Victoriia Varienikova analysed aspects of contractual liability

Extent of the other party's contractual liability will allow for determining who is in the right and runs the market. However, it is always a good practice to require that the counterparty assume reasonable and fair liability.

In Ukraine, there are two applicable legislative instruments – the Ukrainian Civil Code and the Ukrainian Commercial Code – that provide a basis for the regulation of matters in relation to liability for failure to perform an obligation.

They are different in their regulation of liability and, therefore, that difference always gives rise to additional issues. In the Commercial Code, for example, the legislature has provided straight for three penalties that can be applied to the defaulting party – forfeit, fine and penalty (Article 230(1) of the Code).  However, the Civil Code, in its Article 549(1), defines 'forfeit (fine or penalty) as an amount of money or other property the defaulting borrower is required to transfer to the creditor.' With the fine and penalty enclosed in parentheses, the legislature has determined that they constitute a type – a component – of the forfeit. It should be noted that the Commercial Code governs commercial relations, while the Civil Code applies to all civil relations (both property and non-property, personal relations). In the meantime, the Civil Code has a much wider scope of application compared to the Commercial Code, and, accordingly, the case law on that matter is different.

To learn more about what senior management and contractors will need, please read the entire article by Sofiya Law Firm Associated Partner Ms Victoriia Varienikova for FDK magazine, which article is entitled 'Liability for Contractual Failure: Commodities in the morning, and default interest in the evening.'

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