Penalties for failure to perform a contract

Breach or non-fulfillment of obligations under the contract, the terms of the contract by the counterparty. What to choose? Rejecting it or forcing the counterpart to execute it?

Everyone understands such a thing that the main basis of our life is a contract and it is always important to want and be able to negotiate.

The contract is the basis of any property, including economic, relations: whether it is the supply of goods or construction work, or equipment maintenance services.

In the west, there is even such a thing as a gentlemen’s agreement (or agreement). It is orally and not transferred to paper. It is believed that the words of a gentleman are sufficient and the failure to fulfill obligations under the contract is rare. Everyone values their reputation. We have adopted this, unfortunately, only under contracts concluded for small amounts.

So, the contract is concluded, and it is good when everything goes smoothly, and the parties each carry out their part of the contract. Then the fact that it is written, and how legally competently executed contract is often not important.

But quite often there are situations when the counterparty of the contract turns into an opponent from a partner: instead of fulfilling its obligations, it begins to tell all kinds of nonsense, disappear, and appearing for a long time to complain about life. The money has already been paid to him, but he is not in a hurry to execute it, and speaking directly, there is a simple non-performance of the contract. How to proceed? Abandon him and return the money, or force, now the opponent to the execution of his part? What responsibility for non-performance of obligations under the contract should he bear?

Consider this with a specific example.

Suppose you are a successful merchant and have decided to expand your production. Want to build additional workshops. Or workshops have already been built and are planning to build a new residential building for yourself.

And in fact, and in another version, you engage builders and enter into an agreement for the supply of building materials or furniture if the house is already built. For example, let it be a contract for the supply of bricks. The supplier begged for a big advance, citing the high manufacturing costs of making it.

You signed a contract, paid an advance of 70% of the value of the entire product, and waited for it to be brought. In the contract, the delivery date was set for example three months from the date of the advance payment.

And they did not wait. Since four months have passed, or even five, and the partially paid bricks have not been waited.

What to do? And here it all depends solely on the immediate needs. Now you need to answer one single question - is it needed already or not. After all, many months have passed.

Option 1. To build the basic structures of the building (house), walls and equip the roof needed to be done before the onset of winter. And taking into account the delay is not enough. Why now take it, those more in the winter with him no one will work. Then it will also need to be guarded. And it costs.

Either by anticipating such a sad situation, you bought a brick from another seller. But already more expensive, since he agreed to bring him two times faster than the first unfortunate entrepreneur.

Then you don’t need the first batch at all. Neither this year nor the next.

Is it possible if the supplier wakes up after a year, then you have to take the ordered goods from him and pay him the final payment?

It does not have to, because the law is on your side because the supplier has violated the deadlines for fulfilling obligations. There is a fact of delay in delivery.

Legislative thesis 1. The debtor is considered delayed if he did not start to fulfill the obligation, or did not fulfill it within the period established by the contract or the law.

In addition, the law states that if, as a result of the debtor’s delay, the performance of the obligation in kind has lost interest for you, as a creditor, you can refuse to accept the execution and demand compensation for damages.

In other words, if there is a fact of non-fulfillment of the contract and delay in delivery, and the need for it has already disappeared, you boldly have the right not to accept it (refuse to accept it).

This applies to any contractual obligation in general.

Legislative thesis 2. Applied specifically to the contract of sale. The law states that if the counterparty, having received the prepayment amount, did not transfer the goods within the prescribed period, then you have the right to request the transfer of the paid goods or refund of the prepayment amount.

That is, here is an alternative to your behavior. And the basis of this alternative is again the further need for the product, taking into account the fact of delay and violation of the supply contract.

What are your actions if you lose the need for delivery?

You need to write a claim to the supplier for violation of the delivery time in writing and notify him of the fact that there was a delay, the result of which is the absence of the need for the product. In the same letter, it is necessary to demand restoration of the property status quo:

Require an advance payment.

If you, as stated above, bought the same product, but are more expensive and faster from another supplier - demand to recover the difference in price.

If there is a loss to claim it.

Require payment of contractual penalties for late delivery.

If now the former partner rests and keeps silent, you must go to court to make you incur liability for failure to fulfill obligations under the contract, demanding to recover from it the penalties described above. In this case, the court will collect money in your favor, and in case of non-compliance with the court decision, you will apply for its enforcement.

Option 2. You still need a brick. You take a simple position: the contract was, the advance was, the brick must also be delivered. According to the principle: "Babylon must be destroyed."

So you can write your opponent a letter demanding to make a delivery immediately. And you can immediately file a lawsuit in court demanding that you be compelled to commit certain actions. Namely - to fulfill its contractual obligations to deliver to the address indicated.

This requirement can also be combined with the requirement to recover from the opponent the contractual penalties for late delivery.

And if you have losses, you can claim their compensation in court.

In addition, if you need a brick more than paying penalties and compensation for damages, you can use these amounts as a strategic bargaining item, hinting that you will refuse them (in some part) if delivery is expedited.

In this case, the court will force the counterparty to fulfill the contract and will oblige him to make the delivery, and in case of non-compliance with the court’s decision by the opponent, you will apply for its enforcement.

And another interesting point in the conclusion.

As can be seen from the above, both behaviors are combined not only by a certain unity of command (a single basis giving you the right to act both in option 1 and option 2, and in the single right to compensation for damages, if any, have been caused.

In most of these episodes, the damages are in the form of additional expenses incurred by you due to late delivery. For example, payment of idle time of a hired construction crew. But the team - well, upset and went to another object.

But if you hired construction equipment, it is also large-sized, which you just can not take away. Its downtime will have to be paid.

These are the costs and it is possible to present to your opponent for payment, as a loss. Preliminary, of course, having documented them.

You are faced with a failure to perform obligations under the contract, the counterparty or an unscrupulous seller? Do they violate the terms of payment or delivery? Do you wish to force them to fulfill their contractual obligations and collect penalties for non-performance of the contract or for violation of the deadlines for the performance of work?

Do you doubt your abilities? Come to us!

Our experts will help resolve the situation in your favor and provide support at all stages up to the trial and its subsequent execution!

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