The Plenum of the Supreme Court of the Russian Federation adopted the Resolution* “On some issues of the application of the general provisions of the Civil Code of the Russian Federation on the conclusion and interpretation of contracts”.
The Resolution deals with problematic issues related to the enforcement of representations and warranties, as well as the conclusion and interpretation of general and specific contracts (i.e. public, framework, preliminary and subscriber contracts).
Many of the legal positions expressed in the Resolution have already been stated in previous resolutions of the Supreme Court and the Supreme Commercial Court of the Russian Federation. The Resolution, however, is valuable because it categorises the most important explanations in the field of contract law. Addressed to commercial courts and courts of general jurisdiction, the Resolution should contribute to uniform court practice both in cases involving legal entities and individuals.
Representations and warranties
For the first time, the Supreme Court clarified representations and warranties (zavereniya ob obstoyatelstvakh).
The Supreme Court divided the consequences of inaccurate representations and warranties by whether they relate directly to the subject matter of the contract (e.g. the quality of the goods) or not (e.g. having the necessary licences). In the first case, a party to a contract is entitled to require both special remedies provided for certain types of contracts (e.g. the consequences of supplying a defective product) and the application of the consequences of inaccurate representations and warranties. On the other hand, if the representations and warranties do not relate to the subject matter of the contract, then the injured party is entitled to use only those remedies provided in connection with the inaccurate representations and warranties. For example, a party can file a claim for the recovery of damages or penalties, if the latter are provided for in the contract.
Representations and warranties can be made directly not only by the parties, but also by third parties if they have a legitimate interest in the contract. At the same time, the Supreme Court noted that any third party has such an interest until proven otherwise.
If a party has deliberately provided inaccurate representations and warranties, then it cannot argue that the other party was negligent or could have checked whether the representations and warranties were true (e.g. by requesting information from publicly available registers, such as the Unified State Register of Legal Entities, the Unified State Register of Immovable Property). This position of the Supreme Court is important for disputes over the conclusion of insurance contracts.
Communication of acceptance
The Supreme Court explained under what conditions acceptance of a contractual offer remains complete and unconditional and is recognised as acceptance, despite the fact that it changes the terms of the offer. Hence, it is permissible to clarify the details of the parties and correct typographical errors, provided that such changes do not directly affect the content of any contract terms.
In addition, the Supreme Court clarified that acceptance of an offer is considered to have been sent on time if sent within the time limit and – under the normal conditions – would have been received by the offeror on time. However, if the acceptance was deliberately sent in such a way that the offeror could not receive it within the prescribed period, then it cannot be considered sent in a timely manner.
Establishment of benefits for consumers in a public contract
The Supreme Court explained the situations in which the establishment of different pricing conditions for consumers is allowed. In particular, an organisation that is obliged to conclude a public contract has the right to independently determine the categories of consumers, including those related to the personal characteristics of consumers, for which special prices are established. However, such criteria must be objective and be in line with legal requirements. Information on these consumer categories should be made publicly available, such as on the official website of the organisation.
In this way, the Supreme Court confirmed the legitimacy of bonus and loyalty programmes, and other promotions providing discounts to certain categories of consumers, provided that they do not contain discriminatory conditions and the rules are available for consumers to familiarise themselves with.
Conditions of preliminary agreements
The Supreme Court confirmed once again that it is not necessary for a preliminary agreement to set forth all the essential terms of the main contract, which can be agreed by the parties in the main contract or determined by the courts.
Therefore, the Supreme Court is allowing a more flexible use of preliminary contracts when structuring transactions. This applies to the early stages of a project, when the parties do not yet have a complete understanding of all the conditions of their future cooperation.
References to framework agreements
In pursuance of a framework agreement, the parties enter into separate agreements for specific deliveries of goods, scope of work or services to be performed (which may exist in the form of orders accepted by the seller or client). It is noteworthy that, according to the Supreme Court, a lack of reference to the framework agreement in these separate documents would not indicate that the provisions of the framework agreement do not apply to the relationship between the parties. In this case, a party can use other evidence to confirm the applicability of the framework agreement to the relevant situation.
Interpretation of contracts
The Supreme Court confirmed that one of the main principles of the interpretation of terms and conditions of a contract is to prevent a party from benefiting from unlawful or unfair behaviour.
If terms and conditions of a contract are unclear and it is impossible to establish the true common will of the parties, the court must interpret the relevant condition in favour of the party who did not initiate the condition. Thus, the party who sends its draft contract must understand that, if its conditions are ambiguous, the court will most likely rule in favour of the other party.
If you have any questions on the matters referred to in this eAlert, please do not hesitate to contact CMS Russia experts Georgy Daneliya, Maxim Gubanov and Alexey Shadrin or your regular contact at CMS Russia.
* In Russian