Contractual penalty: basic principles of application

The procedure for collecting penalties under the contract

How to collect a penalty under a contract?

Most often questions arise:

• collection of penalties under a share participation agreement;
• collection of penalties under a supply agreement;
• penalty under another agreement.

The conditions for resolving disputes must be specified in the contract; it specifies any conditions that both parties agree to. Therefore, if you are interested in such a question as collecting a penalty under a supply agreement, you need to focus on the signed contract.

If the case is heard in court, the percentage of the penalty (stipulated in the contract), the performance or non-performance of the party that violated the terms of the contract, its obligations is of particular importance. Other important points are the total amount of losses (possible or real), timing of violation of obligations, etc. Reducing the penalty by the court is quite possible. Therefore, approach this issue carefully.

Pre-trial procedure for collecting penalties

Before resolving the issue of litigation, in order to collect a penalty from the amount of the contract, you should try to resolve this issue voluntarily. Why you can contact your counterparty through:

1. telephone conversations;
2. correspondence using email;
3. personal meetings in the offices of the parties or with a lawyer;
4. engaging a lawyer to represent your interests with another party;

If at this stage it was not possible to solve this problem, then it is necessary to contact the other party by writing a claim with a calculation of the penalty and justification for its collection. In this case, it is recommended to state the reasons for the appeal in as much detail as possible, and also attach a calculation. Also indicate the deadline for responding to your claim, however, if these deadlines are not indicated, they are provided for by law. If this method does not work for the counterparty, you must contact the judicial authorities to protect your rights.

USEFUL: watch a video with advice from an Ekaterinburg lawyer on filing a claim

Arbitrage practice

When applying norms when making decisions, courts are guided not only by legislation, but also by established judicial practice, which is often summarized in the Resolutions of the Supreme Court of the Russian Federation (SC RF). If there is evidence, collecting sanctions is not difficult. Reducing the size of the sanction is a common practice; courts often reduce it several times. But recently, debtors have been required to provide specific justifications for the reduction, and worthy and credible arguments in favor of such a decision.

Legal documents

• Article 395 of the Civil Code of the Russian Federation. Liability for failure to fulfill a monetary obligation
• Article 395 of the Civil Code of the Russian Federation. Liability for failure to fulfill a monetary obligation
• Civil Code
• Federal Law of April 25, 2002 N 40-FZ
• Federal Law of December 30, 2004 N 214-FZ
• Article 394 of the Civil Code of the Russian Federation. Losses and penalties
• Article 395 of the Civil Code of the Russian Federation. Liability for failure to fulfill a monetary obligation
• Resolution of the Plenum of the Supreme Court of the Russian Federation dated March 24, 2016 N 7
• Article 333 of the Civil Code of the Russian Federation. Reduction of penalties

Claim for recovery of penalties under the contract:

You can write a statement of claim for the recovery of a penalty under a contract using the services of lawyers in civil cases; in addition to drawing up a procedural document, we enter into agreements for representation, including the cost of a lawyer from the defendant in the claim. Problems often arise with developers who violate the terms of the agreement. Usually, cases come to court when the developer does not agree on a change in the terms of the contract, including issues relating to the timing of delivery of a residential property; in this case, each shareholder can demand a penalty.

How is a penalty collected under an equity participation agreement? Shareholders (or a group of shareholders) can try to resolve the issue without bringing it to court by preparing an official proposal to the developer to voluntarily pay all fines. If the developer does not respond to the application, then you need to go to court, where shareholders may need the help of lawyers.

Any issue, be it the collection of a penalty under a contract or a claim for compensation in case of violation of delivery deadlines, can be resolved legally, since each point of the relationship between the parties is specified in the contract. The same applies to real estate rental issues.

Often, property owners are faced with non-payments from tenants. If it is not possible to resolve the issue peacefully, there is only one way out - collecting penalties under the lease agreement in court. To do this, the necessary documents are collected and a claim is drawn up. The landlord sets out the nature of the claims and determines the amount he wants to claim. The court must submit a contract (lease agreement) and other papers that confirm the fact that the tenant has assumed obligations. Our lawyers will help you achieve justice in such a matter as the collection of penalties under a terminated contract. Let us add that the penalty can be formed from penalties and fines, but the final decision on the amount of all amounts is made by the court.

USEFUL: more tips on drawing up a statement of claim for penalties in the next video

Legal penalty without contract

If the contract does not provide for a penalty:

• Current civil legislation establishes that the creditor has the right to demand payment of a penalty determined by law (the so-called legal penalty), regardless of the fact that the penalty is not specified in the contract.
• the possibility of collecting a legal penalty is provided for by regulations governing various sectors of the economy. For example, laws: “On the Protection of Consumer Rights”, “On Electric Power Industry”, “On Heat Supply” and others.
• If the contract you have entered into is subject to the provisions of one of the laws that provide for a legal penalty, then for certain violations of contractual obligations, it will be possible to recover a penalty from the counterparty in the amount provided for by the provisions of the relevant law.

If neither a contractual nor a legal penalty is provided for, and the counterparty does not fulfill its obligations, then you can use Article 395 of the Civil Code of the Russian Federation, which provides for liability for unlawful withholding, return or other delay in funds. But for this it is necessary to perform a number of procedural procedures. For example, the direction of the claim. And also, if the obligation was to be fulfilled in a non-monetary amount, then a letter confirming the return of funds paid under the contract.

Reducing penalties: basic rules

When the amount of the penalty obviously does not correspond to the scale of the resulting consequences of non-compliance with contractual obligations, the court can reduce its size (clause 1 of Article 333 of the Civil Code of the Russian Federation).

At the same time, the courts indicate that the assessment of the penalty for its disproportionateness to the consequences is carried out according to the internal conviction of the court, taking into account the circumstances of each specific case, since clear criteria for this are not provided for by law (see the resolution of the Supreme Court of the Supreme Court dated November 12, 2020 in case No. A28 -2606/2020).

The burden of proving circumstances that may serve as grounds for reducing the penalty rests with the party applying for such a reduction (see the resolution of the 8th AAC dated December 27, 2016 in case No. A46-7479/2016).

Note! In exercising this power, the courts are not constrained by the terms of the agreement on the maximum or minimum amount of the penalty (clause 70 of PPVS No. 7). If the penalty, according to the terms of the contract, consists of a fine and penalties, then its proportionality to the resulting consequences is assessed on the basis of the total amount of such a fine and penalties (clause 80 of PPVS No. 7).

Deadline for collecting penalties under the contract

The penalty is accrued from the day the party violates the obligation under the contract until the moment of its actual execution. For example, if payment was due on June 25, then the first day of violation will be June 26 - the day after the last day on which the obligation should have been fulfilled. At the same time, the penalty is subject to Article 196 of the Code of Civil Procedure and the statute of limitations for collecting the penalty under the contract is 3 years.

An interesting point is that the limitation period for the collection of penalties applies separately to each amount of contractual penalties payable for each day of delay.

Therefore, in order to have the right to demand a penalty from the counterparty, it is necessary to comply with the deadlines for filing a claim in court.

Reasons for reducing the penalty

The grounds for reducing the amount of the penalty may be, for example, the following:

• a significant excess of the amount of the penalty over the amount of damage (for example, the resolution of the Supreme Court of the Russian Federation dated November 12, 2020 in case No. A28-2606/2020);
• excessively high percentage of penalties;
• short duration of non-fulfillment of the obligation (see the decision of the Kopeysky City Court of the Chelyabinsk Region dated October 12, 2016 in case No. 2-2940/2016), etc.

The following arguments of the debtor cannot in themselves be accepted as grounds for reducing the penalty (paragraph 4 of clause 1 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated December 22, 2011 No. 81, hereinafter referred to as PPVAS No. 81):

• about his difficult financial situation:
• violation of obligations to the debtor himself by his counterparties;
• the existence of debt obligations to other persons;
• seizure of his property;
• failure to provide financial support from the budget;
• return of the amount of debt as of the date of consideration of the dispute;
• the defendant performs socially significant functions;
• the existence of the defendant’s obligation to pay interest for the use of funds, etc.

The courts note that the argument that the creditor has no damage (or lack of proof of its infliction) caused by the other party’s violation of its obligations under the contract cannot be considered as a basis for reducing the penalty (see the resolution of the 8th AAC dated December 15, 2016 in case No. A81-3174/2016).

Although the creditor is not obliged to prove the occurrence of losses in connection with the improper fulfillment of the obligation by the second party, he has the right to present to the court evidence of the consequences of similar violations of the obligation for him (clause 74 of the PPVS No. 7).

How to calculate the penalty under a contract?

The method of calculating the penalty depends on the type of penalty specified in the contract.

Let's look at a few examples:

• If the contract specifies a penalty in the form of a fixed amount, then the prescribed amount is subject to payment.
• If the contract specifies the payment of penalties, then it is necessary to calculate the percentage to be paid. This can be done using the following formula:

Total amount of debt * percentage of penalties * number of days of delay.

• if the amount of the penalty is not specified in the contract, then the penalty must be calculated at the refinancing rate of the Central Bank of the Russian Federation. The refinancing rate is regularly revised by the Central Bank of the Russian Federation, so it is necessary to check its changes over the entire period of overdue obligations. This can be done on the official website of the Central Bank of the Russian Federation.

The penalty is subject to calculation for each period of validity of the refinancing rate of the Central Bank of the Russian Federation. The calculated penalties for each period of validity of the refinancing rate during the period of delay of the obligation are summed up.

When calculating such a penalty, the formula will look like this:

• amount of debt * number of days overdue * refinancing rate / 360,
• 360 is the number of days in a year accepted by the Central Bank of the Russian Federation in calculations.

The above calculation methods will help you quickly and accurately calculate the penalty for an obligation not fulfilled on time.

Reduction rules

The court may reduce the amount of the penalty for failure to fulfill obligations under the contract on the basis of Art. 333 of the Civil Code of the Russian Federation - for this purpose a petition is submitted. This is one of the legal ways to prevent abuse of rights when freely determining the terms of an agreement.

A reduction is allowed only in exceptional cases in the presence of the following circumstances:

• the amount of the penalty is equal to or exceeds the amount of the principal debt;
• the sanction percentage clearly exceeds the market rate for short-term loans;
• there is reason to believe that the interested party delayed going to court in order to increase the amount of liability.

Difficult financial situation, seizure of the debtor's property, non-payment of amounts under concluded agreements or from the budget are not grounds for reduction.

What penalty can I choose?

Based on the legislation, we can distinguish a number of types of penalties that are included in the contract, and subsequently in a claim for the recovery of penalties under the contract:

• fine, the amount of which is determined in a fixed amount
• penalty, a periodic amount, the amount of which depends on the period of delay of the obligation.

Penalties are much more common than fines and are most favorable when the terms of the contract are delayed. Collection of penalties under a service agreement is often used to protect the rights of individuals.