(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.