RECOVERY OF FUNDS (DEBT) UNDER THE SUPPLY CONTRACT DURING MARIAL STATE

When hostilities began in Ukraine, for many people and businesses the issue of paying debts took a back seat. However, this does not diminish the importance of the mentioned topic. This especially applies to collaborations and interactions, where the factor of difficult circumstances is speculated by those whose business they either did not affect or affected minimally. So, let’s consider whether it is realistic to collect funds under the supply contract under martial law and what needs to be done for this.

Non-fulfilment by the party of financial obligations under the contract of delivery/provision of services

Non-payment for goods or services rendered should not be something usual or appropriate, even in such a difficult time. It is important to understand that this is a violation of current legislation, in particular part 1 of Art. 901 of the Civil Code. It clearly states that the executor is obliged to provide the service, and the customer is obliged to pay for it, unless otherwise stipulated in the contract.

It is also important to refer to Part 1 of Art. 652 of the same Code. It is stated there that a further change in the circumstances that were relevant at the time of the conclusion of the contract may be the reason for changing or terminating the contract under specific conditions. It is about changing or terminating the contract with the consent of the parties, except when otherwise follows from the essence of the obligation or is established by the contract. If it is explained in a more accessible way, it means that a change in circumstances should not become a reason for a unilateral refusal to fulfill one’s contractual obligations.

What does judicial practice say about this

When we turn to the practice of the Supreme Court of Ukraine, we see that it is on the side of those who demand payment for a service or product. Thus, the resolution dated November 30, 2021 in case No. 913/785/17 details the practice in similar cases where the defendant refers to force majeure as a reason for the impossibility of fulfilling obligations. In this resolution, it is noted that the defendant must prove not only the existence of the mentioned circumstances in themselves, but also that they were such for a specific case regarding the fulfillment of economic obligations.

Again, explaining this in a more understandable way, we can state the conclusion:

• martial law in itself is not a reason for exemption from the fulfillment of one’s contractual obligations;
• it is impossible to unilaterally refuse to fulfill obligations, because the Civil Code of Ukraine does not provide for such a right;
• if force majeure circumstances affected the fact that the counterparty cannot fulfill payment obligations under the contract of supply or provision of services, it must prove that the mentioned circumstances really had an impact on its situation;
• proper proof of this takes place in court, and not at the level of a verbal refusal to fulfill a voluntarily assumed contractual obligation.

Therefore, force majeure conditions caused by the state of war do not exempt from obligations under the contract of supply or provision of services. This means that a natural or legal person who has not received money for the goods or services provided can defend his right in court and has sufficient grounds to win the case.

How can we help?

Even in cases where there are sufficient grounds to protect the interests of the debt collector under the supply contract, sometimes the debt collector himself does not know how to protect his legal rights and interests. The defaulting counterparty cites martial law as the reason.

However, this absolutely does not mean that such circumstances should be manipulatively used by those who were practically unaffected by them in order to refuse to pay for the goods or services received.

So, how can the help of the lawyers of the “Prikhodko and Partners” law office be useful?

• First of all, we study your situation in detail in the context of current legal norms and look for mechanisms to solve it. You won’t have to compare pre-war and current legislation on your own or not know how to defend yourself in court.
• We provide all necessary services, starting with consulting and ending with legal support of the case until you get a positive result.

n the case of debt collection, this can be very important, given that success in such cases often depends on the client’s ability to obtain the necessary resources for further business activities.