Oda Russian Commercial Law 2007-1

If the lessee continues to use the property after the expiry of the term and the lessor does not object, the contract is deemed to have been renewed on the same terms for an undetermined period (ibid., para.2).

The Code provides for the right of the lessee to purchase the object of lease. Thus, by law or contract, it is possible to provide that the title to the leased property is to be transferred to the lessee on expiry of lease, or that even before the expiry, the lessee may purchase the property by paying the full purchase price as determined by the contract (Art.624, para.1). This right of the lessee to purchase the leased property was rst introduced by the above-mentioned Fundamental Principles on Lease of 1989. In the case of a lease of a state enterprise, the lessee was entitled to purchase the enterprise by deferred payment and convert it to a joint stock company or other forms of business entities. In the formal privatisation process which started in 1992, commercial companies which the workers’ collectives set up were allowed by law to have the of ces, buildings and structures leased to them on a long term basis and were given a preferential right eventually to purchase them.21

(3)Lease of Buildings and Installations

The lease of buildings and installations has to be effected in written form. Breach of this requirement makes the contract null and void. Contracts of lease of buildings and installations with a term of one year or more are subject to state registration and are regarded as concluded at the time of registration (Art.651).

With the lease of a building or installation, the right to use the land which it occupies and needed for its use is transferred to the lessee. If the lessor is the owner of the land, the lessee obtains the right to lease or other rights as provided by the contract (Art.652, paras.1 and 2). Even if the lessor is not an owner of the land, the lessor may still lease the building or installation standing on it without the consent of the owner of the land, if providing the property for lease is not against the conditions of use of land as provided by the law or contract (ibid., para.3).

If the land on which the building or installation is located changes hands, the lessee of the building or installation maintains the right to use the land which it occupies and which is needed for the use of the building or installation on the same terms that existed prior to the sale of the land (Art.653).

21 Fundamentals of the Legislation on Lease, Vedomosti SSSR, 1989 No.25, item 481.

the bene t of the principal, the agent obtains rights and assumes duties even if the principal was referred to in the transaction or if the principal had directly performed the obligation in relation to the third party. In this “commission type model”, the agent is under obligation to transfer the rights and duties to the principal. When the agent acts in the name of the principal, the principal obtains rights and assumes duties directly (Art.1005, para.1).22

There seems to be signi cant overlap between these three types of contracts. In fact, if a person is to effect a juristic act in the name of another person, it can be either mandate or agency. If a juristic act is to be effected in the name of the person himself, it can be either commission or agency. Acts performed by the commission agent, agent, and the person with a mandate are juristic acts (including “transactions”), but in the case of agents, they can effect non-juristic – factual acts as well. Provisions on mandate and commission contracts are applicable to agency contracts insofar as they are not against the provisions of agency contracts, depending on whether the agent has acted in the name of the principal or in his name (Art.1011).

This confusing state of legislation has a historical background. Commission contracts and contracts of mandate had been accommodated in the socialist civil codes, while the agency contract, which came from Anglo-American Law, is new to Russian Law. The agency contract was added as a new category of contract in the light of the transition to the market economy to cope with situations e.g. where an agent not only undertakes the task of selling products, but also advertises and markets the products. This is a combination of juristic acts (e.g. sale) and factual acts (e.g. advertisement) which cannot be fully covered by either mandate or commission contracts, so a new type of contract in the form of agency had to be introduced.23

It should be added that in the General Part of the Civil Code, there is a provision on “commercial representation (kommercheskoe predstavitel’stvo)”.Acommercial representative is a person who, constantly and independently represents an entrepreneur in the name of this entrepreneur in concluding contracts in the area of business activities (Art.184). Although this resembles agency, reference is made to commercial representation in the chapter on contracts of mandate (Art.973, para.3).

22O.N.Sadikov ed., Kommentarii k grazhdanskomu kodeksu Rosiiskoi Federatsii chasti vtoroi, Moscow 1999, p.592.

23Braginskii, supra, pp.306-307.

(3)Agency Contracts

In agency contracts, if the principal grants to the agent a general power to act in the name of the principal, the principal may not refer to the absence of power on the part of the agent vis à vis a third party, unless he proves that the third party had known or should have known the restriction of power on the agent (Art.1005, para.2).

In the contract, it is possible to provide for an obligation of the principal not to conclude a similar contract with another agent who is active in the same territory determined by the contract, or to refrain from conducting activities by himself analogous to those which are the object of the agency contract. By the same token, the agent may be placed under an obligation not to conclude an analogous agency contract with another principal in the territory which in all or part, overlaps with the territory covered by the agency contract (Art.1007, paras.1 and 2).

On the other hand, the terms of an agency contract by which the agent is allowed to sell products, execute works, or provide service exclusively for a speci c category of buyers, or only to those who are located or resident in the territory, are null and void (Art.1007, para.3). This is explained to be because by these terms, a speci c category of people will be excluded in advance from among potential consumers (buyers, customers).24

In the process of performance of an agency contract, the agent is under an obligation to submit a report to the principal as provided by the contract. If there is no such provision in the contract, the agent has a duty to report to the principal in the course of the performance or at the end of the performance of the contract. If the principal has objections to the report, he has to inform the agent within three days of the receipt of the report; otherwise, he is considered to have accepted the report (Art.1008).

Unless otherwise provided by the contract, the agent is entitled to contract a subagent for the purpose of performing the agency contract, but has to remain responsible vis à vis the principal for the act of the subagent (Art.1009, para.1).

Agency contracts are terminated on the following grounds:

i)refusal of performance by either party of a contract concluded without a xed period of validity;

ii)death, declaration of incapacity, limited capacity, and disappearance of the agent;

iii)recognition of an individual entrepreneur as insolvent (bankrupt).

24 Ibid., p.309.

(4)Contracts of Mandate

The person under mandate must perform his duties in accordance with the instructions of the principal. The instructions must be “lawful, enforceable, and speci c”. The person under mandate may deviate from the instruction if it is in the interest of the principal and there was no time to inquire with the principal or if the person had failed to receive a reply to the inquiry. The person under mandate must inform the principal of such deviation without delay, once the communication has become possible (Art.973, paras.1 and 2).

A person under mandate acting as a “commercial representative”, i.e. a person who perpetually and independently represents an entrepreneur in concluding contracts in the area of entrepreneurial activities (Art.184, para.1), may be granted a right to deviate from the instructions without advance consultation with the principal (Art.973, para.3).

5)Contracts related to Banking

(1)Contracts of Credit and Loan

The current Civil Code has a chapter on contract of credit and loan. This chapter is subdivided into credit and loan, and “commodity and commercial credit”.

In the RSFSR Civil Code of 1964, provisions on credit and loan contracts were accommodated in separate chapters and were scarce. In contracts of credit, with the absence of commercial banks, creditors were invariably state banks. There was only one provision on extending credit to “organisations” including state enterprises to the effect that the loans to various entities were to be granted in accordance with the plan by state banks and in accordance with the procedure established by legislation. Loans between enterprises were allowed only in cases provided by legislation.25

The current Civil Code distinguishes between loan (zaem) and credit (kredit). The RSFSR Civil Codes of 1923 only provided for zaem. Credit was referred to in the USSR Fundamental Principles of Civil Legislation of 1990, but not as a separate type of a contract. Zaem and kredit were regarded as one and the same contract (Art.113). In contrast, the current Civil Code, zaem and kredit are provided as different types of a contract.

In zaem, the lender transfers money or other things determined by their generic nature to the ownership of the borrower, and the borrower is obliged

25 Art.392, Civil Code of the RFSFR of 1964.

to return the same amount of money or things of the same generic nature to the lender within the agreed period. Contract of zaem is a contrat réel, i.e. it is deemed to be concluded at the time of the transfer of money or other things (Art.807, para.1). Contract of zaem concluded between juridical persons must take a written form; the same applies to contracts between individuals for the amount of 10 times or more of the minimum wage (Art.808). The lender is entitled to receive interest out of the money or other things transferred to the borrower (Art.809).

Although interest is not a constituent element of zaem, unless otherwise provided by law or contract, the lender is entitled to an interest as provided by the contract. If the terms regarding the amount of interest are not provided in the contract in which the lender is a juridical person, the rate of interest is determined by the bank re nancing rate at the place of the lender on the day of repayment by the borrower. Unless otherwise agreed between the parties, the interest is payable every month until repayment (Art.809, paras.1 and 2). There is no restriction on the level of interest charged in zaem or kredit contracts.

Variations of zaem are promissory notes (veksel’), corporate bonds (obligatsiia) and government bonds. If the borrower issued a promissory note which certi es an unconditional assumption of debt by the issuer (simple promissory note) or by another person indicated on the note as a payer (bill of exchange), the relationship between the parties is regulated by the law on promissory notes and bills of exchange. If there is a contradiction between the Civil Code and this law, provision of the latter prevails (Art.815).At the moment, the Statute on Bills of Exchange and Promissory Notes, which was attached to the Federal Law of March 11, 1997, is applicable. In fact, this was a “recon rmation” of the 1937 Law which was enacted following the rati cation of the 1930 Geneva Convention by the USSR in the same year. Although after the “reform of the credit system” in the early 1930s, there was no need for bills of exchange or promissory notes within the country, they were thought to be necessary for foreign trade, and therefore, the USSR rati ed the Geneva Convention. Basic rules of the Convention are said to have been incorporated in the statute.

The Civil Code presupposes the enactment of a new law on this matter. It is expected that the new law will take into account the 1988 UN Convention on International Bills of Exchange and International Promissory Notes which was signed, but not rati ed by the former USSR.26 There is a joint decision of the Plenums of the Supreme Commercial Court and the Supreme Court on bills of exchange and promissory notes.27

26Braginskii, supra, p.213.

27Joint decision No.33/14 of December 4, 2000.

Interest is paid on the deposit. The interest rate is to be determined by the contract, but in the absence of an explicit provision, the rate is determined by the bank re nancing rate at the place of business of the creditor – juridical person (Art.838, para.1).

(3)Bank Settlement (bankovskii schet) Contracts

In bank settlement contracts, the bank is under an obligation to accept and credit the money to the account opened by the client, execute the instructions of the client on transfer of the money, payment and other operations (Art.845, para.1). The bank is entitled to use the money in the account, provided that it guarantees free disposal of the money in the account by the client (ibid., para.2). It is possible to open a credit account from which a payment can be made regardless of the absence of money in the account (Art.850, para.1).

Bank settlement contracts are public contracts, i.e. the bank is obliged to conclude a contract when requested to do so by a customer. The bank is liable for ungrounded refusal to open an account (Art.846, para.2).

There is no question that the client is entitled to withdraw money by instructing the bank. However, the Code also provides for withdrawal of money without the instruction of the client. Grounds for such withdrawal are court judgments, and “instances provided by laws or contracts between the bank and the client” (Art.854, para.2).At present, the Federal Tax Service is empowered to withdraw unpaid tax and penalties from the account of juridical persons without recourse to court. The same applies to unpaid customs duty, pension, social security contributions and medical insurance payments by employers.28

(4)Payment (raschet) Contracts

This is a new section introduced by the present Civil Code. Previously, there was only one provision concerning payment in the 1964 Civil Code. It was primarily regulated by subordinate legal acts, namely by normative acts of the Central Bank. With the enactment of the new Civil Code, payment is regulated by banking regulations only when so provided by the Code and other laws (namely the Banking Law).

Payment in Russia is not entirely free from restrictions. The Civil Code provides that payment with at least one party being an individual who is not engaged in entrepreneurial activities can be effected by cash without restriction. However, payments between juridical persons, and between juridical persons and

28 Sadikov, fth edition, supra, pp.525-526.