Unilateral refusal to fulfill a supply contract in 2022 - what is the procedure and consequences

Author

Sergey Ershov

Registration number in the register of lawyers of St. Petersburg – 78/5563

The supplier has repeatedly missed delivery deadlines. You see no point in continuing cooperation, but you are not sure whether you have the right to terminate relations with a problematic counterparty without obtaining his consent and without going to trial. Unilateral refusal of a supply agreement out of court is possible, and I will tell you what the grounds for this should be.

From the article you will learn whether cancellation of the contract is allowed at the initiative of the buyer and at the initiative of the supplier, what is the procedure for notifying the counterparty of refusal to fulfill obligations, what information should be contained in the notification, how to correctly compose it and how to send it. And also, what are the consequences of a unilateral refusal and whether it can be challenged.

Is unilateral refusal to fulfill a supply contract allowed?

Unilateral refusal to execute a supply agreement (DP) is permitted if the right to refuse and the list of grounds for it were specified in the terms of the agreement - Art. 450.1 Civil Code of the Russian Federation.

Please note the restrictions for refusal imposed by paragraph 2 of Art. 310 Civil Code of the Russian Federation:

• If both parties to the contract carry out entrepreneurial activities, the possibility of refusal may be provided for by the DP for both the buyer and the supplier.
• If the buyer is not a commercial organization or entrepreneur, and purchases goods for purposes unrelated to personal, family, household and other similar use, the right to unilaterally refuse the supply agreement is granted only to the buyer.

If the terms of the DP have not secured the right to refuse, then any of the parties can refuse to fulfill their obligations, but only in the event of a significant violation by the counterparty of the terms of the agreement - Art. 523 Civil Code of the Russian Federation.

On a note. A refusal cannot be stated without observing the basic principles of civil law: good faith, reasonableness and fairness.

What are the advantages and features of unilateral withdrawal from the contract?

The advantage of unilateral refusal of the DP is that in the event of non-fulfillment or improper fulfillment of obligations by your counterparty, you will not have to obtain his consent to terminate or go to court. The term “unilateral refusal” means that the conflict is resolved out of court.

To exercise the right to unilateral refusal, it is enough to notify the other party of your decision - Art. 450.1 Civil Code of the Russian Federation. The contract will be considered terminated from the moment the counterparty receives notification of your intentions. A different termination period may be specified in the notice itself or determined by agreement of the parties.

Important! The right to unilateral refusal is different from the requirement to terminate the contract. Refusal to perform is made without going to court - the contract is considered terminated by virtue of the very fact of notifying the counterparty.

If the basis for termination of the contract is a significant violation of the contract, you also have the right to demand compensation from the counterparty for:

1. Damages caused by violation of the terms of the contract in accordance with Art. 15 of the Civil Code of the Russian Federation and Art. 393 Civil Code of the Russian Federation.
2. Damages caused by termination of the contract - Art. 453 of the Civil Code of the Russian Federation and Art. 524 Civil Code of the Russian Federation.

What are the grounds for unilateral refusal?

The contract can be terminated unilaterally on the following grounds:

1. If they are provided for by the terms of the agreement - Art. 310 Civil Code of the Russian Federation. This also applies to the pottestative conditions specified in the contract (agreements depending on the performance of actions or refusal of them by one of the parties) - Art. 157 and 327.1 of the Civil Code of the Russian Federation.
2. If the violations are significant - Art. 523 Civil Code of the Russian Federation.

Important! Since the provisions of the purchase and sale agreement are applicable to the DP, the grounds for refusal are also the material violations provided for by the provisions of the sale and purchase - clause 5 of Art. 454 of the Civil Code of the Russian Federation and ch. 30 § 1 of the Civil Code of the Russian Federation.

What violations are significant?

A violation of the terms of the contract is considered significant if it entails such damage that one party is substantially deprived of what it had the right to count on when concluding the contract - Art. 450 Civil Code of the Russian Federation. In this case, materiality depends on the difference between what the party had the right to count on and what it was actually able to receive.

The list of essential grounds for unilateral refusal of the supply contract is given in Art. 523 Civil Code of the Russian Federation:

1. Delivery of goods of inadequate quality with defects that cannot be eliminated within a time acceptable to the buyer.
2. Repeated violation of delivery and payment deadlines.
3. Repeated failure to pick up goods at the supplier’s location within the period established by the DP - Art. 515 of the Civil Code of the Russian Federation. And if there is no deadline in the contract - within a reasonable time after receiving the supplier’s notification about the readiness of the goods.

Important! The expression “repeated” means committing a violation at least 2 times. A prolonged single failure by the supplier to comply with the delivery deadline may be considered a significant violation and will be considered grounds for the buyer’s refusal to fulfill the supply contract.

Significant violations that allow the buyer to refuse the DP include:

1. Failure to fulfill the obligation to transfer goods - Art. 463 Civil Code of the Russian Federation.
2. Identified irreparable deficiencies and shortcomings that cannot be eliminated without disproportionate costs or time are either identified repeatedly or appear again after they have been eliminated - Art. 475 of the Civil Code of the Russian Federation.
3. Requirements for replenishment of goods not fulfilled within a reasonable time - Art. 480 Civil Code of the Russian Federation.
4. Transfer of goods subject to packaging or packing without containers or without packaging, or in improper containers or packaging - Art. 482 of the Civil Code of the Russian Federation.
5. Failure to fulfill the obligation to insure the goods - Art. 490 Civil Code of the Russian Federation.

Significant violations that allow the supplier to unilaterally refuse DP are also:

1. Failure to make the next payment within the period established by the contract for goods sold in installments and transferred to the buyer - clause 2 of Art. 489 of the Civil Code of the Russian Federation.
2. Failure to fulfill the obligation to pre-pay for goods (in whole or in part) - Art. 487 Civil Code of the Russian Federation and Art. 328 Civil Code of the Russian Federation.
3. Failure by the buyer to submit a shipping order within the prescribed period - Art. 509 of the Civil Code of the Russian Federation.
4. The buyer does not accept the goods or refuses to accept them - Art. 484 Civil Code of the Russian Federation.
5. Refusal to accept and pay for goods - Art. 486 of the Civil Code of the Russian Federation.
6. The buyer did not insure the goods in accordance with the terms of the contract - Art. 490 Civil Code of the Russian Federation.
7. The selection of goods was not carried out within the prescribed period - Art. 515 of the Civil Code of the Russian Federation.

What are the additional grounds for unilateral refusal?

You have the right to refuse performance on the grounds provided for in the DP.
The Civil Code of the Russian Federation gives the parties the right to decide in the DP which of the violations of obligations they consider significant and on what basis they can unilaterally refuse to perform the contract - Art. 450.1 of the Civil Code of the Russian Federation and clause 4 of Art. 421 Civil Code of the Russian Federation.

The grounds for unilateral refusal provided for by the parties and agreed upon in the supply contract may be different, but all of them must be clearly stated and must not contradict the essence of the supply.

Important! A provision of a supply agreement that prohibits the parties from unilaterally renouncing it in the event of a material violation of the terms of this agreement is void.

Most often, the DP specifies the right to refuse in the following cases:

1. A one-time violation of the delivery or payment deadline.
2. Delay in delivery or payment exceeding a certain number of days.
3. Delivery of goods in inconsistent packaging.
4. Agreed by the parties.

If a violation specified in the DP occurs and you decide to refuse to fulfill your obligations, you will not have to prove the materiality of the violation in the notification - it is enough to provide a reference to the clause of the agreement.

Important! If the contract provides for the possibility of unilateral refusal to perform it, regardless of any violations by the other party, then such a condition is considered invalid - Resolution of the Federal Antimonopoly Service of the North-Western District of April 17, 2008 No. A56-32099/2006.

Is it possible to refuse a contract if the violation is not provided for either by contract or by law?

If the counterparty has committed violations that are not significant under the Civil Code of the Russian Federation and were not agreed upon in the supply agreement, you should notify the party in breach of its obligations about your decision to refuse to fulfill the contract and your intention to go to court to terminate the agreement.

Such notification will serve as evidence of compliance with the claim procedure. In the event of a dispute, you will have to prove the significance of the violation. The court will evaluate your arguments and those of the counterparty, and on their basis will make a decision on the legality of a unilateral refusal - clause 20 of the RF Supreme Arbitration Court No. 18 “On issues related to the application of the provisions of the Civil Code of the Russian Federation on the supply agreement.”

Note:

• The demand for termination of the contract is not subject to satisfaction if the violations that served as the basis for going to court are eliminated within a reasonable time.
• Violation of deadlines or cost (price) may serve as a significant basis for termination of the contract.

See also:

How to make a claim under a supply contract in 2022 - procedure + sample

Is partial refusal to fulfill a supply contract allowed?

The legislation provides for the right to unilaterally withdraw from the contract, both in whole and in part - clause 2 of Art. 450.1 Civil Code of the Russian Federation. In case of partial refusal, the contract is considered modified.

If there are no conditions in the agreement itself for a partial unilateral refusal, it is necessary to establish the fact of a significant violation of the DP. You have the right to refuse to perform the contract:

• Only in relation to that part of the goods (that batch of goods) during the delivery of which a violation was committed.
• Both in full and in part (for example, in terms of future deliveries).

Choosing a behavior option, i.e. full or partial refusal belongs to the party whose rights or interests were violated.

On a note. If the buyer fails to provide a shipping order (in relation to the transfer of goods in separate batches), the waiver of obligations must be complete, unless otherwise stated in the waiver itself - comments to Art. 509 of the Civil Code of the Russian Federation.

Is it possible to cancel a supply contract due to loss of interest?

Loss of interest is not an unconditional basis for refusal of a supply agreement.
The parties have the right to stipulate loss of interest in fulfilling an obligation and the possibility of unilateral refusal in the supply agreement itself, indicating any violations. If there is no such clause in the agreement, then the loss of interest itself cannot serve as an unconditional basis for exercising the right to refuse.

Refusal is possible in the following cases:

1. If the loss of interest clearly follows from the terms of the contract.
2. If the execution of the DP by a strictly defined deadline is implied by the specifics of the product.
3. In case of missing the deadline specified in the contract - clause 2 of Art. 405 of the Civil Code of the Russian Federation.
4. If there is a significant change in the circumstances from which the parties proceeded when concluding the DP - Art. 451 Civil Code of the Russian Federation.
5. If the violations are significant - Art. 523 Civil Code of the Russian Federation and Ch. 30 § 1 of the Civil Code of the Russian Federation.

Is unilateral refusal to perform a state or municipal contract allowed?

To refuse to fulfill a state or municipal contract, the provisions of Art. 523 of the Civil Code of the Russian Federation do not apply. Unilateral refusal of a contract is allowed when it is provided for by law or by agreement of the parties - Art. 450 Civil Code of the Russian Federation.

The following rules apply to cancel a contract:

1. The supplier has the right to refuse performance if losses caused to him in connection with the performance of the contract are not compensated in accordance with the terms of the contract - Art. 533 Civil Code of the Russian Federation.
2. A state or municipal customer, in cases provided for by law, has the right to fully or partially refuse goods, subject to compensation to the supplier for losses caused by such refusal - Art. 534 Civil Code of the Russian Federation.

A complete refusal of goods entails termination of the state or municipal contract, and a partial refusal means its modification.

Termination by court decision

This is exactly the way in which you will need qualified legal assistance. Any trial is fraught with many nuances and pitfalls. Without a competent and professional approach, it will be difficult to achieve the desired result. Turning to professionals in your field is often the key to success. Legal, having extensive judicial practice, is ready to assist you. We are ready to undertake the entire range of activities - analyze your supply contract, draw up a claim under the contract, prepare documents for the court, represent your interests in court and provide full assistance at the stage of enforcement proceedings.

In cases provided for by current legislation, a party has the right to apply to court to terminate the contract. Termination of a supply contract in court is possible at the request of one of the parties in the event of a significant violation of the contract by the other party. Significant violations will include those violations that have caused damage to the other party, due to which it is significantly deprived of what it had the right to count on when concluding the contract. It is precisely this materiality that will need to be proven in court. Therefore, merely citing the fact of a violation is not enough; damage caused as a result of the violation must be proven. But of course, the decision on the degree of significance of the violation will be made directly by the court. And if the violation is not considered significant, termination of the contract may be refused.

Courts include the following as significant violations of the supply contract:

• violation of the terms of the contract regarding the quantity and completeness of the goods;
• violation by the supplier of the delivery time of goods;
• short delivery of goods, delivery in larger quantities than established by the contract, early delivery without the buyer’s consent;
• supply of goods in an assortment that differs from that stipulated in the contract.

What nuances arise when one of the parties refuses to execute the agreement?

If both counterparties carry out entrepreneurial activities, then by law or contract the right to unilateral refusal to perform is granted to both the buyer and the supplier - clause 2 of Art. 310 Civil Code of the Russian Federation. If the fulfillment of an obligation by the buyer is not related to his business activities, then the following has the right to refuse:

• Only the buyer - if the grounds for refusal are specified in the contract.
• Both the buyer and the supplier - if the terms of the agreement did not provide for it, and the violation is significant.

I will talk about some of the nuances of refusing DP for each of the parties to the transaction. The selection is compiled on the basis of explanations from the highest judicial authorities and an analysis of the judicial practice of lower authorities.

What features arise when the buyer refuses DP

If the contract does not provide for the right to unilateral refusal, then the buyer can refuse the DP only in one case - if the supplier committed a significant violation of the terms. Also pay attention to the following points:

1. The significance of the violations given in Art. 523 of the Civil Code of the Russian Federation (violation of delivery deadlines and delivery of goods of inadequate quality), does not require proof. The buyer does not need to prove it even in case of violations recognized as grounds for refusal in the supply agreement itself.
2. Repeated (at least 2 times), but insignificant in duration, violation of the delivery time of goods cannot serve as a basis for unilateral refusal. To assess materiality, one should proceed from the proportionality of the violation committed and the consequences of termination of the contract.
3. Repeated violations should be considered in relation to one delivery period.
4. The court may recognize a one-time but long-term violation of the delivery deadline as sufficient grounds for the buyer to refuse to fulfill the contract.
5. When delivering goods of inadequate quality with defects that cannot be eliminated within a period acceptable to the buyer, it is necessary to evaluate the concept of “acceptable period”, since it is not disclosed in the law - you must make sure that the defects really cannot be eliminated within a reasonable time, otherwise refusal DP may be declared illegal by the court.
6. If the contract establishes the need for the goods to comply with a certain GOST, then if this condition is violated, the quality of the goods is considered inadequate, and the buyer has the right to unilaterally refuse the DP.
7. If the contract provides for specifications (technical conditions) for the quality of the goods and a discrepancy is identified, the buyer should draw up a report indicating in it the non-compliance of the goods with the technical conditions, describing the identified defects, the method of acceptance of the product in terms of quality and information about the quantity of low-quality goods.
8. The supplier’s lawful suspension of delivery of goods cannot be considered a violation and is not a basis for the buyer’s refusal to fulfill the contract.
9. The necessary conditions for the buyer to refuse to fulfill the contract in connection with the transfer of incomplete goods are the filing of a claim with a requirement to complete the goods and the supplier’s failure to fulfill this requirement within a reasonable time.
10. A refusal of the DP is considered legitimate if it does not define the assortment of goods (type, model, size, color, other characteristics), and from the essence of the obligation it follows that the goods must be transferred to the buyer in an assortment, and the procedure for determining it is not established.
11. In the event of an unlawful unilateral refusal by the buyer from the supply contract, the supplier has the right to make demands for payment for the goods and for the recovery of damages.

Can a buyer refuse goods under a supply agreement?

The buyer is not allowed to refuse goods of proper quality, assortment and completeness.
The buyer is obliged to accept the goods transferred to him - clause 1 of Art. 484 Civil Code of the Russian Federation. The exception is cases when he has the right to demand replacement of goods or refuse to fulfill the contract. The buyer has no right to refuse the delivered goods of proper quality, assortment, completeness and in the established quantity.

He is obliged to check the quantity and quality of accepted goods in the manner prescribed by law, other legal acts, agreement or business customs. If any discrepancies or deficiencies are identified, the supplier must be notified immediately in writing.

Important! Under one-time delivery contracts, the legal consequences of the buyer’s refusal to accept the goods are equivalent to the consequences of refusal to fulfill the contract. If the contract provides for multiple deliveries, refusal to accept one shipment does not affect further contractual relations, i.e. The mutual rights and obligations of the parties are preserved.

The grounds for the buyer to refuse the goods and/or pay for them are:

1. Transfer of goods in a smaller quantity than specified in the DP - Art. 466 of the Civil Code of the Russian Federation.
2. The entire range of goods does not comply with the terms of the contract - clause 1 of Art. 468 Civil Code of the Russian Federation.
3. Some of the goods were delivered in violation of the assortment condition - clause 2 of Art. 468 Civil Code of the Russian Federation. The buyer has the right to refuse both all transferred goods and only those that do not comply with the assortment conditions.
4. Accessories or documents related to the goods were not delivered within the reasonable time specified by the buyer - Art. 464 Civil Code of the Russian Federation. When accepting the goods, the buyer must ensure that all necessary documents for the goods are available, demand their transfer, and if this requirement is not met, send a notice of refusal.
5. In case of short delivery of goods (subject to notification of the supplier of refusal to accept goods whose delivery is overdue) - Art. 511 of the Civil Code of the Russian Federation. Goods delivered before the supplier receives notification must be accepted and paid for.

Important! If the buyer unmotivatedly evades acceptance of the goods, the obligation to accept the goods may be imposed on him by the court.

What nuances should you be aware of in the event of a supplier’s unilateral refusal to execute an agreement?

The supplier may exercise the right of unilateral refusal in cases provided for by the supply contract and the law. Please note the following features:

1. Refusal in case of violation of terms of payment for goods will be legal if the violation is repeated and this is not the fault of the supplier himself (for example, lack of payment due to late delivery).
2. Refusal due to repeated non-selection of goods is possible only if the selection was provided for by the terms of the contract. When qualifying the buyer’s actions, it is necessary to take into account the specifics of determining the sampling period, i.e. whether it is provided for in the contract, or whether the sampling is carried out within a reasonable time after receiving the supplier’s notification of the readiness of the goods.
3. The supplier may not refuse the DP if the goods were not insured under the terms of the contract - he has the right to insure the goods himself and demand reimbursement of expenses from the buyer.
4. Refusal is possible if the buyer did not submit a shipping order within the period specified in the DP, or sent the order later than 30 days before the delivery period. An alternative to refusal would be to demand payment for the goods.

What rights does the supplier have if the buyer refuses to accept the goods?

If the buyer, without grounds established by law or contract, does not accept the goods or refuses to accept them, then the supplier has the right to refuse to fulfill the contract and demand:

• Compensation for damages.
• Payment of penalties established by the contract.
• Payment of either penalties or losses - if such a condition is specified in the contract.

Important! Refusal of the contract at the initiative of the supplier implies the buyer's obligation to pay for the accepted goods. If the goods have not been accepted, then the buyer is not obliged to accept them or pay for them.

If the buyer, having received notification of the receipt of goods, does not fulfill the obligation to accept the goods, the supplier has the right (at his discretion):

• Do not return prepayment.
• Refuse to fulfill the contract and return the advance payment to the buyer.

If the delivery was to take place on sample terms, then the supplier should notify the buyer about the readiness of the goods and provide himself with evidence of the fact that the goods are in the warehouse after the sampling period.

Return of unpaid goods upon cancellation of the contract

The possibility of demanding the return of unpaid goods is determined by the moment of transfer of ownership from the seller to the buyer. Unfortunately, due to gaps in the regulatory framework, fundamental disagreements often arise between the parties to the agreement and the decisions of the judicial authorities.

If material assets were supplied by the seller on the terms of subsequent payment by the buyer, in case of refusal and going to court, there are 3 possible solutions:

• The seller demands the return of the property even after the transfer of ownership to the client. For example, this is exactly the decision that was made by the Supreme Arbitration Court in Resolution No. 15550/05 of May 16, 2006.
• If ownership passes to the customer upon receipt of the goods, the supplier cannot demand its return. A similar situation was considered in determination No. VAS-324/12 dated 02/09/2012.
• If the property has not been paid for by the buyer, the supplier has the right to demand its return, guided by regulations on commodity lending and pledge of material assets. The FAS of the East Siberian District came to this conclusion, which was recorded in the decision in case No. A33-13869/2010.

It is permissible to be guided by regulations on the procedure and possibility of collecting collateral if the contract reflects the conditions characteristic of the pledged property. The corresponding point of view was expressed by the Supreme Arbitration Court in ruling No. VAS-5585/10 dated May 13, 2010.

In such situations, the courts are more willing to cooperate if the supplier demands payment rather than the return of the goods. It is easier to get a positive decision on such a process, which cannot be said about the debt repayment procedure.

What is the procedure for unilateral refusal to execute a DP?

When the grounds for unilateral refusal are established in the supply agreement, the refusal procedure prescribed in the agreement must be followed. This applies to the form of notification of refusal, timing and methods of presenting it. Both the supplier and the buyer must comply with the conditions for notifying the second party of its decision.

If the procedure is not specified in the DP, you need to:

1. Make sure that you have the right to unilateral refusal - only significant violations, the list of which is given in Art. 523 of the Civil Code of the Russian Federation and Ch. 30 § 1 of the Civil Code of the Russian Federation, which can be considered significant taking into account the requirements of Art. 450 Civil Code of the Russian Federation.
2. Compose a notice in writing, indicating in it the intention to refuse the contract, the details of the agreement, the grounds for refusal, a link to the article of the Civil Code of the Russian Federation providing the right to refuse and related requirements related to the refusal of the DP.
3. If you keep a log of incoming and outgoing correspondence, you should put in it the date of the notification, indicate the name of the document and the details of the counterparty.
4. Send a notice to the counterparty.

The supply contract is considered terminated/modified from the moment the other party receives a notice of unilateral refusal or from the moment:

• As provided by you in the notice.
• Agreed upon by the parties to the contract.

After refusal to execute the DP, the situation may develop according to one of the following scenarios:

1. If the counterparty agrees with your decision to completely refuse, the contract is considered invalid.
2. If the other party agrees with your refusal in part of the agreement, it is necessary to agree on changes to the terms and conditions and sign an additional agreement or draw up a new version of the DP.
3. The counterparty has the right to declare the refusal void in court - if the violations are not significant and you refused the contract without taking into account the rights and interests of the other party.

See also:

How to quickly collect debt under a supply agreement in 2022 in court - instructions + collection of penalties

Free legal advice

What is the difference between unilateral termination and refusal?

Although in both cases the result is the same, the courts point out some differences between these concepts.

According to the law, any contract can be terminated in two ways: by filing a demand or notifying the second party of unilateral refusal.

The difference lies in the preceding activities. In the first case, the initiator is obliged to go to court, and to refuse, notify the second participant at the legal and actual address of the location.

Experts recommend using clear language in the contract to avoid any ambiguity of interpretation. Unfortunately, in practice there are often cases when, for example, the seller sends a demand and considers the contract terminated. But a few months later, an unpleasant surprise awaits him: the company becomes a defendant in a lawsuit where the buyer demands compensation for damages or payment of penalties for termination.

There is also a difference in the consequences. If one participant terminates the contract on the basis of a demand, the second has the opportunity to call for the fulfillment of its terms, even despite the court decision that has entered into force. This situation is impossible if one of the parties refuses.

In addition, the difference lies in the moment the agreement is declared invalid:

• If a notice of refusal is sent, cooperation is terminated upon delivery of it to the second participant.
• In case of termination on the initiative of one of the parties - after a decision of a judicial authority.

In the latter case, the creditor has every reason to demand compensation for damage, citing unjust enrichment by the second participant and illegal use of other people's money.

How to draw up a notice of unilateral refusal to fulfill a supply agreement

To cancel the contract, you must draw up a written notice and send it to the counterparty.
The right to unilateral refusal to fulfill obligations does not serve as a basis for automatic termination/change of the supply contract (exception - if such a condition was specified in the DP). Therefore, you must notify the other party about your decision to refuse, in whole or in part, from fulfilling the contract - clause 4 of Art. 523 Civil Code of the Russian Federation.

Notification is a written request to the counterparty, which refers to legally significant messages. There is no legally approved form for this document, but it must contain an unequivocal expression of will for a complete or partial refusal to fulfill the supply agreement. An offer or intention to terminate the DP will not be enough.

What samples and forms will help you write notifications correctly?

I have prepared for you forms and completed samples of notifications of unilateral refusal, which will help you independently compose a letter to the counterparty and avoid errors in formatting:

• Notice of unilateral refusal to fulfill the supply agreement (DOC 18 KB).
• Form for notification of cancellation of the supply agreement and acceptance of goods for safekeeping (DOC 18 KB).
• Sample notice of cancellation of a supply agreement and acceptance of goods for safekeeping (DOC 19 KB).
• Form for notification of unilateral refusal to fulfill a supply contract due to the supplier’s refusal to transfer goods (DOC 19 KB).
• Sample notice of unilateral refusal to fulfill a supply contract due to the supplier’s refusal to transfer goods (DOC 19 KB).
• Notifications of unilateral refusal to fulfill the supply contract due to non-selection of goods (DOC 19 KB).
• Notice of unilateral refusal to fulfill the supply contract due to the supply of goods of inadequate quality (DOC 19 KB).
• Notice of unilateral refusal to fulfill the supply contract due to repeated violation of the delivery deadlines for goods (DOC 19 KB).

What structure should the notification have?

The table shows the structure of the notification:

It is advisable to prepare the notification in two copies.

See also:

Order a legal analysis and document preparation service

How to send notice of unilateral refusal and to what address

Unilateral refusal of the supply agreement requires mandatory notification of the counterparty.
If the supply agreement stipulates that the notification is sent exclusively to the addresses specified in it or exclusively in the manner provided for in the agreement, then sending the document only to these addresses and only in the specified manner is considered appropriate - clause 64 of the RF Armed Forces Regulations dated 06/23/2015 No. 25.

If the address for notifications is not indicated in the DP, then the notification must be sent - Art. 165.1 Civil Code of the Russian Federation:

1. For an individual entrepreneur - at the address indicated in the unified state register of individual entrepreneurs (in the Unified State Register of Entrepreneurs extract), or at the address indicated by the individual entrepreneur himself in the supply agreement.
2. For a legal entity - at the address indicated in the unified state register of legal entities (in the Unified State Register of Legal Entities), or at the address indicated by the legal entity itself in the DP.
3. To the citizen or his representative - at the address of his registration at the place of residence or stay, or at the address that the citizen indicated himself in the text of the contract.

On a note. If the contract specifies the address of the actual location of the counterparty, or the specified address in the contract differs from the address of the Unified State Register of Legal Entities (USRIP), send a copy of the notice to each address. If the counterparty has not indicated its location either in the supply agreement or in other documents, send the document to the address of the Unified State Register of Legal Entities (USRIP).

Civil consequences begin from the moment the notice is delivered to the counterparty. In this case, the notification delivered to the addresses listed above is considered received and the contract is considered terminated due to a unilateral refusal to perform it, even if:

• The counterparty is not actually located at the specified address.
• Due to circumstances depending on the counterparty, the notification was not delivered to him or the counterparty did not familiarize himself with it.
• The addressee avoided receiving the correspondence, and therefore it was returned after the storage period had expired.

A notice of unilateral refusal is a legally significant message that is sent (unless otherwise provided by the contract) in a way that allows one to reliably determine who the message came from and to whom it is addressed. You can do this:

1. In person, against the signature of a person authorized to act on behalf of the counterparty.
2. A valuable letter with an inventory of the contents and a notification of delivery is the most reliable option. The addressee will not be able to deny the fact of its receipt if you have postal documents.
3. By email, fax and other communications - used only if the DP specified the possibility of notification in this form and indicated email addresses and fax numbers.

Important! The mere fact of sending a notice is not grounds for recognizing the contract as terminated. You must have evidence that the counterparty received a notice of refusal of the DP - otherwise the court may invalidate such refusal.

From what moment is the contract considered terminated or amended?

If the termination period is not provided for in the notice or was not specified in the contract itself, then the DP is considered terminated or amended from the moment the counterparty receives a notice of unilateral refusal to fulfill the contract in whole or in part - clause 4 of Art. 523 Civil Code of the Russian Federation.

General provisions on termination of the contract

The parties have the right to provide in the contract the possibility of unilateral refusal from it (clause 2 of Article 450 of the Civil Code of the Russian Federation). But nevertheless, from the established judicial practice we can conclude that for a unilateral refusal to fulfill a contract related to the implementation of entrepreneurial activities by its parties, the very fact of indicating in the law the possibility of such a refusal is sufficient (Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated 09.09.2008 No. 5782/08 ).

However, in order to minimize possible disagreements, the contract should establish the grounds and conditions for withdrawal from the contract. The agreement should also provide for the procedure for unilateral refusal or modification. The text of the agreement must indicate that the party wishing to terminate the agreement must send to the counterparty a notice of refusal to fulfill the terms of the agreement unilaterally. If necessary, the parties can fix the method (for example, a valuable letter with a list of attachments, telegraphic message, courier) and the timing of sending such a notification (clause 4 of Article 421 of the Civil Code of the Russian Federation). From the moment the notification is received, the contract is considered modified or terminated, unless otherwise provided by this notification.

note

A message is considered delivered to the addressee even if it was not actually received for reasons depending on the addressee (clause 1 of Article 165.1 of the Civil Code of the Russian Federation).

Thus, the contract may be recognized as amended or terminated even if the party did not receive the notice if the reason was, for example, the absence of a person authorized to receive correspondence at the address specified in the contract.

If the agreement does not provide the addresses of the parties for sending notifications, then the address specified in the Unified State Register of Legal Entities can be used. Such an address is reflected in the Unified State Register of Legal Entities for the purpose of communicating with a legal entity (subparagraph “c”, paragraph 1, article 5 of the Federal Law of 08.08.2001 No. 129-FZ “On State Registration of Legal Entities and Individual Entrepreneurs”). If a party does not take measures to receive correspondence at this address, it will not be able to further refer to the fact that the notification was not received by it, and, as a result, claim that the agreement has not changed or that its validity has not terminated (clause 1 of the resolution Plenum of the Supreme Arbitration Court of the Russian Federation dated July 30, 2013 No. 61 “On some issues in the practice of considering disputes related to the accuracy of the address of a legal entity”). The organization bears the risk of the consequences of failure to receive legally significant messages that were received at its address indicated in the Unified State Register of Legal Entities, as well as the risk of the absence of its representative at this address.

Transactions between counterparties involve various issues of cooperation. In this regard, depending on the content of the transaction, the appropriate type of contract is concluded. The grounds for unilateral refusal to fulfill various civil obligations (under supply, lease, paid ]contract[/anchor] contracts) have their own characteristics.

What are the consequences of unilateral refusal to fulfill a supply agreement?

From the moment of termination of the contract, the obligations cease to apply.
Unilateral refusal of the DP entails the same consequences as termination/change of the contract by agreement of the parties or by court decision - clause 1 of the Decree of the Supreme Arbitration Court of the Russian Federation dated 06.06.2014 No. 35. When the contract is terminated, the obligations of the parties are terminated, and when the contract is changed, the obligations of the parties remain in the modified form - Art. 453 Civil Code of the Russian Federation.

Attention! After renunciation of the agreement, the parties do not have the right to demand the return of what they performed under the obligation before the change or termination of the contract (unless otherwise established by agreement of the parties).

Consequences of unilateral refusal:

1. Major obligations are terminated.
2. Obligations to pay penalties, fines and other debts that arose before termination of the contract continue to apply, but they are accrued only until the date of termination of the contract.
3. Conditions apply regarding warranty obligations, the procedure for returning the advance payment, etc., unless otherwise provided by the contract.
4. The conditions for consideration of disputes under the DP do not terminate.
5. The conditions establishing the obligations of the parties after termination of the agreement also remain in force.
6. A waiver in the event of a material breach allows the injured party to seek damages.
7. If, before terminating or amending the contract, one of the parties, having received performance from the other party, did not fulfill its obligation or provided unequal performance, then the rules on unjust enrichment are applied to the relations of the parties.

There are some nuances regarding the consequences of the buyer’s refusal to accept the supply agreement:

1. Along with the refusal to perform, the buyer acquires the obligation to return the defective product to the supplier.
2. The supplier has the right to demand the return of goods that the buyer refused, and if it is impossible to return the goods in kind, to demand reimbursement of its cost.
3. The supplier is obliged to return the advance payment upon the buyer's request, regardless of whether the goods are returned to him or not.
4. Violation of the equivalence of counter-provisions allows you to demand the return of what was transferred to the other party to the extent that the equivalence is violated. For example, when receiving only 1 shipment of goods out of 3 paid ones, the buyer has the right to demand either a refund of the amount for 2 undelivered shipments, or a refund of the amount for 3 shipments (by returning the delivered goods to the supplier).

When obligations end

In a pre-trial procedure, the parties can establish that the obligations under the contract are changed or terminated not from the moment the agreement is concluded, but from a certain date or from the date of the occurrence of the event specified in it.

If the contract is amended or terminated in court, the obligations of the parties are considered changed or terminated from the moment the corresponding court decision enters into legal force. The parties do not have the right to establish another point (clause 3 of Article 453 of the Civil Code of the Russian Federation).

For your information

In case of unilateral refusal of the contract, the customer must pay the contractor the actual expenses incurred solely in connection with the provision of services to the customer (determination of the Supreme Arbitration Court of the Russian Federation dated December 24, 2013 No. VAS-17829/13 in case No. A56-38647/2012).

Thus, the expenses that the contractor may incur after the customer refuses to fulfill the contract are not compensated (resolution of the Federal Antimonopoly Service of the West Siberian District dated April 29, 2010 in case No. A46-23676/2009). Such expenses may represent costs arising after the customer’s refusal, and not be related to the subject of the contract - severance pay for dismissed employees, costs for removing the contractor’s property from the customer’s territory, and so on.

As a result of termination of the contract, the debtor’s obligation to perform actions that are the subject of the contract ceases (for example, to ship goods under a supply agreement, to perform work under a contract, to issue funds under a loan agreement, etc.). In this case, one of the parties, as a rule, suffers economic losses, which, by a court decision, the other party is obliged to compensate (clause 1 of Article 393 of the Civil Code of the Russian Federation). The penalty established in case of improper fulfillment of the agreed obligation is accrued until the date of termination of the contract.

To impose liability in the form of recovery of damages, it is necessary to prove a violation of a contractual obligation, the fact of causing losses and their amount, as well as a cause-and-effect relationship between the violation and the damage. Failure to prove one of these elements entails refusal to satisfy such claims.

Is it possible to challenge the refusal to perform a contract?

Unilateral refusal of the DP is considered a unilateral transaction, to which the general rules for challenging and invalidating transactions are applicable - clause 50 of the RF Supreme Court Order No. 25 dated June 23, 2015. If one of the parties declared a refusal to execute the supply contract unilaterally without taking into account the rights and interests of the second party to the agreement, if the refusal is not justified and there are no significant violations of the terms of the contract, it is necessary to file a claim with the arbitration court demanding that the transaction be declared void or voidable.

You can file a claim to invalidate the refusal if you can prove:

1. The actual existence of grounds for declaring the transaction invalid.
2. There are no grounds for terminating the supply contract.
3. The transaction violates rights or interests protected by law.
4. Your integrity.

Is it possible to cancel a unilateral refusal?

There are no direct indications of this possibility in regulations. However, stat. 421 of the Civil Code of the Russian Federation provides for the right of any company to conclude contracts necessary for the implementation of the current activities of the enterprise.

Therefore, in the event of refusal by one of the participants, the contract should be considered terminated without the possibility of renewal. In such a situation, you can conclude a new supply agreement and continue working with the counterparty. It should be borne in mind that in this case, none of the participants has the right to demand, insist and coerce the other, respecting his right to freedom of choice and conclusion of a contract.

Remember

1. Both the supplier and the buyer have the right to unilaterally withdraw from the supply agreement. It occurs when there is a significant violation of the terms of the transaction or when the grounds for refusal specified in the agreement occur.
2. In order to refuse to execute the DP unilaterally, it is necessary to send the counterparty a notice of this, observing the procedure established by law or the terms of the contract.
3. The notification is made in writing in any form. At the legislative level, the information required for this document has not been approved.
4. It is necessary to follow the cancellation procedure specified in the contract, i.e. send a notification to a specific address, within a specified period, etc.
5. If the conditions and procedure are not specified in the DP, the notification should be sent in a way that allows you to prove the fact that it was sent and received by the addressee.
6. The risk of not receiving notification of the refusal of the DP is borne by the addressee. If the notice is not delivered due to circumstances depending on the addressee, it is considered that the content of the message was accepted by him, and the contract is considered terminated due to a unilateral refusal to perform it.
7. Unilateral refusal of the agreement entails the same consequences as termination/change of the contract by agreement of the parties or by court decision: upon termination of the contract, the obligations of the parties are terminated, and if changed, they are retained in an amended form.
8. Under one-time delivery contracts, the legal consequences of the buyer’s refusal to accept the goods are equivalent to the consequences of refusal to fulfill the contract. If the contract provides for multiple deliveries, refusal to accept one shipment does not affect further contractual relations, i.e. mutual rights and obligations of the parties are preserved.

Termination of the supply contract unilaterally

The Civil Code allows us to terminate a contract by unilaterally refusing to perform it. In this case, we do not need to go to court, we do not need to obtain the consent of the other party. The contract will be terminated due to the very fact of refusal to perform it. But it is worth paying attention to the fact that the conditions for unilateral refusal must be fixed in the contract itself. A party may refuse to fulfill obligations in whole or in part. This procedure is extrajudicial in nature.

Possible consequences

There are two possible scenarios for the development of the situation after one of the participants refuses to perform:

• Invalidation of the contract
• Agreeing on changes in conditions and signing an additional agreement or a new version of the contract

Experts recommend going to court in such cases. The fact is that even in matters of unilateral refusal, representatives of the judiciary take opposing positions. And although this method is associated with additional costs, the participation of a third party endowed with all the necessary powers can guarantee the absence of disagreements with both the supplier and the buyer.

Termination of a supply agreement by agreement of the parties

The supply agreement may be terminated early by agreement of the parties.

In the event of termination of the contract by agreement of the parties, an agreement to the contract on its termination is drawn up, which states when the contract is considered terminated, and also, at the discretion of the parties, other points related to termination are prescribed. In their termination agreement, the parties have the opportunity to agree on the terms of payment for the delivered goods or their return, payment of penalties for violations by one or the other party to the contract, and other issues.

Termination of any contract, including a supply contract, by agreement of the parties is the most advantageous option for resolving a dispute. In some cases, an agreement between the parties to terminate the contract allows one to avoid negative consequences. For example, termination of a contract for the supply of goods within the framework of the law on the contract system allows one to avoid including the supplier in the register of unscrupulous suppliers.

USEFUL : it is more correct to entrust the drafting of a supply contract and additional agreements for its termination to our lawyer, AB “Katsailidi and Partners”