Understanding Russian Contract Law to Protect Your Business Interests

Russian contract law is based on market economy principles of respect for civil rights and liberties of individuals and legal entities, equality of parties, freedom of contracts, and inviolability of property. In Russia, contract law falls under Russian civil law.

Contractual relationships in Russia are governed by many laws and regulations with the Civil Code of the Russian Federation (hereinafter – the “Civil Code”) being the principal one. The last part of this Code was passed as far back as 1994. Currently, civil law is being reformed in Russia, and laws of obligations and contract law have undergone the most significant changes.

Russian Contract Law Basics

A feature of the Russian legal system is that a labor contract does not fall under the contract law system. When it comes to the Russian contract law, only civil law contracts are usually implied. According to the Russian civil law doctrine, a contract in Russia is an agreement between two or more persons on the establishment, change, or termination of civil rights and liabilities.

As stated above, a principle of freedom of contracts is applied in Russia, which implies the following components:

  • It is not allowed to force the making of a contract unless otherwise provided by law.
  • Parties may enter into any type of contracts, both stipulated and not stipulated by law.
  • Parties may establish any contractual terms except when a particular term is governed by law and may not be changed by agreement between parties.

With regard to the latter component of the principle of freedom of contracts, the contract law provisions in Russia are divided into imperative, dispositive, and conventionally dispositive provisions.

Imperative Provisions

Imperative provisions of contract law strictly set terms of contracts, and parties may not change them at their own discretion. If parties have made a contract with terms contradicting imperative law provisions, in case of a dispute between parties, imperative provisions will be applied rather than contractual terms.

For example, in a supply contract, parties have established that the seller shall not be liable for the quality of the supplied equipment for fabrication of plastic bags; the equipment is delivered to the buyer as is; therefore, additional discount to the equipment is offered to the buyer. But after payment for the equipment and receipt, the buyer finds that the equipment is defective due to absence of controller and may not be used for manufacture of plastic bags. If the dispute between the seller and the buyer is resolved by judicial process, this contractual term would be declared invalid, and the court would take the side of the buyer because pursuant to Article 469 of the Civil Code, the quality of the goods shall correspond to the terms of delivery contract; the goods shall be suitable for the purposes for which goods of this sort are usually used; the quality of the goods shall meet mandatory quality requirements if they are established in relation to these goods. According to Article 470 (1) of the Civil Code, goods which the seller is obliged to hand over to the buyer shall correspond to the requirements stipulated by Article 469 of the Civil Code, at the time of their transfer to the buyer, unless the sale and purchase contract provides for a different time of defining the compliance of goods with these requirements and within the reasonable period goods shall be suitable for the purposes for which goods of this sort are usually used.

Dispositive Provisions

Dispositive contract law provisions allow the parties to establish the terms of their contract independently, limiting them only with general law principles.

For example, according to Article 614 (1, 2) of the Civil Code, a lessor and a lessee may determine the amount of the rental payment, the procedure and the terms of payment thereof.

Conventionally Dispositive Provisions

Conventionally dispositive provisions of contract law include provisions allowing parties to choose a certain contractual term among the variants provided by law or to establish any contractual term, but within the framework provided by law.

For example, according to Article 612 (1) of the Civil Code, in case of discovery of defects of leased property, a lessee shall have the right at his option:

  • To demand that the lessor should either remove free of charge the defects of property or reduce proportionately the rental payment, or indemnify its expenses on the removal of the defects of property.
  • To deduct directly the sum of the expenses incurred in the removal of these defects from the rental payment by notifying the lessor about this in advance.
  • To demand the anticipatory dissolution of the contract.

According to Article 627 (1) of the Civil Code, a hire contract shall be concluded for a term of one year. This means that parties may establish any term of the contract but within one year.

Due to the fact that it is often unclear if a contract law provision is imperative, dispositive or conventionally dispositive, it is not uncommon in practice that courts understand and apply contractual terms in a way that is absolutely different from expectations of a certain party, this is why a court order in resolution of a dispute between parties may be unexpected for both contracting parties.

Jus Privatum’s Legal Team Offers Knowledge of Russian Contract Law

To avoid embarrassing situations and substantial losses in implementing a certain contract, Jus Privatum recommends consulting lawyers at the stage of its preparation and determination of terms. And if Russian law applies to the contracts that have been prepared, it is necessary to consult attorneys who specialize in Russian contract law.

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