. A joint-stock company can be voluntarily reorganized or liquidated by decision of the general meeting of stockholders.

Other grounds and the procedure for reorganizing and liquidating a joint-stock company are established by this Code and other laws.

2. A joint-stock company has the right to transform into a company with a limited liability or production cooperative, or into a non-commercial institution in accordance with the law (the clause has been added to from #M12293 0 6351744 33736 18700879 12367960 1532009799 45355 14239401 34638 422529994614 July 1999 by the Federal Act No 138-FZ of 8 July 1999#S).

7. Subsidiary and dependent companies
Article 105. Subsidiary economic society

1. An economic society is considered a subsidiary company if some other (parent) economic society or partnership by virtue of domination in its authorized capital or an agreement concluded between them or in some other manner has possibility to determine decisions made by such company.

2. A subsidiary company bears no responsibility for the parent company’s (partnership’s) debts.

A parent company (partnership) entitled to issue binding instructions to its subsidiary company, including those under agreement with it, bears joint responsibility with the subsidiary company for the deals made by the latter in fulfillment of these instructions.

Should a subsidiary company go insolvent (bankrupt) through the parent company’s (partnership’s) fault, the latter shall bear subsidiary responsibility for its debts.

3. Partners (stockholders) in a subsidiary company have the right to demand that the losses caused to the subsidiary company through some fault of the parent company (partnership) be recovered unless otherwise provided for by the laws on economic societies.

Article 106. Dependent economic societies.

1. An economic society is considered a dependent company if some other (dominating, participating) company has more than twenty percent of voting stock in a joint-stock company or twenty percent of authorized capital in a company with a limited liability.

2. An economic society which has purchased more than twenty percent of voting stock in a joint-stock company or twenty percent of authorized capital in a company with a limited liability must immediately publish information about this according to the procedure established by the laws on economic societies.

3. The extent to which economic societies can share in each other’s authorized capitals, as well as the number of votes one of such societies can dispose of at the general meeting of partners or stockholders of the other society is determined by law.

III. Production cooperatives

Article 107. Concept of a production cooperative

1. A production cooperative (artel) is recognized to be a voluntary association of citizens on the basis of membership for joint productive or other economic activity (manufacture, processing, sale of industrial, agricultural and other products, performance of jobs, trading, consumer services, provision of other services) based on their personal labor or other participation and on the pooling of proprietary stocks by its members (partners). The law and constituent documents of a production cooperative can provide for the participation of legal persons in its activity. A production cooperative is a commercial organization.

2. Production cooperative members bear subsidiary responsibility for the cooperative’s obligations within the limits and according to the procedure established by the law on production cooperatives and by the cooperative articles.

3. The firm’s name of a cooperative shall contain its name and the words "production cooperative" or "artel".

4. Legal status of production cooperatives and the status of their members shall be defined by the laws on production cooperatives in accordance with this Code.

Article 108. Formation of production cooperatives.

1. A constituent document for a production cooperative is its articles approved by the general meeting of its members.

2. Besides the information referred to in pt.2, article 52 of this Code, the cooperative articles shall contain clauses on the sizes of cooperative members’ stocks; the composition and procedure for cooperative members to pay their stocks and responsibility for violating the obligation to pay stocks; the character and practice of cooperative members’ labor participation in its activity and responsibility for violating the obligation of personal labor participation; the procedure for distributing cooperative profits and losses; the extent of and conditions for subsidiary responsibility of cooperative members for its debts; the make-up and competence of cooperative management bodies and procedure for their decision-making, including on issues to be decided unanimously or by qualified majority.

3. The number of members in a cooperative shall be no less than five.

Article 109. Property of a production cooperative.

1. Property owned by a production cooperative is divided into its members’ stocks according to the cooperative articles.

It can be established by the cooperative articles that a certain portion of the property belonging to the cooperative makes its indivisible funds to be used for the purposes set by the articles.

Decision to form indivisible funds shall be made by cooperative members unanimously unless otherwise provided for by the cooperative articles.

2. A cooperative member shall pay no less than ten percent of his stock by the time the cooperative is registered and the rest of it within a year from the registration date.

3. Cooperatives have no right to issue stocks.

4. Profits of a cooperative shall be distributed among its members commensurably with their labor contribution unless a different procedure is provided for by law and the cooperative articles.

The same procedure apply to distributing the property left after the liquidation of the cooperative and satisfaction of its creditors’ claims.

Article 110. Management in a production cooperative.

1. The supreme management body in a cooperative is the general meeting of its members.

In a cooperative with more than fifty members, a supervisory council shall be created to control the functioning of the cooperative’s executive bodies.

The board of management and/or its chairman are executive bodies in a cooperative. They manage the cooperative’s current activity and are accountable to the supervisory council and general meeting of cooperative members.

Only members of a cooperative can be members in its supervisory council and board of management, as well as cooperative chairman. A cooperative member cannot be simultaneously a member in the supervisory council and member in the board of management or cooperative chairman.

2. Competence of a cooperative’s management bodies and decision-making procedure for them is determined by law and the cooperative articles.

3. It is the exclusive competence of the general meeting of cooperative members to:

1) change the cooperative articles;

2) form a supervisory council and revoke its members’ powers, as well as form and recall authority of cooperative executive bodies unless this title is entrusted by the cooperative articles to its supervisory council;

3) admit and expel cooperative members;

4) approve the cooperative’s annual reports and accounting balance sheets and distribute its profits and losses;

5) make a decision on reorganizing and liquidating the cooperative.

The law on production cooperatives and the cooperative articles can also include settling other issues in the exclusive competence of the general meeting.

The issues falling within the exclusive competence of the cooperative’s general meeting or supervisory council cannot be passed thereby to the cooperative executive bodies for consideration.

4. A cooperative member has one vote when decisions are made by the general meeting.

Article 111. Resigning one’s membership in a production cooperative and transfer of shares.

1. A cooperative member has the right, at his discretion, to withdraw from the cooperative. In this case, he must be paid the value of his share or property equivalent to the share; other payments provided for by the cooperative articles shall be made, as well.

The stock value is paid or other property is delivered to the retiring cooperative member upon the expiration of fiscal year and approval of the cooperative’s balance sheet unless otherwise provided for by the cooperative articles.

2. By decision of the general meeting, a cooperative member can be expelled from the cooperative if he does not perform or improperly performs the duties imposed on him by the cooperative articles, as well as in other cases specified by law and the cooperative articles.

A member of the supervisory council or executive body can be expelled from the cooperative by decision of the general meeting in connection with his membership in a similar cooperative.

An expelled cooperative member has the right to receive his share and other payments provided for by the cooperative articles and in accordance with pt.1 of this article.

3. A cooperative member has the right to transfer his share or part of it to other cooperative member unless otherwise provided by law and the cooperative articles.

Transferring a share (its part) to a citizen who is not a member of the cooperative is allowed only by the cooperative’s consent. In this case, other cooperative members have priority right to buy such share (its part).

4. If a member of production cooperative dies, his heirs can be admitted as members into the cooperative unless otherwise provided for by the cooperative articles, in which case the cooperative shall pay the value of the deceased cooperative member’s share to the heirs.

5. Taking recourse on the share of a production cooperative member for his own debts is allowed only if his other property is insufficient in order to cover such debts according to the procedure established by law and the cooperative articles. Recourse for debts of a cooperative member cannot be taken on the cooperative’s indivisible funds.

Article 112. Reorganization and liquidation of production cooperatives.

1. A production cooperative can be voluntarily reorganized or liquidated by decision of the general meeting of its members.

Other grounds and the procedure for reorganizing and liquidating a cooperative are established by this Code and other laws.

2. A production cooperative, by unanimous decision of its members, can be transformed into an economic partnership or company.

IV. State-owned and municipal unitary enterprises

Article 113. Unitary enterprises

1. A unitary enterprise is recognized to be a commercial organization which is not conferred the right of property for the property allotted to it by the owner. The property of a unitary enterprise is indivisible and cannot be distributed according to contributions (stocks), including among the employees of the enterprise.

Besides the information referred to in pt.2, article 52 of this Code, a unitary enterprise’s articles shall contain information on major business line and objectives of the enterprise’s activities, as well as on the size of the authorized capital, procedure and sources of its formation.

Only state-owned and municipal enterprises can be created in the form of unitary enterprises.

2. Property of a state-owned or municipal enterprise is, respectively, in the governmental or municipal ownership and belongs to such enterprise as of right of administrative control or operational management.

3. The firm’s name of a unitary enterprise shall contain an indication as to the owner of its property.

4. A unitary enterprise is managed by its director who is appointed by the owner or the body authorized by the owner and is accountable to them.

5. A unitary enterprise is responsible for its obligations with all the property belonging to it.

A unitary enterprise bears no responsibility for the obligations of the owner of its property.

6. Legal status of state-owned and municipal unitary enterprises is defined by this Code and the law on state-owned and municipal unitary enterprises.

Article 114. Unitary enterprises based on the right of administrative control.

1. A unitary enterprise based on the right of administrative control is created by decision of the authorized governmental body or local self-government body.

2. A constituent document for the enterprise based on the right of administrative control is its articles approved by the authorized local self-government body.

3. The size of authorized capital in an enterprise based on the right of administrative control cannot be lower than the sum set by the law on state-owned and municipal unitary enterprises.

4. An enterprise’s authorized capital shall be fully paid by the owner before the enterprise is officially registered.

5. If, at the end of financial year, the value of net assets of the enterprise based on the right of administrative control proves less than its authorized capital, the body empowered to create such enterprises must reduce the authorized capital according to the established procedure. If the value of net assets becomes lower than the amount set by law, the enterprise can be liquidated by court decision.

6. If a decision is made to reduce the authorized capital, the enterprise must notify its creditors in writing about the occurrence.

A creditor of the enterprise has the right to demand that the obligation for which this enterprise is debtor be canceled or fulfilled ahead of time and his losses be recovered.

7. A unitary enterprise based on the right of administrative control can create other unitary enterprise as a legal person by transferring part of its property to it for administration according to the established procedure (subsidiary enterprise).

The founder approves the subsidiary enterprise’s articles and appoints its director.

8. The owner of property of the enterprise based on the right of administrative control bears no responsibility for the enterprise’s obligations, except in the cases specified by pt. 3, article 56 of this Code. This rule also applies to the responsibility of the enterprise establishing a subsidiary enterprise for the obligations of the latter.

Article 115. Unitary enterprises based on the right of operational management.

1. In the cases provided for by the law on state-owned and municipal unitary enterprises, a unitary enterprise based on the right of operational management (federal state enterprise) can be created by decision of the Russian Federation government on the basis of federally owned property.

2. A constituent document for a state-run enterprise based on the right of operational management is its articles approved by the Russian Federation government.

3. The firm’s name of an enterprise based on the right of operational management shall contain an indication that it belongs to the state.

4. The rights of a state-owned enterprise to the property assigned to it are defined according to articles 296 and 297 of this Code.

5. The Russian Federation bears subsidiary responsibility for the obligations of a state enterprise when the latter lacks property.

6. A state-owned enterprise can be reorganized or liquidated by decision of the Russian Federation government.

V. Non-profit organizations

Article 116. Consumer cooperatives

1. A consumer cooperative is recognized to be a voluntary association of citizens and legal persons on the basis of membership aimed at meeting material and other needs of partners through the pooling of proprietary shares by its members.

2. Besides the information mentioned in pt. 2, article 52 of this Code, a consumer cooperative’s articles must contain clauses on the sizes of shares of cooperative members; the composition and procedure for cooperative members to pay shares and their responsibility for breaking the obligation to pay shares; the make-up and competence of cooperative management bodies and procedure for their decision-making, including on issues to be decided unanimously or by qualified majority; the procedure for cooperative members to cover losses incurred by the cooperative.

3. The name of a consumer cooperative shall contain an indication as to the principal object of its activity, as well as either the word "cooperative" or the words "consumer association" or "consumer society".

4. Members of a consumer cooperative must, within three months after the approval of annual balance sheet, cover current losses by paying additional shares. In case of nonfulfillment of this obligation, the cooperative can be judicially liquidated on creditors’ demand.

Members of a consumer cooperative jointly bear subsidiary responsibility for its obligations within the limits of additional share unpaid by each cooperative member.

5. Earnings of a consumer cooperative from its business activity carried out by the cooperative in compliance with law and articles shall be distributed among its members.

6. Legal status of consumer cooperatives, as well as the status of their members are defined by laws on consumer cooperatives in accordance with this Code.

Article 117. Public and religious organizations (associations).

1. Public and religious organizations (associations) are recognized to be voluntary associations of citizens who unite, according to the procedure established by law, on the basis of common interests in order to meet their spiritual or other non-material needs.

Public and religious organizations are non-profit organizations. They have a right to engage in business activity inasmuch as it helps achieve the objectives they have been created for and answers these objectives.

2. Participants (members) of public and religious organizations do not retain rights to the property, including membership fees, surrendered by them to these organizations. They are not responsible for the obligations of public and religious organizations where they participate as members, whereas the aforementioned organizations bear no responsibility for their members’ obligations.

3. Specific legal status of public and religious organizations as participants in the relations regulated by this Code is determined by law.

Article 118. Foundations.

1. For the purposes of this Code, a foundation is recognized to be a non-profit organization without membership established by citizens and/or legal persons on the basis of voluntary property contributions and pursuing social, charitable, cultural, educational or other objectives to the public benefit.

Property surrendered to a foundation by its founders (founder) is the foundation’s ownership. Founders bear no responsibility for the obligations of the foundation they create, while the foundation bears no responsibility for the obligations of its founders.

2. A foundation uses property for the purposes defined in its articles. The foundation has a right to engage in business activity required to attain objectives of social utility for which the foundation has been created and meeting these objectives. To run business activity, foundations have the right to create economic societies and participate in them.

Each year, foundations must publish reports on how they have used their property.

3. Procedures for managing a foundation and forming its bodies are established by its articles approved by the founders.

4. Besides the information referred to in pt. 2, article 52 of this Code, a foundation’s articles must contain the foundation name including the word "foundation"; information about the foundation’s objectives; description of foundation bodies, including the board of trustees which supervises the foundation’s activities; the procedure for the appointment of functionaries for the foundation and their dismissal; the foundation’s location; the destiny of the foundation’s property in case of its liquidation.

Article 119. Changes in the articles and liquidation of a foundation

1. A foundation’s articles can be changed by foundation bodies if the articles provide for the possibility of making changes in this way.

If keeping the articles unchanged brings about consequences which could not be expected at the time of establishing the foundation and the articles do not provide for the possibility of making changes therein or if authorized persons do not change the articles, the authority to introduce changes is vested with the court after an application is filed by foundation bodies or the body authorized to exercise supervision over its activity.

2. Decision on liquidation of a foundation can be made only by the court by request of the parties concerned.

A foundation can be liquidated:

1) if the foundation lacks property to realize its objectives and probability of obtaining necessary property is unrealistic;

2) if the objectives pursued by the foundation cannot be achieved and necessary changes in the foundation’s objectives cannot be made;

3) in the case where the foundation in its activity avoids the objectives set by its articles;

4) in other cases specified by law.

3. If a foundation is in liquidation, its property remaining after creditors’ claims have been met is allotted for the purposes referred to in the foundation articles.

Article 120. Establishments.

1. An establishment is recognized to be an organization created by the owner in order to perform managerial, socio-cultural or other functions of non-profit character and funded by him fully or partially.

Rights of an establishment to the property assigned to it are defined in accordance with article 296 of this Code.

2. An establishment bears responsibility for its obligations with money resources available at its disposal. If they are insufficient, the owner of property in question shall bear subsidiary responsibility for its obligations.

3. Specific legal status of individual types of state-managed and other establishments is defined by law and other legal acts.

Article 121. Corporations of legal persons (associations and unions)

1. Commercial organizations for the purposes of coordinating their businesses, as well as representing and protecting their common proprietary interests can, under an agreement between them, create corporations in the form of associations and unions which are non-profit organizations.

If by decision of partners an association (union) is charged with running business activity, such association (union) shall be transformed into an economic society or partnership according to the procedure provided for by this Code or it can create an economic society in order to run business or participate in such society.

2. Public and other non-profit organizations, including establishments, can voluntarily unite into associations (unions) of these organizations.

An association (union) of non-profit organizations is also a non-profit organization.

3. Members of an association (union) retain autonomy and rights of a legal person.

4. An association (union) bears no responsibility for the obligations of its members. Members of the association ((union) shall bear subsidiary responsibility for its obligations to the extent and according to the procedure established by the association’s constituent documents.

5. The name of an association (union) shall contain an indication as to the main object of activity of its members and include the words "association" or "union".

Article 122. Constituent documents of associations and unions.

1. Constituent documents for an association (union) are its memorandum of association signed by its members and the articles approved by the same.

2. Besides the information referred to in pt. 2, article 52 of this Code, constituent documents of an association (union) must contain clauses on the make-up and competence of association (union) management bodies and procedure for them to make decisions, including on issues to be decided unanimously or by qualified majority of vote of association (union) members, as well as the procedure for distributing the property left after the liquidation of the association (union).

Article 123. Status of members of associations and unions.

1. Members of an association (union) have the right to avail themselves to its services free of charge.

2. A member of an association (union) has the right, at his discretion, to withdraw from the association (union) after the financial year is over. In this case, he shall bear subsidiary responsibility for the obligations of the association (union) proportionately to his contribution during two years from the day of withdrawal.

A member of an association (union) can be expelled from it by decision of the rest of partners in the cases and according to the procedure established by the association’s (union’s) constituent documents. The rules for the withdrawal from an association (union) apply in relation to the responsibility of the expelled member of the association (union).

3. By consent from members of an association (union), a new member can join it. Admitting the new partner into the association (union) can be conditioned by his subsidiary responsibility for the obligations of the association (union) arising before joining.

Chapter 5. Participation of the Russian Federation, Subjects of the Russian Federation, and Municipal Formations in Relations, Regulated by Civil Legislation

Article 124. The Russian Federation, Subjects of Russian Federation, and Municipal Formations as Subjects of Civil Law.

1. The Russian Federation, subjects of the Russian Federation republics, territories, regions, cities of federal significance, autonomous region, autonomous districts, as well as urban and rural settlements and other municipal formations shall act in relations regulated by civil legislation on equal principles with other participants in these relations, i.e. citizens and legal persons.

2. The norms determining the participation of legal persons in relations regulated by civil legislation shall apply to the subjects of civil law unless it arises otherwise from a law or the peculiarities of the subjects in question.

Article 125. The Procedure for Participation of the Russian Federation, subjects of the Russian Federation, and Municipal Formations in Relations, Regulated by Civil Legislation.

1. Agencies of State power within the framework of their competence established by acts, determining the status of these agencies, may by their actions acquire and exercise property and personal nonproperty rights and duties and appear in court in the name of the Russian Federation and of subjects of the Russian Federation.

2. Agencies of local self-government within the framework of their competence established by acts determining the status of these agencies may by their actions acquire and exercise the rights and duties specified in point 1 of this Article in the name of municipal formations.

3. In the instances and following the procedure provided for by federal laws, Russian Federation Presidential edicts, Russian Federation governmental decrees, and normative acts of subjects of the Russian Federation and municipal formations, State agencies, local self-government agencies, as well as legal persons and citizens may act in their names upon the special commission thereof.

Article 126. Responsibility for Obligations of the Russian Federation, Subject of the Russian Federation, and a Municipal Formation.

1. The Russian Federation, a subject of the Russian Federation, and a municipal formation shall be liable for its respective obligations with the property belonging to it by right of ownership, except for property which was allocated by it to legal persons by right of economic jurisdiction or operative management, as well as property which may be only in State or municipal ownership.

Levying execution upon land and other natural resources in State or municipal ownership shall be permitted in the instances provided for by law.

2. Legal persons created by the Russian Federation, by subjects of the Russian Federation, or by municipal formations shall not be liable for their obligations.

3. The Russian Federation, subjects of the Russian Federation, and municipal formations shall not be liable for obligations of legal persons created by them except in the instances provided for by law.

4. The Russian Federation shall not be liable for obligations of subjects of the Russian Federation and municipal formations.

5. Subjects of the Russian Federation and municipal formations shall not be liable for obligations of one another, nor for obligations of the Russian Federation.

6. The rules of points 2 to 5 of this Article shall not extend to instances when the Russian Federation has assumed a guarantee (surety) for the obligations of a subject of the Russian Federation, municipal formation, or legal person, or when the said subjects have assumed a guarantee (surety) for obligations of the Russian Federation.

Article 127. Particulars of Responsibility of Russian Federation and Subjects of Russian Federation in Relations Regulated by Civil Legislation with Participation of Foreign Legal Persons, Citizens, and States.

The particulars concerning the responsibility of the Russian Federation and subjects of the Russian Federation in relations regulated by civil legislation with the participation of foreign legal persons, citizens and States shall be determined by the law on the immunity of the State and its property.

Subsection 3. OBJECTS OF CIVIL RIGHTS.

Chapter 6. General Provisions

Article 128. Types of Objects of Civil Rights.

To objects of civil rights shall be relegated: things, including money and securities, other property, including proprietary rights; works and services; information; products of intellectual activity, including exclusive rights to them (intellectual property); and nonmaterial benefits.

Article 129. Circulability of Objects of Civil Rights.

1. Objects of civil rights may be freely alienated or be transferred from one person to another by way of universal legal succession (inheritance, reorganization of legal person) or by other means unless they have been withdrawn from circulation or their circulation have been limited.

2. Types of objects of civil rights whose being in circulation is not permitted (objects withdrawn from circulation) must be expressly specified in a law.

Types of objects of civil rights which may belong only to specified participants in circulation or whose being in circulation is permitted by a special authorization (objects of limited circulability) shall be determined according to the procedure established by law.

3. Land and other natural resources may be alienated or pass from one person to another by other means insofar as their circulation is permitted by laws on land and other natural resources.

Article 130. Immovable and Movable Things.

1. To immovable things (real estate, realty) shall be relegated land plots, mineral resources fields, isolated water bodies, and all that is closely connected with the land, i.e. objects which cannot be moved without detriment out of proportion to the purpose thereof, including woods, plantations of long standing, buildings, and structures.

To immovable thing also shall be relegated aircraft and sea-going vessels, inland-navigation vessels and space objects, all of which shall be subject to State registration. Other property also may be relegated by law to immovable things.

2. Things not relegated to real estate, including money and securities, shall be deemed to be movable property. The registration of rights to movable things shall not be required, except in the instances specified by law.

Article 131. State Registration of Real Estate.

1. The right of ownership and other real rights to immovable things, restrictions of these rights, the arising thereof, transfer, and termination shall be subject to State registration in a unified State register by justice institutions. There shall be subject to registration: right of ownership, right of economic jurisdiction, right of operative management, right of inheritable possession for life, right of permanent use, mortgage, and servitudes, as well as other rights in the instances specified by this Code and other laws.

2. In the instances provided for by law, a special registration or recording of individual types of immovable property may be effectuated together with the State registration.

3. The agency effectuating State registration of rights to real estate and transactions with it shall be obliged upon the petition of the rightholder to certify the registration made by means of issuing a document concerning the registered right or transaction or by making an inscription on the document submitted for registration.

4. The agency effectuating State registration of rights to real estate and transactions with it shall be obliged to provide information concerning the registration made and the rights registered to any person.

The information shall be provided in any agency effectuating the registration of real estate irrespective of the place of conducting the registration.

A refusal of State registration of the right to real estate or transaction with it, or the evading of registration by a respective agency may be appealed to a court.

6. The State registration procedure and the grounds for refusal of registration shall be established in accordance with this Code by the law on registration of the rights to immovable property and transactions with it.

Article 132. Enterprise.

1. An enterprise as an object of rights shall be deemed to be a property complex used to run entrepreneurial activity.

An enterprise as a whole, as a property complex, shall be deemed to be real estate.

2. An enterprise as a whole or part thereof may be an object for purchase and sale, for pledge, lease, and other transactions connected with the establishment, change, and termination of real rights.

An enterprise as a property complex shall comprise all types of property designated for its operation, including land plots, buildings, structures, equipment, implements, raw material, products, rights of demand, debts, as well as the rights to designation which individualize the enterprise, its products, jobs, and services (firm name, trademarks, service marks), and other exclusive rights, unless otherwise provided for by a law or contract.

Article 133. Indivisible Things

A thing the division of which in kind is impossible without changing the purpose thereof shall be deemed to be indivisible.

The particulars of partitioning a share in the right of ownership to an indivisible thing shall be determined by Articles 252 and 258 of this Code.

Article 134. Complex Things

If various kinds of things form a single whole which implies the use thereof for a common purpose, they shall be considered one thing (complex thing).

The effect of a transaction concluded with regard to a complex thing shall extend to all of its constituent parts unless otherwise provided by a contract.

Article 135. Principal Thing and Appurtenance.

A thing designated to serve another , principal thing and connected therewith by a common purpose (appurtenance) shall follow the fate of the principal thing unless otherwise provided by a contract.

Article 136. Fruits, Products, and Revenues.

Proceeds received as a result of the use of property (fruits, products, revenues) shall belong to the person lawfully using this property unless otherwise provided by a law or other legal acts or by the contract concerning the use of this property.

Article 137. Fauna.

The general rule on property shall apply to fauna insofar as not established otherwise by a law or other legal acts.

When exercising rights, the cruel treatment of fauna contrary to the principles of humaneness shall not be permitted.

Article 138. Intellectual Property.

In the instances and in accordance with the procedure established by this Code and other laws, an exclusive right (intellectual property) of a citizen or legal person shall be recognized to the results of intellectual activity and to the means equated with them and used to individualize the legal person, products, jobs or services provided (firm name, trademark, service name, and others).

The results of intellectual activity and means of individualization which are the object of exclusive rights (intellectual property) may be used by third persons only by consent of the possessor of the right.

Article 139. Official and Commercial Secret.

1. Information shall constitute an official or commercial secret when the information has real or potential commercial value by virtue of its being unknown to third persons, when there is no free access to it on legal grounds, and the possessor of the information takes measures to protect its confidentiality. Information which cannot constitute an official or commercial secret shall be determined by law or other legal acts.

2. Information constituting an official or commercial secret shall be protected by the means provided for by this Code and other laws.

Persons who have received information which constitutes an official or commercial secret by illegal methods shall be obliged to compensate the losses caused. The same duty shall be placed on employees who, contrary to the labor agreement, including the contract, have divulged an official or commercial secret, as well as on contractors who have done so despite a civil-law contract.

Article 140. Money (Foreign Currency).

1. The ruble shall be the legal means of payment obligatory for acceptance at face value throughout the entire territory of the Russian Federation.

Payments on the territory of the Russian Federation shall be effectuated in cash or as clearing settlements.

2. The instances, procedure, and conditions for the use of foreign currency on the territory of the Russian Federation shall be determined by law or according to the procedure established by it.

Article 141. Foreign Currency Valuables.

The types of property deemed to be foreign currency valuables and the procedure for concluding transactions with them shall be determined by the law on foreign currency regulation and foreign currency control.

The right of ownership in foreign currency valuables shall be protected in the Russian Federation on the general grounds.

Chapter 7. Securities

Article 142. Security.

1. A security shall be a document certifying, in compliance with the established form and obligatory requisites, property rights whose exercise and transfer shall be possible only upon its presentation.

The transfer of a security shall entail the transfer of all rights in the aggregate which are certified by it.

2. In the instances provided for by law or according to the procedure established by it, in order to exercise and transfer the rights certified by a security, evidence of them being granted as recorded in a special register (ordinary or computerized) shall be sufficient.

Article 143. Types of Securities.

To securities shall be relegated: State bond, bond, bill of exchange, check, deposit and savings certificates, bank bearer savings book, bill of lading, stock, privatization securities, and other documents which have been relegated among securities by the laws on securities or according to the procedure established by them.

Article 144. Requirements for Securities.

1. The types of rights which shall be certified by securities, the obligatory requisites of securities, the requirements for the form of a security, and other necessary requirements shall be determined by law or according to the procedure established by it.

2. The absence of obligatory requisites of a security or non-conformity of the security to the form established for it shall entail the nullity thereof.

Article 145. Subjects of Rights Certified by Security.

1. Rights certified by a security shall belong to:

1) the bearer of the security (bearer security);

2) the person named on the security (registered security);

3) the person named on the security who may himself exercise these rights or appoint by his instruction (order) another authorized person (order security).

The possibility of issuing securities of a specified type as registered, or as order, or as bearer securities may be excluded by law.

Article 146. Transfer of Rights Relating to Security.

1. In order to transfer to another person the rights certified by a bearer security, it shall be sufficient to hand over the security to this person.

2. The rights certified by a registered security shall be transferred according to the procedure established for the assignment of claims (cession). In accordance with Article 390 of this Code, a transferor of the right relating to a security shall bear responsibility only for the invalidity of the respective claim, but not for the failure to fulfil it.

3. The rights relating to an order security shall be transferred by means of making an inscription of transfer on this security, i.e. an endorsement. The endorser shall bear responsibility not only for the existence of the right, but for the exercise thereof as well.

An endorsement made on a security shall pass all the rights certified by the security to whom or to the order of whom the rights relating to the security are transferred, i.e. the endorsee. An endorsement may be in blank (without specifying the person to whom execution must be made) or to order (specifying the person to whom or to the order of whom execution must be made).

An endorsement may be limited only to a commission to exercise the rights certified by the security without the transfer of these rights to the endorsee (endorsement of entrustment). In this event, the endorsee shall act as a representative.

Article 147. Performance Relating to Security.

1. The person who has issued a security and all the persons who have endorsed it shall be liable to the legal possessor thereof jointly and severally. In the event the claim of the legal possessor of the security concerning the performance of the obligation certified by it is satisfied by one or several persons from among those obliged according to the security earlier than him, they shall acquire the right of recourse (regress) against the other persons who are obliged with regard to the security.

2. A refusal to perform an obligation certified by a security by referring to the absence of grounds for the obligation or to its invalidity shall not be permitted.

The possessor of a security who has discovered a forgery or a counterfeit security shall have the right to present to the person who transferred the security to him a demand for proper performance of the obligation certified by the security and for compensation of losses.

Article 148. Reinstatement of Security.

The rights relating to lost bearer securities and order securities shall be reinstated by a court in the procedure provided for by procedural legislation.

Article 149. Paperless Securities.

1. In the instances determined by law or according to the procedure established by it, a person who has received a special license may fix the rights vested by a registered or order security, including in paperless form (with the assistance of computer technology, and the like). The rules established for securities shall apply to this form of fixation of rights unless it arises otherwise from the particulars of the fixation.

The person who has fixed the right in paperless form shall be obliged upon the demand of the possessor to issue a document to him certifying the vested right.

The rights certified by means of the said fixation, the procedure for the official fixation or rights and rightholders, the procedure for the documentary confirmation of entries, and the procedure for performing operations with paperless securities shall be determined by law or in accordance with the procedure established by it.

Operations with paperless securities may be performed only by having recourse to the person officially responsible for the entry of rights. The transfer, granting, and restriction of rights must be officially fixed by this person who shall bear responsibility for the safety of official entries, ensuring their confidentiality, the submission of correct data concerning such entries, and the performance of official entries concerning operations carried on.

Chapter 8. Nonmaterial Benefits and Protection Thereof

Article 150. Nonmaterial benefits.

1. Life and health, the dignity of the person, personal inviolability, honor and good name, business reputation, inviolability of private life, personal and family secrecy, the right of free movement, and choice of place for sojourn and residence, the right to name, the right of authorship, other personal nonproperty rights and other nonmaterial benefits which belong to a citizen from birth or by virtue of law shall be inalienable and not transferable by other means. In the instances and pursuant to the procedure provided for by law, personal nonproperty rights and other nonmaterial benefits which belonged to a deceased person may be exercised and protected by other persons, including heirs of the possessor of the right.

2. Nonmaterial benefits shall be protected in accordance with this Code and other laws in the instances and procedure provided for by them, as well as in those instances and within those limits in which the use of the means for protecting civil rights (Article 12) arises from the essence of the violated nonmaterial right and from the character of the consequences of this violation.

Article 151. Compensation for Moral Harm.

If moral harm (physical or moral suffering) has been caused to a citizen by actions violating his personal nonproperty rights or infringing on other nonmaterial benefits belonging to the citizen, as well as in other instances provided for by law, the court may impose on the offender the duty of monetary compensation for the said harm.

When determining the amounts of compensation for moral harm, the court shall take into account the degree of fault of the offender and other circumstances deserving of attention. The court must also take into account the extent of physical and moral suffering connected with the individual peculiarities of the person to whom harm was caused.

Article 152. Protection of Honor, Dignity, and Business Reputation.

1. A citizen shall have the right to demand through a court the refutation of information defaming his honor, dignity, or business reputation, unless the disseminator of such information proves that it corresponds to reality.

Upon the demand of interested persons the protection of the honor and dignity of a person shall also be permitted after his death.

2. If information defaming the honor, dignity, or business reputation of a citizen has been disseminated in the mass media, it must be refuted in the same mass media.

If the said information is contained in a document coming from an organization, such document shall be subject to replacement or recall.

The procedure for refutation in other instances shall be established by court.

3. A citizen with respect to whom the mass media have published information infringing upon his rights or interests protected by law, shall have the right to publication of his reply in the same mass media.

4. If a decision of court has not been fulfilled, the court shall have the right to impose a fine on the violator to be recovered in the amount and according to the procedure provided for by procedural legislation to the revenue of the Russian Federation. The payment of the fine shall not relieve the violator from the duty to fulfil the action provided for by the court decision.

5. A citizen with respect to whom information has been disseminated which defames his honor, dignity, or business reputation, shall have the right, together with the refutation of such information, to demand compensation for losses and moral harm caused by the dissemination thereof.

6. If it is impossible to establish the person who has disseminated information defaming the honor, dignity, or business reputation of a citizen, the person with respect to whom such information has been disseminated shall have the right to apply to court with a statement concerning recognition that the information being disseminated does not correspond to reality.

7. The rules of this Article for the protection of business reputation of a citizen shall respectively apply to the protection of business reputation of a legal person.

Subsection 4. TRANSACTIONS AND REPRESENTATION

Chapter 9. Transactions

I. Concept, Types, and Forms of Transactions

Article 153. Concept of Transaction

The actions of citizens and legal persons directed to the establishment, change, or termination of civil rights and duties shall be deemed to be transactions.

Article 154. Contracts and Unilateral Transactions

1. Transactions may be bilateral or multilateral (contracts), or unilateral.

2. A transaction for the conclusion of which in accordance with a law, other legal acts, or agreement of the parties the expression of the will of one party is necessary and sufficient shall be considered unilateral.

3. In order to conclude a contract, the expression of the concordant will of two parties (bilateral transaction), or three or more parties (multilateral transaction) shall be necessary.

Article 155. Duties Regarding Unilateral Transaction

A unilateral transaction shall create duties for the person who has concluded the transaction. It may create duties for other persons only in the instances established by law or by agreement with those persons.

Article 156. Legal Regulation of Unilateral Transactions

The general provisions on obligations and on contracts shall respectively apply to unilateral transactions insofar as this is not contrary to law or to the unilateral character and essence of the transaction.

Article 157. Transactions Concluded under Condition

1. A transaction shall be considered concluded under a condition suspensive if the parties have made the arising of rights and duties dependent upon a circumstance relative to which it is unknown whether this will ensue or not.

2. A transaction shall be considered concluded under a condition subsequent if the parties have made the termination of rights and duties dependent upon a circumstance relative to which it is unknown whether this will ensue or not.

3. If the ensuing of a condition is obstructed in bad faith by a party for which the ensuing of the condition is disadvantageous, the condition shall be deemed to have ensued.

If the ensuing of a condition is facilitated in bad faith by a party for which the ensuing of the condition is advantageous, the condition shall be deemed not to have ensued.

Article 158. Form of Transactions

1. Transactions shall be concluded orally or in writing (simple or notarial form).

2. A transaction which may be concluded orally shall be considered concluded also in the instance when the will to conclude the transaction is manifest from the behavior of the person.

3. Silence shall be deemed to be an expression of will to conclude a transaction in the instances provided for by law or by agreement of the parties.

Article 159. Oral Transactions

1. A transaction for which the written (simple or notarial) form has not been established by law or by agreement of the parties may be concluded orally.

2. Unless otherwise established by agreement of the parties, all transactions performed during their conclusion may be concluded orally, except for transactions for which a notarial form has been established and transactions the failure to comply with the simple written form of which entails their invalidity.

3. Transactions in pursuance of a contract concluded in writing may, by agreement of the parties, be concluded orally unless this is contrary to the law, other legal acts, and a contract.

Article 160. Written Form of Transaction

1. A transaction in written form must be concluded by means of drawing up a document reflecting the content thereof and signed by the person or persons concluding the transaction, or by persons duly authorized by them.

Bilateral (multilateral) transactions may be concluded by means established by Article 434(2) and (3) of this Code.

A law, other legal acts or an agreement between the parties may establish additional requirements to which the form of a transaction must conform (conclusion on a letterhead of a specified form, affixing of seal, etc.) and provide for consequences for the failure to comply with these requirements. If such consequences have not been provided, the consequences specified for the failure to comply with the simple written form of a transaction shall apply (Article 162[1]).

2. The use when concluding transactions of a facsimile reproduction of a signature with the help of mechanical or other copying devices, as well as electronic-digital signature, or other analog of a signature in one’s own hand shall be permitted in the instances and procedure provided for by law, other legal acts, or by agreement of the parties.

3. If a citizen as a consequence of physical defect, disease, or illiteracy cannot sign in his own hand, then at his request another citizen may sign the transaction. The signature of the latter must be certified by a notary or other official entitled to perform such a notarial act, specifying the reasons for which the person concluding the transaction could not sign it in his own hand.

However, when concluding the transactions specified in Article 185(4) of this Code and granting powers of attorney to conclude them, the signature of the signer of the transaction may also be certified by the organization employing the citizen who cannot sign in his own hand or by the administration of the inpatient treatment institution in which he is situated for care.

Article 161. Transactions Concluded in Simple Written Form

1. There must be concluded in simple written form, except for transactions requiring notarial certification:

1) transactions of legal persons between themselves and with citizens;

2) transactions of citizens between themselves for an amount exceeding no less than ten times the minimum wage established by law, and irrespective of the transaction amount in the instances provided for by law.

2. Compliance with the simple written form shall not be required for the transactions which in accordance with Article 159 of this Code may be concluded orally.

Article 162. Consequences of Failure to Comply with Simple Written Form of Transaction

1. The failure to comply with the simple written form of a transaction shall deprive the parties of the right to refer, in the event of a dispute, to witness testimony in confirmation of the transaction and its conditions, but shall not deprive them of the right to give written and other evidence.

2. In the instances expressly specified in a law or in the agreement of the parties the failure to comply with the simple written form of a transaction shall entail its invalidity.

3. The failure to comply with the simple written of a foreign economic transaction shall entail its invalidity.

Article 163. Notarially Certified Transactions

1. The notarial certification of a transaction shall be performed by means of an endorsement of certification written on the document corresponding to the requirements of Article 150 of this Code by a notary or other official entitled to perform such a notarial act.

2. Notarial certification shall be obligatory:

1) in the instances specified in a law;

2) in the instances provided for by agreement of the parties, even if such form is not required by the law for these transactions.

Article 164. State Registration of Transactions

1. Transactions with land and other real estate shall be subject to State registration in the instances and according to the procedure provided for by Article 131 of this Code and by the law on the registration of rights to real estate and transactions with it.

2. State registration of specified types of transactions with real estate may be established by a law.

Article 165. Consequences of Failure to Comply with Notarial Form of Transaction and Requirement for Registration Thereof

1. The failure to comply with the notarial form and in the instances established by a law, with the requirement concerning State registration of a transaction shall entail its invalidity. Such a transaction shall be considered null and void.

2. If one party has wholly or partially performed a transaction requiring notarial certification, and the other party evades such certification of the transaction, the court shall have the right at the demand of the party which performed the transaction to deem the transaction to be valid. In this event, subsequent notarial certification of the transaction shall not be required.

3. If a transaction requiring State registration has been concluded in the proper form but one of the parties evades the registration thereof, the court shall have the right at the demand of the other party to render a decision concerning registration of the transaction. In this event, the transaction shall be registered in accordance with the court decision.

4. In the instances provided for by points 2 and 3 of this Article the party which unjustifiably evades notarial certification or State registration of a transaction must compensate the other part for losses caused by the delay in concluding or registering the transaction.

II. Invalidity of Transactions

Article 166. Contested and Null Transactions

1. A transaction shall be invalid on the grounds established by this Code, or by virtue of being deemed as such by a court (contested transaction), or irrespective of such deeming (null transaction).

2. A claim to deem a contested transaction to be invalid may be brought by the persons specified in this Code.

A claim to apply consequences of the invalidity of a null transaction may be presented by any interested person. The court shall have the right to apply such consequences at its own initiative.

Article 167. General Provisions on Consequences of Invalidity of Transaction

1. An invalid transaction shall not entail legal consequences, except for those which are connected with its invalidity, and it shall be invalid from the moment of its conclusion.

2. In the event a transaction is invalid, each of the parties shall be obliged to return to the other everything received under the transaction, and if it is impossible to return that received in kind (including when the received is expressed in the use of property, a job performed, or a service provided), to compensate its value in money, unless other consequences of the invalidity of the transaction have been provided for by a law.

3. If it follows from the content of a contested transaction that it may be only terminated for the future time, the court when deeming the transaction to be invalid shall terminate its validity for the future.

Article 168. Invalidity of Transaction Not Conforming to Law or Other Legal Acts

A transaction not conforming to a law or other legal acts shall be null unless the law establishes that such a transaction is contestable or provides for other consequences for the violation.

Article 169. Invalidity of Transaction Concluded for Purpose Contrary to Fundamentals of Law Order and Morality

A transaction concluded for a purpose known to be contrary to the fundamentals of law order or morality shall be null and void.

If both parties have been involved in such a transaction and the transaction has been performed by both parties, everything received by them under the transaction shall be recovered to the revenue of the Russian Federation, and if the transaction has been performed by one party, everything received by the other party and everything due from it to the first party in compensation for that received shall be recovered to the revenue of the Russian Federation.

If only one party to such a transaction has intent, everything received by it under the transaction shall be returned to the other party, and everything received by the latter or due to it in compensation for that performed shall be recovered to the revenue of the Russian Federation.

Article 170. Invalidity of Fictitious and Sham Transactions

1. A fictitious transaction, i.e. a transaction concluded only proforma, without the intention to create relevant legal consequences, shall be null.

2. A sham transaction, i.e. a transaction concluded for the purpose of covering up another transaction, shall be null. To the transaction which the parties actually had in view, taking into account the character of the transaction, shall apply the rules relevant thereto.

Article 171. Invalidity of Transaction Concluded by Citizen Deemed to Lack Active Capacity

1. A transaction concluded by a citizen deemed to lack active capacity as a consequence of mental disorder shall be null.

Each of the parties to such a transaction shall be obliged to return to the other everything received in kind, and if it is impossible to return that received in kind, to compensate its value in money.

The party having active capacity shall be obliged, in addition, to compensate the other party for the real damage incurred by it, if the actively capable party knew or should have known about the incapacity of the other party.

2. In the interests of a citizen deemed to lack active capacity as a consequence of mental disorder, the transaction concluded by him may, at the demand of his trustee, be deemed by a court to be valid if it was concluded to the advantage of this citizen.

Article 172. Invalidity of Transaction Concluded by Minor Under Fourteen Years of Age

1. A transaction concluded by a minor who has not reached fourteen years of age (youth) shall be null. To such transaction shall apply the rules provided for by Article 171(1), paragraphs two and three, of this Code.

2. In the interests of the youth, a transaction concluded by him may at the demand of his parents, adoptive parents, or trustee be deemed by a court to be valid if it was concluded to the advantage of the youth.

3. The rules of this Article shall not extend to petty domestic and other transactions of youth which they have the right to conclude on their own in accordance with Article 28 of this Code.

Article 173. Invalidity of Transaction of Legal Person Exceeding Limits of Its Legal Capacity

A transaction concluded by a legal person contrary to the purposes of activity expressly limited in its constituent documents, or by a legal person not having a license to engage in the respective activity, may be deemed by a court to be invalid upon the suit of this legal person, its founder (partner), the State agency effectuating control or supervision over the activity of the legal person if it is proved that the other party to the transaction knew or knowingly should have been aware of the illegality thereof.

Article 174. Consequences of Limitation of Powers to Conclude Transaction

If the powers of a person to conclude a transaction have been limited by a contract or the powers of an organ of a legal person by its constituent documents in comparison with those as determined in a power of attorney, in a law, or which may be considered obvious from the situation in which the transaction was concluded, and when concluding it such person or organ exceeded these limitations, the transaction may be deemed by a court to be invalid upon the suit of the person in whose interests the limitations were established only in instances when it can be proved that the other party to the transaction knew or knowingly should have been aware of the said limitations.

Article 175. Invalidity of Transaction Concluded by Minor from Fourteen to Eighteen Years of Age

1. A transaction concluded by a minor from fourteen to eighteen years of age without the consent of his parents, adoptive parents, or guardian in the instances when such consent is required in accordance with Article 26 of this Code may be deemed by a court to be invalid upon the suit of the parents, adoptive parents, or guardian.

If such transaction has been deemed to be invalid, the rules provided for by Article 171(1), paragraphs two and three, of this Code shall apply respectively.

2. The rules of this Article shall not extend to transactions of minors who have come to have full active capacity.

Article 176. Invalidity of Transaction Concluded by Citizen Limited by Court in Active Capacity

1. A transaction relating to the disposition of property concluded without the consent of the guardian by a citizen limited by a court in active capacity as a consequence of alcohol or drug abuse may be deemed by a court to be invalid upon the suit of the guardian.

If such transaction has been deemed to be invalid, the rules provided for by Article 171(1), paragraphs two and three, of this Code shall apply respectively.

2. The rules of this Article shall not extend to petty domestic transactions which a citizen limited in active capacity has the right to conclude on his own in accordance with Article 30 of this Code.

Article 177. Invalidity of Transaction Concluded by Citizen Not Capable to Understand the Purport of His Actions and Directing Them

1. A transaction concluded by a citizen, although having active capacity but at the moment of concluding it being in a state when he was not capable to understand the purport of his actions or to direct them, may be deemed by a court to be invalid upon the suit of this citizen or other persons whose rights or interests protected by law have been violated as a result of the conclusion thereof.

2. A transaction concluded by a citizen who is subsequently deemed to lack active capacity may be deemed by a court to be invalid upon the suit of the trustee if it can be proved that at the moment of concluding the transaction the citizen was not capable of understanding the import of his actions or directing them.

3. If a transaction is deemed to be invalid on the grounds of this Code, the rules provided for by Article 171(1), paragraphs two and three, of this Code shall apply respectively.

Article 178. Invalidity of Transaction Concluded under Influence of Delusion

1. A transaction concluded under the influence of delusion having material significance may be deemed by a court to be invalid upon the suit of the party which acted under the influence of delusion.

Delusion as to the nature of a transaction, the identity, or such qualities of its subject which considerably reduce the possibility of using it for its purpose shall have material significance. Delusion as to the motives of a transaction shall not have material significance.

2. If a transaction is deemed to be invalid as concluded under the influence of delusion, the rules provided for by Article 167(2) of this Code shall apply respectively.

In addition, the party upon whose suit the transaction was deemed to be invalid shall have the right to demand from the other party compensation for real damage caused to it if it is proved that the delusion arose through the fault of the other party. If it not proved, the party at whose suit the transaction was deemed to be invalid shall be obliged to compensate the other party at its demand for real damage caused to it even if the delusion arose through circumstances beyond the control of the deluded party.

Article 179. Invalidity of Transaction Concluded Under Influence of Fraud, Coercion, Threat, or Ill- Intentioned Agreement of Representative of One Party with Other Party or Coincidence of Grave Circumstances

1. A transaction concluded under the influence of fraud, coercion, threat, or ill-intentioned agreement between a representative of one party with the other party, as well as a transaction which a person was forced to conclude as a consequence of the coincidence of grave circumstances on conditions extremely disadvantageous for himself which the other party took advantage of (transaction on crushing terms) may be deemed by a court to be invalid upon the suit of the victim.

2. If the transaction was deemed invalid on one of the grounds specified in point 1 of this Article, then the other party shall return to the victim everything received by it under the transaction, and if it is impossible to return that received in kind, the value thereof shall be compensated in money. Property received under a transaction by the victim from the other party, as well as that due to it in compensation for what was transferred to the other party, shall go to the revenue of the Russian Federation. If it is impossible to transfer the property to the revenue of the Russian Federation in kind, the value thereof in money shall be recovered. In addition, the other party shall compensate the victim for real damage caused to it.

Article 180. Consequences of Invalidity of Part of Transaction

The invalidity of part of a transaction shall not entail the invalidity of its other parts if it is possible to suppose that the transaction would have been well concluded without including the invalid part thereof.

Article 181. Periods of Limitation for Invalid Transactions

1. A suit concerning the application of consequences of the invalidity of a null transaction may be filed within ten years from the date when the fulfillment thereof commenced.

2. A suit to deem a contested transaction to be invalid and concerning the application of the consequences of its invalidity may be filed within a year from the date of the termination of the coercion or threat under whose influence the transaction was concluded (Article 179[1]), or from the date when the plaintiff learnt or should have learnt about other circumstances which are the grounds for deeming the transaction to be invalid.

Chapter 10. Representation. Power of attorney

Article 182. Representation

1. A transaction concluded by one person (representative) in the name of another person (person represented) by virtue of authority based on a power of attorney, specification of a law, or act of an empowered State agency or local self-government agency shall directly create, change, and terminate civil rights and duties of the person represented.

A power also may be manifest from the situation in which a representative acts (retail seller, cashier, etc.).

2. Persons acting, although in the interests of others but in their own name (commercial intermediaries, trustees in bankruptcy, executors in a will, etc.). , as well as persons authorized to enter into negotiations concerning possible future transactions, shall not be representatives.

3. A representative may not conclude transactions in the name of the person represented with respect to himself personally. He also may not conclude such transactions with respect to another person whose representative he is simultaneously, except in the instances of commercial representation.

4. Concluding a transaction which by its character may be concluded only personally, and likewise other transactions specified in a law, shall not be permitted.

Article 183. Conclusion of Transaction by Unauthorized Person

1. In the absence of powers to act in the name of another person or in the event of exceeding such powers, a transaction shall be considered concluded in the name and in the interests of the person who concluded it unless the other person (person represented) subsequently approves expressly this transaction.

2. Subsequent approval of a transaction by the person represented shall create, change, and terminate civil rights and duties for him with regard to the particular transaction from the moment of its conclusion.

Article 184. Commercial Representation

1. A person who permanently and autonomously is representing in the name of entrepreneurs when they conclude contracts in the sphere of entrepreneurial activities shall be a commercial representative.

2. The simultaneous commercial representation of various parties in a transaction shall be permitted by consent of these parties also in other instances provided for by law. In so doing the commercial representative shall be obliged to perform the commissions given to him with care of a normal entrepreneur.

A commercial representative shall have the right to demand payment of stipulated remuneration and compensation for expenses incurred by him when performing a commission from the parties to the contract in equal shares unless otherwise provided by agreement between them.

3. A commercial representation shall be effectuated on the basis of a contract concluded in writing and stating the powers of the representative, and in the absence of such statement, also a power of attorney.

A commercial representative shall be obliged to preserve the secrecy of the information made known to him concerning trade transactions also after the fulfillment of the commission given to him.

4. The particulars of commercial representation in individual spheres of entrepreneurial activity shall be established by a law and other legal acts.

Article 185. Power of attorney

1. A power of attorney shall be deemed to be a written authorization issued by one person to another person for representation to third persons. The written authorization to conclude a transaction by a representative may be granted by the person represented directly to the respective third person.

2. A power of attorney to conclude transactions requiring a notarial form must be notarially certified, except for the instances provided for by a law.

3. There shall be equated to notarially certified powers of attorney:

1) powers of attorney of military servicemen and other persons being treated in military hospitals, sanatoriums, and other military treatment institutions certified by the head of such institution, his deputy for medical affairs, and the senior or duty doctor;

2) powers of attorney of military servicemen, and in centers for the stationing of military units, formations, establishments, and military training institutions where there are no notarial offices or other agencies which perform notarial functions, also the powers of attorney of workers and employees, members of their families and members of the families of military servicemen certified by the commander (head) of this unit, formation, establishment, or institution;

3) powers of attorney of persons in places of confinement certified by the head of the respective place of confinement;

4) powers of attorney of legally capable citizens of full age who are in institutions for social protection of the populace which are certified by the administration of this institution or the director (or his deputy) of the respective agency of social protection of the populace.

4. A power of attorney to receive earnings and other payments connected with labor relations, to receive royalties of authors and inventors, pensions, grants and scholarships, deposits of citizens in banks, and to receive correspondence, including monetary and parcel, may also be certified by the organization in which the entruster works or studies, by the housing-operations organization at his place of residence, and by the administration of the inpatient treatment institution in which he is being treated.

A power of attorney for a representative of the citizen to receive the latter’s deposit in the bank, sums of money from his bank account, correspondence addressed to him at post offices, as well as to effect in the citizen’s name other transactions specified in paragraph one of this point, may be certified by the respective bank or post office. Such power of attorney shall be certified free of charge. *)

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*) Added from 14 August 1996 by Federal Act No. 111-FZ of 12 August 1996

5. A power of attorney in the name of a legal person shall be issued signed by its director or other person authorized by the constituent documents to do so, with the seal of this organization affixed.

A power of attorney in the name of a legal person based on State or municipal property for the receipt of issuance of money and other property valuables must be also signed by the chief (senior) bookkeeper of this organization.

Article 186. Duration of Power of Attorney

1. The duration of a power of attorney may not exceed three years. If the period has not been specified in the power of attorney, it shall retain force for one year from the date of the issuance thereof.

A power of attorney in which the date of its issuance has not been specified shall be null.

2. A power of attorney certified by a notary and intended for the fulfillment of operations abroad, without its duration specified, shall retain force until the revocation thereof by the person who has issued the power of attorney.

Article 187. Transfer of Power of Attorney

1. A person to whom a power of attorney was issued must personally perform the actions for which he is authorized. He may transfer the power of attorney to perform them to another person if authorized to do so by the power of attorney or forced to do so by virtue of circumstances in order to protect the interests of the person who issued the power of attorney.

2. The person who transferred the power of attorney to another person must notify the person who issued the power of attorney thereof and communicate to him necessary information about the transferee of the powers. The failure to perform this duty shall impose on the transfer of powers responsibility for the actions of the transferee as they were his own.

3. A power of attorney issued by way of transfer must be notarially certified except for the instances provided for by Article 185(4) of this Code.

4. The duration of a power of attorney issued by way of transfer may not exceed the duration of the power of attorney on the basis of which it was issued.

Article 188. Termination of Power of Attorney

1. The effect of a power of attorney shall terminate as a consequence of:

1) expiry of the duration of the power of attorney;

2) revocation of the power of attorney by the person who issued it;

3) renunciation by the person to whom the power of attorney was issued;

4) termination of the legal person in whose name the power of attorney was issued;

5) termination of the legal person to whom the power of attorney was issued;

6) death of the citizen who issued the power of attorney, deeming him to be legally incapable, partially capable, or missing;

7) death of the citizen to whom the power of attorney was issued, deeming him to be legally incapable, partially capable, or missing.

2. The person who issued the power of attorney may any time revoke the power of attorney or the transfer of the power of attorney, and the person to whom the power of attorney was issued, to renounce it. An agreement concerning the waiver of these rights shall be null.

3. The transfer of a power of attorney shall lose force with the termination of the power of attorney.

Article 189. Consequences of Termination of Power of Attorney

1. A person who issued a power of attorney and subsequently revoked it shall be obliged to notify the person to whom the power of attorney was issued about the revocation thereof, as well as third persons known to him and with respect to whom the power of attorney was issued for representation. The same duty shall be imposed on legal successors of the person who issued the power of attorney in instances of the termination thereof on the grounds provided for in Article 188(1), subpoints (4) and (6), of this Code.

2. The rights and duties which arose as a result of the actions of the person to whom the power of attorney was issued before this person knew or should have known about its termination shall remain in force for the person who issued the power of attorney and his legal successors with respect to third persons. This rule shall not apply if the third person knew or should have known that the validity of the power of attorney had terminated.

3. Upon the termination of a power of attorney the person to whom it was issued or his legal successors shall be obliged immediately to return the power of attorney.

Subsection 5. Terms. Limitation of Action

Chapter 11. Calculation of Term

Article 190. Determination of Term

A term established by a law, other legal acts, a transaction, or awarded by a court shall be determined by a calendar date or by the expiry of a period of time calculated by years, months, weeks, days, or hours.

A term may also be determined by referring to an event which must inevitably ensue.

Article 191. Commencement of Term Determined by Period of Time

The duration of a term determined by a period of time shall commence on the following day after the calendar day or the onset of the event by which its commencement is determined.

Article 192. End of Term Determined by Period of Time

1. A term calculated by years shall expire in the corresponding month and date of the last year of the term.

The rules for terms calculated by months shall apply to a term set at a half-year.

2. To a term calculated by quarters of a year shall apply the rules for terms calculated by months, a quarter being considered equal to three months and quarters being counted from the beginning of the year.

3. A term calculated by months shall expire on the corresponding date of the last month of the term.

A term determined as a half-month shall be considered a term calculated by days and equal to fifteen days.

If the expiry of a term calculated by months comes in a month in which there is no corresponding date, the term shall expire on the last day of that month.

4. A term calculated by weeks shall expire on the corresponding day of the last week of the term.

Article 193. Ending of Term on Non-Work Day

If the last day of a term comes on a non-working day, the next work day following shall be considered the day of the ending of the term.

Article 194. Procedure for Performing Actions on Last Day of Term

1. If a term has been established for performing some action, it may be fulfilled up to 24:00 o’clock of the last day of the term.

However, if this action must be performed in an organization, the term shall expire at the hour when the respective operations in this organization terminate according to the established rules.

2. Written applications and notifications handed in to a communications organization before 24:00 o’clock of the last day of the term shall be deemed to be made within the term.

Chapter 12. Limitation

Article 195. Concept of Limitation

A period for the defense of a right at the suit of a citizen whose right has been violated shall be deemed to be a limitation.

Article 196. General Period of Limitation

The general period of limitation shall be established to equal to three years.

Article 197. Special Periods of Limitation

1. Special periods of limitation, shorter or longer than the general period, may be established by law for individual types of claims.

2. The rules of Articles 195, 198-207 of this Code shall also extend to special periods of limitation unless otherwise established by law.

Article 198. Invalidity of Agreement to Change Limitation Periods

Limitation periods and the procedure for the calculation thereof may not be changed by agreement of the parties.

The grounds for the suspension and interruption of the running of limitation periods shall be established by this Code and by other laws.

Article 199. Application of Limitation

1. A demand concerning the defense of a violated right shall be accepted by a court irrespective of the expiry of the limitation period.

2. A limitation shall be applied by a court only upon the application of a party to the dispute which was made before the rendering of the court decision.

The expiry of the limitation period concerning the enforcement of which a party to the dispute has applied for shall be grounds for the court to render a decision to reject the action.

Article 200. Commencement of Running of Limitation Period

1. The running of a limitation period shall commence from the day when the person knew or should have known about the violation of his right. Exceptions from this rule shall be established by this Code and by other laws.

2. With regard to obligations with a specified period of fulfillment, the running of the limitation shall commence upon the period of fulfillment ensuing.

With regard to obligations the period for the fulfillment of which has not been specified or has ben specified with reference to the moment of demand, the running of the limitation shall commence from the moment when the right arises with the creditor to submit a demand concerning the fulfillment of the obligation, and if the debtor is granted an exemption period for fulfilling such demand, the calculation of limitation shall commence upon the expiry of the said period.

3. With regard to recourse obligations, the running of a limitation period shall commence from the moment of fulfillment of the principal obligation.

Article 201. Limitation Period in Event of Change in Obligation

The change of persons involved in a obligation shall not entail a change in the limitation period and the procedure for calculating it.

Article 202. Suspension of Running of Limitation Period

1. The running of the limitation period shall be suspended:

1) if the bringing of action was impeded by a circumstance which was extraordinary and unavoidable under the particular conditions (insuperable force);

2) if the plaintiff or defendant is in the Armed Forces being under martial law;

3) by virtue of a deferral for the fulfillment of obligations established by the Russian Federation Government on the basis of a law (moratorium);

4) by virtue of the suspension of the effect of a law or other legal act regulating the respective relation.

2. The running of a limitation period shall be suspended on condition that the circumstances specified in this Article arose or have continued to exist during the last six months of the limitation period, and if this period is equal to six months or less than six months, during the limitation period.

3. The running of a limitation period shall continue from the date of termination of the circumstance which served as the grounds for the suspension thereof. The remaining part of the period shall be lengthened up to six months, and if the limitation period is equal to six month or less than six months, up to the limitation period.

Article 203. Interruption of Running of Limitation Period

The running of a limitation period shall be interrupted by bringing suit according to the established procedure, and also by the performance of actions by the obliged person which testify to recognition of the debt.

After the interruption, the running of the limitation period shall commence anew; the time which elapsed before interruption shall not be included in the new period.

Article 204. Running of Limitation Period in Event of Leaving Suit Without Consideration

If a court has left a suit without consideration, the running of the limitation period which commenced before bringing suit shall continue as is usual.

If a suit brought in a criminal case has been left by a court without consideration, then the running of the limitation period which commenced before bringing suit shall be suspended until the judgement by which the suit was left without consideration comes into legal force; the time during which the limitation was suspended shall not be included in the limitation period. In this instance, if the remaining part of the period is less than six months, it shall be lengthened to six months.

Article 205. Restoration of Limitation Period

In exceptional instances when the court deems the reason for the missing of the limitation period to be justifiable in view of personal circumstances of the plaintiff (grave illness, helpless state, illiteracy, and the like), the violated right of the citizen shall be subject to defense. The reasons for having missed the limitation period may be deemed to be justifiable if they occurred in the last six months of the limitation period, and if this period is equal to six months or less than six months, during the limitation period.

Article 206. Performance of Duty Upon Expiry of Limitation Period

A debtor or other obliged person who has performed a duty upon the expiry of the limitation period shall not have the right to demand back that which has been performed, even though at the moment of performance the said person did not know about the expiry of the limitation.

Article 207. Application of Limitation Period to Additional Demands

With the expiry of the limitation period for the principal demand, the limitation period for additional demands (penalty, pledge, surety, and the like) shall expire as well.

Article 208. Demands to Which Limitation Does Not Extend

Limitation shall not extend to:

- demands concerning the protection of personal nonproperty rights and other nonmaterial benefits, except for the instances provided for by law; and

- demands of depositors against a bank concerning the issuance of deposits; and

- demands concerning compensation of harm caused to the life or health of a citizen. However, demands presented upon the expiry of three years from the moment when the right to compensation for such harm arose, shall be satisfied for the lapsed time for not more than three years preceding the bringing of suit; and

- demands of an owner or other proprietor concerning the elimination of any violations of his right, even though these violations were not connected with the deprivation of ownership (Article 304); and

- other demands in the instances established by law.

SECTION II. RIGHT OF OWNERSHIP AND OTHER REAL RIGHTS

Chapter 13. General Provisions

Article 209. Content of Right of Ownership

1. The right of possession, use, and disposition of property shall belong to the owner thereof.

2. The owner shall have the right at his discretion to perform with respect to property belonging to him any actions which are not contrary to a law and other legal acts and do not violate the rights and legally protected interests of other persons, including to alienate his property in ownership to other persons, to transfer to them while remaining the owner the rights of possession, us, and disposition of the property, to pledge out property and encumber it by other means, and to otherwise dispose of it.

3. The possession, use, and disposition of land and other natural resources to the extent that their turnover is permitted by law (Article 129) shall be effectuated by the owner thereof freely unless this causes damage to the environment and violates the rights and lawful interests of other persons.

4. The owner may transfer his property for trust management to another person (trust manager). The transfer of property to trust management shall not entail the transfer of the right of ownership to the trust manager who shall be obliged to manage the property in the interests of the owner or a third person specified by him.

Article 210. Burden of Maintenance of Property

The owner shall bear the burden of maintaining the property belonging to him unless otherwise provided by law or by contract.

Article 211. Risk of Accidental Perishing of Property

The risk of accidental perishing or accidental damage of property shall be borne by the owner thereof unless otherwise provided by law or by contract.

Article 212. Subjects of Right of Ownership

1. Private, State, municipal, and other forms of ownership shall be recognized in the Russian Federation.

2. Property may be in the ownership of citizens and legal persons, as well as the Russian Federation, subjects of the Russian Federation, and municipal formations.

3. Particulars for the acquisition and termination of the right of ownership to property, and the possession, use, and disposition thereof depending upon whether the property is in the ownership of a citizen or legal person or in the ownership of the Russian Federation, a subject of the Russian Federation , or municipal formation may be established only by law.

The types of property which may be only in State or municipal ownership shall be determined by law.

4. The rights of all owners shall be protected equally.

Article 213. Right of Ownership of Citizens and Legal Persons

1. Any property may be in the ownership of citizens and legal persons, except for individual types of property which in accordance with a law may not belong to citizens or legal persons.

2. The quantity and value of property in the ownership of citizens and legal persons shall not be limited, except in the instances when such limitations have been established by law for the purposes provided for by Article 1(2) of this Code.

3. Commercial and non-profit organizations, except for Stateowned and municipal enterprises, as well as establishments financed by the owner, shall be the owners of property transferred to them as contributions (or dues) by their founders (participants, members), as well as property acquired by these legal persons on other grounds.

4. Public and religious organizations (associations), philanthropic and other foundations shall be the owners of property acquired by them and may use it only in order to achieve the purposes provided for by the constituent documents thereof. The founders (participants, members) of these organizations shall lose the right to property transferred by them to the ownership of the respective organization. In the event of the liquidation of such organization, the property thereof remaining after satisfaction of the claims of creditors shall be used for the purposes specified in its constituent documents.

Article 214. Right of State Ownership

1. Property which belongs by right of ownership to the Russian Federation (federal property) and property belonging by right of ownership to subjects of the Russian Federation - republics, territories, regions, cities of federal significance, autonomous region, and autonomous districts (property of a subject of the Russian Federation) - shall be State property in the Russian Federation.

2. Land and other natural resources which are not in the ownership of citizens, legal persons, or municipal formations shall be State property.

3. The agencies and officials specified in Article 125 of this Code shall exercise the rights of owner on behalf of the Russian Federation and subjects of the Russian Federation.

4. Property in State ownership shall be allocated to State enterprises and institutions for possession, use and disposition in accordance with this Code (Articles 294 and 296).

Assets of the respective budget and other State property not allocated to State enterprises and institutions shall constitute the State treasury of the Russian Federation, the treasury of a republic within the Russian Federation, or the treasury of a territory, region, city of federal significance, autonomous region, or autonomous district.

5. The relegation of State property to federal ownership and the ownership of subjects of the Russian Federation shall be effectuated according to the procedure established by law.

Article 215. Right of Municipal Ownership

1. Property belonging by right of ownership to urban or rural settlements, as well as to other municipal formations, shall be municipal property.

2. Agencies of local self-government and the persons specified in Article 125 of this Code shall exercise the rights of owner on behalf of a municipal formation.

3. Property in municipal ownership shall be allocated to municipal enterprises and institutions for possession, use, and disposition in accordance with this Code (Articles 294 and 296).

Assets of the local budget and other municipal property not allocated to municipal enterprises and institutions shall constitute the municipal treasury of the respective urban or rural settlement or other municipal formation.

Article 216. Real Rights of Persons Who Are Not Owners

1. Real rights, in a addition to the right of ownership, are, in particular:

- the right of inheritable possession for life of a land plot (Article 265); and

- the right of permanent (perpetual) use of a land plot (Article 268); and

- servitudes (Articles 274, 277); and

- the right of economic jurisdiction over property (Article 294) and the right of operative management of property (Article 296).

2. Real rights to property may belong to persons who are not the owners of this property.

3. The transfer of the right of ownership in property to another person shall not be grounds for the termination of other real rights to this property.

4. Real rights of a person who is not an owner shall be defended against the violation thereof by any person according to the procedure provided for by Article 305 of this Code.

Article 217. Privatization of State-Owned and Municipal Property

Property in State or municipal ownership may be transferred by its owner to the ownership of citizens and legal persons according to the procedure provided for by laws on privatization of State-owned and municipal property.

In privatizing State-owned and municipal property, the provisions of this Code regulating the procedure for the acquisition and termination of the right of ownership shall apply unless otherwise provided by the laws on privatization.

Chapter 14. Acquisition of Right of Ownership

Article 218. Grounds for Acquisition of Right of Ownership

1. The right of ownership to a new thing manufactured or created by a person for himself in compliance with a law and other legal acts shall be acquired by this person.

The right of ownership to fruits, products, and revenues received as a result of the use of property shall be acquired on the grounds provided for by Article 136 of this Code.

2. The right of ownership to property owned may be acquired by another person on the basis of a contract of purchase/sale, barter, gift, or other transaction concerning the alienation of this property.

In the event of the death of a citizen the right of ownership to the property belonging to him shall pass by inheritance to other persons in accordance with the will or a law.

In the event a legal entity is reorganized, the right of ownership to the property belonging to it shall pass to the legal entities succeeding to the reorganized legal entity.

3. In the instances and according to the procedure provided for by this Code, a person may acquire the right of ownership in property which has no owner, in property whose owner is unknown, or in property which the owner has renounced or to which he has lost the right of ownership on other grounds provided for by a law.

4. A member in a housing, housing-construction, dacha, garage, or other consumer cooperative, and other persons having the right to share accumulation who have fully made their share contribution for an apartment, dacha, garage, or other premise granted to these persons by the cooperative shall acquire the right of ownership to the said property.

Article 219. Arising of Right of Ownership in Newly Created Immovable Property

The right of ownership in buildings, structures, and other newly created immovable property subject to State registration shall arise from the moment of such registration.

Article 220. Treatment

1. Unless otherwise provided for by a contract, the right of ownership to a new movable thing manufactured by the person by means of treating materials which do not belong to him shall be acquired by the owner of the materials.

However, if the treatment cost significantly exceeds the value of the materials, the right of ownership to a new thing shall be acquired by the person who, acting in good faith, has performed the treatment for himself.

2. Unless otherwise provided for by a contract, the owner of materials who has acquired the right of ownership in a thing made from them shall be obliged to compensate for the cost of treatment to the person who has performed it, and if this person has acquired the right of ownership to the new thing, the latter shall be obliged to compensate for the value of the materials to the owner thereof.

3. The owner of materials who has lost them as a result of the actions in bad faith of the person who effectuated the treatment shall have the right to demand the transfer of the new thing to his ownership and compensation for losses caused to him.

Article 221. Appropriation of Things Generally Accessible for Gathering

In the instances when in accordance with a law, general authorization issued by a particular owner, or in accordance with local custom the gathering of berries, catching of fish, and gathering, extraction, or hunting of generally accessible things or fauna is permitted in forests, water bodies, or on other territories, the right of ownership in respective things shall be acquired by the person who has gathered or extracted them.

Article 222. Unauthorized Structure

1. A dwelling house, other building, structure, or other immovable property created on a land plot not allotted for these purposes according to the procedure established by a law or other legal acts, or created without obtaining the necessary permissions for this, or with a substantial violation of town-planning and construction norms and rules, shall be an unauthorized structure.

2. A person who has erected an unauthorized structure shall not acquire the right of ownership in it. He shall not have the right to dispose of the structure, i.e. to sell, give as a present, lease out, or effectuate other transactions.

An unauthorized structure shall be subject to demolition by the person who erected it or at his expense, except for the instances provided for by point 3 of this Article.

3. The right of ownership to an unauthorized structure may be deemed by a court to belong to the person who erected the structure on a land plot not belonging to him on condition that the plot in question will be granted to this person for the erected structure according to the established procedure.

The right of ownership in an unauthorized structure may be deemed by a court to belong to the person in whose ownership, inheritable possession for life, or permanent (perpetual) use the land plot is where the structure was erected. In this event the person whose right of ownership to the structure has been recognized shall compensate the person who erected it for the expenses for the structure in the amount determined by the court.

The right of ownership in the unauthorized structure cannot be recognized for the said persons if retention of the structure violates the rights and law-protected interests of other persons or creates a threat to the life and health of citizens.

Article 223. Moment of Arising of Right of Ownership for Acquirer under Contract

1. The right of ownership shall arise for the acquirer of a thing by contract from the moment of the transfer thereof unless otherwise provided by a law or contract.

2. In instances when the alienation of property is subject to State registration, the right of ownership shall arise for the acquirer from the moment of such registration unless otherwise provided for by law.

Article 224. Transfer of Thing

1. The delivery of a thing to the acquirer shall be deemed to be the transfer, and likewise the handing over to a carrier for despatch to the acquirer, or to a communications organization for the sending to the acquirer of things alienated without the obligation of delivery.

A thing shall be considered handed in to the acquirer from the moment of its actual receipt in the possession of the acquirer or person specified by him.

2. If by the moment of concluding a contract on the alienation of a thing it is already in the possession of the acquirer, the thing shall be deemed to be transferred to him from this moment.

3. The transfer of a bill of lading or other document of title to a thing shall be equated to the transfer thereof.

Article 225. Masterless Thing

1. A thing which has no owner or whose owner is unknown, or a thing the right of ownership in which has been renounced by the owner shall be masterless.

2. Unless excluded by the rules of this Code on the acquisition of the right of ownership to things renounced by the owner (Article 226), on a find (Articles 227 and 228), on neglected animals (Articles 230 and 231), and on treasure (Article 233), the right of ownership in masterless movable things may be acquired by virtue of acquisitive prescription.

3. Masterless immovable things shall be accepted for recording by the agency effectuating State registration of the right to immovable property upon the application of the local self-government agency on whose territory they are situated.

Upon the expiry of a year from the day of the masterless immovable thing being recorded, the agency empowered to manage municipal property may apply to a court with a demand to recognize the right of municipal ownership in this thing.

A masterless immovable thing not deemed by court decision to have entered into municipal ownership may be accepted anew into the possession, use, and disposition by the owner who left it, or acquired in ownership by virtue of acquisitive prescription.

Article 226. Movable Things Renounced by Owner

1. Movable things abandoned by the owner or otherwise left by him with a view of renouncing the right of ownership in them (discarded things) may be appropriated by other persons according to the procedure provided for by point 2 of this Article.

2. The person in whose ownership, possession, or use a land plot, water body or other object is where the discarded thing is situated and the value of which is clearly lower than an amount equivalent to five times the minimum wage, or discarded scrap metal, defective products, melted alloys, slag-heaps and discharges formed when extracting minerals, production wastes, and other wastes, shall have the right to appropriate these things in his ownership, having commenced to utilize them or having performed other actions testifying to the appropriation of the thing.

Other discarded things shall enter into the ownership of the person who has taken possession of them if, upon the application of this person, they have been deemed by a court to be masterless.

Article 227. Find

1. The finder of a lost thing shall be obliged immediately to inform thereof the person who lost it or some other person known to him as having the right to receive it and shall return the found thing to this person.

If a thing has been found in a premise or transport, it shall be subject to being handed over to a person representing the owner of this premise or vehicle. In this event, the person to person to whom the find has been handed over shall acquire the rights and bear the duties of the person who found the thing.

2. If the person having the right to demand the return of a found thing or his whereabouts are unknown, the finder of the thing shall be obliged to declare the find to the police or agency of local self- government.

3. The finder of a thing shall have the right to keep it or to hand over for keeping to the police or agency of local self-government or to a person specified by them.

A perishable thing or a thing the cost of keeping of which is incommensurate greater than its value may be sold by the finder of the thing, receiving written evidence certifying the amount of the receipts. The money derived from the sale of a found thing shall be subject to return to the person authorized to receive the thing.

4. The finder of a thing shall be responsible for its loss or damage only in the event of intent or gross negligence and within the limits of the value of the thing.

Article 228. Acquisition of the Right of Ownership in Find

1. If within six months from the moment of declaring the find to the police or local self-government agency (Article 227[2]) the person authorized to receive the found thing has not been established or has not himself declared his right to the thing to the finder, or to the police, or local self-government agency, the finder of the thing shall acquire the right of ownership to it.

2. If the finder of a thing refuses to acquire the found thing in his ownership, it shall enter municipal ownership.

Article 229. Compensation for Expenses Connected with Find and Remuneration to Finder of Thing

1. The person who has found and returned a thing to the person authorized to receive it shall have the right to receive from this person or, if the thing has passed into municipal ownership, from the respective agency of local self-government, compensation for necessary expenses connected with keeping, handing in, or selling of the thing, as well as expenditures for discovering the person authorized to receive the thing.

2. The finder of a thing shall have the right to demand from the person authorized to receive the thing remuneration for the find in the amount of up to 20% of the value of the thing. If a found thing is of value only to the person authorized to receive it, the amount of remuneration shall be determined by agreement with this person.

The right to remuneration shall not arise unless the finder of the thing has not declared the find or attempted to conceal it.

Article 230. Neglected Animals

1. A person who has detained neglected or stray livestock or other domestic animals shall be obliged to return them to their owner, and if the owner of the animals or his whereabouts are unknown, no later than three days from the moment of detention to declare the discovered animals to the police or local self-government agency which shall take measures to find the owner.

2. During the search for the owner of the animals, they may be kept by the person who detained them with himself for maintenance and for use, or handed over for maintenance and use to another person having necessary conditions for this. At the request of the person who detained neglected animals, the seeking of a person who has necessary conditions for their maintenance and the transfer of the animals to him shall be effectuated by the police or local self-government agency.

3. The person who has detained neglected animals and the person to whom they have been transferred for maintenance and use shall be obliged to maintain them properly and, if there is fault, shall be liable for the perishing and spoilage to the animals within the limits of the value thereof.

Article 231. Acquisition of Right of Ownership to Neglected Animals

1. If within six months from the moment of declaring the detention of neglected domestic animals their owner is not discovered or he himself does nor declare his right to them, the person who has kept the animals for maintenance and use shall acquire the right of ownership to them.

If this person refuses to acquire animals maintained by him in ownership, they shall enter into municipal ownership and be used according to the procedure determined by the local self-government agency.

2. In the event the former owner of the animals appears after they have been transferred into the ownership of another person, the former owner shall have the right, if there are circumstances testifying to the persistent attachment to him on the part of these animals or to the cruel or other improper treatment of them by the new owner, to demand their return on the conditions determined by an agreement with the new owner, and in the event of the failure to reach agreement, by a court.

Article 232. Compensation for Expenses for Maintenance of Neglected Animals and Remuneration for Them

In the event of the return of neglected animals to the owner, the person who detained the animals and the person with whom they have been situated for maintenance and use shall have the right to compensation by their owner for necessary expenses connected with the maintenance of the animals, setting off the advantages derived from the use thereof.

The person who has detained neglected domestic animals shall have the right to remuneration in accordance with Article 229(2) of this Code.

Article 233. Treasure

1. Treasure, i.e. money or valuable objects buried in the earth or otherwise concealed, whose owner cannot be established or by virtue of law has lost the right to them shall enter into the ownership of the person to whom the property belongs (land plot, building, etc.) where the treasure was concealed, in equal shares unless otherwise established by an agreement between them.

Should a treasure be discovered by a person who has made diggings or searches for valuables without the consent thereto of the owner of the land plot or other property where the treasure was concealed, the treasure shall be subject to transfer to the owner of the land plot or other property where the treasure was discovered.

2. In the event of the discovery of a treasure containing things relegated to monuments of history or culture, they shall be subject to transfer to State ownership. In this case, the owner of the land plot or other property where the treasure was concealed and the person who discovered the treasure shall have the right to receive, together, remuneration in the amount of 50% of the treasure value. The remuneration shall be equally divided between these persons unless otherwise established by an agreement between them.

Should such treasure be discovered by the person who has made diggings or searches for valuables without the consent of the owner of the property where the treasure was concealed, the remuneration shall not be paid to this person and shall go to the owner in full.

3. The rules of this Article shall not apply to persons whose labor or official duties included the conducting of diggings and searches directed towards the discovery of treasure.

Article 234. Acquisitive Prescription

1. A person - citizen or legal entity - who is not the owner of property but who in good faith, openly, and uninterruptedly possesses it as his own immovable property for fifteen years or other property for five years shall acquire the right of ownership in such property (acquisitive prescription).

The right of ownership in immovable and other property subject to State registration shall arise for the person who acquired this property by virtue of acquisitive prescription from the moment of such registration.

2. Until the acquisition of the right of ownership in property by virtue of acquisitive prescription, the person possessing the property as his own shall have the right to defend his possession against third persons who are not the owners of the property, as well as those who do not have the rights to possession thereof by virtue of another ground provided for by law or contract.

3. A person referring to the prescription of possession may add to the time of his possession all of the time during which this property was possessed by a person whom the former is the legal successor of.

4. The running of the period of acquisitive prescription with respect to things situated with a person from whose possession they may be demanded in accordance with Articles 301 and 305 of this Code shall commence not earlier than upon the expiry of the limitation period for respective demands.

Chapter 15. Termination of Right of Ownership

Article 235. Grounds for Termination of Right of ownership

1. The right of ownership shall terminate if the owner alienates his property to other persons, if the owner renounces his right of ownership, if the property perishes or is destroyed, and if the right of ownership to property is lost in other instances provided for by a law.

2. The compulsory withdrawal of property from the owner shall not be permitted except in the instances when on the grounds provided for by a law the following is done:

1) levying of execution against property for obligations (Article 237);

2) alienation of property which by virtue of a law cannot belong to the particular person (Article 238);

3) alienation of immovable property in connection with the withdrawal of a plot (Article 239);

4) buying out of improvidently maintained cultural valuables and domestic livestock (Articles 240 and 241);

5) requisition (Article 242);

6) confiscation (Article 243);

7) alienation of property in the instances provided for by Article 252(4), Article 272(2), and Articles 282, 285, and 293 of this Code.

By decision of the owner and according to the procedure provided for by laws on privatization, the property in State or municipal ownership shall be alienated into the ownership of citizens and legal entities.

Property in the ownership of citizens and legal entities shall be brought into State ownership (nationalization) on the basis of a law, with compensation for the value of this property and other losses according to the procedure established by Article 306 of this Code.

Article 236. Renunciation of Right of Ownership

A person or legal entity may renounce the right of ownership in property belonging to him by so declaring or having performed other actions which specifically testify to his resignation from the possession, use, and disposition of the property without the intention to preserve any rights whatever to this property.

The renunciation of the right of ownership shall not entail the termination of the rights and duties of the owner with regard to the respective property until another person acquires the right of ownership thereto.

Article 237. Levy of Execution Against Property for Obligations of Owner

1. The withdrawal of property by means of levying execution against it for the obligations of the owner shall be done on the basis of the court decision unless a different procedure for levying execution has been provided for by a law or contract.

2. The right of ownership in property against which execution has been levied shall terminate in the owner from the moment the right of ownership in the withdrawn property arises in the person to whom this property passes.

Article 238. Termination of Right of Ownership of Person in Property Which Cannot Belong to Him

1. If on the grounds permitted by a law a person happens to have in his ownership property which by virtue of law cannot belong to him, this property must be alienated by the owner within a year from the moment the right of ownership in the property arises unless a different period has been established by a law.

2. In instances when the property has not been alienated by the owner within the terms specified by point 1 of this Article, such property, taking into account its character and purpose, shall be by court decision rendered upon the application of a State agency or local self-government agency be subject to compulsory sale, with transfer to the former owner of the amounts received or the transfer to State or municipal ownership with compensating the former owner for the value of the property determined by court. In so doing, the expenditures for alienation of the property shall be deducted.

3. If in the ownership of a citizen or legal entity on the grounds permitted by a law there turns out to be a thing for whose acquisition a special authorization is required, the issuance of which has been refused to the owner, this thing shall be subject to alienation according to the procedure established for property which cannot belong to the particular owner.

Article 239. Alienation of Immovable Property in Connection with Withdrawal of Plot on Which It Is Situated

1. In instances when the withdrawal of a land plot for State or municipal needs or in view of the improper use of land is impossible without the termination of the right of ownership in buildings, structures, or other immovable property situated on this plot, this property may be withdrawn from the owner by means of the purchase by the State or by selling at public sales according to the procedure provided for, respectively, by Articles 279 to 282 and 284 to 286 of this Code.

The claim to withdraw immovable property shall not be subject to satisfaction if the State agency or local self-government agency which has applied to a court with this claim does not prove that the use of the land plot for the purpose for which it is being withdrawn is impossible without terminating the right of ownership to the particular immovable property.

2. The rules of this Article shall respectively apply when the right of ownership to immovable property is terminated in connection with the withdrawal of mining allotments, water area sections, and other areas on which property is situated.

Article 240. Buying Out of Improvidently Maintained Cultural Valuables

In instances when the owner of cultural valuables relegated in accordance with a law to those of particular value and protected by the State maintains these valuables improvidently, which is fraught with their losing their significance, such valuables may by court decision be withdrawn from the owner through the buying out by the State or selling at public sales.

When buying out cultural valuables, the owner shall be compensated their value in the amount established by agreement of the parties, and in the event of a dispute, by a court. When selling at public sales, the amount received from the sale shall be transferred to the owner less the expenses for holding the public sale.

Article 241. Buying Out of Domestic Animals in Event of Improper Treatment Thereof

In instances when the owner of domestic animals treats them in clear contravention of the rules established on the basis of a law and the norms accepted in society for the humane attitude to animals, these animals may be withdrawn from the owner by way of the purchase thereof by the person who has brought the respective claim in court. The buy-out price shall be determined by agreement of the parties, and in the event of a dispute, by a court.

Article 242. Requisition

1. In instances of natural disasters, accidents, epidemics, epizooties, or other circumstances of an extraordinary character, property may, in the interests of society by decision of State agencies, be withdrawn from the owner according to the procedure and on the conditions established by a law, with payment of the value of the property to him (requisition).

2. The valuation according to which the value of the requisitioned property shall be compensated to the owner may be contested by him in court.

3. The person whose property was requisitioned shall have the right, upon the cessation of the circumstances in connection with which the requisition was made, to demand in court the return to him of the property survived.

Article 243. Confiscation

1. In the instances provided for by a law, property may be withdrawn without compensation from the owner by court decision in the form of a sanction for the commission of a crime or other violation of law (confiscation).

2. In the instances provided for by a law, confiscation may be made in an administrative procedure. The decision concerning confiscation in an administrative procedure may be appealed to a court.

Chapter 16. Common Ownership

Article 244. Concept and Grounds for Arising of Common Ownership

1. Property in the ownership of two or several persons shall belong to them by right of common ownership.

2. Property may be in common ownership with the determination of the share of each of the owner in the right of ownership (shared ownership) or without the determination of such shares (joint ownership).

3. Common ownership in property shall be shared, except for instances when the formation of joint ownership has been provided for by a law.

4. Common ownership shall arise when two or more persons enter into the ownership of property which cannot be divided without changing its purpose (indivisible things), or is not subject to division by virtue of law.

Common ownership in divisible property shall arise in the instances provided for by a law or contract.

5. By agreement of participants of joint ownership, and at the failure to achieve consent, by court decision, the shared ownership of these persons may be established for the property they have in common.

Article 245. Determination of Shares in Right of Shared Ownership

1. If shares of participants in shared ownership cannot be determined on the basis of a law and have not been established by agreement of all of its participants, the shares shall be considered equal.

2. By agreement of all participants in shared ownership, there may be established the procedure for the determination and change of their shares depending on the contribution of each of them in the formation and increment of the common property.

3. A participant in shared ownership who has made, at his own expense and in compliance with the procedure established for the use of common property, indivisible improvements of this property shall have the right to a corresponding increase of his share in the right to common property.

Divisible improvements of common property, unless otherwise provided by agreement of the participants in shared ownership, shall enter into the ownership of those participants who produced them.

Article 246. Disposition of Property in Shared Ownership

1. The disposition of property in shared ownership shall be effectuated by agreement of all of its participants.

2. A participant in shared ownership shall have the right at his discretion to sell, give as a present, bequeath, or pledge his share or otherwise dispose of it while complying, in the event of alienation for compensation, with the rules provided for by Article 250 of this Code.

Article 247. Possession and Use of Property in Shared Ownership

1. The possession and use of property in shared ownership shall be effectuated by agreement of all of its participants, and if consent is not achieved, according to the procedure established by a court.

2. A participant of shared ownership shall have the right to be granted part of the common property commensurate to his share for possession and use, and if this is impossible, shall have the right to demand respective compensation from the other participants who possess and use the property his share entitles him to.

Article 248. Fruits, Products, and Revenues from Use of Property in Shared Ownership

Fruits, products, and revenues from the use of property in shared ownership shall become part of the common property and be distributed among the participants of shared ownership commensurately with their shares unless otherwise provided by an agreement between them.

Article 249. Expenses for Maintenance of Property in Shared Ownership

Each participant in shared ownership shall be obliged, commensurately with his share, to participate in the payment of taxes, charges, and other payments relating to the common property, as well as the costs of its maintenance and preservation.

Article 250. Preemption Right

1. In the event of the sale of a share in the right of common ownership to an outside person, the remaining participants of shared ownership shall have the right of preemption to the share being sold at the price for which it is being sold and on other equal conditions, except in the instance of the sale at public sales.

The public sales for the sale of a share in the right of common ownership may, in the absence of consent thereto of all the participants of shared ownership, be held in the instances provided for by Article 255, paragraph two, of this Code, and in other instances provided for by a law.

2. The seller of a share shall be obliged to notify in writing the remaining participants of shared ownership of the intention to sell his share to an outside person, specifying the price and other conditions on which he is selling it. If the other participants of shared ownership refuse to purchase or do not acquire the share being sold in the right of ownership to immovable property within a month, and in the right of ownership to movable property, within ten days from the date of notification, the seller shall have the right to sell his share to any person.

3. In the event of the sale of a share in violation of the preemption right, any other participant of shared ownership shall have the right within three months to demand in a judicial proceeding the transfer of the rights and duties of the purchaser to him.

4. The cession of the preemption right to a share shall not be permitted.

5. The rules of this Article shall also apply to the alienation of a share under a contract of barter.

Article 251. Moment of Transfer of Share in Right of Common Ownership to Acquirer under Contract

A share in the right of common ownership shall pass to the acquirer under a contract from the moment of conclusion of the contract unless otherwise provided by an agreement of the parties.

The moment of transfer of a share in the right of common ownership under a contract subject to State registration shall be determined in accordance with Article 223(2) of this Code.

Article 252. Division of Property in Shared Ownership and Partition of Share Therefrom

1. Property in shared ownership may be divided between its participants by an agreement between them.

2. A participant in shared ownership shall have the right to demand the partition of his share from the common property.

3. If the participants in shared ownership fail to reach agreement concerning the means and conditions for the division of common property or partition of the share of one of them, the participant in shared ownership shall have the right in a judicial proceeding to demand the partition of his share in kind from the common property.

If the partition of a share in kind is not permitted by a law or is impossible without incommensurate damage to property in common ownership, the partitioning owner shall have the right to payment to him of the value of his share by the other participants in shared ownership.

4. The incommensurateness of property partitionable in kind to a participant in shared ownership on the basis of this Article to his share in the right of ownership shall be eliminated through paying a corresponding money amount or other compensation.

The payment of compensation to a participant in shared ownership by other owners instead of partitioning his share in kind shall be permitted by his consent. In instances when the share of the owner is insignificant and cannot be truly partitioned and he does not have a material interest in the use of the common property, a court may, also in the absence of the consent from this owner, to oblige the other participants in shared ownership to pay compensation to him.

5. Upon the receipt of the compensation in accordance with this Article, the owner shall lose the right to the share in the common property.

Article 253. Possession, Use, and Disposition of Property in Joint Ownership

1. The participants of joint ownership, unless otherwise provided by agreement between them, shall jointly posses and use common property.

2. The disposition of property in joint ownership shall be effectuated by consent of all the participants, which shall be presupposed irrespective as to which of the participants has concluded the transaction with regard to the disposition of the property.

3. Each of the participants of joint ownership shall have the right to conclude transactions relating to the disposition of common property unless it follows otherwise from the agreement of all the participants. A transaction concluded by one of the participants of joint ownership and relating to the disposition of common property may be deemed to be invalid at the demand of the remaining participants for reasons that the participant who concluded the transaction lacked the necessary powers only if it proved that the other party to the transaction knew or should have known beforehand about this.

4. The rules of this Article shall apply insofar as not established otherwise for individual types of joint ownership by this Code or other laws.

Article 254. Division of Property in Joint Ownership and Partition of Share Therefrom

1. The division of common property between participants of joint ownership, as well as the partition of the share of one of them may be effectuated after the preliminary determination of the share of each of the participants in the right to common property.

2. In the event of the division of common property and the partition of a share therefrom, unless otherwise provided by law or by agreement of the participants, their shares shall be deemed to be equal.

3. The grounds and procedure for the division of common property and the partition of a share therefrom shall be determined according to the rules of Article 252 of this Code insofar as has not been established otherwise for individual types of joint ownership by this Code and other laws and does not arise from the nature of the relations between the participants in joint ownership.

Article 255. Levying Execution Against Share in Common Property

The creditor of a participant of shared or joint ownership shall, in the event of the insufficiency of the latter’s other property, have the right to present a demand concerning partition of the share of the debtor in the common property in order to levy execution against it.

If in such instances the apportionment of the share in kind is impossible or the other participants of shared or joint ownership object to this, the creditor shall have the right to demand that the debtor sell his share to the other participants of common ownership at a price commensurate with the market price of this share, with the assets received from the sale being applied to repayment of the debt.

If the remaining participants of common ownership refuse to acquire the share of the debtor, the creditor shall have the right to demand in court the levy of execution against the share of the debtor in the right of common ownership through selling this share at public sales.

Article 256. Matrimonial Property

1. Property acquired by spouses during marriage shall be their joint property unless a different regime for this property has been established by a contract between them.

2. The property which belonged to each of the spouses before entering into marriage, and also received by one of the spouses during marriage as a gift or by way of inheritance, shall be his property.

Things of individual use (clothing, footwear, etc.), except for jewelry and other luxuries, although acquired during marriage at the expense of the common means of the spouses, shall be deemed to be the property of the spouse who used them.

The property of each spouse may be deemed to be their joint property if it is established that during the marriage investments were made at the expense of the common property of the spouses or the personal property of the other spouse which significantly increased the value of this property (overhaul, reconstruction, re-equipping, etc.). This rule shall not apply if a contract between the spouses provides otherwise.

3. Execution may be levied with regard to the obligations of one spouse only against property in his ownership, as well as his share in the matrimonial property which would have been due to him in the event of the separation of this property.

4. The rules for determining the shares of spouses in matrimonial property in the event of the separation thereof and the procedure for such separation shall be established by legislation on marriage and the family.

Article 257. Ownership of Peasant Enterprise (Farm)

1. Property of a peasant enterprise (farm) shall belong to its members by right of joint ownership unless otherwise established by a law or a contract between them.

2. The land plot granted in ownership to or acquired by a peasant enterprise (farm), plantings, household and other buildings, land improvement and other structures, productive and working livestock, poultry, agricultural and other technology and equipment, vehicles, tools, and other property acquired for the enterprise from common money of its members shall be in the joint ownership of the members of the peasant enterprise (farm).

3. The fruits, products, and revenues received as a result of the activity of a peasant enterprise (farm) shall be the common property of the members of the peasant enterprise (farm) and shall be used by agreement between them.

Article 258. Partition of Property of Peasant Enterprise (Farm)

1. In the event of the termination of a peasant enterprise (farm) in connection with the withdrawal therefrom of all of its members or for other reasons, the common property shall be subject to partition according to the rules provided for by Articles 252 and 254 of this Code.

The land plot in such instances shall be divided according to the rules established by this Code and by land legislation.

2. The land plot and means of production belonging to a peasant enterprise (farm) shall not be subject to partition if one of its members withdraws from the enterprise. The person withdrawing from the enterprise shall have the right to receive monetary contribution commensurate with his share in the common ownership in such property.

3. In the instances provided for by this Article, the shares of members of a peasant enterprise (farm) in the right of joint ownership to the property of the enterprise shall be deemed to be equal unless otherwise established by an agreement between them.

Article 259. Ownership of Economic Partnership or Cooperative Formed on Base of Property of Peasant Enterprise (Farm)

1. An economic partnership or production cooperative may be created by members of a peasant enterprise (farm). Such economic partnership or cooperative shall, as a legal entity, possess the right of ownership to the property transferred to it in the form of contributions or other payments by members of the farm, as well as to property received as a result of its activity and acquired on other grounds permitted by a law.

2. The amount of contributions of the participants in the partnership or members of the cooperative created on the base of property of a peasant enterprise (farm) shall be established proceeding from their shares in the right of common ownership in the property of the enterprise determined in accordance with Article 258(3) of this Code.

Chapter 17. Right of Ownership and Other Real Rights to Land*

Article 260. General Provisions on the Right of Ownership in Land

1. Persons having a land plot in ownership shall have the right to sell it, give as a present, pledge, lease out, and otherwise dispose of it (Article 209) insofar as the respective land has not been excluded from turnover or is limited in turnover on the basis of a law.

2. Lands of agricultural or other designation, the use of which for other purposes is not permitted or is limited, shall be determined on the basis of a law and according to the procedure established by it. A land plot relegated to such lands may be used within the limits determined by its purpose.

Article 261. Land Plot as Object of Right of Ownership

1. The territorial boundaries of a land plot shall be determined according to the procedure established by land legislation on the basis of documents issued to the owner by State agencies for land resources and land management.

2. Unless otherwise established by a law, the right of ownership to a land plot shall extend to the surface (soil) layer and enclosed water bodies situated within the boundaries of this plot and the forest and plants situated thereon.

3. The owner of a land plot shall have the right to use at his discretion everything that is situated above and below the surface of this plot unless otherwise provided by the laws on mineral resources, on the use of airspace, and by other laws, and if this does not violate the rights of other persons.

Article 262. Land Plots of Common Use. Access to Land Plot.

1. Citizens shall have the right freely, without any authorization whatever, to be on land plots not closed off for general access which are in State or municipal ownership and to use natural objects on these plots within the limits permitted by a law and other legal acts, as well as by the owner of the respective land plot.

2. If a land plot is not fenced off or the owner thereof has not clearly designated by other means that entry to the plot is not permitted without his authorization, any person may traverse this plot provided this does not cause damage or disturbance to the owner.

Article 263. Building on Land Plot

1. The owner of a land plot may erect buildings and structures thereon, rebuild or demolish them, and authorize construction on this plot to other persons. These rights shall be exercised on condition that town-planning and construction norms and rules, as well as requirements concerning the purpose of the land plot (Article 260[2]) are complied with.

2. Unless otherwise provided by a law or contract, the owner of a land plot shall acquire the right of ownership in a building, structure, and other immovable property erected or created by him for himself on the plot belonging to him.

The consequences for the owner for building arbitrarily on the plot belonging to him shall be determined by Article 22 of this Code.

Article 264. Rights to Land of Persons Who Are Not Owners of Land Plots

1. Land plots and immovable property thereon may be granted by their owners to other persons for permanent or fix/term use, including on lease.

2. The person who is not the owner of a land plot shall exercise his rights of possession and use of the plot on the conditions and within the limits established by a law or by a contract with the owner.

3. The possessor of a land plot who is not the owner shall not have the right to dispose of this plot unless otherwise provided by a law or contract.

Article 265. Grounds for Acquisition of Right of Inheritable Possession for Life of Land Plot

The right of inheritable possession for life of a land plot which is in State or municipal ownership shall be acquired by citizens on the grounds and according to the procedure provided for by land legislation.

Article 266. Possession and Use of Land Plot by Right of Inheritable Possession for Life

1. A citizen who has the right of inheritable possession for life (possessor of land plot) shall have the rights of possession and use of the land plot transferable by inheritance.

2. Unless it follows otherwise from the conditions established by a law for the use of a land plot, the possessor of the land plot shall have the right to erect buildings and structures thereon and create other immovable property, acquiring the right of ownership therein.

Article 267. Disposition of Land Plot in Inheritable Possession for Life

1. The possessor of a land plot may transfer it to other persons on lease or fixed-term use without compensation.

2. The sale or pledge of a land plot and the conclusion by the possessor of other transactions which entail or might entail the alienation of the land plot shall not be permitted.

Article 268. Grounds for Acquisition of Right of Permanent (Perpetual) Use of Land Plot

1. The right of permanent (perpetual) use of a land plot which is in State or municipal ownership shall be granted to citizens and legal entities on the basis of a decision of the State or municipal agency empowered to grant land plots for such use.

2. The right of permanent use of a land plot may also be acquired by the owner of a building, structure, and other immovable property in the instances provided for by Article 27(1) of this Code.

3. In the event of the reorganization of a legal entity, its right of permanent use of a land plot shall pass by way of legal succession.

Article 269. Possession and Use of Land by Right of Permanent Use

1. The person to whom a land plot has been granted for permanent use shall effectuate the possession and use of this plot within the limits established by a law, other legal acts, and by the deed of granting the plot for use.

2. The person to whom a land plot has been granted for permanent use shall have the right, unless otherwise provided for by a law, to autonomously use the plot for the purposes for which it has been granted, including the erection on the plot of buildings, structures, and other immovable property for such purposes. The buildings, structures, and other immovable property created by this person for himself shall be his property.

Article 270. Disposition of Land Plot In Permanent Use

1. The person to whom a land plot has been granted for permanent use shall have the right to transfer this plot on lease or fixed-term use without compensation only by consent of the owner of the plot.

Article 271. Right to Use Land Plot by Owner of Immovables

1. The owner of a building, structure, or other immovables on a land plot belonging to another person shall have the right to use the portion of the land plot under these immovables granted by such person.

Unless it arises otherwise from a law, the decision on granting the land in State or municipal ownership, or contract, the owner of a building or structure shall have the right of permanent use of the portion of the land plot (Articles 268-270) on which this immovable property is located.

2. In the event of the transfer of the right of ownership to the immovable property situated on someone’s else land plot to another person, the latter shall acquire the right to use the respective part of the land plot on the same conditions and within the same limits as the former owner of the immovable.

The transfer of the right of ownership in a land plot shall not constitute grounds for the termination or change of the right to use this plot which belongs to the owner of the immovable.

3. The owner of an immovable on someone’s else land plot shall have the right to possess, use, and dispose of this immovable at his discretion, including the demolition of the respective buildings and structures insofar as this is not contrary to the conditions of use of the particular plot established by a law or contract.

Article 272. Consequences of Loss by Owner of Right to Use Land Plot

1. In the event of the termination of the right to use a land plot granted to the owner of immovable property situated on this plot (Article 271), the right to the immovable left by its owner on the land plot shall be determined in accordance with an agreement between the owner of the land plot and the owner of the respective immovable property.

2. In the absence of or the failure to reach an agreement specified in point 1 of this Article, the consequences of the termination of the right to use the land plot shall be determined by a court at the demand of the owner of the land plot or the owner of the immovable.

The owner of a land plot shall have the right to demand in court that the owner of an immovable shall, after termination of the right to use the plot, free it of the immovable and bring the plot into its original state.

In instances when the demolition of a building or structure situated on a land plot has been prohibited by a law or other legal acts (dwelling houses, monuments of history and culture, and the like) or is not subject to effectuation in view of the value of the building or structure obviously exceeding that of the land allotted for it, the court may, taking into account the grounds for the termination of the right to use the land plot and upon the respective claims of the parties being presented:

- recognize the right of the owner of the immovable to acquire the land plot on which this immovable is situated, or the right of the owner of the land plot to acquire the immovables left thereon, or

- establish conditions for the use of the land plot by the owner of the immovables for a new period.

3. The rules of this Articles shall not apply when a land plot is withdrawn for State or municipal needs (Article 283) and also when the rights to the land plot are terminated in view of its improper use (Article 286).

Article 273. Transfer of Right to Land Plot in Event of Alienation of Buildings or Structures Situated on It

In the event of the transfer of the right of ownership to a building or structure which belonged to the owner of a land plot on which it is situated, the rights to the land plot determined by agreement of the parties shall pass to the acquirer of the building (or structure).

Unless otherwise provided for by a contract on alienation of the building or structure, the right of ownership in the portion of the land plot occupied by the building (or structure) and necessary for its use shall pass to the acquirer.

Article 274. Right of Limited Use of Another’s land plot (Servitude)

1. The owner of real estate (land plot, other immovables) shall have the right to demand from the owner of the neighboring land plot and, when necessary, also from the owner of another land plot (neighboring plot) that the right of limited use of the neighboring plot (servitude) be granted to him.

A servitude may be established in order to ensure passage through the neighboring land plot, the laying and operation of transmission and communications lines and pipelines, ensuring of water supply and land reclamation, as well as other needs of the owner of the real estate which cannot be ensured without establishing a servitude.

2. The encumberment of a land plot by a servitude shall not deprive the owner of the plot of the rights of possession, use, and disposition of this plot.

3. A servitude shall be established by agreement between the person requiring the establishment of the servitude and the owner of the neighboring plot and shall be subject to registration according to the procedure established for registration of the rights to immovable property. In the event of the failure to reach agreement concerning the establishment or conditions of a servitude, the dispute shall be settled by a court upon the suit of the person requiring to establish the servitude.

4. On the conditions and according to the procedure provided for by points 1 and 3 of this Article a servitude may also be established in the interests and upon the demand of the person to whom the plot was granted by right of inheritable possession for life or by right of permanent use.

5. The owner of a plot encumbered by a servitude shall have the right, unless otherwise provided by a law, to demand commensurate payment for the use of the plot from the persons in whose interests the servitude was established.

Article 275. Preservation of Servitude in Event of Transfer of Rights to Land Plot

1. A servitude shall be preserved in the event of the transfer of the rights to a land plot encumbered by this servitude to another person.

2. A servitude may not be an autonomous subject for purchase and sale or pledge and may not be transferred by any means to persons who are not the owners of the immovable property to ensure the use of which the servitude was established.

Article 276. Termination of Servitude

1. Upon the demand of the owner of a land plot encumbered by a servitude, the servitude nay be terminated if the grounds for which it was established no longer exist.

2. In instances when a land plot belonging to a citizen or legal entity cannot be used in accordance with its designation as a result of being encumbered with a servitude, the owner shall have the right to demand in court the termination of the servitude.

Article 277. Encumberment of Buildings and Structures by Servitude

Buildings, structures, and other immovable property, the limited use of which is necessary without any connection with the use of the land plot may be encumbered by a servitude conformably to the rules provided for by Articles 274 to 276 of this Code.

Article 278. Levying Execution Against Land Plot

Levying execution against the land plot with regard to obligations of its owner shall be permitted only on the basis of a court decision.

Article 279. Purchase of Land Plot for State and Municipal Needs

1. A land plot may be withdrawn from the owner for State or municipal needs by way of purchase.

Depending on whose needs the land is withdrawn for, it may be purchased by the Russian Federation, a respective subject of the Russian Federation, or municipal formation.

2. The decision concerning withdrawal of a land plot for State or municipal needs shall be made by federal executive agencies and by executive agencies of the subjects of the Russian Federation.

State agencies empowered to make decisions concerning the withdrawal of land plots for State or municipal needs and the procedure for the preparation and adoption of these decisions shall be determined by federal land legislation.

3. The owner of a land plot must be informed in writing not later than a year before the forthcoming withdrawal of the land plot by the agency which made the decision concerning the withdrawal. The purchase of the land plot before the expiry of a year from the date of receipt by the owner of such notification shall be permitted only by consent of the owner.

4. The decision of the State agency to withdraw the land plot for State or municipal needs shall be subject to State registration with the agency effectuating the registration of the rights to the land plot. The owner of the land plot must be notified about the notification made, specifying the date thereof.

5. The purchase of a land plot for State or municipal needs shall be permitted not other than by consent of the owner.

Article 280. Rights of Owner of Land Plot Subject to Withdrawal for State or Municipal Needs

From the moment of State registration of the decision concerning withdrawal until the reaching of agreement or the adoption by a court of the decision concerning the purchase of a land plot, the owner of the land plot may possess, use, and dispose of it at its discretion and make necessary expenditures ensuring the use of the plot in accordance with its purpose. However, when the purchase price of the land plot is determined (Article 281), the owner shall bear the risk of taking upon himself the expenditures and losses connected with the new construction, expansion, and reconstruction of buildings and structures on the land plot within the said period.

Article 281. Purchase price of Land Plot Withdrawn for State or Municipal Needs

1. Payment for a land plot withdrawn for State and municipal needs (purchase price) and the terms and other conditions of the purchase shall be determined by agreement with the owner of the land plot. An agreement shall include the obligation of the Russian Federation, a subject of the Russian Federation, or municipal formation to pay the purchase price for the plot being withdrawn.

2. When determining the purchase price, the market value of the land plot and of immovable property thereon shall be included therein, as well as all losses caused to the owner by the withdrawal of the land plot, including losses which he bears in connection with the premature termination of his obligations to third persons, including lost profit.

3. By agreement with the owner, another land plot may be granted to him in place of the plot withdrawn for State or municipal needs, setting off the value thereof in the purchase price.

Article 282. Purchase of Land Plot for State or Municipal Needs by Court Decision

If the owner does not agree with the decision concerning the withdrawal of a land plot from him for State or municipal needs , or agreement has not been reached with him concerning the purchase price or other conditions of the purchase, the State agency which made such decision may bring suit to purchase the land plot in a court. The suit concerning the purchase of the land plot for State or municipal needs may be filed within two years from the moment of sending the notification specified in Article 279(3) of this Code to the owner of the plot.

Article 283. Termination of Rights of Possession and Use of Land Plot in Event of its Withdrawal for State or Municipal Needs

In instances when a land plot to be withdrawn for State or municipal needs is in possession and use by right of inheritable possession for life or permanent use, the termination of these rights shall be effectuated conformably to the rules provided for by Articles 279 to 282 of this Code.

Article 284. Withdrawal of Land Plot Which Is Not Used in Accordance with its Purpose

A land plot may be withdrawn from the owner in instances when the plot is earmarked for agricultural production or for housing or other construction and is not used for the respective purpose within three years unless a longer period has been established by a law. The time needed to develop the plot, as well as the time during which the plot could not be used for the designation because of natural disasters or in view of other circumstances precluding such use, shall not be included in this period.

Article 285. Withdrawal of Land Plot Being Used in Violation of Legislation

A land plot may be withdrawn from the owner if the plot is used in flagrant violation of the rules for the rational use of land established by land legislation, in particular, if the plot is not used in accordance with its designated purpose or if its use leads to a material reduction of the fertility of agricultural land or to a significant deterioration of the ecological situation.

Article 286. Procedure for Withdrawal of Land Plot in View of Its Improper Use

1. The agency of State power or local self-government empowered to make decisions concerning the withdrawal of land plots on the grounds provided for by Articles 284 and 285 of this Code, as well as the procedure for the obligatory timely warning of owners of the plots about violations made shall be determined by land legislation.

2. If the owner of a land plot informs in writing the agency which made the decision to withdraw the land plot of his consent to execute this decision, the plot shall be subject to sale at public sales.

3. If the owner of a land plot does not agree with the decision to withdraw the plot from him, the agency which made the decision to withdraw the plot may present a demand in court concerning the sale of the plot.

Article 287. Termination of Rights to Land Plot Belonging to Persons Who Are Not Owners Thereof

The termination of the rights to a land plot belonging to lessees and other persons who are not the owners thereof shall, in view of the improper use of the plot by these persons, be effectuated on the grounds and according to the procedure which have been established by land legislation.

Chapter 18. Right of Ownership and Other Real Rights to Dwelling Premises

Article 288. Ownership in Dwelling Premise

1. The owner shall exercise the rights of possession, use, and disposition of a swelling premise belonging to him in accordance with its designation.

2. Dwelling premises are intended for the residence of citizens.

A citizen-owner of a dwelling premise may use it for personal residence and the residence of members of his family.

Dwelling premises may be leased by their owners for residence on a contractual basis.

3. The siting of industrial entities in dwelling premises shall not be permitted.

The siting by the owner of enterprises, institutions, and organizations in a dwelling premise belonging to him shall be permitted only after the transfer of such premise to nonresidential. The transfer of premises from residential to nonresidential shall be effectuated according to the procedure determined by housing legislation.

Article 289. Apartment as Object of Right of Ownership

A share in the right of ownership to the common property of a house (Article 290) also shall belong to the owner of an apartment in an apartment house together with the premises occupied by the apartment belonging to him.

Article 290. Common Property of Owners of Apartments in Apartment House

1. The common premises of the house, load-carrying structures of the house, mechanical, electrical, sanitary, and other equipment beyond or within an apartment servicing more than one apartment shall belong to the owners of apartments in the apartment house by right of common shared ownership.

2. The owner of an apartment shall not have the right to alienate his share in the right of ownership to common property of a dwelling house, nor to perform other actions which entail the transfer of this share separately from the right of ownership to the apartment.

Article 291. Partnership of Owners of Housing

1. The owners of apartments shall, in order to ensure the operation of the apartment house and the use of the apartments and the common property thereof, form partnerships of the owners of the apartments (housing).

2. A partnership of the owners of the housing shall be a nonprofit organization created and operating in accordance with the law on partnerships of owners of housing.

Article 292. Rights of Members of Family of Owners of Dwelling Premise

1. The members of the owner’s family who reside in a dwelling premise belonging to him shall have the right to use this premise on the conditions provided for by housing legislation.

2. The transfer of the right of ownership to a dwelling house or apartment to another person shall not be the grounds for termination of the right of members of the family of the former owner to use the dwelling premise.

3. The members of the family of the owner of a dwelling premise may demand the elimination of the violations of their rights to the dwelling premise from any persons, including the owner of the premise.

4. The alienation of a dwelling premise in which minor members of the owner’s family reside shall be permitted by consent of the agency of trusteeship and guardianship.

Article 293. Termination of Right of Ownership in Improvidently Maintained Dwelling Premise

If the owner of a dwelling premise uses it not for the designation or systematically violates the rights and interests of neighbors, or treats the dwelling improvidently, allowing the destruction thereof, the agency of local self-government may warn the owner about the need to eliminate violations, and if these entail destruction of the premise, also to designate a commensurate period for repair of the premise to the owner.

If, after the warning, the owner continues to violate the rights and interests of the neighbors or to use the dwelling premise not for its designation, or without justifiable reasons does not make the necessary repair, then the court may, upon the suit of the local self- government agency, adopt a decision concerning the sale of such dwelling premise at public sales, with payment to the owner of money derived from the sale less expenses for execution of the judicial decision.

Chapter 19. Right of Economic Jurisdiction, Right of Operative Management

Article 294. Right of Economic Jurisdiction

A State or municipal unitary enterprise to which property belongs by right of economic jurisdiction shall possess, usе, and dispose of this property within the limits determined in accordance with this Code.

Article 295. Rights of Owner with Respect to Property in Economic Jurisdiction

1. The owner of property in economic jurisdiction shall, in accordance with a law, decide questions concerning creation of the enterprise and determination of the purposes of its activity, its reorganization and liquidation, appoint the director of the enterprise, and shall control the use according to designation and preservation of property belonging to the enterprise.

The owner shall have the right to receive part of the profit from the use of the property in the economic jurisdiction of the enterprise.

2. An enterprise shall not have the right to sell immovable property belonging to it by right of economic jurisdiction, lease it our, pledge it, contribute it as a share to the authorized (or contributed) capital of economic societies and partnerships or otherwise dispose of this property without the consent of the owner.

It shall autonomously dispose of the remaining property belonging to the enterprise, except in the instances established by a law or other legal acts.

Article 296. Right of Operative Management

1. A State-owned enterprise, as well as an institutions, shall exercise the rights of possession, use, and disposition of the property allocated to it within the limits established by a law and in accordance with the purposes of its activity, the targets of the owner, and the designation of the property.

2. The owner of the property allocated to a State-owned enterprise or institution shall have the right to withdraw redundant, unused, or unduly used property, and to dispose of it to his discretion.

Article 297. Disposition of Property of State-owned Enterprise

1. A State-owned enterprise shall have the right to alienate or otherwise dispose of property allocated to it only by consent of the owner of this property.

A State-owned enterprise autonomously shall sell the products manufactured by it unless otherwise established by a law or other legal acts.

2. The procedure for the distribution of revenues of a Stateowned enterprise shall be determined by the owner of its property.

Article 298. Disposition of Property of Institution

1. An institution shall not have the right to alienate or otherwise dispose of property allocated to it and property acquired at the expense of funds allotted to it under the estimate.

2. If in accordance with the constituent documents an institution has been granted the right to engage in activity which brings revenues, the revenues received from such activity and the property acquired at the expense of such revenues shall be at the autonomous disposition of the institution and shall be taken into account on a separate balance sheet.

Article 299. Acquisition and Termination of Right of Economic Jurisdiction and Right of Operative Management

1. The right of economic jurisdiction or the right of operative management of property with respect to which the owner has made a decision concerning the allocation to a unitary enterprise or institution shall arise for this enterprise or institution from the moment of the transfer of the property unless otherwise established by a law and other legal acts or by decision of the owner.

2. The fruits, products, and revenues from the use of property in economic jurisdiction or operative management, as well as the property acquired by a unitary enterprise or institution under contract or on other grounds, shall enter the economic jurisdiction or operative management of the enterprise or institution according to the procedure established by this Code, other laws, and other legal acts for acquisition of the right of ownership.

3. The right of economic jurisdiction and the right of operative management of property shall terminate on the grounds and according to the procedure provided for this Code, other laws, and other legal acts on the termination of the right of ownership, as well as in instances of the lawful withdrawal of the property from the enterprise or institution by decision of the owner.

Article 300. Retention of Rights to Property in Event of Transfer of Enterprise or Institution to Another Owner

1. In the event of the transfer of the right of ownership in a State or municipal enterprise as a property complex to another owner of State or municipal property, this enterprise shall retain the right of economic jurisdiction in the property belonging to it.

2. In the event of the transfer of the right of ownership in an institution to another person, this institution shall retain the right of operative management to the property belonging to it.

Chapter 20. Protection of Right of Ownership and Other Real Rights

Article 301. Reclamation of Property from Another’s Illegal Possession

The owner shall have the right to reclaim his property from another’s illegal possession.

Article 302. Reclamation of Property from a Bona Fide Acquirer

1. If the property has been acquired for compensation from the person who did not have the right to alienate it, of which the acquirer did not know or could not have known (bona fide acquirer), then the owner shall have the right to reclaim this property from the acquirer when the property has been lost by the owner or person to whom the property was transferred by the owner into possession, or stolen from one or the other, or left the possession thereof by means other than the will thereof.

2. If property was acquired without compensation from a person who did not have the right to alienate it, the owner shall have the right to reclaim the property in all instances.

3. Money, as well as bearer securities, may not be reclaimed from a bona fide acquirer.

Article 303. Settlements of Accounts in Event of Return of Property from Illegal Possession

When reclaiming property from another’s illegal possession, the owner shall also have the right to demand from a person who knew or must have known that his possession is illegal (mala fide owner) the return or compensation of all revenues which this person derived or should have derived throughout the entire period of possession; and from a bona fide possessor, the return or compensation of all revenues which he derived or should have derived from the time when he learnt or should have learnt about the unlawfulness of the possession or received a writ relating to the suit of the owner for the return of the property.

In turn, a possessor, both bona and mala fide, shall have the right to demand from the owner compensation for necessary expenditures made by him on the property beginning from the time from which revenues from the property are due to the owner.

A bona fide possessor shall have the right to reserve improvements made by him if they can be separated without damaging the property. If such a separation of the improvements is impossible, a bona fide possessor shall have the right to demand compensation for expenditures made for the improvement, but not more than the amount of the increase of the value of the property.

Article 304. Protection of Rights of Owner Against Violations Not Connected with Deprivation of Possession

An owner nay demand the elimination of any violations of his right, even though these violations are not connected with deprivation of possession.

Article 305. Protection of Rights of Possessor Who is Not the Owner

The rights provided for by Article 301 to 304 of this Code shall belong also to a person who, although not the owner, is the possessor of the property by right of inheritable possession for life, economic jurisdiction, operative management, or on other grounds provided for by a law or contract. This person shall have the right to protection of his possession against the owner as well.

Article 306. Consequences of Termination of Right of Ownership by Virtue of Law

In the event of the adoption by the Russian Federation of a law terminating the right of ownership, the losses caused to the owner as a result of the adoption of this act, including the value of the property, shall be compensated by the State. Disputes concerning compensation of losses shall be settled by a court.

SECTION III. GENERAL PART OF THE LAW OF OBLIGATION

Subsection 1. GENERAL PROVISIONS ON OBLIGATIONS

Chapter 21. Concept of and Parties to Obligations

Article 307. Concept of Obligation and Grounds for Its Arising

1. By virtue of an obligation one person (the debtor) shall be obliged to perform a specified action to the benefit of another person (the creditor), namely: to transfer property, fulfil a job, pay money, and the like, or to retain from a specified action, whereas the creditor shall have the right to demand from the creditor the fulfillment of his duty.

2. Obligation shall arise from a contract, as a consequence of the causing of harm, or from other grounds specified in this Code.

Article 308. Parties to Obligation

1. One or simultaneously several persons may participate in an obligation as each of its parties, i.e. creditor or debtor.

The invalidity of the creditor’s claims with regard to one of the persons participating in an obligation as a debtor, and likewise the expiry of the limitation period with regard to the claim against such person, shall not in and of itself affect his claims against the other such persons.

2. If each of the parties to a contract bears a duty in favor of the other party, it shall be considered the debtor of the other party in what it is obliged to do to the its benefit and, simultaneously, the creditor thereof in what it has the right to demand from it.

3. An obligation shall not create duties for persons who are not participating therein as parties (for third persons).

In the instances provided for by a law, other legal acts, or by agreement of the parties, an obligation may create rights for third persons with respect to one or both parties to the obligation.

Chapter 22. Performance of Obligations

Article 309. General Provisions

Obligations shall be performed duly in accordance with the conditions of the obligation and the requirements of a law and other legal acts, and in the absence of such conditions and requirements, in accordance with the customs of business practice or other usually presented requirements.

Article 310. Inadmissibility of Unilateral Refusal to Perform Obligation

A unilateral refusal to perform an obligation and a unilateral change of its conditions shall not be permitted, except in instances provided for by a law. A unilateral refuse to perform an obligation connected with the effectuation by its parties of entrepreneurial activity, and a unilateral change of conditions of such obligation shall also be permitted in the instances provided for by the contract unless it follows otherwise from a law or the essence of the obligation.

Article 311. Performance of Obligation in Parts

A creditor shall have the right not to accept the performance of an obligation in parts unless otherwise provided for by a law, other legal acts, or by the conditions of the obligation and arises from the customs of business practice or the essence of the obligation.

Article 312. Performance of Obligation to Proper Person

Unless otherwise provided by agreement of the parties and arise from the customs of business practice or the essence of the obligation, the debtor shall have the right while performing the obligation to demand evidence that performance is accepted by the creditor himself or by a person authorized by him to do this and shall bear the risk of the consequences of the failure to present such demand.

Article 313. Performance of Obligation by Third Person

1. The performance of an obligation may be entrusted by the debtor to a third person unless the debtor’s duty to perform the obligation personally follows from a law, other legal acts, the conditions or essence of the obligation. In this event, the creditor shall be obliged to accept the performance offered by a third person for the debtor.

2. A third person exposed to the danger of losing his right to the debtor’s property (right of lease, pledge, or others) as a consequence of execution being levied by the creditor against this property may at his own expense satisfy the creditor’s claim without the consent of the debtor. In this event, the rights of the creditor regarding the obligation shall pass to the third person in accordance with Articles 382 to 387 of this Code.

Article 314. Term for Performance of Obligation

1. If an obligation provides for or enables the date of its performance or the period of time during which it must be performed to be determined, the obligation shall be subject to performance on that date or, respectively, at any moment within that period.

2. When an obligation does not provide for a term for its performance and does not contain conditions enabling this term to be determined, it must be performed within a reasonable period after the obligation has arisen.

An obligation not performed within a reasonable period, and likewise an obligation whose term of performance has been determined by the moment of demand, must be performed by the debtor within a seven-day period from the day of presentation by the creditor of the demand concerning the performance thereof unless the duty to perform within another period arises from a law, other legal acts, the conditions of the obligation, the customs of business practice, or the essence of the obligation.

Article 315. Performance of Obligation Before Time

The debtor shall have the right to perform an obligation before time unless otherwise provided by a law, other legal acts, or the conditions of the obligation, or arises from the essence thereof. However, a premature performance of an obligation connected with the effectuation of entrepreneurial activity by the parties thereof shall be permitted only in instances when the possibility to perform the obligation before time is provided for by a law, other legal acts, or the conditions of the obligation or arises from the customs of business practice or the essence of the obligation.

Article 316. Place of Performance of Obligation

If the place of performance has not been determined by a law, other legal acts, or by contract and is not manifest from customs of business practice or the essence of the obligation, performance must be made:

- with regard to an obligation to transfer a land plot, building, structure, or other immovable property: at the location of the property; and

- with regard to an obligation to transfer a commodity or other property providing for the transportation thereof: at the place of handing over the property to the first transporter for delivery thereof to the creditor; and

- with regard to other obligations of an entrepreneur to transfer a commodity or other property: at the place of manufacture or storage of the property if this place was known to the creditor at the moment of arising of the obligation; and

- with regard to a monetary obligation: at the place of residence of the creditor at the moment of arising of the obligation, and if the creditor is a legal entity: at its location at the moment of arising of the obligation; if the creditor by the moment of performance of the obligation has changed place of residence or location and notified the debtor thereof: at the new place of residence or location of the creditor, relegating the expenses connected with the change of place of performance to the creditor’s account; and

- with regard to all other obligations: at the place of residence of the debtor, and if the debtor is a legal entity: at its location.

Article 317. Currency of Monetary Obligations

1. Monetary obligations must be expressed in rubles (Article 140).

2. It may be provided in a monetary obligation that it shall be subject to payment in rubles in an amount equivalent to a specified amount in foreign currency or in conventional monetary units (ecu, "special drawing rights", etc.). In this event the amount subject to payment in rubles shall be determined according to the official exchange rate f the respective currency or conventional monetary units as of the day of payment unless a different exchange rate or date for determining it has been established by a law or by agreement of the parties.

3. The use of foreign currency, and also of payment documents in foreign currency, when settling accounts with regard to obligations on the territory of the Russian Federation shall be permitted in the instances, according to the procedure, and on the conditions determined by a law or according to the procedure established by it.

Article 318. Increase of Amounts Payable for Maintenance of Citizen

An amount payable with regard to a monetary obligation directly for the maintenance of a citizen in compensation for the harm caused to life or health, under a contract of maintenance for life, and in other instances, shall be increased proportionately with the increase of the minimum wage amount established by a law.

Article 319. Priority of Payment of Demands Relating to Monetary Obligations

The amount of payment made which is insufficient for the performance of a monetary obligation shall, in the absence of another agreement, cover first of all the creditor’s costs with regard to the receipt of performance and then, interest, and last, the principal amount of the debt.

Article 320. Performance of Alternative Obligation

The right of choice, unless it follows otherwise from a law, other legal acts, or the conditions of a contract, shall belong to the debtor when he is obliged to transfer to the creditor one property or another or to perform one of two or several actions.

Article 321. Performance of Obligation in Which Several Creditors or Several Debtors Participate

If several creditors or several debtors participate in an obligation, each of the creditors shall have the right to demand performance, and each of the debtors shall be obliged to perform the obligation in equal share with the others insofar as it does not follow otherwise from a law, other legal acts, or the conditions of the obligation.

Article 322. Joint Obligations

1. A joint duty (responsibility) or a joint demand shall arise if the joint character of the duty or demand has been provided for by a contract or established by a law, in particular, when the subject of the obligation is indivisible.

2. The duties of several debtors relating to an obligation connected with entrepreneurial activity, and likewise demands of several creditors to such obligation, shall be joint unless otherwise provided by a law, other legal acts, or by the conditions of the obligation.

Article 323. Rights of Creditor in Event of Joint Duty

1. In the event of a joint duty of debtors, the creditor shall have the right to demand performance both from all of the debtors jointly or from any of them individually, either for the whole or for part of the debt.

2. A creditor who has not received full satisfaction from one of the joint debtors shall have the right to demand that which has not been received from the other joint debtors.

Joint debtors shall remain obliged until the obligation is performed in full.

Article 324. Objections to Demands of Creditor in Event of Joint Duty

In the event of a joint duty, the debtor shall not have the right to raise objections against the creditor’s demand based on similar relations of other debtors with the creditor in which the said debtor does not participate.

Article 325. Performance of Joint Duty by One of Debtors

1. The performance of a joint duty in full by one of the debtors shall relieve the other debtors from performance to the creditor.

2. Unless it follows otherwise from relations between the joint debtors:

1) the debtor who has performed the joint duty shall have the right of a recourse demand against the other debtors in equal shares less the share falling on himself;

2) that unpaid by one of the joint debtors to the debtor who has performed the joint duty shall fall in equal shares on this debtor and on the other debtors.

3. The rules of this Article shall apply respectively when terminating the joint obligation by setting off the counterdemand of one of the debtors.

Article 326. Joint Demands

1. If a demand is joint, any of the joint creditors shall have the right to present the demand to the debtor in full.

Until the demand is presented by one of the joint creditors, the debtor shall have the right to perform the obligation to any of them at his discretion.

2. The debtor shall not have the right to raise against the demand of one of the joint creditors objections based on similar relations of the debtor with another joint debtor in which the particular creditor does not participate.

3. The performance of the obligation in full to one of the joint creditors shall relieve the debtor from performance to the other creditors.

4. A joint creditor who has received performance from the debtor shall be obliged to compensate that which is due to the other creditors in equal shares unless it follows otherwise from the relations between them.

Article 327. Performance of Obligations by Placing Debt on Deposit

1. A debtor shall have the right to place money due from him or securities on deposit with a notary, and in the instances established by a law, on deposit with a court if the obligation cannot be performed by the debtor as a consequence of:

1) the absence of the creditor or person authorized by him to accept performance at the place where the obligation must be performed;

2) legal incapacity of the creditor and the absence of his representative;

3) the evident lack of certainty as to who is the creditor with regard to the obligation, in particular, in connection with a dispute in this regard between the creditor and other persons;

4) evasion of the creditor from accepting performance or other delay on his part.

2. The placing of a monetary amount or securities on deposit with a notary or court shall be considered performance of the obligation.

The notary or court on whose deposit the money or securities have been placed shall notify the creditor thereof.

Article 328. Counter Performance of Obligation

1. The performance of an obligation by one of the parties which in accordance with a contract is conditioned by the performance of its obligations by the other party shall be deemed to be counter performance.

2. In the event of the failure of an obliged party to provide the performance of an obligation stipulated by the contract or if circumstances exist which obviously testify that such performance will not be made within the established period, the party responsible for the counter performance shall have the right to suspend the performance of its obligation or to waive the performance of this obligation and demand compensation of losses.

If the performance of an obligation stipulated by a contract was not made in full, the party responsible for the counter performance shall have the right to suspend the performance of its obligation or to waive performance in the part corresponding to the performance not provided.

3. If counter performance of an obligation has been made notwithstanding the failure of the other party to provide performance of its obligation stipulated by the contract, this party shall be obliged to provide such performance.

4. The rules provided for by points 2 and 3 of this Article shall apply unless otherwise provided for by the contract or a law.

Chapter 23. Securing Performance of Obligations

I. General Provisions

Article 329. Means of Securing Performance of Obligations

1. The performance of obligations may be secured by a penalty, pledge, withholding of property from the debtor, suretyship, bank guarantee, earnest money, and other means provided for by a law or by a contract.

2. The invalidity of an agreement to secure the performance of an obligation shall not entail the invalidity of this obligation (principal obligation).

3. The invalidity of the principal obligation shall entail the invalidity of the obligation securing it unless otherwise provided for by a law.

II. Penalty

Article 330. Concept of Penalty.

1. A penalty (fine, forfeit) shall be deemed to be a monetary amount specified by a law or contract which the debtor shall be obliged to pay to the creditor in the event of the failure to perform or of the improper performance of an obligation, in particular, in the event of the delay of performance. With regard to a demand concerning payment of a penalty the creditor shall not be obliged to prove the causing of losses to him.

2. A creditor shall not have the right to demand payment of a penalty unless the debtor bears responsibility for the failure to perform or for the improper performance of the obligation.

Article 331. Form of Agreement on Penalty.

An agreement concerning a penalty must be concluded in writing irrespective of the form of the principal obligation.

The failure to comply with the requirement concerning the written form shall entail the invalidity of the penalty agreement.

Article 332. Legal Penalty.

1. A creditor shall have the right to demand the payment of a penalty specified by a law (legal penalty) irrespective of whether the duty to pay it has been provided for by agreement of the parties.

2. The amount of a legal penalty may be increased by agreement of the parties if the law does not so prohibit.

Article 333. Reduction of Penalty.

If a penalty subject to payment is clearly incommensurate to the consequences of the violation of the obligation, a court shall have the right to reduce the penalty.

The rules of this Article shall not affect the right of the debtor to a reduction of the amount of his responsibility on the basis of Article 404 of this Code and the right of the creditor to compensation of losses in the instances provided for by Article 394 of this Code.

III. Pledge

Article 334. Concept and Grounds for Arising of Pledge

1. By virtue of a pledge the creditor with regard to an obligation secured by a pledge (pledgee) shall have the right, in the event the debtor fails to perform this obligation, to receive satisfaction from the value of the pledged property in preference to other creditors of the person to whom this property belongs (pledger) with the exceptions established by a law.

The pledgee shall have the right to receive on the same principles satisfaction from insurance compensation for loss or damage of the pledged property irrespective of to whose benefit it was insured unless the loss or damage occurred for reasons for which the pledger is responsible.

2. A pledge of land plots, enterprises, buildings, structures, apartments, and other immovables (mortgage) shall be regulated by the law on mortgage. The general rules on pledge contained in this Code shall apply to mortgage in the instances when other rules have not been established by this Code or by the law on mortgage.

3. A pledge shall arise by virtue of a contract. Pledge shall also arise on the basis of a law upon the ensuing of the circumstances specified therein if it is provided in the law which property and for securing the performance of which obligation shall be deemed to be in pledge.

The rules of this Code on a pledge arising by virtue of a contract shall respectively apply to a pledge arising on the basis of a law unless otherwise established by a law.

Article 335. Pledger.

1. Either the debtor himself or a third person may be a pledger.

2. The pledger of a thing may be the owner thereof or a person having the right of economic jurisdiction over it.

The person to whom a thing belongs by right of economic jurisdiction shall have the right to pledge it without the owner’s consent in the instances provided for by Article 295(2) of this Code.

3. The pledger of a right may be the person to whom the pledged right belongs.

The pledge of the right of lease or other right to another’s thing shall not be permitted without the consent of its owner or the person having the right of economic jurisdiction over it if the alienation of this right without the consent of these persons have been prohibited by a law or contract.

Article 336. Object of Pledge.

1. Any property, including things and property rights (demands) may be the object of a pledge except for property withdrawn from circulation, demands inseparably connected with the person of the creditor, in particular, demands concerning alimony, compensation for harm caused to life or health, and other rights whose assignment to another person has been prohibited by a law.

2. The pledge of individual types of property, in particular the property of citizens against which levy of execution is not permitted, may be prohibited or limited by a law.

Article 337. Demand Secured by Pledge.

Unless otherwise provided by a contract, a pledge shall secure a demand in the amount which it has by the moment of satisfaction, in particular, interest, penalty, compensation of losses caused by delay in performance, as well as compensation of necessary expenses of the pledgee for maintenance of the pledged thing and expenses relating to recovery.

Article 338. Pledge With and Without Transfer of Pledged Property to Pledgee.

1. Pledged property shall remain with the pledger unless otherwise provided by contract.

Property on which a mortgage is established, as well as pledged goods in turnover, shall not be transferred to pledgee.

2. The object of a pledge may be left with the pledger under the lock and seal of the pledgee.

The object of a pledge may be left with the pledger with the imposition of marks testifying to the pledge (firm pledge).

3. The object of a pledge transferred by the pledger to a third person in temporary possession or use shall be considered left with the pledger.

4. In the event of the pledge of a property certified by a security, the latter shall be transferred to the pledgee or on deposit to a notary unless otherwise provided by contract.

Article 339. Contract of Pledge, Its Form and Registration.

1. A contract of pledge must specify the object of pledge and its valuation, the essence, amount, and period of performance of the obligation secured by the pledge. It also must contain an indication of the party with which the pledged property is situated.

2. A contract of pledge must be concluded in writing.

A contract of mortgage, and also contracts on the pledge of movable property or rights to property to secure obligations under a contract which must be notarially certified, shall be subject to notarial certification.

3. A contract of mortgage shall be registered according to the procedure established for the registration of transactions with the respective property.

4. The failure to comply with the rules contained in points 2 and 3 of this Article shall entail the invalidity of the contract of pledge.

Article 340. Property to Which Rights of Pledgee Extend.

1. The rights of the pledgee (right of pledge) to a thing which is the object of pledge shall extend to its appurtenances unless otherwise provided for by contract.

The right of pledge shall extend to fruits, products, and revenues obtained as a result of the use of the pledged property in the instances provided for by contract.

2. In the event of the mortgage of an enterprise or other property complex as a whole, the right of pledge shall extend to all of its property, movable and immovable, including the rights of demand and exclusive rights, amongst them those acquired during the mortgage period unless otherwise provided for by a law or contract.

3. The mortgage of a building or structure shall be permitted only with the simultaneous mortgage under the same contract of the land plot on which this building or structure is situated, or the part of this plot functionally ensuring the pledged project, or the right of lease of this plot or respective part thereof which belongs to the pledger.

4. In the event of the mortgage of a land plot, the right of pledge shall not extend to buildings and structures of the pledger situated or erected on this plot unless a different condition has been provided for in the contract.

If such a condition is absent in the contract, the pledger shall, in the event execution is levied against the pledged land plot, retain the right of limited use (servitude) of that part thereof which is necessary for the use of the building or structure in accordance with its purpose. Conditions for the use of this part of the plot shall be determined by agreement of the pledger with the pledgee, and in the event of a dispute, by a court.

5. If a mortgage has been established on a land plot where buildings or structures are situated which belong not to the pledger, but to another person, then if the pledgee levies execution against this plot and it is sold at a public sale, to the acquirer of the plot shall pass the rights and duties which the pledger had with respect to this person.

6. The pledge of things and of property rights which the pledger will acquire in future may be provided for by the contract of pledge, and with respect to a pledge arising on the basis of a law, by the law.

Article 341. Arising of Right of Pledge.

1. Unless otherwise provided for by the contract of pledge, the right of pledge shall arise from the moment of concluding the contract of pledge, and with respect to the pledge of property which is subject to transfer to the pledgee, from the moment of transfer of this property.

2. The right of pledge to goods in turnover shall arise in accordance with the rules of Article 357(2) of this Code.

Article 342. Subsequent Pledge.

1. If property in pledge becomes the object of yet another pledge as a security of other demands (subsequent pledge), the demands of the subsequent pledgee shall be satisfied from the value of this property after the demands of preceding pledgees.

2. A subsequent pledge shall be permitted if it is not prohibited by the preceding contracts of pledge.

3. The pledger shall be obliged to communicate to each subsequent pledgee information about all of the existing pledges of the particular property provided for by Article 339(1) of this Code, and shall be liable for losses caused to pledgees by the failure to fulfil this duty.

Article 343. Contents and Preservation of Pledged Property.

1. The pledger or pledgee, depending upon which of them has the pledged property (Article 338), shall be obliged, unless otherwise provided for by a law or contract, to:

1) insure the pledged property at its full value at the expense of the pledger against risks of loss and damage, and if the full value of the property exceeds the amount of the demand secured by the pledge, for an amount not lower than the amount of the demand;

2) take measures necessary in order to ensure the preservation of the pledged property, including protection thereof against infringements and claims on the part of third persons;

3) immediately inform the other party concerning the arising of the threat of loss or damage to the pledged property.

2. The pledgee and the pledger shall have the right to check by documents and de facto the existence, quantity, state, and conditions of keeping the pledged property situated with the other party.

3. In the event of a gross violation by the pledgee of the duties specified in point 1 of this Article which create a threat of loss or damage of the pledged property, the pledger shall have the right to demand termination of the pledge before time.

Article 344. Consequences of Loss or Damage of Pledged Property.

1. The pledger shall bear the risk of accidental perishing or accidental damage to pledged property unless otherwise provided by the contract of pledge.

2. The pledgee shall be liable for the full or partial loss or damage to the object of pledged transferred to him unless he proves that he may be relieved of responsibility in accordance with Article 401 of this Code.

The pledgee shall be liable for the loss of the object of pledge in the amount of its real value, and for the damaging thereof - the amount by which the value was reduced irrespective of the amount at which the object of pledge was valued when transferring it to the pledgee.

If as a result of damage to the object of pledge it has so changed that it cannot be used for its immediate purpose, the pledger shall have the right to reject it and demand compensation for the loss thereof.

The duty of the pledgee to compensate the pledger for other losses caused by the loss of or damage to the object of pledge may be provided for by a contract.

The pledger who is a debtor with regard to the obligation secured by a pledge shall have the right to set off the demand against the pledgee concerning compensation for losses caused by the loss of or damage to the object of pledge in repaying the obligation secured by the pledge.

Article 345. Replacement and Restoration of Object of Pledge.

1. The replacement of the object of pledge shall be permitted by consent of the pledgee unless otherwise provided for by a law or contract.

2. If the object of pledge has perished or is damaged or the right of ownership therein or the right of economic jurisdiction has been terminated on the grounds established by a law, the pledger shall have the right within a reasonable period to restore the object of pledge or substitute it with other property of equal value unless otherwise provided by the contract.

Article 346. Use and Disposition of Object of Pledge.

1. The pledger shall have the right, unless otherwise provided by contract or it follows from the essence of the pledge, to use the object of pledge in accordance with its purpose, including to derive fruits and revenues from it.

2. Unless otherwise provided by a law or contract and it follows from the essence of the pledge, the pledger shall have the right to alienate the object of pledge, to transfer it on lease or for use without compensation to another person, or otherwise to dispose of it by consent of the pledgee.

An agreement restricting the right of the pledger to bequeath pledged property shall be null and void.

3. The pledgee shall have the right to use the object of pledge transferred to him only in the instances provided for by contract, regularly submitting a report on use to the pledger. The duty may be placed by contract on the pledgee to derive fruits and revenues from the object of pledge for the purposes of repaying the principal obligation or in the interests of the pledger.

Article 347. Protection by Pledgee of His Rights to Object of Pledge.

1. The pledgee with whom the pledged property is or should be situated shall have the right to reclaim it from another’s illegal possession, including the pledger’s possession (Articles 301, 302, 305).

2. In instances when according to the contractual conditions the pledgee has been granted the right to use the object of pledge transferred to him, he may demand from other persons, including from the pledger, the elimination of any violations of his right, even though these violations were not linked with deprivation of possession (Articles 304, 305).

Article 348. Grounds for Levying Execution Against Pledged Property.

1. Execution may be levied against pledged property in order to satisfy the claims of the pledgee (creditor) in the event of the failure to perform or the improper performance by the debtor of an obligation secured by the pledge because of the circumstances for which he is responsible.

2. Levy of execution against pledged property may be refused if the violation of the obligation secured by the pledge which was committed by the debtor is extremely insignificant and the amount of the pledgee’s claims as a consequence thereof is clearly incommensurate with the value of the pledged property.

Article 349. Procedure for Levying Execution Against Pledged Property.

1. The claims of the pledgee (creditor) shall be satisfied from the value of pledged immovable property by decision of a court.

Satisfying the pledgee’s claim at the expense of the pledged immovable property without application to a court shall be permitted on the basis of a notarially certified agreement between the pledgee and the pledger concluded after the grounds arise to levy execution upon the object of pledge. Such an agreement may be deemed by a court to be invalid upon the suit of the person whose rights were violated by such agreement.

2. The claims of a pledgee shall be satisfied at the expense of pledged immovable property by decision of a court unless otherwise provided by agreement of the pledger with the pledgee. However, execution may be levied against the object of pledge transferred to the pledgee according to the procedure established by the contract of pledge unless a different procedure has been established by a law.

3. Execution may be levied against the object of pledge only by decision of a court in instances when:

1) the consent or authorization of another person or agency was required in order to conclude a contract of pledge;

2) property having significant historic, artistic, or other cultural value for society is the object of pledge;

3) the pledger is absent and it is impossible to establish his whereabouts.

Article 350. Realization of Pledged Property.

1. Pledged property against which execution is levied in accordance with Article 349 of this Code shall be realized (sold) by means of sale at public sales according to the procedure established by procedural legislation unless a different procedure has been established by a law.

2. At the request of the pledger, the court shall have the right in deciding to levy execution upon pledged property to defer the sale thereof at public sale for a period of up to one year. The deferral shall not affect the rights and duties of the parties with regard to an obligation secured by the pledge of this property, and shall not relieve the debtor from compensating for the losses of the pledgee and the penalty which grew during the period of deferral.

3. The initial sale price for pledged property at which the public sale begins shall be determined by court decision in the instances of levying execution against property in a judicial proceeding or by agreement between the pledgee and the pledger in other instances.

The pledged property shall be sold to the person who offered the highest price at the public sale.

4. When a public sale is declared to be unconstituted, the pledgee shall have the right by agreement with the pledger to acquire the pledged property and to set off against the purchase price his demands secured by the pledge. The rules for contracts of sale shall apply to such an agreement.

In the event a second public sale is declared to be unconstituted, the pledgee shall have the right to retain the object of pledge, valuing it in an amount of no more than 10% less than the initial sale price at the second public sale.

If the pledgee does not take advantage of the right to retain the object of pledge within a month from the date of announcement of the second public sale being unconstituted, the contract of pledge shall terminate.

5. If the amount received when selling the pledged property is insufficient in order to cover the pledgee’s demand, he shall have the right, in the absence of another indication in a law or the contract, to receive the amount in arrears from other property of the debtor, without enjoying a preference based on the right of pledge.

6. If the amount received when selling the pledged property exceeds the amount of the pledgee’s demand secured by the pledge, the difference shall be returned to the pledger.

7. A debtor and pledger who is a third person shall have the right at any time until the sale of the object of pledge to terminate the levy of execution upon it and the realization thereof, having performed the obligation secured by the pledge or that part thereof whose performance has been delayed. An agreement restricting this right shall be null and void.

Article 351. Premature Performance of Obligation Secured by Pledge and Levy of Execution Upon Pledged Property.

1. A pledgee shall have the right to demand the performance before time of an obligation secured by pledge in instances of:

1) the object of pledge departing from the possession of the pledger with whom it was left contrary to the conditions of the contract of pledge;

2) a violation by the pledger of the rules concerning substitution of the object of pledge (Article 345);

3) loss of the object of pledge due to circumstances for which the pledgee is not responsible if the pledger has not taken advantage of the right provided for by Article 345(2) of this Code.

2. The pledgee shall have the right to demand the performance before time of the obligation secured by pledge and, if this demand is not satisfied, to levy execution against the object of pledge in instances of:

1) a violation by the pledger of rules concerning subsequent pledge (Article 342);

2) the failure of the pledger to fulfil the duties provided for by Article 343(1), subpoints (1) and (2), and Article 343(2) of this Code;

3) a violation by the pledger of the rules concerning the disposition of pledged property (Article 346[2]).

Article 352. Termination of Pledge.

1. A pledge shall terminate:

1) with the termination of the obligation secured by the pledge;

2) upon the demand of the pledger when there exist the grounds provided for by Article 343(3) of this Code;

3) in the event of the perishing of the pledged thing or termination of the pledged right unless the pledger has taken advantage of the right provided for Article 345(2) of this Code;

4) in the event of the sale of the pledged thing at public sale, and also when the realization thereof has proved to be impossible (Article 350[4]).

2. A notation concerning the termination of the mortgage must be made in the register in which the contract of mortgage was registered.

3. When a pledge is terminated as a consequence of the performance of the obligation secured by the pledge or at the pledger’s demand (Article 343[3]), the pledgee with whom the pledged property is situated shall be obliged immediately to return it to the pledger.

Article 353. Preservation of Pledge in Event of Transfer of Right to Pledged Property to Another Person.

1. In the event of the transfer of the right of ownership to pledged property or the right of economic jurisdiction therein from the pledger to another person as a result of the alienation, with or without compensation, of this property or by way of universal legal succession, the right of pledge shall retain force.

The pledger’s legal successor shall take the place of the pledger and shall bear all the duties of the pledger unless otherwise established by an agreement with the pledgee.

2. If the pledger’s property which is the object of pledge has passed by way of legal succession to several persons, each of the legal successors (acquirers of the property) shall bear the consequences arising from the pledge for the failure to perform the obligation secured by the pledge commensurate with the part of the said property which has passed to him. However, if the object of pledge is indivisible or, for other reasons, remains in common ownership of the successors, they shall become joint pledgers.

Article 354. Consequences of Compulsory Withdrawal of Pledged Property.

1. If the right of ownership of a pledger to property which is the object of pledge terminates on the grounds and in the procedure established by a law as a consequence of the withdrawal ((buy-out) for State or municipal needs, requisition, or nationalization, and the pledger is granted other property or respective compensation, the right of pledge shall extend to the property granted instead or, respectively, the pledgee shall acquire the right of preferential satisfaction of his demand from the amount of compensation due to the pledger. The pledgee also shall have the right to demand the performance before time of the obligation secured by the pledge.

2. In the instances when property which is the object of pledge is withdrawn from the pledger according to the procedure established by a law on the grounds that in reality the owner of this property is another person (Article 243), or as a sanction for the commission of a crime or other violation of law (Article 243), the pledge with respect to this property shall terminate. In these instances, the pledgee shall have the right to demand performance before time of the obligation secured by the pledge.

Article 355. Cession of Rights Under Contract of Pledge.

A pledgee shall have the right to transfer his rights under a contract of pledge to another person while complying with the rules for the transfer of the rights of a creditor by way of the cession of a demand (Article 382 to 390).

The cession by the pledgee of his rights under a contract of pledge to another person shall be valid if the rights of demand against the debtor regarding the principal obligation secured by pledge have been assigned to the same person.

Insofar as not proved otherwise, the cession of rights under a contract of mortgage shall also mean the cession of rights relating to the obligation secured by the mortgage.

Article 356. Transfer of Debt With Regard to Obligation Secured by Pledge.

With the transfer of a debt regarding an obligation secured by a pledge to another person, the pledge shall terminate unless the pledger has given consent to the creditor to be liable for the new debtor.

Article 357. Pledge of Goods in Turnover.

1. A pledge of goods while leaving them with the pledger and granting to the pledger the right to change the composition and natural form of the pledged property (goods reserves, raw material, materials, semi-fabricates, finished products, and the like) on condition that their total value does not become less than that specified in the contract of pledge, shall be deemed to be a pledge of goods in turnover.

A reduction of the value of the pledged goods in turnover shall be permitted commensurately with the performed part of the obligation secured by pledge unless otherwise provided by the contract.

2. Goods in turnover alienated by a pledger shall cease to be the object of pledge from the moment of their transfer into ownership, economic jurisdiction, or operative management of the acquirer, while goods acquired by the pledger which are specified in the contract of pledge shall become the object of pledge from the moment the right of the pledger arises to ownership or economic jurisdiction over them.

3. The pledger of goods in turnover shall be obliged to keep a register book of pledges in which entries are made concerning the conditions of the pledge of goods and all operations entailing a change of the composition or natural form of the pledged goods, including the processing thereof, as of the day of the last operation.

4. In the event of a violation be the pledger of the conditions of a pledge of goods in turnover, the pledgee shall have the right, by placing his marks and seals on the pledged goods, to suspend operations with them until the violation is eliminated.

Article 358. Pledge of Things in Pawnshop.

1. The acceptance from citizens on pledge of movable property intended for personal consumption and pledged to secure short-term credits may be effectuated as entrepreneurial activity by specialized organizations, pawnshops, having a license for this.

2. A contract of pledge of things in a pawnshop shall be formalized by the issuance of a pledge ticket by the pawnshop.

3. The pledged things shall be transferred to the pawnshop.

The pawnshop shall be obliged, at its expense, to insure to the benefit of the pledger things accepted on pledge for the full amount of their valuation established in accordance with prices for things of this type and quality commonly established in trade at the moment of their acceptance on pledge.

The pawnshop shall not have the right to use and dispose of pledged things.

4. The pawnshop shall bear responsibility for the loss of and damage to pledged things unless it proves that the loss or damage occurred as a consequence of force majeure.

5. In the event of the failure to return within the established period the credit amount secured by the pledge of things in the pawnshop, the pawnshop shall have the right on the basis of an endorsement of execution of a notary upon the expiry of a grace onemonth period to sell this property according to the procedure established for the realization of pledged property (Article 350[3],[4],[5],[6], and [7]). After this, the claims of the pawnshop against the pledge (debtor) shall be paid, even if the amount received from the sale of the pledged property is insufficient for the full satisfaction thereof.

6. The rules for granting credits to citizens by pawnshops under pledge of things belonging to citizens shall be established by a law in accordance with this Code.

7. The conditions of a contract of pledge of things in a pawnshop restricting the rights of the pledger in comparison with the rights granted him by this Code and other laws shall be null. The respective provisions of the law shall be applied instead of such conditions.

IV. Withholding

Article 359. Grounds for Withholding

1. A creditor with whom a thing is situated which is subject to transfer to a debtor or person specified by the debtor shall have the right in the event of the failure of the debtor to perform on time the obligation to pay for this thing or compensate the creditor for expenses and other losses connected therewith to withhold it until the respective obligation is performed.

The withholding of a thing may also secure demands which, although not connected with the payment for the thing or compensation of expenses therefor, but arose from an obligation, the parties to which act as entrepreneurs.

2. A creditor may withhold a thing situated with him notwithstanding the fact that after this thing came into the possession of the creditor the rights thereto have been acquired by a third person.

3. The rules of this Article shall apply unless otherwise provided for by a contract.

Article 360. Satisfaction of Claims at Expense of Withheld Property.

The claims of a creditor who is withholding a thing shall be satisfied from the value thereof in the amount and procedure provided for the satisfaction of claims secured by a pledge.

V. Suretyship

Article 361. Contract of Suretyship

Under a contract of suretyship the surety shall be obliged to the creditor of another person to be liable for the performance by the latter of his obligations in full or in part.

A contract of suretyship may also be concluded to secure an obligation which will arise in future.

Article 362. Form of Contract of Suretyship.

A contract of suretyship must be concluded in writing. The failure to make the written form shall entail the invalidity of the contract of suretyship.

Article 363. Responsibility of Surety.

1. In the event of the failure to perform or the improper performance by the debtor of an obligation secured by a suretyship, the surety and the debtor shall be jointly liable to the creditor unless subsidiary responsibility of the surety has been provided for by a law or contract of suretyship.

2. The surety shall be liable to the creditor within the same limits as the debtor, including the payment of interest, compensation for legal expenses relating to recovery of the debt, and other losses of the creditor caused by the failure to perform or the improper performance of the obligation by the debtor unless otherwise provided by the contract of suretyship.

3. Persons who have given a suretyship jointly shall be jointly liable to the creditor unless otherwise provided by the contract of suretyship.

Article 364. Right of Surety to Objections Against Demand of Creditor.

The surety shall have the right to raise against the creditor’s demand the objections which the debtor could present unless it follows otherwise from the contract of suretyship. The surety shall not lose the right to these objections even if the debtor has waived them or acknowledged his debt.

Article 365. Rights of Surety Who Has Performed Obligation.

1. To the creditor who has performed an obligation shall pass the rights of the creditor with regard to this obligation and the rights which belonged to the creditor as pledgee in the amount in which the surety satisfied the demand of the creditor. The surety also shall have the right to demand from the debtor the payment of interest on the amount paid to the creditor and compensation for other losses incurred in connection with responsibility for the debtor.

2. Upon performance of the obligation by the surety, the creditor shall be obliged to hand over to the surety the documents certifying the demand against the debtor and to transfer the rights which secure this demand.

3. The rules established by this Article shall apply unless otherwise provided for by a law, other legal acts, or by the contract of the surety with the debtor and it arises from the relations between them.

Article 366. Notification of Surety About Performance of Obligation by Debtor.

The debtor who has performed an obligation secured by a suretyship shall be obliged immediately to notify the surety thereof. Otherwise, the surety who in turn has performed the obligation shall have the right to exact from the creditor that unjustifiably received or to present a recourse claim against the debtor. In the last instance, the debtor shall have the right to recover from the creditor that unjustifiably received.

Article 367. Termination of Suretyship.

1. A suretyship shall terminate with the termination of the obligation secured by it, as well as in the event of a change thereof entailing an increase of responsibility or other unfavorable consequences for the surety without the consent of the latter.

2. A suretyship shall terminate with the transfer to another person of the debt relating to the obligation secured by the suretyship unless the surety has given consent to the creditor to be liable for the new debtor.

3. A suretyship shall terminate if the creditor has refused to accept proper performance offered by the debtor or the surety.

4. A surety shall terminate upon the expiration of the period for which it was given as specified in the contract of suretyship. If such period has not been established, it shall terminate if a suit against the surety has not been brought by the creditor within a year from the date of ensuing of the period during which the obligation secured by the suretyship is to be performed. When the period of performance of the principal obligation has not been specified and cannot be determined or is determined by the moment of demand, the suretyship shall terminate if the creditor does not bring suit against the surety within two years from the date of concluding the contract of suretyship.

VI. Bank Guarantee

Article 368. Concept of Bank Guarantee

By virtue of a bank guarantee the bank, other credit institution, or insurance organization (guarantor) gives at the request of another person (principal) a written obligation to pay to the principal’s creditor (beneficiary) a monetary amount in accordance with the conditions of the obligation given by the guarantor upon the presentation by the beneficiary of a written demand concerning the payment thereof.

Article 369. Securing Obligation of Principal by Bank Guarantee.

1. A bank guarantee shall secure the proper performance by the principal of his obligation to the beneficiary (principal obligation).

2. The principal shall pay remuneration to the guarantor for the issuance of a bank guarantee.

Article 370. Independence of Bank Guarantee from Principal Obligation.

An obligation of a guarantor to a beneficiary provided for by a bank guarantee shall not depend in the relations between them upon the principal obligation, to secure the performance of which it was issued even if the guarantee contains a reference to this obligation.

Article 371. Irrevocability of Bank Guarantee.

A bank guarantee may not be revoked by the guarantor unless otherwise provided therein.

Article 372. Untransferability of Rights Under Bank Guarantee.

The right of demand against the guarantor which belongs to the beneficiary under the bank guarantee may not be transferred to another person unless otherwise provided for in the guarantee.

Article 373. Entry of Bank Guarantee into Force.

A bank guarantee shall enter into force from the date of its issuance unless otherwise provided for in the guarantee.

Article 374. Presentation of Demand Under Bank Guarantee.

1. The demand of a beneficiary concerning the payment of a monetary amount under a bank guarantee shall be submitted to the guarantor in writing, with the documents specified in the guarantee appended. In the demand or in the annex thereto, the beneficiary must specify what the violation by the principal of the principal obligation consists in, to secure which the guarantee was issued.

2. The demand of the beneficiary must be submitted to the guarantor before the expiry of the period specified in the guarantee for which it was issued.

Article 375. Duties of Guarantor When Demand of Beneficiary is Considered.

1. Upon receipt of the demand of the beneficiary, the guarantor must without delay to inform the principal thereof and transfer to him copies of the demand with all documents relevant thereto.

2. The guarantor must examine the demand of the beneficiary with the documents appended thereto within a reasonable period and manifest reasonable care so as to establish whether this demand and the documents appended thereto correspond to the conditions of the guarantee.

Article 376. Refusal of Guarantor to Satisfy Demand of Beneficiary.

1. The guarantor shall refuse to the beneficiary of his demand if this demand or the documents appended thereto do not correspond to the conditions of the guarantee or have been submitted to the guarantor upon the expiry of the period specified in the guarantee.

The guarantor must immediately notify the beneficiary about the refusal to satisfy his demand.

2. If it becomes known to the guarantor before satisfaction of the beneficiary’s demand that the principal obligation secured by the bank guarantee has been performed fully or in respective part, or has been terminated on other grounds, or is invalid, he must immediately communicate this to the beneficiary or the principal.

A repeated demand of the beneficiary received by the guarantor after such notification shall be subject to satisfaction by the guarantor.

Article 377. Limits of Obligation of Guarantor.

1. An obligation of the guarantor to a beneficiary provided for by a bank guarantee shall be confined to payment of the amount for which the guarantee was issued.

2. Unless otherwise provided for in the guarantee, the responsibility of the guarantor to the beneficiary for the failure to perform or the improper performance by the guarantor of the obligation under the guarantee shall not confine to the amount for which the guarantee was issued.

Article 378. Termination of Bank Guarantee.

1. The obligation of the guarantor to a beneficiary under a guarantee shall be terminated:

1) by payment to the beneficiary of the amount for which the guarantee was issued;

2) upon the expiry of the period specified in the guarantee for which it was issued;

3) as a consequence of the waiver by the beneficiary of his rights under the guarantee and the return thereof to the guarantor;

4) as a consequence of the waiver by the beneficiary of his rights under the guarantee by means of a written statement concerning the release of the guarantor from his obligations.

The termination of the obligation of the guarantor on the grounds specified in subpoints 1, 2, and 4 of this point shall not depend upon whether the guarantee is returned to him.

2. A guarantor to whom the termination of the guarantee has become known must without delay notify the principal thereof.

Article 379. Recourse Demand of Guarantor Against Principal.

1. The right of the guarantor to demand from the principal by way of recourse the compensation of amounts paid to the beneficiary under a bank guarantee shall be determined by agreement of the guarantor with the principal for the performance of which the guarantee was issued.

2. The guarantor shall not have the right to demand from the principal the compensation of amounts paid to the beneficiary contrary to the conditions of the guarantee or for a violation of the obligation of the guarantor to the beneficiary unless otherwise provided by agreement of the guarantor with the principal.

VII. Earnest

Article 380. Concept of Earnest. Form of Agreement on Earnest

1. An earnest shall be deemed to be a monetary amount issued by one of the contracting parties on account of payments due, under contract, from it to the other party as evidence of the conclusion of the contract and to secure its performance.

2. An agreement on earnest, irrespective of the earnest amount, must be concluded in writing.

3. In the event of doubt as to whether the amount paid on account of payments due under contract from a party is an earnest, in particular as a consequence of the failure to comply with the rule established by point 2 of this Article, this amount shall be considered to be paid as an advance unless otherwise proved.

Article 381. Consequences of Termination and Failure to Perform Obligation Secured by Earnest.

1. In the event of the termination of an obligation before the commencement of the performance thereof by agreement of the parties or due to the impossibility of performance (Article 416), the earnest must be returned.

2. If the party which gave the earnest is responsible for the failure to perform the contract, it shall remain with the other party. If the party which received the earnest is responsible for the failure to perform the contract, it shall be obliged to pay the other party twice the amount of the earnest.

Moreover, the party responsible for the failure to perform the contract shall be obliged to compensate the other party for losses, with the earnest amount set off, unless otherwise provided for in the contract.

Chapter 24. Change of Persons in Obligation

I. Transfer of Rights of Creditor to Other Person

Article 382. Grounds and Procedure for Transfer of Rights of Creditor to Other Person

1. A right (demand) belonging to a creditor on the basis of an obligation may be transferred by him to another person under a transaction (assignment of demand) or pass to another person on the basis of a law.

The rules for the transfer of the rights of a creditor to another person shall not ally to recourse demands.

2. The consent of the debtor shall not be required for the transfer of the creditor’s rights to another person unless otherwise provided for by a law or by contract.

3. If the debtor was not informed in writing about the transfer of the rights of the creditor to another person, the new creditor shall bear the risk of the unfavorable consequences caused by this to him. In this event, the performance of the obligation to the initial creditor shall be deemed to be performance to the proper creditor.

Article 383. Rights Untransferable to Other Persons.

The transfer to another person of the rights inextricably connected with the person of the creditor, in particular, demands concerning alimony or compensation for harm caused to life or health shall not be permitted.

Article 384. Amount of Rights of Creditor Passing to Other Person.

Unless otherwise provided for by a law or by contract, the right of the initial creditor shall pass to the new creditor in that amount and on those conditions which existed by the moment of transfer of the right. In particular, to the new creditor shall pass the rights securing the performance of an obligation, as well as other rights connected with the demand of a right, including the right to an unpaid interest.

Article 385. Evidence of Rights of New Creditor.

1. A debtor shall have the right not to perform the obligation to a new creditor until evidence is presented to him that the demand has been transferred to this person.

2. The creditor who has assigned a demand to another person shall be obliged to transfer to him the documents certifying the right of demand and to communicate information of significance for the effectuation of the demand.

Article 386. Objections of Debtor Against Demand of New Creditor.

The debtor shall have the right to raise against the new creditor’s demand objections which he had against the initial creditor by the moment when he received a notification about the transfer of the right with regard to the obligation to the new creditor.

Article 387. Transfer of Rights of Creditor to Other Person on Basis of Law.

The rights of a creditor relating to an obligation shall pass to another person on the basis of a law and the ensuing of the circumstances specified therein:

- as a result of universal legal succession to the rights of the creditor; and

- by decision of a court concerning the transfer of the creditor’s rights to another person when the possibility of such transfer has been provided for by a law; and

- as a consequence of the performance of the debtor’s obligation by his surety or by a pledger who is not a debtor with regard to the obligation; and

- in the event of the subrogation to an insurer of the creditor’s rights relating to the debtor who is responsible for the ensuing of an insured event; and

- in other instances provided for by a law.

Article 388. Conditions of Assignment of Demand.

1. The assignment of a demand by the creditor to another person shall be permitted insofar as this is not contrary to a law, other legal acts, or a contract.

2. The assignment of a demand concerning the obligation in which the person of the creditor is of vital importance for the debtor shall not be permitted without the consent of the debtor.

Article 389. Form of Assignment of Demand.

1. The assignment of a demand based on a transaction concluded in simple written or notarial form must be concluded in the respective written form.

2. The assignment of a demand relating to a transaction requiring State registration must be registered according to the procedure established for registration of this transaction unless otherwise established by a law.

3. The assignment of a demand relating to an order security shall be executed by means of an endorsement on this security (Article 146[3]).

Article 390. Responsibility of Creditor Who Has Assigned Demand.

The initial creditor who has assigned a demand shall be liable to the new creditor for the invalidity of the demand transferred to him but shall not be liable for the failure of the debtor to perform this demand, except in the instance when the initial creditor has assumed suretyship for the debtor to the new creditor.

II. Transfer of Debt

Article 391. Condition and Form of Transfer of Debt.

1. The transfer by the debtor of his debt to another person shall be permitted only by consent of the creditor.

2. The rules contained in Article 389(1) and (2) of this Code shall apply respectively to the form of the transfer of a debt.

Article 392. Objections of New Debtor Against Demand of Creditor.

The new debtor shall have the right to raise against the creditor’s demand objections based on relations between the creditor and the initial debtor.

Chapter 25. Responsibility for Violation of Obligations

Article 393. Duty of Debtor to Compensate Losses

1. A debtor shall be obliged to compensate the creditor for losses caused by the failure to perform or improper performance of an obligation.

2. Losses shall be determined in accordance with the rules provided for by Article 15 of this Code.

3. Unless otherwise provided for by a law, other legal acts, or by contract, while determining losses the prices shall be taken into account which existed at the place where the obligation was to have been performed and on the date of voluntary satisfaction by the debtor of the creditor’s demand, and if the demand was not voluntarily satisfied, on the day of presenting a suit. Proceeding from the circumstances, a court may satisfy the demand to compensate losses taking into account the prices existing on the day the decision is rendered.

4. When determining lost profit, the measures taken by the creditor to receive it and the preparations made for this purpose shall be taken into account.

Article 394. Losses and Penalty.

1. If a penalty has been established for the failure to perform or for improper performance of an obligation, the losses shall be compensated in the part not covered by the penalty.

A law or contract may provide for instances when the recovery of only a penalty, but not of losses is permitted; when losses may be recovered in full in the excess of the penalty; and when at the creditor’s choice either a penalty or losses may be recovered.

2. When limited responsibility (Article 400) has been established for the failure to perform or for improper performance of an obligation, the losses subject to compensation in the part not covered by the penalty or in excess or in place of it may be recovered up to the limits established by such limitation.

Article 395. Responsibility for Failure to Perform Monetary Obligation.

1. For the use of another’s monetary funds, as a consequence of unlawful withholding, evasion from the return thereof, other delay in the payment thereof, or unjustified receipt or savings at the expense of another person, interest shall be subject to payment on the amount of these funds. The amount of interest shall be determined by the discount rate of bank interest as of the date of performance of the monetary obligation or respective part thereof which existed at the creditor’s place of residence, and if the creditor is a legal person, at the place of its location. Should a debt be recovered in a judicial proceeding, the court may satisfy the creditor’s claim by proceeding from the bank interest rate on the date of presenting the suit or on the date of rendering the decision. These rules shall apply unless a different amount of interest has been established by a law or contract.

2. If the losses caused to a creditor by the unlawful use of his monetary funds exceed the amount of interest due to him on the basis of point 1 of this Article, he shall have the right to demand from the debtor compensation for the losses in the part exceeding this amount.

3. Interest for the use of another’s funds shall be recovered up to the day of payment of the amount of these funds to the creditor unless a shorter period has been established for calculating interest by a law, other legal acts, or contract.

Article 396. Responsibility and Performance of Obligation in Kind.

1. The payment of a penalty and compensation of losses in the event of the improper performance of an obligation shall not relieve the debtor from performance of the obligation in kind unless otherwise provided for by a law or contract.

2. The compensation of losses in the event of the failure to perform an obligation and the payment of a penalty for the failure to perform it shall relieve the debtor from the performance in kind unless otherwise provided for by a law or by contract.

3. The refusal of a creditor to accept performance which as a consequence of a delay is no longer of interest to him (Article 405[2]), as well as the payment of a penalty as smart-money (Article 409), shall relieve the debtor from performance of the obligation in kind.

Article 397. Performance of Obligation at Expense of Debtor.

In the event of the failure of a debtor to manufacture and transfer a thing into ownership, economic jurisdiction, or operative management, or to transfer a thing for use to a creditor, or to perform specified job or to provide a service for him, the creditor shall have the right within a reasonable period of time to commission the fulfillment of the obligation to third persons for a reasonable price or to fulfil it by his own efforts unless it follows otherwise from a law, other legal acts, the contract, or the essence of the obligation, and to demand from the debtor compensation for necessary expenses and other losses incurred.

Article 398. Consequences of Failure to Perform Obligation to Transfer Individually-Specified Thing.

In the event of the failure to perform an obligation to transfer an individually-specified thing into ownership, economic jurisdiction, operative management, or use for compensation to a creditor, the latter shall have the right to demand that this thing be taken away from the debtor and be transferred to the creditor on the conditions provided for by the obligation. This right shall disappear if the thing already has been transferred to a third person having the right of ownership, economic jurisdiction, or operative management. If the thing has not yet been transferred, the one of the creditors to whose benefit the obligation arose earlier shall have priority, and if this is impossible to establish, then he who has brought suit earlier.

The creditor shall have the right to demand compensation of losses instead of a demand to transfer the thing to him which is the object of the obligation.

Article 399. Subsidiary Responsibility.

1. Before demands are presented to the person who in accordance with a law, other legal acts, or the conditions of an obligation bears responsibility additionally to the responsibility of another person who is the primary debtor (subsidiary responsibility), the creditor must present the demand to the primary debtor.

If the primary debtor refused to meet the demand of the creditor or the creditor has not received within a reasonable period of time a reply from him to the demand presented, this demand may be presented to the person who bears subsidiary responsibility.

2. The creditor shall not have the right to demand satisfaction of his demand against the primary debtor from a person bearing subsidiary responsibility if this demand may be satisfied by setting off a counter demand against the primary debtor, or by the uncontested recovery of assets from the primary debtor.

3. The person who bears subsidiary responsibility must before satisfying the demand presented to him by the creditor warn the primary debtor thereof, and if suit is brought against such person, to involve the primary debtor in the case. Otherwise, the primary debtor shall have the right to raise against the recourse demand of the subsidiarily liable person objections which he had against the creditor.

Article 400. Limitation of Amount of Responsibility for Obligations.

1. The right to full compensation may be limited (limited responsibility) by a law with regard to individual types of obligations and with regard to obligations connected with a specific type of activity.

2. An agreement concerning the limitation of the amount of responsibility of a debtor under a contact of adhesion or other contract in which the citizen acting as a consumer is a creditor shall be null for the particular type of obligations or for the particular violation has been determined by a law and if the agreement was concluded before the circumstances ensue which entail responsibility for the failure to perform or for improper performance of the obligation.

Article 401. Grounds of Responsibility for Violation of Obligation.

1. A person who has not performed an obligation or who performed it improperly shall bear responsibility when there is fault (intent or negligence) except for instances when other grounds of responsibility have been provided for by a law or by contract.

The person shall be deemed not to be at fault if he has taken all measures for proper performance of the obligation with that degree of care and circumspection which was required of him by the character of the obligation and conditions of turnover.

2. The absence of fault shall be proved by the person who violated the obligation.

3. Unless otherwise provided for by a law or by contract, the person who has not performed or who performed an obligation improperly while effectuating entrepreneurial activity shall bear responsibility unless he proves that proper performance turned out to be impossible as a consequence of force majeure, that is, unusual circumstances unavoidable under the particular conditions. There shall not be relegated to such circumstances, in particular, a violation of duties on the part of the debtor’s contractors, the absence in the market of goods necessary for performance, and the lack of necessary cash resources on the part of the debtor.

4. An earlier concluded agreement concerning the elimination or limitation of responsibility for an intentional violation of an obligation shall be void.

Article 402. Responsibility of Debtor for His Employees.

The actions of the employees of a debtor relating to the performance of his obligation shall be considered the actions of the debtor. The debtor shall be liable for these actions if they entailed the failure to perform or the improper performance of the obligation.

Article 403. Responsibility of Debtor for Actions of Third Persons.

1. A debtor shall be liable for the failure to perform or for improper performance of the obligation by third persons charged with the performance unless it has been established by a law that responsibility shall be borne by the third person who is the immediate performer.

Article 404. Fault of Creditor.

1. If the failure to perform or improper performance of an obligation has occurred through the fault of both parties, a court shall respectively reduce the amount of responsibility of the debtor. A court also shall have the right to reduce the amount of responsibility of the debtor if the creditor has intentionally or through negligence facilitated the increase in the amount of losses caused by the failure to perform or improper performance, or has not taken reasonable measures to reduce them.

2. The rules of point 1 of this Article also shall respectively apply in instances when the debtor, by virtue of a law or contract, bears responsibility for the failure to perform or improper performance of an obligation irrespective of his fault.

Article 405. Delay by Debtor.

1. A debtor who has delayed performance shall be liable to the creditor for losses caused by the delay and for the consequences of the impossibility of performance which incidentally ensued during the delay.

2. If as a consequence of delay by the debtor the performance has lost interest for the creditor, he may refuse to accept performance and demand compensation of losses.

3. The debtor shall not be considered to have delayed until the obligation cannot be performed as a consequence of delay by the creditor.

Article 406. Delay by Creditor.

1. A creditor shall be considered to have delayed if he refused to accept proper performance offered by the debtor or did not perform actions provided for by a law, other legal acts, or by contract or arising from the customs of business usage or from the essence of the obligation, until the performance of which the debtor could not perform his obligation.

A creditor shall be considered to have delayed also in the instances specified in Article 408(2) of this Code.

2. A delay by a creditor shall give the debtor the right to compensation of losses caused by the delay if the creditor does not prove that the delay occurred through circumstances for which neither he himself nor the persons on whom by virtue of a law, other legal acts, or the commission of the creditor acceptance of performance was placed are liable.

3. With regard to a monetary obligation a debtor shall not be obliged to pay interest for the time of delay by the creditor.

Chapter 26. Termination of Obligations

Article 407. Grounds for Termination of Obligation

1. An obligation shall terminate wholly or in part on the grounds provided for by this Code, other laws, other legal acts, or contract.

2. The termination of an obligation upon the demand of one of the parties shall be permitted only in the instances provided for by legislation or by contract.

Article 408. Termination of Obligation by Performance.

1. Proper performance shall terminate an obligation.

2. A creditor accepting performance shall be obliged at the debtor’s demand to issue him a receipt for performance fully or in respective part.

If a debtor has issued a debt document to a creditor in certification of the obligation, then the creditor, in accepting performance, must return this document, and if it is impossible to return, specify this on the receipt issued by him. A receipt may be replaced by an inscription on the returned debt document. The fact of the debt document being with the debtor shall certify, unless proven otherwise, the termination of the obligation.

If the creditor refuses to issue the receipt, to return the debt document, or to note on the receipt the impossibility of the return thereof, the debtor shall have the right to delay performance. In these instances the creditor shall be considered to have delayed.

Article 409. Smart-Money.

By agreement of the parties an obligation may be terminated by granting smart-money instead of performance (payment of money, transfer of property, and the like). The amount, terms, and procedure for granting smart-money shall be established by the parties.

Article 410. Termination of Obligation by Set-Off.

An obligation shall be terminated wholly or in part by settingoff a counter demand of similar type, the period of which has ensued or the period of which has not been specified or is determined by the moment of demand. The petition by one party shall be sufficient for set-off.

Article 411. Instances of Inadmissibility of Set-Off.

The set-off of demands shall not be permitted:

- if upon the petition of the other party the limitation period is subject to application to the demand and this period has expired; and

- concerning compensation of harm caused to life or health; and

- concerning the recovery of alimony; and

- concerning maintenance for life; and

- in other instances provided for by a law or contract.

Article 412. Set-Off in Event of Assignment of Demand.

In the event of the assignment of a demand, the debtor shall have the right to set-off against the demand of the new creditor his counter demand against the initial creditor.

The set-off shall be made if the demand arose on grounds which existed at the moment of receipt by the debtor of notification concerning the assignment of the demand and the period of the demand ensued before the receipt thereof or this period was not specified or is determined by the moment of call.

Article 413. Termination of Obligation by Coincidence of Debtor and Creditor in One Person.

An obligation shall terminate by the coinciding of the debtor and the creditor in one person.

Article 414. Termination of Obligation by Novation.

1. An obligation shall be terminated by agreement of the parties concerning the replacement of the initial obligation which existed between them by another obligation between the same persons providing for other subject or means of performance (novation).

2. Novation shall not be permitted with respect to obligations relating to compensation for harm caused to life or health and relating to the payment of alimony.

3. Novation shall terminate additional obligations connected with the initial one unless otherwise provided by agreement of the parties.

Article 415. Forgiving of Debt.

An obligation shall be terminated by the release of the debtor by the creditor from the duties placed on him unless this violates the rights of other persons with respect to the property of the creditor.

Article 416. Termination of Obligation for Impossibility of Performance.

1. An obligation shall be terminated by the impossibility of performance if it was caused by a circumstance for which none of the parties is liable.

2. In the event of the impossibility of performance by a debtor of an obligation caused by the faulty actions of the creditor, the latter shall not have the right to demand the return of that which has been performed under the obligation.

Article 417. Termination of Obligation on Basis of Act of State Agency.

1. If as a result of the publication of an act of a State agency the performance of an obligation becomes impossible wholly or partially, the obligation shall terminate wholly or in respective part. The parties which have incurred losses as a result thereof shall have the right to demand compensation thereof in accordance with Articles 13 and 16 of this Code.

2. In the event of the act of the State agency, on the basis of which an obligation has terminated, being deemed according to the established procedure to be invalid, the on the basis of which an obligation has terminated shall be restored unless it follows otherwise from an agreement of the parties or the essence of the on the basis of which an obligation has terminated and performance has not lost interest for the creditor.

Article 418. Termination of Obligation by Death of Citizen.

1. An obligation shall be terminated by the death of the debtor if performance cannot be carried out without the personal participation of the debtor or the obligation is otherwise inextricably connected with the person of the debtor.

2. An obligation shall be terminated by the death of the creditor if the performance was intended personally for the creditor or the obligation was otherwise inextricably connected with the person of the creditor.

Article 419. Termination of Obligation by Liquidation of Legal Person.

An obligation shall be terminated by the liquidation of a legal person (debtor or creditor) except for instances when by a law or other legal acts the performance of an obligation of a liquidated legal person is placed on another legal person (upon demands concerning compensation of harm caused to life and health, and others).

Subsection 2. GENERAL PROVISIONS ON CONTRACT

Chapter 27. Concept and Conditions of Contract

Article 420. Concept of Contract

1. A contract shall be deemed to be an agreement of two or several persons concerning the establishment, change, or termination of civil rights and duties.

2. The rules for bilateral and multilateral transactions provided for by Chapter 9 of this Code shall apply to contracts.

3. The general provisions on obligations (Articles 307 to 419) shall apply to obligations which arose from a contract unless otherwise provided by rules of this Chapter and by rules on individual types of contracts contained in this Code.

4. The general provisions on contract shall apply to contracts concluded by more than two parties unless this is contrary to the multilateral character of such contracts.

Article 421. Freedom of Contract.

1. Citizens and legal entities shall be free in concluding a contract.

Coercion to conclude a contract shall not be permitted except for instances when the duty to conclude a contract has been provided for by this Code, by a law, or by a voluntarily accepted obligation.

2. The parties may conclude a contract which is either provided for or is not provided for by a law or other legal acts.

3. The parties may conclude a contract which contains elements of various contracts provided for by a law or other legal acts (mixed contact). The rules on contracts whose elements are contained in a mixed contract shall apply in respective parts to the relations of the parties under a mixed contract unless it follows otherwise from the agreement of the parties or the essence of the mixed contract.

4. The conditions of a contract shall be determined at discretion of the parties except for instances when the content of the respective condition has been prescribed by a law or other legal acts (Article 422).

In instances when a condition of a contract has been provided for by a norm which applies insofar as not established otherwise by agreement of the parties (dispositive norm), the parties may by their agreement exclude the application thereof or establish a condition which differs from that provided therein. In the absence of such agreement, the condition of the contract shall be determined by the dispositive norm.

5. If a condition of a contract has not been determined by the parties or by a dispositive norm, the respective conditions shall be determined by the customs of business usage applicable to the relations of the parties.

Article 422. Contract and Law.

1. A contract must correspond to rules established by a law and other legal acts (imperative norms) which are binding upon the parties and prevailing at the moment of its conclusion.

2. If after the conclusion of a contract a law is adopted which establishes rules binding upon the parties other than those in force when the contract was concluded, the conditions of the contract concluded shall retain force except for instances when it is established in the law that its effect extends to relations which arose from the contracts previously concluded.

Article 423. Contract For and Without Compensation.

1. A contract under which a party must receive payment or other consideration for the performance of its duties shall be deemed to be for compensation.

2. A contract under which one party is obliged to grant something to the other party without receiving payment or other consideration from it shall be deemed to be without compensation.

3. A contract shall be presupposed to be for compensation unless it follows otherwise from a law, other legal acts, or the content or essence of the contract.

Article 424. Price.

1. The performance of a contract shall be paid for at the price established by agreement of the parties.

In the instances provided for by a law the prices (tariffs, scales of prices, rates, etc.) established or regulated by duly empowered State agencies shall be applied.

2. A change of the price after the conclusion of a shall apply shall be permitted in the instances and on the conditions provided for by contract, by a law, or according to the procedure established by a law.

3. In instances when the price has not provided for in a contract for compensation or may not be determined by proceeding from the conditions of the contract, the fulfillment of the contract must be paid for at the price which under comparable circumstances is usually recovered for similar goods, jobs, or services.

Article 425. Validity of Contract.

1. A contract shall enter into force and become binding for the parties from the moment of its conclusion.

2. The parties shall have the right to establish that the conditions of a contract concluded by them shall apply to their relations which arose before the conclusion of the contract.

3. It may be provided for by a law or contract that the expiry of the term of validity of a contract shall entail the termination of the obligations of the parties under the contract.

A contract which lacks such a condition shall be deemed to be in force until the moment established therein for the ending of performance of the obligation by the parties.

4. The expiry of the term of validity of a contract shall not relieve the parties from responsibility for the violation thereof.

Article 426. Public Contract.

1. A contract concluded by a commercial organization and establishing its duties relating to the sale of goods, performance of jobs, or providing of services which such organization by the character of its activity must effectuate with respect to everyone who has recourse to it (retail trade, carriage by common-use transport, communications services, electric power supply, medical, hotel servicing, and so forth) shall be deemed to be a public contract.

A commercial organization shall not have the right to prefer one person to another with respect to the conclusion of a public contract except in the instances provided for by a law or other legal acts.

2. The price of goods, jobs, and services, as well as other conditions of a public contract shall be established identical for all consumers except in instances when the granting of privileges for individual categories of consumers is permitted by a law and other legal acts.

3. A refusal of a commercial organization to conclude a public contract when it has possibilities to provide the respective goods or services to the consumer or to perform the respective job for him shall not be permitted.

In the event of an unjustified evasion by a commercial organization from the concluding of a public contract, the provisions provided for by Article 445(4) of this Code shall apply.

4. In instances provided for by a law, the Government of the Russian Federation may issue rules binding upon the parties when concluding and performing public contracts (standard contracts, regulations, etc.).

5. The conditions of a public contract which do not meet the requirements established by points 2 and 4 of this Article shall be null.

Article 427. Model Conditions of Contract.

1. It may be provided in a contract that its individual conditions shall be determined by model conditions worked out for contracts of the respective type and published in the press.

2. In instances when a reference to model conditions is not contained in the contract, such model conditions shall apply to the relations of the parties as customs of business practice if they meet the requirements established by Article 5 and by Article 421(5) of this Code.

3. Model conditions may be stated in the form of a model contract or other document containing these conditions.

Article 428. Contract of Adhesion.

1. A contract of adhesion shall be deemed to be a contract whose conditions have been determined by one of the parties in model forms or other standard forms and which could be accepted by the other party not other than by means of adhering to the offered contract as a whole.

2. A party which has adhered to the contract shall have the right to demand dissolution or change of the contract if the contract of adhesion, although not contrary to a law or other legal acts, deprives this party of the rights usually granted under contracts of that type, excludes or restricts the responsibility of the other party for a violation of obligations, or contains other conditions clearly burdensome for the adhering party which it, proceeding form its own reasonably understood interests, would not have accepted, had it the opportunity to participate in determining the conditions of the contract.

3. When the circumstances provided for by point 3 of this Article are present, the demand concerning dissolution or change of the contract presented by a party which has adhered to the contract in connection with the effectuation of its entrepreneurial activity shall not be subject to satisfaction, if the adhering party know or should have know on what conditions it concluded the contract.

Article 429. Preliminary Contract.

1. Under a preliminary contract, the parties shall undertake to conclude in future a contract concerning the transfer of property, performance of jobs, or providing of services (prime contract) on the conditions provided for by the preliminary contract.

2. A preliminary contract shall be concluded in the form established for a prime contract, and if the form of the prime contract has not been established, then in writing. The failure to comply with the rules concerning the form of the preliminary contract shall entail its nullity.

3. A preliminary contract may contain conditions enabling to establish the subject, as well as other material conditions of the prime contract.

4. A preliminary contract shall specify the period in which the parties undertake to conclude the prime contract.

If such period has not been determined in the preliminary contract, the prime contract shall be subject to conclusion within a year from the moment of concluding the preliminary contract.

5. In instances when a party which has concluded a preliminary contract evades from concluding the prime contract, the provisions established by Article 445(4) of this Code shall apply.

6. The obligations provided for by a preliminary contract shall terminate if before the expiry of the period during which the parties must conclude the prime contract it has not been concluded or one of the parties has not sent to the other party an offer to conclude this contract.

Article 430. Contract to Benefit of Third Person.

1. A contract to the benefit of a third person shall be deemed to be a contract in which the parties have established that a debtor is obliged to make performance not to the creditor, but to a third person specified or not specified in the contract and having the right to demand performance of the obligation to his benefit from the debtor.

2. Unless otherwise provided by a law, other legal acts, or by contract, from the moment the third person has expressed to the debtor an intention to take advantage of his right under the contract, the parties may not dissolve or change the contract concluded by them without the consent of the third person.

3. A debtor in a contract shall have the right to raise against the demand of the third person objections which he could have raised against the creditor.

4. When a third person has waived a right granted to him under the contract, the creditor may take advantage of this right unless this is contrary to a law, other legal acts, or to contract.

Article 431. Interpretation of Contract.

When interpreting the conditions of a contract, a court shall take into consideration the literal meaning of the words and expressions contained therein. The literal meaning of the conditions of a contract in the event of its ambiguity shall be established by means of comparing with the other conditions and the sense of the contract as a whole.

If the rules contained in paragraph one of this Article do not enable the content of a contract to be determined, then the true common will of the parties, the purpose of the contract taken into account, must be elicited. In so doing, all the respective obligations, including negotiations and correspondence preceding the contract, practice being established in the mutual relations of the parties, the customs of business usage, and the subsequent conduct of the parties, shall be taken into account.

Chapter 28. Conclusion of Contract

Article 432. Basic Provisions on Conclusion of Contract

1. A contract shall be considered concluded if agreement between the parties regarding all material conditions of the contract has been reached in the form required in appropriate instances.

Conditions concerning the subject of a contract, conditions named in a law or other legal acts as material or necessary for contracts of the particular type, as well as all those conditions relative to which agreement must be reached upon application of one of the parties, shall be material.

2. A contract shall be concluded by means of sending an offer (proposal to conclude a contract) by one of the parties and its acceptance (approval of the offer) by the other party.

Article 433. Moment of Conclusion of Contract.

1. A contract shall be deemed to be concluded at the moment of receipt by the person who has made an offer of its acceptance.

2. If in accordance with a law the transfer of property is also necessary in order to conclude a contract, the contract shall be considered concluded from the moment of the transfer of the respective property (Article 224).

3. A contract subject to State registration shall be considered concluded from the moment of the registration thereof unless otherwise established by a law.

Article 434. Form of Contract.

1. A contract may be concluded in any form provided for the conclusion of transactions unless a specified form has been established by a law for contracts of the particular type.

If the parties have agreed to conclude a contract in a specified form, it shall be considered to have been concluded after imparting the stipulated form to it even though such has not been required by a law for contracts of this particular type.

2. A contract in writing may be concluded by means of drawing up one document signed by the parties, as well as by means of the exchange of documents via mail, telegraph, teletype, telephone, electronic, or other means of communication enabling it to be reliably established that the document comes from a party to the contract.

3. The written form of a contract shall be considered to have been observed if the written offer to conclude a contract has been accepted according to the procedure provided for by Article 438(3) of this Code.

Article 435. Offer.

1. A proposal addressed to one or more concrete persons which is clear enough and expresses the intention of the person who has made the proposal to consider himself to have concluded a contract with the addressee who will accept the proposal shall be deemed to be an offer.

An offer must contain material conditions of a contract.

2. An offer shall bind the person who sent it from the moment of its receipt by the addressee.

If notice of the revocation of an offer has come earlier or simultaneously with the offer itself, the offer shall be considered to be not received.

Article 436. Irrevocability of Offer.

An offer received by the addressee may not be revoked within the period established for its acceptance unless otherwise stipulated in the offer itself or it arises from the essence of the proposal or situation in which it was made.

Article 437. Invitation to Make Offers. Public Offer.

1. An advertisement and other proposals addressed to an indefinite group of persons shall be regarded as an invitation to make offers unless expressly specified otherwise in the proposal.

2. A proposal containing all the material conditions of a contract from which the will of the person making the proposal is seen to conclude a contract on the conditions specified in the proposal with anyone who responds shall be deemed to be an offer (public offer).

Article 438. Acceptance.

1. The reply of a person to whom an offer has been addressed confirming the approval thereof shall be deemed to be an acceptance.

An acceptance must be full and unconditional.

2. Silence shall not be an acceptance unless it follows otherwise from a law, custom of business usage, of previous business relations of the parties.

3. The performance by an offeree, within the period established for the acceptance of an offer, of actions relating to the fulfillment of the contractual conditions specified therein (shipment of goods, provision of services, performance of jobs, payment of respective amount, etc.) shall be considered an acceptance unless otherwise provided for by a law, other legal acts, or specified in the offer.

Article 439. Revocation of Acceptance.

If notice of the revocation of an acceptance has come to the offerer earlier than or simultaneously with the acceptance, the acceptance shall be considered not to be received.

Article 440. Conclusion of Contract on Basis of Offer Determining Term for Acceptance.

When a term for acceptance is determined in a offer, a contract shall be considered concluded if the acceptance was received by the offerer within the limits of the term specified therein.

Article 441. Conclusion of Contract on Basis of Offer Not Determining Term for Acceptance.

1. When a written offer does not specify the term for acceptance, the contract shall be considered concluded if the acceptance was received by the offerer before the expiry of the period established by a law or other legal acts, and if such a period has not been established, during the period of time it normally takes to do this.

2. When an offer has been made orally without specifying the term for acceptance, the contract shall be considered concluded if the other party immediately announced the acceptance thereof.

Article 442. Acceptance Received Late.

In instances when a notification of acceptance sent in good time has been received late, the acceptance shall not be considered delayed if a party which has sent the offer immediately informs the other party about the late receipt of the acceptance.

If a party which has sent an offer immediately informs the other party about the approval of its acceptance which has been received late, the contract shall be considered to be concluded.

Article 443. Acceptance on Other Conditions.

A reply concerning consent to conclude a contract on conditions other than those proposed in the offer shall not be an acceptance.

Such a reply shall be deemed to be a refusal to accept and, at the same time, a new offer.

Article 444. Place of Conclusion of Contract.

Unless the place of conclusion has not been specified in a contract, the contract shall be deemed to be concluded at the place of residence of the citizen or location of the legal person which sent the offer.

Article 445. Conclusion of Contract Without Fail.

1. In instances when in accordance with this Code or other laws the conclusion of a contract for one of the parties to which an offer (draft contract) was sent is obligatory, this party must send to the other party a notification of acceptance or rejection of acceptance or acceptance of the offer on other conditions (protocol of disagreements to draft contract) within 30 days from the date of receipt of the offer.

A party which has sent an offer and received from the party for which the conclusion of the contract is obligatory a notification of its acceptance on other conditions (protocol of disagreements to draft contract) shall have the right to transfer disagreements which have arisen when concluding the contract for consideration of a court within 30 days from the date of receipt of such notification or the expiry of the term for acceptance.

2. In instances when in accordance with this Code or other laws the conclusion of a contract is obligatory for the party that has sent an offer (draft contract) and a protocol of disagreements to the draft contract is sent to it within 30 days, this party shall be obliged within 30 days from the date of receipt of the protocol of disagreements to notify the other party about acceptance of the contract in the wording thereof or rejection of the protocol of disagreements.

In the event the protocol of disagreements is rejected or of the failure to receive notice concerning the results of the examination thereof within the specified period, the party which sent the protocol of disagreements shall have the right to transfer the disagreements which arose when concluding the contract for the consideration of a court.

3. The rules concerning the terms provided for by points 1 and 2 of this Article shall apply unless other terms have been established by a law, other legal acts, or have not been agreed upon by the parties.

4. If a party for which in accordance with this Code or other laws the conclusion of a contract is obligatory evades the conclusion thereof, the other party shall have the right to apply to a court with a demand to compel the contract to be concluded.

The party which has unjustifiably evaded the conclusion of the contract must compensate the other party for losses caused by this.

Article 446. Precontractual Disputes.

In the instances of the transfer of disagreements which arose when concluding a contract for the consideration of a court on the basis of Article 445 of this Code or by agreement of the parties, the conditions of the contract with regard to which the parties had disagreements shall be determined in accordance with the court decision.

Article 447. Conclusion of Contract at Public Sale.

1. A contract may, unless it follows otherwise from the essence thereof, be concluded by means of holding public sales. The contract shall be concluded with the person who has won the public sale.

2. The owner of a thing or the possessor of a property right or a specialized organization may act as the organizer of a public sale. A specialized organization shall operate on the basis of a contract with the owner of the thing or the possessor of the property right and shall act in their name or in its own name.

3. In the instances specified in this Code or in another law, contracts concerning the sale of a thing or property right may be concluded only by means of holding public sales.

4. A public sale shall be held in the form of an auction or a competition.

The winner of public sales at an auction shall be deemed the person who has bidden the highest price, and at a competition, the person who in accordance with the opinion of a competition commission previously appointed by the sales organizer offered the best conditions.

The form of public sale shall be determined by the owner of the thing being sold or the possessor of the property right being realized unless otherwise provided for by a law.

5. An auction or competition in which only one participant took part shall be deemed to be unconstituted.

6. The rules provided for by Articles 448 and 449 of this Code shall apply to public sales held by way of execution of the court decision unless otherwise provided for by procedural legislation.

Article 448. Organization and Procedure for Holding Public Sale.

1. Auctions and competitions may be open and closed.

Any person may participate in an open auction or open competition. Only persons specially invited for this purpose shall participate in a closed auction or closed competition.

2. Unless otherwise provided for by a law, a notice concerning the holding of a public sale must be made by the organizer no less than 30 days before holding it. In any event the notice must contain information concerning the time, place, and form of the public sale, the subject thereof and the procedure for holding it, including the formalization of participation in the sale, determination of the winner, as well as information about the starting price.

If the subject of the public sale is only the right to conclude a contract, the period granted for this must be specified in the notice of the forthcoming public sale.

3. Unless otherwise provided in a law or in the notice on holding the public sale, the organizer of a open public sale who has given notice shall have the right to refuse to hold the auction at any time, but no later than three days before the date ensues to hold it, and to hold a competition, no later than 30 days before holding the competition.

In instances when the organizer of an open public sale refuses to hold it in violation of the specified periods, he shall be obliged to compensate participants for actual damage incurred.

The organizer of a closed auction or closed competition shall be obliged to compensate the participants invited by him for actual damage irrespective of precisely when the sending of the notice was followed by the refusal to hold the public sale.

4. The participants in a public sale shall make an advance deposit in the amount, within the terms, and according to the procedure specified in the notice on holding the sale. If the sale is unconstituted, the deposit shall be subject to return. The deposit shall also be returned to the persons who participated in the public sale, but did not win it.

When concluding a contract with the winner of a public sale, the amount of the deposit paid by him shall be deducted from the performance of the obligation under the contract concluded.

6. On the day of holding the auction or competition a person who has won a public sale and the organizer of the sale shall sign a protocol concerning the results of the public sale which shall have the force of a contract. Should the person who won the public sale evade signing the protocol, he shall lose the deposit paid by him. If the organizer of a public sale evades signing the protocol, he shall be obliged to return the double amount of the deposit, as well as compensate the sale’s winner for losses caused by participation in the public sale in the part exceeding the amount of the deposit.

If only the right to conclude a contract was the subject of a public sale, such contract must be signed by the parties no later than 20 days or other period specified in the notice after the completion of the sale and drawing up of the protocol. In the event one of them evades the conclusion of the contract, the other party shall have the right to apply to a court with a demand to compel the contract to be concluded, and also to compensate for losses caused by evading the conclusion thereof.

Article 449. Consequences of Violation of Rules for Holding Public Sale.

1. A public sale held in violation of the rules established by a law may be deemed by a court to be invalid upon the suit of an interested person.

2. The deeming of a public sale to be invalid shall entail the invalidity of the contract concluded with the winner of the public sale.

Chapter 29. Change and Dissolution of Contract

Article 450. Grounds for Change and Dissolution of Contract

1. A change and dissolution of a contract shall be possible by agreement of the parties unless otherwise provided for by this Code, other laws, or by contract.

2. Upon the demand of one of the parties, a contract may be changed or dissolved by court decision only:

1) in the event of a material violation of the contract by the other party;

2) in other instances provided for by this Code, other laws, or contract.

A violation of a contract by one of the parties which entails for the other party such damage that it is deprived in considerable degree of what it had the right to count on when concluding the contract shall be deemed to be material.

3. In the event of a unilateral refuse to fulfil a contract wholly or partially when such refusal is permitted by a law or by agreement of the parties, the contract shall be considered, respectively, dissolved or changed.

Article 451. Change and Dissolution of Contract in Connection with Material Change of Circumstances.

1. A material change of circumstances from which the parties proceeded when concluding a contract shall be grounds for the change or dissolution thereof unless otherwise provided by the contract or it follows from the essence thereof.

A change of circumstances shall be deemed to be material if they have changed to such an extent that if the parties could reasonably foresee this, the contract would not have been concluded by them at all or it would have been concluded on significantly differing conditions.

2. If the parties have reached agreement concerning the bringing of the contract into conformity with the materially changed circumstances or concerning the dissolution thereof, the contract may be dissolved, and on the grounds provided for by point 4 of this Article, changed at the demand of the interested party when the following conditions simultaneously exist:

1) at the moment of concluding the contract the parties proceeded from the fact that such a change in circumstances would nor occur;

2) the change of circumstances has been caused by reasons which the interested party could not overcome after their arising with that degree of care and circumspection which was required of it by the character of the contract and the conditions of turnover;

3) the performance of the contract without a change in its conditions would so violate correlation of property interests of the parties which corresponds to the contract and would entail for the interested party such damage that it would be deprived to a significant degree of what it had the right to count on when concluding the contract;

4) it does not follows from the customs of business usage or the essence of the contract that the risk of a change of circumstances shall be borne by the interested party.

3. In the event of the dissolution of a contract due to a material change of circumstances, the court at the demand of any of the parties shall determine the consequences of the dissolution of the contract by proceeding from the necessity to justly distribute between the parties the expenses incurred by them in connection with the performance of this contract.

4. The change of a contract as a consequence of a material change of circumstances shall be permitted by decision of a court in exceptional instances when dissolution of the contract is contrary to public interests or entails damage for the parties which significantly exceeds the costs needed to perform the contract on the conditions changed by the court.

Article 452. Procedure for Change and Dissolution of Contract.

1. An agreement concerning a change or dissolution of a contract shall be concluded in the same form as the contract unless it follows otherwise from a law, other legal acts, the contract, or the customs of business usage.

2. A demand concerning a change or dissolution of a contract may be brought by a party in court only after receipt of the other party’s refusal to the proposal to change or dissolve the contract or not receiving a reply within the period specified in the proposal or established by law or by contract, and in the absence thereof, within a 30-day period.

Article 453. Consequences of Dissolution and Change of Contract.

1. In the event of the change of a contract, the obligations of the parties shall be preserved in the changed form.

2. In the event of the dissolution of a contract, the obligations of the parties shall terminate.

3. In the event of the change or dissolution of a contract, the obligations shall be considered changed or terminated from the moment of the conclusion of an agreement by the parties concerning the change or dissolution of the contract unless it follows otherwise from the agreement or the character of the change of the contract, and in the event of the change or dissolution of a contract in a judicial proceeding, from the moment of the entry into legal force of the court decision concerning the change or dissolution of the contract.

4. The parties shall not have the right to demand the return of what was performed by them under the obligation until the moment of change or dissolution of the contract unless otherwise established by a law or by agreement of the parties.

5. If a material violation of a contract by one of the parties has served as the grounds for the change or dissolution of the contract, the other party shall have the right to demand compensation for losses caused by the change or dissolution of the contract.

PRESIDENT

OF THE RUSSIAN FEDERATION

B.YELTSIN

Moscow, Kremlin