(2022.12.06-ны өдрийн орчуулгын хяналт) Unofficial translation
LAW OF MONGOLIA
January 10, 2002 Ulaanbaatar city
CIVIL CODE
PART I
GENERAL BASIS
SUB-PART I
CIVIL LEGAL RELATIONS AND LEGISLATION
CHAPTER ONE
General provisions
Article 1.Purpose of the Law
1.1.The purpose of this Law shall be to regulate relations 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 relations 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.The Civil Legislation shall be comprised of the Constitution of Mongolia, this Law and other legislative acts adopted in compliance with them.
2.2.If the International Treaty of Mongolia stipulates otherwise than this Law, 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.
/The words "…competent state bodies, officials…" in this paragraph was invalidated by the resolution No.1 of the Constitutional Court as of February 19, 2003/
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, individuals without citizenship participating in the civil legal relationship shall be deemed as citizens.
7.3.State, aimags, soums, the capital city, and districts, as the administrative and territorial units, may enter into civil legal relation like other legal entities.
/This paragraph was amended according to the law as of April 22, 2022/
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 relations.
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 pre-violation 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/or inaction/ 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 seal 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 citizen's birth and terminates with his/her 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.Minors 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 dependents, 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 life-threatening 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 organized 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 its 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 profit or non-profit one with an objective specified by a law or a charter.
25.3.A Juristic person shall be either public or private, or mixed property.
25.4.Unless otherwise provided in the Law, several 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 defined 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.Civil legal capacity of public juristic person in civil law shall be 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 defined by laws or founding documents.
26.6.Non-profit juristic persons shall undertake activities in compliance with the objectives specified by their charters and other founding documents.
26.7.For-profit juristic persons shall be entitled to undertake any activity not prohibited by law or not in conflict with common behavioral norms.
26.8.Juristic persons shall undertake certain activities provided by law with the permits issued by respective competent authorities. The entitlement to undertake the activities shall emerge from the day of getting the permit.
/The phrase "special" was removed from this paragraph by the law as of June 17, 2022, and it shall be enforced on January 1, 2023/
26.9. Civil legal capacity of juristic persons 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 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 founding 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.Establishment of juristic persons
30.1.Unless otherwise stipulated in the law, citizens and juristic persons may establish 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 property or in collaboration with a third party.
Article 31.Re-organization of juristic persons
31.1.A juristic person may be reorganized by merging, joining, dividing, separating or restructuring at the decision of the assets' owner, or a designated body or a body authorized by its founding documents, 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.
31.4.Dividing 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 organization type, form and basic goals.
Article 32.Liquidation of juristic persons
32.1.Unless otherwise stipulated in the law, juristic persons shall be liquidated on the following grounds:
/This paragraph was amended according to the law as of April 23, 2010/
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 of 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 or accomplishment of its goals;
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 announcement of the liquidation of the juristic person
32.5.Unless otherwise stipulated in the law, claims against a juristic person in liquidation shall be satisfied in the following order:
/This paragraph was amended according to the law as of April 23, 2010/
32.5.1.payments to recover (or remedy) damages caused to the life and health of others, collection of tax debt and other payments due to a decision by Court;
/This sub-paragraph was amended according to the law as of March 22, 2019/
32.5.2.operational expenses born, by the executor, Liquidation Commission, or other persons equivalent to them 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.reimbursement for compulsory deposit insurance;
/This paragraph was added according to the law as of January 10, 2013/
32.5.5.money assets of depositors;
/The numbering of this sub-paragraph was amended according to the law as of January 10, 2013/
32.5.6.wages of workers under labor contracts;
/The numbering of this sub-paragraph was amended according to the law as of January 10, 2013/
32.5.7.settlements with other persons in accordance with the laws.
/The numbering of this sub-paragraph was amended according to the law as of January 10, 2013/
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 authorized 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 be governed to the liquidation of a legal entity.
/This paragraph was added according to the law as of April 23, 2010/
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.
/This paragraph was amended according to the law as of October 06, 2011/
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 of 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 publicly beneficial 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 governors of a foundation or the governing board shall consist of donors, supporters and representatives designated by them.
37.2.The Governing body of foundation shall 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 or inaction 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 legal 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 analyzing the intention expresser's needs, demands, words, actions and inactions, 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 authorization. In that case, the signature of the authorizing 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 to be made in writing shall be invalid, in which case the parties shall return to each other everything received under the transaction.
/This paragraph was modified according to the law as of December 15, 2011/
42.11.In the event of a dispute over a transaction that violates the requirements of the law to be made 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.
/This paragraph was modified according to the law as of December 15, 2011/
Article 421.Electronic transactions
421.1.Transactions that are required by law to be registered, notarized, or to be made in writing may be made electronically.
/This paragraph was amended according to the law as of June 21, 2018/
421.2.Unless otherwise provided by law, a transaction to be concluded in electronic form shall enter into force when the parties mutually express their intention, execute an electronic document and sign a digital signature, or otherwise express their intention using technical means and software, mutually accept it, and sign it electronically.
/This paragraph was added according to the law as of December 15, 2011/
/This paragraph was amended according to the law as of January 26, 2017/
/This paragraph was modified according to the law as of May 21, 2021/
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.
43.2.4.If the transaction is concluded in electronic from, the parties shall make an electronic document expressing their intention and sign an electronic signature in accordance with the Law on Digital Signatures.
/This paragraph was amended according to the law as of December 17, 2021/
/This paragraph was added according to the law as of December 15, 2011/
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 unfavorable 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 favorable 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 authorization-the mandatory condition for a transaction to become effective, shall equally notify parties to the transaction about issuing the authorization 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 authorization with the purpose to conclude a transaction, the authority, issued such an authorization may invalidate the authorization prior to concluding the transaction. Parties shall be notified if the invalidation of the authorization.
Article 52.Condition for non-retroactivity of an authorization
52.1.Actions taken at the decision of the person competent to issue the permit prior to later support and authorization 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
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 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
56.1A transaction shall be deemed void if:
56.1.1breaches 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 legal capacity;
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 conduct;
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 himself/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 authorized 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 authorization 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 organization, and prisoner's authorization shall be certified a chief of the prison unit.
/This paragraph was amended according to the law as of September 01, 2016/
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 an 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 loses 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 date, weekdays, 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 special dependence on asset shall be accessories to asset.
86.2.Things that are pertinent to immovable property, serve to it and can separately 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 cannot 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 contract, 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 possess the asset or lost such a right, shall be obliged to return the property to the authorized person.
94.2.Asset 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 asset during the possession period.
94.4.If the asset 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 asset 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 asset 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 losing 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, soum, capital city, district, citizen and legal entity shall be owners.
/This paragraph was amended according to the law as of April 22, 2022/
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 asset.
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 off-spring and benefits due to emergency and force majeure 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 State-owned 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 asset 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 asset 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.
/This paragraph was amended according to the law as of January 26, 2017/
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 asset 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 asset 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 relevant documents
113.1.If law or agreement provides so, ownership rights for property concerned shall be considered as transferred with the transfer of relevant 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 organization 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 organization.
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 paleontological 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 contract, 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.Unless otherwise stipulated in law, 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.
/This paragraph was amended according to the law as of July 02, 2015/
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 claiming right possessor and previous obligation performer, to the claiming 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 labor 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, ger, 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 labor 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 labor 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 any time 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 no prohibition 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, 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 solely owned.
142.2.Parts of apartment building, construction and equipment that are not related to solely 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 single 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 single ownership rights for apartment
145.1.The right for single ownership of an apartment shall be created on basis of law or transaction.
145.2.Transaction creating the right of single 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 areas, which are subject to single ownership, with the State Immovable Properties Registration Office as provided by law.
Article 146.Objects of single 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 single objects, or without damaging the outside appearance of the building, shall be objects of single ownership.
146.2.Despite of location in the middle of an single 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 single ownership.
146.3.Apartment owners may negotiate and agree about co-ownership of some parts of the area that belong to the single ownership objects.
146.4.It is prohibited to transfer single 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 single 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 link box 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 single ownership shall be compared with total area of single ownership in the building.
147.4.In order to calculate the space, which is in single 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 single 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 co-owners 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 single 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 single ownership property, in order to ensure safety and normal operation of objects of communal ownership existing in the single 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 single 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 sole 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 parts 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.
/This paragraph was added according to the law as of June 21, 2018/
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.
/This paragraph was amended according to the law as of June 21, 2018/
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.
/This paragraph was amended according to the law as of July 09, 2009/
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.
/This paragraph was amended according to the law as of July 02, 2015/
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 items
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.
/This paragraph was amended according to the law as of July 02, 2015/
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.
/This paragraph was added by law on July 7, 2005, and the second sentence was invalidated by Resolution No. 02 of the Constitutional Court as of June 15, 2006. /
154.4.The item of pledge may be a raised in the future. In this case demand shall be satisfied after relevant property will be a raised and transferred to the pledgee's ownership.
/This paragraph was added according to the law as of July 07, 2005/
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.
/The numbering of this paragraph was amended according to the law as of July 07, 2005/
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.
/The numbering of this paragraph was amended according to the law as of July 07, 2005/
154.7.Pledgee referred to in article 154.4 of this Law shall have a prevailing right as a fair possessor over third persons.
/The numbering of this paragraph was amended according to the law as of July 07, 2005/
154.8.A pledge contract may be altered by parties in order to replace the item of pledge with another.
/The numbering of this paragraph was amended according to the law as of July 07, 2005/
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.
/This paragraph was amended according to the law as of July 09, 2009/
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.
/This paragraph was amended by the laws as of July 9, 2009, as of July 2, 2015, and as of July 2, 2015, respectively./
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;
/This paragraph was amended according to the law as of July 02, 2015/
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 item;
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 items are pledged in order to secure the demand of creditor, then unless otherwise provided by law, the pledgee shall be entitled to chose the item 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 item to a third party, who is capable to keep the pledge sound and safe, if he/she considers that pledgee cannot 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 item, 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 an 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.
/This paragraph was modified according to the law as of July 02, 2015/
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 item 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 item.
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 item.
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 item 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.
/This paragraph was invalidated according to the law as of July 02, 2015/
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.
/This paragraph was invalidated according to the law as of July 02, 2015/
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.
/This paragraph was invalidated according to the law as of July 09, 2009/
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.
/This paragraph was amended according to the law as of July 09, 2009/
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 exist grounds 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.
170.6.If the owner enters into a transaction to transfer ownership of the hypothec immovable property to a third party, he/she shall obtain the obligor's permission first.
/This paragraph was added according to the law as of January 19, 2016/
/This paragraph was invalidated by Resolution No. 01 of the Constitutional Court as of December 6, 2017/
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.
/This paragraph was invalidated by Resolution No. 11 of the Constitutional Court as of December 09, 2015/
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.
/This paragraph was amended according to the law as of July 07, 2005/
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 are transferred to a new creditor and this new creditor is registered with State register.
/This paragraph was amended according to the law as of July 09, 2009/
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.
/This paragraph was invalidated according to the law as of July 09, 2009/
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.
/This paragraph was added by law on July 7, 2005, and it was invalidated by Resolution No. 06 of the Constitutional Court as of June 15, 2006/
174.4.The procedure for selling hypothec though a non-judicial proceeding shall be established by the law.
/This paragraph was added according to the law as of July 07, 2005/
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.
/This paragraph was amended according to the law as of July 09, 2009/
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.
/This sub-paragraph was added according to the law as of July 09, 2009/
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, oblige 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.
/This paragraph was amended by the law of July 9, 2009, and is was modified by the law of December 5, 2014/
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.
/This paragraph was modified according to the law as of December 05, 2014/
177.5.Expenses related to the auction shall be borne by the obligation performer.
/This paragraph was added according to the law as of December 05, 2014/
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 and its notice shall be registered with the State register.
/This paragraph was amended according to the law as of July 02, 2015/
182.3.Registration procedure of rights and notice stated in this article shall be regulated by law.
/This paragraph was amended according to the law as of July 02, 2015/
182.4.A notice of pledge right may be registered in accordance with the procedure specified by law in order to certify the right of pledge on property or non-property movable asset as legitimate before a third party.
/This paragraph was added according to the law as of July 02, 2015/
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 permits shall be defined by law.
/The phrase "special" was removed from this paragraph by law as of June 17, 2022, and it shall be enforced on January 1, 2023/
/The phrase "Special Permission" in this paragraph was changed into "Permits" by law as of June 17, 2022, and it shall be enforced on January 1, 2023/
189.3.Contract concluded on the basis of permits shall enter into effect after receiving special permission from the competent authority.
/The phrase "special" was removed from this paragraph by law as of June 17, 2022, and it shall be enforced on January 1, 2023/
/The phrase "Special Permission" in this paragraph was changed into "Permits" by law as of June 17, 2022, and it shall be enforced on January 1, 2023/
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.
/This paragraph was amended according to the law as of July 02, 2015/
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.
/This paragraph was added according to the law as of July 02, 2015/
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.
/This paragraph was amended according to the law as of January 26, 2017/
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 offers
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 express their intention by signing an electronic document and signing a digital signature, or by signing an electronic signature that mutually acknowledges the expression of their intention using technical tools and software.
/This paragraph was added according to the law as of December 15, 2011/
/This paragraph was modified according to the law as of May 21, 2021/
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 action 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 nonperformance 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 loses 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.Submission 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.
/This paragraph was amended according to the law as of January 26, 2017/
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 oblige 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 - tugrug.
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.
/This paragraph was amended according to the law as of July 09, 2009/
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 oblige 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 be 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 oblige 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.Unless otherwise provided in law, forfeiture contract shall be concluded in written.
/This paragraph was amended according to the law as of December 15, 2011/
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.Unless otherwise provided in law, warranty contract shall be concluded in written.
/This paragraph was amended according to the law as of December 15, 2011/
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 /feduci/
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 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 concluded to ensure obligation performance by transferring property to ownership, shall be done in written unless provided otherwise by law.
/This paragraph was amended according to the law as of December 15, 2011/
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.
/This paragraph was added according to the law as of April 23, 2010/
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 co-guarantors freed from the debt.
239.7.Bi-lateral obligation relations shall not be terminated with one of the parties' refusals 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-pided 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-pided 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-pidable, 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
Article 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 transfer 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 affect 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 be 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 these 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.Unless otherwise provided in law, contract for sale and purchase on credit shall be concluded in written form.
/This paragraph was amended according to the law as of December 15, 2011/
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. Unless otherwise provide in law, the parties shall be obligated to return all properties acquired under the contract.
/This paragraph was amended according to the law as of July 02, 2015/
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.Unless otherwise provided in law, gift contract for special purpose shall be concluded in written form.
/This paragraph was amended according to the law as of December 15, 2011/
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.In case of one-time or non-profit loan agreement, parties may set an interest rate on basis of negotiation.
/This paragraph was modified according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
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 unless otherwise provided in law. If this requirement is not satisfied, right to receive interest shall be lost.
/This paragraph was amended according to the law as of December 15, 2011/
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.
/This paragraph was invalidated according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
283.4.Unless otherwise provided by contract, the interest rate must be paid each year.
/This paragraph was invalidated according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
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 pledged assets, and issuing loan by citizen on regular basis for the purpose of making a profit
/This Article was modified according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
286.1.The activity of cash loans granted by a citizen who engages in the activity of cash loans shall be regulated by a law.
286.2.Only movable property shall be pledged in the activity of cash loan granted under the procedure of loan with pledged assets.
/This paragraph was modified according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
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.
/This paragraph was invalidated according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
286.4.Lender is obliged to ensure full safety of pledged property but it shall not have the ownership or disposal rights.
/This paragraph was invalidated according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
286.5.Contract for a loan with pledge issued by a lender shall be concluded in writing unless otherwise provided in law. A contract not complying with this requirement shall be deemed void.
/This paragraph was amended according to the law as of December 15, 2011/
/This paragraph was invalidated according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
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.
/This paragraph was invalidated according to the law as of November 4, 2022 and it shall be enforced on March 1, 2023/
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 cannot 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 property's 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 porced 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.Unless otherwise provide in law, contracts for financial leasing shall be concluded in written.
/This paragraph was amended according to the law as of December 15, 2011/
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.
/This paragraph was amended according to the law as of December 15, 2011/
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 transfers 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
/The title of this chapter was amended according to the law as of May 15, 2014/
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 ensure 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.Unless otherwise provided in law, franchising contract shall be made in writing.
/This paragraph was amended according to the law as of December 15, 2011/
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 ten 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.
3381.2.Unless otherwise provided by law, a merchandise contract shall be made in writing.
/This above article 3381 was added according to the law as of December 15, 2011/
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 article 352.2.2 shall be revoked.
352.