Bases of the law of obligations of the Russian Federation. Now, we start breach of contract and consequences. First of all, what is necessary to say when we speak about breach of contract? Breach of contract, that means that you do not execute obligations properly or you do not execute obligations at all. Failure to perform at present, so you do not execute obligation. You had to supply materials, you did not supply materials. Performance in defective manner right away. You had to supply 100 boxes of carrier, you supplied 90 boxes of carrier. So you supplied in defective manner. Or breach prior to performance, which is quite interesting. For example, you have not breached yet obligation, for example, you have to execute obligations 1st of May, today is 1st of February. On the 1st of February, I understand that I cannot execute this obligation on the 1st of May. So I call my counter-agent and say that I cannot execute obligation on the 1st of May. That means I breached contract prior to performance. Now, what my counter-agent can do, my counter-agent can regard obligation as failed, which is a bit risky because maybe on the 1st of May, still I will execute obligation. Or my counter-agent can wait for the 1st of May that I do not execute obligation and regard failure to perform. So it is up to injured party how to regard to such obligation, as breached prior to performance or wait for actual breach. In case of breach, both parties has certain obligations and rights. First of all, if we speak about injured party, injured party has duty to mitigate loss. For example, I haven't supplied pens which cost 100 rubles each and you need a substitute. Substitute shall be closer to this price of 100 ruble. So you should not take advantage of the fact that I have not executed obligation and decide that, "Great, I will buy each pen for 1,000 rubles each and then I will call this real damages, and I will take all these real damages from my counter-agent." This does not work. You have a duty to mitigate. You should prove that you took all necessary steps to mitigate so to make loss smaller. The other party which has breached obligations must compensate the following. First of all, we speak about damages, real damages. When we speak about real damages, real damages means loss de facto, so actual loss; expenses to restore violated right or real damage to property. First of all, it is calculatable. This damage can be calculated basing on this particular agreement. Next, missed profit. When we speak about missed profit, it is not that I wanted to conclude a transaction which will bring me 15 billion jobs. It does not work. Missed profit is also something measurable. For example, I have an office space which is under fire because of tenant. So real damage means compensation, restoration of property, renovation, and missed profit means that I have a contract, and during this contract, I would have given these premises into rent unless this fire happened. So it is also calculated. If we speak about forfeit, forfeit as we know is legal or contract. Contract forfeit shall be payable only in case it is provided by the contract. But when we speak about legal forfeit, legal forfeit shall be paid even when it is not provided by the contract. Here we speak about monetary firms raising on the rate of the Bank of Russia. So according to the rate of the Bank of Russia, it is possible to claim forfeit as well, even if it is not provided by the contract. Next subject, we'll speak about changes or termination of contract, when contract can be terminated. There are four main cases of termination of the contract. Here we speak about agreement, discharge, breach, or cancellation. Discharge is the easiest. Proper execution of contract terminates the contract. Agreement, both parties agreed to terminate the contract. They can agree on a new condition, new payment conditions. They can novate obligations. When we speak about novation, novation means different object or different way of discharge. For example, an obligation on payment of the forfeit may be novated into a loan obligation. Another case of termination of contract by agreement, indemnity. For example, I cannot bring you two tables, but instead I make an indemnity, so I bring you four chairs. Remittance means excuse. Remittance is the same as donation. That is why when we speak about legal entities, remittance is limited to 3,000 rubles in the Russian Federation. Next case of termination of contract is breach. Breach of contract which terminates the contract. That means breach of essential condition of contract. For example, in case of contract of delivery, term of delivery is essential condition. Breach of term of delivery, delivery not on the 1st of May but on the 3rd of May will end the contract. In certain cases, partial performance terminates the contract. What is important that partial performance never executes the contract. Another case of termination of contract is cancellation. Cancellation, first of all, offset. When we speak about offset, decision of one party is enough. One party, party A and party B. For example, we have one contract under which B must pay to A one million ruble. There is another contract where A must pay to B 600,000 rubles. So A equals B, a letter, and here we have the following offset from B to A, 400,000 rubles. Like this. What is important? One party is enough. When we speak about obligation, obligation shall be similar and shall be calculatable in money. It is necessary that it is possible to transfer obligation into money. That is why offset is impossible for life maintenance, for recovery of alimony of for compensation of harm, life, and health because these obligations are linked to personnel, and when limitation period has expired. General limitation period in the Russian Federation, three years. Next case of termination of contract, coincidence of debtor and creditor, which sometimes happens when there are complicated obligations. Force major, act of state body, or death or liquidation also terminates obligation. When we speak about forced major, forced major is act of God. Act which you cannot prevent and you even cannot identify, like a strike, or flood, or earthquake. That is why it is not forced major when we speak about the following situations, when alternative methods of performance are possible or commodities are absent on market, or debtor does not have money. This does not work. When we speak about situations, act of state body, for example, withdrawing license by state authorities if you try to do de-crude oil, will stop your obligation. You cannot provide this activity any more. To terminate everything, it is death or liquidation. So if you want to have no problems, you just need to die and that will terminate all obligations. The same with legal entity, liquidation of legal entity terminate all obligation.
