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Unofficial Translation

LAW OF MONGOLIA

CIVIL CODE

January 10, 2002

PART I

GENERAL BASIS

Sub-part I

Civil Legal Relationship and Legislation

CHAPTER ONE

GENERAL PROVISIONS

 

Article 1. Purpose of the Law

1.1. The purpose of the Law shall be to regulate relationship with respect

to material and non-material wealth arising between legal persons.

1.2. Civil legislation shall be based on the principles of equality and

autonomy of participants to the civil legal relations, sanctity of their property,

contract freedom, non-interference into personal affairs, free exercise of civil rights

and obligations, reinstatement of the violated rights and their protection in the

court.

1.3. Unless stipulated otherwise by law, this Law shall not be applied for

regulating relationship with respect to material and non-material wealth, subject to

regulation by Administrative Laws including Tax, Budget and Finance or based on

administrative subordination.

Article 2. Civil Legislation

2.1. Civil Legislation shall be consisted of the Constitution of Mongolia,

the present Law and other legislative acts adopted in compliance with them.

2.2. If the rules, laid down in the international treaty of Mongolia, differ

from those stipulated by this law, the rules of the international treaty shall be

applied.

 

Article 3. Application of Civil Legislation

3.1. Courts shall not apply any law contradicting with the Constitution of

Mongolia.

3.2. In cases other than the International Treaty stipulating that national

legislation should be adopted, civil legal relations shall be regulated by the

International Treaty of Mongolia.

3.3. In case laws other than the Constitution and this Law contradict

each other, the provisions of the Law, which regulates the matter in more details,

or in case of absence of such, provisions of the lately adopted Law shall be

applied.

3.4. Validity of an invalidated law shall not be restored if the annulling law

is invalidated.

3.5. If the Law envisages, the publicly enforceable legal acts containing

civil legal norms, which adopted in compliance with this Law by Government may

be applied.

3.6. Legal acts defining norms shall be applied only in case they replace

the legal norms.

3.7. Ignorance of the Law or its misinterpretation shall not serve as a

ground for its non-appliance or exempt from responsibilities stipulated by the Law.

 

Article 4. Application of Civil Code by analogy

4.1. Norms of laws regulating similar relations shall be applied, if the Civil

Code lacks norms regulating a particular relationship.

4.2. In the absence of norms regulating similar relations, the particular

relations shall be regulated in compliance with the civil legal content, principles

and commonly accepted norms.

4.3. Norms specifically regulate a particular relationship shall not be applied

by analogy in other relations.

 

 

Article 5. Retrospective application (ex post facto) of civil legislation

5.1. Unless stated otherwise in the Law, retrospective application of civil

legislation shall be excluded.

5.2. In case the newly adopted legislation damages the rights and

legitimate interests of either one or both parties to the contract, contract terms and

conditions shall be valid.

5.3. If parties to the contract mutually agree, the newly adopted

legislation with better terms and conditions shall apply.

 

Article 6. Objects of civil legal relationship

6.1. In accordance with the grounds and procedure stated in the law,

material and non-material wealth, which could be valued in terms of money in civil

circulation, shall be objects of civil legal relationship.

6.2. Material or non-material rights, action or non-action and information

may be objects of civil legal relations as well.

 

Article 7. Participants to civil legal relationship

7.1. Citizens, legal persons and organizations without legal status shall

be participants to civil legal relationship.

7.2. Mongolian and foreign citizens, stateless persons/individuals without

citizenship participating in the civil legal relationship shall be deemed as citizens.

7.3. Aimags, the capital city, soums, and districts, as state, administrative

and territorial units, may enter into civil legal relation like other legal entities.

CHAPTER TWO

GROUNDS FOR ARISING CIVIL LEGAL RELATIONSHIP AND ITS

PROTECTION, EXERCISING RIGHTS AND DUTIES IN CIVIL LEGAL

RELATIONSHIP

 

Article 8. Grounds for arising civil legal relationship

8.1. Civil legal relationship shall arise on the following grounds:

8.1.1. transactions stated or not stated in the Law, which do not

contradict content-wise the law;

8.1.2. court ruling causing civil legal relationship;

8.1.3. an administrative decision causing civil legal relationship if

stated in the Law;

8.1.4. creation of an intellectual value;

8.1.5. causing harm;

8.1.6. acquisition or possession of goods without grounds;

8.1.7. legal events causing civil legal relations;

8.1.8. other grounds stated in the Laws creating civil legal relationship.

 

Article 9. Civil legal protection

9.1. Civil legal protection shall aim at restoration of violated rights.

9.2. A participant to the civil legal relationship shall be entitled to select

the person whose rights to be protected as provided by law.

9.3. Civil legal protection shall be executed by court or arbitration body

along with procedures and methods provided by Law.

9.4. Civil rights shall be protected as follows:

9.4.1. admitting the rights;

9.4.2. halting acts that violate the rights and restoring the previolation conditions;

9.4.3. enforcing the assumed duties;

9.4.4. eliminating damages caused;

9.4.5. eliminating non-material harms;

9.4.6. enforcing to pay indemnities stipulated in the law or contract;

9.4.7. invalidating decisions violating rights of others;

9.4.8. altering or terminating civil legal relationship;

9.4.9. self-help;

9.4.10. other methods stipulated by law.

Article 10. Compelled defense

10.1. Compelled defense shall be an appropriate and required action

undertaken to defend oneself or other persons or assets from illegal attacks.

10.2. The person, who undertakes the compelled defense, shall not be

responsible for elimination of the harms caused by such defense.

 

Article 11. Action taken in a desperate situation

11.1. Action taken in a desperate situation shall an action/inactivity/ taken

to halt or prevent the danger of that particular situation, if other elimination

methods are impossible.

11.2. If the harm done in a desperate situation is less than the potential

one, the person has taken such an action shall not be responsible for its

elimination.

11.3. If the harm done in a desperate situation is obviously more than the

potential one, the person has taken such an action shall be responsible for its

elimination commensurate to his/her excessive action.

11.4. Taking into consideration real circumstances of harm-doing, court

may assign the third person, in whose interests the act was taken, to eliminate the

harm, or the harm-doer or the third person may be partially or fully released from

such an obligation.

11.5. If the person took action in a desperate situation, him/herself created

such a situation, him/herself should eliminate the harm.

 

Article 12. Self-help

12.1. In case it is impossible to get timely assistance from competent

authorities, without which it is impossible to exercise civil rights or if serious

impediment to such rights may occur, respective actions taken by a participant to

a civil legal relationship in order to self-help and protect own legitimate interests,

and targeted at detaining the performer who might seize, destroy or damage,

escape or halt counter measures by the latter against legitimate actions taken by

the competent person, shall not be deemed illegal.

12.2. Person that took actions stated in article 12.1 of this Law shall

immediately notify the competent authority in order to attach the assets or detain

the obliged person.

12.3. Self-help action shall not exceed the norms appropriate for the

particular situation.

12.4. Person which took the action stated in article 12.1 of this Law by

mistake or by exceeding norms shall be obliged to eliminate the harm.

 

Article 13. Exercising rights and duties in civil legal relationship

13.1. Participants to civil legal relationship shall fairly exercise and fulfill

their rights and duties stipulated by law or contracts.

13.2. Participants to civil legal relationship may at own will exercise rights

and duties which are not prohibited or directly stated in the law.

13.3. Participants to civil legal relationship are prohibited to undertake

activities harmful to others, limiting freedom of market relations without grounds,

illegally taking advantage of legitimate advantages while enjoying own rights or

fulfilling duties. Otherwise, they shall bear responsibilities stipulated by law.

Sub-part II

Participants to Civil Legal Relationship

 

CHAPTER THREE

CITIZENS

 

Article 14. Civil legal capacity

14.1. Civil legal capacity shall commence with citizens’ birth and

terminates with their death.

14.2. It is prohibited to limit civil legal capacity.

 

Article 15. Full civil legal capability

15.1. Civil legal capability to acquire rights and obligations by own conduct

or full legal capacity emerges with reaching an adolescence or the age of 18.

15.2. Court may consider citizens reached the age of 16-18 with full civil

legal capability at own request with the consent of parents, or guardians, or

custodians based on grounds and procedures stipulated by Law.

15.3. If relevant grounds exist, the court rule considering the citizen with

civil full capability could be invalidated at the request of an interested person.

 

Article 16. Partial civil legal capability

16.1. Minors under age of 14-18 shall have partial civil legal capability.

16.2. Minors may conclude transactions other than the ones permitted by

Law, on the basis of written consent of their legal representative (parents,

guardians, custodians).

16.3. Minyors may exercise the following rights without consent of their

legal representative:

16.3.1. administering own salary, student stipend, other similar

incomes, or any asset transferred to them for administering at own discretion;

16.3.2. concluding transactions harmless or of utility nature with

immediate execution;

16.3.3. depositing in banks or credit institutions incomes stated in

article 16.3.1 of this Law.

16.4. Citizens of age 16-18 may be cooperative members.

 

Article 17. Some civil legal capability

17.1. Persons of age 7-14 shall possess some civil legal capability.

17.2. Legal representative (parents, guardians, trustees) of persons of age

7-14 shall on their behalf conclude transactions other than petty and harmless

ones of utility nature with immediate execution.

 

Article 18. Citizens without civil legal capability

18.1. Persons under age of seven shall lack civil legal capability.

18.2. Court shall deem deprived of civil legal capability of the persons,

who are unaware of own conduct and lacking self-control due to mental illness,

and shall establish for them custody.

18.3. Legal representatives shall conclude any transactions on behalf of

persons with deprived civil legal capability.

18.4. In case of elapsing the conditions or grounds for considering the

person deprived of civil legal capability, court may revoke its decision on

considering her/him as deprived of civil legal capability.

 

Article 19. Limited civil legal capability

19. 1. Civil legal capability of adult citizens who are addicted, or regularly

using addictive drug substances or alcohol and causing substantial economic

damages for their family, may be limited and established custody at the request of

interested person according to procedure defined by law.

19.2. It shall be prohibited to limit civil legal capability by concluding

transactions.

19.3. Persons with limited civil legal capability may conclude transactions

within the unlimited part of their capability upon custodian’s consent.

19.4. With elapse of circumstances served as grounds for limiting civil

legal capability, court shall invalidate the imposed limitation and shall release the

custodian from the obligations.

 

Article 20. Name of citizens

20.1 Citizens shall have own names.

20.2. Procedure to register and change citizens’ names shall be

determined by law.

20.3. Citizens’ name shall be registered with the competent authority. Civil

rights and obligations shall be acquired and exercised at own name. Pseudonyms

could be used only according to the procedure and conditions stipulated by law.

20.4. Name changing shall not serve as grounds for altering or terminating

the rights and obligations acquired under the previous name.

20.5. Person with changed name shall be obliged to inform an obligation

beneficiary or an obligation performer, in case of failure to do so he/she personally

shall bear the responsibility for the consequences.

 

Article 21. Protection of citizens’ name, honor, dignity and business

reputation

21.1. It is prohibited to use illegally the name of citizens.

21.2. If the person, who defamed citizen’s name, honor, dignity and

business reputation, fails to prove the defamation accuracy, he/she shall be liable

to refute the defamation via media and in the form, it was originally disseminated,

or in other forms.

21.3. If the defamation of others’ name, honor, and dignity and business

reputation is due to incomplete information about the documents, the guilty person

shall be liable to refute, as stipulated in article 21.2 of this Law.

21.4. Citizen, considering harmful the dissemination without his/her

consent of any personal information, defined by law as confidential, shall be

entitled to demand the harm elimination.

21.5. Person, considering harmful any publication or public demonstration

without its consent of an individual image in a form of photo, movie, video

recording, portrait or any other form, shall be entitled to demand the harm

elimination.

21.6. In case a person receives any fee or payment for using his/her

image or grants the rights to use his/her image in connection with his/ her social

status for promotion, or his/her image is used during public activities as a part of

training, scientific research, business activities, no special permit shall be required

from the person.

21.7. If any information, defaming the name, honor, dignity and business

reputation, or confidential personal news of the diseased person is publicized

without consent of the heir specified in article 520 of this Law, the rules laid down

in this article shall equally be applied.

21.8. Harm done in the case stipulated in article 21.7 shall not be

demanded to be compensated in material form.

21.9. Person violated rights provided by this article, shall eliminate the

harm done to others, as envisaged in articles 497 and 511 of this Law.

 

Article 22. Citizen’s residence

22.1. Citizen’s residence shall be determined by the administrative and

territorial unit, where the individual is registered according to law.

22.2. If the citizen does not reside in the registered location, the place

he/she basically lives or the most of her/his personal assets is located may be

deemed as her/his residence.

22.3. Residency of a person under others’ custody shall be determined by

the residency of her/his parents or custodians.

 

Article 23. Citizen declared as missing

23.1. Upon request of an interested person, Court may declare a citizen

as missing, if his/her whereabouts is unknown or not heard for a period of two

years since the date of her/his missing from the place of residence.

23.2. Court shall rule the protection over the property of a missing citizen,

and the citizen’s statutory obligations such as raising and assisting her/his

dependants, paying fees and taxes according to law, paying debts according to

liabilities, shall be charged from the property.

23.3. If the location of the missing person is identified, or the person is

back, the Court shall revoke its ruling and terminate the property protection.

23.4. Upon return, the missing citizen shall be entitled to reclaim his/her

property available or transferred free to others on grounds other than stipulated by

Article 23.3 of this Law. However, any profit gained in the result of using the

assets for economic purposes, shall not be claimed.

23.5. The administrator shall pay the price of assets of the missing person

if they are sold, or pay their full or partial value if they are lost, or short of, or

damaged, in the amount ruled by Court, depending on the degree of guilt.

23.6. If the missing person is back, the administrator of the assets shall be

entitled to demand the reimbursement of costs related to their protection, storage

and use.

 

Article 24. Citizen declared as deceased

24.1. Upon request of an interested person, Court may declare a citizen

as deceased if his/her whereabouts remains unknown for over five years since the

date of her/his missing from the residency, or if her/his existence remains

unknown for a year since the date of missing in life-threatening circumstances.

24.2. Person missing while participating in military operations could be

deemed as deceased after the expiration of two years since the termination of

such operations.

24.3. The date of death of the citizen declared as deceased shall be the

date, when the Court decision on considering him/her deceased enters into force.

24.4. If the citizen declared as deceased due to missing under lifethreatening circumstances, Court may consider the date of possible death as the

date of the death of that citizen.

24.5. The property of a citizen declared as deceased shall be transferred

to others according to the succession rule.

24.6. If the person declared as deceased is back or her/his location is

identified, Court shall revoke its previous decision.

24.7. If the person declared deceased is back, he/she shall enjoy the right

to reclaim the available property transferred free to others in way of inheritance or

other forms. If thus transferred to the state property cannot be returned to the

owner, its price shall be reimbursed.

24.8. Revocation of the Court rule declaring a person as deceased shall

not serve as grounds for invalidating the new marriage of her/his spouse.

 

CHAPTER FOUR

JURISTIC PERSON

Sub-chapter one

Common provisions

 

Article 25. Juristic person

25.1. Juristic person shall be an organised unity with concrete mission and

engaged in regular activities, which is entitled to own, possess, use and dispose

of its separate property, which can acquire rights and bear duties on it’s own

name, which can be liable for consequences arising out of own activities with its

own assets, and which is capable to be defendant or plaintiff.

25.2 Juristic person may be for-profit with an objective to make profitor

non-profit one with an objective specified by a law or a charter.

25.3.A Juristic person shall be eitherpublic or private, or mixed property.

25.4. Unlessotherwise provided in the Law, juristic persons may be in an

amalgamation with the purpose to coordinate their activities, while they will

retaining their juristic person status.

25.5. Juristic status of juristic persons shall be established by law.

 

Article 26. Civil juristic capacity of juristic persons

26.1. A Juristic person’s legal capacity in civil law shall be commenced,

arising with registering with the State Register, and terminated upon its liquidation

according to law or its deletion from the State Register.

26.2. Procedure to register juristic persons with or to be deleted from the

State Register shall be determined by law.

26.3. Legal capacity of public juristic person in civil law shall be born

(commenced) or terminated with its foundation or liquidation in accordance with

law provisions, and it shall be entitled to participate in civil juristic relationships

with equal status to other participants.

26.4. Juristic persons shall participate in civic legal relationships via their

governing bodies.

26.5. Juristic status of governing bodies of juristic persons shall be

specified by laws of their incorporating thereof,

26.6. Non-profit juristic persons shall undertake activities in compliance

with the objectives specified by their charters or other bylaws incorporating

thereof,

26.7. For-profit juristic persons shall be entitled to undertake any activity

not prohibited by law or not in conflict with common by accepted moral.

26.8. Juristic persons shall undertake certain activities with the consent of

respective competent authorities provided by law. The entitlement to undertake

the activities shall emerge from the day of getting the special authorisation.

26.9. Legal capacity of juristic persons in civil law shall be limited solely

based on grounds and procedure prescribed by law.

 

Article 27. Name of juristic persons

27.1. Juristic persons shall have own names. Juristic person’s name shall

reflect its structure and juristic form.

27.2. If required by law, the juristic person’s type should be indicated.

27.3. Juristic person’s name shall not duplicate or be misleadingly similar to

the name of other juristic persons.

27.4. Other persons shall be prohibited to use illegally other juristic

persons’ names. The person violating this provision shall remedy any damage

caused to others thereby pursuant to procedure specified in Article 497 of this

Law.

27.5. Juristic persons shall register their names as it stipulated in the Law.

27.6. Article 21 of this Law shall be equally applied for protecting the

business reputation of juristic persons.

 

Article 28. Business place of juristic persons

28.1. The place where the head office of a juristic person is located shall be

its business place.

28.2. A Juristic person shall have only one business place and or official

address.

 

Article 29. Subsidiary and representative office of juristic persons

29.1. If prescribed by law or by documents, subsidiary or representative

offices may set up by such juristic person in accordance with the due procedure.

29.2. Subsidiary shall be a special unit located in place other than the

juristic person’s business place, which performs fully or partially main functions of

that juristic person.

29.3. A representative office shall be a unit located in a place other than the

juristic person’s business place, obligated to defend legitimate interests and

conclude transactions, or take other legal actions on behalf of at juristic person.

29.4. The rights and liabilities of subsidiaries and representative offices

shall be determined by the charter of the principal juristic person.

29.5. Executives of subsidiaries and representative offices shall carry out

their activities on the basis of power of attorney granted by the principal juristic

person thereto.

29.6. Subsidiaries and representative offices of the juristic person shall not

be entitled to the rights a juristic person.

 

Article 30. Incorporation of juristic persons

30.1. Unless otherwise stipulated in the law, citizens and juristic persons

may incorporate juristic person as prescribed by law.

30.2. In order to perform its functions or satisfy public needs, the state may

establish a juristic person, using solely the state proferty or in colobration with a

third party.

 

Article 31. Re-organization of juristic persons

31.1.A juristic person may be reorganised by merging, considilating,

dividing, separating or restructuring at the decision of the assets’ owner, or a

designated body or a body authorised by its founding bylaws, as prescribed by

law.

31.2. Merging shall take place when activities of two or more juristic persons

are halted, and their rights, obligations and responsibilities are transferred to a

newly established juristic person.

31.3. Joining shall take place when rights, obligations and responsibilities

are transferred to another juristic person after halting its activities.

31.4Dividing shall take place when activities of juristic persons are halted,

and their rights, obligations and responsibilities are transferred to newly emerging

two or more juristic persons.

31.5. Separating shall take place when some rights, obligations and

responsibilities of a juristic person are transferred to a newly established juristic

person, without halting the former activities.

31.6. Juristic person could be established by changing its organisation type,

form and basic goals.

 

Article 32. Liquidation of juristic persons

32.1. Juristic persons shall be liquidated on the following grounds:

32.1.1.a decision issued by it’s of the owner or the designated body,

or a body authorized by the founding documents;

32.1.2. court decision on liquidation on the grounds declaration of

bankrupting, or several or serious breaches of the law, or other grounds stipulated

in the law;

32.1.3. own decision on discontinuing its activities due to its term

expiration 31.3 or body founded

32.1.4. a decision by the competent founder of the juristic person;

32.1.5. any other grounds provided by law;

32.2. A commission, appointed by the body, which made the decision on

liquidation, shall be in charge of liquidation process.

32.3. Liquidation Commission shall publicize the liquidation of the juristic

person.

32.4. The time limit for acceptance by the Liquidation Commission of claims

from creditors shall be not less than two month and not more than six months

from the date of public notification of the liquidation of the juristic person in

question.

32.5. Claims against a juristic person in liquidation shall be satisfied in the

following order:

32.5.1. payments to recover (or remedy) damages caused to the life

and health of others and other payments due to a decision by Court;

32.5.2. operational expences born, by the executor, Liquidation

Commission, or other similar persons thereto.within their competence;

32.5.3. claims arising out of contracts and transactions concluded in

the process of re-capitalization of the plaintiff during its bankruptcy;

32.5.4. capital of depositors;

32.5.5. payment of due to workers under labor contracts;

32.5.6. payments to other claimants in accordance with laws.

32.5.7. settlements with other persons in accordance with the laws.

32.6. Principle of satisfying the following claims after full payment of all first

claims shall in order to satisfy claims against juristic persons in process of

liquidation observed in satisfying claims against the juristic person in liquidation.

32.7. If the available cash of the juristic person is insufficient to satisfy the

amounts owing to claimants, then the Liquidation Commission may sell other

assets and complete the payments as provided by the law.

32.8. If the assets of the juristic person in liquidation are insufficient to meet

its debts, its available assets shall be distributed among the claimants in

proportion to the amounts owed and with proper sequence.

32.9. After satisfying debts of claimants, any remaining property shall be

transferred to the legitimate owners or to authorised persons, if provided by law.

32.10. If there is no person to accept the property of the juristic

person in liquidation, then it shall be transferred to state ownership.

32.11.  The registration body shall announce publicly the deletion of the juristic person from the State register.

32.12. Unless otherwise provided by law, this Article shall apply to the liquidation of a legal entity.

SUB-CHAPTER TWO

TYPES OF JURISTIC PERSONS

 

Article 33. Types of juristic persons

33.1. Profit-making juristic persons shall be established in the form of

partnership or company.

33.2. Non-profit juristic persons shall be established in the form of

association, foundation or cooperative.

 

Article 34. Companies

34.1. A company shall be a juristic person with shareholders’ capital

divided into certain number of shares, with separate own assets, and with an

objective to make profit.

34.2. The legal status of companies shall be determined by law.

 

Article 35. Partnerships

35.1. A partnership shall be a juristic person with assets, consisting of its

members contributions, and liable for its obligations with these assets and the

personal property of its members, as provided by law.

35.2. Legal status the partnership shall be determined by law.

 

Article 36. Associations, foundations, cooperatives

36.1. An association shall be a membership juristic person established by

voluntary amalgamation of several persons with common specific goals.

36.2. A foundation shall be a juristic person with no members, established

by one or more founders by raising funds to attain for the public common goals.

36.3. The legal status of associations and foundations shall be determined

by law.

36.4. A cooperative shall be a juristic person, established jointly on

voluntary basis by several persons to carry out activities aimed at satisfying

common economic and social needs of its members, based on assets with

corporate governance and control over joint assets.

36.5. Incorporation, registration, termination of and control over its

activities, membership and other relations relevant to cooperatives shall be

regulated by law.

36.6. Monasteries and churches, participating in the civil juristic relations,

shall observe provisions of the law pertaining to the juristic status of foundations

 

Article 37. Special regulation for foundations.

37.1. The Governing body the board of governers of a foundation or the

governing board shall consist of donors, supporters and representatives

designated by them.

37.2. The Governing body of foundationshall nominate its executives and

supervising body.

37.3. Executives of foundation shall carry out activities consistent with the

statute, of foundations shall distribute to the public the published operational and

financial reports reviewed by the governing body of the foundations.

 

Article 38. Foundation liquidation procedure

38.1. Liquidation Commission, nominated by the authority and made the

liquidation decision, shall be in charge of liquidation. In the special cases, Court

may nominate another liquidation body, which shall bear the same responsibilities

as members of Liquidation Commissions.

38.2. Day-to-day activities of liquidated foundations shall be halted, the

available assets shall be and payments made to claimants.

38.3. After making payments as provided by Article 38.1 of this Law, the

remaining assets shall be transferred to one or more persons with goals common

or similar to the liquidated foundation. In case of absence of such a person, it may

be decided to be transferred to the state ownership.

 

SUBPART III

Transactions

 

CHAPTER FIVE

GENERAL PROVISIONS

 

Article 39. Transaction

39.1. Transaction shall mean an intended action /inactivity/ of citizens or

juristic persons aimed at creating, modifying, transferring or terminating civil rights

and obligations.

39.2. A person may conclude a transaction expressing one’s intention.

 

Article 40. Validity of expression of intention

40.1. Expression of intention shall become effective when it received by the

other party.

40.2. If the other party refuses in advance or straightforward to receive the

expressed intention, the intention expressed shall be deemed as ineffective.

40.3. Transactions or intention expressed by the person before his/her

death or loosing his/her full civil law capability shall remain as valid.

 

Article 41. Interpretation of intention

41.1. While interpreting the content of an intention, direct meaning of its

words shall directly be taken into consideration.

41.2. If the meaning of the expressed intention is ambiguous, it shall be

interpreted by analysing the intention expresser’s needs, demands, words, actions

and inactivity, as well as other conditions and circumstances.

 

Article 42. Forms of transaction

42.1. Transactions may be concluded in the form as provided by law, or if it

is not provided, the parties may agree on concluding either orally or in writing.

42.2. Written transaction with simple form shall enter into force upon

signing it by the person expressing the intention.

42.3. According to business traditions, the signature directly copied by

technical means may be considered as an authentic to the original.

42.4. As to transactions requiring notary certification, it shall be certified by

notary or other persons provided by law.

42.5. If a transaction requiring notary certification is not certified, and one of

the parties accepts full or substantial performance of the obligations by the other

party, but objects to notary certification of the transaction, then at the request of

the party fulfilled its obligations, Court may consider that the transaction have

been concluded.

42.6. If a person is unable to sign personally the document due to sickness

or illiteracy, another person may sign the transaction on his/her behalf upon

authorisation. In that case, the signature of the authorising person must be

certified and reason of signing by another person shall be stated in the document.

42.7. If a written transaction was executed in several copies, it shall be

considered as concluded, if copies left with parties are mutually signed by both of

them.

42.8. The parties may conclude a transaction by expressing their intention

through undertaking real actions as for the major condition.

42.9. If it is provided by law or contract, a silence may be considered as an

acceptance of the proposal to conclude a transaction.

42.10. Except as provided in Article 421.1.   of this Law, a transaction that does not meet the legal requirements in writing shall be invalid, in which case the parties shall return to each other everything received under the transaction.

 

 

 

42.11.  In the event of a dispute over a transaction that violates the requirements of the law in writing, except as provided in Article 421.1. of this Law, they shall lose the right to testify as witnesses, unless otherwise provided by this Law, but may be proved by other means of evidence.

 

Article 421. Electronic transactions

 

421.1. Transactions that are required by law to be registered, notarized, or in writing may be made electronically.

421.2 Unless otherwise provided by law, a transaction to be concluded in electronic form shall enter into force upon digital signature by the other party to the agreement acknowledging that the person expressing his / her will prepared and sent the electronic document.

 

Article 43. Evidence of transaction as concluded

43.1. Oral transaction shall be considered as concluded in the following

cases:

43.1.1. agreement by the parties on the essential terms of the

transaction;

43.1.2. handing over customary things like receipts or documents

certifying the conclusion of the transaction;

43.1.3. if provided by law or contract, in the absence of a reply to a

proposal for concluding the transaction and on the expiry of a fixed time or of a

reasonable time for reply.

43.2. A written transaction shall be considered as concluded in the

following cases:

43.2.1. executing and signing by parties of a document expressing

their intention;

43.2.2. receiving by a party of an official letter, telegram, fax or other

similar documents expressing the intention of the other party, who accepted the

proposal to conclude a transaction;

43.2.3. registering and certifying by notary of transactions, which

have to be registered or certified by notary, as provided by law.

43.3. If a party expressed its acceptance of the other party’s intention by

concrete conduct or action, then the transaction shall be considered as concluded

by real action.

43.4. If it is impossible to define the content of transaction, the transaction

shall be deemed as not concluded.

 

Article 44. Conditional transaction

44.1. Transaction which is concluded that it would be executed or

terminated if an event that is uncertain takes place shall be called a conditional

transaction.

44.2. If a transaction provides for creation of rights and obligations

depending on happening of an event with uncertain occurrence, or the parties are

unaware of its occurrence, then it shall be considered to be a suspended

conditional transaction.

44.3. If a transaction provides for termination of rights and obligations

depending on happening of an event with uncertain occurrence, then it shall be

considered to be a changeable conditional transaction.

44.4. If the future occurrence of an event depends on intention of parties to

the transaction, then the provisions of this article shall not be applied.

 

Article 45. Void conditional transaction

45.1. If conditions are not in compliance with law requirements or contradict

with admitted common behavioral norms, or obviously unrealistic, the transaction

shall be void.

 

Article 46. Void conditions

46.1. In case of concluding a transaction with condition that an event

occurs at certain time, but the event does not take place during the specified

period, the condition shall become void.

46.2. Condition without concrete term may occur anytime.

46.3. If it becomes evident that the event indicated in the condition will

never take place, then the condition shall become void.

 

Article 47. Condition deemed satisfied

47.1. If the transaction with a condition that an event shall not occur at

certain time, and prior to the specified time it becomes evident that it will not

occur, then the conditions shall be deemed satisfied.

 

Article 48. Obligations of the person concluded a conditional

transaction

48.1. Person, concluded a conditional transaction, shall not be entitled to

undertake any actions obstructing the other side to fulfil its obligations prior to the

occurrence of the event, indicated in the transaction.

48.2. If the party to whom the condition’s occurrence would cause

unfavourable situation, unfairly obstructs the condition occurrence, the condition

shall be deemed occurred.

48.3. If the party to whom the condition’s occurrence would cause

favourable situation, unfairly affect the condition occurrence, the condition shall

not be deemed occurred.

48.4. If a person has already taken the action specified in article 48.1 of this

Law by the time the condition is occurred, then, he/she shall be obliged to

eliminate the harm caused to the other party due to such action.

 

Article 49. Stock exchange transactions

49.1. Transactions for investment into the stock exchange turnover or for

the transfer of property rights (properties, securities etc) shall be subject to

execution procedure and registration with the Stock exchange, as provided by

law.

49.2. Unless conflicted with law, or the nature of the particular type of

transaction, Stock exchange transactions may be regulated by the rules governing

the relevant contracts (contracts for sale and purchase, contracts for commission

etc) subject to adjustment to content-wise.

49.3. The conditions concerning confidentiality of the commercial secrets of

parties to transactions, which are not disclosed without their consent, shall be

determined by the Law on Stock Exchange.

49.4. Disputes over the conclusion of stock exchange transactions, and

rights and obligations arising out of them, shall be reviewed and settled by the

competent authority, and the parties may appeal to Court with respect to its

decisions.

 

Article 50. Transactions subject to special authorization

50.1. The third party, who is competent to issue an authorisation-the

mandatory condition for a transaction to become effective, shall equally notify

parties to the transaction about issuing the authorisation or refusal to issue it.

50.2. The authorization does not need to be in the form that to be observed

in the transaction.

50.3. If the transaction, the validity of which depends on the authorization of

the third person, concluded with the latter’s consent, the provision of article 54.5 of

this Law shall be applied as well.

 

Article 51. Invalidation of an authorization

51.1. If parties have not created any consequences yet on basis of the

received authorisation with the purpose to conclude a transaction, the authority,

issued such an authorisation may invalidate the authorisation prior to concluding

the transaction. Parties shall be notified if the invalidation of the authorisation.

 

Article 52. Condition for non-retroactivity of an authorisation

52.1. Actions taken at the decision of the person competent to issue the

permit prior to later support and authorisation of the transaction, or according to

the mandatory execution, or in connection with administering the property by the

Liquidation executor, shall be valid notwithstanding to articles 42.1 – 42.3 of this

Law.

 

Article 53. Validity of conduct of unauthorized person

53.1. If the conduct of unauthorized person is later supported and

authorized by the competent person, such conduct shall be deemed as valid.

 

Article 54. Unauthorized transaction concluded by minors under age

14-18

54.1. If a person, concluded a transaction with a minor, requests the

legitimate representative to prove that the transaction was authorized, the latter

shall notify the former in writing within 14 days. In this case, the previous

authorization issued to the minor or refusal by the representative shall be void.

54.2. If no reply received within the period stipulated in article 54.1 of this

Law, it shall be deemed that the authorization was renounced.

54.3. If the minor attains adolescence after concluding an unauthorized

transaction without her/his legitimate representative, him/herself shall decide

whether the expressed intention is still valid.

54.4. Person, concluded a transaction with minor, shall be entitled to

renounce it prior to receiving an authorization supported by the legitimate

representative.

54.5. If the legitimate representative authorized the minor to conclude the

transaction, but the proof document is not presented to the other side, the latter

shall be entitled to renounce the transaction.

 

Article 55. Transaction concluded independently by minors under age

14-18

55.1. Minors shall exercise the right to conclude independently a

transaction with regard to assets transferred to them, with the right to administer

at own discretion, by the legitimate representative or by a third party with the

latter’s consent.

55.2. Article 55.1 of this Law shall not be applicable to unilateral

transactions other than those allowed by law to be concluded by minors.

 

CHAPTER SIX

VOID TRANSACTIONS

 

Article 56. Void transaction

56.1 A transaction shall be deemed void if:

56.1.1 breaches law or contradicts with commonly accepted or

behavioral norms;

56.1.2 made fictitiously;

56.1.3 made with the purpose of concealing another transaction;

56.1.4 made to represent a specific will, without genuine intention,

with recklessness, and with foresight of its disclosure;

56.1.5 made by a person without civil law capability;

56.1.6 made by a citizen who is incapable to understand

consequences of own conduct, or unable to manage oneself properly, due to

mental illness, at the time he/she is officially not considered as legally incapable;

56.1.7 expressed by a person with full legal capability at the time of

incapability to understand consequences of own conduct or in the state of

temporary derangement;

56.1.8 made with a breach of form defined by law or without consent

of the respective person as stipulated by law;

56.1.9 made by a juristic person in breach of the main purpose of its

own activities;

56.1.10 other transactions concluded on the basis of void transactions

mentioned above.

56.2. If the parties learn about the conditions of considering the transaction

is void, specified in article 56.1 of this law, after concluding it, however, the

transaction is in compliance with requirements of another transaction, and if the

parties wish, the transaction that complies with the requirements shall be deemed

as valid.

56.3 In case of a person concluded transaction specified in articles 56.1.2-

56.1.4 and 56.1.8 of this law, later acknowledges the validity of the intention

expressed in the contract and expresses it in a form stipulated by law, the

transaction shall be considered newly made and valid.

56.4. An interested person may request to eliminate the consequences

arising from the void transaction.

56.5. The parties to the transaction specified in article 56.1 of this law shall

be liable to mutually return all objects transferred by the transaction or pay the

prices if it is not possible to do so.

56.6 The person at fault for concluding a void transaction shall compensate

the losses caused to others.

 

Article 57. Transaction could be deemed as void

57.1. At the request of an interested person, Court may consider a

transaction to be void.in accordance with the grounds and procedures specified by

law.

57.2. Transaction considered by Court as void shall be invalid from the

moment of its conclusion.

57.3. Transaction that contradicts with the form agreed by the contract may

be deemed as void by Court at the request of an interested party.

57.4. Apparent error made by a party to the transaction while expressing its

intention in written or in calculation shall not serve as grounds for considering the

transaction to be void. The person made such an error shall enjoy a right to

correct it.

 

Article 58. Transactions concluded in the result of serious misleading

58.1. Court may consider a transaction, which concluded expressing

intention based on serious misleading, to be void.

58.2. The followings shall be deemed as serious misleading:

58.2.1. concluding a transaction different from the one intended;

58.2.2. confusing about the intended transaction content.

58.3. The following may be deemed as serious misleading:

58.3.1. misleading about a person who is the other party to the

transaction, or his/her personality which served as major reason for concluding

the transaction;

58.3.2. confusing about the nature of the goods important for

determining the value of the transaction object;

58.3.3. confusing about the right – serving as the transaction’s major

ground;

58.3.4. confusing about intention- the negotiation object.

58.4. Transaction concluded on the basis of misinformation about the

expressed intention of the client or person represented by the broker or

representative, may be fallen under scope of provisions of article 58.2 of this Law.

58.5. If other party to the transaction agrees to execute the transaction at

the request of the disputing party, the transaction concluded due to confusion

shall not be considered as void.

58.6. Person concluded the transaction due to confusion, upon learning

about the confusion shall be liable to immediately inform the other party.

58.7. If a party to the transaction is confused due to negligence or the

transaction deemed void on the grounds stipulated in article 58.4 of this law, the

person at fault shall be liable to eliminate the harm done to the other party to the

transaction or to the third person. If the other party was aware of, or should have

known, or potentially could find out about the confusion, it is not obliged to

eliminate the harm caused to him/her.

 

Article 59. Transactions concluded as a result of fraud

59.1. If others are cheated with the purpose to conclude transaction, the

cheated person shall be entitled to contend the transaction is void. In this case,

considering the transaction void shall not depend on whether the person cheated

had an intention to gain profit or do harm to the cheated person.

59.2. If a party to the transaction finds out later that the other party has

hidden circumstances might obstruct the conclusion of the transaction, he/she

shall be entitled to insist to consider the transaction void.

59.3. If person benefiting from the transaction was aware of or should have

known of that he/she was cheated by the third party, the cheated person shall be

entitled to insist on considering the transaction void.

59.4. An interested person shall be entitled to present a claim within a year

after learning of that the grounds exist to consider the transaction void

 

Article 60. Transactions concluded as a result of use of force

60.1. A party or third party made the transaction concluded through use of

force or threatening to do so, the other party who is binding by the transaction

shall have a right to contend the transaction is void.

60.2. Convincing of that the party to the transaction him/herself, or his/her

family members, relatives, or any other person who close to him/her, or their

properties could be in jeopardy, shall be considered as use of force.

60.3. If the transaction is concluded as result of use of force, the party to

the transaction shall be entitled to present a demand to the other party within a

year after the conclusion of the transaction.

 

Article 61. Some transaction parts become void

61.1. Some parts of transaction deemed to be void though, the remaining

parts potentially could satisfy the transaction objectives, then the transaction shall

remain as valid.

61.2. This article shall be applied for article 202.5 of this Law as well.

 

 

CHAPTER SEVEN

REPRESENTATION

 

Article 62. Representation in transactions

62.1. Transactions may be concluded through a representative.

62.2. If law prohibits concluding transaction through a representative, or

due to the nature of transaction, the parties must conclude it in person, such a

transaction shall not be concluded through representative.

62.3. The representative’s authority shall be created in accordance with law

or on the basis of authorization.

62.4. Representative shall be liable to carry out the authorised activity in

person.

62.5. If the authorization envisages that activity could be carried out by

others, or if it is required in the interest of the principal, the authorization may be

transferred.

62.6. The term of transferred authorisation shall not be longer than the

original one., Transferred authorization shall be terminated upon termination of the

original authorization.

62.7. Representative shall be liable to inform the principal about

transferring the authority to others and the recipient. If the representative fails to

do so, he/she shall be responsible for consequences of the conduct of the

recipient.

 

Article 63. Representatives

63.1. In case of representation of an authorization, a representative may be

a citizen with full, or partial, or limited civil law capability and a juristic person.

63.2. Within the authority delegated by the principal, a representative shall

conclude transactions with third parties on behalf of the principal. Rights and

obligations created by transaction shall belong solely to the principal.

63.3. Representative shall be liable to exercise the authority fairly and in

conformity with principal’s rights and legitimate interests.

63.4. Representative shall be liable to eliminate the harm done to the

principal due to failure to fulfil obligations as provided in article 63.3 of this Law.

63.5. Person represented by a citizen with partial or limited civil law

capability, without consent of its legal representative, shall bear personal

responsibility for any harm done to others, due to such representation.

 

Article 64. Representative authority

64.1. Principal may delegate an authority to the representative by notifying

orally or in writing her/him and the third party to the transaction about the

representation and representative authority.

64.2. Written authorization shall meet the following requirements:

64.2.1. be signed by principal, and juristic person’s authorization

shall be signed by executive and attached with chops or seal on it;

64.2.2. authorization entitling to receive, or transfer, or administer

juristic person’s assets shall be signed by the accountant beside executive;

64.2.3. issued date shall be indicated;

64.2.4. if provided by law, it should be certified by notary;

64.2.5. if authorization was issued for certain period of time, the

duration should be indicated;

64.3. Authorization which is not satisfying the requirements specified in

article 64.2 of this Law shall be void.

64.4. Military officer’s authorization may be certified by commanders of the

unit or organisation, and prisoner’s authorisation shall be certified a chief of the

prison unit.

64.5. Authorization issued for a certain period of time shall be valid for no

more than three years, authorization without a specified time shall be valid for a

year period from the date of issuance.

64.6. Unless otherwise stipulated by law, requirements for the form of

transaction to be concluded by representative are irrelevant to the expression of

intention of being represented.

 

Article 65. Acceptance of representative authority

65.1. In case a person has created a situation, when another person

comprehends him/herself as the former’s representative, and with this

comprehension the latter assumes seriously his/her representative authority and

has concluded a transaction with a third person, the person created such a

comprehension of representative authority shall not take advantage of the real

absence of such a authority.

65.2. If a representative concludes a transaction, without informing others

of his/her representative authority, the transaction consequences will be born by

the principal only when the other party to the transaction should be aware of

dealing with a person representing others.

65.3. Provision of article 65.2 of this Law shall be applied, if it was not

important for the other party to the transaction with whom the transaction was

concluded.

 

Article 66. Advantages of principal’s expressed intention

66.1. An expressed intention of the principal shall prevail when transaction

is considered to be void due to insufficient expression of intention by the

representative and desired consequences were not created

66.2. In case of concluding by the representative of a transaction in

compliance with the authority issued and instructions received, the principal shall

not be entitled to insist on considering the transaction to be void on the grounds

that the representative was not aware of the conditions, which the principal knew

better or should have known.

 

Article 67. Altered or terminated representation

67.1. If the representative authority is altered or become invalid, the third

party shall be notified of it in the form, in which originally the authorization was

issued. If this requirement is not met, the alteration shall not be used by the

parties in cases other than the third party knew or should have known of at the

time of concluding the transaction.

67.2. Representation shall be terminated on the following grounds:

67.2.1. declining the authority by representative;

67.2.2. revocation by the principal of the authority;

67.2.3. unless otherwise stipulated in the law or contract, either the

representative or principal died or looses full civil law capability;

67.2.4. termination of the activity of the juristic person issued the

authorization;

 67.2.5. fulfillment of the authority;

67.2.6. expiration of the term of the authority;

67.2.7. as provided by law, if the grounds for representation defined

by law are being terminated.

67.3. Principal shall enjoy the right to revoke the authorization anytime, or

decline the representation. Transaction agreeing on non-entitlement to such rights

shall be void.

67.4. Representative is obliged to return the authorization to the principal,

as soon as he/she learns about it.

67.5. The principal shall notify the representative and the third party about

the revocation of the authorization, directly or through any possible means of

official media.

67.6. Transaction concluded with another person by the representative

while he was not aware of termination of the authorization or if it was impossible to

know of it, shall remain valid.

 

Article 68. Transaction concluded by person without representative

authority

68.1. If a person without representative authority concluded a transaction

with a third person on behalf of others at his/her own discretion, the validity of the

transaction shall depend on the consent of the principal.

68.2. If the third person to the transaction requests consent from the

principal, he/she may receive it.

68.3. The consent shall be received within two weeks. If no reply is

received during this period, consent shall be deemed declined.

68.4. A third party concluding the transaction shall be entitled to renounce

the transaction prior to granting the consent by the principal, except he/she was

aware of that the representative had no authority.

 

Article 69. Responsibility of person without representative authority

69.1. If representative fails to prove its authority or the principal refuses to

issue his/her consent to support the transaction, the person concluded the

transaction at own discretion shall be obliged to fulfill the obligations under the

transaction at the other party’s demand, or eliminate any harm caused to it.

69.2. If the third party was aware of or should have know that the

transaction had been concluded with a person without representative authority,

then the person without representative authority shall not be responsible for any

consequence of the transaction.

69.3. A representative with limited or partial civil law capability shall not be

liable for consequences except representing other persons with the consent of

their legal representative.

 

Article 70. No self-transaction by representative

70.1. Representative shall be prohibited to conclude transaction with

him/herself on behalf of the principal or on behalf of a third party with the principal.

 

SUBPART IV

PERIOD OF TIME IN CIVIL LAW

CHAPTER EIGHT

TIME DEFINITION AND CALCULATION

Article 71. Determination of period of time

71.1. Period of time fixed in law, contract or court decision shall be defined

by calendar year, months, days, or year, quarter, month, week, day or hour.

71.2. Period of time may be defined by an event, occurrence of which is

inevitable.

 

Article 72. Procedure to calculate period of time

72.1. Period of time shall be calculated starting from a fixed date or a day

or hour after the expiration of the period, or the event took place.

72.2. If the last day of the calculated period of time expires on nonworking day, then the time shall expire on the next working day.

72.3. Period of time is defined in order to fulfil an obligation, so unless

otherwise stated in the transaction, such an obligation shall be fulfilled within 24

hours of the last day of the period of time.

72.4. If an organization was supposed to fulfil the obligation, it shall be

fulfilled within the last hour of the organization’s working day or production

operation, as determined by the relevant procedure.

72.5. Document shall be deemed executed on time if it was transferred

within 24 hours of the last day to a post office or courier service agency.

72.6. For calculating the period of time, calendar year shall be consisting of

12 months, half a year – six months, quarter – three months, a day – 24 hours.

72.7. In case of extension, the new period of time shall be calculated from

the moment when the previous period of time expires.

 

Article 73. Termination of calculating a period of time

73.1. Period of time fixed in years, half a year, quarter and months, shall

expire the day of the expiring month. If there is no day of the expiring month, the

period shall expire the last day of the month.

73.2. Calendar year shall start from January 1st and terminate on

December 31st.

73.3. Period of time, fixed in weeks or days, shall expire at the hour of the

day when the period expires.

73.4. Period of time, fixed by days of week, shall expire the last hour of the

day of week, when the period expires.

73.5. Period of time, fixed in hours, shall expire at the moment of the hour,

when the period expires.

 

CHAPTER NINE

LIMITATION PERIOD

 

Article 74. Right to demand related to limitation period

74.1. In cases other than the law provides the limitation period is irrelevant,

the right to demand a person to take or not to take any action shall have a

limitation period.

74.2. Unless otherwise stipulated by law, limitation period shall be

irrelevant to non-material assets.

74.3. If specified by law, limitation period shall be irrelevant to some

property rights.

 

Article 75. General and special limitation period

75.1. Unless otherwise stipulated by law, general limitation period shall be

ten years.

75.2. Unless otherwise specified in this Law, in the following cases special

limitation period shall be effective:

75.2.1. claims related to performing contract obligations shall have

three year limitation period ;

75.2.2. claims related to contract obligations concerning immovable

property shall have six year limitation period ;

75.2.3. claims related to obligations due to perform during a fixed

time shall have three year limitation period ;

75.2.4. claims related to obligations arising due to causing damage

to others’ property shall have five year limitation period.

75.3. At the request of parties, Court may change the limitation period and

its calculating procedure.

 

Article 76. Calculation of limitation period

76.1. Limitation period shall be calculated from the time when right to

demand emerges.

76.2. Unless otherwise stipulated in the law, the right to demand shall

emerge at the time of the breach of rights or at the time when the breach was

known or should have known, or, if there is a warranty period or a fixed time limit

for complaint, on the date on which those periods expire or on which the response

to the complaint is received.

76.3. The limitation period, related to claim regarding the refusal to perform

certain actions, shall be calculated from the time of violating such a claim.

76.4. If the claiming right depends on the claimant’s conduct, the limitation

period shall be calculated from the time when the claimant was supposed to take

an action.

76.5. The limitation period of a counter-obligation shall be calculated from

the performance of the principal obligations.

 

Article 77. Termination of limitation period of supplementary

obligation

77.1. With termination of the limitation period for the principal obligation, the

limitation period of supplementary obligation (penalty, pledge, guarantee and

warrants) shall terminate simultaneously.

 

 

 

 

Article 78. Suspension of limitation period

78.1. The limitation period shall be suspended in the following cases:

78.1.1. if performance of obligation was postponed-for the period of

delay;

78.1.2. for the period, admitted by an obligee of an obligor’s refusal

to perform the obligation;

78.1.3. if a competent person due to emergency situation or force

majeure was unable to refer to court within six months prior to the termination of

the limitation period, or if court was unable to run its regular operation, then – for a

period, until such situation disappears;

78.1.4. claims between spouses during the validity of marriage;

78.1.5. as to parents and children, - until the latter reach

adolescence;

78.1.6. claims between guardians, custodians and people under

their custody – during the period when guardianship or custody are still valid;

78.1.7. for a period when the validity of legal acts regulating such

relationship is suspended.

78.2. Article 209 of this Law shall be irrelevant to article 78.1.2 of this Law.

78.3. From the time of elapsing the conditions suspending the limitation

period, it shall be calculated continuously. If the remaining period is less than

three months, the limitation period shall be extended up to three months, if

remaining period is less than six months, the limitation period shall be prolonged

for the remaining period.

78.4. If a person deprived of or with partial civil law capability has no legal

representative and the limitation period might contradict with their legitimate

interests, the limitation period shall not be calculated during six months after the

restoration of the person’s civil law capability or appointing the legal

representative.

 

 

Article 79. Cessation of limitation period

79.1. If a claim is referred to Court in accordance with the specified

procedure or obligated person admits the claim by paying to the competent

person an advance, or interest, or provide guarantee, or in any other form, the

limitation period shall be ceased.

79.2. If a claim is referred to Court, the limitation period shall be ceased

until the Court ruling enters into force, or the law-suit ends in other forms.

79.3. If parties reconciled, or the law-suit cannot be continued, the

cessation of the limitation period shall be stopped upon termination of the final

actions taken by the parties or Court.

79.4. In case of the circumstances stipulated in article 79.3 of this Law, the

limitation period shall be calculated newly from the beginning, but if any party

decides to continue the law-suit, it shall be considered as presenting a claim, and

the limitation period shall be interrupted again.

79.5. If competent person withdraws the claim or Court dismissed it, the

limitation period shall not be deemed as interrupted.

79.6. If competent person presents a new claim within six months, the

limitation period shall be considered as interrupted from the day when the claim

was initially presented. During this period of time the procedures stipulated in

articles 78.1.3 and 78.4 of this Law shall be equally applied.

79.7. If the limitation period was interrupted, the passed time shall not be

taken into consideration and the limitation period shall be calculated as a new.

 

Article 80. Limitation period of legally valid claim

80.1. Despite of the shortened limitation period was set for the particular

claim; the limitation period for such claim shall be ten years if the claim is legally

valid pursuant to Court decision.

80.2. If legally valid claim is repetitive and relevant to future obligations, the

shortened limitation period set for that particular obligation shall remain as valid.

 

Article 81. Limitation period for legacy right

81.1. If the property to be claimed was transferred to a third person

according to a legacy right, the limitation period shall be calculated continuously

starting from the time when the property belonged to the previous owner.

 

Article 82. Consequence of limitation period expiration

82.1. In case of expired limitation period, an obligor shall be entitled to

refuse to perform the obligations.

82.2. If an obligor admits the obligation performance, while being unaware

of the limitation period expiration, he/she shall not be entitled to refuse of

obligation performance.

82.3. If an obligor fulfilled the obligation while being unaware of the

limitation period expiration, he/she shall not be entitled to claim back the

performed obligation.

82.4. If limitation period expiration has justifiable reason to consider, Court

or arbitration body may restore it and protect the breached rights.

SUBPART V

TITLE TO MATERIAL AND NON-MATERIAL WEALTH

CHAPTER TEN

MATERIAL AND NON-MATERIAL WEALTH

 

Article 83. Asset

83.1. Anybody may acquire assets that are material wealth, and intellectual

values, that are non-material wealth, as well as rights, earned by means not

prohibited by law or conflicting with commonly accepted behavioral moral norms,

in this case the abovementioned wealth is considered as an asset.

 

Article 84. Material and non-material asset

84.1. Asset that is subject to somebody’s possession shall be property.

84.2. Property shall be classified into immovable and movable.

84.3. Land and assets that cannot be used for their original purpose when

they are in separation with land shall be classified as immovable property.

84.4. Property other than that referred to in article 84.3 of this Law shall be

classified as movable property.

84.5. Rights and claim that bring profit to their owner or that entitle to

demand from others or claims, as well as intellectual values belong to nonmaterial asset.

 

Article 85. Components of asset

85.1. If it is provided in law, components that cannot be separated without

destroying them or separation of which is resulted in loss of their original

designation shall be independent subjects of civil legal relationship.

85.2. Houses, buildings, constructions and other things, that are

constructed for permanent purposes but not to meet temporary needs and

inseparably attached to the land shall be main components of land.

 

Article 86. Accessories to asset

86.1. Movable property, not belonging to components of asset but serving

to satisfy common utility designations of the main asset and which exists in

spacial dependence on aset shall be accessories to asset.

86.2. Things that are pertinent to immovable property, serve to it and can

separetely be used without affecting their self-values or causing serious damage

to them shall also be considered as accessories.

86.3. Temporary use of other asset for logistic purposes instead of a

certain asset shall not make the former an accessory of the latter.

86.4. Temporary separation of an accessory from the main asset shall not

deprive of its characteristics of being an accessory.

 

Article 87. Inseparable or limited rights

87.1. Rights inseparably connected with other rights and that can not be

exercised independently without them shall be inseparable rights.

87.2. Rights inherited from wider ranged rights, but limited by the latter

shall be limited rights.

 

Article 88. Benefits from assets and rights

88.1. Product, newly emerged from natural characteristics of assets or

produced as a result of designated application of assets, shall be benefits from

assets.

88.2. Incomes, generated by designated exercise of rights, shall be

benefits from the particular right.

88.3. Unless otherwise provided by law and agreement, legal owner of

asset and rights shall be entitled to own the benefits from assets and particular

right.

88.4. If person concerned is liable to return benefits, he/she shall be

entitled to demand from authorized person a compensation for costs spent for

production of benefits during the normal commercial operation within the limits not

exceeding the cost of benefits concerned.

 

CHAPTER ELEVEN

POSSESSION

 

Article 89. Creation of possession

89.1. Possession shall be created by lawful acquisition of rights and assets

at own will.

89.2. Person, currently keeping an asset in own possession on behalf of

another person according to his/her authorization, shall not be considered as a

possessor. In this case the person delegating the authority shall be the possessor.

89.3. Person acquired the right or obligation to possess assets for certain

period of time according to one’s own rights and legitimate interests, based on law

or transaction, shall be direct possessor. The person delegating the authority shall

be indirect possessor.

89.4. If two or more persons jointly possess an asset, they shall be joint

possessors.

89.5. If two or more persons possess certain parts of an asset, each of

them shall be possessors of respective parts of the asset.

 

Article 90. Fair possessor

90.1. Person, legally possessing an asset or having definite possession

entitlement, shall be a fair possessor.

90.2. Fair possessor shall be entitled within three years to reclaim from the

new possessor the property lost from his/her/its possession.

90.3. If the new possessor enjoys prevailing rights over the previous

possessor except the acquisition of the property through deception or use of force,

the procedure stated in article 90.2 of this Law shall not be applied.

 

Article 91. Recognition of possessor as an owner

91.1. As for the third person, possessor shall be considered as an owner of

the property.

91.2. Article 91.1 of this Law shall not be applied for the following cases:

91.2.1. if ownership right is based on State registration;

91.2.2. for the previous owner, if property, except for money and

non-bearer’s securities, was out of possession due to reasons not depending on

the previous possessor’s will (such as loss or theft, etc.).

 

Article 92. Demanding cancellation of acts impeding the exercise of

possession and use rights

92.1. Fair possessor likewise the owner shall be entitled to demand

elimination of any other persons' impediments to exercise rights to possess and

use property in possession.

 

 

Article 93. Rights of legal possessor

93.1. A property shall not be demanded from its legal possessor.

93.2. Unless otherwise provided by Law or agreement, legal possessor

shall possess the benefits from the property concerned during the period of

possession.

93.3. Provision of this article shall be effective as well for relations between

direct and indirect possessors.

 

Article 94. Rights and obligations of fair possessor

94.1. Fair possessor, not entitled to posses the asset or lost such a right,

shall be obliged to return the property to the authorized person.

94.2. Property and benefits derived from it shall belong to the previous

possessor until the authorized person gets the property back.

94.3. Fair possessor shall be entitled to demand from the authorized

person to reimburse the cost of storage, maintenance, repair and improvement of

the property during the possession period.

94.4 If the property value increased as a result of improvement, the amount

of demanded reimbursement shall be determined by the improvement cost at the

moment of returning the property. In this case, the demanded reimbursement

amount shall not exceed the total sum of the property value and profit.

94.5 If the fair possessor failed to get benefits from the possession due to

his/her own fault, the amount of the lost benefit shall be deducted from the

reimbursement amount.

94.6 Fair possessor shall be entitled to refuse to return the property back to

the authorized person until his/her demands are satisfied.

 

Article 95. Rights and obligations of non-fair possessor

95.1. Non-fair possessor shall be liable to return the benefit from property

or rights to the authorized person and reimburse the due benefits, if he/she failed

to get benefits due to own fault.

95.2. Non-fair possessor shall be entitled to demand from the authorize

person to reimburse the cost of storage, maintenance, repair and improvement of

the property, if this input increased the profit to the authorized person. The

demanded sum shall not exceed the total sum of property value and profit.

 

Article 96. Termination of possession

96.1. Possession shall be terminated, if possessor completely refused from

possession or owner/legal possessor lost to others his/her right to keep the

property in other forms under his/her possession.

96.2. Possession transferred as inheritance shall be transferred to heir in

the same size as it was possessed by testator.

96.3. Possession of property shall terminate when owner or legal

possessor present justified demand to the property possessor.

 

Article 97. Cessation of possession period

97.1. If possessor lost his/her right to possess, the period referred to in

articles 104.1 and 104.2 of this Law shall be ceased. When possession right is

restored, the possession period shall be newly counted commencing from the

period of cessation excluding the elapsed period.

97.2. If possessor, who lost possessor’s right beyond own will or on the

grounds of a third party’s claim, regained the right within a year from loosing it; the

period of possession shall not be considered as ceased.

 

Article 98. Possession of intellectual values and rights

98.1. The relevant provisions of Articles 89 - 94 of this Law shall be applied

to acquisition under possession of intellectual values and rights.

CHAPTER TWELVE

OWNERSHIP

SUB-CHAPTER ONE

GENERAL PROVISIONS

Article 99. Types and forms of ownership

99.1. There shall be public and private ownership in Mongolia.

99.2. Public ownership shall have forms as of state, local, ecclesiastical

and communal.

99.3. Private ownership shall have forms as individual and joint.

99.4. Public and private ownership may be in mixed forms.

 

Article 100. Owner

100.1. Unless otherwise provided by Law, the state, aimag, capital city,

soum, duureg, individual and legal person shall be owners.

 

 

Article 101. Right to ownership

101.1. Owners shall be entitled to freely possess, use, dispose of their

ownership subjects at own discretion and protect them from any encroachment,

without breaking the other parties’ rights guaranteed by law or agreement and

within the limits determined by law.

101.2. Owners shall be prohibited to abuse ownership rights by causing

harm or damage to others. However, if the conduct inevitable to protect own

interests was proven to be legitimate, it shall not be considered as an abuse of

rights.

101.3. Owners of livestock and pet, while exercise their ownership rights,

shall be liable to observe norms and standards on protection of livestock, wildlife

and environment, hygiene and safety requirements.

101.4. In case of owner’s failure to properly use, maintain and store the

ownership object conflicts with public interests, Court may charge the owner with

obligation to properly use, maintain and store the ownership object, or may

commission the latter to have this obligation performed by somebody else for

certain remuneration.

101.5. Rights to ownership shall be pertained to components of the

concerned property.

101.6. Owner may transfer the rights provided by this article to others, and

the recipient shall be entitled to possess, use, and dispose of the property in

accordance with designation authorized by the owner and for own activity

purposes and procedure.

101.7. Unless otherwise provided by the contract, owner shall be

responsible for risks of destruction or damages to object of ownership, its offspring and benefits due to emergency and force majeur circumstances.

 

Article 102. Land ownership

102.1. Land, other than the one in private ownership of citizens of

Mongolia, shall be in state ownership.

102. 2. While exercising rights, landowners shall not cause damages to the

environment or violate rights and legitimate interests of other persons.

102.3. Landowners shall specify a utilization of the land when they transfer

it for others’ use. Such transferred land for specific purpose shall be prohibited to

use for other purposes.

102.4. The term “landowner” in this Law shall refer to the State until the

procedure for private ownership of land by citizens of Mongolia is legalized.

102.5. Relations with regard to privatization, possession and use of Stateowned land shall be regulated by law.

 

Article 103. Restriction on ownership rights

103.1. Ownership rights shall only be restricted under the grounds specified

in law.

 

Article 104. Acquisition of ownership rights depending on possession

period

104.1. Persons, possessing ownerless property for five years continuously

and transparently like own one, after finding it in a fair manner, shall acquire the

right to own it.

104.2. Unless otherwise provided by law, a non-owner, who acquired

ownerless immovable property and was possessing it for a period of fifteen years

like its owner after its registration with State register, shall acquire the right to own

it upon termination of the above-mentioned period.

104.3. Right to ownership shall not be created for person, who acquired the

property in an unfair manner or if the legitimate owner of the property was

identified within the period stipulated in articles 104.1 and 104.2 of this Law.

104.4. If the property acquired in accordance with articles 104.1 and 104.2

of this Law was transferred to a third party on the basis of inheritance, the period

of ownership for heir shall be continuously counted as including the period when

the property was under possession of the previous possessor.

104.5. If the owners presented a claim to the person who acquired the

property prior to the period stated in articles 104.1 and 104.2 of this Law, this

period shall be ceased.

 

Article 105. Preemptive right to acquire an ownership right

105.1. Unless otherwise provided by law and agreement, the possessors,

who legally possessed and used the property for ten or more years, shall have the

preemptive right to acquire an ownership right for this particular property.

 

Article 106. Owner’s right to claim

106.1. Owners shall be entitled to claim own property from its illegal

possession by others.

106.2. If owner considers that his/her ownership right is violated to some

extent, though this is not related to the possession of the ownership object, he/she

shall be entitled to demand from the violator to eliminate the violation or stop the

act impeding the exercise of the ownership right.

106.3. If the owner's rights continue to be violated after the requirements specified in Articles 106.1 and 106.2 of this Law, if the owner has an arbitration agreement, he / she shall file a claim to the arbitration and other plaintiffs shall file a claim to the courts to protect his / her violated rights.

106.4. Provisions of articles 106.2 and 106.3 of this Law shall be applicable

for the legal owner alike.

 

Article 107. Restoration of violated rights certified by securities

107.1. Court shall restore violated rights certified by bearer or inscribed

securities as prescribed by law.

107.2. Authority, competent to regulate and control the security market,

shall restore violated rights certified by registered security.

 

Article 108. Joint ownership

108.1. Two or more persons may jointly own property partially or jointly in

whole, as provided by law or based on transaction.

108.2. Each owner of joint ownership shall be entitled to claim the entire

property from possession of a third person, without affecting rights and legitimate

interests of other owners.

108.3. Each owner of parts of joint ownership property shall be entitled to

transfer own part of it to ownership of others or dispose otherwise and shall be

liable to inform other owners of parts of joint ownership of thus disposing.

108.4. Any owner of joint ownership property may transfer to others or

otherwise dispose of own part of the property with permission of all other owners,

on behalf of the right and in the legitimate interests of any of them.

108.5. Unless otherwise provided by law or agreement, partial owners of

joint ownership property shall pro rata be responsible for costs, taxes, fees and

other obligations pertaining to maintenance and storage of the property,

meanwhile owners in whole of the property shall be equally responsible for

ownership property. Benefits from use of joint ownership property shall be

allocated commensurably to the above-mentioned shares or proportion.

108.6. Partial owner of joint ownership property shall enjoy a preemptive

right to purchase a certain part of the joint ownership property.

108.7. Unless otherwise provided by law, partial owner of joint property

shall be entitled to sell own part of the property to a third party at the price not less

than that offered to other owners, in case of absence of any answer from other

owners within a month since their notification of intention to sell own part of

property and offered price

108.8. Partial owner of joint ownership property shall be entitled to separate

own part of property or to demand the price of own part, if the designation, entirety

and other characteristics of the property could be lost as result of such separation.

 

SUB-CHAPTER TWO

CREATION AND TERMINATION OF OWNERSHIP RIGHTS

 

Article 109. Transfer of ownership rights for immovable property

109.1. Either transferor or transferee shall be entitled to request to transfer

to others ownership rights for immovable property or have the transfer registered

with the State register.

109.2. Grounds for transfer of immovable property shall be clearly stated in

the transactions on transfer of immovable property and other relevant documents,

and be registered with notary’s office. In case, any of parties enters this

relationship through a representative, a proxy mandate of representative shall be

noted or attached to the document.

109.3. Non-owner, registered with the State register as owner, shall be the

owner of the immovable property for the transferee of ownership rights. However,

this provision shall not apply to transferee, who was aware that the transferor of

rights was not the property owner.

 

Article 110. Termination of ownership rights for immovable property

110.1. If ownership right for immovable property is transferred from a

person to another based on transaction, ownership rights shall be created for the

new owner and terminated for the previous owner by registering the transaction

with Immovable property registration office.

Article 111. Transfer of ownership rights for movable property

111.1. Unless otherwise provided by law or agreement, rights ownership for

movable property shall be created for the new owner and terminated for the

previous by the actual transfer of the property to the ownership of transferee as

requested, in conformity with relevant procedures.

111.2. Actual transfer of property shall be considered as completed, in the

following cases:

111.2.1. with transferring the property to possession of transferee;

111.2.2. with conclusion of transfer agreement, if the property in

question is in the possession of transferee of ownership rights;

111.2.3. with conclusion of an agreement on transfer of the right to

claim by the owner to the person acquiring the ownership right, if the property is in

the possession of a third party.

 

Article 112. Transfer of ownership rights with payment of property

price

112.1. If parties agreed that ownership rights shall be transferred with

complete payment of the price of property, the ownership right shall be transferred

to the new owner, when the property price is fully paid.

112.2. Parties shall be liable to return all objects duly transferred to each

other, if transferor of ownership rights renounces the agreement, when the

transferee has not paid the price of property in due time. In this case, owner of the

property in question shall be entitled to demand the party, that has not fulfilled the

obligation, to compensate for actual damage and loss incurred, excluding ordinary

depreciation.

 

Article 113. Transfer of ownership rights with transfer of securities

and endorsement documents

113.1. If law or agreement provides so, ownership rights for property

concerned shall be considered as transferred with the transfer of endorsement

documents or securities attached to the property.

113.2. Ownership rights to be certified by inscribed security, shall be

transferred by updating the entry of the inscriber security.

113.3. Ownership rights certified by non-bearer security shall be transferred

by handing-over the security to others.

113.4. Ownership rights certified by bearer security shall be transferred in

conformity with relevant legislation.

113.5. Transferor of bearer security shall be responsible for validity of the

security. However, the transferor shall not be responsible for the transfer of rights.

113.6. Rights certified by security shall be entirely transferred upon transfer

of security to others.

113.7. Transferor of inscribed security shall be responsible for its validity

and transfer of rights.

 

Article 114. Fair acquisition of ownership rights

114.1. Rights to ownership shall be considered acquired fairly, if transferee

of ownership rights was not aware or was not able to be aware that the transferor

was not the owner of property. On the contrary, if transferee of ownership rights

was aware, or had to be aware or was able to learn that the transferor was not the

owner of property, ownership rights shall not be considered as being acquired

fairly.

 

Article 115. Acquisition of property without ownership

115.1. Ownerless property or property, the owner of which renounced own

ownership with the purpose of terminating its ownership rights, shall be

considered as objects without ownership.

115.2. If person acquired objects without ownership by means other than

that prohibited by law or did not violate the rights of authorized person while

acquiring them, then he/she shall be entitled to possess and own the objects in

accordance with articles 104.1 and 104.2 of this Law.

115.3. Unless otherwise provided by law, provisions of this article may be

applied in case of acquisition, possession and ownership of lost livestock, pet or

other animal.

 

Article 116. Lost property

116.1. Person found the lost property shall be liable to immediately notify

its owner or an authorized claimant and hand over to them the property. In the

absence of such persons, local administrative or police shall be informed, and

him/herself shall store and protect it, or shall be liable to hand over it to these

authorities.

116.2. Person found the lost property shall be entitled to own it, if the owner

or authorized person were not identified within a year from the date of notice to

relevant authorities in accordance with article 116.1 of this Law. If the finding

person refuses to own it, the property shall be transferred to local ownership.

116.3. Person found the lost property shall be entitled to demand from the

owner or authorized person, or local authorized organizations a reward, and

reimburse the costs related to storage, protection and search for owner of the

property.

116.4. Reward amount shall be subject to the parties’ negotiation, but if

they fail to do so, the reward amount shall be equal to ten percent of the whole

price of the lost property.

116.5. If the lost property may easily be blemished or the cost of its storage

and protection significantly exceeds its price, the finding person shall be entitled to

sell it with the consent of competent authorities as specified in article 116.1 of this

Law through public market places. In this case, proceeds from sales of the lost

property shall be considered as lost property.

116.6. Person, found lost property in public place, office-room or public

transport, shall hand over the property to the administration of the respective

organization.

116.7. Administration of the organization specified in article 116.6 of this

Law shall be liable to announce publicly about the lost property, ensure its safety

or transfer it to the competent authorities stipulated in article 116.1 of this Law. In

this case, person found the property and organization to which the lost property

was handed over shall be entitled to demand the reward specified in article 116.4

of this Law in equal amounts and related costs in actual expenses.

116.8. Provision of article 116.5 of this Law shall be applied to the property

specified in article 116.6 as well. However, if the property owner or possessor was

not identified within the period specified in article 116.2 of this Law, the

organization to which the lost property was handed over shall become owner of

the property.

 

Article 117. Lost livestock

117.1. Person found lost livestock must notify the proper local

administrative body or police and herd the livestock in her/his possession until the

owner of the livestock is identified, or transfer it to local administrative body or

police.

117.2. If the owner is identified within a year from the public

announcement, the lost livestock together with offspring shall be returned. If the

owner is not identified within this period, the livestock shall be kept in ownership of

the person who found it or transferred to the local ownership if the finding person

refused.

117.3. Person found the lost livestock shall be entitled to demand

reimbursement of any costs incurred and reward for finding as prescribed by

articles 116.3 and 116.4 of this Law.

 

Article 118. Hidden valuables

118.1 Unless otherwise provided by law, if any hidden valuable, which had

been buried underground for long time or abandoned until it became impossible to

identify its owner or authorized person, was found, the person found it or owner of

the land or property, where the hidden valuable was found, shall be entitled to

own it in equal shares, unless they agreed otherwise.

118.2. Hidden valuable shall be transferred as a whole to the owner of the

land or property, where it was found, if hidden valuable was found in the result of

exploration with the purpose of finding it without the consent of owner of the land

or property, where hidden valuable was found.

118.3. If objects of historic and cultural value were found among buried

valuables, they shall be transferred to the state ownership. In this case, the owner

of the land and property, where the hidden valuable was found, or person found it

shall be entitled to equal share of reward equal to fifty percent of price of the

valuable.

118.4. Provision of this article shall not apply to buried valuables,

archaeological and paleonthological findings, found by persons in charge of

research and digging during performance of their official duties.

 

Article 119. Merger or mix up of property

119.1. Unless otherwise provided in law or agreement, the movable

property as main component of and attached to the estate as provided by article

85.2 of this Law, shall be the property of the owner of the estate.

119.2. In case of a new property, which is inseparable and created as

result of merger or mix up of properties belonging to separate ownership of two or

more owners, those owners shall be joint owners of the new property.

119.3. If a dispute arises over the ownership right for property referred to in

article 119.2 of this Law, the person, who owned the major or main part of the

property prior to merger or mix up, shall be the owner of the newly created

property and the other party shall not be entitled to demand the restoration of the

initial state of property though he/she shall have the right to demand the damages

are compensated.

 

 

 

Article 120. Reprocessing of property

120.1. If a person created new movable property through repair,

improvement and reprocessing, then the person and the owner of the property

shall partially own the property together, unless otherwise provided by law or

agreement and parts of ownership belonging to them shall be determined

proportionally to the material cost and production expenses.

120.2. If a dispute arises over ownership rights between parties referred to

in this Article, then the party, which invested more assets and labour into the

newly created property shall be the owner of the property and the other party shall

not be entitled to right to demand the restoration of the initial state of property

though he/she shall have the right to demand the damages are compensated.

 

Article 121. Termination of others’ rights by transfer of ownership right

121.1. If ownership right was transferred according to Articles 119 and 120

of this law, any right of other persons concerning the property in question shall be

terminated.

 

Article 122. Acquisition of ownership right over non-material property

122.1. Unless otherwise provided by law, ownership right of a person who

created an intellectual value which considered as an intellectual property shall

arise at the moment of its creation.

122.2. Possessor of the right or claiming right may transfer them to the

ownership of another person in the extent of its possession.

122.3. The previous owner shall be responsible for providing the new

owner with all documents pertaining to the right and claiming right, and any

information necessary for exercising these rights, as well as the transfer

notification certified by notary office regarding such transfer of above-mentioned

rights, if the new owner requires, and relevant expenses thereof shall be borne by

the new owner.

 

 

Article 123. Transfer of claiming rights

123.1. Obligation performer shall fulfill obligations undertaken by the

agreement before the principal until he/she is notified of the transfer of the rights.

123.2. If it does not contradict with the law, or contract, or the nature of the

obligation, possessor of the claiming rights may transfer his/her rights to a third

party on basis of the agreement concluded, without the consent of the obligation

performer.

123.3. If rights and legitimate interests of obligation performer might suffer,

transfer of claiming rights may be limited by agreement.

123.4. Obligation performer shall be entitled to object or present claims at

the moment of receiving a notification on transfer of claiming rights to the new

principal.

123.5. If obligation performer demanded the former principal to consider

obligations fulfilled prior to the transfer of claiming rights, such demand may be

addressed to the new principal.

123.6. Other rights, pertaining to claiming rights and methods to ensure its

enforcement, shall be transferred along with transfer of claiming rights to new

owner.

123.7. If person who enjoy the claiming rights agreed with several persons

to transfer the rights, then the first person agreed with, shall have full rights to

demand the obligation from obligation performer. If it is impossible to identify the

agreed first person, then the person, who first notified the obligation performer

shall be considered as person to whom the rights were transferred.

123.8. As for the transaction to be made in the form specified in law or

agreement, transfer of claiming rights shall be made in the form as the transaction

is made.

123.9. Procedure prescribed by this article shall be applied as well for the

transfer of claiming rights as specified in law, or on the basis of Court ruling or the

decision of the competent government authority.

Article 124. Transfer of debt

124.1. Having agreed with the possessor of claiming rights, a third party

may transfer to him/herself the debt of the obligation performer, thus becoming the

obligation performer. In this case the procedure provided by articles 123.8 shall be

effective as well.

124.2. New obligation performer shall be entitled to make all counter

claims, arising out of relationship between the claming right possessor and

previous obligation performer, to the claming right possessor.

124.3. If a guarantor and pledgee refuse to continue their relations upon

the transfer of debt, then the collateral/mortgage, pledge, guarantee and bank

guarantee aimed at satisfying the demand shall be terminated.

 

SUB-CHAPTER THREE

FAMILY PROPERTY RIGHTS

 

Article 125. Family property and its regulation

125.1. Family property shall consist of properties of spouses, and other

family members.

125.2. Some relations of property rights of spouses may be regulated by

contract.

 

Article 126. Joint property of family members

126.1. All properties accrued for the period of life together since the

marriage, except for personal property of family members, shall be joint property.

126.2. The following property shall be the joint property of family members:

126.2.1. profits earned in the course of joint labour and economic

activities of family members, as well as other revenues, cash accumulation and

property which is newly accrued;

126.2.2. immovable or movable properties earned by incomes of

joint property of family members;

126.2.3. dividends and securities;

126.2.4. other properties accrued since the marriage,

notwithstanding at whose name of spouses or family members the property is

registered;

126.2.5. asset, cash accumulation transferred from personal

property of a family member for the purpose of joint ownership;

126.3. If the price of a personal property of a family member increased

significantly as a result of reconstruction, innovation or re-equipping undertaken

by other members of family or the separate property (apartment, gher, compound,

house) was designed for the use of the new family, then these may be defined as

property of joint ownership.

126.4. Wife, husband, and other members of the family, who did not earn

income since the marriage due to engagement in household works, child caring,

sickness and other justifiable reasons, shall be entitled to ownership of family joint

property.

 

Article 127. Personal property of family member

127.1. The following property shall be the personal properties, unless a

family member agrees to transfer them to joint ownership of family members:

127.1.1. property, money or property rights which were acquired by

either spouse before the marriage;

127.1.2. accumulated money, property or property rights transferred

to a member by inheritance or gift, as well as property or money acquired as a

result of sale or exchange of those things;

127.1.3. property designated for individual consumption by a family

member;

127.1.4. intellectual property or author’s honorarium;

127.1.5. reward for individual talent, capability and achievement;

127.1.6. property or money acquired by a family member using

personal property and which is required for carrying out professional activities.

127.2. Family members shall be entitled to right to possess, use and

dispose of their personal property at their own discretion.

127.3. Unless otherwise agreed, family members shall be responsible with

their personal property for assuming obligations arising from their private

activities.

 

Article 128. Possession, use and disposal of joint property

128.1. Family members shall enjoy equal rights to own, use, and dispose of

properties of family joint ownership, as well as possess, use and dispose them on

the basis of mutual agreement.

128.2. Any member of family shall obtain written permission from a family

adult member and have it certified by notary when disposing an immovable

property of the family joint ownership.

128.3. Unless otherwise provided by law, any transaction which does not

comply with provision of article 128.2 of this Law shall be void.

128.4. If it has been reveled after marriage that a family member

transferred property to others at own discretion or deliberately concealed profits

and incomes derived from the transfer, then other family members whose rights

were violated shall be entitled to restore their rights.

 

Article 129. Defining member’s share in joint property of family

129.1. Per member share of family joint property shall be defined in the

following cases:

129.1.1. if dispute over per member share arises when a member

leaves the family;

129.1.2. if the personal properties of spouses are insufficient to

make payments;

129.1.3. if payments are made by other members of the family;

129.1.4. on the opening of inheritance with the death of a family

member.

129.2. Per member share in the property shall be the same for all family

members including minors and disabled members.

129.3. In case of divorce or the marriage considered as void, Court may fix

a different per member shares in property, taking into consideration the health

condition of spouses or interest of children.

129.4. When defining per member share in the property for family

members, other than specified in article 129.3 of this Law, Court may rule to

reduce share size or not to give at all to a family member, taking into

consideration her/his labour contribution and property size contributed to

formation of the family joint property.

129.5. Article 129.4 of this Law shall not be applicable if a family member

was not able to contribute own labour or property to the formation of family joint

property for justifiable reason such as military service, academic study or long

term illness, etc.

129.6. Court shall settle the disputes arising from the defining the per

member share in the family joint property.

129.7. If profit and income earned jointly by family members or earned as a

result of assuming obligations by a member were proven to be used for family

needs, then payment may be made from property of joint ownership, and if the

property is insufficient then the payment shall be made from the personal

properties of the family members.

129.8. If profit and income gained were proven to be transferred to

personal property of other members of the family or to property of joint ownership,

in order to escape of paying the compensation for damages caused to others or to

conceal own illegal acts, then payment may be made in the required amount from

the respective property.

 

Article 130. Split up joint property of family

130.1. Joint property of family members may be split up at the request of a

spouse or any adult member of family while marriage is valid, or after the divorce,

or at the demand of a plaintiff, if personal property of a family member is

insufficient to make payment.

130.2. Family members may split up the property of joint ownership based

upon their mutual consent.

130.3. Court shall define per member shares in family joint property in case

of dispute, and rule which property should be allotted to which family member,

and if the price of property transferred to a member exceeds her/his share, the

price balance may be given to other members.

 

Article 131. Member leaving the family

131.1. If one or more family members leave the family, they shall take their

shares in joint property, but shall not be entitled to property which is essential for

the further conduct of family business.

131.2. If it is impossible to give the share in kind, then its money equivalent

shall be paid.

 

Article 132. Spouses regulating ownership rights by contract

132.1. Spouses may set up a procedure regulating a responsibility of each

spouse in regard to family budget and expenses, and in case of annulling the

marriage procedure to determine per spouse share of property and other

conditions pertaining to ownership rights by concluding an agreement in

conformity with this Law.

132.2. Spouses shall conclude a written contract pertaining to their

ownership rights and have it certified by notary. Contract that does not meet this

requirement shall be invalid.

132.3. Spouses may conclude a contract pertaining ownership rights

anytime prior to or after the marriage.

132.4. Contract concluded prior to marriage shall enter into effect from the

date of marriage registration.

132.5. It is prohibited for spouses to include into the contract conditions,

that regulate non-property relations, or obviously affecting legitimate rights and

interests of either of spouses, or restricting legal capability of any of them.

 

Article 133. Alteration and termination of contract

133. 1. Contract may be terminated by agreement of spouses or decision of

Court at the request of any of spouses. Agreement on alteration and termination

of contract shall be made in the same format as of the original contract.

 

SUB-CHAPTER FOUR

NEIGHBOR’S RIGHTS

 

Article 134. Neighboring properties

134.1. Bordering estates and other immovable properties, which may

mutually influence on each other shall be considered as neighboring property.

134.2. Owners or possessors of the neighboring properties shall be obliged

to pay a respect to the other parties in situations, other than exercising his/her

rights and fulfilling obligations defined by law.

 

Article 135. Restriction and prohibition, or non-restriction and nonprohibition of neighbor’s influence

135. 1. Owner or possessor of one side of the neighboring properties shall

not be allowed to restrict or prohibit the other side’s inevitable influence which is

not impeding the use of his/her property.

135.2. If a party’s influence was due inevitable necessity to use own

property for ordinary entrepreneurial purposes, though the influence is serious,

then the provision of article 135.1 of this Law shall be applied as well. If this

influence is considered as exceeding the degree of normal use, then the other

party shall be entitled to demand from the influencing party cash compensation.

135.3. Owner of the neighboring property shall be entitled to prohibit the

construction and use of on-the-ground or underground facilities, that may cause

serious damages to his/her rights and legitimate interests, and demand the owner

or possessor of the other part to halt acts violating the rights.

135.4. In case of construction and facility referred to in article 135.3 of this

law clearly conflicts with legitimate interests and rights of owner of the other part,

despite they are constructed outside the fixed boundary of neighboring estates,

then owner of neighboring property shall be entitled to demand to demolish or

remove them.

135.5. A neighbor shall have rights to demand the owner or possessor of

construction located on the territory of neighbor to undertake all safety measures

to prevent from the danger of falling of the construction on his/her territory.

 

Article 136. Use of water flow

136.1. It is prohibited to change the flowing direction of underground clean

water or waste water running across several estates, as well as to reduce the

amount of water running to other estates, or to deteriorate the quality of water, or

use flowing or underground clean water in a way restricting the others’ needs.

136.2. It is prohibited to change the natural river flow, except for cases

provided by law.

 

Article. 137. Admission of violation of neighbor’s border

137.1. If possessor of land constructs facilities without neighbor’s

permission, then the neighbor shall have to admit such violation unless he/she

demanded the possessor to halt his/her activities prior to or soon after beginning

the act of violation of boundary.

137.2. The party violated the neighbor’s rights, shall pay cash

compensation to his/her neighbor annually and be liable to pay in advance the

payment due in current year before the end of previous year.

 

Article. 138. Construction of roads, pipelines across neighbor’s land

138.1. In case of an estate in possession is surrounded by private land and

has no access to the road of public use or unable to use public network of power,

gas and water supply, then possessor of the land shall be entitled to build a road,

line or pipeline to be connected with the above-mentioned networks through

neighbor’s land.

138.2. In the case referred to in article 138.1 of this law, neighbor shall

provide with relevant permission, and the party that builds a road, line or pipeline

shall pay one-time compensation at the other party’s request subject to mutual

negotiation. If parties fail to reach consensus about the compensation amount,

Court shall determine the amount of compensation.

138.3. Possessor of land, who changed or made impossible to use the

road, line and pipeline, that had previously been used, without neighbor’s

permission, shall lose rights stipulated in article 138.1 of this Law.

138.4. If possessor transferred a part of land of his/her estate with road,

line and pipeline of public use, to possession of another person, and the

remaining part of the land is needed to be connected with road, line and pipeline

of public use, then the new possessor shall be obliged to issue a permission to

build a road, line and pipeline through his/her territory.

 

Article 139. Marking neighbor’s boundary

139.1. The land owner shall be entitled to demand the neighboring land

owner to participate in erecting border marks along the boundaries of the

neighboring area, restoring or repairing the marks earlier erected along the

boundaries of the neighboring area, and unless otherwise agreed by the parties

the respective costs thereof shall be born equally.

139.2. If it is not possible to define the detailed boundaries, the size of

area, which is actually possessed by the neighbors shall be taken into

consideration. If the actual size is impossible to determine, the parties shall

equally divide and possess the disputed area. If they fail to do so the dispute shall

be settled by Court.

 

Article 140. Communal use of construction of neighboring boundary

area

140.1. Neighbors shall have an equal right to use from both sides at the

same time the boundaries of the neighboring area and other constructions

including fences. While exercising this right, both parties shall be liable not to

hinder other side’s rights to use the land.

140.2. The parties shall equally share the cost related to use and

maintenance of fences and other constructions.

140.3. No party shall be entitled to disassemble fences or other

constructions marking the boundaries of the neighboring area without permission

from the other party.

140.4. Provisions of articles 140.1- 140.3 shall not be applied in case of

wall is being as component of a building in the neighboring area, which is in the

ownership or possession of one party and marks the boundary.

 

Article 141. Irrelevancy of the limitation period to neighbor’s rights

141.1. Limitation period shall not be applicable to the requirements

stipulated in articles 135.3- 135.5, 138.1, 138.4, 139.1 and 139.2 of this Law.

 

SUB-CHAPTER FIVE

COMMUNAL APARTMENT BUILDING OWNERSHIP RIGHT

 

Article 142. Ownership of communal apartment building

142.1. Apartments /rooms/ inside the communal apartment building and

other non-residential area which is not related to objects of communal ownership

can be owned individually.

142.2. Parts of apartment building, construction and equipments that are

not related to individually owned objects shall be subject to the communal

ownership.

142.3. Per apartment ownership’s share in the communal ownership

property, shall be determined by the ratio of apartment area to the overall area of

the building.

142.4. Only isolated apartments with concrete boundaries (apartments,

rooms) and other isolated facilities of the construction shall be considered as

property of individual ownership.

 

Article 143. Apartment owners’ association

143.1. In case of two or more households become owners of their

apartments in the same communal apartment building, the Apartment owner’s

association (hereinafter referred to as an Association) shall be set up with the

purpose of exercising communal ownership rights, ensuring utilization

maintenance of the apartment building and protecting rights, benefits and interests

of apartment owners.

143.2. Apartment owners inhabiting in neighboring several apartment

buildings may join and form a single association.

143.3. The Apartment owner’s association shall not enjoy the rights of

juristic person.

143.4. All other persons owning apartments in the same apartment building

must be members of the Apartment owner’s association.

143.5. If the apartment building is composed of the mixed ownerships,

including state and local property apartments, representatives appointed by the

owner’s authorized organization shall be members of the Association.

143.6. Matters related to the Apartment owner’s association shall be

regulated by law.

 

Article 144. Dissolution of association

144.1. If the major part of the apartments and other property is destroyed or

damaged, and the damage and destruction cannot be repaired or recovered

through insurance or other ways, apartment owners may dissolve the association.

 

Article 145. Creation and termination of individual ownership rights

for apartment

145.1. The right for individual ownership of an apartment shall be created

on basis of law or transaction.

145.2. Transaction creating the right of individual ownership of an

apartment shall be certified by notary and registered with the State register.

145.3. All owners shall be entitled to have registered the apartments

(rooms) and other yareas, which are subject to individual ownership, with the

State Immovable Properties Registration Office as provided by law.

 

Article 146. Objects of individual and communal ownership of

apartment

146.1. The area stipulated in article 142 of this Law, and its components,

which could be renovated, isolated and improved without violating the rights of

other persons owning communal or individual objects, or without damaging the

outside appearance of the building, shall be objects of individual ownership.

146.2. Despite of location in the middle of an individual ownership

area/property, the area or part, which is necessary for ensuring the reliable quality

and safety of the building, and as well as facilities and equipment, commonly used

by owners shall not be deemed as objects of individual ownership.

146.3. Apartment owners may negotiate and agree about co-ownership of

some parts of the area that belong to the individual ownership objects.

146.4. It is prohibited to transfer individual ownership areas for others’

ownership through a sale and collateral or any other form, without including the

respective part of communal property. This provision shall not cover nonresidential areas of individual ownership property.

 

Article 147. Distribution of costs and payments related to communal

ownership objects of apartment houses

147.1. Apartment owners shall be liable to pay the competent authorities

the heating, hot and clean water, sewage water removal, hygiene, electricity, and

communication costs for their owned apartment and non-residential areas, and to

pay the expenses for maintenance and repair of communal ownership parts to the

Apartment owner’s association.

147.2. For determining the participation of apartment owners in paying

costs related to services and repair of elevators, ladder, balconies, patio, gates,

waste removal, window, and in financing other related costs, the total cost shall be

divided by the total number of apartments in the building.

147.3. For defining apartment owner’s participation in financing the repair

and maintenance, insurance and other relevant inevitable costs related to the

maintenance of roof, basement, space to the first blinder of heating supply,

hot/cold water supply net, area to the switchboard of power input, area to the linkbox of telecommunication line installed on each floor, wastewater net above the

floor +0.00 mark, water pools for public use located in the upper floor or basement

of the apartment building, parking area and other objects of communal ownership

similar to them, the area belonging to individual ownership shall be compared with

total area of individual ownership in the building.

147.4. In order to calculate the space, which is in individual ownership, the

size of one third of non-residential area shall be added to owner’s residential area.

147.5. Owner, who did not make a proposal on issues other than ensuring

the normal and safe operation of apartment use, and current repairs, shall not be

liable to reimburse the costs related to the implementation of above-mentioned

measures, but in this case he/she shall not be entitled to demand to use the

products resulting from implementing the above-mentioned measures.

147.6. Association of apartment owners shall have repaired the objects of

communal ownership by professional organizations on contract basis. The

association shall recover damages caused to others in related to the contractual

obligations according to provisions stated in articles 147.2 and 147.3 of this Law,

unless otherwise stipulated in the statute of the Association or contract with

apartment owners.

Article 148. Rights and obligations of apartment owners

148.1. The apartment owners shall have the following rights:

148.1.1. To possess, use and dispose of the objects of individual

ownership at won discretion unless otherwise provided in law;

148.1.2. To use the communal ownership objects according to their

original designation;

148.1.3. To have a voting right commensurate to the own share in

regard to use, maintenance and disposal of communal ownership objects;

148.1.4. To be entitled to take necessary measures to reduce and

eliminate any potential damage to the communal objects without permission of coowners and to claim for reimbursement of any related costs;

148.1.5. Other related rights stated in law;

148.2. The apartment owners shall have the following duties:

148.2.1. To break no rules and orders of common residence with

other co- owners in the course of possession, use, maintaining and protecting the

objects of individual ownership;

148.2.2. While maintaining, repairing and renovating own apartment

or non-residential parts of the building, to comply with the respective legislation,

standards and norms, cause no damages to objects of other parties’ ownership,

and violate no legitimate rights and interests of the other persons;

148.2.3. To be liable for financing the maintenance and repair of

objects of communal ownership and other commonly accepted costs in defined

extent;

148.2.4. To be liable to permit an access to the individual ownership

property, in order to ensure safety and normal operation of objects of communal

ownership existing in the individually owned area;

148.2.5. To accept any measures necessary to install

communication and supply lines and networks;

148.2.6. To be liable to share the responsibility for any

consequences due to failure of transferee to fulfill duties stipulated in articles

148.2.1-148.2.7 of this Law, if the communal and other types of ownership objects

were transferred to other person’s use;

148.2.7. To be liable to recover the damages caused due to failure to execute own duties stated in articles 148.2.4 and 148.2.5 of this Law.

148.3. Non-use or refusal to use objects of individual or communal

ownership shall not serve as grounds for full or partial exemption from paying any

costs related to utilization, maintenance and repair of objects of the communal

ownership.

 

Article 149. Claiming rights of apartment owners

149.1. Other owners of apartments shall have the right to demand to

exclude the owner, who made the below-stated violations, from the Apartment

owners' association, and to transfer the apartment ownership rights to other

persons:

149.1.1. if an owner seriously and regularly violated his/her

obligations stated in articles 148.2.1, 148.2.2 and 148.2.6 of this Law, and did not

take measures to stop and eliminate the violation within three months, despite the

written warning from the Association;

149.1.2. if an owner did not perform his/her obligations, stated in

article 148.2.3 of this Law, over six months, or his/her outstanding payment

exceeds 20 percent of the price of the apartment of individual ownership;

149.1.3. other grounds provided by law.

149.2. If the apartment owner does not satisfy voluntarily the demand

stated in article 149.1 of this Law, then the Association of apartment owners shall

be entitled to sue him/her in the Court through its representative.

 

SUB-CHAPTER SIX

LIMITING OTHERS’ OWNERSHIP RIGHTS WITH THE

PURPOSE TO EXERCISE OWN RIGHTS

Article 150. Right to build buildings and facilities on others’ land

150.1. Person, who obtained a right to build a building or facility on the land

owned by others, shall transfer that land into own possession with the right to

inherit, use as mortgage, or sell to a third party, or dispose of it in any other

manner.

150.2 The land owner is obliged, at the request of the person obtaining the

right to construct a building or facility, to transfer into his/her possession the land

that provides an opportunity to use the land in a better way, despite it is not

absolutely necessary to build the building and facility.

150.3 The right to build buildings and facilities shall necessarily have a

specific term; however, this term shall not exceed 99 years. A transaction that

conditions the premature termination of such rights shall be void.

150.4 In cases other than specified in article 150.7 of this Law, it is

prohibited to terminate the rights to construct a building or facility, at one party’s

initiative.

150.5 The buildings or facilities that are built based on the right to construct

a building or facility shall be deemed as a main component of such right, and

destruction and break of the construction or facility shall not serve as grounds for

termination of such rights.

150.6. If land owner’s permit is required for selling, mortgaging and

disposing of the right to construct a building or facility in any other way, the owner

shall not be entitled to refuse giving permit except for situations when his/her

rights and legal interests are seriously breached.

150.7 Unless stipulated otherwise by contract, a person who obtained the

rights to construct a building or facility, shall pay the payments for possessing the

rights to the land owner in accordance with the procedures stated in article 137.2

of this Law. In case of this payment is not done for two years, the land owner shall

be entitled to cancel the contract at own initiative.

150.8 The parties may agree to revise every ten years the amount of the

payment provisioned in article 150.7 of this Law.

150.9 Unless otherwise provided by law or contract, when the right to

possess the land for the purpose to construct a building or facility expires, the

owner of land shall be obliged to compensate the price of the building or facility to

the person who possessed the right.

150.10. Possessor of land may extend the term of the right to possess land

allocated with designation to construct a building or facility for the period of normal

existence of construction or facility concerned, instead of compensation stipulated

in article 150.9 of this Law.

150.11. If person, who used to possess land for the purpose of constructing

refuses to extend the term stipulated in article 150.10 of this law, then he/she shall

lose his/her rights to demand a compensation.

150.12. Unless otherwise provided by law or contract, a person, who used

to possess land for the purpose to construct a building or facility, shall not be

entitled to separate the building or facility and their components, and move them

away, upon the expiry of the term of the right concerned.

150.13. Right to construct a building or facility shall be registered with the

State register.

150.14. Right to demand compensation as provided in article 150.9 of this

Law, shall be satisfied in the same order as the rights to construct a building or

facility, and parties shall not be entitled to alter this order on negotiation basis.

150.15. If the rights to construct a building or facility are still under collateral

at the moment of expiration of the right, then the person given the collateral shall

be entitled to demand the performance of obligation secured by the collateral.

150.16 Owner of the land shall become a party to the rent contract

concluded between the person, who used to have the right to construct a building

or facility, and a third party.

150.17. The relevant part of the procedure on acquiring the immovable

property provided by this law shall be applied as well for relations pertaining to

creation of rights to construct building or facility and acquisition of such a right.

 

 

Article 151. Right to limit immovable property ownership rights

(servitude)

151.1. For the purpose of exercising ownership rights, owners of

immovable property shall have rights to limit the rights of other owners of

immovable property (hereinafter called as servitude) in the following ways:

151.1.1. If provided by law or contract, to use immovable property

of others in a limited way prior to others;

151.1.2. to assign other owners not to carry out activities

conflicting with his/her rights and legitimate interests;

151.1.3. to restrict the exercise of some rights of owner limited by

servitude towards the immovable property of party with servitude;

151.2. The authorized person while exercising the servitude shall

be liable not to violate the legitimate rights of owner of the immovable property

concerned.

151.3. If parties agreed, the party with servitude shall regularly pay

appropriate payment and bonus to the party with limited rights for the fixed period.

151.4. As for a house or construction, person with servitude shall

be obliged to maintain it safe and use it properly, and parties may agree so that

the party with limited rights shall unilaterally or partially be responsible for relevant

cost.

151.5. In case of the estate or other immovable property of person

with servitude is split up and transferred into the ownership of several persons,

then each of those owners shall keep the servitude, unless rights of owner with

limited rights are deteriorating. If the servitude pertains to only one of the part of

the estate or immovable property, which is split up, then servitude for the other

area or part shall be terminated.

151.6. In case of the estate of owner with limited by servitude

rights, is split up and transferred into several persons, then estate, other than that

used be limited by servitude, shall be exempted from restriction of rights.

151.7. If somebody causes impediment to person with servitude in

exercising his/her rights, then he/she shall be entitled to demand to eliminate the

impediment.

151.8. Non-owner may on the grounds provided by law or contract

exercise servitude rights to meet his/her household purpose likewise the person

with servitude, then in this case this person shall not be entitled to transfer the

servitude to others.

151.9. Owner with limited rights shall be entitled to transfer the

servitude to other parts of his/her estate, unless serious difficulty may occur to

entitled person in exercising his/her servitude. Any transaction that restricts such

right shall be void.

151.10. Owner of limited rights shall be responsible for costs

related to the transfer of servitude as provided by article 151.9 of this Law.

151.11. The right to restrict the rights of the owner of immovable property (Servitude) shall be registered in the state register of rights.

 

Article 152. Right to limited possession and use of others’ property

(usufruct)

152.1. Usufruct is the right of limited possession and use of other people's property for the purpose of gaining benefits and profits. The right of limited possession and use of immovable property shall be registered in the state registry of rights.

152.2. The usufruct holder has the right to possess and use the property in the same way as the owner, except for the disposal by permanent transfer to the ownership of a third party, but the owner's permission must be obtained in case of pledge or lease of the property to a third party.

152.3. Upon termination of usufruct, the owner of the property concerned

shall become a party to an agreement concluded between the usufruct possessor

and a third party.

152.4. For acquisition of usufruct, the same procedure used for acquisition

of similar types of movable and immovable properties as stated in this Law shall

be applied.

152.5. Usufruct may by determined with or without charge, for certain or

uncertain period or for lifetime of the usufruct possessor.

152.6. Usufruct may be terminated on the following grounds:

152.6.1. with the death of person possessing usufruct or dissolution

of the juristic person;

152.6.2. usufruct possessor and owner of property become one

person.

152.6.3. termination of usufruct term.

152.7. Usufruct possessor shall be obliged to return the property concerned

to the principal owner when usufruct is terminated on the grounds specified in

articles 236-240 of this Law.

152.8. Usufruct possessor shall not change the type and designated use of

usufruct objects without consent of the owner.

152.9. As for an estate, usufruct possessor shall enjoy a right to mine or

construct other necessary facilities and install equipment in the estate without

seriously modifying the commercial designation of the estate.

152.10. Parties may assign experts at their expense to evaluate the current

state of the usufruct object.

152.11. If usufruct object is a complex of objects, then parties shall compile

its list and document it by signing. At the request or cost of any party, parties may

invite a competent person as a witness or request competent agencies or experts

produce the list.

152.12. Unless otherwise provided by law or agreement, usufruct

possessor shall be responsible for repairs, securing normal commercial operation,

maintenance of usufruct object, relevant taxes and payments as well as be

responsible for insurance of the usufruct object, however, the possessor shall not

be responsible for normal depreciation of the usufruct object.

152.13. In case of insurance event, the owner of the property concerned

likewise the usufruct possessor, shall be entitled to demand compensation from

insurer.

152.14. Usufruct possessor shall be obliged to immediately notify of the

principal owner if the usufruct object is destroyed, damaged, or unplanned

excessive expenses are required to ensure the entirety of the usufruct object, as

well as if a third party raised a claim over the usufruct object. Usufruct possessor

shall not refuse, when the owner takes necessary measures to eliminate the

circumstances.

152.15. If usufruct possessor notified of the owner and undertook the

necessary measures specified in article 152.14 of this law in advance at own

expenses, then he/she shall be entitled to demand the owner to return the repairs

or improvements if they are separable, or to pay for repairs upon the termination

of usufruct.

152.16. If usufruct possessor replaced some parts of the property

concerned with new ones in order to improve them, then he/she shall transfer

those parts that have replaced the old parts to the owner, upon the termination of

usufruct.

152.17. Although usufruct possessor shall be owner of profit and benefit

earned beyond normal commercial use or exceeding the normal amount, he/she

shall be obliged to compensate for the damages caused to usufruct object due to

such activities.

152.18. It is prohibited to transfer the usufruct without the owner’s consent

and set double usufruct on it.

152.19. If usufruct item is a right, then the right concerned may be altered

and invalidated only with the consent of usufruct owner on contract basis.

 

CHAPTER THIRTEEN

RIGHTS TO PLEDGE

SUB-CHAPTER ONE

GENERAL PROVISIONS OF PLEDGE

Article 153. Pledge

153.1. If an obligation performer fails to fulfil legal or contractual obligation

secured by a pledge, then the creditor-pledgee shall be entitled to have his/her

needs satisfied first from the value of the pledged property prior to other creditors.

153.2. With creation of the pledge rights, the person concerned shall

exercise a prevailing right to demand the performance of obligations.

153.3. Collateral may be used to meet future, conditional claims or any obligations agreed upon by the parties that may arise at the time the collateral arises.

153.4. Rights to pledge shall belong to main requirements, other auxiliary

rights pertaining to them and benefits provided in article 88 of this Law.

 

Article. 154. Pledge objects

154.1. Movable and immovable property and rights that can be transferred

to ownership of others may be objects of pledge.

154.2. Unless otherwise provided by law and the pledge agreement, the pledge item was the right to claim, and if the obligor performed the obligation ahead of time, this performance shall be the pledge item.

154.3. The object of pledge may be in the ownership of others. In this case

demand shall be satisfied after the relevant property is be transferred to pledgee’s

ownership.

154.4. The item of pledge may be araised in the future. In this case

demand shall be satisfied after relevant property will be araised and transferred to

the pledgee’s ownership.

154.5. If it is provided in this law, pledge objects may be pledged to several

persons and in such case, the demand secured by the pledge shall be satisfied by

contract execution order.

154.6. If person, who has no right to pledge the property despite keeping it

under his/her possession, pledged the property through transfer of documents

certifying the right to possess, and pledgee was not aware of or it is not possible

to learn that the pledger has no right to pledge it, the pledgee shall be deemed

as a fair possessor.

154.7. Pledgee referred to in article 154.4 of this Law shall have a

prevailing right as a fair possessor over third persons.

154.8. A pledge contract may be altered by parties in order to replace the

item of pledge with another.

 

Article. 155. Transfer of pledge rights

155.1. Rights to pledge shall be transferred to a new creditor when creditor pledgee transfers the demand secured by pledge to a third party.

155.2. For transfer of asset, securities that may be transferred to others, as

well as rights to asset, the procedure to acquire them shall be applied alike.

155.3. If transfer of pledge to others might affect the interests of a third

person, then the third person concerned may transfer the rights to pledge into

his/her name by satisfying demands of creditor.

 

Article 156. Pledge contract

156.1. Contract for pledge shall be concluded in writing.

156.2. The contract of pledge of immovable property shall be registered in the state registry and shall specify the names of the parties, place of residence (residence), requirements to be secured by the pledge, its amount, term of obligation, pledge item, its location and price.

156.3. Contract that does not meet requirements stated in articles 156.1

and 156.2 of this Law shall be void.

156.4. Unless otherwise provided by law at request of a party to the contract for pledge of movable property may be certified by a notary or registered with registration authority.

 

Article 157. Rights and obligations of parties in regard to pledge

object

157.1. Pledgee shall be entitled to the following rights:

157.1.1. to acquire benefits from the pledge within the demand

secured by pledge;

157.1.2. to have his/her demand satisfied from the sum of sales of

pledge prior to other creditors;

157.1.3. to sell the pledge object in accordance with provisions of

this Law, unless the pledger chooses other option or had other object pledged

within the period stated in article 157.2.2 of this Law;

157.1.4. to demand to transfer the pledge to his/her possession if

he/she considers that pledger does not perform obligations stated in article

157.6.1 of this Law.

157.1.5. to secure the completeness of pledge when the pledge is

transferred to his/her possession and demand from pledger the necessary cost

arising with this regard;

157.2. Pledgee shall have the following obligations:

157.2.1. to immediately inform the pledger, in case of a real situation

of destruction and significant reduction of value of pledge object is emerged;

157.2.2. in the case stated in article 157.2.1 of this Law, to

recommend the pledger to chose other options and possible period to replace

another pledge object;

157.2.3. keep the money earned from sales of pledge until the end

of the period stated in article 157.1.3 of this Law;

157.3. If several objects are pledged in order to secure the demand of

creditor, then unless otherwise provided by law, the pledgee shall be entitled to

chose the object that meets the demand, however, this should not exceed the

quantity and size to satisfy the demand.

157.4. Pledgee shall exercise the rights stated in article 92 of this Law, in

case of the condition, which impedes implementation of pledge rights, is emerged.

157.5. Pledger shall exercise the following rights:

157.5.1. to get benefits from pledge during the period of possessing

it;

157.5.2. if the circumstances stated in article 157.2.1 emerge, to

offer an alternative that may satisfy the demands of pledgee and demand the

return of the pledge;

157.5.3. to demand to transfer the pledge object to a third party, who

is capable to keep the pledge sound and safe, if he/she considers that pledgee

can not perform properly his/her obligations stated in article 157.1.5 of this Law.

157.5.4. to demand to transfer the remaining income from sales of

pledge at auction after deduction of creditor’s demand, costs related to holding an

auction and other necessary costs;

157.6. Pledger shall assume the following obligations:

157.6.1. to ensure safety and soundness of the pledge object, which

is under her/his possession;

157.6.2. to inform a third party, if the third party has certain right to

demand concerning the object to be pledged at the moment of conclusion of

contract for pledge.

157.7. If the pledger is not obligation performer in the demand secured by

pledge, then the pledger shall be entitled to make counter-demand that can be

made from a obligation performer to a creditor.

157.8. If the demand secured by pledge can be satisfied by assets of

obligation performer and a third party at the same time, then the pledger shall be

entitled to demand the creditor to satisfy the demand with asset of the obligation

performer first.

 

Article 158. Satisfying pledgee’s demand

158.1. The pledgee’s demand shall be satisfied through sales of pledge or

other forms of sale, if right to demand is begun or period of performing the

obligations is over.

158.2. Pledgee’s demand is deemed as satisfied, when obligation

performer makes proper payment to creditor.

158.3.

If the pledge obligation has expired or has not been performed in accordance with the pledge agreement, the pledgee shall have the right to demand the exercise of the pledge right.

 

158.4. If it is necessary to take actions of legal significance in order to

satisfy the demand secured by pledge, then the pledgee is entitled to demand the

pledger to undertake actions, which may be taken by pledgee with a third party on

behalf of the pledger unless the latter undertakes these actions within fourteen

days.

 

158.5. If a pledge object is pledged to several persons, then the person,

who first accepted as pledge shall have rights to demand to sell the pledge. If this

person refuses to exercise this right, then the next pledger shall exercise this right

to demand.

 

Article 159. Sale of pledge

159.1. Unless otherwise provided by law or contract, a pledge shall be sold

at the auction according to procedures set forth in this Law.

159.2. Price of the pledge may be determined by an expert prior to sale, if

pledger demanded so, and in this case the pledger shall bear the relevant cost.

159.3. Owner of the pledge may take a part in the sale of the pledge and

make an offer to purchase the pledge object.

159.4. Participants to the auction shall be explained that they shall lose the

rights to purchase unless they had paid the price of the pledge object.

159.5. Pledge shall be transferred with unrestricted rights to a person who

acquired the pledge object lawfully and in a fair manner.

 

Article 160. Termination of pledge rights

160.1. Pledge rights shall be terminated in the following cases:

160.1.1. if demand secured by pledge is terminated;

160.1.2. if pledgee notified the pledger or owner about his/her

refusal from pledge;

160.1.3. if pledgee returned the pledge object that was under his/her

possession, back the pledger;

160.1.4. if right to possess the pledge object is transferred to

pledgee;

160.1.5. if the pledge object was destroyed;

160.1.6. any other grounds set forth in the law;

160.2. As for the third person, the demand that is secured by pledge

remains valid, the pledge right shall not be terminated in case of conditions

specified in article 160.1.3 of this law.

160.3. In case of the pledge right is terminated on grounds other than that

specified in articles 160.1.4 and 160.1.5 of this Law, then the pledgee shall be

obliged to return the pledge object back to pledger or owner.

SUB-CHAPTER TWO

SPECIAL REGULATION OF MOVABLE PROPERTY AND RIGHTS’

PLEDGE

 

Article 161. Transfer of demand secured by pledge

161.1. Creditor may transfer his/her rights to pledge to others by

transferring the demand secured by pledge.

161.2. Rights to pledge shall not be created, if transfer of pledge objects

along with transfer of demand is impossible.

 

Article 162. Obtaining a permission

162.1. Unless otherwise provided by law or agreement, pledgee and

pledger shall be obliged to obtain mutual permission in the following cases:

162.1.1. from pledger, if pledgee takes a pledge object;

162.1.2. from pledgee, if pledger is to make a transaction with a

third party with regard to the pledge object.

 

Article 163. Sale of immovable property and rights

163.1. Pledgee may entrust a special sales organization for sale of pledge

through it, if the market or stock exchange price of pledge object is evident.

163.2. Pledgee shall be obliged to notify in advance the owner of the

pledge object of the possible sale of pledge, as well as its price. The pledge shall

not be sold within fourteen days from the notification.

 

 

 

Article 164. Pledge of rights

164. 1. The relevant provisions of articles 153-160 of this Law shall be

equally applicable to pledge of rights.

 

SUB-CHAPTER THREE

MORTGAGE OF IMMOVABLE PROPERTY /HYPOTHEC/

 

Article 165. Hypothec

165.1. Creditor's mortgage of certain immovable property in order to have

his/her demand satisfied first before all the other creditors shall be hypothec.

165.2. Maximum price of immovable property that may satisfy the demand

of the creditor shall be identified and noted in the State register.

165.3. Possessor and creditor may mutually agree to replace the demand

secured by hypothec with other demand, and in this case they shall have

respective changes registered with state registration.

165.4. If demand of creditor is to be satisfied with hypothecs of several

immovable properties, each immovable property shall be used for entire

satisfaction of the demand concerned and the creditor may chose any of

immovable property for having his/her demand satisfied.

165.5. Hypothec shall be equally applied to component of and benefit from

immovable property, which was acquired by irregular commercial operations, or

which has not been transferred to ownership of others although it was acquired by

regular commercial operations.

165.6. If otherwise provided by agreement, interest, tort, damage caused

and Court expenses, in addition to main obligations, shall be deducted from the

price of immovable property that is a hypothec object.

 

 

 

 

Article 166. Registration of hypothec

166.1. Hypothec is created with its registration with the State register.

166.2. Owner, obligation performer and creditor of immovable property

shall make a document certifying the amount of demand secured by hypothec, its

interest, and term of performance of the demand. The owner and creditor of the

immovable property shall have hypothec registered in conformity with procedures

set forth in the law.

 

Article 167. Secured hypothec

167.1. Creditor may agree to satisfy his/her rights to hypothec through

proving own demands only, instead of referring to the registration of hypothec

right as a proof. This hypothec shall be registered with the State register as

secured hypothec.

167.2. Secured hypothec may be used for the demand concerning payment

obligations of non-bearer or inscribed securities, and in this case, the secured

hypothec shall not necessarily be registered.

 

Article 168. Transfer of hypothec to owner

168.1. Hypothec shall be transferred to owner of immovable property upon

termination of creditor's demand or if the creditor refused from his/her demands.

168.2. In the case referred to in article 168.1 of this Law, the owner shall

terminate the hypothec and write off the State register or may transfer it to another

person, retaining the registration order.

168.3. If owner of immovable property is liable before a third person for

terminating the hypothec, or the immovable property or hypothec should be

transferred to the same person, then it may be noted in the State register in

advance.

168.4. If an owner of the immovable property is not obliged before the

pledgee in person, he/she shall exercise the same rights as the person, who is

obliged in person, and be entitled to request the demand to be considered invalid

or have the requested amount be reduced.

 

Article 169. Satisfying creditor’s demand

169.1. Owner of the immovable property shall be obliged to satisfy the

demand of creditor if period of satisfaction of creditor's demand is due, or from the

time when the obligation performer acquires the right to perform the obligation or in other cases provided by law.

169.2. If the owner satisfied the demand of creditor, then he/she shall have

rights to demand the creditor to provide him/her with documents necessary for

making changes in the State register or termination of hypothec.

169.3. If an owner is not obliged in person, he/she may transfer the

obligations from an obligation performer into his/her name with the consent of

pledgee.

 

Article 170. Protection of creditor’s rights

170.1. Owner shall be obliged to have the value of immovable property

under hypothec determined reasonably.

170.2. If there is an emerging situation that threatening danger to the

immovable property, creditor may set a period of time for owner to eliminate the

danger. If owner failed to take actions to eliminate the danger by expiration of the

period, the creditor shall be entitled to have his/her demands immediately satisfied

from the property concerned.

170.3. If immovable property is insured, then in the event of insurance,

insurer shall be obliged to notify the creditor and then provide insurance

compensation to the insured.

170.4. If there grounds exist to consider that insurance compensation shall

not be used for rehabilitation or restoration purposes, then, the creditor shall be

entitled to take necessary measures not to let insured receiving the insurance

compensation.

170.5. If it is determined that the owner failed to perform obligations with

regard to safety and soundness of immovable property under hypothec, then the

creditor shall be entitled to demand the transfer of immovable property to his/her

ownership.

 

Article 171. Non-restriction of owner’s transaction right

171.1. Transaction, obliging the owner not to use the immovable property

under hypothec, not to transfer it to ownership of others, and not to otherwise

entitle rights to it to a third party, shall be void.

171.2. Validity of the transaction concluded by hypothec owner with a third

party shall depend on the creditor's permission.

171.3. Unless otherwise provided in law, transaction about agreeing that

right to ownership of immovable property shall be transferred to the creditor

unless the latter’s demand is satisfied completely or partially, shall be void.

 

Article 172. Transfer of hypothec and demand

172.1. Hypothec and demand serving as its grounds may be transferred

together to others only in case stipulated in article 87.1 of this Law.

172.2. Demand is considered as transferred if documents of hypothec

certified by notary are transferred to a new creditor and this new creditor is

registered with State register.

172.3. If obligation performer executed his/her obligations before the

previous creditor after the transfer of demand to the new creditor, but was not

unaware of such a transfer, then the previous creditor shall perform obligations

before the new creditor to the extent to which obligation was performed by the

obligation performer.

172.4. Hypothec and demand shall be transferred to new creditor in the

same amount as the previous creditor had.

172.5. Document that certified the transfer of hypothec to new creditor

registered with the State register shall be considered true and reliable. Obligation

performer shall not be entitled to make demand with regard to it. However, if new

creditor was aware of that the registration is in error, this provision shall not be

applied.

172.6. If rights and legitimate interests of a third party were damaged as a

result of the hypothec, the person concerned shall be entitled to satisfy the

demand of creditor and transfer the hypothec rights to him/herself.

172.7. If a third party satisfied the creditor's demand according to provision

of article 172.6 of this Law, he/she shall be entitled to demand the transfer of

registration into her/his name along with relevant documents.

172.8. If hypothec was transferred to a person who satisfied the creditor's

demand as referred to in article 172.6 of this Law, he/she shall be entitled to

demand the owner to compensate the damages caused.

172.9. If a creditor, who is entitled to demand, has the same amount of

obligations as the obligation performer before the obligation performer, then their

demands may be considered as mutually satisfied.

 

Article 173. Waiver of hypothec and rights to demand

173.1. If creditor renounces the demand and hypothec and have this waiver

registered with the State register according to appropriate procedures, hypothec

shall be transferred to the owner of the property concerned.

173.2. If creditor declined the hypothec, but retained his/her demand as

valid, then obligation performer shall be exempted from the obligation to the extent

he/she already paid the compensation for damages caused by hypothec.

173.3. Owner of the immovable property shall be entitled to demand the

creditor to decline the hypothec, in case the hypothec becomes impossible to use

for long-term due to owner’s acquisition of the right to dispute.

 

Article 174. Demand on sale of immovable property

174.1. Creditor shall be entitled to demand to sell the immovable property,

in case the obligation performer exceeded the period of satisfaction of hypothec

demand.

174.2. Provision of this law shall be applied for sales of immovable

properties, and the regulations of this law shall be deemed as more detailed

regulation.

174.3 If the creditor is a bank or a non-banking financial institution, it shall

submit the request to a court for selling hypothec through a judicial proceeding or

to a registration office for selling through a non-judicial proceeding as prescribed

in the law. The articles 175.5-175.7, 176 and 177 of this law shall not be

applicable for sale hypothec in non-judicial way

174.4 The procedure for selling hypothec though a non-judicial proceeding

shall be established by the law

 

Article 175. Mandatory sale of mortgage on basis of Court ruling

175.1. Unless otherwise provided by law, the immovable property under

hypothec shall be subject to mandatory sale at the decision of Court, if an

obligation performer failed to fulfill obligations despite of demand in accordance

with article 174 of this Law.

175.2. Court may determine other forms of sale of the immovable property

upon consideration of the joint claims from owner of the immovable property and

creditor, and proposals made by the authorized parties of the property concerned.

175.3. Creditor, obligation performer and owner shall be entitled to take a

part in the auction.

175.4. Obligation performer shall lose his/her rights to keep the benefit from

the property by issuance of decision on sale of the immovable property at the

auction.

175.5. If obligation performer lives with his/her family members in a house

or in a room of the house, that under hypothec, he/she shall become lessee by the

moment of issuance of Court decision on mandatory sale of the immovable

property and shall be obliged to pay the rent to creditor at the current rate.

175.6. Person, who assigned by Court to organize the auction, shall carry

out the auction within 30 days from issuance of Court decision.

175.7. Person assigned by Court to organize the auction shall notify the

public of the event through the mass media 14 days prior to it.

 

Article 176. Ceasing and postponing auction

176.1. In case of the owner or third person, whose rights may be affected

by carrying out the auction, satisfies the creditor's demand in advance, then the

auction may be ceased.

176.2. Court may postpone the auction on the basis of request from the

owner or having considered proposals by authorized parties to ownership rights

by up to six months in the following cases:

176.2.1. if it is possible to postpone the auction depending on the

nature of debt to be paid by obligation performer;

176.2.2. if it is necessary to consider the personal and commercial

relations of an owner.

176.2.3. Other grounds provided by law.

176.3. If Court deems that temporary postponement of auction pursuant to

article 176.2 of this Law may potentially create an explicitly negative

consequences for the creditor, it may decline to satisfy the owner’s request.

 

Article 177. Auction price

177.1. The minimum bid price of immovable property to be sold at auction shall be determined by 70% of the price agreed upon by the obligor, obligee and owner prior to the auction, and if not agreed, by the appraiser at the market price. The appraiser shall be appointed by the person authorized to conduct the auction.

177.2. If no price offer was up to the level of the price offered at the initial

auction, or no one participated in the auction, the second auction shall be

conducted.

177.3. The second auction shall be organized within 30 days after the first

one. Second auction shall be publicly announced as provided by law.

177.4. The price offered by auction participants shall be sufficient to cover

the costs related to organizing the auction and meeting the creditor’s demand.

If the offered price was not enough to cover these amounts, it shall be

considered that the auction did not take place. Expenses related to the auction

shall be born by the owner.

177.5.  Expenses related to the auction shall be borne by the obligation performer.

 

Article 178. Ownership right over auctioned property

178.1. The buyer, offered the highest price, shall be liable to transfer to the

competent person conducted the auction the price, from which the auction

conducting cost shall be deducted.

178.2 Buyer shall become the owner of the property from the time of paying

fully the price of the auctioned property.

178.3. All limited rights for property and other hypothecs, registered after

the hypothec, which is enforced by the creditor, shall be terminated with

transferring the ownership right.

178.4. Nonetheless, other limited rights to be exercised with regard to that

particular immovable property, shall remain valid.

178.5. New owner bought the immovable property, shall become a party to

the lease or rent contract, which was effective during transferring the ownership

right.

 

Article 179. Distribution of auction proceeds

179.1. If the creditor is the sole person registered with the State register

with hypothec right, or if the auction proceeds were sufficient to satisfy the

demands of all obligation creditors, after deducting from it the cost related to

organizing the auction, the competent auctioneer shall distribute the remaining

proceeds, after deducting from it all costs among creditors according to proper

order and procedures, and transfer the residuals to the owner participated in the

auction.

179.2. If the price for which the immovable property was sold is not enough

to satisfy the demands of creditors, the competent auctioneer shall deduct the

costs of organizing the auction, deposit the remaining amount on a special

account and distribute it among creditors in the order they were registered with the

State register.

 

Article 180. Auctioneer’s liability

180.1. If damages were caused to others due to the failure of a competent

person nominated to organize the auction properly, the damages shall be

compensated as provided in article 497 of this Law.

 

Article 181. Transfer of immovable property for others’ management

181.1. Court may rule to transfer the property for others’ management

instead of auctioning it based on the request of creditor with hypothec claiming

rights. In this case, Court may nominate a competent person to manage the

immovable property or transfer this right to the owner.

 

181.2. Before making decision provided by article 181.1 of this Law, Court

shall be obliged to consider the opinions of all competent persons registered with

the State register, whose rights and legitimate interests might be affected with

mandatory transfer of the property for others’ management.

181.3. Court shall rule as provided in article 181.1 of this Law only in case,

when the proceeds from the immovable property after transferring for others’

management would be more than the costs related to its management.

181.4. If the obligation performer and her/his family reside in the building or

its part, which was transferred mandatory for others’ management, he/she shall

pay the rent at the current rate.

181.5 Competent person managing the immovable property shall get all

benefits from the property, deduct from it all management and other related costs

according to own proposal approved by Court, and distribute the residuals at the

end of the year.

181.6. If the creditor’s demands were satisfied, the competent person

managing the immovable property shall return the immovable property to its

owner.

181.7. If it became evident that the creditor’s requirements cannot be

satisfied by the mandatory management, it shall be terminated and the immovable

property shall be sold through auction.

 

SUB-CHAPTER FOUR

STATE REGISTER

 

Article 182. Right to state registration

182.1. Rights, except for the right to ownership to immovable properties

and other rights of property related thereto, shall be registered with the State

register.

182.2. If it is provided in law or contract, movable properties and related

rights shall be registered with the State register.

182.3. Registration procedure of rights stated in this article shall be

regulated by law.

 

Article 183. Accuracy of state registration note

183.1 Note written in the State register shall be considered as accurate,

unless the person, who receives, on the basis of transaction, the right registered

with the State register under the name of transferor, was aware of that the note

was inaccurate or refused to believe that it is accurate.

183.2. If the registration is made under the name of a person who is not

entitled to register it, the person who is affected by the consequence of that

registration in terms of rights and legal status, shall be entitled to demand from the

person whose name is in the register to alter the records in the registration.

 

183.3. In order to identify the legitimate owner of the right registered with

the State register, a person, whose right is violated, shall be entitled to submit to

registration office an application about inadequate records in the State register.

 

Article 184. Order of registered rights

184.1. Order of registered rights in the State register shall be determined

according to the submission order of application to register.

184.2. The order could be altered later based on the permission of parties

that are exchanging their orders, and the alteration shall be recorded in the State

register.

184.3. In order to register any rights, the owner of immovable properties

may put a condition to register any right before another; such a condition shall be

recorded in the State register.

 

Article 185. Preliminary records in the State register

185.1 In order to meet the requirements of registering immovable property

rights, preliminary records may be made in the State register.

185.2. The recording specified in article 185.1 of this Law could be made in

order to satisfy conditional demands or those may emerge in the future.

185.3. Unless the registration, which will be made after preliminary

recordings, terminates or damages the demanding rights of a person, whose

rights are protected by the preliminary records, such records shall not impact on

the person.

185.4. The preliminary record shall be made in order to determine the

possessor of right, with the permission of the owner of the immovable property.

185.5. If preliminary record is likely to reduce the opportunity to use the

property for a long period of time, possessor of the property shall be entitled to

demand from the person who made such recording to cancel it.

185.6. If any rights of the person insisted on preliminary recording are not

valid, he/she shall be entitled to demand from the possessor of the property a

permission to get registration, which is necessary to implement requirements that

would be satisfied by preliminary record.

 

 

PART II

OBLIGATIONS

SUB-PART ONE

GENERAL BASIS

CHAPTER FOURTEEN

GENERAL PROVISIONS

Article 186. Obligation relationship

186.1 As provided by law or contract, an obligation performer has an obligation before

an obligee, to perform an action or refuse to perform a particular one, and the

obligee is entitled to demand the obligation performance.

186.2 Depending on characteristics and contents of the obligation, an

exclusive obligation, regarding rights and property of the other party, may be

delegated to either of two parties.

 

Article 187. Grounds for obligation

187.1. Obligation shall emerge on the grounds stipulated in article 8 of this

Law.

187.2. Obligations stipulated in article 186 of this law may emerge at the

preparatory stage of concluding a contract.

187.3. If contract was not concluded due to negligence of either party in the

process of negotiations, the obligation may arise to pay to the other party the cost

of conducting negotiations by the party who is at fault due to the negligence.

 

Article 188. Obligation to provide information

188.1. Obligation may create rights for any party to obtain information.

188.2. If the information possessor may provide with information, required

for defining the obligation content, without harm to own rights and interests, the

other party shall be entitled to access to such information.

188.3. Party receiving the information, shall be liable to reimburse the costs

related to providing information to the other party.

 

CHAPTER FIFTEEN

CONTRACT LAW

SUB-CHAPTER ONE

GENERAL PROVISIONS

Article 189. Contracting parties’ autonomy

189.1. Parties to the contract shall be entitled within the legal frame-work to

conclude contract freely and define its content.

189.2. In order to protect societal and individual interests, certain types of

contracts may be concluded on the basis of special permission issued by

government authorities. The procedure of issuing special permission shall be

defined by law.

189.3. Contract concluded on the basis of special permission shall enter

into effect after receiving special permission from the competent authority.

189.4. A person dominating the market of producing certain types of goods,

or delivering services, or performing works, shall be liable to enter into contract

with persons willing to make a deal with it in the areas mentioned herein-above,

and shall not be entitled to put pressure on the other party to accept unequal

terms and conditions or to refuse to conclude a contract.

189.5 A contract, which is not named directly or regulated by this law, but

having specific content, expressing basic contract characteristics and forms shall

be considered as an unnamed contract. General basis of obligation stipulated in

this Law shall be applied to the unnamed contracts.

 

Article 190. Contracts regarding the currently available or future

acquired properties

190.1. Unless otherwise provided by law, the contracts, under which a party assumes an obligation to transfer all his/her future acquired properties to another party’s ownership, or limited use or possession (usufruct), shall be deemed as void.

190.2. Contracts under which a party assumes an obligation to transfer all

or part of his/her currently available properties to another party’s ownership or

limited use or possession (usufruct), shall be certified by notary.

190.3. An agreement to pledge all available property or for future use for personal or family use shall be deemed as void.

 

Article 191. Contract on property to be inherited

191.1. A contract regarding the property to be inherited by a citizen,

concluded between third parties shall be deemed as void.

191.2. Article 191.1 of this Law shall be applied to the contract between

third parties regarding a mandatory share of property to be inherited by to a

citizen, as well as restrictions set by testator’s written will.

191.3 Article 191.1 of this Law shall not be applied to the contract between

lawful successors regarding shares of the property to be inherited.

 

Article 192. Obligation applying to property accessories

192.1. If a party assumes an obligation to transfer his/her property to

another party’s ownership, limited possession, or use, such an obligation shall

apply equally to accompanying items of the property, unless otherwise stipulated

in the contract.

 

Article 193. Defining the obligation performance

193.1. If method, form and procedure of the obligation performance, which

determined by a party or a third party to the contract, may cause hesitation of the

other party or parties, the matter shall be determined in accordance with principle

of fairness and mutual expression of their intentions.

193.2 If determined method, form and procedure of obligation performance

does not meet the principle of fairness, or are deemed by any of the parties that

they slowing down the process of determining obligation performance, such party

shall be entitled to seek a court ruling or party with an arbitration agreement shall file a claim to the arbitration.  

Article 194. Regulation for non-contractual obligations

194.1. Regulation relevant to contract obligation may be applied to noncontractual obligation relations, unless this conflicts with obligation nature.

SUB-CHAPTER TWO

FORMATION OF THE CONTRACT

Article 195. Contract offer

195.1. Actual and sufficiently definite expression of an intention of a party

addressed to one or more particular persons in order to be bound with someone

who accepts her/his intention regarding rights and obligations, shall be deemed as

an offer to enter into a contract.

195.2. Essential terms of a contract or procedure for their determination

shall be stated in a contract offer.

195.3. The essential terms of a contract shall be those terms which are

required by law, or which are necessary to the contract, or which are accepted by

one party at request of the other party.

195.4. An expression of intention addressed to unidentified persons and

which does not contain any provisions about an offer to be, shall be considered as

a call for an offer.

195.5. A party, who proposed a contract offer, shall not be entitled to

revoke the offer within the period of time stipulated by law, contract or the offer.

195.6. A response accepting to conclude a contract on different terms shall

be deemed as a new offer to enter into a contract.

195.7. If a party, who sent a contract offer, receives the response late and

immediately informs the other party about it, then, such a late response shall be

deemed as a new offer to enter into a contract.

 

Article 196. Considering contract concluded

196.1. A contract shall be considered to have been concluded on the

following grounds:

196.1.1. if law provides that contract shall be concluded by

transferring property, the parties agree on essential terms of the contract and

transfer the property;

196.1.2. if law provides that contract shall be concluded in written

or parties agreed that a document shall be executed and signed, or if a party

receives documentation like letter, facsimile, or official note signed by the other

party that expressed the acceptance of the offer to enter into a contract;

196.1.3. if a contract offer was sent with stated deadline, and

accepting response from the other party was received within the deadline;

196.1.4. if a contract offer was sent in written form, without

indicating the deadline, and the accepting response to it was received within

normal and reasonable time;

196.1.5. if verbal offer made in person was accepted immediately;

196.1.6. if a party accepted the offer to enter into a contract, sent

the positive response in time, but it was received late, and the other party, decided

not to conclude a contract due to this delay, but did not notify immediately about it

the responding party;

196.1.7. if a party who received an offer assumes that the offering

party will accept the counter offer according to the customs established in

business routine, and sends the counter offer with different terms and conditions

than the original one, however, the former offering party fails to notify immediately

the other party about its refusal.

196.1.8. In case of concluding an agreement in electronic form, the parties shall prepare an electronic document and sign it digitally as specified in the Law on Electronic Signature.

196.2. Service providing entrepreneurs who receive an offer from their

regular business partners to perform the particular type of activity, shall be obliged

to respond within reasonable time. If they fail to fulfill this obligation, it shall be

deemed that they have accepted the contract offer without notification.

196.3. If a party, who received an offer, gives a negative response within

normal and reasonable time, however, the offering party sends the goods in

accordance with the obligations stipulated in the offer due to non-awareness of

such a refusal, the offer receiving party shall be obliged to receive and store the

goods in order to prevent or reduce any potential damage to them, or take all

possible measures to keep it safe and sound, and be entitled to demand the

offering party to reimburse incurred expenses.

 

Article 197. Bidding

197.1. A contract may be concluded through bidding.

197.2. A contract shall be concluded with a person that won in a bid, unless

otherwise stipulated in law.

197.3. Owner, or right possessor, or an authorized person may be an

organizer of the bidding process.

197.4. An authorized organization shall organize the bid on own behalf or in

the name of owner or right possessor on the basis of contract concluded with

them.

197.5. A contract to sell a property or property rights may be concluded

through bidding when it is provided by law only.

197.6. Bidding process shall be organized in a form of auction or

competition.

197.7. The winner of auction bidding shall be a person who offered the

highest price.

197.8. The winner of competition shall be the best qualified person of all

requirements that are determined in advance by the competition organizing

commission. Unless otherwise stipulated in law, the form of the bidding process

shall be determined by the owner of the property or possessor of the property

rights.

197.9. If only one bidder was present, an auction or competition shall be

deemed that it did not take place.

197.10. An auction or competition may be organized either open or closed.

197.11. Any person may attend in an open auction or competition.

197.12. Closed auction or competition may be attended exclusively by

specially invited persons.

197.13. Unless stipulated otherwise in law, organizers shall announce the

bidding notice that contains information on the form of the event, date and venue,

contract object, starting price, procedure to register participants and determining

the winner, and other information not less than 30 days prior to the event. If

contract object is the right to conclude a contract, the date to conclude the

contract shall be indicated.

197.14. Unless otherwise stipulated in law or the announcement, an

organizer of the open auction or competition shall be entitled to refuse to organize

it. However, such a refusal may be exercised within not less than three days prior

to the auction date and not less than 30 days prior to the competition date.

197.15. An organizer, who refused to organize an auction or competition

violating the date stated in article 197.14 of this Law, shall be liable to compensate

direct damages to the participants.

197.16. An organizer of closed auction or competition shall be liable to

compensate the damages caused to participants who invited to the event,

regardless to when he/she refused to organize the events.

197.17. A participant in bidding process shall make a deposit in the amount

and on time pursuant to the bidding procedure specified in the announcement.,.

197.18. The deposit shall be returned to the respective persons if the

bidding has not taken place or who did not participate in it, or who did not win

though participated in it.

197.19. While entering into a contract with the winner, the deposit shall be

considered as part of the performance of the contractual obligation.

197.20. The winner of a bidding process or the event organizer shall sign

notes about the results of the auction or competition on the day when the event

took place and these notes shall be as valid as the contract.

197.21. If the winner avoids signing the notes, he/she shall lose the

deposit.

197.22. If an organizer avoids signing the notes, the deposit made by the

other party shall be returned and be liable to pay compensation for damages

caused due to participation in the event in the amount exceeding the deposit.

197.23. If bidding process is organized with the condition to acquire a right

to enter into a contract, the parties shall sign the contract within 20 days after

completion of the event and signing the notes, or within the period of time

specified in the announcement. If a party avoids entering into a contract, another

party shall consider the contract is concluded and be entitled to demand obligation

performance, as well as damage compensation.

197.24. Bidding that organized in violation of procedures set by law shall be

deemed as invalid.

197.25. A contract, concluded with the winner of invalid bidding, shall be

deemed as invalid.

197.26. The procedure stipulated in this article shall also be applied to

auction that is subject to enforcement of judicial decisions.

 

Article 198. Interpretation of contract

198.1. While interpreting a contract, literal meaning of its words shall be

considered.

198.2. If the meaning of any contract condition is not comprehensible, its

content shall be defined by comparing with other conditions and overall content of

the contract.

198.3. If some words and expressions of a contract could be interpreted

differently due to the local dialects, they shall be interpreted in local context,

where parties concluded the contract reside. If parties are residents in different

areas, words and expressions shall be interpreted in the context of the area,

where the accepting party to the contract resides.

198.4. If expressions conflict with each other or have various meanings,

they shall be interpreted by a meaning more appropriate for the contract.

198.5. In order to interpret the content of mixed contract, the law provisions

regulating a particular type of contract that is more similar to the contract

execution, shall be taken into consideration.

198.6. If contract content is impossible to determine as provided by articles

198.1-198.5 of this Law, the integrated views of the parties shall be clarified while

keeping in mind the contract objective, and for this purpose, the circumstances

and conditions like negotiations, exchanged documents prior to entering into the

contract, business practices or customs of business routines established between

the parties shall be taken into consideration.

 

Article 199. Contract becomes effective upon acceptance

199.1. In order to consider the contract certifying already established

obligation relations as valid, an obligation performer shall inform of the acceptance of the

obligation in written.

199.2 In order to create obligation relations in the form as negotiated by the

parties, a contract shall be concluded in the negotiated form.

199.3 It is not necessary to conclude a contract in the form stipulated in

law, if debt is accepted by making payment or parties are mutually agreed on.

 

SUB-CHAPTER THREE

STANDARD CONDITIONS OF A CONTRACT

 

Article 200. Standard conditions are inseparable parts of a contract

200.1. Conditions offered by a party to another; that are not determined by

law, but which specifies procedure clarifying law provisions, and that shall be used

permanently and determined beforehand, shall be standard conditions of contract.

200.2. Conditions, which determined in detail subject to mutual negotiations

between parties, shall not be considered as standard conditions of contract.

200.3. In the presence of the following circumstances, standard conditions

shall become inseparable parts of contract concluded between parties:

200.3.1. if it is provided that the offering party clearly declares the

standard conditions in a place, where the contract is concluded, and concludes

contract with a person who accepts these conditions; and

200.3.2. if the other party was able to acquaint with the abovementioned conditions and accepted them.

200.4. If the offer receiving party is a business entrepreneur, who must be

aware of or should have known standard conditions beforehand due to its own

business specifics the standard conditions shall be inseparable parts of the

contract.

200.5. If the other party was not able to learn them beforehand due to the

external circumstances expressing the standard conditions were different from the

typical form, the standard conditions shall not be an inseparable part of the

contract.

 

Article 201. Interpretation of standard conditions

201.1 If meaning of words and expressions that express standard

conditions are incomprehensible, they shall be interpreted in favor of the offer

receiving party.

 

Article 202. Invalid standard conditions

202.1. Standard conditions shall be invalid if they contradict with good faith

of the parties and principles of fairness and are harmful to the accepting party,

despite of their reflection in the contract. In this case, the circumstances forcing

their inclusion into the contract, interests of the parties and other circumstances

shall be taken into account.

 

202.2. If a party, who offers a contract with an individual that is engaged in

non-commercial activities, incorporates the following conditions into the standard

conditions of the contract, they shall be invalid:

202.2.1. excessively long and ambiguous deadlines are set for

receiving and refusing from an offer;

202.2.2. excessively long or ambiguous or not in compliance with

law deadlines are set for obligation performance;

202.2.3. it provides a right to annul the contract without concrete

grounds or on the grounds which are not stipulated in the contract;

202.2.4. it provides a right to a party to alter or refuse the obligations

which are already determined by contract in a manner not in the legal interests of

the other party;

202.2.5. it provides a self-entitlement to demand the incurred

expenses in a way that excessively high or exceeding the real amount of costs;

202.2.6. it provides to deem that exclusively important interpretation

was already provided to the other party;

202.2.7. it provides groundless sharp increase of prices within a

short span of time for long-term obligation relations;

202.2.8. legal rights of the other party to refuse executing rights or

obligations are restricted or rejected;

202.2.9. the offering party is released from the liability, provided by

law, to remind the other party to assume obligations or to give it sufficient time to perform obligations;

202.2.10. it provides that the offering party demands excessive

amount of compensation for damages caused to him/her;

202.2.11. denying or limiting the responsibility for damages caused,

due to an extreme negligent or deliberate actions by the offering party or its legal

representative;

202.2.12. limiting the rights of the other party to demand

compensation of damages caused, due to breach of obligations;

202.2.13. denying the entitlement to demand the entire damages

caused due to non performance of obligation, or refusal, or renouncing the

contract in case of the legal interests of the other party were damaged due to

partial performance of obligations by the offering party;

202.2.14. the responsibility of the offering party for deficient delivery

of goods, or poorly performed work or provided services, is determined lower than

the limits stated in law;

202.2.15. it provides that the party, who annuls the contract due to

non or improper performance of obligations by the offering party, shall pay forfeit

to the offering party;

202.3. If the following conditions are incorporated into standard conditions

of the contracts concerning the regular supply of goods and service and regularly

performed work, then those conditions shall be deemed void:

202.3.1. if the other party is liable to perform the obligations for more

than two years;

202.3.2. if it provides that contract shall be deemed to be extended

for more than a year in case of neither of parties proposes to annul the contract;

202.3.3. if the provision that the contract annulling period is three

months longer than the period for which the contract is deemed to be extended, is

against the legitimate interests of the other party.

202.4. Except for the cases mentioned below, standard conditions shall be

deemed void if they provide that a third party shall participate in such particular

contractual relationship instead of the offering party with equal rights, or provide

an opportunity to participate:

202.4.1. a third party is indicated by its name;

202.4.2. if the other party is entitled to annul the contract unilaterally.

202.5. If any part of standard conditions of the contract is void or they

become as non essential terms of the contract, the contract as a whole still shall

be valid.

 

SUB-CHAPTER FOUR

CONTRACTS FOR THE BENEFIT OF THIRD PARTIES

 

Article 203. Right to demand of contracts for the benefit of third

parties

203.1 Unless otherwise stipulated in law or contract, or if it does not

contradict with the nature of obligation, either an obligee of contract that for the

benefit of third party or a third party shall be entitled to demand an obligation

performance from the obligor.

203.2. Unless specifically stipulated in the contract, its content and

objectives shall determine whether third party is entitled to make decision

independently, or whether this right is created directly or with specific preconditions needed, or whether parties to the contract, who conclude it without third

party’s permission, are entitled to alter or terminate the latter’s rights.

203.3. The party included into the contract for the benefit of a third party

special conditions related to rights and obligation, provided by article 203.2 of this

Law, shall be entitled to replace the third party, regardless of the permission of the

other party.

203.4. Unless otherwise provided by the contract, and if it does not conflict

with the nature of obligation, an obligee may demand obligation performance, if

the third party refuses the rights stated in the contract.

 

SUB-CHAPTER FIVE

CONTRACT REFUSAL

 

Article 204. Procedure of contract refusal

204.1. If either of parties refuses the contract, other party shall be informed

of it.

204.2 Unless otherwise stipulated in law or contract, contract refusal period

shall be determined by the party who did not propose refusal. If during this period,

the other party was not informed of the contract refusal again, then the refusing

party shall lose the right to refuse contract.

204.3. If several persons participate in one or both parties to the contract,

they shall refuse contract jointly. If any of them looses the right to refuse contract,

then others shall lose this right as well.

204.4. If the contract was concluded with condition that the obligor shall

lose the right to refuse the contract upon non performance of its obligation, the

obligee shall be entitled to refuse the contract as soon as such condition is

emerged.

204.5. If contract was concluded with condition that the either party is

entitled to refuse the contract upon failure of obligation performance by other

party, and the obligor was entitled to terminate the mutually demanded obligations

as being fulfilled subject to consideration, and the latter immediately informed the

obligee about the obligation consideration after the contract refusal by the obligee,

such a refusal of the obligee shall be invalid.

 

Article 205. Consequences of contract refusal by either of contracting

parties

205.1. If either party refuses the contract as provided by law or contract,

the parties shall be obliged to mutually return contract accomplishments physically

and profits from its implementation.

205.2. In the following cases, an obligor shall reimburse the obligation

performance not physically, but rather in cash:

205.2.1. depending on characteristics of obligation performance, it

is impossible to return it physically;

205.2.2. if the party receiving the executed obligation utilizes it, or

transfers to others’ ownership, or is restricted by others’ rights, or changed it by

processing or recycling it;

205.2.3. if obligation item was damaged, spoiled, missing and

destroyed with the exception of normal depreciation or loss.

205.3. If an obligor executed any obligation in response, as provided in

contract, such an executed obligation in response may replace the cash payment.

205.4. In the following cases, an obligor shall not pay compensation:

205.4.1. if defected item, which transferred by obligee according to

contract, served as grounds of the obligor to refuse the contract and was revealed

by obligor in course of processing or recycling it;

205.4.2. if contract item was damaged, spoiled, missing or destroyed

due to negligence of the obligee;

205.4.3. if contract item got damaged, spoiled or missing despite it

was duly stored, maintained and protected by an obligor. In this case the remainder of the contract item shall be returned to the obligee.

205.5. If an obligor failed to earn potential profit due to violation of procedure to use the obligation item, he/she shall be liable to eliminate the harm caused to the obligee.

205.6. If an obligor returned contract item, or paid the cost, or there is no need to return the contract item or compensate the damages in accordance with articles 205.4.1 and 205.4.2 of this Law, the obligee shall be liable to reimburse the inevitable costs to the obligor. Other costs shall be paid by obligor to the obligee only in the amount of profit earned by the obligee.

205.7. Parties shall be liable to perform the obligations, which stipulated in

article 205.1 of this Law, in person and simultaneously.

 

CHAPTER SIXTEEN

EXECUTING THE OBLIGATION

SUB-CHAPTER ONE

GENERAL PROVISIONS

Article 206. Principles to execute obligation

206.1. An obligation shall be executed at determined place and on time

properly and fairly.


Article 207. Place to execute obligation

207.1. Unless otherwise stipulated in law or contract, and if it does not

conflict with the nature of obligation, place of obligation execution shall be

determined as follows:

207.1.1. in respect to an obligation related to an immovable

property-in the place, where the immovable property locates;

207.1.2. in respect to an obligation to transport any property – in the

place, where property was transferred to the first carrier in order to deliver it to the

obligee or an authorized person;

207.1.3. in respect to monetary obligation – in the place, where the

obligee resides. If the obligee changed the residence and informed an obligor

about it, the place shall be the new residence of the obligee; and

207.1.4. in respect to any other obligations – in the place where the

obligor resides..

207.2. In the case stated in article 207.1.3 of this Law, the obligor shall be

deemed as executed the obligations by transferring money to bank or other

organizations similar to it, in order to send it to address of the obligee.

207.3. If an obligee or obligor were liable to inform each other about

changing the place of residence, prior to executing the obligation, the expenses

related to performing or receiving the obligation in a new place shall be covered

by the relocating party, who shall also be responsible for any risk thereof.

 

Article 208. Time period for obligation execution

208.1. Obligation shall be executed within the time period stipulated in law

or contract.

208.2. If the time period for obligation execution was not set or conditions

were not made, or if it is impossible to set it due to the characteristics of the

obligation, the obligee shall be entitled to demand any time the execution of

obligation and the obligor shall be liable to execute the obligation immediately.

208.3. Unless otherwise stipulated in law or contract, depending on the

characteristics of the obligation, the obligor shall be liable to execute the

obligations within 10 days from the moment when the obligee demands the

execution of obligation.

208.4. If time period for obligation execution was set by law or contract, the

obligee shall not be entitled to demand execution of obligation prior to the time

period.

208.5. If an obligee does not object, an obligor shall be entitled to execute

the obligation before the set time.

208.6. If an obligor became insolvent, or the amount of property securing

the obligation execution decreased, or left without property, the obligee shall be

entitled to demand from the obligor the execution of obligation immediately before

the time period stated in article 208.4 of this Law.

208.7. As for the transaction made with conditions, obligation execution

shall commence from the day when the condition is emerged.

 

Article 209. Refusal to execute obligation

209.1. Except for cases when the obligor is obliged to execute first the

obligation pursuant to the bi-lateral contract, he/she may refuse to execute

obligation before the other party executes counter obligation.

 

Article 210. Obligation execution by a third party

210.1. Unless law or contract provides that the obligor must execute

obligation in person or if it does not contradict with the nature of obligation, the

obligation may be executed by a third party.

210.2. If an obligor refuses the execution of obligation by a third party, an

obligee shall be entitled to refuse to receive the obligation execution.

210.3. Unless law stipulates that a third party shall be responsible, the

principal obligor shall be responsible for the obligation that was not executed or

not executed properly.

210.4. If obligation is forced to be executed from the property of the obligor,

any person, who considers he/she might lose own rights regarding the property,

shall be entitled to satisfy demands of the obligee. In this case, the obligee’s right

to demand shall be transferred to the third party, which performed the obligation.

 

Article 211. Submition of obligation execution

211.1. Obligation execution shall be submitted to the obligee or an

authorized person specified in law, contract or judicial decision or arbitration.

211.2. If obligation execution was submitted to a person who is not entitled

to receive it, the obligation shall be deemed executed only when the obligee

permits or the obligee benefits from such execution.

Article 212. Obligation to select

212.1. Unless otherwise stipulated in law or contract, or if it does not

contradict with the nature of obligation, the obligor shall be entitled to choose and

execute one obligation out of several.

212.2. If obligor is entitled to refuse any action out of several, which are

subject to execution, and thus refused, the obligation to execute the rest of actions

shall remain valid.

212.3. When selection is made as provided by article 212.2 of this Law, the

obligor shall inform of it the obligee.

 

Article 213. Partial execution of obligation

213.1. If it is stated in contract or the obligee permits, the obligor shall be

entitled to execute the obligation partially.

213.2. The obligee shall be entitled to refuse receiving execution that is

different from one indicated in the contract. This provision shall be equally

applicable even if the execution of obligation was costly.

 

Article 214. Quality of obligation execution

214.1. If the quality of obligation execution was not clearly stated in the

contract, the obligor shall be liable to execute obligations meeting normal

requirements and to transfer property with quality not below the average.

 

Article 215. Right to impede obligation execution

215.1. Until the obligee assumes own obligations and makes possible to

execute obligation, the obligor may impede obligation execution other than

monetary obligation.

215.2. If obligation item is property that can be determined by

characteristics of type, the obligor shall be liable to execute the obligation in any

condition.

 

Article 216. Execution order of obligation

216.1. If obligor is liable to execute several and same type obligations, but

their execution is not enough to cover all debts, the obligor shall be entitled to

select and execute any obligation. If the obligor did not make such selection, the

debt with payment deadline is due, shall be paid first.

216.2. In case the payment deadline of several debts coincides, demand

with most difficult conditions, shall be executed first.

216.3. If demands have similar conditions for the obligor, a priority shall be

given to the obligation with less possible execution.

216.4. If obligation execution is not enough to cover all debts, first of all,

judicial expenses, secondly, principal obligation, and lastly, interests, shall be

paid.

 

SUB-CHAPTER TWO

EXECUTION OF MONETARY OBLIGATION

 

Article 217. Banknote to execute the payment

217.1. Monetary obligation shall be executed by Mongolian banknote -

togrog.

217.2. Unless prohibited by law, parties may execute monetary obligation

in foreign currency banknotes.

 

Article 218. Currency rate to make the payment

218.1. If currency rate appreciates or depreciates before the time of making

the payment, the payment shall be made at currency rate existed when the

obligation was created.

218.2. If the type of currency banknote is changed, the payment shall be

calculated at currency rate existed when the banknote was changed.

CHAPTER SEVENTEEN

CIRCUMSTANCES OBSTRUCTING OBLIGATION EXECUTION

SUB-CHAPTER ONE

GENERAL PROVISIONS

 

Article 219. Impossibility to execute obligation due to obligor’s fault

219.1. If an obligor breaches the obligation, the obligee shall be entitled to

demand compensation for damages caused.

219.2. If the obligor exceeds the deadline to execute obligation, the obligee

may indicate additional time to execute obligation. If the obligation is overdue

again, the obligee shall be entitled to demand compensation for damages caused.

219.3. If it is obvious that no results could be achieved with giving

additional time, or exercising rights by the obligee to get compensation for caused

damages is more in the interests of parties, then additional time shall not be given.

219.4. It shall be prohibited to agree in advance to release the obligor, who

deliberately breaches his/her obligation, from the obligation to eliminate the

caused damages.

219.5. The obligor, who executed his/her obligation through a legal

representative or other parties, shall be fully responsible for the caused damages

to the obligee due to their actions.

219.6. Unless otherwise stated in contract, or if it does not contradict with

the characteristics of obligation, the obligor, who fails to fulfill obligation due to

failure to receive the obligation items from another party, shall bear the

responsibility resulted from such a failure.

 

Article 220. Impossibility to execute obligation due to changes in

circumstances

220.1. If circumstances, which serve as the grounds for concluding the

contract, have changed substantially after entering into contract, and the parties

were aware of such a change beforehand, and it was possible not to enter into

contract or conclude with different contents, the parties shall be entitled to

mutually demand to adjust the contract to the changes in circumstances.

220.2. If assumption of parties about the grounds to enter into contract was

erroneous, it shall be deemed as same as the changes in circumstances to

conclude the contract.

220.3. Parties shall be liable to take measures to adjust the contract to

change in circumstances as a priority.

220.4. If adjusting the contract to changes in circumstances is impossible

or the other party does not allow it, the party whose interests are affected shall be

entitled to renounce the contract.

 

Article 221. Contract renouncing by parties on justifiable reasons

221.1. If justifiable reasons exist, the parties who entered into long-term

contract, may renounce the contract regardless its expiration date.

221.2. Emergency situation and force majeure condition, or circumstances

that make impossible to demand to prolong or extend duration of the contract in

order to protect legitimate interests and rights of the parties, shall be deemed as

justifiable reasons.

221.3. If a breach of contractual obligation serves as grounds for its

termination, the contract may be terminated only within the period to give prior

warning or eliminate breaches as provided in articles 219.3 and 225.2 of this Law.

221.4. An authorized person may terminate a contract within normal and

reasonable period of time after becoming aware of existence of termination

grounds.

221.5. If previously executed obligation becomes meaningless with contract

termination, it shall be terminated as well. The regulation provided by article 205

of this Law shall equally apply to such a termination.

221.6. Article 227 of this law shall equally apply to requirements concerning

of an elimination of damages.

SUB-CHAPTER TWO

CONSEQUENCES OF OVERDUE

Article 222. Overdue by obligor

222.1. In the following cases, obligor shall be deemed in overdue:

222.1.1. if obligation was not performed on time; and

222.1.2. a failure to perform obligations after notification by the

obligee about expiration of the obligation performance term;

222.2. If circumstances led to the overdue were not caused by the obligor’s fault, he/she shall not be deemed to be in overdue.

222.3. An obligor who is in overdue shall be responsible for any careless

actions or inactivity.

222.4. An obligor who is in overdue shall be responsible for the caused

damages regardless of any event had impact on it. However, he/she shall not be

responsible for damages caused due to an inevitable event despite the obligation

was executed on time.

222.5. If obligation of monetary payment was not executed on time, the

obligor shall be liable to pay interest that fit to overdue period.

222.6. Forfeiture shall not be calculated from the interest.

222.7. An obligee shall be entitled to demand to eliminate the caused

damages due to the obligor’s overdue.

222.8. If an obligor executes the obligation before the deadline without

getting obligee’s permission, it shall be deemed as he/she is in overdue.

 

Article 223. Overdue by obligee

223.1. If an obligee did not receive an obligation performance on time,

he/she shall be considered as in overdue.

223.2. If an obligee was liable to take certain actions in order to create

conditions to execute obligation, but this did not happen causing an overdue, then

the obligee shall deemed as in overdue.

 

Article 224. Obligation emerging from obligee’s overdue

224.1. An oblige, who is in overdue due to his/her own fault as provided in

article 223 of this law, shall be liable to eliminate the damages caused to the

obligor.

224.2. The following obligation and consequences shall arise for the

obligee that is in overdue regardless whether he/she is at fault or not:

224.2.1. to compensate additional costs incurred by the obligor

due to storage of the contract items;

224.2.2. to be responsible for risks of accidental damage or

destruction of the contract items;

224.2.3. to lose the right to get interest and forfeiture pursuant to

monetary payment obligations.

 

SUB-CHAPTER THREE

BREACH OF BI-LATERAL CONTRACTUAL OBLIGATIONS

 

Article 225. Contract refusal due to breach of obligation by parties

225.1. If either party breaches contractual obligations and an additional

time was set though no results achieved, the other party shall be entitled to refuse

the contract.

225.2. If the obligee did not set an additional time, but reminded the obligor

to execute the obligations, additional time shall be deemed as being set.

225.3. Although obligor violated some parts of obligation, but performance

of the rest of it is no longer beneficial for the obligee, the latter may be entitled to

refuse the contract.

225.4. In the following cases, parties shall not refuse the contract:

225.4.1. slight violation of obligation;

225.4.2. if the obligee is entitled to demand the contract to be valid,

despite of the requirements stated in article 186.2 of this Law were violated;

225.4.3. if the obligee him/herself is responsible fully or significantly

for obligor’s violation of the obligation;

225.4.4. if the obligor makes counter claim to the obligee prior to

his/her refusal from the contract, or it is possible to make counter claim

immediately after the obligee’s refusal from the contract.

225.5. If it is inevitable or apparent that grounds to refuse the contract

could happen in the future, the obligee shall be entitled to refuse the contract prior

to expiration of the obligation performance.

225.6. An obligor may set a time period for the obligee to refuse the

contract.

225.7. Although an obligee does not exercise the right to refuse the

contract during the period stated in article 225.6 of this Law, but the obligor fails to

perform contractual obligations during the period of prior warning or additional

period to perform obligation, the obligee shall be entitled to refuse the contract.

 

Article 226. Circumstances not requiring additional period or prior

warning

226.1. If the following circumstances exist, setting additional period or

giving prior warning as stated in articles 204.2 and 219.2 of this Law, is not

required:

226.1.1. it is clear that no results could be achieved;

226.1.2. if contractual relations are supposed to be prolonged in

case the obligor fails to perform the obligation within the period stated in the

contract, but performed during the additional period; and

226.1.3. if it is necessary to terminate the contract immediately on

special grounds in the interests of both parties.

 

Article 227. Responsibility for obligation breach

227.1. If a contracting party violates one’s obligation, the other party shall

be entitled to demand compensation for caused damages due to contract

refusing.

227.2. If a party is not responsible for the contract refusal by another party,

the provision stipulated in article 227.1 of this Law shall not be applied.

227.3. Expenses paid by the obligee, property loss or damage, and

inevitable income to be earned if the obligor had performed the obligation, shall be

deemed as a loss.

227.4. If an obligor fails to perform the obligation to transfer certain property

to the obligee’s right to own or possess, use or dispose, the latter shall be entitled

to demand the transfer of such property to oneself and compensation for the

caused damages as well.

227.5. Unless otherwise provide in law or contract and if the obligor fails to

perform the obligation to perform certain work or provide assistance, the obligee

shall be entitled to perform the obligation him/herself or ask a third party to do so,

and to demand the compensation for the caused damages.

 

CHAPTER EIGHTEEN

RECOVERY OF DAMAGE

 

Article 228. Right to recover damage

228.1. A party that is responsible for recovery of the damage, shall be liable

to restore the violated right of the other party to the condition existed before the

damage inflicted. If it is impossible to restore the violated right or it requires

considerably high cost, damage can be compensated in cash.

228.2. A victim may set a certain time period to the party responsible for

recovery of the damage caused to him/her, and if the obligation is not performed

within that period, the former may demand to perform in cash.

228.3. If a victim was incapacitated, or labor capacity decreased, or

consumption increased due to health damage, the party responsible for recovery

of the damage shall liable to recover the damages by paying the former money

(subsidy to support and care) on monthly basis.

228.4. A victim shall be entitled to demand inevitable treatment costs in

advance from the party responsible for recovery of the damage.

228.5. If a victim was professionally incapacitated, and it is necessary to

acquire a new profession, this regulation shall similarly apply to compensation of

costs related to it.

228.6 If justifiable reason exists, a victim may demand one-time

compensation instead of monthly subsidy as stated in article 228.3 of this Law.

 

Article 229. Scope of damage recovery

229.1. To recover the damage, the party responsible shall be liable to

compensate for actual damage caused to the property and income to be earned.

229.2. In order to determine the size of damage, the victim’s interests,

circumstances in which harm was inflicted, and degree of guilt of the person who

causes the damage, shall be taken into consideration.

 

Article 230. Recovery of non-material damage

230.1. A victim shall be entitled to demand to recover the non-material

damage.

230.2. If it is specifically provided in law, non-material damage shall be

compensated in cash.

230.3. If an action or inactivity of an authorized person or victim had impact

on causing the damage or its prevention, or increasing the size of damage caused

by such harm, then degree of their guilt shall be taken into consideration when

determining the obligation to recover the damage and its scope.

CHAPTER NINETEEN

METHODS TO SECURE OBLIGATION PERFORMANCE

Article 231. Methods to secure obligation performance

231.1. Obligation performance shall be secured by the following methods:

231.1.1. forfeiture;

231.1. 2. deposit;

231.1. 3. warranty;

231.1.4. pledge;

231.1.5. guarantee;

231.1.6. contract to transfer the property to ownership, in order to

ensure obligation performance /feduci/;

231.1.7. other methods stated in law.

 

Article 232. Forfeiture

232.1. Forfeiture shall be monetary payment which must be forfeited by a

party that failed to perform or performed improperly of one’s obligation as provided

by law or contract to the other party.

232.2. In case of failure to perform obligation of deposit, forfeiture may be

used as well.

232.3. Forfeiture contract shall be concluded in written.

232.4. Forfeiture shall be classified as a penalty or fine. Total amount of

forfeiture shall not exceed 50 percent of the value of the non-performed obligation.

232.5. Forfeiture, which is due by a party failed to perform or improperly

performed his/her contractual obligations, in the amount as stipulated in advance

by law or contract, or calculated on the basis of a fixed percentage of the value of

the non-performed, or improperly performed obligations, shall constitute a penalty.

232.6. Forfeiture, which is due by a party in overdue of the period stipulated

in law or contract, in the amount of no more then 0.5 percentage per day of the

value of the non-performed obligation, shall constitute a fine.

232.7. If it is not provided in the contract that forfeiture shall be imposed on

if the obligor fails to perform his/her obligation on time, the obligee shall not be

entitled to demand forfeiture, however, entitled to demand recovery of the caused

damage.

232.8. If forfeiture amount is obviously high, Court may reduce the amount

depending on circumstances of the lawsuit.

 

Article 233. Deposit

233.1. The money, paid in advance, included into the mandatory payment

by a party to the contract to the other, as a proof of contract conclusion, shall be a

deposit.

233.2. If contract is cancelled or the party offering deposit does not include

the deposit into the obligation performance, the party received the deposit shall

return it after performance of the obligation.

233.3. If a party offering deposit is responsible for the non-performed

obligation, the deposit shall remain with the party which received the deposit. In

this case, the deposit shall be included when the deposit receiver calculates

compensation for the caused damage.

233.4. If a party received the deposit is responsible for the non-performed

obligation, the deposit shall be returned to the party offered the deposit. In this

case, the latter shall be entitled to demand compensation for the caused damage.

 

Article 234. Warranty

234.1. In order to secure performance of obligation by the obligor, a third

party may provide the obligee with warranty.

234.2. Warranty contract shall be concluded in written.

234.3. Unless otherwise provided in contract, contract shall not be

cancelled by the unilateral motion of the warranty providing party.

234.4. If an obligor fails to perform his/her obligation, the obligee shall be

entitled to demand the warranty provider to perform the obligation on

incontestable proceeding.

234.5. Warrantor obliged before the obligee shall not be entitled to demand

obligation performance from the obligor.

234.6. Bank warranty shall be regulated as provided in article 457 of this

Law.

 

Article 235. Contract on transferring property to ownership to ensure

obligation performance

235.1. According to contract (feduci) concluded to ensure obligation

performance by transferring property to ownership, an obligor transfers moveable

property to the ownership of the obligee with the purpose of ensuring monetary

obligation performance, and if the obligor executes the principal obligation on

time, the obligee shall be obliged to return the property.

235.2. It may be stated in the contract that the obligor may be entitled to

use the transferred property.

235.3. If the obligee disposed of the transferred properties in accordance

with contract prior to performance of the principal obligation, the obligor, who

performed his/her obligation shall be entitled to demand compensation for the

caused damage.

235.4. Contract (feduci) concluded to ensure obligation performance by

transferring property to ownership shall be expired when the obligor performed

his/her obligation to make payment on time and retained the transferred property

or failed to perform the obligation and obligee gained an actual entitlement over

the transferred property.

235.5. Contract (feduci) concluded to ensure obligation performance by

transferring property to ownership, shall be done in written unless provided otherwise by law.

235.6.

If the ownership of the property is transferred to a third party on the basis of fiduciary in order to ensure the performance of the obligation, the third party shall own and manage the property in the interests of the obligor in accordance with the trust agreement specified in Chapter 37 of this Law.

 

CHAPTER TWENTY

TERMINATION OF OBLIGATION

 

Article 236. Termination of obligation upon performance

236.1. Obligation shall be terminated on the following grounds:

236.1.1. if an obligor performed his/her obligation properly;

236.1.2. if an obligee receives another performed obligation instead

of the one to be performed;

236.1.3. parties agreed to change the previous obligation;

236.2. In the case stated in article 236.1.3 of this Law, previous obligation

relations shall be terminated.

236.3. At request of the obligor the obligee shall be liable to provide

documentation that certifies the receipt of complete or parts of performance of

obligation.

236.4. If the interest is not stated in the documentation of debt repayment,

the interest shall be deemed paid and monetary obligation shall be terminated.

236.5. If debt was paid in several instalments, stage by stage, unless

otherwise provided in the documentation about receiving the last part, previous

parts shall be deemed paid.

236.6. Type and amount of debt, given name, surname of obligor, or of a

person paid the debt, duration and place where the obligation was performed shall

be indicated in the documentation about receipt of performance of obligation,

executed by an authorized person or the obligee.

236.7. If an obligor presents a note proving requirements of the obligee,

he/she shall be entitled to demand to return or annul the note together with

documentation about performance of obligation.

236.8. If an obligee is unable to return the proof note, the obligor shall be

entitled to demand to give a document about termination of the obligation.

236.9. Unless parties agreed otherwise, the obligor shall be obliged for the

cost of issuing documentation about receiving obligation performance, but in case

of death of the obligee and his/her successor resides in another place or if the

obligee changed the place of residence, the obligee or the latter successor shall

be obliged.

236.10. In case of obligee’s refusal to perform the following actions, the

obligor shall be entitled to refuse to submit the performance of obligation:

236.10.1 issuing documentation about receiving performance of

obligation;

236.10.2 canceling or returning the proof note stated in article 236.7 of this Law;

236.10.3 writing in the documentation about receiving performance of obligation about the impossibility of returning the proof note, or developing a document about the termination of obligation performance.

236.11. In the case stated in article 236.10 of this Law, the obligee shall be

deemed as in overdue of the deadline of receiving obligation performance.

 

Article 237. Obligation termination with transferring it for storage

237.1. If an obligee is in overdue of the deadline for receiving obligation

performance or his/her place of residence is unknown, the obligor shall be liable to

transfer obligation item to notary of place where the obligation shall be performed;

and money or stocks to the bank, through notary, for storage. In this case, the

obligor shall be deemed as performed his/her obligation and freed from the

obligation.

237.2. Notary shall be obligated to transfer the obligation item, transferred

by the obligor, to the obligee. The person, assigned to keep the item until its

transfer, shall be selected at the notary’s discretion while the documentation shall

be kept with him/herself.

237.3. The obligation item should meet storing requirements; items that

might decay easily or might lose the quality shall not be accepted.

237.4. Notary shall inform the obligee that performance of obligation was

received for storage and shall demand him/her to receive the performance of

obligation.

237.5. The obligee shall be liable for the costs related to storing of the

obligation item.

237.6. The obligor shall be entitled to demand back the item, transferred to

notary for storing, anytime before transferring it to the obligee. In case of getting

back the obligation item, it shall be deemed as not been transferred for storage.

237.7. If the obligee refuses to accept obligation item or the time period

stated in article 237.9 of this Law is expired, the obligor may get back the item

transferred for storage.

237.8. As provided in articles 237.6 and 237.7 of this Law, the obligor,

retained back the item transferred for storage, shall be responsible for the cost of

storing.

237.9. Notary shall keep the item transferred to him/her for up to three

years and if the obligee has not received the item during this period, the obligor

shall be informed about it and the former shall demand from the latter to return

back the item. If the item is not returned within the determined period, it shall be

transferred to the state ownership.

 

 

Article 238. Considering as terminated the obligation with mutual

requirement

238.1. Mutual and similar demands between two parties, deadline of which

is due, may be mutually considered as performed and the obligation is terminated.

238.2. If a party that is entitled to demand agrees, mutual demands may be

considered as performed and the obligation may be terminated prior to the

deadline to satisfy the demand of the other party.

238.3. Demands which limitation period have expired may be mutually

considered as the obligation terminated.

238.4. If the mutual demands to be considered as terminated are not equal,

the small one shall be counted fully, while the balance after counting, shall be

deemed valid.

238.5. If party received the proposal of obligations consideration, is obliged

to satisfy several demands, regulation provided by articles 216.1 to 216.3 of this

Law shall be applied.

238.6. If a party is liable in addition to the principal obligation to pay interest

and other costs, regulation stated in article 216.4 of this Law shall be applied.

238.7. Obligations to be performed in different places may be agreed by

the parties to consider as terminated.

238.8. In the following cases, obligation may not be mutually considered as

terminated:

238.8.1. if parties agreed in advance that obligation shall not be

mutually considered;

238.8.2. if obligation item cannot be taken as payment or the item is

the source of living;

238.8.3. if obligation was formed due to recovery of damages to

human life and health; and

238.8.4. other cases provided in law.

 

Article 239. Termination of obligation upon annulling the debt

239.1. If parties cancelled the debt subject to negotiation, the obligation

shall be terminated.

239.2. In cases, other than the obligee retains the right to demand from

other obligors, if one of joint obligors of obligation paid off all debt, other obligors

shall be released from the obligation.

239.3. The obligee, after deducting the share of the released obligor, may

consolidate into one all remaining parts and demand from other obligors.

239.4. With terminating the debt of the principal obligor, the warranty or

guarantee issuer shall be released from their obligations.

239.5. Release of the guarantor or the guarantee issuer from the obligation

shall not serve as grounds for freeing the principal obligor from the obligation.

239.6. Other guarantors shall be freed from their obligation if one of the coguarantors freed from the debt.

239.7 Bi-lateral obligation relations shall not be terminated with one of the

parties refusal from his/her demands. In this case, the party refused from the

demands shall be liable to perform obligation provided by the contract until the

other party refuses from his/her demands.

 

Article 240. Other grounds for terminating obligation

240.1. Obligation shall be terminated in the following cases:

240.1.1. if the obligee and the obligor become one party;

240.1.2. in case of performance of the obligation is inseparably

connected to the personal condition of the obligor, when the obligor is considered

without civil law capability, or announced as missed, or deceased or announced

as deceased;

240.1.3. in case of the obligation performance is only relevant to the

obligee, who is considered without civil law capability, or announced as missed, or

deceased or announced as deceased;

240.1.4. if a legal person has been liquidated without legacy right

and dismissed from the State register; and

240.1.5 other grounds stated in law or contract.

 

CHAPTER TWENTY-ONE

PARTICIPATION OF SEVERAL PERSONS IN THE OBLIGATION

 

Article 241. Co-obligees

241.1. If several persons are entitled to demand complete or partial

performance of obligation from the obligor, and the latter is obligated to provide

complete or partial performance of obligation, they shall be deemed as competent

co-obligees.

241.2. Competence of co-obligees shall be created on the grounds stated

in the law or contract or in connection with non-divided characteristic of the

obligation item.

241.3 If one of the obligees does not present demands as stated in article

241.1 of this Law, the obligor may transfer performance of obligation to any of the

obligees at own discretion. In this case, the latter shall be freed from obligation

before other obligees.

241.4. If one of the co-obligees refuses from his/her demand, the obligor

shall be freed from the obligation as much as the share of obligee refused from

demand.

241.5. If one of the co-obligees has several successors, each of them shall

be entitled to inherit his/her part of right to claim the debt.

241.6. If one of the co-obligees receives complete performance of

obligation from the obligor, the former shall be obliged to hand over the respective

parts of the obligation to each of other obligees.

241.7. Unless co-obligees negotiated otherwise, their right to demand the

performance of obligation shall be equal.

 

Article 242. Co-obligors

242.1. If any of co-obligors is obligated to provide complete or partial

performance of obligation, and the obligee is entitled to demand complete or

partial performance of obligation from each obligor, then they shall be deemed as

co-obligors.

242.2. Joint obligation shall be created as provided by law or contract, or in

connection with non-divided characteristics of the obligation item.

242.3. The obligee may demand, at own discretion, complete or partial

performance of obligation from any obligor, and the obligation undertaken by coobligors shall remain valid until the obligation is performed completely.

242.4. Any co-obligor shall be entitled to present to the obligees any

counter demand provided by law or under the granted rights, or under the demand

common for all co-obligors.

242.5. If any co-obligor handed over complete performance of obligation to

the obligee, other co-obligors shall be freed from the obligation.

242.6. With presenting demands to obligors, the obligee shall not lose the

right to demand from other co-obligors.

242.7. Consequences, arising from the delay of receiving obligation

performance by the obligee from the obligor, shall be relevant to other co-obligors

performers as well.

242.8. Consequences arising from violation of time-period to perform

obligation by an obligor, shall not be relevant to other co-obligors.

242.9. If any co-obligor has several successors, each of them shall be

liable for obligation equal to corresponding share in the overall inherited

obligation, but if the demand is non-dividable, this regulation shall not apply.

242.10. If debt of co-obligors is integrated with the demand of the obligees,

obligation of other co-obligors shall terminate in the amount of the debt of the

obligor.

242.11. Unless otherwise provided in law or contract, or if the obligation of

each co-obligor is impossible to determine, their obligation shall be equal.

242.12. Unless otherwise provided in law or contract, the obligor, who

performed the joint obligation, shall be entitled to demand the part of obligation

performance from each of obligor.

242.13. If any of co-obligors is insolvent, part of obligation imposed on

him/her shall be equally divided among other solvent co-obligors.

242.14. Termination or suspension of limitation period for any co-obligor

shall not be relevant to other obligors.

 

PART III

CONTRACT LAW

SUB-PART I

CONTRACT OBLIGATION REALATED TO TRANSFERRING PROPERTY TO OTHER’S OWNERSHIP

 

CHAPTER TWENTY TWO

SALE AND PURCHASE, TRADING

SUB-CHAPTER ONE.

COMMON PROVISIONS

Artilce 243. Sale and purchase contract

243.1. Under sale and purchase contract, a seller shall be obliged to deliver

the goods and to transfer the property in the goods without any right violation and

physical deficiency and related to them documentation, to the ownership of buyer,

and a buyer shall be obliged to pay the agreed price to the seller and receive the

purchased goods.

243.2. Seller shall be obligated to provide the buyer with complete, true and

accurate information about the designation, characteristics of usage, storage, use

and transportation condition and procedures, duration of warranty and durability of

the goods sold.

 

Article 244. Sale and purchase contract price

244.1. Unless price is not directly stated in the sale and purchase contract,

parties may negotiate and agree on instruments of setting price.

 

Article 245. Distributing costs related to property transfer

245.1. Unless otherwise provided in contract, seller shall be liable for cost

related to the deliver of goods /weighing, packaging, etc/ and buyer shall be liable

for costs related to transporting, delivering and receiving the goods from the place

where the seller is located.

245.2. Unless otherwise provided in contract, buyer shall be liable for costs

related to formulating the immovable property sale and purchase contract and

required documentation, having the documentation certified by a notary and

registration with the State register.

 

Article 246. Seller’s obligation to dispatch goods

246.1. As provided by contract, seller transferred goods to the carrier, but

did not put any recognition mark on them or any mark by other means, shall

inform buyer about dispatching goods and send a comprehensive list of freight

246.2. If seller is bound to arrange for carriage of the goods, s/he is

obliged to conclude such contracts as are necessary for carriage to the place of

destination by means of transportation. according to the usual terms of certain

transportation.

246.3. If seller is not bound to effect insurance in respect of the carriage of

the goods, s/he shall be obliged, at the buyer’s request to provide him/her with all

available information necessary to enable him/her to effect such insurance.

 

Article 247. Passing of benefit and risk to buyer

247.1. Unless otherwise provided in contract, with their transfer of sold

goods to buyer, benefits gained from using them, or the risk of their accidental

damage or loss shall be passed to the buyer.

247.2. If seller delivered the sold goods to the place different from the one

stated in contract, as requested by buyer, benefit and risk shall be passed to the

buyer when goods are handed over to the carrier or an authorized person.

 

Article 248. Goods deemed received

248.1. Unless otherwise provided in the law, condition to receive goods

shall be defined by contract.

248.2. If buyer performs certain action certifying the reception of goods, the

goods shall be deemed received.

 

Article 249. Contract parties refuse from their obligation

249.1. If actual circumstances emerge when one of parties to the contract

after concluding it, becomes unable to perform the majority of his/her obligation,

the other party may refuse from his/her obligation.

249.2. If one party’s obligation was performed in advance by the method to

ensure the performance of obligation stated in the law, the other party shall not

refuse from his/her obligation.

249.3. In case of delivery of sold goods in several installments, a party’s

failure to deliver the one part of goods lead practically to non-delivery of the

following part the other party may refuse from his/her contract obligation after the

expiration of period, stated in Items 204.2 and 219.2 of this law.

 

Article 250. Prevailing right to possess sold goods

250.1. If seller sold one good to several buyers, then the first buyer got the

goods into own possession, or the one concluded contract first, shall have a

prevailing right to get the goods into own possession if the goods has not been

transferred to anyone else’s possession.

 

Article 251. Physical deficiency of sold goods

251.1. Goods, which quantity and quality are stated in contract, shall be

deemed non-deficient in terms of its physical condition.

251.2. If quality of the goods is not stated in contract, the goods which is

possible to use for purpose stated in contract, shall be deemed physically nondeficient.

251.3. If it does not seriously affect performance of obligation, although

some parts of it are missing or transferred goods are different from the ones

stated in contract and in smaller amount, or a part of the goods has deficiency, the

goods shall not be deemed completely deficient.

 

Article 252. Right deficiency of sold goods

252.1. As for the sold goods, unless the third party has claim on the

ownership right of the goods, the goods shall be deemed as goods without any

right violated.

252.2. If void ownership right is registered as property, it shall be deemed

defective.

 

Article 253. Right and duty of seller in terms of goods deficiency

253.1. If a sold goods contain defects, the seller shall be obliged to

eliminate the defect and replace it with the same type of goods if it is determined

by characteristics of type, or replace it with other goods which is necessary for the

buyer at that particular time.

253.2. According to Item 253.1 of this Law, all costs related to eliminating

the defects (loading, transporting, payment for work performance, material cost

and etc) shall be borne by the seller.

253.3. If the seller replaces the deficient goods with non-deficient goods,

the seller shall be entitled to claim back the previous goods.

 

Article 254. Right and duty of buyer regarding goods deficiency

254.1. The buyer shall be entitled to demand eliminating any good defect,

its replacement with another same type one, or compensation for costs related to

eliminating the defect, or the contract cancellation.

254.2. Unless presenting his/her official complaint stated in Item 254.1 of

this Law within the warranty or refunding period, the buyer may request to reduce

the original price by the amount that needs to eliminate the defect. In this case,

the evaluation shall be made at price prevailed at the time of contract conclusion.

254.3. Except for cases other than stated in Item 251.3 of this Law, if seller

delivered goods with less quantity than stated in the contract, buyer shall be

entitled to refuse to receive the goods.

254.4. If buyer receives the goods stated in Item 254.3 of this Law, the

seller shall pay back the price of missing parts in the proportion of this part in the

overall contract price.

254.5. If seller delivered goods in quantity larger that stated in contract,

buyer shall be entitled to accept it and pay the price of exceeded volume in

proportion to the overall contract price, or send the seller back the excessive

quantity at latter’s cost.

254.6. If seller set warranty period for the goods, buyer shall be entitled to

claim for compensation within the warranty period. If no warranty period was set,

but buyer revealed the defect within six months since receiving the ownership

right for the transferred goods, then s/he shall be entitled to claim for one of

several claims stated Item 254.1 of this Law.

254.7. Goods warranty period shall started from the date of risk transfer to

buyer. If the good’s defect was identified within the warranty period, it shall be

deemed that the goods had defects at the time of risk transfer to buyer.

 

Article 255. Buyer loses the right to claim

255.1. In the following cases, buyer shall be deemed as lost the right to

claim:

255.1.1. If buyer received the goods was aware or was possible to

know the good’s defect at the moment when s/he received it;

255.1.2. if business operating buyer fails to assume her/his

obligation to immediately check the goods while receiving it; and

255.1.3. if the defect occurred due to buyer’s failure to observe the

procedure of transportation, storing and use, or if it occurred due to emergency

or force majeure conditions.

255.2. Item 255.1 of this Law shall not be applied if seller intentionally hides

the defects while transferring the goods.

 

Article 256. Contract cancellation in connection with goods deficiency

256.1. Both seller and buyer shall be entitled to cancel the contract in

connection with the goods defect. In this case, the seller shall be liable to

compensate any losses incurred to buyer.

256.2. In case of selling several goods and some of them are deficient, the

contract shall be canceled for the deficient part, but if this part should be used for

the same purpose together with other parts or deficient part is inseparable from

others or considered together as a complex set, the contract shall be canceled as

a whole.

256.3. If the main part of the goods is deficient, the contract shall be

entirely canceled, but if its the auxiliary parts or accessories are defected, the

contract shall be partly canceled.

 

Article 257. Invalidity of transaction limiting the responsibility

257.1. Parties may negotiate and state in the contract that no responsibility

shall be borne for selling defected goods, or that responsibility shall not be limited,

however, if seller intentionally hide the defects of the goods, such negotiations

shall be deemed void.

 

 

Article 258. Obligation to store sold goods

258.1. If buyer fails to receive the bought goods on time, seller shall be

obliged to store the goods.

258.2. Seller shall be entitled to keep or detain the property until the buyer

pays relevant price of the goods or reimburses any respective expenses.

258.3. In case buyer receives the goods, but wishes exercising her/his

rights to return them, then s/he shall be obliged to store the goods and ensure its

safety and shall be entitled to retain goods until seller pays the relevant costs

related to storage.

258.4. Unless the cost is very high, the party liable to store the goods, may

store the goods at the cost of the other party in the warehouse owned by a third

party.

 

Article 259. Selling stored goods

259.1. If a contract party delayed receiving the goods or fails to pay costs

related to storing the goods, the party storing the goods shall be entitled to sell the

goods according to the respective procedure. Thus doing, the selling party shall

be obliged to notify about the sale to the other party within seven days.

259.2. From the proceeds from selling goods as provided by Item 259.1 of

this Law relevant costs including selling and storing, shall be deduct from the total

price of the goods, and the remaining money shall be transferred to the other

party.

259.3. In the case stipulated in Article 258 of this Law, if the goods in

storage is easily perishable or fast devaluating, or storing is relatively expensive,

the party liable to store it, shall be entitled to sell the goods as provided by this

provisions.

 

Article 260. Rights, requirements, selling and buying other properties

260.1. If it does not conflict with the content of obligation, this provision

shall be equally applied for rights, requirements, selling and buying other

properties.

260.2. In case of selling any right, the seller shall be liable to bring sound

grounds of the validity of right and cover costs related to transferring the right.

260.3. In case of selling a right giving an opportunity to own property, the

seller shall be liable to transfer to buyer a property without any physical or

ownership right defects.

 

Article 261. Eliminating harm done due to violation of contract

obligation by parties

261.1. Damages, caused to a party of sale and purchase contract due to

the other party failure to fulfill the contract obligations, shall be eliminated

according to common procedure for eliminating any caused damages.

 

SUB-CHAPTER TWO

SALE AND PURCHASE ON CREDIT

Article 262. Contract for sale and purchase on credit

262.1. Under a contract for sale and purchase on credit, seller shall be

obliged to transfer the property before the buyer pays the price of property, and

buyer shall be obliged to make the payment of the price stated in contract in parts

or completely after a certain period of time, or pay in parts during a certain period

of time.

 

Article 263. Forms of sale and purchase contract on credit

263.1. Contract for sale and purchase on credit shall be concluded in

written form.

263.2. Following terms and conditions shall be included in the contract;

263.2.1. amount of payment due in cash;

263.2.2. amount and date of partial payment;

263.2.3. amount of interest should be paid;

263.2.4. price or regulation to set price

263.3. Seller shall be obliged to transfer to buyer copies of contract and

accompanying documents.

263.4. If a contract conflicting with the procedure provide by this Article,

was concluded, the contract shall be considered valid according to Item 196.1.1 of

this Law. In this case, seller shall not pay interest, but the price of property. The

payment shall be made within the period states in the contract.

 

Article 264. Seller refuses contract

264.1. If buyer fails to perform his/her obligation stated under sale and

purchase contract on credit or performed it improperly, seller shall be entitled to

refuse the contract. The parties shall be obligated to return all properties acquired

under the contract.

264.2. In the case of stated in Item 264.1 of this Law, seller shall be entitled

to claim for compensation for damages caused by buyer.

SUB-CHAPTER THREE

SALE AND PURCHASE CONTRACT WITH CONDITION TO REPURCHASE PROPERTY

Article 265. Right of seller re-purchase the property

265.1. If it is stated in the sale and purchase contract, seller shall be

entitled to re-purchase/buy back the property sold to buyer. This right of seller

shall be exercised depending on his/her will.

 

Article 266. Contract price

266.1. Unless otherwise stated in contract, seller shall be entitled to repurchase the property at the initially sold price.

266.2. If value was added in the result of improving the property, party reselling the property shall be entitled to demand the total price not exceeding the amount of added value.

 

Article 267. Obligation of property re-seller

267.1. Party re-selling property to the buyer, shall be obliged to transfer the

property with accessories/accompanying items.

267.2. If party re-selling property caused damages to the property or lost it,

replaced it with other one before seller exercises rights stated in Article 265 of this

Law, the former, shall be liable for eliminating caused damages.

267.3. Party re-selling the property shall not be entitled to transfer the

property to a third party for ownership before seller exercises the right stated in

Article 265 of this Law. Transaction concluded by violating this regulation shall not

be deemed valid.

 

Article 268. Exercise of re-purchasing right

268.1. Time period to exercise the right to re-purchase property shall be

determined by mutual agreement of parties, and the duration shall not exceed five

years.

SUB- CHAPTER FOUR

SALE AND PURCHASE OF PROPERTY IN FUTURE /OPTION/

 

Article 269. Contract for sale and purchase property in future

269.1. Parties may agree about selling or buying certain object before a

concrete time or any particular event, or may conclude a contract to acquire

certain item at the initiative of buying party.

269.2. Respective provisions of this Law about sale and purchase contract

shall equally relevant to contract stated in Item 269.1 of this Law.

 

SUB-CHAPTER FIVE

PREVAILING PURCHASE RIGHT

Article 270. Exercising prevailing purchase right

270.1. In case of selling property to a third person by the seller, the latter

shall be obliged to notify a person who has prevailing right purchase the property.

270.2. Seller shall set a period for buyer with prevailing right to exercise

her/his right, but if the latter fails to exercise the right, seller shall be entitled to

conclude sale and purchase contract with a third person.

 

270.3. If seller fails to perform his/her obligation stated in Item 270.1 of this

Law, the buyer with prevailing right shall be entitled to demand from seller to

conclude sale and purchase contract on the same condition as was proposed to

the third person by seller.

 

Article 271. Invalidity of seller’s contract with the third person

271.1. In case the prevailing right to purchase was not performed or the

right was exercised, the transaction, concluded by seller with a third person

envisaging to refuse the contract concluded with the buyer with prevailing right,

shall be invalid.

 

Article 272. Additional obligations of the third party

272.1. If third person took an obligation to deliver additional services or

extra obligations according to contract concluded with seller, the buyer with

prevailing right shall be obliged to pay for the additional service or obligation.

272.2. If additional service or obligation are impossible to expressed in

money term, the prevailing right shall not be exercised.

272.3. Transaction, concluded by the third person with the seller to take

additional obligation with the purpose disqualify the prevailing right to purchase,

shall be deemed void.

 

Article 273. Non-transfer of the prevailing right to purchase

273.1. Unless otherwise stated in law or contract, the prevailing right to

purchase shall not be transferred to others.

SUB-CHAPTER SIX

TRADING

Article 274. Trading contract

274.1. Under trading contract, parties shall be are obligated to mutually

transfer certain properties for ownership.

274.2. Under a trading contract, parties shall be considered sellers with

regard to selling property and buyers with regard to properties buying.

274.3. Respective provisions of this Law related to sale and purchase

contract shall be equally relevant to trading contracts.

274.4. Regulations on trading of state owned assets and securities shall be

determined by separate laws.

 

Article 275. Calculating price balance of properties for trading

275.1. If prices of properties exchanged under a trading contract, are not

equal, the price difference shall be calculated in money term.

 

CHAPTER TWENTY-THREE

GIFT

Article 276. Gift contract

276.1. Under a gift contract, with the consent a person to receive the gift,

grantor shall transfer certain property to the latter’s ownership without any repayment.

276.2. By transferring the property, gift contract shall be deemed

concluded.

276.3. As to property which ownership right is created by concluding a

contract in a form determined by law, the gift contract shall be established in the

same form.

276.4. If gift promise to present with certain property is certified by notary,

then obligation shall be created.

276.5. Certain property may be donated as contribution for a special

purpose.

276.6. A person, who receives the contribution, shall possess, use and

dispose the property of contribution according to designation, and if recipient fails

perform this obligation or performs improperly, the grantor shall be entitled to

demand from latter duly to possess, use and dispose of the contributed property.

 

 

Article 277. Limiting grantor’s right

277.1. Grantor shall not be entitled to gift property in demand for

subsistence of persons under her/his care.

 

Article 278. Responsibility of grantor

278.1. Grantor shall liable to eliminate damages caused to gift receiver due

to the intentional hiding by grantor the defects of gifted property.

 

Article 279. Gift contract concluded for special purposes

279.1. Parties may agree that gift contract becomes effective upon creating

certain conditions or reaching certain goals.

279.2. Conditions and goals stated in Item 279.1 of this Law may be

devoted to others’ or common benefits. In this case, the grantor or interested

person shall be entitled to demand to create conditions and the achieve goals.

279.3 If party entitled to receive the gift fails to create conditions or achieve

goals, grantor may refuse the contract.

279.4 Gift contract for special purpose shall be concluded in written form.

 

Article 280. Revocation of gift contract

280.1. In the following cases, grantor and his/her heir shall be entitled to

demand to revoke the gift from the receiver:

280.1.1. if person, received the gift, performed serious misconduct

offending the grantor;

280.1.2. if person, received the gift, intentionally damaged the health

or life of the grantor or his/her relatives or intended to do so;

280.2. If the gift contract was revoked, the gift items shall be returned to the

grantor or his/her heir.

280.3. If a year passed since emerging the right to demand revoking the

gift, the gift shall not be revoked.

 

CHAPTER TWENTY-FOUR

LOAN

Article 281. Loan contract

281.1. Under a loan contract lender shall be obliged to transfer to the

ownership of borrower money or other property that shall be determined by

characteristics of type, and a borrower shall be obliged to return the property of

the same type, amount, quality, and quantity or money that was received by

him/her within negotiated time.

 

Article 282. Interest of loan contract

282.1. Under loan contract, parties may negotiate and determine the

interest.

282.2. If interest rate was set in the amount obviously damaging the right

and legitimate interests of borrower, then Court may reduce the interest rate at the

request borrower.

282.3. If interest rate is set, loan contract shall be concluded in written

form. If this requirement is not satisfied, right to receive interest shall be lost.

282.4 Loan contract shall be deemed concluded by transferring money or

other property to the borrower.

 

Article 283. Loan contract term

283.1. If the time of loan repayment is not fixed by the contract, borrowers

shall be obliged to repay the loan on lender’s request within one month from the

time of request.

283.2. If interest rate was not fixed by the contract, the borrower may repay

the loan before expiration date specified in the contract.

283.3. If interest rate was fixed in the contract, borrowers may repay the

loan with interest rates only if the interest rate was fixed by contract with the

lender’s consent.

283.4. Unless otherwise provided by contract, the interest rate must be

paid each year.

 

Article 284. Demand on immediate loan repayment

 

284.1. If financial situation of the lender deteriorates and the borrower

failed to perform obligations, lender is entitled to demand immediate repayment of

the loan.

284.2. If circumstances stated in Item 284.1 of this law existed before

conclusion of the contract, but the lender becomes aware of it after concluding the

contract, he or she shall be entitled to demand immediate return of the loan.

 

Article 285. Refusal to issue a loan

285.1. If certain circumstances arise under which a borrower may fail to

repay a loan due to deterioration of assets’ condition, the lender shall be entitled

to refuse to issue promised loan.

 

Article 286. Issuing loan with pledge

286.1. In order to ensure the fulfillment of loan contract obligations, lender

shall be entitled to require immovable property pledge.

286.2. Interest rate on a pledged loan shall be determined by parties.

286.3. In case borrower fails to repay the loan and interest on time, lender

shall immediately notify borrower in writing of intention to sell pledged property to

ensure obligation fulfillment. If the borrower fails to perform its obligations within

10 days from the date of notification, pledged property may be sold on a

commission basis or auction sale, and proceeds shall be used to perform

obligations, and remaining money shall be returned.

286.4. Lender is obliged to ensure full safety of pledged property but it shall

not have the ownership or disposal rights.

286.5. Contract for a loan with pledge issued by a lender shall be

concluded in writing. A contract not complying with this requirement shall be

deemed void.

286.6. Items 157.1.3, 157.2.1, 157.2.2, 157.3, 159.2, 159.5 of this law shall

apply to loans issued by lender under pledge.

 

SUB- PART 2

CONTRACTUAL LIABILITY IN RESPECT OF THE PROPERTY

TRANSFER INTO THE POSSESSION AND USE OF OTHER PERSON

 

CHAPTER TWENTY FIVE

LEASE OF PROPERTY

SUB-CHAPTER ONE

COMMON PROVISIONS

 

Article 287. Contract for lease of property

287.1 Under contract for lease of property, a lessor undertakes to transfer

property for temporary use of a lessee, and the lessee undertakes to pay rental

fees for use of that property.

 

Article 288. Rights and obligations of lessor

288.1. A lessor shall have the following obligations:

288.1.1 Lessor shall transfer property in conformity with the contract

terms;

288.1.2 If provided by law or contract, lessor shall reimburse

necessary expenses related to leased assets;

288.1.3 Unless otherwise provided by contract, lessor must repair

leased assets;

288.1.4 Lessor shall perform other obligations stated in law or

contract;

288.2. Lessor shall have the following rights:

288.2.1. Lessor shall have the right to keep improvements made to

leased assets and that can be separated;

288.2.2. Lessor shall have the right to claim for damage caused by

the failure of lessee to implements duties specified by Item 289.1.3, 289.1.4;

288.2.3. If lessee allows assets to deteriorate, break or created

conditions leading to deterioration and breakage or does not pay rental fees for

three months despite repeated warnings, lessor may terminate contract and claim

for losses caused;

288.2.4. Unless otherwise provided by contract, lessor may refuse to

pay costs of improvements to assets made without permission and that can not be

separated;

288.2.5. Lessor shall have other rights provided by law or contract;

 

Article 289. Rights and obligations of lessee

289.1. A lessee shall have the following obligations:

289.1.1 to use leased assets in accordance with terms of contract;

289.1.2 to pay regularly rental fees for use of properties;

            289.1.3 not to repair or alter leased properties structure or design

without consent of lessor;

289.1.4 not to allow assets to deteriorate to more than normal

depreciation as reflected by law or contract;

289.1.5 to return assets to lessor upon expiry of contract in

complete;

289.1.6 to inform lessor promptly if discovering a defect in properties

or circumstances require immediate action in order to protect assets;

289.1.7. other obligations specified in the law or contract.

289.2. Rights of lessee

289.2.1 Lessee shall have right not to pay rental fees if it is

impossible to use leased properties without his or her fault;

289.2.2 Lessee has right to claim from lessor rented properties

maintenance costs;

289.2.3. Lessee may terminate contract for lease of assets any time

regardless of term stated in Item 294.3 if leased assets may cause harm to health

and life of others;

289.2.4. Lessee may cancel contract before contract expiry if finds a

person, financially capable and willing to lease properties for remaining contract

period, and notifies lessor not less than one month before contract cancellation;

289.2.5. Unless otherwise agreed by parties, lessee can demand

compensation for repair and improvements made with consent of lessor upon

expiry of contract;

289.2.6. Lessee may separate any improvements made from leased

assets upon expiry of contract;

289.2.7. Lessee may transfer and sublease assets to third parties

with consent of lessor;

289.2.8. Lessee shall have other rights provided by law or contract.

289.3. In case specified in Item 289.2.7, lessor shall have no right to refuse

without good grounds.

289.4. Item 289.2.3 shall apply even if lessee was aware of dangers before

concluding a contract for lease of property and does not present any complaint.

289.5. If property had hidden defects which become known during or after

contract conclusion for assets leasing and lessor refuses to repair defects or

procrastinates, lessee may demand to reduce rental fee or claim for damages

caused.

289.6. According to Item 289.2.7 duration of contract for sub-lease shall not

exceed duration of original assets leasing contract.

289.7. Lessee which properly performs obligations under contract for lease

of property shall have a priority right to conclude new rental contract upon expiry

of previous contract. If leasing contract is concluded with another party in breach

of this provision, former lessee may demand from lessor to transfer rights and

obligations of a new lessee.

 

 

Article 290. Property deficiency

290.1. Assets with quality, amount and size complying with contract terms

shall be considered as physically non-deficient.

290.2. If condition of assets is not specified in contract, assets that can be

used for purposes stipulated in contract shall be considered as non-deficient.

290.3. If third parties have no rights to make any claim as to leased

property, such property shall be considered as legally non-deficient.

290.4. Lessor shall be liable for any consequences arising from limitation of

leased property by third party rights.

290.5. Rental fee shall be reduced correspondingly to decrease in use of

leased property due to its inadequate condition.

290.6. Item 290.5 shall not apply if lessor repaired property or defects are

not significant to restrict proper use of property.

290.7. If lessor does not perform obligations to repair property, lessee may

carry out necessary repairs and require reimbursement of repair costs.

290.8. If lessee knew of defects at time of contract conclusion, it shall not

be entitled to raise a claim unless otherwise provided by law.

 

Article 291. Grounds for exempting lessee from liability

291.1. Lessee shall not be liable for deterioration of leased property quality

if used according to contract terms and purpose;

 

Article 292. Rental fee payment methods

292.1. Unless otherwise provided by law or contract, lessee shall pay rental

fees for leased property upon completion of contract

292.2. Lessee shall be obliged to pay rental fees in instalments according

to agreed schedule.

292.3. If agreed by parties, additional expenses shall be paid.

292.4. Lessee shall not be exempt to pay fees if properties were not used

properly due to lessee’s fault

292.5. Lessee shall have right to raise a claim related to rented properties

and demand its satisfaction or consideration and any terms of contract limiting

such rights shall not be valid.

 

Article 293. Duration of contract

293.1. A contract for lease of property shall be concluded for definite or

indefinite periods of time.

293.2. If a contract for lease of property is concluded for more than 10

years, after its expiry any of parties may terminate contract within time stated in

the provision 294.3 of this law.

 

Article 294. Termination of leasing contract

294.1. A contract for lease of property shall be terminated on the following

grounds:

294.1.1. expiry of contract

294.1.2. if leasing contract is concluded for indefinite period and

period specified in contract or law passes after notification on contract cancellation

by any party;

294.1.3. contract is cancelled according to terms stated in contract;

294.2. Parties may cancel contract according to the following good

reasons:

294.2.1. if obligations under leasing contract are not performed or

performed improperly by one party, other party may cancel contract;

294.2.2. if lessor or close relatives need leased apartment;

294.2.3. if lessee refuses to pay market based rental fee proposed

by lessor;

294.2.4. other grounds specified by law

294.3. Unless otherwise provided by contract, and no circumstances for

cancellation arise, either party may cancel contract anytime but must give three

months advance notice to other party. Such a period shall be counted since day of

notification.

294.4. If contract is concluded for lease of furnished apartment, lessor shall

comply with Item 294.3. when canceling contract.

294.5. Item 294.4 shall not apply to hotels and hostels.

294.6. Lessor shall request cancellation of contract for apartment leasing in

writing.

 

Article 295. Consequences of leasing contract termination

295.1. Lessee shall return properties to lessor upon termination of contract

with allowance for natural wear out and depreciation or as agreed in contract.

295.2. Lessee of land shall not retain it upon termination of contract in

order to satisfy any claim.

295.3. If lessee transfers assets for a use to a third party without consent

and knowledge of lessor, latter may require leased property from third party upon

termination of contract

295.4. If lessee extends time of returning leased property upon termination

of contract, lessor may claim for losses in form of rental fees for overdue period of

time.

 

Article 296. Extension or continuation of contract for lease of property

296.1. If lessor does not object to a further lease of property by lessee

upon contract expiration, it shall be deemed extended for indefinite period on

same terms and conditions.

296.2. If contract is concluded for definite period, lessee may request in

writing its extension for definite or indefinite period no less than two months prior

to contract termination and lessor may extend contract except grounds specified

by Item 294.2.

 

 

Article 297. Consequences of ownership rights transfer

297.1. If lessor transfers ownership of leased assets to a third party, all

rights and obligations of lessors shall be passed on to new owner.

 

Article 298. Limitation period

298.1. Within six months from contract termination lessor shall have right to

raise a claim for damage caused by improper use, deterioration of leased

property, and lessee may demand reimbursement of expenses related to

maintenance of properties in proper condition.

298.2. Limitation period shall be counted according to provisions of Article

76.

 

Article 299. Rights of lessee to protect assets

299.1. Lessee has right to protect leased properties by legal means from

infringement by the owner or others.

 

Article 300. Void contract for lease of property

300.1. Following contracts and agreements for lease of property shall be

considered void:

300.1.1. Exemption of the lessor from or the reduction of liability in case he

or she knew about defected property but deliberately did not inform the lessee

about them;

300.1.2. limitation or …. of the right to cancel contract;

300.1.3. if lessee is obligated to reimburse higher price than the actual

damage;

300.1.4. other cases specified in law;

 

Article 301. Lessor right to retain

301.1. Lessor of a land, building or apartment has the right to retain

properties of the lessee located on his or her land, building or apartment in order

to fulfill contract.

301.2. If properties pledged by the lessor are returned back to lessee for

normal use or to ensure normal living conditions, lessor’s pledging right shall be

expired.

SUB- PART TWO

LEASE OF APARTMENT

 

Article 302. Contracts for apartment leasing

302.1. Under contract for apartment leasing, lessor shall undertake to

transfer residential houses, apartment buildings and apartments to possession

and use by lessee, and lessee shall undertake to pay rental fee for its use on time.

302.2. Unless provided otherwise by law or contract, lessees who live in

one apartment shall have equal rights to use its common areas (kitchen,

bathroom, entrances, stairways, etc) that cannot be leased separately.

302.3. If lessor undertakes measures to improve apartment buildings,

apartments or residential houses, he or she must inform lessee of impending

works, and lessee is obliged not to hamper this works.

302.4. Related provisions of law shall equally apply to contract for

apartment leasing.

 

Article 303. Prevailing right of lessee

303.1. Lessee who properly performed obligations for last three years, has

the prevailing right to conclude a new leasing contract or purchase the property.

 

Article 304. Refusal of lessee from contract

304.1. Irrespective of time specified in Item 294.3, lessee may cancel the

contract if it becomes disadvantageous to him or her as a result of not transferring

all or parts of apartment on time or lessee loses later rights to use the apartment.

 

 

 

Article 305. Sublease of apartments

305.1. Lessee may sub-lease all or parts of the leased apartment to a third

party with the consent of the lessor.

305.2. In case described in Item 305.1, the lessor has no right to refuse

without good reason.

305.3. The following grounds shall be considered as good reasons:

305.3.1. if lessor has serious grounds to refuse or it depends on a

personal situation of a sub-lessee;

305.3.2. leased area becomes overburdened;

305.3.3. other grounds stated by law or contract

305.4. Parties shall determine the duration of contract for sublease, but it

may not exceed the remaining period of the original contract for apartment

leasing.

305.5. Contract for sublease may be concluded for indefinite period of time.

In this case, parties may cancel the contract anytime, but they are obliged to

comply with the period of time referred in Item 294.3 of this law.

305.6. If apartment is subleased, the rights and obligations of sublessor

shall be transferred upon termination of the contract to the lessor.

 

Article 306. Rights of lessee family members

306.1. Spouses, children, parents who live permanently with the lessee

shall be considered as family members

306.2. Relatives other than specified in Item 306.1 and/or disabled persons

under the lessee’s care who are living permanently with him or her for no less

than one year in one household, may be considered to be family members.

306.3. Any dispute in respect of family members shall be decided by the

Court.

306.4. A family member living permanently with lessee shall have all rights

and obligations of lessee provided by law or contract of apartment leasing.

 

306.5. Upon request by lessee or family members, a contract of apartment

leasing may be concluded with any of family members.

306.6. If an adult family member leaves the family, any disputes arising in

respect of possession and use of the apartment shall be decided by the Court

irrespective of whom contract for apartment leasing was concluded with.

306.7. In case of lessee death, the rights and obligations shall be

transferred to family members who live permanently with lessee and they have the

right to cancel contract within time specified in Item 294.3

306.8. If disputes arise in respect of possession and use of the apartment

between divorced spouses, the Court shall resolve these disputes. If the Court

decides to give apartment to a spouse who was not a lessee, this spouse shall be

considered the lessee.

 

Article 307. Lodgers

307.1. Lessee may permit a lodger to live in the leased apartment without

contract and free of charge. The lodger must vacate apartment on lessee’s

request.

 

Article 308. Transfer of apartment ownership

308.1. If right of ownership of the leased apartment is transferred to

another person, the contract for apartment leasing shall remain in force.

 

Article 309. Termination of contract due to demolition

309.1. The contract for apartment leasing shall be terminated if relevant

authorities decide to demolish the apartment building.

309.2. If contract is terminated under Item 309.1 of this article, the lessee

shall be given another apartment and, if impossible, expenses borne by the lessee

shall be reimbursed by the authorities.

309.3. If the leased apartment is demolished as a result of not complying

with maintenance requirements, provisions of this article shall not apply.

 

Article 310. Contract for apartment leasing between employer and

employee

310.1. If an employer concludes contract for apartment leasing under its

possession with an employee for indefinite period of time and the contract for

works between parties is terminated, the employer is entitled to terminate the

contract for apartment leasing.

310.2. If the employer concludes a contract for apartment leasing with the

employee for definite period of time and the contract for works expires before

leasing contract, Items 294.2, 294.3 of this law shall equally apply in respect of the

termination of contract for apartment leasing.

 

Article 311. Official apartment

311.1. Apartments transferred for temporary use to certain persons due to

the rights and privileges related to their official status according to the law, shall

be considered official.

311.2. If persons referred in Item 311.1 of this law possess certain rights

and privileges related to their official status, and these rights and privileges are

terminated, the relevant authorities shall recover official apartment.

311.3. Unless otherwise provided by law, regulation of contracts for lease

of property shall equally apply to possession of official apartments.

 

CHAPTER TWENTY SIX

FINANCIAL LEASING

 

Article 312. Contracts for financial leasing

312.1. Under the contract for financial leasing, the lessor shall undertake to

transfer assets to the use of a lessee within a period specified in the contract, and

the lessee shall undertake to pay the fees for its use on a regular basis.

312.2. The lessor shall be obligated to produce itself or through a third

party, or purchase an object of contract upon request from the lessee.

312.3. Parties may include in the contract for financial leasing that the

lessee shall purchase or continue to lease the objects of the contract after the

contract expiration.

312.4. If the lessee compensates depreciation and cost of contract object

upon the contract expiration, he/she may have the right and obligation to

purchase or lease contract object.

 

Article 313. Forms and terms of contracts

313.1. Contracts for financial leasing shall be concluded in written.

313.2. The contract shall contain total price, rental fees, methods of

payment, duration of contract, rules governing the payment procedures in case of

early termination of contract.

313.3. If provisions of this article are breached, the contract for financial

leasing shall be void.

 

Article 314. Obligations of lessor

314.1. Lessor shall be held liable as specified in the violation of provisions

of this property lease contract for the failure to transfer contract object or for a late

transfer, or if transferred assets do not conform to contract terms.

314.2. If provided by the contract, prior to filing a complaint against the

lessor, lessee may claim for damages caused by the seller or carrier of contract

object.

 

Article 315. Consideration of lessor’s claim amount

315.1. If the financial leasing contract is terminated due to the lessee’s

fault, depreciation, unpaid fees and other expenses saved shall be taken into

account when determining lessor’s claim.

 

Article 316. Rights and obligations of third parties

316.1. If provided by contract, a third party may produce or supply contract

object upon request of lessor and require reasonable award or reimbursement of

expenses from the lessor.

316.2. If provided by contract, the third party is obligated to give accurate

information to the lessee on repair, adjustment, installation, use of the contract

object.

 

Article 317. Other provisions on financial leasing contract

317.1. Unless provided otherwise in this chapter, provisions concerning

governing contracts for property leasing specified in this law shall equally apply to

financial leasing contracts.

 

CHAPTER TWENTY SEVEN

LEASING CONTRACT

 

Article 318. Leasing contract

318.1. Under leasing contract, a lessor shall undertake to transfer to a

lessee’s possession and use named assets in order to conduct economic

activities or accomplishment of the purposes stated in its charter, and the lessee

shall undertake to pay fees according to the contract.

318.2. Lessee shall have the right to possess revenue and profits derived

from the leased assets within the period and in accordance with the contract

duration.

318.3. Unless otherwise provided by law the leasing contract shall be concluded in writing and leased

immovable property shall be registered at real estate registration agency.

318.4. A contract which does not comply with requirements of article 318.3

of this law shall be deemed void.

318.5. Unless otherwise provided in this article, regulations of contracts for

property lease shall equally apply to leasing contracts.

 

Article 319. Rental fee

319.1. Payment of rental fee can be made in cash or in other agreed form.

319.2. If the quality of leased assets deteriorates due to unexpected

circumstances or force majeure, parties may change the lease fees by mutual

agreement.

 

Article 320. Duration of lease contract

320.1. Duration of a lease contract shall be determined by the parties.

320.2. If a lease contract is concluded for more than 10 years, it may be

terminated after 10 years according to the provisions of the law and upon the

initiative of any one party.

320.3. If a lease contract on land or right to lease land is concluded for

indefinite period, this contract may be terminated after one year or within one

month at the end of a one year lease period.

320.4. If parties terminate the lease contract before its expiration, they shall

comply with article 320.3 of this law.

 

Article 321. Lease of land with assets

321.1. Lessee of land with its assets has an obligation to protect the land

and each asset from damage and deterioration.

321.2. If the property or assets are damaged or destroyed due to reasons

beyond the lessee’s control, the lessor is obligated to replace them.

321.3. If the lessee agrees by a contract and make separate appraisal of

assets on leased land and to return them upon the termination of contract, he or

she shall be liable for any damages or destructions caused to the assets by

unexpected circumstances or force majeure.

321.4. If it is provided by the contract, the lessee may use some parts of

the assets for economic activities.

321.5. The lessee shall be responsible for keeping the assets according to

the requirements of using land assets for economic purposes.

321.6. After the completion of a lease contract of land, the property and

improvements on assets that are impossible to separate shall be transferred to the

ownership of the lessor

321.7. Upon the termination of a lease contract, lessee shall be obligated to

return leased land assets to the lessor.

321.8. If the price of the assets at the moment of transfer from lessor to

lessee differs from its price when returning them, the lessee shall compensate the

lessor of the difference. Price of the assets shall be determined according to

ongoing market rates at the termination of leasing contract.

321.9. The lessor may refuse to accept or pay for an asset which has no

importance for economic activities or is too expensive.

321.10. In order to satisfy claims concerning leased land assets, the lessee

may pledge the assets. If the lessor satisfies claims in other forms, the lessee may

relinquish its pledge right. If certain parts of the claim are satisfied in monetary

form, the lessee may release some parts of the pledged assets.

 

Article 322. Leasing of factories, businesses

322.1. Factories and businesses may be leased with its assets.

322.2. If livestock and domestic animals that are part of the assets, die or

are injured, the lessee shall compensate damage to the lessor irrespective of

proper business conduct.

322.3. The provisions of article 321 of this law shall equally be applied to

lease of factories and businesses.

 

Article 323. Sublease

323.1. Unless otherwise provided by the contract, the lessee may sublease the rented assets only with the lessor’s consent.

323.2. If a sub-lessee does not use rented assets in accordance with terms

agreed with the principal lessor, he or she shall be liable for any consequences

arising from misuse, to principal lessor. In this case, principal lessor may demand

to revoke the rights of sub-lessee.

 

Article 324. Substitution of lessee

324.1 If the lessee returns rented assets to the lessor before the contract

expiration, he or she shall not be exempted from rental fees.

324.2 If the lessee proposes a new legal person who agrees with terms of

contract and is capable of paying the rental fees to the consent of the lessor, the

lessee shall be exempt from obligations under article 324.1 of this law.

 

Article 325. Continuation of leasing contract after lessee death

325.1. If a lessee dies, his successor may terminate the contract within six

months from the end of the respective quarter.

325.2. If the lessee’s successor considers it possible to continue to use

rented assets him/herself or through a third party for economic activities, he or she

may refuse to terminate and request the lessor to extend contract.

 

Article 326. Obligations of lessee

326.1. Upon termination of a lease contract, the lessee shall return leased

assets allowing for normal depreciation or as agreed in contract.

326.2. The lessor may raise claim for damages caused and demand

payment of rental fee for overdue period of time.

 

CHAPTER TWENTY EIGHT

LEASE OF LAND FOR AGRICULTURAL PURPOSES

 

Article 327. Contracts for lease of agricultural land

327.1. Land for agricultural purposes may be leased with or without

residential or business facilities.

327.2. Unless provided otherwise in this article, regulations of lease

contracts shall equally apply to lease of agricultural land.

 

Article 328. Property transfer according to contract

328.1. A lessor shall be responsible to transfer to a lessee land with assets

to be used for purposes specified in contract.

328.2. Unless otherwise provided by the contract, lessee shall be

responsible for the maintenance of the property and repair assets under lease

such as residential and commercial buildings, roads, fences and walls and use

that property for economic activities.

328.3. Upon conclusion and termination of lease contract, parties shall

jointly make a list of property to be transferred under lease contract reflecting

amount, size, price, quality of assets at time of transfer and confirming it by

signatures of parties.

 

Article 329. Pledging rights of lessors

329.1. In order to satisfy own demands under lease contract, the lessor

may pledge revenues and profits derived from leased assets.

 

Article 330. Extension of contract

330.1. Lease contract of agricultural land for more than two years shall be

concluded in writing, and contracts not complying with this term shall be

considered as being concluded for indefinite period and these contracts shall be

terminated after one year from the date they come into effect.

330.2. If any party proposes to extend a contract concluded for more than

three years, and the other party does not reject it within three months upon the

receipt of proposal, the contract shall be considered extended for indefinite period.

330.3. A proposal or refusal to extend contract shall be made in writing.

 

 

Article 331. Obligation on necessitated expenses

331.1. A lessor shall be obligated to compensate a lessee necessitated

expenses.

331.2. If the lessor agrees to compensate expenses other than stated in

Article 331.1, he or she shall make the payment upon the termination of lease

contract.

 

Article 332. Rights and obligations of parties upon contract

termination

332.1 If a harvest resulting from the lessee business operation is not

collected before the contract expiration, the lessee may request to the lessor to

extend the lease contract, or lessor is obligated to compensate to lessee the cost

of the harvest.

332.2. When agricultural land lease expires, the lessee is obligated to

return leased land, buildings and equipment in normal condition, complying with

the requirements of regular business activities, with allowing for natural wear out

and depreciation or as agreed in the contract.

332.3. If the lessee returns leased assets in better condition than it was at

time of lease, he or she may request compensation from the lessor.

332.4. The lessee may separate improvements made to the leased assets

or the lessor may purchase those improvements for proper price upon the

termination of lease contract.

 

CHAPTER TWENTY NINE

FRANCHISING, MERCHANDISING

 

Article 333. Franchising contract

333.1 Under franchising contract a franchisor shall undertake to transfer a

license, obtained according to established procedures and allow the use of nonmaterial property, to a franchisee, and the latter shall undertake to conduct

activities in accordance with structures and cooperative program agreed with

franchisor, as well as to pay proper fees or a certain part of revenues. Nonmaterial property shall include a name of a company, trademark, product design,

packaging, planning, management and communication, main guidelines on goods

and services procurement.

 

Article 334. Obligations of parties

334.1 A franchisor shall have the following obligations:

334.1.1. to protect a cooperation program from involvement of third

parties;

334.1.2. to regularly update program;

334.1.3. to supply necessary information to the franchisee;

334.1.4. to provide technical assistance to the franchisee;

334.1.5. to offer training for franchisee’s employees;

334.2 A franchisee shall have the following obligations:

334.2.1. to use rights and property received under contract

productively and in accordance with purpose;

334.2.2. to pay fees and certain parts of revenue on time;

334.2.3. to insure transferred rights and property in favor of

franchisor if provided by the contract;

334.2.4. not to transfer license and franchising to third party without

franchisor’s consent;

334.2.5. to involve own employees to training programs offered by

the franchisor and bear respective expenses;

334.2.6. to inform clients and customers that the franchisor trade

name is being used under a license;

334.3. Parties shall exchange all necessary information if a contract is

concluded and maintain the confidentiality of received information if a contract is

not concluded.

 

Article 335. Forms of franchising contract

335.1. Franchising contract shall be made in writing.

335.2. Franchising contract shall contain such basic terms as the contract

duration, procedures of termination and extension of the contract, obligations of

parties, other necessary main conditions and the program for franchise

implementation.

 

Article 336. Duration of franchising contract

336.1. Parties shall determine duration of franchising contract depending

on the demand for particular product or service and market share.

336.2. If franchising contract was concluded for more than 10 years, and

the duration of contract is not fixed, either party may terminate the contract after

10 years within one year since notifying the other party on termination.

336.3. If the contract term expires, parties, guided by principles of mutual

trust and business cooperation, may extend the contract for definite or indefinite

period on same or renewed terms at initiative of either party until their business

relationship comes to end.

 

Article 337. Limiting competition

337.1. Upon the expiration of the franchising contract, the franchisor shall

have the right to prohibit the franchisee’s successor to compete in a specific

territory for up to one year.

337.2. If this prohibition stated in article 337.1 of this law causes serious

damage to the main business of the franchisee, the franchisor shall award a

reasonable compensation to franchisee.

 

Article 338. Mutual liabilities of parties

338.1. Parties shall be liable for implementation of contractual obligations

and accuracy of information provided.

338.2. Franchisee shall be obligated to compensate damage and expenses

caused to the franchisor in relation to obligations under franchising contract

338.3. Franchisor shall not be obliged to issue any guarantee as to

possible revenues the franchisee may earn under franchising contract.

338.4. Franchisor shall not be liable for any damage caused to clients as a

result of a conduct by franchisee.

 

Article 3381. Merchandising

3381.1. Under a merchandising agreement, the right to use an individual's name, image, voice, and literary, artistic, artistic, and artistic image in products and services is granted by the owner to the producer or seller. are responsible for paying for the use of the voice, image, and painting.

3381.1. Unless otherwise provided by law, a merchandise contract shall be made in writing.

 

CHAPTER THIRTY

GRATUITOUS USE OF ASSETS

 

Article 339. Contracts for gratuitous use of assets

339.1. Under contract for gratuitous use of assets property one party shall

undertake to transfer to the other party’s disposal specific assets for gratuitous

use, and the other party shall undertake to use assets in accordance with its

purposes and return them upon termination of contract in normal condition.

339.2. The provisions of articles 289.1.3, 289.1.6, 289.2.6, 293, 295.3, 296,

297, 298 of this law related to contracts for property lease shall also apply to

contracts for gratuitous use of assets.

 

Article 340. Obligations of grantee

340.1. Grantees of gratuitous use of property shall have the following

obligations:

340.1.1. to use assets in conformity with the contract terms and

prevent their deterioration other than regular wear out;

340.1.2. not to transfer assets for use and possession to a third

party without the consent of the grantor;

340.1.3. to pay any inevitable expenses necessary to maintain

assets in normal condition;

340.1.4. to return assets in normal condition upon the expiration of

the contract.

 

Article 341. Termination of contract for gratuitous use

341.1. A grantor of assets, transferred for gratuitous use may terminate

contract in the following cases:

341.1.1. if assets are agreed to be used for specific purpose and

for indefinite period, and the specified period of time expires; or at any time if the

purpose was not determined;

341.1.2. if the grantor needs the assets for own use;

341.1.3. if the grantee of assets for gratuitous use fails to perform

its obligations provided in Articles 340.1.1.-340.1.3 or performs improperly;

341.1.4. if the grantee passes away;

341.2. The grantee of assets for gratuitous use may return the assets

anytime.

 

Article 342. Liabilities of parties

342.1. The grantor of assets for gratuitous use who intentionally did not

inform the other party of any defects in body or in legal status of assets, shall be

obligated to compensate any damage caused to the user of the assets.

342.2. The grantee of assets for gratuitous use shall be liable for any

damages incurred to assets as a result of his or her improper action.

342.3. The grantee of assets for gratuitous use shall be liable for any

damage caused to the other party as a result of a damage, loss, alteration or

deterioration of assets to a greater extent than natural wear out.

342.4. If the grantee of assets for gratuitous use transfers assets to a third

party with the consent of the grantor, he or she shall not be exempt from any

liabilities before the grantor.

 

SUB- PART 3.

OBLIGATIONS RELATED TO PERFORMANCE

OF WORKS AND RENDERING ASSISTANCE

CHAPTER THIRTY ONE

CONTRACTED WORK

Article 343. Contract for works

343.1. Under the contract for works, a contractor shall undertake to carry

out a particular work stipulated in the contract using own or provided by employer

materials, and an employer shall undertake to accept the result of the work and

pay agreed remuneration.

343.2. An object of the contract for works shall be the results of execution

of works.

343.3. Any tangible result of contractor’s work shall be transferred to the

other party’s ownership.

343.4. If the contractor produces goods which can be specified by type and

form and transfers it into ownership of the employer, procedures regulating

contracts for sale and purchase shall apply.

343.5. Depending on the nature of certain kind of works other laws may

apply to the contract for works.

 

Article 344. Work remuneration

344.1. Unless provided otherwise by law, remuneration for work execution,

methods, procedures and time for payment shall be agreed by parties.

344.2. If remuneration for work execution is not specified, the employer

shall make payment depending on the nature of executed work and reasons and

based on tariffs for particular work confirmed by entitled authorities. In case no

such list of tariffs is available, the employer shall base the award on the ongoing

average market rate.

Article 345. Budget for work execution

345.1. Contractor may fix a budget for execution of works stipulated in the

contract.

345.2. If the planned budget for execution of works tends to go over the

proposed budget due to unforeseen factors, contractor shall immediately inform

the employer.

345.3. If the employer decides to terminate the contract due to the

exceeding budget, he or she shall be obligated to pay the remuneration due for

performed work according to the planned budget.

345.4. If the contractor included unreasonably high value in costs when

fixing the budget, the employer may refuse to pay remuneration for the executed

work.

 

Article 346. Remuneration duration

346.1 Unless otherwise agreed by parties, the payment shall be made

upon the completion of work and acceptance of work results.

346.2 If parties agree to execute work in stages or parts and set a premium

for each part or stage separately, payments shall be made upon the completion

and acceptance of work results of each stage.

 

Article 347. Head contractor and subcontractor

347.1. Contractors may engage other legal persons (subcontractors) for

execution of work stipulated in the contract. In this case, the contractor shall act

as a head contractor in relation to the employer, and as an employer in relation to

the subcontractor.

347.2 Unless otherwise provided by law or contract, the contractor shall be

liable to employer for subcontractors work result.

 

Article 348. Duration of work contract

348.1. Unless otherwise provided by the law, parties shall determine the

duration of the contract for work, and they may set a work schedule depending on

the nature of the work involved.

348.2. Unless otherwise provided by the law, parties may agree on mutual

liabilities arising from a disruption of work schedule, but not exceeding the liability

arising from a breach of main contract term.

 

Article 349. Period for raising a claim

349.1. If a contractor breaches contract terms or executes work with

defects, the employer may raise a claim within six months from the date of

accepting work, and, if defects are not possible to detect at the time of work

acceptance, the employer may raise a claim within one year from accepting the

work, unless otherwise provided by law or contract. Employer may make a claim

within three years from accepting the work for such defects of a construction work.

349.2. If the law or contract provides a warranty period during which a

claim can be raised on any detected work defect, the period for presenting claims

shall be counted from the date of discovering the defect.

349.3. Liability period shall be counted from the date on which time limit for

presentation of claims referred to in this article expires.

 

Article 350. Obligations of a contractor

350.1. Contractor shall undertake the following obligations:

350.1.1. to execute work stipulated in the contract on time;

350.1.2. to personally execute work to be carried out in person due

to the nature of work or the personal nature of a contractor;

350.1.3. to immediately inform the employer in following cases:

a) if employer’s materials supplied for works and

instructions on work methods tend to negatively affect the quality and results of

work;

b) if conditions arise beyond the control of the contractor

that may negatively affect the quality and results of work;

350.1.4. to take all necessary measures to ensure proper condition

of materials supplied by employer;

350.1.5. to economically use the materials supplied by the employer

and according to the purpose, to report to the employer on disposal of materials,

to transfer to the employer the remaining materials after the completion of work;

350.1.6. to transfer results of work without any defects to the

employer;

350.1.7. to be liable for all expenses, cost of materials, road fees,

transportation and other expenses necessary to remedy any defects in work

results;

350.1.8. to use materials of proper quality if obligated to execute

work with own materials;

 

Article 351. Obligations of employer

351.1. An employer shall undertake the following obligations:

351.1.1. to pay remuneration according to set procedures on the

dates stipulated by the contract or after accepting the work;

351.1.2 to accept the work results within the time stipulated in the

contract;

351.1.3 to provide the contractor with materials, tools, equipment

and working space necessary to do the work if provided by the contract;

351.1.4 to take all measures to replace, upon request of the

contractor, materials that do not meet requirements or are of poor quality, to

amend improper instructions, to remove obstacles that negatively affect work

quality and results;

351.2. Work result shall be deemed accepted if an employer fails to accept

it on time.

 

Article 352. Demands of parties under work contact

352.1. Claims for damage caused by failure or improper performance of

obligations by any parties shall be regulated by the general rules provided in this

law.

352.2. Employer shall have the right to issue the following demands:

352.2.1. to remedy any work defect or do the work again at

contractor’s initiative and expense if the result of work has defects;

352.2.2. if the contractor does not remedy defects within specified

time, the employer may remedy those defects and claim a compensation;

352.2.3. to reduce the remuneration correspondingly to for the work

result value decrease due to defects;

352.3. If contractor refuses to conclude contract due to relatively high cost

of liquidating defects, the employer’s rights referred to in aticle 352.2.2 shall be

revoked.

352.4. If an employer was aware of any defects at time of handing over

work results, he or she shall lose the right to raise a claim provided in article 352.2

of this law.

352.5. Contractor shall have the right to issue the following demands:

352.5.1. to claim compensation for damage caused by nonacceptance of executed work or non-performance of obligations by employer

specified in Article 351.1 of this law or latter’s failure to do necessary actions;

352.5.2. to take back the work results handed over to the employer

earlier, if the work is executed again to remedy defects and new results of work

are produced;

352.5.3. to demand remuneration in case employer’s failure to

accept the work results on time and they are destroyed or damaged as a result of

force majeure or unexpected disaster or it was impossible to accomplish the work

in time due to the employer’s fault.

 

Article 353. Defects in work result

353.1. If a third party does not have any rights to raise any claim to an

employer regarding the result of work, those work results shall be deemed as

legally defect less.

353.2. If the number, size and quality conform with the contract, work

results shall be deemed as physically defect less.

353.3. If the contract does not specify the number, size and quality, results

of work that may be used in accordance with the contract shall be considered as

physically defect less

 

Article 354. Contractor’s pledge right

354.1. Contractor may pledge the movable property in his or her

possession which is a result of the work ordered by the employer in order to

satisfy his or her claims.

354.2. If objects of contract are buildings or specific part of a building,

contractor shall be entitled to mortgage land for buildings in order to satisfy his or

her claims.

 

Article 355. Termination of contract

355.1. If anyone of the parties seriously breach the contract, other party

may terminate the contract according to grounds and procedures provided in

articles 225, 226 of this law and claim for compensation of damages caused.

355.2. Employer may terminate the contract anytime before the completion

of works.

355.3. It is not required to set additional duration in cases other than

described in article 226, if contractor does not perform its obligations to remedy

defects.

355.4. If an employer’s order can be executed in other form, the contractor

may terminate the contract according to article 355.2 of this law.

355.5. If a contractor is not guilty or special circumstances arise, the

contractor may terminate the contract anytime irrespective of article 355.4 of this

law and shall be exempted from any liabilities resulting to damage to the

employer. And he or she may request to be paid for the executed work if the

employer has interest to obtain results of work executed by the contractor before

the contract termination.

355.6. In a case when the employer terminates the contract, it shall be

obliged to compensate the damage to the contractor after deducting from the due

payment the amount of remuneration issued before.

 

Article 356. Sharing risks of contingency

356.1. Contractor shall be liable for all risks if results of executed work are

destroyed and damaged due to contingency and force majeure before delivery of

the results.

356.2. Employer shall be liable for consequences of destruction or damage

caused by force majeure or contingency to the work results remaining in the

possession of contractor if it fails to accept them on time.

356.3. If the work materials are destroyed or damaged in cases described

in articles 356.1, 356.2 of this law, the party who supplied the materials shall be

liable for the risks.

 

Article 357. Void contract for works

357.1. If contractor does not intentionally inform the other party of any

defects in work results and these defects are discovered later, any agreements as

to full or partial exemption from liabilities shall be deemed void.

 

Article 358 Regulation of specific types of work contract

358.1. Related provisions of this chapter shall apply to all specific types of

contracts for works.

CHAPTER THIRTY TWO

HIRED WORK

Article 359. Hired work

359.1. Under a hired work contract, employee undetakes to perform

specific job order and employer undertakes to issue due wages.

359.2. Any kind of job can fall under this category of contract.

 

Article 360. Payment for hired work

360.1. If it is not specified otherwise in the contract, wages shall be issued

after completion of job order or service.

360.2. It can be agreed that wages be issued in instalments and according

to an agreed schedule.

 

Article 361. Execution of work order

361.1. Unless specified otherwise by the law or contract, employee shall

execute the job order personally and is not allowed to pass it to third party.

Article 362. Refusal to accept work or service

362.1. If an employer postpones or refuses to accept job result, employee

shall have the right to discontinue execution of job order and to demand due

payment.

 

Article 363. Working conditions

363.1. Employer shall have the duty of providing office standards and work

specific requirements of space, tools and equipment necessary to ensure

employees’ health and safety.

 

Article 364. Termination of contract

364.1. Hired employment shall end with expiration of agreed contract term.

364.2. If a contract does not specify employment terms or due to the nature

and aims of the specific job or service, parties shall have the right to terminate

contract at agreed time.

 

Article 365. Contract termination period

365.1 Depending on the schedule of payments, a contract can be

terminated in the following cases:

365.1.1. if it is agreed to be paid on a daily basis, on the next day

after the last payment;

365.1.2. if it is agreed to be paid on a weekly basis, on the next

week’s first working day after the last payment;

365.1.3. if it is agreed to be paid on a monthly basis, within the 15th

day of the of month of payment;

365.1.4. if it is agreed to be paid on a quarterly or longer term basis,

after making payment 30 days prior the term expiration;

365.1.5. if a duration is not agreed, after issuing due payment 14

days prior contract termination;

365.2. For contracts of more than five years term, employee shall have the

right to terminate the contract after five years, with six-month prior notice to the

other party.

 

Article 366. Contract extension

366.1. If an employee notifies the employer about expiry of contract and

expresses an interest to extend it, and latter consents it, contract shall be deemed

extended for unspecified period of time.

 

Article 367. Contract termination

367.1. Employee shall have the right to demand remuneration for the work

accomplished until the termination of contract due to reasons specified in article

221 of this law.

367.2. Employee shall not have the right to demand remuneration if

contract was terminated due to failure of the employee to meet its contract

obligations or involvement in activities contrary to contract and with the employer

performing all its obligations.

367.3. In a case when a contract is terminated after the advance payment

or some part of the remuneration was issued, an employer shall have the right to

demand it back.

367.4. An employer shall be responsible for damages caused by the

termination of contract due to activities contrary to contract.

 

Article 368 Proof of contracted employment

368.1. An employee shall have the right to request from employer a written

statement confirming contracted employment and its duration.

 

CHAPTER THIRTYTHREE

LABOUR

 

Article 369. Labour contract

369.1. Citizens may conclude labour contracts with legal persons or

citizens.

369.2. The procedure for conclusion and terms of labour contracts shall be

determined by law.

369.3. Unless otherwise provided by law, general grounds of this law shall

be applied for labour contracts.

 

CHAPTER THIRTYFOUR

TOURISM

 

Article 370. Tourism contract

370.1. Under tourism contract travel agency takes an obligation to provide

agreed services, and the tourist takes the obligation to pay for such services.

 

Article 371. Involving third party into tourism

371.1. A tourist may involve a third party into the tourism on behalf of

him/herself, and is entitled to submit a request to the agency engaged in tourism

before the tour.

371.2. If travel agency deems that the third party stated in article 371.1.

does not meet required conditions of the trip, it shall be entitled to request for

replacement of the person with another, before the trip.

371.3. A travel agency shall be entitled to demand from the tourist to pay

for the extra costs incurred in connection with the third party involvement in the

trip.

 

Article 372. Obligation not to make a mistake

372.1. Travel agency shall be liable to organise the trip without making any

mistakes like lowering the magnitude of the trip, mentioned in the contract, or

making the trip senseless.

372.2. If the travel agency fails to fulfil obligations stated in article 372.1 of

this Law, the tourist shall be entitled to demand to eliminate the mistake, however

if such an elimination is relatively costly, the travel agency may refuse to eliminate

the mistake.

372.3. If the travel agency fails to eliminate the mistake within a time given

by the tourist, the latter may eliminate it at own cost and shall be entitled to

demand the former to reimburse respective costs.

372.4. If a travel agency flatly refuses or is unable to eliminate the mistake,

it shall not be required to set the time stated in article 372.3 of this law.

372.5. In a case where the trip has faults, the trip cost may be reduced,

taking into consideration the time required for its elimination.

372.6. If a tourist did not inform the travel agency to eliminate the fault due

to his/her own mistake, the trip cost shall not be reduced.

 

Article 373. Termination of contract

373.1. Contract shall be terminated on the following grounds:

373.1.1. if due to the trip fault a substantive damage was caused to

the tourist;

373.1.2. if a tourist informed the travel agency about the impossibility

to participate in the trip due to sound reasons;

373.1.3. if travel agency failed to eliminate the fault on time set by

the tourist;

373.2. If contract was cancelled due to grounds stated in article 373.1.,

travel agency shall fail to get the agreed payment. However, it could be paid for

the in-deficient part of the organised trip.

373.3. If a travel agency is liable for sending back the tourist after the trip,

according to the contract obligation, it shall be liable to fulfil the contract obligation.

In this case the travel agency shall be responsible to pay the cost related to

sending back the tourist.

373.4. If serious difficulties for the trip or other circumstances, which might

cause damages to the tourist, emerge due to emergency or force majeure

conditions, which was impossible to foresee when entering into the contract, either

party to the contract shall be entitled to terminate the contract, and the cost of

sending the tourist back shall be equally shared by both parties.

 

Article 374. Damage compensation

374.1. If a fault was made due to travel agency’s mistake, the tourist shall

be entitled to demand from the travel agency in addition to terminating the

contract to compensate for damages caused.

374.2. If the trip did not take place or it was not organised properly, the

tourist shall be entitled to demand from the travel agency to compensate for the

time wasted in money term.

 

Article 375. Time to present claims

375.1. Tourist may present claims with regard to requirements stated in

articles 372.3 and 374 of this law to the travel agency within one month after the

trip.

375.2. If tourist was not at fault in the expiration of the time stated in article

375.1 of this law, a claim may be presented even after the expiration of the above

time.

Article 376. Transcription

376.1. Transcription for presenting claims by tourist shall be six months.

376.2. Transcription term shall be counted from the day of expiration of

presenting claims or from the day when the travel agency refused to accept

claims.

 

Article 377. Limitation of responsibility

377.1. Travel agency may limit its responsibilities by three-fold cost of

services based on the consent of the tourist, in the following cases:

377.1.1. damage caused by the travel agency to the tourist was not

intentional or wasn’t due to former’s carelessness;

377.1.2. if a travel agency was not liable to bear the

responsibility alone for the damages caused to the tourist due to mistakes made

by other participants of the organisation of the trip.

 

Article. 378. Right to renounce the contract

378.1. Tourist may renounce the contract any time before the trip, in such

case he/she shall be entitled to get back the costs saved due to cancelling the trip

or the advance payments to the travel agency designated to pay for other

services.

378.2. In the case stated in article 378.1 of this law travel agency shall lose

the right to get the fees agreed in the contract, however, it shall be entitled to

demand from the tourist to compensate for damages.

 

Article 379. No alterations to procedures stated in the law

379.1. While concluding a contract, parties to it shall be prohibited to

change procedures stipulated in this article, in a way affecting the tourist.

 

CHAPTER THIRTY FIVE

CARRIAGE

Article 379. Contract for carriage

379.1. Under contract for carriage, a carrier shall take an obligation to

transport passengers or the cargo entrusted to it by the sender to an agreed

destination, and the sender shall take an obligation to pay the agreed price.

379.2. Conditions for the carriage of cargo, passengers and luggage, and

the responsibilities of parties to the contract for carriage shall be determined by

law, or by rules for particular kinds of carriage, enacted in compliance with law.

 

Article 381. Concluding contract

381.1. Person publicly proposing to transport passengers, cargo and

luggage shall conclude a contract for transportation, unless there are sound

reasons for refusal to do so.

 

Article 382. Passenger transportation

382.1. Contract with passengers shall be considered concluded when they

are given tickets or boarding cards.

382.2. Tickets and boarding cards could be done in a transferable and nontransferable ways, but the possibility to transfer them shall be terminated when the

transport means start moving.

 

Article 383. Contract termination

383.1. Passenger may cancel transportation contract any time without

causing damage to the contract, but s/he shall compensate to the carrier any

damage caused due to contract cancellation.

383.2. If from the side of a carrier circumstances were revealed, which

were not possible to know, but if known, could serve as reason for not concluding

contract, or in case there is a potential delay in reaching the place of destination

or the trip time may take longer than expected, the passenger may refuse to enter

into the contract. In this case the liability to compensate the damage shall not

arise.

Article 384. Carrier liabilities

384.1. If during transportation any damage was caused to the passenger or

to her/his property, or the carried luggage was lost or damaged, the carrier shall

bear the responsibility stated in the law or rules of particular transport kinds.

384.2. Carrier shall not bear any responsibility for the damage caused by

emergency or force majeur circumstances, or due to the passenger’s fault, or

luggage carried by the passenger.

384.3. Damage caused to the passenger by the driver or other staff of the

carrier due to their failure to perform duties, breakage, shortage or poor quality of

transportation and its equipments shall not serve as grounds for exempting the

carrier from responsibility.

384.4. Damages caused to passenger due to delay shall not be borne by

carrier unless stipulated otherwise in the contract, or unless caused on purpose

or by carelessness.

384.5. Carrier’s responsibility shall not be limited or lifted by the contract.

 

Article 385. Passenger liabilities

385.1. Passengers shall be responsible for the damage caused to the

carrier due to her/his faulty activity, or luggage or cargo, or other stuff carried by

her/him.

385.2. Passengers who have strictly observed conditions and procedures

on storage and transportation, shall not bear any responsibility for the damage.

 

Article 386. Freight transportation contract

386.1. Freight transportation contract shall be accompanied with

consignment documents.

386.2. The consignment document shall be made in three copies and

signed, with one copy accompanying the shipment, the second one going to the

carrier and the third remaining in consignor’s possession.

386.3. If the shipment transportation shall be made by various or several

means or types of transportation, or in parts, the consignor can demand to file

documents for each type or means of transportation or part of shipment.

386.4. Irrespective of missing, incomplete or lost consignment documents,

respective provisions of this Chapter shall be relevant to transportation content

and conditions of validity.

 

Article 387. Consignment documentation

387.1. The consignment documentation shall reflect the following

information:

387.1.1. date and place the documents were filed;

387.1.2. name and address of the consignor;

387.1.3. name and address of the transportation agent;

387.1.4. date and place of handing over the shipment to the agent,

the final destination;

387.1.5. name and address of the consignee;

387.1.6. normal name of shipment and packaging, accepted

special marks for dangerous shipments;

387.1.7. number of pieces, sizes, markings and shipment

registration number

387.1.8. shipment weight and other measurement notes;

387.1.9. transportation costs (transportation price, extra expenses,

customs duties, other expenses related to the forwarding of shipment during the

contract term);

387.1.10. other provisions specified by the law;

387.2. The parties to contract can include in the consignment

documentation the following information if necessary:

387.2.1. prohibition of the transfer or loading of the shipment to

other means of transportation ;

387.2.2. expenses to be borne by the transpiration agent ;

387.2.3. the amount of additional expenses to be paid at the

shipment dispatch time;

387.2.4. the shipment value, special instructions for handling ;

387.2.5. instructions on the shipment insurance;

387.2.6. the limit for delivery time;

387.2.7. the list of documents presented to the transportation

agent;

 

Article 388. Transfer of shipment to transportation agent

388.1 When receiving the shipment, the transportation agent shall check

the following:

388.1.1. if documents accurately reflect the shipment number, sizes

and markings;

388.1.2. the shipment packaging and appearance;

388.2. If the transportation agent has no possibility to examine shipment as

specified in article 388.1.1 of this law, it shall make entries into the consignment

document about it and about the shipment appearance and package .

388.3. The consignor can demand from the transportation agent to

examine the number of pieces, sizes and its parts and to reflect these in the

consignment document, and the transportation agent shall bear the costs

involved.

388.4. The fact of the shipment transfer to the transportation agent and

consignment documents shall serve as a proof of concluding a contract unless

proven contrary.

388.5. If the notes required by article 388.2 of this Law were not filed, it

shall be assumed that the consignment accurately reflects the shipment

appearance, number of pieces, sizes and markings.

388.6. If transportation agent discovers any discrepancy while receiving the

shipment, the consignor shall be responsible for the damages caused to other

parties due to the shipment packaging, unless the former did not present

conditions to this end.

388.7. The consignor shall supply the transportation agent with custom

declaration, other additional documents, as well as all the information necessary

to deliver the shipment to the destination point.

388.8. The transportation agent is not responsible for the accuracy of

information provided by the consignor according to article 388.7 of this Law.

388.9. The consignor shall be responsible for the damages to the

transportation agent in case of incomplete or inaccurate information and

documents, unless the damage results from the transportation agent’s own fault.

388.10. The transportation agent shall be responsible for losing or misusing

the received or attached documents but in the amount not exceeding of the

responsibility for the lost shipment.

 

Article 389. Shipment disposal

389.1. The consignor has the right of disposal over the shipment up to

canceling freight forwarding operation to prevent the delivery of shipment to a

destination other than reflected in the consignment document.

389.2. This right of disposal ends with the transfer of the second copy of

the consignment to the consignee, and thereafter the transportation agent shall

follow the latter’s instructions.

389.3. If the consignor does not file special instructions, the consignee will

take disposal right over the shipment at the moment of receiving the consignment.

389.4. If the consignee instructs the transportation agent to deliver the

shipment to a third party, the latter shall not have a right to name other

consignees.

389.5. The following procedure shall be observed in exercising the disposal

right over the shipment:

389.5.1. the consignor or the consignee with shipment disposal right

can give the transportation agent new instructions entered in the consignment

document and compensate expenses and cost involved after the execution of the

instruction;

389.5.2. the new instructions shall be possible to implement

immediately upon receiving them, and shall not be harmful to normal operation of

the transportation company and pose hazard for the consignor’s or the

consignee’s other shipments;

389.5.3. instructions for opening or dividing the shipment are not

allowed;

389.6. In case it is not possible to fulfill other instructions because of the

instruction to open the shipment, the transportation agent shall immediately notify

the party that issued it.

389.7. The transportation agent shall bear sole responsibility before the

authorized person for harm caused due to its failure to execute the instructions or

to executing them without receiving the original copy of the consignment provided

by article 389.5.1 of this Law.

 

Article 390. Transfer of shipment to consignee

390.1. The consignee shall exercise the right to demand the second set of

consignment documents from the transportation agent as a proof of receiving the

shipment when receiving the shipment.

390.2. The consignee shall be entitled on behalf of him/herself to claim the

lost, missing or not receiving the shipment on time, as specified in the contract.

390.3. To exercise the rights specified in article 390.2 of this Law, the

consignee shall reimburse all expenses reflected in the consignment document.

The transportation agent may retain the right to refuse to hand over the shipment

in case a dispute arises over the payment of such expenses until its requirements

are satisfied.

 

Article 391. Circumstances preventing transportation

391.1. If it is impossible to implement the transportation contract fully or

under conditions stated in the consignment document before delivering the

shipment to the place of designation and handing it over to the consignee, the

transportation agent may demand from the party with disposal right over the

shipment according to article 389 of this Law.

391.2. In situations when delivery according to instructions is not possible

or no new instructions provided by article 389 of this Law was received in time,

the transportation agent shall be liable to take measures most suitable to the

interests of the authorized person.

391.3. The transportation agent shall be entitled to sell the shipment in

cases of spoilage, storage costs exceeding that of transportation and other

unavoidable situations without waiting for instructions from the authorized person.

391.4. If the shipment sold according to article 391.3 of this Law, the

transportation expenses shall be deducted from the proceeds and the reminder

shall be transferred to the authorized person. The transportation agent shall have

the right to demand compensation if the revenue from the shipment sale does not

cover the transportation costs.

391.5. The transportation agent shall be entitled to demand further

instructions form the consignor if circumstances impeding handing over the

shipment after its delivery to the point of destination.

391.6. The transportation agent shall be entitled to demand to accept the

shipment in case the consignee refuses to receive the shipment, if no other

instructions came from the consignor.

391.7. If conditions, impeding handing over the shipment, emerge after the

consignee gives instructions to transfer the shipment to a third party as stated in

article 389.4 of this Law and provisions of articles 391.1 and 391.2 of this Law

shall be applied, the consignee shall exercise rights and obligations of the

consignor and the third party shall exercise the rights and obligations of the

consignee.

391.8. In circumstances provided by articles 391.1, 391.3, 391.5-391.7 of

this Law, the transportation agent can unload the shipment at the expense of the

authorized person. In such case, the delivery of shipment shall be deemed

completed and the transporting agent may store the shipment or a third party may

be assigned to do so.

 

Article 392. Transportation agent’s right to take the shipment as

pledge

392.1. The transportation agent shall be entitled to retain the shipment as

pledge until the right to dispose of the shipment arises in order to have the

transportation costs paid.

 

Article 393. Transportation agent’s liability

393.1. The transportation agent shall bear full or partial responsibility for

lost, incomplete, damaged or delayed shipment from the moment of receiving and

delivering the shipment.

393.2. The transportation agent shall be exempted from liability for lost,

incomplete, damaged or delayed shipment due to the authorized person’s fault or

in a case of following the instructions of the latter, or if the transportation agent

could not prevent the above conditions or its consequences.

393.3. The provisions of this law on limiting the transportation agent‘s

responsibility or relieving it from the duty to prove shall not apply in case of direct

fault of the transportation agent.

393.4. The transportation agent shall be relieved from liability for lost,

incomplete or damaged shipment in the following cases:

393.4.1. the parties agreed to transport the shipment by

transportation means with open access and this was reflected in the consignment;

393.4.2. the shipment was not packaged and was of low quality;

393.4.3. the consignor, the consignee or a third person representing

them examined and loaded or unloaded the shipment ;

393.4.4. the inherent danger of breaking down, rusting, drying up,

wearing out, shrinking, spilling or be affected by rodents fully or partially due to its

specific nature;

393.4.5. the registration number or notes did not match

requirements;

393.4.6. transportation of animals;

393.5. The transportation agent shall be liable for damages caused for

reasons other than reflected in article 393.4 of this Law which might exist.

393.6. The transportation agent shall be exempted from responsibility if it

can prove that it was not guilty in the loss, incompleteness or damage to the

shipment which was caused by one or more reasons stipulated in article 393.4 of

this Law.

393.7. In case of the shipment being lost, incomplete or damaged due to

force majeure during the transportation as stipulated in article 393.4.1 of this Law,

the provisions of article 393.6 of this law shall not be relevant.

393.8. Article 384.3 of this Law shall apply to the transportation agent as

well.

 

Article 394. Filing a complaint

394.1. The shipment shall be deemed as matching the consignment and

accepted if the consignor did not inspect the shipment together with the

transportation agent or did not express any complaint for the lost, incomplete or

damaged shipment until it is proven contrary,

394.2. The consignee shall file a written complaint regarding obvious

damage or shortage on the day of receiving the shipment or within one week after

the receiving the shipment in case of complaints regarding invisible ones .

394.3. If the consignee and the carrier checked the shipment, but failed to

reveal hidden defects, the opposite proof of result of examination may be

presented within a week time.

394.4. The consignee shall have the right to demand compensation for the

damages caused by late delivery in case of filing a written complaint to the carrier

within 21 days after receiving the shipment.

394.5. The time period stated in this article shall not include days of

dispatching, checking and delivery.

394.6. The transportation agent and the consignee shall be liable to assist

each other in conducting relevant inspection and identification of critical factors.

 

Article 395. Transcription period

395.1. The transcription period for claiming rights arising from

transportation contract shall be one year, and in case of intentional damages or

due to carelessness the transcription shall be three years.

395.2. The transcription period shall be counted from the following

occurrences:

395.2.1. from the day the shipment was lost or damaged; or the

day when it became known or should have been known; or the day of expected

delivery in case of delay;

395.2.2. in case of incomplete shipment delivery- from the 30th day

after the expiration of the time to deliver the shipment agreed by the transportation

contract, if such date was not specified, from the 60th days since the date of

actual receiving the shipment by the carrier;

395.2.3. in other cases, from the day the response to the complaint

was received or the day when the time of presenting complaint expires.

 

Article 396. Chain freight forwarding

396.1. If the transportation is handled by several carriers, each carrier shall

bear full responsibility for transportation and assume disposal right at the moment

of receiving the shipment and consignment documents from the previous carrier.

396.2. Upon the receipt of the shipment each forwarding agent shall file in

the date and provide a signed copy to the previous agent, and enter own name

and address in the second copy of the consignment document.

396.3. If necessary, the carrier receiving the shipment shall reflect on the

second copy of the consignment document a proof of the shipment receipt and put

the marks stipulated in article 388.2 of this Law.

396.4. In all successive shipment transfers, articles 388.4 and 388.5 of this

law shall apply to both the passing and receiving carriers.

396.5. If the shipment was lost, incomplete or damaged, the compensation

claim may be issued to the first and the last carrier, or directly to the carrier

responsible for the loss, damage or delay, one demand may be presented to

several carriers.

396.6. The transportation agent shall have the right to file a counter-claim

in the following cases:

396.6.1. one transportation agent paid solely for the damage inflicted

by several agents that should have shared responsibility for lost, incomplete or

damaged shipment on equal basis.

396.6.2. carriers had borne responsibility commensurate to payment

each received due to impossibility of establishing personal liability, despite the

requirement to pay according to the degree of liability for each lost, incomplete or

damaged part of the shipment.

396.6.3. in case no responsibility of specific carrier can be

established, the responsibility has been spread equally.

396.7. If one of carriers is insolvent other carriers shall spread the payment

according to the share of revenues received.

396.8. If the transportation agent filing a claim paid without grounds or the

plaintiff failed to appear at court despite advance notice, the latter shall have no

right to refuse to accept the claim or file a counter claim.

396.9. Carriers in charge of the chain transportation may come to an

agreement on issues other than stipulated in articles 396.6 and 396.7 of this Law.

 

Article 397. Some void transportation transactions

397.1. Transactions contrary to the provisions of this Chapter, other than

stipulated in article 396.9 of this Law, shall be deemed void.

397.2. Any transaction on transfer to others by the carrier of claims arising

in connection with insurance of freight or transfer of right to prove shall be deemed

not valid.

 

Article 398. Additional compensation liability

398.1. The consignor or the consignee may agree in advance with the

carrier that in case a shipment of special importance is lost or incomplete, the

agent responsible shall pay double price.

 

CHAPTER THIRTY SIX

ASSIGNEE CONTRACT

 

Article 399. Assignee contract

399.1. Under the assignee contract an attorney undertakes to perform on

behalf of and at the expense of the principal certain actions, and the principal

undertakes to pay for the service, unless otherwise stipulated in the Law or

contract.

399.2. If the particular conduct of the assignee is of counter payment

character it shall be deemed that parties have mutually agreed on the payment

399.3. The attorney shall perform the assigned task personally unless

specified otherwise by the law or contract.

399.4. The principal has the right to cancel the assignment and the attorney

to refuse from the task at any time. No contract restricting this right shall be

considered valid.

 

Article 400. Attorney’s duties

400.1. The attorney shall execute the assignment in accordance with the

instructions of the principal.

400.2. The attorney shall have the right, in the interest of the principal, to

recede from the instructions in a case of necessity and if it was impossible to

inform about it in advance, or even though previously notified the principal, further

instructions have not been received in due time.

400.3. The attorney shall be liable to inform at principal’s request on the

progress of the assignment and to promptly pass on to the principal all articles

received in the course of executing the assignment.

400.4. If attorney recedes from the assignment, it shall return all the

remaining articles received for the execution of the assignment.

 

Article 401. The Principal’s duties

401.1. The principal shall accept the results of the assignment and provide

the attorney with articles necessary for the execution of the assignment,

reimburse the expenses paid by the attorney, unless otherwise specified by the

contract.

 

Article 402. Compensation for contract cancellation

402.1. If the principal alters or cancels the assignment before its complete

execution, the principal shall be liable to reimburse the expenses paid in the

course of the assignment execution and compensate for the damages incurred. If

it was agreed to pay a fee, a portion of the fee due for executed tasks shall be

paid.

402.2. If the attorney was not guilty in executing the principal’s instructions

under dangerous conditions, the principal shall be responsible for the damages

caused.

 

Article 403. Death of attorney or legal entity’s dissolution

403.1. In case of the attorney’s death, its successor shall be liable to notify

the principal on the termination of the contract and take action to protect the

his/her property.

403.2. In case of the dissolution of the legal entity the dissolution group or

individual who is in charge of the dissolution of the legal entity shall be liable to

notify the principal on the termination of the contract and take action to protect the

his/her property.

 

Article 404. Transfer of assignment to another person

404.1. If it is stipulated in the contract, or if the principal delegated the

rights, or personal implementation is impossible, and if implementation of the

assignment by another person is in the best interests of the principal, the attorney

may transfer the assignment to another person.

404.2. The attorney, delegating the assigned tasks fully or partially to a

person replacing him/her, shall promptly inform the principal and provide the

necessary information of the replacing person.

404.3. The attorney shall bear responsibility for the failure or improper

execution of the assignment due to the nomination of the replacement not meeting

the requirements or violation of articles 404.1 and 404.2 of this Law.

404.4. The principal shall be entitled to change the replacing person

nominated by the attorney at any time.

 

Article 405. Termination of assignee contract

405.1. The assignee contract may be terminated on following grounds,

other than stipulated in the law or contract:

405.1.1. The principal cancels the assignment;

405.1.2. Refusal of the attorney to execute the assignment;

 

CHAPTER THIRTY-SEVEN

ENTRUSTED ASSETS

 

Article 406. Property entrusting contract

406.1. Under the property entrusting contract the settler undertakes to

transfer the right of disposal over movable property or assets to the trustee, and

the latter undertakes the obligation, upon receiving them, to manage and dispose

the trust funds in the best interests of the settler.

406.2. Trust contract shall be concluded in a written form.

 

406.3. The trustee shall dispose the entrusted assets on its own and at the

expense and risk of the settler.

406.4. The trustee shall exercise the ownership mandate while entering

into legal relations with the third person and shall be responsible for the

consequences and shall compensate damages caused by actions contradictory to

the interests of the settler.

406.5. The trustee shall not receive any reward from the settler for

managing entrusted assets unless specified otherwise by the contract.

406.6. The settler shall own the proceeds and revenues from managing the

entrusted assets.

 

CHAPTER THIRTY EIGHT

PARCEL FORWARDING CONTRACT

 

Article 407. Parcel forwarding contract

407.1. Under the parcel forwarding contract the forwarding agent

undertakes to transport parcel or shipment on behalf of its own name, but at the

expense of the consignor, and the latter undertakes to pay the service fee.

407.2. Unless specified otherwise in this chapter, the general provision for

assignee contract shall apply.

 

Article 408. Forwarding agent rights and liabilities

408.1. The agent shall be obliged to transport the parcel and shipment, to

choose a carrier, and to fulfill the orders in the interest of the consignor according

to the requirements and conditions reflected in the contract.

408.2. The agent shall insure the shipment if the consignor expressed a

wish to do so. In case of no expression of such wish is made from the consignor,

the agent shall insure the parcel under regular insurance terms.

408.3. Unless the consignor expressed disagreement in writing, the agent

shall insure the shipment against any damage from the consignor’s own default

actions at the expense of the latter with the insurance agent of its own choice and

should inform the consignor about this.

408.4. The consignor shall promptly notify the agent about any damage in

accordance with article 408.3 of this Law and the latter should pass on the

information to the insurance company.

408.5. If the recipient of the parcel refuses or unable to accept the

shipment for other reasons, the rights and obligations of the forwarding agent shall

be determined by the transportation rules.

408.6. The parcel shall be deemed accepted complete and without any

defect except for the case when it was impossible to check the parcel in the

presence of the client and the recipient which discovered the damage reports it to

the agent.

408.7. The recipient shall inform the sender about any obvious damage or

shortage within the day of receiving the parcel.

408.8. Unless specified otherwise by the contract, the forwarding agent can

transport the parcel by own means of transportation and at own expense. In such

case, the forwarding agent shall exercise rights and obligation equal to that of

transportation agent and this will not be deemed detriment of the consignor

interests.

408.9. The forwarding agent shall bear responsibility for any damage

resulting from its own or employee’s fault.

408.10. In a case where a third party afflicts damage to the parties of the

contract, the forwarding agent shall exercise the claim right at the consignor’s

expense only with the consent of the latter. Otherwise the client has the priority

right over the claims.

408.11. If the forwarding agent or its employee inflicted damage to the

consignor, the provision of the contract limiting their liability or transferring the

obligation to prove the damage to others shall be void.

 

 

Article 409. Consignor rights and liabilities

409.1. The consignor shall be obliged to present the forwarding agent

information on the parcel and other necessary data and transportation documents.

409.2. The consignor shall be obliged to provide documents proving that

the information provided in accordance with article 409.1 of this law is true.

409.3. The consignor shall inform the forwarding agent about the parcel’s

appearance, possible dangers and safety instructions.

409.4. If the consignor failed to provide information in accordance with

article 409.3 of this Law, the forwarding agent shall have the right to dislodge the

shipment, destroy or take other measures at any time to prevent the threat and be

exempted form any liability for damage inflicted to the consignor by such actions.

409.5. The consignor shall pack the parcel according to the requirements of

the forwarding agent.

409.6. if it is necessary to separate the parcel from other shipment the

consignor shall put special markings on the parcel before handing it over to the

entitled party

409.7. The consignor shall bear responsibility for any damage resulting

from its failure to comply to articles 409.5 and 409.6 of this Law except in the case

when the forwarding agent failed to report on parcel without or missing or

improper packaging or markings.

409.8. The consignor has the right to demand the forwarding agent with the

task of inspecting the parcel for additional payment.

409.9. The consignor shall pay the service fee to the forwarding agent only

after the delivery.

 

CHAPTER THIRTY-NINE

BROKERAGE

SUB-CHAPTER ONE.

COMMON PROVISIONS

Article 410. Brokerage contract

410.1. Under the brokerage contract a broker undertakes, by the authority

given and in the interests of the principal, to connect latter with other parties to

conclude transactions, and the principal undertakes to pay the service fees and

rewards unless otherwise specified in the contract.

410.2. If the amount of award or fee is not agreed upon, the commonly

accepted average rates shall apply.

410.3. If the duration of the contract is not specified it can be terminated at

any time.

 

Article 411. Exclusive brokerage rights

411.1. Under the exclusive brokerage contract the principal undertakes to

refrain from contracting other broker’s service, and the broker undertakes to assist

in signing a contract within this period.

411.2. The broker shall have the right to demand compensation for the

damage caused by the principal’s decision to hire another broker within the period

specified in article 411.1 of this Law. In a case of being contracted for brokering a

purchase and sale contract, the compensation shall not exceed two percent of the

amount involved.

411.3. The principal shall retain the right to sign deals with the third party

directly and in this case a fee or award can be agreed upon. In case of brokering a

purchase and sale contract such reward shall not exceed five percent of the

amount involved.

411.4. The exclusive brokerage contract shall be made in a written form.

411.5. The exclusive brokerage contract can be terminated only in a case

of special circumstances.

411.6. Irrespective of the result the contract can be terminated after six

months since the date of issuing the brokerage order if it’s not specified otherwise

by the contract.

411.7. If the contracted article belonged to the third party broker the

principal shall pay no brokering commission, award or reimbursement for the

expenses. This provision shall apply even if this fact is revealed afterwards in the

following cases:

411.7.1. the broker was the third party

411.7.2. the third party has legal involvement with the broker

411.7.3. the broker has legal involvement with the third party

411.7.4. the broker and the third party had official or business

relations

411.7.5. the broker is the family member of the third party

411.8. The broker shall have the right to demand commission, award or

compensation of expenses in a case where it has informed the principal about the

article 411.7 of this Law before concluding the contract with the third party.

411.9. The broker shall lose the right for commission, award or

compensation if it starts working for the interest of the third party, violating

brokerage contract.

411.10. Any agreement contradicting articles 411.7 and 411.8 of this Law,

shall not be deemed valid.

 

Article 412. Credit brokerage

412.1. Unless specified otherwise by the law, the general provisions of the

brokerage contract shall apply to credit brokerage.

412.2. Unless otherwise provided by law, the credit brokerage contract shall be made in a written form.

412.3. The contract shall specify the remuneration or commission, the

credit amount, repayment schedule, interest rate, exchange rate, additional

expenses and the creditor’s full name and address.

412.4. The principal shall pay agreed remuneration or commission to the

broker in the case of securing a credit.

 

SUB-CHAPTER TWO.

TRADING BROKERAGE AND COMMISSION

 

Article 413. A trading broker

413.1. A broker specializing in a purchase and sale, insurance,

transportation, asset rentals or other none trading activities shall have rights and

obligations of a trading broker.

413.2. In cases other than specified in article 413.1 of this Law brokering

services involving agreements and real estate property with the assistance of a

trading broker shall not be deemed as a trading brokerage.

413.3. If the parties to the contract do not prohibit or release from the duty,

the broker shall provide the parties after concluding the contract with signed a

document specifying the contract terms and conditions, parties to, goods and

type, number, size, contract price and duration if it involves securities.

413.4. In cases not requiring immediate action, the parties shall sign all

documents as specified in article 413.3 of this law.

413.5. If one party to agreement refuses to sign or accept the documents,

the broker shall immediately notify the other party.

413.6. If one party accepted the brokerage document without specifying the

other party and does not file a complaint against the other party such document

shall be deemed as an official agreement.

413.7. The broker serving only one party shall inform in a possible or most

suitable time to the other party.

413.8. If one party is not identified, or files a complaint on good grounds

against the identified party in the agreement document, the other party can

demand to hold responsible for the consequences of signing such document.

413.9. In a case where the agreement is signed based on samples it

should be marked clearly as such and the broker should keep it until the

purchasing side consigns the goods without complaints.

413.10. The trading broker shall not have the right to receive any payment

or profit from the agreement signed as the result of a brokerage made between

the parties themselves.

413.11. Trading broker shall be liable for the damages caused by his/her

fault.

413.12. If no prior agreement was reached on which party shall pay the

brokering commission, the parties shall share the agreed amount between

themselves.

 

Article 414. Trading broker records

414.1. The trading broker shall maintain up-to-date daily records and

regularly enter all records and sign each record made.

414.2. The trading broker shall supply upon request from the parties to the

agreement a personally signed document with all information in regard of the

agreement.

 

Article 415. Trading agent, commission

415.1. A citizen or legal entity concluding a contract or brokering the sale of

goods, rights and services on behalf and at the expenses of the client shall be

deemed as a trading agent.

415.2. A citizen or legal entity selling good or acting on its own but at

others’ expense shall be deemed as a commission.

415.3. The trading agent or commission shall undertake to fulfill the

instructions of the client and in his/her best interests and general standards of

conduct, provide the client with necessary information. If it’s not stated otherwise

in the contract, the trading agent or the commission shall provide in the last ten

days of a season a report containing the results of the service, service fee, profit

margin and commission’s payment.

415.4. At the end of each month the principal shall pay to the agent due

fees and commission, and the commission shall give proceeds from the profit.

415.5. If the principal does not fulfill its obligations under the contract or

failed to secure an agreement already brokered by the trading agent or

commission, they shall have the right to demand due fees and bonuses.

415.6. If the agreement was not secured because of the other party this will

nullify the right to demand fees and bonuses.

415.7. If the other party is found incapable of meeting its obligations under

the agreement, the trading agent/ commission shall lose its right for fee/bonus and

return the received funds back to the principal.

415.8. If the commission sells the client’s goods for a different price it shall

promptly inform the client and receives no response it shall consider it as granting

permission.

415.9. If goods are sold at a higher price the client shall retain the

difference.

 

Article 416. Volume of remuneration, bonus and due payments

416.1. If no amount of remuneration, bonus or percentage was mutually

agreed upon, the commonly accepted rates and tariffs shall apply.

416.2. Fees and bonuses shall be calculated on the basis of the amount

due from the paying party, and such additional expenses as cash payment

discounts, accounting, packaging, customs duty, taxes shall be deducted.

416.3. If additional expenses are paid by the third party article 416.2 of this

law shall not be applied.

416.4. Fees and commission for an insurance contract shall be calculated

based on the overall insurance amount, and if the contract does not specify the

amount, it can be based on the insurance payments.

 

Article 417. Trading brokerage, commission contract duration

417.1. If it is not agreed otherwise by the parties, trading agent contract

duration shall be one year. Unless any party expresses a wish to terminate it

within three months prior to its expiration, the contract shall be deemed extended

for one more year.

 

 

Article 418. Compensation for an agent

418.1. The trading agent has the right to demand compensation after the

expiry of the contract, in the following cases:

418.1.1. the principal obtained exclusive rights with the new

customer because of the brokering services of the trading agent.

418.1.2. the trading agent lost the right for fees and bonuses due to

the extension of the agreement with new customers by the principal.

418.2. Attracting new customers shall mean the principal establishing

business relations that can bring in bigger profits.

418.3. The compensation shall not exceed the trading agent’s average

revenue for the last five years of operation or annual revenue. If the contract is

signed for less than one year, the compensation shall be calculated based on the

average revenue the trading agent can earn within the specified period.

418.4. It is prohibited to demand compensation before the contract expires

or refusal from the right to demand compensation.

418.5. The complaint shall not be deemed valid in the following cases:

418.5.1. in cases other than termination of the contract due to

default production operation, the trading agent terminates the contract on its own

initiative, or as a result of his/her age or disease preventing him/her from

continuing to perform the obligations.

418.5.2. the principal cancels the contract due to the trading agents

default actions.

418.5.3. a third party enters into the contract concluded between the

principal and the trading agent on behalf of the latter.

418.6. An agreement specified in article 418.3 of this law must not be

concluded before the expiry of the brokering service contract.

418.7. The liability term for compensation shall be one year after the

expiration of the contract.

 

 

Article 419. Liability

419.1. The trading commission shall compensate for the damages caused

by its deviation from the principal’s instructions under circumstances limiting its

right to power to withdraw or failure to transfer all revenues to the customer.

419.2. The trading commission shall compensate for the loss,

incompleteness or damages to the assets entrusted by the principal except cases

when such damage was caused by force majeure.

419.3. The trading commission or agent can receive additional bonus in

case he/she produces a written guarantee to the client to undertake full

responsibility to the agreement participants to which are identified.

419.4. The trading commission or agent is prohibited to represent interests

of the client’s competitors without the former’s consent, and such consent shall be

deemed granted if the client knew, at the time of signing a brokerage service

contract that the trading agency or commission is representing the client’s

competitor.

419.5. The client has the right to demand compensation for the caused

damage if the trading agent violates article 419.4 of this law.

419.6. If the contract contains a prohibition for the trading agent to serve

the competing company after the contract expiration, such provision shall be valid

only if the client pays compensation amount of which shall be calculated

according to article 418 of this law.

419.7. The contract containing prohibition to serve the competing company

after the contract expiration shall not exceed more than one year’s term.

 

CHAPTER FORTY

PUBLIC PROMISE OF AWARD AND COMPETITION

 

Article 420. Announcing public promise of award

420.1. A citizen or legal entity that makes a public promise of award for a

specific action or result shall undertake to issue the award.

420.2. The citizen or legal entity shall have the right to receive the award in

case it met the announced conditions securing result as specified in Article 420.1

of this law without following the public announcement.

420.3. The party, which promised the award, may alter the award before

the actual performance or result, through publicising by the same means, method,

procedure and other ways of communication as the initial public announcement.

420.4. It is allowed to include in the public announcement a reference to a

possible cancellation of award in case conditions to meet within the announced

period are doubtful.

420.5. If several citizens or legal entities meet the conditions for the award,

the first to perform the task or secure a result shall be given the award.

420.6. If several citizens or legal entities met the conditions simultaneously,

the award shall be divided between them.

420.7. If it is not possible to divide the award or according to the

announced conditions it’s stated that there will be just one winner, the award shall

be given by drawing lots.

 

Article 421. Competition

421.1. The citizen or legal entity that announced a public competition and

promised an award or to grant the right to a winner who performed the required

task undertakes to issue the award or the right as specified by the conditions of

the competition.

421.2. The competition conditions shall specify the task to perform, time

frame, special right issuing conditions, number and amount of awards, executed

work selection procedure and time and other conditions that it deems necessary.

421.3. If it is necessary to change the conditions for the competition for

reasons beyond the control of the announcing party, it can be amended within the

submission period.

421.4. The party announcing the competition has the right to extend the

competition duration, as required, if the requirements to the task change

significantly.

421.5. The notice on change of conditions should be made in the same

way the competition was announced, and without such notice the initial conditions

shall remain valid.

421.6. The party announcing the competition shall not after receiving the

consent of participants to take part or relevant material revoke the competition and

the winner has the right to claim the award in case of such cancellation.

421.7. If the party announcing a competition breaches the procedure set

out in this article, it shall compensate for the damages resulted to participants.

421.8. If a work subject to copyright regulation is created as the result of

the competition and receives the award, the competition announcer shall have the

right to use it in accordance with the conditions of the competition. Unless

specified otherwise by the terms of the competition, the author shall be entitled to

receive fees and awards for use of the work.

421.9. Unless specified otherwise by the law or the competition terms,

works not awarded or granted a right or which have received an award or were

granted a right has not been agreed to be used after the competition according to

the competition terms, it shall be returned immediately at the end of the

competition.

421.10. If several citizens or legal entities performed the announced task

the award shall be issued in accordance to articles 420.5, 420.6 of this law.

CHAPTER FORTY-ONE

STORAGE

 

Article 422. Storage contract

422.1. Under a storage contract the agent undertakes to store items

assigned by the client.

422.2. Unless specified otherwise by the contract the storage shall be free.

If the agent specializes in storing within the core business services then it will be

assumed that even though there has been no mutual preliminary agreement the

storage is for a charge.

422.3. The storage agent has the following rights and obligations:

422.3.1. to store and maintain the assigned assets on equal terms

as if its own even if it is on a free service base;

422.3.2. not to transfer the stored assets to a third party without the

consent of the client;

422.3.3. not to use the stored assets without the consent of the

client unless circumstances force it to;

422.3.4. to change the storing terms and conditions after notifying

the client of the necessity;

422.3.5. to notify the client about a third party’s claims;

422.3.6. to take all necessary measures to maintain the stored

assets in a proper conditions;

422.3.7. to transfer the proceeds resulting from the stored assets to

the client during the storage period;

422.3.8. to refuse to release the stored assets until the payment for

storage fee, reward or storage expenses are fully paid;

422.4. The client has the following rights and obligations:

422.4.1. to pay the agent the necessary storage costs;

422.4.2. if it is a paid service, to pay to the storing agent, the

storage fees after the contract expiration;

422.4.3. to compensate for the damages resulting from the stored

assets except in the cases where it was impossible to know about the dangerous

nature of the goods.

422.5. The client shall bear the responsibility for the consequences of

consented transferring the stored assets to the third party

422.6. The keeper shall bear responsibility for the damages caused

deliberately or on negligence after the expiration of the contract and at the time of

handing over the stored items.

422.7. Unless agreed otherwise, the stored items shall be delivered to a

place specified in the contract and the client shall bear the transportation costs.

 

Article 423. Storage contract duration

423.1. Storage contracts can be made for definite and indefinite period.

424.3. The parties to the contract concluded for indefinite term shall have

the right to terminate it at any time but allow sufficient time for the other party to

fulfill the obligations.

 

Article 424. Storage contract liabilities

424.1. Unless specified otherwise the keeper shall compensate the

damages to the client caused by lost, incomplete or damaged assets.

424.2. The client shall be responsible for the damage caused by the failure

to inform the keeper about the known or could have known quality defects, and in

a case where both parties did not know about or did not have the possibility to

know about;

424.3. The party responsible for the failure to store or for the delay in the

assigned storage period shall be responsible to pay a penalty fee.

 

Article 425. The right for claim to demand stored items

425.1. Irrespective of the storage contract period the client has the right to

claim the stored items at any time.

 

Article 426. Special storage contract

426.1. The general procedure for a loan contract shall apply to a special

storage contract under which the client assigns to the custody of the keeper an

item that can be replaced and on the condition that the same amount and number

of items of equal quality will be returned.

 

Article 427. Storing at hotels

427.1. Hotel, resort, sanatorium or legal person engaged in similar services

shall bear responsibility for the perseverance of the property in the clients room

other than money, valuables that is required to be stored under special procedure.

If the hotel fails to fulfill its obligations it shall be responsible for the loss, shortage

or damage caused to the client.

427.2. If the damage specified in article 427.1 of this law is resulted due to

unexpected or force majeure circumstances or activities of the client or his/her

companion or characteristics of that particular property, hotel, resort sanatorium

shall not be responsible for such damage.

427.3. Obligation to compensate the damages shall not be relevant to the

property that left in the vehicles.

 

CHAPTER FORTY-TWO

WAREHOUSE STORAGE

 

Article 428. Warehousing contract

428.1. Unless specified otherwise by law the warehouseman shall not be

responsible for checking the quality, type, weights and amount, quantity and other

properties of the items assigned for warehouse storage.

428.2. If at the time of assignment of property for storage the

warehouseman finds apparent defects or lack of component it shall immediately

notify the client and be liable for the damage caused to the client from the failure

to fulfill this obligation.

428.3. The warehouseman shall bear responsibility for damage in case it

fails to inform promptly the last bearer of the storage documents, known to him or

her, on the change of or threat to the properties of the stored goods, or transfer of

the stored goods to another warehouse.

428.4. The warehouseman shall store at the warehouse goods of similar

type together only with the consent of the client. In such case the goods shall

become a joint property and the due share of goods shall be determined based on

the amount submitted to the storage.

428.5. The warehouseman shall be entitled to return the due share of the

goods to the client without permission of other clients.

428.6. The warehouseman shall inform the relevant persons in case of

damage or deterioration of the stored goods significantly affecting their value, and

sell the stored goods if there is no sufficient time or possibility to inform.

428.7. The general procedures for a storage contract shall apply to a

warehouse storage contract unless specified otherwise in this chapter.

 

Article 429. Warehousing documentation

429.1. The warehouseman shall provide the client with storage documents

upon the assignment of the goods.

429.2. The storage documents shall include the following information:

429.2.1. date of issuance and registration number;

429.2.2. names and addresses of the parties to contract;

429.2.3. place of storage;

429.2.4. a number of pieces, amount, weight, color, quality, and

packaging description of the stored goods;

429.2.5. storage fee and other necessary expenses;

429.2.6. insurance fee in case of insuring is involved;

429.2.7. term of contract;

429.2.8. signature, seal or stamp of a warehouseman.

429.3. The parties may include additional conditions, other than specified in

article 429.2 of this law, into storage documents.

429.4. The parties shall not be released from responsibility for failing to

include information, required by article 429.2 of this law, in every respect.

429.5. The bearer of the storage documents may put the stored goods on

pledge by producing a confirmation of not withdrawing the goods from the storage

for purposes to execute other obligations.

429.6. The client may transfer the storage documents to the third party

through making a record on it if the warehouseman provides consent.

429.7. The warehouseman shall bear responsibility for the accuracy of the

information mentioned in the storage documents in relation to the bearer of the

documents if the storage documents were transferred by making records but

he/she shall be relieved from such responsibility if records are marked as

“according to information submitted by the client or the third party.”

429.8. The warehouseman shall bear responsibility in accordance to article

429.7 if he or she knew the information was false although the record was made

in relation to it.

429.9. The warehouseman shall not be entitled to enter the records

pursuant to article 429.7 if similar goods are stored together.

429.10. The warehouseman that issued the storage consent documents

shall release the stored goods only to the lawful bearer of the storage documents.

429.11. The warehouseman has the right to demand to return a storage

pledge document if such document was provided.

429.12. The warehouseman shall not bear an obligation to check the

accuracy of the documents transferred by making records but to secure the

entrance of such transfer in the warehouse records.

429.13. If storage or pledge documents are lost or destroyed the lawful

owner may lodge a writ to a court to annul the lost or destroyed documents and a

warehouseman shall issue the new storage or pledge documents on basis of the

court’s ruling.

429.14. In order to pledge the assigned goods for storage the owner of the

stored goods shall transfer the pledge document with special records on it.

429.15. The transferred pledge document shall contain information on the

client and the creditor and their obligations.

429.16. The warehouseman shall be notified on the transfer of the storage

document and make appropriate records.

429.17. The warehouseman shall have the right to retain the stored goods

until the payment of the expenses related to storage.

 

429.18. If the storage documents are transferred through making all

necessary records the new owner shall have the right to pledge the stored goods.

 

Article 430. Expiration of storage term

430.1. Warehouseman shall have no right to demand the client to withdraw

the stored goods until the expiry of terms of a storage contract or if the storage

term was not specified –within three months from the date of the assigning the

goods for storage.

430.2. If an owner of storage documents fails to remove the stored goods

after the expiry of terms of a storage contract, warehouseman shall extend the

terms of the storage contract for another two weeks and if the stored goods were

not withdrawn within the extended period, have the right to sell the stored goods.

430.3. The remaining of proceeds of sale of the stored goods after

deduction of storage fees and other necessary expenses related to the storage

shall be transferred to the owner of the storage documents.

 

CHAPTER FORTY-THREE

INSURANCE

 

Article 431. A contract of Insurance

431.1. Under an insurance contract, an insurer shall undertake to

compensate fully or agreed amount for any damage caused to the insured party if

the insurance event occurs and the insured shall undertake to pay the insurance

premium.

431.2. The insurance items can be property, citizen’s life, health and other

non material interests not contradicting the law.

431.3. Unless otherwise provided by law, the contract of insurance shall be made in writing. A contract which does not comply with this requirement shall be void.

431.4. The insurance contract shall contain the following provisions:

431.4.1. insurance items;

431.4.2. type of insurance perils;

431.4.3. insurable value;

431.4.4. terms of insurance, and conditions for its extension;

431.4.5. insurance premium, and payment schedule;

431.4.6. rights and obligations, and liabilities of the insurer and

insured;

431.4.7. Appraisal, termination or amendment conditions of a policy.

 

Article 432. Type and form of insurance

432.1. Insurance shall be voluntary or mandatory.

432.2. Types of mandatory insurance shall be specified by law.

432.3. All types of insurance except specified in article 432.2 shall be

voluntary.

 

Article 433. Insurance policies

433.1. The insurer shall provide the insured party with a signed insurance

policy.

433.2. The insurer may request same requirements as those to which the

initial insured was obliged by a contract of insurance, from an owner of the

insurance policy if the insurance policy was granted indicating a name of particular

person or in form of This provision shall not apply in case of the insured party

notification of the insurer about the transfer of the insurance certificate or the

assignee promptly claimed its rights.

433.3. If prerequisite for fulfillment of obligations under the insurance

contract was presentation of the insurance policy pursuint to the insurance

contract and the insurance policy was lost, the insured party shall demand

performance of the insurance contract only after notifying the nullity of the policy in

accordance with the particular proceedings.

433.4. The insured may demand a copy of the lost insurance policy nullity

of which was notified in accordance with article 433.3 of this law. Expenses

related to such issuance shall be born by the insured party.

 

Article 434. Grounds for discharge of an insurance contract

434.1. Terms of an insurance contract shall be agreed upon by the insurer

and the insured.

434.2. The insurance contract shall be deemed as discharged in the

following cases:

434.2.1. the expiration of the term as specified by the contract or

law;

434.2.2. the bankruptcy or dissolution of either the insurer or the

insured;

434.2.3. a court ruling announcing the contract is invalid;

434.2.4. confiscation of the insured property by a court ruling;

434.2.5. the parties to the contract consented to discharge the

contract;

434.2.6. the insurer has fulfilled its obligations under the contract;

 

Article 435. Termination of the insurance contract

435.1. The insurance contract, concluded for more than five years, may be

terminated after three months from the date of notification of the intention to

terminate the contract by one of the parties.

435.2. if the contract is concluded with conditions to extend its terms for

more than one year, clause on self-extension of the terms of the contract in case

of the parties’ inaction or not to terminate the contract before the expiration of its

terms shall be deemed invalid. The insured shall apply the proceedings specified

in article 435.1 of this law in order terminate the contract.

435.3. The insured may terminate the contract within one month if the

insurer has increased the insurance premiums.

 

 

Article 436. Serious circumstances to terminate the contract

436.1. The insured shall be obliged to inform promptly the insurer about

serious circumstances known to him or her that may cause danger or occurrence

of the insurance event at the time of concluding the contract as well as after the

conclusion of the contract.

436.2. Circumstances that may cause the insurer to renounce the contract,

or to alter conditions of the contract, as well as, which were directly asked by the

insurer in written form without double meanings, shall be considered as serious

circumstances.

436.3. If the insured fails to fulfill the obligations specified in article 436.1 of

this law, the insurer shall have the right to renounce the contract, or to terminate

the contract or to increase the insurance premium within one month from the

moment acknowledging of such circumstances. The insurer shall be entirled to

terminate the contract at any time if the insured has intentionally increased the

danger.

436.4. the proceedings specified in article 436.3 of this law shall not apply if

the insured attempted to inform the insurer about the serious circumstances but

the latter deliberately evaded or knew about the serious circumstances.

436.5. The insurer may renounce the contract if the report on serious

circumstances contains false information. But the insurer shall not be entitled to

exercise the right to renounce the contract if it was known to the insurer that the

report contained false information or the insured was not responsible for

submission of such report.

436.6. The insurer has the right to terminate the contract if the insured has

deliberately failed to report in writing to the insurer on the circumstances of

potential occurrence of the danger.

436.7. If the insurer has informed about the insurance contract termination

after the occurrence of the insurance event, and the failure of the insured to report

on the potential danger does not lead to the occurrence of the insurance event

and affect the implementation of the insurer’s obligations, the insurer shall not be

entitled to be released from performance of its obligations under the contract.

 

Article 437. Obligations to pay the insurance premium

437.1. If the insured fails to pay the insurance premium on time, the insurer

may extend the due period for 15 days. If the insured fails again, the insurer shall

inform the insured in writing on the consequences of the overdue within the

extended period.

437.2. If an insurance event occurs during the period of the overdue of the

insurance premium, the insurer shall not be responsible to fulfill its obligations

under the contract.

437.3. If the insured renounced the contract before the occurrence of the

insurance event, the insurer has the right to claim the insurance premium due for

the duration for that it has been bearing the insurance perils and the fees due for

services rendered under the contract.

437.4. If the financial situation of the insurer deteriorates leading to the

failure to perform its obligations under the contract, the insured has the right to

refuse to pay the insurance premium.

 

Article 438. The amount of the insurable value

438.1. The parties shall agree on the amount of the insurable value.

438.2. The insurer has the right to check the insured property and

determine its insurable value.

438.3. The insurable value of the insured property shall not exceed the total

value of the property.

438.4. If the insurance value of the insured property provided in the

insurance contract is higher than the cost of the property, the insurance policy

shall be void in respect to the excess value of the property.

438.5. If the insurable value of the insured property is less than the cost of

the property, in case of the occurrence of the insurance event, the indemnity value

shall be calculated taking the insurable value proportionally to the cost of the

property.

438.6. The insurance contract may stipulate higher indemnity value than

specified in article 438.5 but this value shall not exceed the total amount of the

insurable value of the insured property.

438.7. Loss of the potential profit or income due to the occurrence of the

insurance event may be included into the insurable value if it was stipulated the

insurance contract.

438.8. If it is determined that the insurable value is considerably higher

than the the cost of the insured property, the insurer and the insured have the

right to demand to reduce the insurable value, and to lower the insurance

premium respectfully.

438.9. The insurance contract shall be considered void if the insured has

deliberately increased the insurable value and if the insurer has not acknowledged

this fact at the time of concluding the contract, the insurance premium paid before

the renouncement of the contract shall be retained by the insurer.

 

Article 439. Obligations borne by the insurer and the insured in case

of the occurrence of insurance event

439.1. The insured shall promptly notify the insurer about the occurrence of

the insurance event.

439.2. The insurer has the right to demand all necessary information

relevant to the insurance event or for establishing the indemnity value.

439.3. If the insured has failed to inform about the occurrence of the

insurance event but this failure has not caused any substantial damage to the

insurer’s interests, the insurer shall not be entitled to be released from its

obligations under the contract.

439.4. The insurer is obliged to fulfill its obligations under the contract once

the indemnity value was determined after the occurrence of the insurance event.

439.5. The insured shall undertake actions according to the insurer’s

instructions aimed at repelling the danger or reducing the damage, and the insurer

shall reimburse the expenses involved in such activities.

 

Article 440. Rights of the insurance agent

440.1. The insurance agent shall have the right to conclude insurance

contracts.

440.2. If the insurance agent is authorized to conclude insurance contracts,

the insurance agent may also have the right to change the contract conditions, to

extend the contract terms or terminate the contract.

 

Article 441. Insurance for the benefit of the third party

441.1. The insured has the right on its own behalf to conclude an insurance

contract for the benefit of the third party (thereafter “interested party”), whose

interests are insured, and the latter shall enjoy all rights associated with the

insurance policy except the right to demand from the insurer the insurance policy.

441.2. The interested party shall have the right to exercise the rights given

in the insurance contract or claim to a court to do so without the insured’s consent

only in case of possessing the insurance policy.

441.3. If the insurer provided the insured with the insurance policy, the

latter shall exercise the all rights arising out of the contract without the consent of

the interested party, receive the insurance indemnification or transfer the rights to

the interested party if the insurance policy is transferred to the interested party.

441.4. If the insured provides a proof of the third party’s consent to the

insurance contract, the insurer shall be obliged to indemnify the interested party.

 

Article 442. Social insurance

442.1. Types and forms of the social insurance shall be specified by a law.

442.2. The relations arising from the social insurance shall be regulated by

a law.

 

 

Article 443. Insurance against damages

443.1. Under the insurance against damages, the insurer shall be obliged

to indemnify the insured in the form of money for the damages inflicted to his/her

life, health, property or non tangible interests in accordance with the insurable

value.

443.2. If a compound property is insured, the insurance policy shall equally

cover all its components.

443.3. Irrespective of whether the amount paid as the insurance premium

exceeds the indemnity value in case of the occurrence of the insurance event, the

insurer shall compensate the insured shall indemnify equal to the damages

incurred.

443.4. If the insured has simultaneously insured the same insurable

interest with several insurers, the insured shall promptly notify each insurer of that

fact.

443.5. In case of the circumstances specified in article 443.4 of this law, the

sum of the indemnity values of the insurers is considerably exceeding the cost of

the insured interests or the sum of other compensations for the damage for

different reasons in form of money are exceeding the cost of the damage incurred

to the insured interest, the insurers shall jointly fulfill their obligations. The insured

shall not have the right to demand indemnification exceeding the cost of the

damage.

443.6. The insurer shall be liable for damages incurred during a war if it

was provided in a special contract.

443.7. If the insured claims compensation for damage from the third party

the insurer can transfer the claim right but paying out the compensation to the

client. In this case ensurer shall be relieved from its obligations to the client in the

amount it claims from the third party or underwrites.

443.8. If the right to claim under the insurance police is related to family

member residing with the insured, it shall not be allowed to transfer the right to

claim without the consent of the family member unless there is a damage

deliberately caused by the family member.

443.9. If the insured property is transferred to an other owner, the rights of

the insured shall also be transferred to the new owner. The insured shall promtly

notify the insurer of the occurrence of such transfer.

443.10. If an insurance event occurs within 1 month from the date when the

insurer should have known that the insured had failed to fulfill the obligation

specified in article 443.9 of this law, the insurer shall be relieved from obligations

under the insurance contract.

443.11. The insurer has the right to terminate the insurance contract

following the 1 month rule to terminate the contract.

443.12. The insurer shall loose the right to terminate the insurance contract

with the new owner if it fails to exercise the right to terminate the contract within

one month from the date receiving a notification of property transfer according to

the Item 443.9.

443.13. The person to whom the insurance contract is transferred has the

right to terminate the contract promptly or upon the expiry of the terms of the

contract.

443.14. The new owner shall loose the right to terminate the contract if the

new owner did not know about the existence of the insurance contract at the time

of the transfer and did not exercise the right to terminate the contract within one

month from the date of acknowledgment of the existence of the insurance

contract.

443.15. If the insurance contract was terminated on grounds specified by

articles 443.11 and 443.13 of this law, the insured shall be obliged to pay due

insurance premium but not exceeding the total for the period the contract was

valid including the period of termination. In that case the person to whom the

insurance contract was transferred shall not be liable to pay the due insurance

premium.

443.16. If a life insurance contract is concluded for the benefit of a third

person, a written consent from either that person or his/her legal representative

shall be obtained.

443.17. The insurer shall be relieved from obligations under contract if the

person, concluded the life insurance contract, has committed a suicide.

443.18. The person for whose benefit the life insurance contract was drawn

shall loose the right to be indemnified if the insured was deceased as the result of

an unlawful action of that person.

443.19. If the court ruling on insurance claim is being executed through the

compulsory proceeding or bankruptcy case of the insurer is at the court hearing,

the person, entitled by the insurance policy to receive the indemnification, shall

have the right to participate at the proceedings on the behalf of the insured. If the

insurance contract is terminated due to the bankruptcy of the insured, the person,

entitled to receive the indemnification by the contract, shall be obliged to be

involved in creating a fund, which is distributed to the other by the insured in case

of the bankruptcy, in proportion to the due amount of the indemnification, claimed

from the insurer.

443.20. If the legal person entitled to receive the indemnification pursuant

to the insurance contract is not willing to exercise the right specified in article

443.19 of this law or the insurance contract does not mention any name as a

beneficiary. the legal heir of the insured shall be entitled to exercise that right.

 

Article 444. Liability insurance

444.1. Under the liabilities insurance, the insurer shall bear obligations to

relieve the insured from the liability to the third person arising during the terms of

the contract.

444.2. If the insured was directly claimed to compensate the losses

suffered by a third person, the insurer shall bear obligations to indemnify the

losses within the limit specified by the insurance contract.

444.3. If it is necessary to compensate expenses, which were incurred in

relation to judicial and other proceedings in order to protect against the third

person’s claim, due to surrounding circumstances of the case in question, those

expenses shall be similarly covered by the insurance policy .

444.4. The insurer shall be relieved from its obligations under the insurance

contract if the insured has deliberately created circumstances under which the

insurer was obliged to be liable to a third person.

444.5. Even if the insurer has been fully or partially relived from its

obligations to the insured, the insurer’s liability to the third party shall remain valid

under the compulsory insurance policy.

444.6. If the insurer has satisfied the third person’s claim pursuant to article

444.5 of this law, the third person’s right to claim shall be transferred to the

insurer.

 

CHAPTER FORTY-FOUR

CREDIT AND PAYMENT LIABILITY

SUB-CHAPTER ONE

PAYMENT

Article 445. Payment contract

445.1. Under the payment contract, banks or other authorized juristic

persons (thereafter shall be referred as the “payment executor”) shall bear the

obligation to make non-cash payments of natural or juristic persons (thereafter

shall be referred as the “customer”).

445.2. Cash payments may be executed through banks and authorized

juristic persons unless otherwise provided by a law.

445.3. Non-cash payments may be made by a payment order, a letter of

credit, the collection, a check, a bill of exchange, a debit card, the electronic

transaction, the account credit, loan, and other means of financial payments.

445.4. The payment executor shall execute the payment upon the

customer’s order or permission for the payment in accordance to the payment

contract.

445.5. The payment executor shall not be entitled to limit or supervise the

right to dispose the financial assets deposited into the account by the customer

unless otherwise specified by a law.

445.6. Banks or authorized juristic persons shall have the right to check

completeness of the payment documents.

445.7. The parties to the financial transaction contract may agree to pay

the service fee for settling payments under the contract.

445.8. The relationship of the payment settlements through banks or

authorized juristic persons shall be regulated by a law.

 

Article 446. Obligations of the payer

446.1. The payment executor shall bear the following obligations:

446.1.1. To maintain a book keeping records on cash and non-cash

payments;

446.1.2. To provide the customer with a bank account statement or

other information of the account within the period specified in the contract;

446.1.3. To execute transactions from the customer’s account upon

the customer’s order or permission for the payment;

446.1.4. To maintain confidentiality of accounts and transactions

unless otherwise provided by a law;

446.1.5. To correct any wrongful payment transactions and replace

the loss sustained by the customer;

446.1.6. Not to disturb the normal operations of the customer;

446.1.7. Other obligations specified by a law;

 

Article 447. The customer’s rights

447.1. The customer shall enjoy the following rights:

447.1.1. To get information of the account and its transactions at

whatever time;

447.1.2. To cancel the payment order before the execution of the

payment transaction;

447.1.3. Other rights specified by a law;

447.2. In circumstances as specified in article 447.1.2 of this law, the

customer shall promptly notify the payer and the latter shall transfer the amount

specified in the payment order back into the account of the customer.

 

Article 448. Termination of the payment contract

448.1. The parties shall have the right to terminate the payment contract at

whatever time upon the mutual agreement unless otherwise provided by a law or

the contract.

 

Article 449. Letter of credit

449.1. Upon receiving of the specific documents from the third party

(“thereafter shall be referred as the “payee”) the bank, which issued a letter of

credit, shall execute the payment to the payee or a person assigned by the payee,

or make or accept the payment according to the payee’s bill of exchange, or

assign an other bank to execute the payment pursuant to the request, order and

instruction of the customer.

449.2. The customer shall pay the agreed service fees to the bank.

449.3. The internationally applicable common regulations and customs,

accepted in business routine shall be followed in order to make payments by a

letter of credit.

 

Article 450. Payment by the collection

450.1. Under payment collection service, the payment executor shall bear

obligations to collect payments from the payer, or to make payments to the payee

by the order and at the expense of the customer.

450.2. The laws, internationally applicable common regulations and

customs, accepted in business routine shall apply for executing the payments in

order to make payments by the collection.

SUBCHAPTER TWO

PROVIDING LOANS BY BANKS AND OTHER JURISTIC PERSONS,

AUTHORIZED TO CARRY OUT LENDING ACTIVITIES

 

Article 451. A contract to provide loans by banks and other juristic

persons, authorized to carry out lending activities

451.1. Under a loan contract, banks and other juristic persons, authorized

to carry out lending activities (thereafter shall be referred as the “creditor”) shall

bear duties to transfer monetary assets to the borrower for certain period of time

in accordance with basis and procedures set out in laws and the borrower shall

bear obligations to pay back that monetary assets and interest on it, if it was

provided so in the loan contract, within the agreed period of time.

451.2. Unless otherwise provided by law the loan contract shall be concluded in writing.

451.3. The lending operations by banks and other juristic persons,

authorized to carry out lending activities shall be regulated by laws.

 

Article 452. Interest on a loan provided by banks and other juristic

persons authorized to carry out lending activities

452.1. Loans may be provided by the creditor with or without interest.

452.2. It may be specified in the loan contract that the borrower shall pay

additional interest, not exceeding 20 percent of the main interest, if the borrower

fails to pay back the loan within the period specified in the contract. Banks or other

juristic persons, authorized to carry out lending activities shall not exploit punitive

damages for the issued loans.

452.3. The lender shall be obliged to make interest on its loan are publicly

available.

 

Article 453. The borrower’s liabilities

453.1. The borrower shall bear interest if it is provided so by the loan

contract, and additional interest in case of failure to pay back the loan on time.

453.2. If the contract provides that the pledge will be transferred to the

creditor without right of action in case of the failure of the borrower to perform the

obligations under the loan contract, the creditor shall be entitled to exercise the

right to dispose the pledged assets from the expiration day of the contract.

This provision applies only to movable property.

SUBCHAPTER THREE

SAVINGS

Article 454. Contracts for savings

454.1. Under a contract for savings, a bank or juristic person authorised to

take savings shall undertake to hold the money of the customer on deposit and to

redeliver it in the same currency as deposited together with accrued interest.

454.2. A contract for savings shall state the period of deposit, the interest

rate or the method of its calculation and the liability of parties in case of the failure

to fulfil its obligations.

454.3. Unless otherwise provided by law a contract for savings shall be concluded in writing, by issuing a savings’ book or certificate, or other means defined by laws.

454.4. A customer has the right to terminate the contract at whatever time

and withdraw the deposited money together with the interest.

454.5. A bank or juristic person authorised to take savings shall maintain

the confidentiality of the customer’s savings and transactions related to it unless

otherwise provided by laws.

454.6. The bank or juristic person authorised to take savings can insure the

savings.

454.7. The activities related to savings by banks and juristic person

authorised to take savings shall be regulated by laws.

454.8. The limitation period to claim shall not apply to request to redeliver

the deposited money as saving.

 

Article 455. Period of a contract for savings

455.1. A contract for savings shall be concluded for a definite or indefinite

period.

455.2. If a contract for savings is concluded for an indefinite period, the

depository shall return the deposited money and pay interest on it to the customer

upon his/her demand.

455.3. If a contract for savings is concluded for a definite period, the bank

must return the money and pay interest on the first demand after the expiry of the

contract. If the customer does not demand the deposited money at the expiry of

the period of the contract, the contract shall be deemed to have been further

extended for an indefinite period.

455.4. A bank or juristic person authorised to take savings shall not be

entitled to amend the savings contract concluded for a definite period on its own

initiative and terminate prior to its expiry.

 

Article 456. Information on a bank and juristic person authorised to

take savings

456.1. Banks and juristic persons authorised to take savings shall duly

notify the public about their annual reports, balance statements and other related

information as specified by laws.

456.2. Banks and juristic persons authorised to take savings are obliged to

provide customers with information on their financial solvency and credibility.

456.3. Banks, which have released not true and accurate information

specified in article 456.2 of this law, shall bear responsibility for damages.

 

SUBCHAPTER FOUR

BANK GUARANTEE

 

Article 457. Contracts for bank guarantee

457.1. Under a contract for bank guarantee, the bank shall be obliged to

settle payments on the behalf of the obligor upon a written demand of the obligee,

and the obligor shall be obliged to pay the payment to the bank, issued the

guarantee.

457.2. The bank issued a guarantee shall fulfill its obligations irrespective

of the obligor’s obligations to the obligee under the main contract.

457.3. The bank issued a guarantee shall not have the right to terminate

the contract on its own imitative unless otherwise stipulated in the contract.

457.4. The obligee shall not be entitled to transfer the right to demand from

the guarantee bank to others unless otherwise specified by the contract.

457.5. If the obligor fails to fulfill its guaranteed obligations born to the

obligee, the obligee has the right to demand the payment from the bank in writing.

457.6. The demand specified in 457.5 of this law shall be issued within the

period specified in the contract for bank guarantee.

457.7. A bank shall promptly notify the obligor upon receiving the obligee’s

claim and forward to him/her the claim with copies of the attached documents.

457.8. A bank that issued guarantee shall check within reasonable period

of time whether the claim and attached documents thereto are corresponding with

the conditions of the guarantee contract.

457.9. A bank shall have the right to refuse to satisfy the obligee’s claim if it

is found that the documents do not correspond with conditions of the contract or

the claim has not been lodged within the period specified in the contract, and

promptly inform the obligor in such cituation.

457.10. If the obligor has fulfilled its obligations, or the obligations have

expired or become invalid before the bank satisfies the claim, the bank shall

inform promptly the obligee. If the obligor has demanded again the payment after

receiving such notification, the bank shall fulfill its obligations and satisfy the claim.

457.11. The responsibility of the bank issued a guarantee shall be limited

by the contract conditions.

457.12. Unless otherwise provided in the guarantee contract, liabilities of

the bank, caused by non performance or poor performance of the contractual

duties to the obligee, shall not be determined regardless to the limitation specified

in the article 457.11 of this law.

457.13. The obligations of a bank issued a guarantee to the obligee shall

be terminated in the following cases:

457.13.1. The guaranting bank has fulfilled its obligations to the

obligee;

457.13.2. The period of the contract has expired;

457.13.3. The obligee has refused to exercise the right to demand.

457.14. If the obligations of the bank issued a guarantee has been

terminated as specified in article 457.13 of this law, the bank shall promptly notify

the obligee.

457.15. The proceeding to reimburse the damages, paid to the obligee by

the bank, through lodging a counter claim against the obligor shall be determined

with a contract between the guaranteeing bank and obligor.

457.16. A bank shall not exercise the right to demand compensation from

the obligor if the payment to the obligee by the bank was in breach of the contract

terms or the bank has paid damages as specified in article 457.12 of this law.

457.17. If other relations with regards to bank guarantee are not regulated

by this law, internationally applicable common regulations and customs, accepted

in business routine shall be applied.

 

CHAPTER FORTY-FIVE

GUARANTEE

Article 458. Guarantee contract

458.1. Under a guarantee contract the guarantor undertakes to guarantee

to the obligee that the obligor shall fulfill its obligations, and to accept the

obligation in case of failure.

458.2. The guarantee contract may be concluded covering conditional or

future obligations.

458.3. Under the guarantee contract the guarantor’s obligations shall be

pertained to the obligations of the obligor to the obligee.

458.4. Upon annulations of the main obligations, the guarantee contract

shall become invalid.

458.5. The guarantor shall not be held responsible for the consequences of

the obligor’s agreements reached after the issuance of the guarantee.

 

Article 459. Form of guarantee contracts

459.1. The guarantee contract shall be concluded in writing.

459.2. If the guarantee granted as part of regular business arrangement it

is not necessary to be done in writing.

459.3. The guarantee contract shall specify the limit of the guarantor’s

liabilties for the failure of the obligor to fulfill its obligations.

 

Article 460. Liabilities of the guarantor

460.1. Under the guarantee contract the guarantor shall undertake liability

to compensate on behalf of the obligor.

460.2. The obligee has the right to demand the fulfillment of the obligations

under the contract if it specifies joint liabilities of the guarantor and obligor and the

latter fails to perform its obligations, or inability of the latter to perform the duties

becomes apparent.

460.3. If the guarantors are more than one person, all guarantors shall be

jointly liable for the non performance of the obligations irrespective of whether

they have jointly guaranteed or not.

460.4. The guarantor shall undertake liabilities as defined by the guarantee

contract.

460.5. The guarantor shall make the following payments within the limits

specified in article 460.4 of this law.

460.5.1. Principal debt;

460.5.2. Forfeit and losses if it is specified in the contract;

460.5.3. Expenses sustained in relation to the contract termination;

460.5.4. Expenses related to the adjudication proceedings;

460.5.5. Interest due in accordance with the obligor’s main contract unless

otherwise specified in the contract.

 

 

Article 461. The guarantor’s rights and obligations

461.1. If the obligee lodges a claim against the guarantor, the latter shall be

entitled to present all refusals which may be raised by the obligor against the

obligee.

461.2. In case of the obligor’s death, the legal successor shall be liable for

performance of the obligations in the equal amount to the inherited property and

the guarantor shall cover the remaining part of the liabilities.

461.3. The guarantor shall retain the right to counter action even if the

obligor relinquishes its right to raise refusals.

461.4. The obligor has the right to appeal to the court to denounce the main

contract, and the guarantor shall be entitled to reject the obligee’s claim.

 

Article 462. Obligation of the obligee to report

462.1. The obligee shall inform the guarantor in case of the failure of the

obligor to perform its duties on time.

462.2. The obligee shall provide true information about the obligations of

the obligor under the main contract upon the guarantor’s request.

462.3. The obligee shall loose its right to raise a claim against the

guarantor in case of failure to perform the obligation to provide information in

accordance to article 462.2 of this law.

 

Article 463. Termination of guarantee contracts

463.1. The guarantor shall notify about the termination of the contract in

advance of three months if the contract is concluded for an indefinite period.

463.2. Guarantee contracts concluded for the period of more than five

years may be terminated in accordance with the procedure specified in article

463.1 of this law.

463.3. If the guarantee contract was terminated on any party’s initiative, the

guarantor shall be obliged to fulfill its obligations due before such termination of

the contract.

 

Article 464. Withdrawal of the guarantor

464.1. The guarantor shall have the right to withdraw from its obligations on

the following grounds if the guarantor bears obligations by the assignment of the

obligor or acting as representative of the obligor in accordance with the

proceedings to perform other’s obligations without an assignment.

464.1.1. A substantial deterioration of the obligor’s financial situation;

464.1.2. It has become hazardous to claim from the obligor to perform

the obligations due to the relocation of his/her/its residence;

464.1.3. The obligor failed to perform his/her/its obligations on time;

464.2. The obligor may propose means to the guarantor to implement the

obligations prior to the expiration of the contract period.

 

Article 465. Transfer of all obligee’s rights to the guarantor

465.1. If the guarantor performs an obligation, all rights of the obligee

related to that obligation shall be transferred to the guarantor and such transfer

shall not cover other rights of the obligee not related to the guarantee contract.

465.2. The obligor shall have the right to raise all refusals, which could

have been raised against the obligee, against the guarantor upon the transfer of

the rights of the obligee to the guarantor.

 

CHAPTER FORTY-SIX

SETTLEMENT OF THE BALANCE THROUGH CLEARING

Article 466. Clearing contracts

466.1. Under a clearing contract, the parties to the contract shall agree to

settle the claims arising in the business transactions through settling balances

within the term specified in the contract and be obliged to refrain from raising a

claim until the moment of clearing off.

466.2. Remainder of the settlement of the balances shall be paid within the

term as specified in the contract and the end of the clearing off shall become the

ground for raising a claim to demand the payment of the remainder.

466.3. Conditions of the contract shall be deemed implemented upon the

payment of the remainder resulted from the clearing.

466.4. Unless otherwise specified in the contract, the clearing shall be done

once a year.

466.5. Interest may be earned on the payment pursuant to the clearing

contract.

466.6. If the claims arising out the clearing contract are satisfied by one of

the means of performance of the obligations, the obligee shall have the right to

demand the clearance balance after the settlement.

 

CHAPTER FORTY SEVEN

OBLIGATIONS ARISING OUT OF TRADING OF SECURITIES

 

Article 467. Types of securities

467.1. There shall be certified and uncertified securities.

467.2., Securities, presented by a printed instrument in accordance to the

established procedures, shall constitute certified securities and securities, which

are not presented a printed instrument and requisites of which are registered in a

separate record (balance or computer) shall be considered uncertified securities.

467.3. Securities shall have an established form and requisites.

 

467.4. Securities with faulted sign or requisites shall be deemed as void.

467.5. Securities shall have the forms of non-bearer, bearer and inscribed.

467.6. A law may prohibit certain persons to issue some types of securities.

467.7. The following persons shall exercise the rights certified by securities:

467.7.1. a person, who legally acquires the rights certified by the

bearer securities;

467.7.2. a person, on whose name the rights certified by the nonbearer securities are issued;

467.7.3. an owner of the rights, certified by the inscribed securities,

or a person on whose name those rights were transferred with appropriate

registration of;

467.8. A person, enjoying the rights certified by the securities, shall be the

owner of the securities.

 

Article 468. Bearer securities

468.1. A possessor of the bearer securities has the right to demand the

payment from the person who issued the bearer securities acknowledging the

consent to pay the amount entered.

468.2. A signature on the bearer securities may be executed by all possible

means and tools.

 

Article 469. Rights and duties of an issuer of securities

469.1. A possessor of securities, who acquires deliberately or grossnegligently the right to possess the securities by illegal means, shall be deemed a

possessor in bad faith.

469.2. An issuer of securities shall be entitled to claim any requests related

to the securities from a possessor of the securities;

469.3. If an issuer of securities used a technical mean to execute a

signature on the securities, the issuer shall not be entitled to raise a claim against

a possessor that the earlier was not authorized of using that technical mean,

except when the possessor knew that the signature was forgery or acted grossly

negligent.

469.4. If securities were transferred to the ownership of a third person, the

issuer of the securities shall not be entitled to raise same claims which might be

raised against the previous owner of the securities, against the new owner unless

has been deliberately harmed.

469.5. Refusals, which can not be put directly, may be exercised only when

the possessor of securities acquired the securities through causing deliberately

harm to others or being grossly negligent.

469.6. An issuer of securities shall fulfill its obligations only in case of the

transfer of the securities to its custody.

 

Article 470. Conditions to perform obligations certified by securities

470.1. An issuer of securities and transferors of the securities and rights

certified therein shall bear joint liabilities to the owner of the securities in

accordance to laws.

470.2. An owner of securities shall have the right to claim for dully

performance of obligations and compensation for damage from the persons

specified in article 470.1 of this law if the owner discovers that the securities were

forgeries, or amended.

 

Article 471. Performance of obligations by an obligee

471.1. An obligee, performed obligations to a possessor of securities, shall

be relieved from the obligations unless deliberate or grossly negligent failure to

prove that the possessor is a possessor in bad faith.

 

Article 472. Alteration of securities into non-bear securities

472.1. An issuer of securities shall be entitled to alter the securities into

non-bearer securities.

472.2. An issuer of securities shall not undertake an obligation to alter the

type of the securities.

 

Article 473. Defecting or destroying of securities

473.1. If bearer securities cannot be floated due to defects to them but their

signs and marks are identifiable, a possessor of the securities shall be entitled to

demand to issue new replacing instruments and pay for costs related to such

replacement in advance.

473.2. A person, who invalidated the obligation certified by securities

through judicial decision shall be entitled to demand to issue new instruments of

the bearer’s securities as a replacement of the invalidated ones irrespective

whether the demand was satisfied or not and be obliged to pay for costs related to

such replacement in advance.

 

Article 474. Inscribed securities

474.1. If the ownership of inscribed securities was acquired by registering,

the proceedings, specified in article 469 of this law, shall be applied.

474.2. Unless otherwise provided by a law, a person, possessing inscribed

securities by registering accordingly on his/her/its name, shall be entitled to

demand due payment in accordance with rights certified in the securities.

474.3. An obligee, transferred money to a bona fide possessor of inscribed

securities, shall be deemed performed his/her/its obligations, unless the former

acted deliberately or grossly negligent.

474.4. An obligee, which has performed his/her/its obligations to pay

money to a possessor of securities, shall have the right to own the securities.

 

Article 475. Non-bearer securities

475.1. Non-bear securities may be issued with a condition of making

payments if the securities are presented to an obligee.

475.2. Unless otherwise specified, rights, certified by the securities, shall

be transferred in accordance to established procedures for transferring of such

rights.

475.3. If non-bear securities are defected or destroyed, the non-bearer

securities shall be deemed void in accordance to proceedings of a special

adjudication.

475.4. If non-bearer securities contain a condition to issue a payment to a

bearer of the securities, the agreement between an obligee and a possessor of

the securities shall be deemed valid irrespective of deliberate or grossly negligent

acts of the obligee.

CHAPTER FORTY EIGHT

COOPERATION

 

Article 476. Contract for cooperation

476.1. Under a contract for cooperation, two or more parties shall

undertake obligations to act jointly in order to make profits or to implement other

specific purposes without creating a juristic person.

476.2. A contract for cooperation shall be concluded in writing or orally.

476.3. A contract for cooperation shall contain the following conditions:

476.3.1. Titles and addresses of parties to the contratc;

476.3.2. Types and purposes of the cooperation;

476.3.3. Rights and obligations of the parties;

476.3.4. Rights and duties of a governing body and its structure,;

476.3.5. Procedures for sharing revenues and losses;

476.3.6. Procedures for withdrawal from the contract;

476.3.7. A period of the contract;

476.3.8. Grounds for terminating the contract and procedures for

distributing joint assets.

 

Article 477. Contributions and shares of parties

477.1. Parties to a contract for cooperation shall pay a contribution as

agreed in the contract. If the contract does not specify an amount of the

contribution of the parties, the contribution shall be equal to each of the parties.

477.2. A contribution may be made in form of cash, in-kind payment

including properties or service.

477.3. Unless otherwise specified by a contract, contributions, made by

parties, shall be their joint asset.

477.4. Proceeds and revenues, accrued from the use, merger or

consolidation of the joint asset of parties, shall be joint asset of the parties.

477.5. A party shall be prohibited to transfer own share of the joint asset to

a third party without permission of other parties and to grant a permission shall be

refused only on justifiable grounds.

477.6. Parties shall have priority right to acquire the share which is about to

be transferred to a third party.

 

Article 478. Joint action

478.1. Unless otherwise specified by a contract, the parties shall cooperate

in implementing the joint actions and be obliged to obtain consent of other parties

in order to enter into an agreement.

478.2. If the contract provides that a decision will be reached by a simple

majority of the votes of the parties, each party to the contract shall have one vote

irrespective of their shares of the contributions made by them.

478.3. If the parties agree to act independently from each other, this shall

be reflected in the contract and it is not allowed to conclude the contract in the

absence of consent.

478.4. If the parties agree that one party will execute joint actions, that

person shall be given powers of attorney to sign contracts and mediate disputes

on their behalf.

478.5. The party, neglecting seriously its obligations under the contract,

may be removed from the contract by an unanimous decision of parties.

478.6. The parties to the contract shall have the right to withdraw from the

implementing contract for cooperation and in such case, shall be entitled to

demand necessary information from the governing body.

478.7. Unless otherwise specified in the contract, the rights and duties of

the parties, which are performing the duties of the governing body, shall be

defined in accordance to terms and conditions of an assignment contract.

478.8. Unless otherwise provided in the contract, profits gained as result of

the joint actions, shall be distributed proportionally equal to the shares of the

contributions of the parties.

478.9. The parties to the contract may have the right to demand dully

performance of the obligations by other participants.

478.10. The parties shall not be allowed to transfer any claims raising out

of the contract to a third party.

478.11. The parties shall jointly bear the losses resulted from the joint

actions.

478.12. Unless otherwise provided in the contract, the amount of the

liabilities shall be distributed among the parties according to their shares of the

contribution.

478.13. The parties shall be obliged to maintain the confidentiality of

information obtained in the course of implementing their obligations under the

contract for cooperation.

 

Article 479. Withdrawal from the contract

479.1. The parties shall have the right to withdraw from the contract at any

time if the contract does not specify the duration period of the joint actions, or

such a withdrawal does not cause any harm the joint action.

479.2. If the contract specifies the duration period, a withdrawal before its

expiration shall be allowed only on justifiable grounds.

479.3. Unless otherwise specified in the contract, a withdrawal of a party

shall be deemed as an end of the joint action.

479.4. If the remaining parties agree to continue the joint actions despite

the withdrawal of one party, the latter shall be awarded money in the amount of its

share but its performance of obligations shall be considered before issuing the

payment.

479.5. If the joint property of the parties are not sufficient to cover their

debts under their combined obligations, the withdrawing party shall pay to others

the amount equal to its share.

479.6. The withdrawing party shall retain its obligations to the obligee.

479.7. Any agreement limiting or prohibiting the right to withdraw from the

contract for cooperation shall be illegal.

 

Article 480. Termination of a contract for cooperation

480.1. The contract for cooperation shall be terminated on the following

grounds:

480.1.1. the expiration of the duration period of the contract;

480.1.2. a decision of the parties to the contract

480.1.3. the joint asset is pledged as payment for the debts in

accordance to the bankruptcy procedures;

480.1.4. the purpose of the joint action has become impossible to

be attained;

480.2. Unless otherwise specified in the contract, the contract for

cooperation shall be deemed terminated in case of occurrence of one of the

following circumstances:

480.2.1. The contract was cancelled;

480.2.2. Bankruptcy and dissolution of any party was declared by

a judiciary decision;

480.2.3. A death of any party.

480.3. Upon the termination of the contract, the un-performed agreements

shall be rescinded and parties shall make an inventory of the remaining assets

and distribute them among the parties.

480.4. The parties shall fulfill the remaining obligations, accumulated in the

course of the joint action, prior to the distribution of the remaining assets or

otherwise parties shall perform the part of the obligations in equal portion to their

shares.

 

Article 481. Unregistered union and partnership

481.1. Parties to a contract for cooperation may establish a union or

partnership, for which no state registration is required. The members of such an

union or partnership shall decide its structure and organization by mutual consent.

481.2. Unregistered unions and partnerships shall be involved in the civil

legal relationships through an authorized representative or member.

 

Article 482. Joint assets of unregistered unions and partnerships

482.1. Assets, comprised of membership fees, contributions made by the

members, and operational revenues, shall be the joint assets of the members.

482.2. The amount of the membership fees and contributions, donated to

the joint assets, shall be decided by the members, which may participate in

establishing the joint assets in form money, property and services.

482.3. The authorized representative, appointed by the members, shall

exercise the power of disposal over the joint assets.

482.4. Requirements of claims shall be satisfied from the joint assets

except apartments under joint ownership.

482.5. Unless otherwise agreed by the members, persons, entitled to

conduct activities on the behalf of the union or partnership, shall bear the shared

and equal responsibility in case the joint property is insufficient to satisfy the

claims.

CHAPTER FORTY SIX

GUARDIANSHIP

Article 483. Guardianship contract

483.1. Under a contract of guardianship, a guardian shall undertake the

obligation to take care of a ward, unless otherwise specified in the contract.

483.2. A guardian may provide care in physical form (accommodation,

food, clothes) or by money.

483.3. Parties to a contract of guardianship may agree to change the

physical form of care by money.

 483.4. Unless otherwise provided by law a contract of guardianship shall be made in writing.

483.5. The duration period of a guardianship shall be set by a contract

considering of the purpose and nature of the care.

483.6. A guardian shall not be entitled to sell, pledge or transfer the assets

trusted to the guardian without consent of a ward.

483.7. It is prohibited to dispose the ward’s property specified in Article

483.6 to perform obligations of the guardian to others.

483.8. If a ward transferred an immovable property to a guardian, the latter

shall have the right to pledge it against his or her own claim right.

483.9. The destruction of or damage to the property, transferred to the

guardian, shall not be the ground to exempt the guardian from his/her liability.

 

Article 483. Termination of a contract of guardianship

484.1. Both guardian and ward shall have the right to terminate the contract

of guardianship in case of deterioration of the relations between them or

impossibility to perform the contract due to serious reasons.

484.2. Upon the termination the contract of guardianship, the expenses of

the guardian prior to such termination shall not be reimbursed unless otherwise

specified in the contract.

484.3. If the contract of guardian is terminated, the property shall be

returned to the ward.

 

484. Death of a guardian

485.1. In case of death of a guardian, the successor to the transferred

property shall bear the obligations to take care.

485.2. If the successor refuses to take over the guardian’s obligations, the

property shall be returned to the ward and the contract shall be terminated.

CHAPTER FIFTY

GAMBLING AND BETTING

Article 486. Gambling and betting

486.1. Gambling and betting shall not create the right to demand any

payment.

486.2. Procedures, specified in article 486.1 of this law, shall apply to any

transactions of investment at stock exchange or other similar agreements related

to gambling or betting, or loans, or advance payments provided for gambling and

betting.

486.3. No claims shall be raised in regard to payments, assigned property

and other things transferred for gambling or betting except prohibited by a law.

486.4. The claim right shall be exercised only for lottery and similar games

permitted by the state.

 

Part IV

NON-CONTRACTUAL OBLIGATIONS

SUB- PART ONE.

OBLIGATIONS SPECIFIED BY LAW

CHAPTER FIFTY ONE

OBLIGATIONS CREATED ON LEGAL GROUNDS

SUB- CHAPTER ONE.

OBLIGATIONS ARISING OUT JOINT OWNERSHIP

 

Article 487. Joint property ownership

487.1. Unless the owners of communal property agreed otherwise, they

have the equal right to ownership over their respective share of the joint property.

487.2. Unless the law stipulates otherwise the procedures and

requirements of this chapter shall apply to the property owned by several legal

persons as a joint property.

 

Article 488. Management and use of joint property

488.1. The decision on the use and the management of joint ownership

property shall be reached by the majority vote of co-owners. The votes of the coowners shall be determined in proportion to the respective shares in the property.

488.2. Unless the majority vote or an agreement provides otherwise, each

owner shall have the bona fidei right to demand to manage and use the property

in the best interest of the other owners.

488.3. Any restriction of the right to use a part of the partially owned joint

property without the consent of the owner of that part of the property shall be

prohibited.

488.4. Third parties that take over the joint property rights shall comply with

the management and use requirements over the joint property established by the

co-owners.

 

Article 489. Demand for Annulment of the Joint Property Right

489.1. Each of the co-owners shall have the right to demand to annul the

joint property right.

489.2. The right to annul the joint property rights specified in article 489.1

can be exercised for a considerable reason in spite of the agreement by which

such rights was excluded or limited for a certain period.

489.3. Any agreement, stipulating limitation or exclution of the right to

demand to annul the joint property ownership rights, shall be void except as

stipulated in article 489.2.

489.4. An agreement to suspend the right to demand the annulment of the

joint property ownership rights shall be void in case of death of any co-owner.

489.5. If it is possible to divide the joint property without depreciating its

value pro rata to the ownership portions, the joint property right shall be deemed

void as considering the property divided physically.

489.6. If it is impossible to divide the joint property physically, the joint

ownership right can be terminated through distribution of the proceeds produced

by the sale of properties in accordance with the procedure provided in Article 159,

and the compulsory auctioning of land or immovable properties.

489.7. If it is impossible to transfer the joint ownership property to a third

party, the property shall be sold through an auction among the partial owners.

489.8. The partial owners shall have the right to demand to reorganize the

auction in case the property was not sold at the first auction pursuant to articles

489.6 and 489.7. If the second auction does not result in the sale of the property,

the owner that initiated the auction shall bear the auction related expenses.

 

Article 490. Satisfation of the performance of obligations of partial

owners

490.1. If partial owners are responsible with their respective part of the joint

ownership property to perform their obligations, the owners can demand to

execute the performance of their obligations with that part of the joint ownership

property only when the joint ownership property rights are discharged.

490.2. If it is ought to sell the joint ownership property to satisfy the

performance of the obligation, the procedure provided in articles 489.6 and 489.8

shall apply.

490.3. The procedure, specified in articles 490.1 and 490.2 of this law, shall

apply in same effect to execute the performance of the reciprocal obligations of

the partial owners.

490.4. When the joint ownership property was transferred to one of the

partial owners as result of the termination of the joint ownership right, the other

owners shall be liable for the defects of their own respective parts in a same way

as a trader.

490.5. Nor limitation period shall be applicable in respect to the right to

demand to nullify the joint ownership rights.

 

SUB-CHAPTER TWO

 

Article 491. Performance of other’s obligation without an

assighnment

491.1. A party that performs other’s obligations without an assignment

shall be obliged to execute in a good faith.

491.2. The person that acted for the pruposes to prevent a threat to others’

properties and interests shall only be liable for intentional or grossly reckless

actions in doing so.

491.3. If a damage occurred to the person that acted for the purposes to

prevent the threat to other’s properties and interests, the latter shall compensate

for the damage and the court will determine on the amount of the compensation if

they failed to agree on.

491.4. The person that performs other’s obligations without an assignment

shall notify the person whose interests are being protected as soon as it becomes

possible and proceed to perform the obligations until the latter takes over

performing the obligations or relinquishes those obligations.

491.5. The person that performs other’s obligations without an assignment

shall produce a report to the person whose interest are being protected and

transfer all results happened by the performance of the obligations to the latter.

491.6. The person that performs other’s obligations without an assignment

shall be entitled to demand to be compensated for the direct expenses related to

the performance of the obligations by the person whose interests were protected.

491.7. If the performance of obligations are not meeting the intentions and

interests of the person whose interests are protected, the performer shall not have

the right to demand to be compensated for the expenses. If the performer knew

about it shall be liable for damages caused to the person whose interests were

protected.

SUB-CHAPTER THREE

UNJUST ENRICHMENT

 

Article 492. Liability for acquisition of a property without legal justification

492.1. The party that transferred property to the third party in the course of

performing its obligations shall have the right to claim back that property in the

following cases:

492.1.1. If no liability arises between the recipient of the property

and executor of the obligations, term of the obligation has expired or obligation

becomes void;

492.1.2. The principal has a serious dispute and not able,

therefore, to demand for performance of its obligations;

492.2. The property transferred to other party cannot be claimed in the

following cases:

492.2.1. if the execution of the obligations is conventional and

corresponds to moral norms;

492.2.2. the limitation period for such claim has expired;

492.2.3. as for the for void obligations, the claim for transferred

property in the course of performing the contract on compensation of the debt

contradicts the law;

492.2.4. if one party has transferred property to another in the

course of performing its obligations without knowing about the expiration of the

limitation period.

492.3. The party that transferred property to third party with the purpose of

compelling the latter action or inaction shall have the right to claim property in

case the other party’s action or inaction does not satisfy the expectations.

492.4. It is not allowed to demand return of property in the following cases:

492.4.1. If the party that transferred property knew in advance

about impossibility to achieve the purpose;

492.4.2. If the party that transferred property acts unfairly or

restricting the other party actions;

492.5. The party that transferred property shall have the right to claim it

back if the transfer was forced through by application of violence or threat except

when there is the lawful right of the party in possession of the property to its

ownership.

 

Article 493. Requirements to property claim

493.1. The claim for property transferred to other person shall include the

property, all revenues and benefits from it, a compensation for damage,

destruction caused to the property or related to confiscation of it.

493.2. In case it is impossible to return the property because of its

deterioration or for other reasons, the party that acquired the property without

legal grounds shall be obliged to compensate the cost of the property.

493.3. If the party that acquired the property without legal grounds does not

made any revenue or profit from the property used or passed over to others, lost

or destroyed the property or it deteriorated or for any other reason, it shall not be

held liable for lost potential revenue, profits and benefits.

493.4. If the party that acquired the property under the contract is not

capable to return property in its natural condition or its money equivalent because

of the termination of the contract and this did not serve as a ground for the

contract termination or directly related to such consequences, it shall not be

obliged to return the property.

493.5. The party that acquired a property without legal justification spent

money for its maintenance believing that it owns the property legally shall return

that property after the reimbursement of direct expenses and damages. This

procedure shall not apply if the property is deteriorated to such condition that the

owner neglect is apparent.

493.6. All the revenues earned and potential profits lost due to wrongful

acts of the acquirers shall be returned to the legal owner or possessor of the

property from the moment of acquisition of the property in dishonest way and

without legal grounds or as for the person who acquired the property honestly,

from the moment when such acquirer has learned or should have known of the

lack of legal grounds for acquisition of the property. If it is impossible to return

them, the cost for the proceeds shall be paid.

493.7. The party which acquired the property without legal justification shall

compensate damages caused with destroy or deterioration of the property due to

its own fault in the course of returning to the legal owner.

493.8. The party that acquired the property in the course of action in others’

interest without an assignment has the right to demand reimbursement of

expenses related to this property. The party whose interests were protected shall

only be held responsible for direct and necessitated expenses.

493.9. The provision of Article 232 of this Code shall not apply for the claim

to return.

 

Article 494. Obligations of the Third Party to Return Property

494.1. If the party that acquired the property without legal grounds passes it

on to a third party for free-of-charge, the latter shall be obliged to return the

property to its legal owners.

494.2. The respective provisions of Articles 492 and 493 shall apply in this

case.

 

Article 495. Liability for Illegal Disposal of Others’ Property

495.1. The party which infringed the other rights by using their property

without the consent of legal owners and disposed it by mixing it with other

substances, consolidating, or reprocessing, shall compensate the damage to the

entitled owners.

495.2. If the lawful owners’ rights are infringed as specified in Item 495.1.1,

they shall have the right to demand immediate compensation of damage from the

violator.

495.3. If the property was disposed of on the precondition of back

payments, the proceeds shall comprise a part of the compensation for damage to

the lawful owner.

495.4. The person infringing others rights shall be released from liability in

case of not knowing of the lack of the rights due to his or her apparent negligence

or if there are no reasons to deem him or her as owning property without legal

justification.

495.5. The expenses borne by the violator during the use of others’

property do not form the basis for reduction of the amount of the property held

without legal justification.

495.6. In case the violator was aware of others rights but deliberately

violated them, the legal owner shall have the right to demand compensation

exceeding the damage caused to the property.

495. 7. The violator shall be obliged to provide truthful information on the

incomes derived from the use of others’ property without legal justification.

 

Article 496. Enrichment through saving its own property or using

others’ expenses

496.1. If any juristic person paid the debts of another party knowingly or by

mistake leading to the exemption of the latter from liability, it shall have the right to

demand reimbursement of the expenses from the person exempted from liability.

496.2. The party that expended on the other party property on its own will

or by a mistake and to the benefit of the latter, it shall have the right to demand

compensation of such expenses.

496.3. No compensation shall be allowed in the following cases:

496.3.1. if the liable party has a counter claim and deducts the due

amount from the liability;

496.3.2. if the party raising a claim failed on its own fault to inform

the liable person in reasonable time period.

496.3.3. if the liable party disputes the reimbursement before

payment is made.

SUB-PART 2

OBLIGATIONS FOR TORTS

CHAPTER FIFTY TWO

OBLIGATIONS FOR DAMAGE

 

Article 497. Grounds for liability caused by damage

497.1. A legal person who caused damage to others’ rights, life, health,

dignity, business reputation or property deliberately or due to negligent action

(inaction) shall compensate for that damage.

497.2. If the legal person proves that that damage did not occur as a result

of his/her own fault, he or she shall be released from liability for the damage

except as provided by law.

497.3. If damage was caused by several persons, those persons including

not only those who caused directly that damage, but also those who urged to,

assisted with, and knowingly benefited out of consequences of the damage shall

be collectively liable.

 

Article 498. Liability for damage caused by legal entities and

government officials

498.1. If an employee causes damage to other party in the course of

discharging his or her duties under a labour contract and as a result of fault action

(inaction), the employer shall be liable for that damage.

498.2. If a government official causes damage to other party as a result of

a miscarriages of the official duties or other form of misconduct (inaction), the

administrative bodies that employ the wrongdoer or the state shall be liable for the

damage unless otherwise provided by law.

498.3. The legal entities specified in articles 498.1 and 498.2 shall be

exempted from liability if the damage results from deliberate or negligent actions

of the sufferer or the latter failed to undertake preventive measures by legal

means against possible damage.

498.4.

In case of restoration of the violated rights of an administratively arrested person who has been illegally charged, convicted, arrested, detained or guaranteed not to leave the country, the state shall be liable for the damage caused to him / her by the investigator, procurator or judge.

498.5. If the persons, specified in Items 498.1, 498.2 and 498.4, caused

damage with their deliberate or negligent actions, the entities, compensated for

the damages, shall have the right to claim to be compensated for damages

caused to them by those persons.

Article 499. Liability for damage caused by use of transportation

means

499.1. An owner of a passenger or freight forwarding transportation mean

shall bear responsibility of the harm to others life, health and damage, loss or

destruction of their property caused in the course of using the transportation

mean.

499.2. No liability, specified in article 499.1, shall be imposed if damage

was caused as a result of special circumstances such as emergency or force

majeure in the course of the use of the transportation means other than aircraft.

499.3. A person, caused damage using a transpiration mean without the

consent of its owner or possessor, shall be liable for such damage. However, the

owner or possessor of the transportation mean shall not be released from

liabilities if there was an opportunity to use the transportation mean due to his/her

default.

499.4. The owner or possessor of the transportation mean shall be held

liable for the damage if the transportation mean was assigned or transferred to the

violator by him/herself.

 

Article 500. Liability for damage caused during construction or

utilization of buildings

500.1. An owner or possessor of a building shall be liable for damage

caused by improper maintenance, and partial or complete collapse of the building

except was deficient or damaged.

500.2. The owner or possessor of the building shall be exempted from

liability if the damage caused due to the special circumstances of emergency or

force majeure, or with falling of something due to wrongdoing of the victim, or with

throwing or pouring of something.

 

Article 501. Liability for damage caused by animals

501.1. An owner or possessor of an animal shall be liable for the damage

caused to others life, health by acts of his/her animal.

501.2. The owner or possessor of pets or animals, serving for professional

activities, shall be exempted from liability for the damage caused by act of such

animals except resulting from deliberate or negligent actions of the owner or

possessor.

 

Article 502. Liability for damage caused by actions or thing dangerous

to surroundings

502.1. If damage occurs as result of alterations into the structure and

design of buildings or constructions without a permission, inside installation or

transmission of electricity, or is caused by things with conflagration, explosive or

poisonous effects, the person, carried out such dagerious action, or the owner or

possessor of that dangerous stuff shall be liable for the damage to others’ life,

health and properties.

502.2. An owner or possessor of a building and construction that may

cause especial danger shall bear liablity, specified in article 502.1, irrespective of

whether they were in fault or not.

502.3. An owner of a building or construction shall be exempted from

liability for damage, caused to other inside or at the vicinity of the building if

he/she was not guilty of.

 

Article 503. Liability for damage by minors and legally incapable

persons

503.1. Legal representatives, parents or guardians of minors, aged from 7

to 14, or legally incapable persons shall be liable for damage caused by those

minors or incapable persons.

503.2. If minors aged from 7 to 14, cause damage while they are under

direct supervision at schools, kindergartens or health organisations, those

organisations shall be liable for that damage.

503.3. If a person considered as legally incapacity due to mental disorder

causes damage to others, his or her guardian or the legal person responsible for

his/her regular supervision shall be liable for that damage.

503.4 If parents or guardians prove that they have fulfilled their duties

properly they may be exempted from the liability for the compensation.

503.5. Minors shall be personally liable for the damage they caused to

others but if their remuneration, income or property under their disposal is not

sufficient to compensate for the damage, their parents or guardians shall be

obliged to pay for the unpaid portions.

503.6. The procedure provided in article 503.4 shall apply to the damage

compensation specified in article 503.5.

Article 504. Liability for damage by persons incapable of

understanding the consequences of their actions or of administrating their

own affairs

504.1. If a person who is not fully deprived of legal capacity causes

damage while incapable of understanding the consequences of hi/her own actions

or of administrating his/her affairs, he/she shall not be liable for that damage.

504.1. Persons who were in such state as a result of consuming narcotics,

substance affecting mentality or alcohol shall not be exempted from liability as

specified in article 540.1.

 

Article 505. Compensation for damage to others health

505.1. A person who causes damage to other’s health shall pay wages and

income or their equivalent which the injured person loses as a result of not being

able to work, and such necessary expenses as medical treatment, additional food,

cost of artificial limb production, recovery stay in sanatorium.

505.2. If the injured person does not have salary or income at the time the

damage was caused, he or she may claim compensation no less than the

minimum wage provided by law.

 

Article 506. Compensation for damage to minors of less than 16 years

of age

506.1. If damage is caused to the health of a minor of less than 16 years of

age or who does not receive salary or income, the wrongdoer must compensate

that minor for expenses as specified in article 505.1.

506.2. If a minor reaches 16 years of age and his or her health has not

improved, parents or guardian may raise a compensation claim in the amount of

no less than the minimum wage provided by law.

506.3. If a minor aged less than 16 years was employed and received

salary, remuneration or income at the time that damage is caused, it shall be

compensated according to the amount of not received salary or income.

 

Article 507. Alteration in the amount of compensation

507.1. If a citizen partly loses his/her ability to work as a result of damage

to his or her health, so as to diminish work capacity in the future, or if the amount

of his/her allowances is reduced, he or she may demand from debtor to increase

the amount of compensation to the appropriate extent.

507.2. If the amount of wages or income of the injured person increases as

the result of improvement of his or her ability to work, the debtor may demand to

reduce the amount of compensation for damage.

 

Article 508. Recovery of damages resulting from the death of an

injured person

508.1. The heir of the person who deceased after receiving injuries shall

have the right to demand reimbursement for the expenses related to the funeral

and a compensation for the damage.

508.2. Either one of the parents or spouse who does not have permanent

income and is bring up children, sisters and brothers, grandchildren of less than

eight years of age of the person deceased after receiving an injury, the children

born after the death, the person who lost ability to work and was taken a care by

and would have received an allowance after death of the deceased person shall

have the right to receive compensation.

508.3. The amount of compensation shall be set at the average monthly

salary or income of deceased person after deducting the amount due to person at

the sufferer’s custody but able to work. The allowance for losing a bread-winner

shall also be deducted from the compensation due to entitled persons.

508.4. The compensation for damage shall be issued for the following

periods:

508.4.1. in respect of children of the victim until they reach age of

16 and if they are studying, until they reach age of 18;

508.4.2. in respect of women more than 55 years of age and men

more than 60 years of age until their death;

508.4.3. in respect of disabled citizens for the duration of their

disability;

508.4.4. in respect of either one of the parents or spouse of the

deceased person without permanent income and who bringing up the children,

sisters and brothers, grandchildren of less than eight years of age of the deceased

person until they reach age of eight;

 

Article 509. Payments for death or loss of ability to work of an injured

person

509.1 Payments for death or the loss of ability to work by injured person

shall be made monthly.

509.2. If the operations of a legal entity liable for the compensation

terminate with no legal successor, the liabilities of that legal entity of

compensation for the death or loss of work ability by an injured person shall be

collected as a first priority pursuant to article 32.5 and transferred to social

insurance institutions to be regularly issued.

509.3. A court may alter the amount of payment at the request of the

payee, taking into consideration the inflation rate.

 

Article 510. Compensation for damage to property

510.1. A person who causes damage to the property of another shall

compensate for that damage by restoring the damaged property to its original

state (substitution of property of a similar description, species and quality or repair

of defective property) or shall compensate for the resulting damages.

 

Article 511. Compensation for non material damage

511.1. If the party responsible to distributing information damaging the

good name, dignity and business reputation of others fails to prove that it is true, it

shall be liable to compensate the non material damage in monetary or other form

regardless of whether there has been any material loss.

511.2. A court shall determine the amount of monetary compensation for

non-material damage within the amount of the plaintiff’s claim taking into account

the way the information was disseminated and the scope of dissemination, the

psychological consequences to the affected person, and other thing, and shall

order to disseminate a correction in ways and methods by which the information

was initially disseminated.

511.3. The procedures specified in articles 21.4, 21.5, and 21.6 shall apply

to this article in the same way.

 

Article 512. Liability for damage caused by defective products, goods,

works and services

512.1. The producer of defective products and goods shall be liable for

damage resulting from those products or goods irrespective of whether it has

concluded a contract with the injured party.

512.2. The producer of product and goods shall be released from the

liability specified in article 512.1 in the following cases:

512.2.1. the goods and products were not made for commercial

purpose;

512.2.2. it is verified by documents that goods and products were

not defected at the time of production to a degree to cause damage;

512.2.3. Although the goods and products were defective; they

were meeting respective standards and norms at the time of production;

512.2.4. it was impossible to reveal the defects due to the the

level of scientific and technological development at the time of the production for

the commercial purposes;

512.2.5. it was proven that the damage was caused due to the

violation of storing and utilization procedure by the producers or vendors.

512.3. The party that inflicted damage as specified in article 512.2.5 shall

be liable for the damage.

512.4. The procedure specified in this article shall apply to the liability for

damage caused by defective work and service.

 

Article 513. Claim for reimbursement of compensation

513.1. The social insurance and welfare institutions or authorized agencies

that made payments related to damage to life or health shall have the right to

claim the compensation from the liable person or legal entity.

513.2. The person or legal entity which are liable for the damage shall be

obliged to compensate the organization for damage in accordance with the

requirements of the claim for reimbursment.

513.3. If the amount of compensation is reduce in accordance with grounds

set forth in article 507 of this law, the amount of liability imposed in accordance

with the requirements of the claim for reimbursement shall also be reduced.

 

Article 514. Consideration of fault of of the injured person and

proprieties of wrongdoer

514.1. if any omission or inaction of the injured person adversely affect the

amount of damage or increase the amount of damages, the amount of

compensation payable may be reduced taking into account those circumstances.

514.2. The court can reduce the amount of the compensation for damage

taking into consideration the financial situation of the liable legal person except

such damage was inflicted deliberately.

 

Part V

CHAPTER FIFTY THREE

INHERITANCE

GENERAL PROVISIONS

 

Article 515. Basis for inheritance

515.1. Property and rights of a testator shall be inherited.

515.2. A successor shall bear duties of the heir equal to the size of the

inheritance.

515.3. Inheritance shall be governed in accordance to the law or by a

testament.

515.4. The Statutory order of inheritance may be altered only by the

testament of a testator .

515.5. If the right of succession by law or the testament is lost and, the

heritable property of deseased shall be transferred to the state ownership (as if it

was lost property).

515.6. If only part of the heritable property of deceased is bequeathed, the

remaining part of property in the absence of lawful successor shall be transferred

to the state ownership (as if it was lost property).

 

Article 516. Inheritance of the intellectual property

516.1. The right to inherit intellectual property shall be recognized only as a

property right. The right to inherit intellectual property may be acquired by law or

testament.

516.2. The inheritance right over intellectual property shall be valid for the

period of 50 years.

516.3. Other personal rights except those specified in Item 516.1 shall be

transferred to the state on the ground provided by law.

 

Article 517. Renunciation of the right to inherit

517.1. If a court found a person guilty of murder or other unlawful actions

leading to the death of the testator, any of lawful successors or resulting in their

death, he or she shall loose the right to inherit under the law and the testament.

517.2. The transfer of the inheritance shall be suspended until the end of a

court trial establishing guilt or innocence of the legal person on grounds specified

in article 517.1 and measures shall be taken in accordance to Article 537 to

protect the respective share of the inheritance due to him or her.

 

Article 518. Date of opening inheritance

518.1. The date of opening inheritance shall be the day of the testator’s

death or that stipulated in Article 24, if he or she is declared to be deceased.

 

Article 519. Place of opening inheritance

519.1. The place of inheritance shall be the last place of residence and,

where all or most of the heritable property is situated if the former is unknown.

 

CHAPTER FIFTY FOUR

STATUTORY INHERITANCE

 

Article 520. Lawful successor

520.1. The following persons shall be lawful successors and be entitled to

equal shares of heritable property:

520.1.1 The testator’s spouse, adopted children, children born before or

after the death of testator, parents or foster parents.

520.1.2. In the absence of lawful successor specified in Item 520.1.1 or in

case they relinquished their inheritance right or their right was revoked, the

inheritance right shall transferred to the grandparents, brothers and sisters,

grandchildren of the deceased.

520.2. In the absence of lawful successor specified in Item 520.1 or in case

they relinquished their inheritance right or their right was revoked, the right on

inheritance under the law shall be transferred to the great-grandchildren who

shall inherit the share due to their parents.

520.3. If there is a disabled person who stayed under the testator’s care for

no less than one year before the death aside from successors specified in Items

520.1, 520.2, he or she shall claim an equal share of inheritance.

520.4. Household belongings, irrespective of hereditary sequence or

condition, shall be passed on to the lawful successor who lived together with

testator at the time of death of the deceased.

520.5. The personal property of married couples shall be inherited in

accordance with articles 520.1- 520.3 of this law.

520.6. Only the persons specified in Item 520.1.1 of this law shall have the

right to inherit the share of the joint property, which belong to the member of

family, in kind or in form of money.

 

Article 521. Inheritance of property parts not covered by testament

521.1. If part of property is transferred to the successor under the

testament, the remaining property shall be transferred to the lawful successor

under the law.

CHAPTER FIFTY FIVE

INHERITANCE UNDER TESTAMENT

Article 522. Contents of testament

522.1. Citizen have the right to bequeath at own discretion all or part of

own property or rights to one or several persons, who are or are not lawful

successors, or to the state or juristic persons.

522.2. The testator who devises or bequeathes his or her property to the

state or juristic persons may indicate its utilization.

522.3. Is a citizen bequeathed his or her property to other than the lawful

successors, children under 18 years of age, or children unable to work, or born

after the death of the deceased or , spouses unable to work, parents (foster

parents) and other lawful successors shall be entitled to inherit no less than two

thirds of the heritable property. Shares of deceased in joint and personal property

shall be included in determining the total amount of the heritable property.

522.4. Article 522.3 shall not apply if the rights to inherit of a successor or

several or all successors are revoked by law.

522.5. If a successor indicated in a testament dies or relinquishes his or her

right to inherit prior its opening, the testator may appoint another successor.

 

Article 523. Form of testament and its attestation

523.1. The testament should be made in writing and indicate the place and

date of its making, and certified by a notary. If no notary service is available, the

testament shall be certified by soum’s or bag’s governor.

523.2. The testament shall be treated as having been certified by a notary

in the following circumstances:

523.2.1. a testament of a military serviceman certified by the

commander of his or her military unit;

523.2.2.a testament of a prisoner or a prison employee certified by

the governor of the prison;

523.2.3. a testament of a passenger or crewmember certified by the

captain of the vessel;

523.3. The testament not meeting requirements specified in articles 523.1,

and 523.2 shall not be valid.

 

Article 524. Obligations of testamentary successors

524.1. The testator has the right to impose any obligations on his/her

testamentary successor for the benefit of a lawful successor or other persons or

the public.

524.2. The successor shall implement the obligation only to the extend of

the property or rights he or she inherits.

524.3. In case of death of the successor or refusal to accept the

inheritance, the imposed obligation shall be transferred to other successors who

accept the inheritance in question.

Article 525. Amendment or revocation of testament

525.1. A testator has the right to amend or to revoke the testament at any

time.

525.2. A testament shall be deemed revoked or amended by issuance of a

new testament or a relevant document of revocation of the former testament. The

newly issued testaments or the documents of revocation shall be certified in

accordance with Article 523 of this law.

 

Article 526. Execution of testament

526.1. The execution of the testament shall be assigned to the successor,

appointed in the testament.

526.2. A testator may appoint another person as an executor of the

testament.

526.3. The executor of the testament shall accept the obligation by

expressing his or her consent in writing on the testament or producing a separate

document attached to the testament.

526.4. The executor of the testament shall undertake all actions necessary

for execution of the testament and exercise the right for compensation from the

inheritance property for all expenses issued in the course of executing, managing

or protecting the inheritance.

526.5. The executor of the testament shall is obliged to present the

successors a report on execution of the will.

 

CHAPTER FIFTY SIX

ACCEPTANCE OR REFUSAL OF INHERITANCE

 

Article 527. Acceptance of inheritance

527.1. Inheritance shall be deemed executed on acceptance of heritable

property.

527.2. A successor shall not have the right for temporary and conditional

acceptance of the heritable property.

527.3. Property accepted by successors is considered to have been

transferred to their name from the date of opening the inheritance.

 

Article 528. Procedure for accepting or refusing inheritance

528.1. The inheritance shall be deemed accepted if the successor who

lived with the testator prior to his or her death fails to produce within three months

after the date of opening the testament a document certified by notary or, in the

absence of such, by soum or baga governor and expressing his or her refusal to

accept the inheritance.

528.2. The inheritance shall be deemed accepted by other successors

except those specified in article 528.1 if, within one year from the date of opening

of the inheritance, they have possessed or administered the heritable property

pursuant to law or placing a request to a notary office, soum’s or bag’s governor

for a certificate of acceptance or right of acceptance.

528.3. In case the successors not have declared the acceptance note or

report on refusal of the inheritance to authorized agencies or person within period

specified in Items 528.1, and 528.2 their right for inheritance shall be deemed

relinquished.

528.4. The period of the inheritance acceptance can be extended by court

for respected grounds. If the period of the inheritance is extended the successor

who failed to claim the inheritance on time shall have the right to the share of

property accepted by other successors or transferred to the state and to receive

due part of the inheritance if readily available or its money equivalent if the

property was sold.

528.5. A successor has the right to transfer the right to inherit to other

successors or to refuse to accept the inheritance.

 

Article 529. Transfer of the inheritance right

529.1. If the successor under the law ortestament has deceased after the

date of opening the testament but before accepting the inheritance, the right for

the due share of the deceased in the inheritance shall transferred to his or her

successors.

529.2. This right of the deceased successor can be executed in

accordance to general provisions but if the remaining time is less than three

months, it shall be deemed valid for three months.

 

Article 530. Acceptance by successors of inheritable property prior to

the execution by other successors

530.1. The successor may possess the inheritable property before other

successors appear but he or she shall not to sell, to give as a gift or to pledge, or

to bequeath within one year from the date of opening the inheritance or before

receiving a certificate about the right to the inheritance.

530.2. The successor which accepted the inheritance in accordance to

article 530.1 has the right to withdraw the following expenses:

530.2.1. expenses spent on medical treatment and funeral of the

deceased;

530.2.2. expenses on the persons under the custody or those with

the right to receive allowance from the deceased;

530.2.3. to satisfy claims for salary or other similar expenses;

530.2.4. expenses spent on the protection of the inheritance;

 

Article 531. Issuance of certificate of right to inherit

531.1. A lawful or testamentary successor shall submit an application for

the certificate on the right to inherit to a notary office or, in the absence of such, to

the soum or baga governor at the place of the opening of inheritance.

531.2. A certificate of right to inherit shall be issued to the successor after

one year after the date of the opening of inhertance.

531.3 A certificate of right to inherit can be issued before the expiration of

the term specified by article 531.2 of this law, if it is proven that there are no

successors other than the one who requested a certificate or accepted the

inheritance.

531.4. A certificate of right to inherit can be issued to a successor within

one year from date of the opening of inheritance upon presentation of a testament

in the absence of other successors as specified in article 522.3 of this law.

531.5. A certificate of right to inherit shall be issued to the respective

government agency after one year after the date of the opening of inheritance if

there are not successors to the inheritance and it was transferred to the state.

 

Article 532. Distribution of inherited property

532.1. Upon agreement of all of the successors participating in the

inheritance, the herotiable property shal be distributed in the shares due to each

successors icluding lawful and testamentary successors. A court shall decide

disputes over such distribution.

532.2. Part of the inheritabel property due to the successor conceived

when the testator was alive but not yet born shall be allocated separately.

532.3. To protect the interests of not yet born successor a representative of

a guardianship institution shall be present at the distribution of the inheritance.

CHAPTER FIFTY SEVEN

INCREASE OF INHERITABLE PROPERTY

 

Article 533. Increase of inheritable property

533.1. If one of the successors under the law refuses from a share due

without assigning a successor or his or her inheritance right has been revoked,

the share of the inheritable property shall be distributed to other successors on

equal basis.

533.2. If the testator bequeathed all his or her property but one of

successors under the testament refuses from the due share without assigning a

successor or his or her right to inherit has been revoked, the due share of the

inheritable property shall be distributed to other lawful successors specified in

article 522.3 of this law on equal basis.

533.3. If the testator bequeathed parts of his or her property but one of

successors has been relinquished from the list of successors on grounds specified

in article 533.2 of this law the due share of inheritable property of him or her shall

be distributed among other lawful successors on equal basis.

533.4. If there are no successors of the inheritable property as specified in

articles 533.1- 533.3 of this law, the property shall be transferred to the state.

 

Article 534. Consequences of changes in appointment of

testamentary successors

534.1. If a testator has appointed a new successor to the due parts of

inheritable property following exclution of a testimony successor on the grounds

specified in article 517 of this law, articles 533.2 and 533.3 shall not apply.

 

CHAPTER FIFTY-EIGHT

LIABILITIES OF SUCCESSORS FOR OBLIGATIONS OF TESTATORS

 

Article 535. Liabilities of successor

535.1. A successor or government agency which accepted the inheritance

in accordance to this chapter provisions shall bear obligations of the testator to the

extend of the total value of inherited property.

535.2. At presence of several successors specified in article 535.1 of this

law, they shall be liable for the testator’s obligation in equal to respective shares of

the inherited property by him or her.

 

Article 536. Lodge of a claim by the principal of testators

536.1. A principal of obligations of a testator shall lodge a claim to satisfy

his or her or its claim to successors, testament executors, notary office or the

government agency, which accepted the inheritance, within one year after the Date of the opening of inheritance.

536.2. If a principle of testator’s obligations lodged a claim in accordance to

article 536.1 of this law, he/she/it shall be entitled to issue a writ to a court within

one year after the date of receiving a response on his/her/its claim or the date of

the expiry of the lodging a claim.

 

CHAPTER FIFTY NINE

PROTECTION OF INHERITABLE PROPERTY

 

Article 537. Procedure and term for protection of inheritable property

537.1. A notary office in a place of the opening of inheritance or, in the

absence of such, the soum’s or bag’s governor shall take, if it is deemed

necessary, required measures to protect the inheritable property in the interests of

a successor, executor of the testament and the state.

537.2. An inheritable property shall be protected until of its acceptance by

all successors or its transfer to the state ownership.

 

Article 538. Assigning administrator for inheritable property

538.1. if a principle of a testator’s obligations issued a writ to a court or in

other necessary circumstances local administrative bodies shall appoint an

administrator for inheritable property. The costs of administration shall be

deducted from the inheritable property.

PART VI

PRIVATE INTERNATIONAL LAW

CHAPTER SIXTY

GENERAL PROVISIONS

 

Article 539. International treaty

539.1. Mongolia shall conclude international treaties on the basis of the

general principles of the Civil Code of Mongolia.

539.2. Unless an international treaty of Mongolia contains provisions

providing otherwise than those of the Civil Law and they do not contradict the

Constitution of Mongolia, the provisions of the international treaty shall prevail.

 

Article 540. Application of foreign law

540.1. If it is necessary, Court may apply foreign laws, legislative acts and

or internationally accepted practice not contradicting Mongolian law or the

international treaties of Mongolia to civil litigations, disputes and for regulating

other civil law relations.

540.2. If the foreign laws stipulate the application of Mongolian law the

Mongolian legislation shall be applied.

540.3. Foreign laws can be considered for classification of law relations, if

the Mongolian law does not identify clearly the civil relation’s aspect or defines it

under other legal term, but with different legal context or it is impossible to

classify through interpretation of Mongolian law.

 

Article 541. Ascertaining foreign law

541.1. When applying foreign law, courts and arbitration bodies shall

ascertain their legal framework within the context of their official interpretation and

practice.

541.2. Courts and arbitration bodies may request the central governmental

agency in charge of legal affairs, other competent authorities in Mongolia or

abroad to provide legal assistance and interpretations as well as to invite

specialists in order to ascertain the contents of foreign law.

541.3. Parties shall have the right to issue documents defining the

respective content of foreign law.

541.4. Mongolian law shall be applied in case it is impossible to ascertain

foreign law content despite the best effort in accordance to this provision.

 

Article 542. Limitation period

542.1. Limitation period shall be determined in accordance with Mongolian

law or the international treaties of Mongolia regulating certain relations.

 

CHAPTER SIXTY ONE

PARTICIPANTS TO INTERNATIONAL CIVIL LAW RELATIONS

 

Article 543. Civil law capacity and capability of foreign citizens and

stateless persons

543.1. The civil law capacity of foreign citizens and stateless persons shall

be equal to that of citizens of Mongolia but it can be restricted by Mongolian law.

543.2. The civil law capability of foreign citizens shall be determined by the

law of the state of which those citizens are nationals.

543.3. The law capability of stateless persons shall be determined by the

law of the state where they have permanent residence.

543.4. The refugee’s legal status shall be determined by law of the state

that provided asylum.

543.5. The law capability of foreign citizens and stateless persons in

respect of their contractual obligations and torts occurring on the territory of

Mongolia shall be determined by Mongolian law.

543.6. The deprivation or restriction of civil law capability of any person on

the territory of Mongolia shall be determined by Mongolian law.

543.7. The declaration of any person to be missing or dead on the territory

of Mongolia shall be made in accordance with Mongolian law.

 

Article 544. Civil law capacity of foreign juristic person

544.1. The determination of the civil law capacity of foreign juristic person

under the law of the state of which such juristic persons are nationals shall be

recognised by Mongolia.

544.2. A foreign juristic person entering into agreements shall not apply

restrictions that are not specified by Mongolian law.

Article 545. State participation to international civil law relations

545.1. Unless law provides otherwise, this law shall apply in cases where

the state enters as one party into civil law relations.

 

Article 546. Announcing a citizen to be missing or dead

546.1. In announcing a citizen to be missing or dead the applicable law of

respective state he or she held the citizenship while alive or where seen last shall

be considered.

546.2. In announcing a stateless person to be missing or dead the law of

the state of his her permanent residence shall be considered. In case if he or she

do not has a permanent residence the Mongolian law shall apply.

 

CHAPTER SIXTY TWO

OWNERSHIP AND OBLIGATION LAW

 

Article 547. Ownership right

547.1. The right of property ownership shall be determined as follows:

547.1.1. the property - by the law of the state it is located;

547.1.2. the property subject to registration- by the law of the state it

is registered;

547.1.3. relations pertaining to the creation and termination of the

property ownership rights – by respective documents, and in other case - by the

law of the state where such rights were first created, unless the Mongolian law

provides otherwise;

547.1.4. the property as subject of transaction - by the applicable

law for transaction, unless the parties agreed otherwise.

547.1.5. the goods transported under international contracts - by the

law of the state from where the shipment’s was dispatched, unless the parties

agreed otherwise;

547.1.6. the owner’s rights claim to protect its ownership right - by

the law , which choused by owner from the law of the state where property is

located or registered or where the claim was initially placed;

547.1.7. as for rights to the intangible properties- by law of the state

where these intangible properties are being used.

 

Article 548. Transactions

548.1. Applicable law for conclusion of transaction, or validity of transaction

as a whole or one of it’s provisions shall be the law recognising that transactions

as valid

548.2. The form for a transaction shall be determined by the law of the

state where it was made or the relevant law depending the subject of transaction.

548.3. If the parties to the transaction live in different states and the agreed

to follow the law of one state governing the form of transaction while signing one,

it shall be deemed valid in respect to form.

548.4. It shall be prohibited to revoke a transaction made abroad and

meeting the requirements of Mongolian laws on the ground of violating the

standard form requirements.

548.5. The form of transaction related to real estate situated on the territory

of Mongolia shall be determined by Mongolian law.

548.6. If the transaction was made by a representative and Item 548.2. of

this Law is respectable, than the law of the state of the representative’s origin

shall be applied.

548.7. The place of formation of transaction shall be determined by

Mongolian law.

548.8. The authorisation form and term shall be determined by the law of

the state where the authorisation was issued, and it is not allowed be considered

void on the basis of the form if it meets the requirements of Mongolian law.

 

Article 549. Choice of law by contract parties

549.1. The of rights and obligations of parties to contract, content of

contract, fulfilment of obligations, termination or revocation, implementation of

duties under the contract or the failure shall be regulated by the law of any state

designated by the parties to the contract.

549.2. The parties can change upon mutual consent their choice of law

regulating the contract even after signing the contract.

549.3. In case of applying the legislation of state other than noted in the

contract, it shall be void.

549.4. If the parties did not designate a governing law as provided in Item

549.1 of this Law, then the law shall be the law of the state where the following

parties have their place of residence or carry out their main business activities:

549.4.1. sale purchase contract - by the law of the seller;

549.4.2 leasing contract - by the law of the lesser;

549.4.3 deposit contract - by the law of the depository;

549.4.4. commission contract - by the law of the commission agent;

549.4.5. agency contract - by the law of the agent;

549.4.6. transportation contract - by the law of the carrier;

549.4.7.  insurance contract - by the law of the insured;

549.4.8. loan contract - by the law of the lender;

549.4.9. gift contract - by the law of the donor;

549.4.10. warranty - by the law of the guarantor;

549.4.11. pledge contract - by the law of the pledgor.

549.5. Contracts for joint production, specialised training, co-operation,

construction, assembling and other works shall be governed the law of the state

where those activities are being carried out or where the results of those contracts

occur, unless otherwise agreed by the parties.

549.6. A joint venture agreement involving foreign juristic person and

citizens shall be governed the law of the state where the joint venture has its place

of business.

549.7. A contract concluded as a result of stock exchange transaction or an

auction sale shall be governed by the law of the state where the transaction took

place or where the auction sales were conducted.

549.8. The rights and obligations of parties to contracts not provided for in

Items 549.1.- 549.4. shall be determined by the law of the state where the party

performing the principal obligations under contract has its place of residence or

carries out its core business activities.

549.9. Unless otherwise agreed by the parties, the results of implemented

obligations shall be accepted or appraised in accordance to the law of the state

where such acceptance is made.

 

Article 550. Transfer of right to demand

550.1. The transfer of the right to demand shall be governed by the law of

the state where the previous client and the obligation performer made a contract.

550.2. The right and obligations of the new performer to the previous and

new client shall be governed by the law of the state where the right to demand

was transferred.

 

Article 551. Obligations for torts

551.1. The rights and obligations of the parties for the caused damage shall

be governed by the laws of the state where the fact causing damages or events

and other circumstances justifying claims for recovery of damages occur .

5551.2. If the parties to obligations for torts which occur abroad are citizens

or juristic person of Mongolia, then their rights and obligations shall be determined

by law of Mongolia.

CHAPTER SIXTY THREE

INHERITANCE

Article 552. Governing law for inheritance

552.1. The inheritance relations shall be regulated by the laws of the state

of permanent residence of the testator.

552.2. The civil law capacity of testator, form of the testament, it’s drafting and amendment shall be regulated by the laws of the state of the permanent

residence of the testator at the time of drafting or amending the testament.

552.3. It is prohibited to void the testament only on the basis of its form

inconsistency, if the testament was drafted and amended according to the

requirements of the laws of the state where it was made or laws of Mongolia.

552.4. The inheritance, the making of a testament and its amendment

regarding to immovable property located on territory of Mongolia shall be

regulated by laws of Mongolia.

 

S.TUMUR-OCHIR,

 

CHAIRMAN OF THE STATE IKH KHURAL