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Modification and Termination of Contract

In the financial and economic activities of businesses the change or cancellation of contracts is often necessary. Thats why deep analyze of such procedure is needed in order to deal with it professionaly.

15.08.2014Юридическая фирма "Diplomat Law", www.diplomatlaw.com
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In accordance with the civil legislation of the Republic of Uzbekistan citizens and legal entities are free to contract and determine any not inconsistent with the terms of contract law conditions. Therefore, while the period of the contract the parties may by mutual agreement change and terminate contract in accordance with the conditions stipulated by the current legislation.

1. Amendment and termination of the agreement

Civil law (articles 236 and 237 of the Civil Code of Uzbekistan, Articles 4 and 7 of the Act of the Republic of Uzbekistan "On the contract law basis of economic entities") establishes the obligation of timely and proper fulfillment of the obligations assumed by the contract.
The change of contract means that while maintaining its strength as a whole, some condition or some of them , including those related to contractual obligations, formulated in a new way. Termination of the contract always leads to its early cancellation.
In accordance with the first paragraph of Article 382 of the Civil Code of the Republic of Uzbekistan, modification and termination of the contract may be agreed by the parties, unless otherwise provided by the Civil Code of the Republic of Uzbekistan, other laws or directly by signed contract .
Modification and termination of the contract by mutual agreement is prior in terms of the legislation to. It requires minimal legal regulation.

Modification and termination of a business agreement is possible by agreement of the parties, unless otherwise provided by law or contract.
The parties' agreement on the amendment or termination of a business agreement made ​​in the same form as the contract.
The first and second part of Article 15 of the Act of Republic of Uzbekistan
"On the legal basis of economic entities"

Form of Agreement
According to first part of Article 384 of the Civil Code of Uzbekistan:
Agreement to change or cancellation of the contract is made in the same form as the contract, unless the law, the contract or business practices do not provide other regulations.
Certain agreements must be met in the mentioned agreement. It should be made in the same form as the original contract.
Если договор нотариально удостоверен или прошел государственную регистрацию, то и соглашение подлежит соответственно нотариальному удостоверению или государственной регистрации. 
If the contract was made in simple writing form, then the agreement of modification or termination of this contract should be in the in simple writing form. If the contract is notarized or registered by the state, then the agreement is subject to notarization or state registration respectively.
This rule is dispositive. It can be established by contract that the parties' agreement on the amendment or termination of the contract might be made in a form other than the treaty itself. Another form may also stem from the law, other legal acts or business practices .
Since the agreement is an ordinary transaction, the general requirements presented to it set out in Chapter 9 of the Civil Code of Uzbekistan.

2. Requirement for the modification or cancellation of the contract
Feature of unilateral modification or termination of the contract is the lack of consent of the counterparty. It is understood that if the latter does not object to the modification or termination of the contract proposed by party, it would have gone on other grounds: the agreement between the parties.
Unilateral termination of commitments and unilateral change of contract terms is not permitted, except as provided by law or contract(Article 237 of the Civil Code of the Republic of Uzbekistan).
In contrast to the modification and termination of the contract by mutual agreement, a unilateral change and termination is permitted only in cases expressly provided by the Civil Code of the Republic of Uzbekistan, other laws or contract.

Unilateral termination of the economic contract and a unilateral change in economic conditions of the contract is not permitted, except as provided by law or contract.
Part three of Article 15 of the Act
"On the legal basis of economic entities"

 

In cases where the possibility to change or cancel the contract is not provided by law or contract and the parties have not reached this agreement, the agreement may be amended or terminated at the request of one party only by court order and only in the cases provided by Article 382 of the Civil Code of the Republic of Uzbekistan .

In accordance with the second part of Article 382 of the Civil Code of the Republic of Uzbekistan:
At the request of one of the parties the contract may be modified or terminated by court order only:
1) due to the material breach of contract by the other party;
2) in other cases stipulated by the Civil Code of the Republic of Uzbekistan, other laws or contract.
It is considered as a violation of contract by one party, which causes the other party to such damage that it is largely deprived of what was entitled to expect under the contract.

 

At the request of one of the parties, the economic contract may be modified or terminated by the decision of the Economic Court only if the material breach by the other party of a business agreement or otherwise provided by law or contract.
It is considered as a violation of a business agreement of the parties, which causes the other party to such damage that it is largely deprived of what was entitled to expect when entering into a business agreement.
Fourth and fifth parts of Article 15 of the Act
"On the legal basis of economic entities"

 

In accordance with the second part of Article 384 of the Civil Code of the Republic of Uzbekistan: "Requirement for the modification or cancellation of the contract may be declared a party to the court only after receiving a refusal by the other side to the proposal to modify or terminate the contract or no response is received within the period specified in the offer or established by law or contract, and in his absence - in thirty days".

Established order of changes or cancellation of the contract is that: a party to a contract must first apply to the other party (the counterparty ) with an appropriate proposal. The other party is obliged to send a party that has made a proposal to amend or terminate the contract:

  • or notice of agreement with the proposal;
  • or notice of rejection of the proposal;
  • notice or consent to change the contract on different terms .

In the first case, the contract is considered to reflect the altered or terminated.
In the second case , and if no response within the period specified in the sentence prescribed by law or contract, and if they do not contain such a period - a 30 day period, the interested party may apply to the court for the modification or termination agreement, which will allow the dispute.
In the third case, the party making the proposal to amend the contract could accept the proposal of the counterparty. In this situation, the contract shall be deemed amended to the terms proposed by the counterparty. If the party making the proposal to amend the contract does not agree with a counter offer of the counterparty, it may apply to the court for an amendment of the contract. In this situation, the conditions that are subject to change will be determined by a court decision.

However, it should be borne in mind that it is impossible to cancel or change an executed contract. That is because according to article 341 of the Civil Code of the Republic of Uzbekistan, "the obligation ceases, as a rule, properly its execution". Since the contract is based on the commitment, then the termination obligations terminates the contract itself . Therefore, it is impossible to cancel or change what is at the time of modification or termination no longer exists. Thus, if the parties have entered into a contract of sale, and then executed this agreement (the seller has transferred the ownership of the goods, and the latter has paid his purchase price), then in the future they cannot come to an agreement on the amendment or termination of this contract.
CC of RU and other legal acts widely use along with the "change" and "termination" another term - "Refusal (unilateral refusal) to perform". In accordance with the Civil Code of the Republic of Uzbekistan (part four of Article 382), " in the case of a unilateral refusal to perform the contract in whole or in part, when such refusal is permitted by law or by agreement of the parties, the contract is considered to be terminated or modified accordingly". For example, article 396 of the CC of the RU provides that if by the contract of sale the seller refuses to hand over the goods sold to the buyer, the buyer has right to withdraw from the contract of sale.
In the first part of the CC of the RU some general provisions giving the party the right to unilateral refusal to perform the contract are provided. This right has the party against which the reciprocal obligation is not satisfied or the circumstances clearly indicate that it is not fulfilled within the prescribed period (Article 256 of the CC of the RU). In case of the default of the debtor creditor may also use it, if in connection with that execution got lost interest for him
In such situations side does not need the court's decision, it is sufficient to inform the other party of its desire to terminate or modify the contract, unless otherwise provided by law or contract (paragraph 25 of the Provision № 203 of the Plenum of the Supreme Economic Court of the Republic of Uzbekistan dated 18.12.2009 " On some issues of application of the rules of civil law governing the formation, change and termination of commercial contracts").

3. Substantialchangeofcircumstances
Article 383 of the CC of the RU contains provisions on the amendment and termination of the contract due to a substantial change of circumstances .
According to the second part of this article of the CC of the RU, "it is recognized as a substantial change in circumstances when they are changed so that if the parties could have foreseen, the contract would not have been concluded by them or would have been concluded on substantially different terms".
In such a situation it is not about the impossibility of performance of contractual obligations, but about the sufficient difficulty. The performance of the contract under such conditions is possible, but it would lead to so undesirable consequences for the side that lost the very meaning of entering into a contractual relationship to be mutually beneficial as a general rule.
Part three of Article 383 of the CC of the RU states that if the parties have not reached an agreement on the reduction of the contract in accordance with substantially changed circumstances or its termination, the contract may be terminated; and when termination of the agreement is contrary to the public interest or for the parties will cause damage significantly higher than the costs required to perform the contract to the changed conditions of the court, the contract can be changed by the contract at the request of an interested party in the presence of the following conditions:
1) at the moment of signing the contract the parties proceeded on the basis that such a change of circumstances will not happen;
2) change of circumstances caused by reasons that an interested party could not overcome after they occur with a degree of integrity and diligence, what was required of it by the nature of the contract and the terms of turnover;
3) the performance of the contract without changing its conditions would violate the corresponding contract value of property interests of the parties and would lead to the interested party such damage that it has largely lost to of what was entitled to at the signing of the contract;
4) from the business practices or substance of the contract it does not imply that the risk of a change in circumstances shall by to the interested party .
Balance of the property interests of the parties may be disturbed by any change in circumstances. However, only their significant change considered as grounds to modify or terminate the contract.
In termination of the contract due to the significantly changed circumstances, either party may request the court to determine the consequences of termination of the contract, based on the need for equitable distribution between the parties the costs incurred by them in connection with the performance of this contract.

4. Consequences of changes and termination of the contract
Article 385 of the CC of the RU establishes the following consequences of change and termination of the contract:

  • when the treaty obligations of the parties are preserved in a modified form;
  • when the contract obligations of the parties are terminated.

In accordance with the third paragraph of Article 385 of the CC of the RU:
In case of change or cancellation of the contract, obligations deemed to be modified or terminated from the moment of the agreement of the parties on the amendment or cancellation of the contract, unless otherwise follows from the nature of the agreement or contract amendments, and a change or cancellation of the contract in court - from the entry into force court decision on the amendment or cancellation of the contract .
If the change or cancellation of the contract was by mutual agreement of the parties, then based on its commitment would be modified or terminated by the parties after the decision of an agreement to amend or terminate the contract. This point should be determined taking into account the provisions of Article 365 of the CC of the RU, because such an agreement, in fact, is a kind of contract modification or termination. However, a different rule may be inferred from the nature of the content of the agreement or contract amendments.
While changing or termination of the contract in a court, based on its obligation, accordingly, is modified or terminated from the moment of the entry into force of the decision of court to amend or terminate the contract.
According to the fourth paragraph of Article 385 of the CC of the RU:
Parties are not entitled to demand the return of what was fulfilled by their obligation according to the date of change or termination of the contract, unless otherwise provided by law or by agreement of the parties.
This norm leads to the conclusion that there is the persistence of rights of parties that arose from them until the change or cancellation of the contract. This means that after the decision on the amendment or termination of the contract, the buyer is not obliged to return the sold item that he/she got to the seller. However, over the last retains the right to require the buyer to pay for that staff.
If the basis for amending or terminating the agreement is a material breach of contract by one party, the other party shall be entitled to claim compensation for damages caused by the change or cancellation of the contract.

 

 

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