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Unlocking the Mysteries of the European Inheritance Certificate in Bulgaria

Are you one of the many heirs looking to claim your rightful inheritance in Bulgaria? Have you heard about the European inheritance certificate but have no idea how to obtain one? Look no further, as we delve into the details of this important document and how it can help simplify the often complex process of settling an estate across European borders.

In Bulgaria, as in many European countries, inheritance laws can be complicated and vary from region to region. This is where the European inheritance certificate comes into play. Officially known as the European Certificate of Succession, this document is meant to facilitate the recognition of your status as an heir in another European country.

Obtaining this certificate can be a daunting task, but with the right guidance and legal assistance, the process can be made much easier. It is important to understand the specific requirements and procedures involved in obtaining this certificate in Bulgaria, as failure to comply with these regulations can lead to delays and complications in the inheritance process.

Whether you are a Bulgarian national living abroad or a foreign national seeking to claim inheritance in Bulgaria, having the European inheritance certificate in hand can streamline the process and ensure a smoother transition of assets. By proving your legal status as an heir, you can avoid the red tape and bureaucracy often associated with cross-border inheritances.

So, if you find yourself navigating the complex waters of inheritance laws in Bulgaria, remember that the European inheritance certificate is your key to unlocking the mysteries of the estate settlement process. Seek out the assistance of legal experts who specialize in European inheritance law to guide you through the process and ensure a successful resolution of your inheritance claim.

In conclusion, don’t let the complexities of inheritance laws in Bulgaria deter you from claiming what is rightfully yours. With the European inheritance certificate in hand, you can confidently assert your status as an heir and secure your share of the estate.

Contact our legal professionals to help you navigate the process and ensure a smooth transition of assets across European borders.

Navigating Liquidation Proceedings in Bulgaria: A Guide for Business Owners

Are you a business owner in Bulgaria facing financial difficulties and considering liquidation proceedings? It can be a daunting and complex process, but with the right knowledge and guidance, you can navigate through it successfully. In this article, we will break down the key steps and requirements of liquidation proceedings in Bulgaria to help you understand what to expect and how to proceed.

First and foremost, it is important to understand that liquidation proceedings in Bulgaria can be either voluntary or involuntary. Voluntary liquidation occurs when the business owners make a decision to terminate the company’s activities and liquidate its assets. On the other hand, involuntary liquidation can be initiated by creditors or the court due to insolvency.

If you have decided to proceed with voluntary liquidation, the first step is to convene a general meeting of the shareholders to adopt a resolution for liquidation. This resolution should outline the reasons for liquidation, appoint a liquidator, and set out the liquidation procedure. The liquidator is responsible for managing the liquidation process, collecting and distributing assets, and carrying out all necessary activities to properly wind up the company.

During the liquidation process, the liquidator must prepare a liquidation plan, which includes a list of creditors, an inventory of assets, and a plan for the distribution of assets. Creditors must be notified of the liquidation proceedings and given the opportunity to submit their claims to the liquidator. Once all debts and liabilities have been settled, any remaining assets will be distributed to the shareholders based on their shareholding.

It is important to note that there are strict timelines and procedures that must be followed during the liquidation process in Bulgaria. Failure to comply with these requirements can result in legal consequences for the company and its directors. Therefore, it is crucial to seek legal advice and guidance from a qualified professional to ensure that the liquidation proceedings are conducted properly.

In conclusion, liquidation proceedings in Bulgaria can be a complex and challenging process, but with the right knowledge and support, you can successfully navigate through it. By understanding the key steps and requirements of liquidation, you can ensure that the process is conducted in a timely and efficient manner, ultimately allowing you to move on from your business and start anew.

Out legal team will assist you entirely to pass the process of liquidation proceedings successfully.

EU Blue Card in Bulgaria solution for highly qualified foreigners

Who can qualify for a EU Blue Card?

The EU Blue Card is an option provided to highly qualified professionals, to work and reside legally on the territory of the European Union. The procedure provides access to the labor market in the Republic of Bulgaria with the “Blue Card of the European Union” to professionals – citizens of third party countries outside the European Union only. While EU citizens can travel, reside and work in other EU member states freely, with very few administrative requirements.

The conditions under which the employees – citizens of third party countries and their family members may enter, reside in and leave the Republic of Bulgaria, are determined locally by the Law on Foreigners in the Republic of Bulgaria.

Who can qualify for a EU Blue Card?

“Highly qualified employment” is an employment for a person who has a high professional qualifications:

1. Acquired higher education level, which is certified by a diploma, certificate or other official document issued by a competent authority, after studies of a duration of not less than three academic years conducted by an educational institution recognized as a higher education institution by the relevant country, or:

2. The gross salary specified in the foreigner’s employment contract is at least 1.5 times higher than the average salary in the Republic of Bulgaria according to the available data for the last 12 months before the conclusion of the employment contract.

3. The duration of the employment contract is not shorter than 6 months.

An access to the labor market with the “European Union Blue Card” is awarded by the Ministry of the Interior following received positive written statement from the executive director of the Employment Agency.

The family members of an EU Blue Card holder have the right to reside, work and carry on an activity on the territory of the Republic of Bulgaria for the period of residence of EU Blue Card holder with the permission of the executive director of the Agency for employment to access the labor market.

During the first 12 months of highly qualified employment, the holder of the European Union Blue Card can perform the activities corresponding to the conditions under which was issued the Blue Card of the European Union only on the territory of the Republic of Bulgaria.

During this period, the holder of the “Blue Card of the European Union” can change his employer under the conditions and according to the procedure defined by the Law on foreigners in the Republic of Bulgaria.

An application for the issuance of the EU Blue Card shall be submitted on paper or electronically at the Migration Directorate or at the regional directorates of the Ministry of the Interior, by the employer or a person authorized by the employer or by the foreign applicant.

A holder of an “EU Blue Card” issued by another member state of the European Union, and who has legally resided in the territory of that member state for 12 months, may reside in the Republic of Bulgaria together with his family members for the purposes of highly qualified employment.

Wheither you are an Employer or Employee, and in need of an assistance with obtaining of EU Blue Card, please do not hesitate to contact our team of lawyers.

Variable Capital Company in Bulgaria

The new “train” for business

With the latest ammendments and Supplements to the Commercial Code, published in the “State Gazette”, no. 66 of 01.08.2023, Bulgarian commercial law was enriched with a new type of commercial company – a company with variable capital. It is the latest type of company. The new regulation, which has only been adopted and published so far, will enter into force in 2024.

The main characteristics of VCC are:

  1. It can be established by one or more natural or legal persons and is liable to creditors with its assets.
  2. The legal requirements for VCC provide that the average number of personnel of the entity may not be greater than 50 employees, and the maximal amount of the annual turnover and the maximal amount of assets must not exceed BGN 4,000,000.
  3. VCC is a contractual company because it is established and governed by a company agreement. Its form is ordinary written form. When it is established by one person, no contract shall be concluded, but an act of incorporation shall be drawn up.
  4. Variable Capital Company shall be managed by a Director or Directorship Board.
  5. VCC is subject to registration. In the commercial register, in addition to the company, registered office, address and subject of activity, the names of the members of the management board or the manager, the names of the persons representing the company and the method of representation shall be registered.
  6. The Capital consists of shares. Shares are grouped into classes. In a class, shares have the same nominal value. The minimum limit of one share is 1 Bulgarian cent.
  7. Shares, classes and nominal values ​​are defined in the articles of association. They are acquired by the partners who make contributions in exchange for them. The partners receive rights from the shares. Shares are transferable and inheritable. Apart from being transferable and inheritable, shares can be staked as well as acquired by the company itself. The transaction with shares takes place through a contract, which is formal – written form with notarization of the signatures. The form is established in the interest of the company itself, and therefore it is permissible to stipulate only a written form in the company agreement. From his company share, the partner acquires rights commensurate with its nominal value, but otherwise as well can be agreed upon. Certain shares may confer privileges stipulated in the contract (preferential company shares). Privileges, like shares and bonds, can be expressed in more than one vote, guaranteed or additional dividend or liquidation share, right of redemption. Other privileges beyond the above may be provided for in the law or the company agreement. It is possible for preferred shares to be deprived of voting rights, which are acquired in the event of an unpaid or delayed dividend.

Non-performance of monetary obligation in Bulgaria I part

Money are due on the acquisition of certain property (goods) or against the right to the enjoyment. With the amount of money most frequently are payed the development of a chattel or provided service. Salary (remuneration) also gets money. In currency debt “convertand outstanding non-cash liabilities when seeking their realization through court. Damages from tort are evaluated and compensated with money too.

Then what are the consequences due to non-performance in accordance with Bulgarian laws?

Non-performance most often causes damages to the creditor for compensation of which the legislator should predict appropriate arrangements. The determination of compensation for the creditor of a monetary obligation is possible in two main versions:

1. By the law;

2. By agreement not forbidden by the law;

Compensation by the law

Here we can distinguish two cases:

general rules of law

special rules of law

Compensation in accordance with general rules

The principle of the Law of Obligations and Contracts is that to the creditor is due full compensation of the damage suffered, which are in direct consequence of the failure. In the legal doctrine it is undisputed that objective impossibility of performance of a monetary obligation is unthinkable. The genus of money could never perishes and this is explicitly enshrined in Art. 81, para. 2 of Bulgarian Law on Obligations and Contracts.

Since the implementation of the monetary obligation is always possible creditor may claim money owed (performance) together with compensation for the delay.

The latest gives rise to affirm the understanding that monetary obligation could only be delayed execution, respectively would be due only a compensation for delay. According to the general rules when claiming compensation, the creditor must prove the damage has suffered, and their size. In most cases this is associated with serious difficulties. Losses incurred, except that the creditor should to prove them, should to be identified and their causal connection with the default. Even more difficult on practice is to prove benefits lost.

To avoid such evidentiary difficulties and taking in mind the special nature of money in commodity-money relations legislator created special rules regulating relations regarding non-performance of monetary obligation.

Special rules on compensation – legal default interest

Bulgarian Law on Obligations and Contracts provides for non-performance of monetary obligations debtor owes compensation in amount of the statutory rate from the date of the delay. For actual damages in a higher amount the creditor may claim damages under the general rules.

In Bulgaria statutory rate of interest is determined by the CabinetCurrently, legal default interest is determined by Decree № 72 of 1994 amounted to 10 percentage points above the base rate of the Bulgarian National Bank, and for liabilities in convertible currency to 10 points over three-month LIBOR for the respective currency. Such is the regulation of so called Legal default interest. It is “legal” because the law defines the conditions under which it is due, as well as its size.

Interest rates on defaults

The first prerequisite is to be due amount of money. Ain’t no matter on what grounds the debt was incurred contract, tort, judgment and so on.

The second prerequisite is that a monetary obligation is not yet fulfilled, i. e. the debtor is in default. In art. 84 OCA defined the starting point of the delay:

1) at a fixed date for performance – with it’s expiration;

2) in the absence of agreement to date – following a call from the creditor;

3) in debt arising from tort, the debtor is deemed in default at the time of the injury, whether the creditor invited him to pay compensation or not.

In the next post we will review Compensation by agreement not forbidden by the law.

RP in Bulgaria based on commercial activity

Lots of NON EU entrepreneurs are facing with a problem when they need to stay in Bulgaria for more than 90 days (in every 180 days).  This is due to both Bulgarian and EU immigration legislation procedures.

In general there are two main types of regimes depending of presence or lack of an agreement for visa free regime between their state and EU.

In the first case (when there are an agreement for visa free entrance), citizens may travel to Bulgaria without the need of entry visa and can stay up to 90 days (in every 180 days) but not a day more. Some of the countries in this list are:

United States of America, Australia, Albania, Andorra, Argentina, Bosnia and Herzegovina, Brazil, Venezuela, Guatemala, Israel, Canada, Hong Kong, South Korea, Costa Rica, Macedonia, Malta, Malaysia, Mexico, Moldova, New Zealand, Singapore, Serbia, Japan and so on.

In the second one visitors from countries that doesn’t have an agreement for visa free regime should hold in any case entry visa.

And so, simply running a company in Bulgaria doesn’t allow you to reside in the country. There are three main ways to obtain Residency Permit (RP) in connection with commercial or supporting activity in Bulgaria (except Investment Immigration program):

– to employ 10 Bulgarian citizens in your company;

– to act as a self employed person (freelancer);

– to act as a representative person of foreign entity registered with Bulgarian Chambers and Commerce and Industry;

In this post I will provide you with information for the third option, namely – to obtain residency permit in Bulgaria acting as a representative of a foreign entity.

This possibility is regulated by Law on Foreigners and Investment Encouragement Law.

In order to complete applicants should go through 3 procedures:

1. Registration of Trade Representative Office of foreign entity at Bulgarian Chambers & Commerce.

According to the Investment Encouragement Law, the representative offices in Bulgaria is not a legal entity and can perform only non profit activities such as: identifying the market opportunities and making surveys regarding the business in the Bulgarian market, making travel arrangements for the potential clients to the head office or for the company’s representative in Bulgaria, make promotional campaigns in order to make the goals of the company known in the Bulgarian market, trying to find investment opportunities.

A representative office cannot raise invoices for services or goods and also cannot be invoiced for procured services or goods. All transactions are considered done for the foreign entity.
The representative offices cannot close deals in the name of the Trade Representative Office, but for foreign company and also cannot sign any contracts.
A representative office may hire personnel and enter into agreements but cannot perform any activity that can be considered commercial otherwise it must be registered as a legal entity and enroll for the specific taxes.



What documents are required for the setup of a Trade Representative Office in Bulgaria?

The representative office must be registered at the Bulgarian Chamber of Commerce and Industry based on specific documents such as:
– the application for registration,
– the decision of opening of a representative office and the decision of appointing the person in charge for the representative office’s activities,
– the certificate of registration of the foreign company, showing existence, ownership, representation and a person that represent it, current status (Certificate of Good Standing) of the foreign entity ( and issued no later than 6 months on it’s presence at BCCI).
– the power of attorney in original for the person appointed to carry the activities of the representative office,
– proof that the Chamber of Commerce Industry’s fees were paid and the registration card for the information system of the Bulgarian Chamber of Commerce and Industry.

Nota Bene:  Only legal entity may apply for TRO (Trade Representative Office) and not sole proprietor as a business form. A legal entity is a legal construction through which the law allows a group of natural persons to act as if they were a single person for certain purposes. The most common purposes are lawsuits, property ownership, and contracts.
Nota Bene:  All official documents that are issued outside Bulgaria should be accompanied with Apostille, (if the country of origin is a member of Apostille Convention – The Hague Convention Abolishing the Requirement for Legalisation for Foreign Public Documents) translated in Bulgaria and translation certified at Bulgarian Ministry of Foreign Affairs – consular relations.

The whole procedure of registration doesn’t take longer than a week if all the documents are accurate and delivered on time.

Once TRO is being registered applicant may proceed with the next step.

2. To apply for issuing of Visa D

The presence of visa D is an absolute prerequisite for obtaining a residence permit in Bulgaria. Visa D could be issued only in Bulgarian diplomatic missions by permanent address of the applicant.

Application for Visa D should be submitted not early that 90 days from the planned traveling. Application is being reviewed in 45 days, following submission.

Once a Visa D is granted the applicant may arrive in Bulgaria and apply for long-term residency permit.

Visa D provides you with availability to entry multiply times in Bulgaria till it’s expiration.

3. Application for Long-term residency permit.

Applications for Long-term residency permit should be submitted in front local migration office by registered address of applicant.

Applications are reviewed within 15 days.

Certificate of long-term residency permit Bulgaria

Certificate of long-term residency permit Bulgaria

As a result you will receive a certificate of granted Long-Term residency permit. It’s a subject of renewal annually.


Please do not hesitate to get in contact with us for all other questions arising in your mind.

Telecom has used unfair commercial practices

Mobiltel” JSC has applied an unfair commercial practice, providing false information to consumers, the proposed lease handsets coded to work only with SIM cards of telecom, will be unlocked for free and freely use with cards of other operators after expiration of fixed-term contracts.

This is the final decision of the Supreme Administrative Court (SAC), which confirms the administrative act of the Commission for Consumer Protection (CCP) issued Unfair Commercial Practices reported by CCP.

SAC confirmed a decision of the CPC for UCP of Mtel

SAC confirmed a decision of the CPC for UCP of Mtel

Devices that Mtel sells of leasing in most cases are coded and can work only with the SIM card of the same mobile operator.

It becomes clear that employees of telecom has convicted consumers that after the completion of the contract by which was provided encrypted mobile phone by the company for free would be given a code to unlock it.

A check performed by the Commission for Protection of Consumers, however, found that for the providing of the code is necessary to pay the price indicated in the price list of the operator. Results from the check also shows that information for decoding fee which varies according to the price of the phone (from 50 to 150 lev) is placed only on Mtel website. According to the Commission for Protection of Consumers, it means that users without internet access are unable to make informed choices.

Commission for protection of consumers

Commission for protection of consumers

With the latest amendments to the Law on consumer protection was provided when a final decision of the Supreme Administrative Court confirmed an unfair commercial practice, users to have the right to terminate the contract with the trader concluded as a result of using this practice and to claim compensation in front the courts.

The law also provides the final decisions of the Supreme Administrative Court to be binding on the civil court, the right of consumers to seek redress lapse upon the expiration of five years from the date of entry into force of the decision of the Supreme Administrative Court, says also the message of the Commission for Protection of Consumers.



Failed election for Chairman of Supreme Court of Cassation of Bulgaria

After 8 hours of electing procedure for Chairman of the Supreme Court of Cassation (SCC) and in less than two minutes vote, the Supreme Judicial Council failed to make a successful choice early today.

Nominations for Chairman of the SCC of Bulgaria

Nominations for Chairman of the SCC of Bulgaria

Supporting Judge Tanya Raykovska voted 15 members, six were “against”, and three abstained. For Judge Pavlina Panova voted nine members, eight were against and seven abstained. By provisions of the law to have a valid choice are need at least 17 ​​votes for a candidate. SJC will now have to announce a new procedure. So the choice for the Chairman of the SCC will be held after the parliamentary vote, which is October 5.

After the vote, Judge Panova said in front medias that was not surprised by the result. “As Man, involved in such a race, in such event, you must have the courage to anticipate and any development of the procedure,” said Judge Panova.

Asked if she thinks this choice depends on the political situation, she said that a lot of it is willing to respond that it depends noted that the SJC itself has tried to schedule the election for President of the SCC before the parliamentary vote to demonstrate independence from the political situation.

She refused to give her opinion will she re-join the race, and mostly because one possible future candidature again will depend on the availability of nomination of at least five members of the SJC.

Judge Tanya Raykovska left the building of the Supreme Judicial Council of the side entrance and journalists could not even talk to her.

supreme court of cassation Bulgaria

supreme court of cassation Bulgaria

About an hour SJC members took to discuss the merits of the two candidates. Noticed that in favor of one or the other candidate spoke only importers of the respective nominations. The other members of the board remained silent, or urged to be made ​​optional with the result.

Professor. Lazar Gruev put an end to the debate by saying, “I want to believe that the SJC, in its decision will be commensurate with the expectations of the democratic spirit manifested by election of the President of the SCC. Good news is that every Bulgarian citizen who had the patience to follow the procedure, colleagues and people will be able to compare their choice with that which we will do. I would like to believe that we will make the right choice for SCC, good for the judiciary and the best judges of the SCC.

Original article in Bulgarian by Ralitza Petrova at Legalworld.bg

Protecting your Intellectual Property in Bulgaria

I was planning from a long time to provide you with some initial information regarding Intellectual Property  protection in Bulgaria. Well, finally the time to do this has come.

Intellectual Property protection Bulgaria

Intellectual Property protection Bulgaria

Lets first answer to a question – What actually is Intellectual Property? (for these that don’t know).

An objects of intellectual property rights are intangible assets with economic value, expressed in a manner and an objective form, set out in a legal rule, which primarily are the result of creative activity.

In national, international and supranational provisions are principally non exhaustive listed various objects. General classification of the objects of intellectual property can be expressed as follows:

Objects of copyright and related rights;

Industrial property such as covered by patent law, object of the right of the names and objects of industrial design;

All other objects relating to intellectual activity.

Requirements for legal protection of copyrighted works include the work to be a result of creative activity and meet the possible expressions and forms of creative activity.

Industrial property are also intellectual outcomes that can be inventions and utility models (objects of patent law), marks and geographical indications, as well as companies (subject to the rights of signage), industrial design (subject to the right of the design ) and rights arising from unfair competition.

So what could be protected?

You have an idea for a product, logo, business, book, music, industrial design. Could the idea be a subject of protection?

Intellectual property is unique object which you have physically created – single idea could not be intellectual property, and cannot be a subject of IP protection.

 Than ok, so when I own intellectual property?

1. You have created something unique, that match all requirements established into the law for an industrial design, trade mark, a patent or copyright.

2. You have bought rights over intellectual property from its initial / previous owner.

3. You have well established brand, trade name / product that could be a trade mark.

What constitutes a violation of intellectual property rights?

Unlawful use by third parties of legally protected object-matter intellectual property, ie without the consent of and in spite of the holder of subjective rights constitutes a violation of rights to intellectual property.

The diversity and differences in the legal regime of intellectual property determining and the differences in the legal framework in relation to violations of the rights to them. Bulgarian law does not provide a general definition of infringement of an intellectual property.

1. Rights infringements subject to copyright.

2. Violations of the rights objects of industrial property.

3. Violations of all other rights of objects in relation to intellectual activity (the know-how and show-how).

Protecting copyright

The indication of the types of objects is not exhaustive, but to facilitate the application of the law lists various works of literature, art and science, such as literary works, including works of journalism and computer programs; music; stage works; films and other audiovisual works; works of art; works of architecture; photographic works; projects, maps, charts, plans, etc.; layout of printed matter; translations and adaptations of existing works; periodicals, encyclopedias, collections, anthologies, bibliographies, databases; arrangements of music and folklore.

According to the Law on Copyright and Related Rights

Art. 94 (1) Whoever violates the copyright, related right or any other right under this Act shall be liable to compensate the holder or the person who has been granted the exclusive right to use.

(2) Compensation shall be due for all damages which are the direct and immediate consequence of the breach.

(3) When setting the amount of compensation the court shall take into account all the circumstances of the breach, lost profits and non-pecuniary damage and revenue earned by the offender from the infringement.

(4) The court shall determine fair compensation that should a deterrent and a warning to the offender and other members of society.

Art. 94a. (1) Where an action is well founded, but there is not enough data on its size, the plaintiff may claim as compensation:

1. from five hundred to one hundred thousand Bulgarian Lev, as the amount is determined at the discretion of the court under Art. 94, para. 3 and 4, or

2. equivalent to the subject of the breach at retail prices of legitimate reproductions.

(2) On determining the compensation under par. 1 be taken into account and income resulting from the infringement.

 Other possible actions:

Art. 95 (1) Where a work of art objects by Art. 72 or databases by Chapter Eleven “A” is used in violation of the provisions of this Act, the right or the person who has been granted the exclusive right to use, can be legally enforceable:

1.  To be established the fact of infringement;

2.  The cessation of the unauthorized use or ban on activities that will constitute misuse;

3.  Seizure and destruction of illegal reproductions of artwork, objects of art. 72 or databases in Chapter Eleven, “a”, as well as negatives, matrices, cliches and other devices designed to reproduce copies;

4.  Seizure by use of dubbing, decoding and playback devices used exclusively for infringing;

5. To be forwarded to him the objects under item 3.

6.  Disclosure expense of the infringer of the operative part of the decision of the court in two daily newspapers and in a time zone from the court of television organization with national coverage.

(2) Seizure within the meaning of para. 1, p. 3 and 4 can be required, both in terms of objects located at a particular location and in terms of the objects situated in shops in general.

Legal persons and sole traders bear civil liability for violations of rights under this Act committed by the guilty persons who are, respectively, their employees or persons employed by them. In this case, guilt is assumed until proven otherwise.

Next post will be related to Violations of the rights objects of industrial property and its protection.

Compensation for delay due to contractor’ fault?

In view of the unification of jurisprudence in the presence of conflicting court decisions on the issue, the President of the Supreme Bar Council of Bulgaria Ralitza Negencova sends a statement on the matter with a request to be given an interpretative decision on the matter by the Supreme Court by interpretative case № 7/30 09. 2013.

 Members of the Supreme Bar Council

Members of the Supreme Bar Council

Does it owe a penalty for delay under Article 92, paragraph 1 of Obligations and Contracts Act, when the contract is terminated due to contractor’ fault?

The question referred was opened due to following controversial cases:

1. First solution was given by Decision 206 of 05.05.20010 on by Commercial case 18/2009 of the SCC, in which is assumed that when the parties have agreed default of late performance of the debtor’s obligation, then the contract is terminated by the complete failure, the debtor is liable to pay the agreed penalty by the claim on the ground art. 92 of the Obligations and Contract Act.

Considerations set out in the reasoning of the decision are that even on the basis of Article 88, paragraph 1, of the OCA sentence 1 termination of the contract leads to cancellation of obligations taken by the parties does not mean that the creditor is deprived of the right to claim compensation for non performance or damages by argument of art. 88, para 1, sentence 2 of the OCA.

2. Second solution was given by Decision №17 on 19.03.2010 by Commercial case 414/2009 of Supreme Court of Causation. This decision accepts that responsibility for damages caused by the cancellation of a contract in the form of penalty determined at the conclusion of the contract may be claimed only if such a default has been agreed to compensate the negative interest violations for the upstanding party, as such a possibility of compensation generally permitted in Article 88, paragraph 1, of the OCA sentence 2According to the court, in case of termination of the contract cannot enforcement being sought, nor have nonperformance and therefore if default has been agreed for the poor (slow) performance, it will not be due.

Тhe President of the Supreme Bar Council considered second solution for the proper one, explicitly making it clear that the issue in the two cited above hypothesis decision is not the case of termination of the contract with the continuous or periodic performance where the termination is effective only in the future, according to the provision of Article 88, paragraph 1, of the OCA sentence 2.

The arguments for this conclusion are as follows:

1. Breach of a contractual obligation exists in any case where the debtor does not perform exactly as agreed, i.e. both full default as well as accomplishing inaccurate, as the case may be inaccurate failure could be both quantitative and qualitative, and also in respect of time – the case of Article 79, paragraph 1 of OCA.

2. Breaching of contract is giving rise to the liability of the debtor, which correspond to certain rights of creditor. Thus, under Article 79, paragraph 1 and paragraph 2 of the Obligations and Contracts Act in case of default, the creditor is entitled to claim from the debtor (1) or performance with compensation for the delay or (2) compensation instead of performance, but in this second hypothesis, the debtor can offer initially due along with compensation for the delay if the contractor still has an interest in the implementation.

3. The forfeit is a clause into a contract that is associated with possible failure to meet obligations and compensation for damages of non-compliance. In this sense, the forfeit is secondary in nature, it is always associated with another primary obligation under the contract. According to the legal definition of forfeit in Article 92 of the Obligations and Contracts Act this contract term goals, on the one hand, to ensure the proper performance of the obligation and, on the other hand, serve as compensation for the damages of a possible default without the need such a damage to be proved either as type or size.

4. If based on nonperformance the creditor is suffering greater damage, he may claim compensation for the excess over the agreed default Article 92, paragraph 1, of the OCA sentence 2. But if a forfeit is excessive compared to the actual damage or if the obligation is fulfilled partly or incorrect, the debtor may apply to the court with a request to reduce its size Article 92, paragraph 2 of the OCA.

5. When the contract is bilateral and is canceled due to the fault of the debtor (Article 87 of OCA) according to Article 88, paragraph 1 of the OCA termination is retroactive, i.e. retroactively  drop out parties’ commitments and mutually they owe returning of given by the contract (Article 55, Paragraph 1, Proposal. 3 of OCA). Once the commitments are dropped and not performance is owed, it should logically nonperformance and dropout obligation to not constitute grounds for liability of the debtor. But the law takes account of the fact that it is the debtor’s wrongful conduct led to termination of the contract, thus expressly provides that in the case of termination, the creditor is entitled to compensation for damages from the breach of contract.

6. In view of the above, in bilateral agreements, various events of default are possible depending on the nature of the obligations and also depending on the different situations of failure inadequate performance or complete nonperformance. Accordingly, of any such cases of default, defaulting party would be responsible for damage caused by the breach, the parties may agree in advance what compensation would be due as agreed on a case for default for a delay penalty and the penalty for complete nonperformanceAnd if the law expressly provides for the right to compensation for damage caused by failure in termination of the contract, the parties could therefore still at the conclusion of the contract to understand the compensation of such damages as agreed penalty for failure, leading to termination of the contract.  This way for the correct party there will no be need to prove damage suffered by the termination of the contract and receive the agreed compensation.

7. In conclusion, applying the principle of contractual freedom (Article 9 OCA) parties to a bilateral contract may agree both as compensation for inaccurate (delayed) performance and default for failure, leading to termination of the contract. Accordingly, in an action for the award of default, the court in interpreting the contract and seeking the actual will of the parties (article. 20th OCA) should primarily clarify whether the alleged penalty was agreed for the case of poor performance or in the event of default giving rise to the termination of the contract. In the latter case, a penalty clause will be implemented despite the abolition of the contract retroactively, because the possibility of damages by such breach is expressly provided by law.