CIVIL CODE

OF GEORGIA

CIVIL CODE OF GEORGIA BOOK ONE GENERAL PROVISIONS ................................................................................................ 2 PROVISION OF THE CIVIL CODE .................................................................................. 2 Introductory Provisions.................................................................................................. 2 Article 1. Concept. Sphere of Activity ............................................................................ 2 Article 2. Civil Legislation ............................................................................................. 2 Article 3. Entry into Force of the Civil Law.................................................................... 2 Article 4. Inadmissibility of Refusal from the Administration of Justice in Civil Proceedings ...................................................................................... 3 Article 5. Analogy of Law .............................................................................................. 3 Article 6. Retroactive Force of Civil Legislation Acts...................................................... 3 Article 7. Objects of Private Law ................................................................................... 3 Article 8. Subjects of Private Law.................................................................................. 3 Article 9. Objective of Civil Legislation .......................................................................... 4 Article 10. Independence of Civil Rights from Political Rights . Imperative Rules of Civil Legislation ........................................................................... 4 SECTION ONE PERSONS....................................................................................................................... 4 CHAPTER 1. NATURAL PERSONS................................................................................ 4 Article 11. Legal Capacity ............................................................................................. 4 Article 12. Capability..................................................................................................... 4 Article 13. Inadmissibility of Restriction of Capability under an Agreement................. 5 Article 14. Restricted Capability.................................................................................... 5 Article 15. Consent of the Representative during Restricted Capability ....................... 5 Article 16. Restriction of Capability as a Result of the Abuse of Alcoholic Beverages or Narcotic Substances. ................................................ 5 Article 17. Right to a Name............................................................................................ 6 Article 18. Personal Non-property Rights ...................................................................... 6 Article 19. Protection of Personal Rights after Death..................................................... 7 Article 20. Place of Residence........................................................................................ 7 Article 21. Declaring a Person to be Missing ................................................................. 7 Article 22. Declaring a Person to be Deceased .............................................................. 8 Article 23. Consequences of the Appearance of a Person Declared to be Deceased ..... 8 CHAPTER 2. LEGAL PERSON....................................................................................... 8 1. General Provisions .................................................................................................... 8 Article 24. Concept. Types............................................................................................. 8 Article 25. Legal Capacity of a Legal Person................................................................. 9 Article 26. Name of a Non-entrepreneurial (Non-commercial) Legal Person................... 9 Article 27. Seat of a Legal Person................................................................................ 10 Article 28. Branch of a Legal Person ........................................................................... 10 Article 29. Entrepreneurial (Commercial) Legal Persons ............................................. 10 Article 30. Non-entrepreneurial (Non-commercial) Legal Persons ................................ 10 II. General Rules on a Union and Fund....................................................................... 10 Article 31. Registration of a Union and Fund .............................................................. 10 Article 32. Charter of a Union and Fund ..................................................................... 11 Article 33. Registration Data ....................................................................................... 12 Article 34. Registration of Alterations.......................................................................... 12 Article 35. State Supervision over the Activity of a Union or Fund.............................. 12 Article 36. Management and Representation .............................................................. 12 Article 37. Competence of the Board in Relations with Third Parties.......................... 12 Article 38. Indemnification of Damage ........................................................................ 13 Article 39. Reorganization and Liquidation of a Union and Fund ............................... 13 III. Special Rules on a Union........................................................................................ 14 Article 40. Boards of Management .............................................................................. 14 Article 41. General Meeting of the Members of a Union .............................................. 14

Article 42. Commissions .............................................................................................. 14 Article 43. Advisory Bodies ......................................................................................... 15 Article 44. Union Membership ..................................................................................... 15 Article 45. A Non-registered Union .............................................................................. 15 IV. Special Rules on a Fund ........................................................................................ 16 Article 46. Fund for Destinataires ............................................................................... 16 Article 47. Fund Contribution Liability ........................................................................ 16 Article 48. Supervisory Body....................................................................................... 16 Article 49. Altering Fund’s Aim ................................................................................... 17 SECTION TWO TRANSACTIONS .......................................................................................................... 17 CHAPTER 1. GENERAL RULES ................................................................................... 17 Article 50. Concept ...................................................................................................... 17 Article 51.Validity of a Unilateral Will Expression ...................................................... 17 Article 52. Defining the Expression of the Will ........................................................... 17 Article 53. Non-existence of a Transaction for Non-definition of its Conten................. 18 Article 54. Illegal and Immoral Transactions.............................................................. 18 Article 55. Invalidity of a Transaction for the Abuse of Authority .............................. 18 Article 56. Fictitious and Sham Transactions.............................................................. 18 Article 57. Invalidity of a Transaction for Non-seriousness of the Expression of the Wil................................................................................................... l8 Article 58. Invalidity of a Transaction for Incapability or Mental Disorder.................. 19 Article 59. A Transaction Concluded Contrary to the Form ........................................ 19 Article 60. Conversion of a Transaction ...................................................................... 19 Article 61. Significance of Confirmation in Voidable Transactions.............................. 19 Article 62. Invalidity of a Part of a Transaction........................................................... 20 CHAPTER 2. CAPABILITY AS A TRANSACTION VALIDITY CONDITION...................... 20 Article 63. A transaction Concluded by a Minor.......................................................... 20 Article 64. Repudiation of a Transaction Concluded by a Minor ................................. 20 Article 65. Emancipation of a Minor ............................................................................ 20 Article 66. Invalidity of a Transaction Concluded without the Necessary Consent of the Representative.................................................................................... 21 Article 67. Necessity of a Consent Prior to the Capability Restriction ......................... 21 CHAPTER 3. FORM OF A TRANSACTION.................................................................... 21 Article 68. Significance of a Form for Validity of a Transaction .................................. 21 Article 69. Types of Forms........................................................................................... 21 Article 70. Transfer of Signature to Another Person .................................................... 21 Article 71. Conclusion of a Transaction with Drawing Up of Several Documents ....... 22 CHAPTER 4. VOIDABLE TRANSACTIONS................................................................... 22 I. Transactions Concluded under the Influence of Error.............................................. 22 Article 72. Concept ...................................................................................................... 22 Article 73. Types of an Essential Error........................................................................ 22 Article 74. Errors in Relation to the Identity of a Contracting Party ............................ 22 Article 75. Errors in Relation to Rights ........................................................................ 22 Article 76. An Error in Relation to the Motives of a Transaction.................................. 23 Article 77. Consent of a Contracting Party in Transactions Concluded under the Influence of Error ........................................................................................ 23 Article 78. Minor Errors ............................................................................................... 23 Article 79. Validity of Claiming.................................................................................... 23 Article 80. An Error Caused by an Agent .................................................................... 23 II. Transactions Concluded under Influence of Fraud ................................................. 23 Article 81. Concept ...................................................................................................... 23 Article 82. Invalidity of a Transaction under Influence of Fraud................................. 24 Article 83. Fraud by a Third Party .............................................................................. 24 Article 84. Deadline of a Claim.................................................................................... 24 III. Transactions Concluded under Influence of Force ................................................. 24

2

Article 85. Concept ...................................................................................................... 24 Article 86. Nature of Compulsion................................................................................. 24 Article 87. Compulsion against a Person's Relations .................................................. 25 Article 88. Compulsion through Legitimate Actions..................................................... 25 Article 89. Deadline of a Claim.................................................................................... 25 CHAPTER 5. CONDITIONAL TRANSACTIONS ............................................................. 25 Article 90. Concept ...................................................................................................... 25 Article 91. Invalidity of an Illegal or Immoral Condition .............................................. 25 Article 92. A Will-dependent Condition........................................................................ 25 Article 93. Positive Condition....................................................................................... 26 Article 94. Negative Condition ..................................................................................... 26 Article 95. Inadmissibility of Impact Prior to Occurrence of a Condition ..................... 26 Article 96. A Transaction on Condition of Postponement............................................. 26 Article 97. A Transaction on Condition of Cancellation ............................................... 26 Article 98. Significance of Good Faith Upon Occurrence of a Condition ...................... 27 CHAPTER 6. CONCEPT IN TRANSACTIONS................................................................ 27 Article 99. Concept ...................................................................................................... 27 Article 100. Preliminary Consent (Permit).................................................................... 27 Article 101. Subsequent Consent (Approval) ............................................................... 27 Article 102. Disposition of a Thing by an Unauthorized Person .................................. 27 CHAPTER 7 . Representation in Transaction .............................................................. 28 Article 103. Concept .................................................................................................... 28 Article 104. Addressee of Results of a Transaction in Representation ....................... 28 Article 105. Limited Legal Capacity of a Representative............................................. 28 Article 106. Will Expression Deficiency in Representation .......................................... 28 Article 107. Power of Attorney..................................................................................... 29 Article 108. Obligation of Notification in Altering a Power of Attorney ........................ 29 Article 109. Grounds for Termination of a Power of Attorney...................................... 29 Article 110. Obligation of a Representative in Terminating a Power of Attorney ........ 29 Article 111. Conclusion of a Transaction without a Power of Attorney ....................... 29 Article 112. Right to Repudiate an Agreement ............................................................ 30 Article 113. Obligation of a Representative in the Existence of the Power of Attorney Deficiency....................................................................................... 30 Article 114. Inadmissibility of Entering into a Transaction with Own Self.................. 30 SECTION THREE. EXECUTION OF RIGHTS ............................................................................................. 30 Article 115. Inadmissibility of Detrimental Exercise of a Right ................................... 30 Article 116. A Damage Incurred within the Necessary Rebuff .................................... 31 Article 117. A Damage Caused under Emergency ..................................................... 31 Article 118. Self-help ................................................................................................... 31 Article 119. Limits of Self-help..................................................................................... 31 Article 120. Liability of Indemnity ............................................................................... 32 SECTION FOUR. TIME PERIODS ................................................................................. 32 CHAPTER 1. CALCULATION OF TIME PERIODS........................................................ 32 Article 121. Area of Application of Rules for Calculation of Time Periods ................... 32 Article 122. Commencement of a Time Period Expressed as a Period of Time............ 32 Article 123. Completion of a Time Period..................................................................... 32 Article 124. Notions ..................................................................................................... 32 Article 125. Calculation of a Time Period in the Event of Its Extension....................... 33 Article 126. Calculation of a Time Period by Months................................................... 33 Article 127. Days off and Holidays ............................................................................. 33 CHAPTER 2. LIMITATION ............................................................................................ 33 Article 128. Concept. Types......................................................................................... 33 Article 129. A Period of Limitation for Contractual Claims .......................................... 33 Article 130. Commencement of a Limitation Period ..................................................... 34 Article 131. Origin of a Claim ..................................................................................... 34

3

Article 132. Suspension of the Running of the Limitation Period ................................ 34 Article 133. Suspension of the Running of the Limitation Period during Marriage...... 34 Article 134. Suspension of the Running of the Limitation Period upon Participation of an Incapable Person........................................................................... 34 Article 135. Time During which the Running of the Limitation Period is Suspended .. 35 Article 136. Moment of the Suspension of the Running of the Limitation Period ......... 35 Article 137. Interruption of the Running of the Limitation Period ................................ 35 Article 138. Interruption of the Running of the Limitation Period Where a Suit is Considered ...................................................................................................... 35 Article 139. Duration of the Suspension of the Running of the Limitation Period........ 35 Article 140. Running of the Limitation Period Where a Suit is Not Considered ........... 36 Article 141. Calculation of the Commencement of Running of the Limitation Period Anew ............................................................................................... 36 Article 142. Limitation Period of a Claim Confirmed by a Court Decision ................... 36 Article 143. The Limitation Period With Respect to Actions in Rem............................. 36 Article 144. Performance of an Obligation upon the Lapse of the Limitation Period.... 36 Article 145. Application of the Limitation Period to Additional Claims ........................ 37 Article 146. Invalidity of an Agreement to Alter Time Periods of a Limitation ............. 37 BOOK TWO RIGHT OF OWNERSHIP AND OTHER RIGHTS IN REM............................................... 38 SECTION 1. PROPERTY.............................................................................................. 38 Article 147. Concept .................................................................................................... 38 Article 148. Types of a Thing....................................................................................... 38 Article 149. Concept of an Immovable Thing ............................................................... 38 Article 150. Essential Constituent Part of a Thing ...................................................... 38 Article 151. Accessory ................................................................................................. 38 Article 152. Concept of a Non-Material Value.............................................................. 39 Article 153. Accessory and Limited Rights.................................................................. 39 Article 154. Fruits of a Thing and Right ..................................................................... 39 SECTION 2. HOLDING................................................................................................. 39 Article 155. Concept. Types......................................................................................... 39 Article 156. Termination of Holding............................................................................. 40 Article 157. Transfer of Holding to Successors............................................................ 40 Article 158. Presumption of Holding............................................................................ 40 Article 159. Bona Fide Holder ..................................................................................... 40 Article 160. Demand of the Bona Fide Holder for the Return of a Thing from Illegal Holding .......................................................................................... 40 Article 161. Demand of the Bona Fide Holder for the Elimination of Illegal Obstacles ...................................................................................................... 41 Article 162. Rights of the Bona Fide Holder ................................................................ 41 Article 163. Duties of the Unauthorized Bona Fide Holder ......................................... 41 Article 164. Duties of the Unfair Holder ...................................................................... 41 Article 165. Acquisition of the Right of Ownership on Movable Things through Limitation .......................................................................................... 42 Article 166. Assumption of Continuity of Holding a Thing .......................................... 42 Article 167. Acquisition of the Right of Ownership on an Immovable Thing through Limitation .................................................................................................................... 42 Article 168. Termination of the Right of Holding on the Basis of the Owner’s Claim .. 42 Article 169. Right of Fruit Refusal ............................................................................... 42 SECTION THREE. OWNERSHIP .................................................................................. 43 CHAPTER 1. CONTENT OF OWNERSHIP .................................................................... 43 Article 170. Concept. Content of the Right of Ownership ............................................ 43 Article 171. Right of Ownership to an Essential Constituent Part of a Thing.............. 43 Article 172. Demand for the Return of a Thing from Illegal Ownership and for the Elimination of Obstacles.............................................................................................. 43

4

Article 173. Common Ownership................................................................................. 43 CHAPTER 2. LAW OF NEIGHBOURING TENEMENTS................................................. 44 Article 174. Concept. Duty of Mutual Respect ............................................................. 44 Article 175. Duty of Forbearance of Neighbouring Influences ..................................... 44 Article 176. Inadmissible Encroachment..................................................................... 44 Article 177. Demand for Danger Elimination............................................................... 45 Article 178. Right of the Owner of a Neighbouring Plot to Fruits ................................. 45 Article 179. Money Compensation for the Obligation of Forbearance ......................... 45 Article 180. Necessary Road ....................................................................................... 45 Article 181. Obligation to Fix Boundaries.................................................................... 46 Article 182. Right to Use the Neighbouring Structure .................................................. 46 CHAPTER 3. ACQUISITION AND ALIENATION OF OWNERSHIP................................. 46 I. Acquisition of the Right of Ownership to Immovable Things .................................... 46 Article 183. Grounds for Acquisition of the Right of Ownership to an Immovable Thing ......................................................................................................... 46 Article 184. Alienation of the Right of Ownership to an Immovable Thing .................. 47 Article 185. Protection of the Acquirer’s Interests........................................................ 47 II. Acquisition of the Right of Ownership to Movable Things ....................................... 47 Article 186. Grounds for Acquisition of the Right of Ownership to a Movable Thing... 47 Article 187. Bona Fide Acquirer................................................................................... 47 Article 188. Conditional Ownership ............................................................................ 47 Article 189. Transfer of Ownership by Means of Securities ........................................ 48 Article 190. Acquisition of the right of Ownership to an Ownerless Thing ................. 48 Article 191. Find.......................................................................................................... 48 Article 192. Treasure................................................................................................... 49 Article 193. Acquisition of the Right of Ownership to the Essential Constituent Part of a Land Plot .................................................................................. 49 Article 194. Shared Ownership of a Thing Resulting from a Merger of Movable Things ....................................................................................................... 49 Article 195. Shared Ownership of a New Movable Thing Created by Reprocessing Materials ............................................................................................... 49 Article 196. Termination of Rights Upon Transfer of Ownership................................. 50 Article 197. Demand for Indemnification of Damage from the New Holder................. 50 III. Acquisition of the Right of Ownership to Rights and Claims................................. 50 Article 198. Concept. Content...................................................................................... 50 Article 199. Assignment of a Claim ............................................................................. 50 Article 200. Right of the Debtor in Assigning a Claim ................................................. 51 Article 201. Transfer of Defenses in Assigning a Demand.......................................... 51 Article 202. Order of Priority of Creditors .................................................................... 51 Article 203. Passing of a Debt ..................................................................................... 51 Article 204. Consent of the Creditor in Passing a Debt ............................................... 51 Article 205. Rights of a New Debtor ............................................................................ 51 Article 206. Termination of Defenses in Passing of A Debt ......................................... 52 Article 207. Assignment of a Claim on the Basis of a Law ......................................... 52 CHAPTER 4. RIGHT OF OWNERSHIP TO AN APARTMENT IN APARTMENT BUILDING I. General Provisions ................................................................................................... 52 Article 208. Concept .................................................................................................... 52 Article 209. Right of First Option to an Apartment ...................................................... 52 Article 210. Grounds for Acquiring an Apartment ....................................................... 53 Article 211. Object of the Individual Ownership.......................................................... 53 Article 212. Determination of a Share in the Common Property.................................. 53 Article 213. Inadmissibility of Alienation of the Individual Property without the Appropriate Share in the Common Property............................................. 53 Article 214. Apartment Ownership Registration in the Public Register ....................... 53 II. Relations Among Apartment Owners ...................................................................... 54 Article 215. Registration of Agreements in the Public Register.................................... 54

5

Article 216. Concept of Partnership of Dwelling Owners ............................................ 54 Article 217. Inadmissibility of a Demand for Dissolution of a Partnership of Dwelling Owners ................................................................................ 54 Article 218. Rights of Dwelling Owners....................................................................... 54 Article 219. Duties of Apartment Owners.................................................................... 55 Article 220. Right to Use the Common Property .......................................................... 55 Article 221. Determination of a Share Upon Dissolution of a Partnership................... 56 Article 222. Imposing an Apartment Alienation Obligation ......................................... 56 Article 223. Bodies of Management in a Partnership of Apartment Owners............... 56 Article 224. Common Property Management ............................................................... 56 Article 225. Joint Competence of Apartment Owners.................................................. 57 Article 226. Meeting of Apartment Owners ................................................................. 57 Article 227. Calling a Meeting of Apartment Owners .................................................. 57 Article 228. Competence of a Meeting ......................................................................... 58 Article 229. Rights and Duties of the Chairman of Partnership of Apartment Owners ..................................................................................................... 58 Article 230. Economic Plan .......................................................................................... 58 Article 231. Apartment Repair Obligations.................................................................. 59 Article 232. Advisory Council ..................................................................................... 59 CHAPTER 5. RESTRICTED ENJOYMENT OF PROPERTY BELONGING TO OTHERS .. 60 I. Right to Build............................................................................................................ 60 Article 233. Concept .................................................................................................... 60 Article 234. Grounds for Giving Rise to the Right to Build .......................................... 60 Article 235. Alienation of the Right to Build ................................................................ 60 Article 236. Compensation for the Right to Build ........................................................ 60 Article 237. Registration of the Right to Build ............................................................. 61 Article 238. Termination of the Right to Build ............................................................. 61 Article 239. Termination of the Payable Right to Build ............................................... 61 Article 240. Registration of a Compensation Claim in the Public Register .................. 61 Article 241. Succession in Title Upon Termination of the Right to Build...................... 61 II. Usufruct...................................................................................................................62 Article 242. Concept .................................................................................................... 62 Article 243. Legal Regulation of Usufruct Establishment ............................................ 62 Article 244. Types of Usufruct ..................................................................................... 62 Article 245. Rights and Duties of a Usufructuary ....................................................... 62 Article 246. Termination of Usufruct............................................................................ 63 III. Servitudes .............................................................................................................. 63 Article 247. Concept .................................................................................................... 63 Article 248. Terms of Servitude .................................................................................. 63 Article 249. Building Maintenance Obligation ............................................................. 63 Article 250. Consequences of the Division of a Land Plot ........................................... 64 Article 251. A Portion not Encumbered by a Servitude as a Result of Division........... 64 Article 252. Protection of the Authorized Person’s Right ............................................. 64 Article 253. Personal Servitude ................................................................................... 64 CHAPTER 6. PROPERTY AS THE MEANS OF SECURING PERFORMANCE OF OBLIGATIONS ............................................................................. 64 1. Pledge...................................................................................................................... 64 Article 254. Concept .................................................................................................... 64 Article 255. Procedure for Pledging Movable Things and Securities............................ 65 Article 256. Substitution.............................................................................................. 65 Article 257. Rights of a Bona Fide Pledgee ................................................................. 65 Article 258. Pledge Limits ............................................................................................ 65 Article 259. Rights of Third Persons............................................................................ 65 Article 260. Extension of a Pledge to Property Values Comprised by the Object of a Pledge............................................................................................ 66 Article 261. Pledge with the Transfer of Pledged Property .......................................... 66

6

Article 262. Right of the Pledgor Upon Registration of the Right of a Pledge.............. 66 Article 263. Subsequent Pledge................................................................................... 67 Article 264. Concluding Contract of Pledge ................................................................. 67 Article 265. Repeated Pledge of a Thing...................................................................... 67 Article 266. Protection of the Pledgee’s Rights ............................................................ 67 Article 267. Transfer of the Right of a Pledge to a New Creditor................................. 67 Article 268. Termination of a Pledge ........................................................................... 67 Article 269. Termination of a Pledge by Waiving the Right of a Pledge....................... 67 Article 270. Termination of a Pledge as a Result of Transfer of a Pledge to the Possession of the Pledgee .................................................................. 68 Article 271. Duties of the Pledgee Upon Termination of a Pledge................................ 68 Article 272. Satisfaction of the Pledgee ....................................................................... 68 Article 273. Invalidity of an Agreement on Direct Transfer of the Right of Ownership to the Pledgee .................................................................... 68 Article 274. Right to Realize Pledged Property ............................................................ 68 Article 275. Realization of a Repeatedly Pledged Thing.............................................. 68 Article 276. Transfer of the Object of a Pledge to a Person Entitled to Realization ..... 68 Article 277. Obligation of Expected Realization Notice............................................... 69 Article 278. Realization of Pledged Property at an Auction ......................................... 69 Article 279. Inadmissibility of Realization of Pledged Property at a Price Lower Than the Cost of Material................................................... 69 Article 280. Other Procedure for Realization ............................................................... 69 Article 281. Participation of the Pledgee and the Owner in an Auction....................... 69 Article 282. Cash Payment Obligation at an Auction .................................................. 69 Article 283. Consequences of the Fair Alienation of Pledged Property........................ 70 Article 284. Claim Realization Procedure .................................................................... 70 Article 285. Realization Revenue................................................................................. 70 II. Hypothecation ......................................................................................................... 70 Article 286. Concept .................................................................................................... 70 Article 287. General Hypothecation ............................................................................ 71 Article 288. Owner’s Hypothecation............................................................................ 71 Article 289. Registration of Hypothecation.................................................................. 71 Article 290. Repeated Encumbrance of an Immovable Things .................................... 71 Article 291. Right of the Owner not Being the Hypothecation- Secured Claim Personal Debtor ................................................................................... 71 Article 292. Right of the Owner Upon Satisfaction of the Creditor .............................. 72 Article 293. Extension of Hypothecation to Fruits of an Immovable Thing.................. 72 Article 294. Obligation of Maintenance of a Thing Secured by a Hypothecation ........ 72 Article 295. Assignment of a Hypothecation and a Claim Based on It to Another Person ................................................................................................ 73 Article 296. Obligation of a Debtor Before the New Creditor ....................................... 73 Article 297. Presumption of Accuracy of an Entry in the Public Register Upon Passing of a Hypothecation and a Claim to a New Creditor ............... 73 Article 298. Rights of a Third Person........................................................................... 73 Article 299. Refusal of a Creditor to Satisfy the Claim of Hypothecation.................... 74 Article 300. Demand for Realization of a Thing Secured by a Hypothecation............. 74 Article 301. Compulsory Sale at a Public Auction ....................................................... 74 Article 302. Other Forms of Realization of an Immovable Thing ................................. 74 Article 303. Rights of a Debtor to a Realized Dwelling Structure ................................ 75 Article 304. Averting a Public Sale .............................................................................. 75 Article 305. Participation of the Creditor, Debtor and Owner in a Public Sale ............ 75 Article 306. Repeated Holding of a Public Sale ........................................................... 75 Article 307. Termination of a Hypothecation as a Result of the Realization of a Thing.................................................................................................. 76 Article 308. Procedure for Distribution of Income from the Realization of a Thing ...... 76 Article 309. Joint Responsibility of the State for Inadequate

7

Holding of a Public Sale .............................................................................................. 76 Article 310. Compulsory Management (Sequester) of a Thing..................................... 77 SECTION FOUR ........................................................................................................... 77 PUBLIC REGISTER ...................................................................................................... 77 Article 311. Purpose of the Public Register.................................................................. 77 Article 312. Presumption of the Register Data Reliability and Completeness ............. 77 Article 313. Demand of a Consent for Correcting an Inaccurate Entry ....................... 78 Article 314. Order of Priority of Rights Recorded in the Register................................. 78 Article 315. Preliminary Entry in the Public Register .................................................. 78 BOOK THREE LAW OF OBLIGATION ................................................................................................. 80 GENERAL PART........................................................................................................... 80 General Provisions on Obligations............................................................................... 80 Article 316. Concept .................................................................................................... 80 Article 317. Grounds for Origin of an Obligation ......................................................... 80 Article 318. Obligation of Furnishing Information ....................................................... 80 SECTION 1. CONTRACT LAW...................................................................................... 81 PART ONE ................................................................................................................... 81 CHAPTER 1. GENERAL PROVISIONS.......................................................................... 81 Article 319. Freedom of Contract. Contract Conclusion Obligation ............................. 81 Article 320. Invalidity of Contract for Future Property ................................................ 81 Article 321. A Contract for the Transfer of Property .................................................... 81 Article 322. Invalidity of a Contract for Inheritable Property....................................... 81 Article 323. Procedure for Alteration of an Immovable Thing ...................................... 82 Article 324. Limits of a Contract for Encumbrance of a Thing..................................... 82 Article 325. Definition of Terms of an Obligation on a Fair Basis ............................... 82 Article 326. Application of the Rules of Contractual Obligations Towards Non-contractual Obligations ........................................................................ 82 CHAPTER 2. CONCLUSION OF A CONTRACT............................................................. 82 Article 327. Basic Provisions on Concluding a Contract.............................................. 82 Article 328. Form of a Contract ................................................................................... 83 Article 329. Making Offer ............................................................................................ 83 Article 330. An Offer Made to Present and Absent Persons ........................................ 83 Article 331. Acceptance ............................................................................................... 83 Article 332. Acceptance Received Late ....................................................................... 83 Article 333. New Offer ................................................................................................. 83 Article 334. Assumption of Offerer’s Consent ............................................................ 84 Article 335. Silence as a Form of Acceptance.............................................................. 84 Article 336. A Contract Concluded in Street ................................................................ 84 Article 337. Interpretation of Individual Expressions of a Contract ............................ 84 Article 338. Mutually Exclusive and Polysemantic Expressions ................................. 85 Article 339. Trade Customs and Traditions ................................................................ 85 Article 340. Definition of Mixed Transactions.............................................................. 85 Article 341. Acknowledgement of a Debt Existence .................................................... 85 CHAPTER 3. MODEL TERMS AND CONDITIONS OF A CONTRACT ............................ 85 Article 342. Concept .................................................................................................... 85 Article 343. Transformation of Model Terms and Conditions into a Integral Part of a Contract....................................................................................................................... 86 Article 344. Unusual Provisions of Model Terms and Conditions of a Contract .......... 86 Article 345. Interpretation of Ambiguous Text in Favour of the Other Party ............... 86 Article 346. Invalidity of Terms and Conditions Contrary to Principles of Confidence and Fairness......................................................................................... 86 Article 347. Invalidity of Model Terms and Conditions of a Contract.......................... 86 Article 348. Other Grounds for Invalidity of Model Terms and Conditions of a Contract............................................................................................. 87

8

CHAPTER 4. CONTRACT IN FAVOUR OF THIRD PERSONS........................................ 88 Article 349. Concept .................................................................................................... 88 Article 350. Interpretation of a Contract in Favour of Third Persons........................... 88 Article 351. A third Person’s Waiver of a Right Under a Contract............................... 89 CHAPTER 5. WITHDRAWAL FROM CONTRACT........................................................ 89 Article 352. Consequences of Repudiation of a Contract ............................................ 89 Article 353. Liability of a Debtor for Non-Receipt of Benefit for Violating Rules of Improper Use of a Thing ................................................................................ 89 Article 354. Performance of Obligations Arising as a Result of Withdrawal from a Contract........................................................................................ 90 Article 355. Liability of a Notice in Withdrawing from a Contract .............................. 90 Article 356. Term of Withdrawal from a Contract ....................................................... 90 Article 357. Withdrawal from a Contract by Several Persons ..................................... 90 Article 358. Inadmissibility of a Withdrawal from a Contract..................................... 90 Article 359. Creditor’s Repudiation of a Contract........................................................ 90 Article 360. A Mistake in Grounds of a Deal ............................................................... 91 SECTION 2. PERFORMANCE OF AN OBLIGATION..................................................... 91 CHAPTER 1. GENERAL PROVISIONS.......................................................................... 91 Article 361. Presumption of Existence of an Obligation............................................... 91 Article 362. Place of Performance of an Obligation...................................................... 91 Article 363. Changing a Place of Location of a Debtor or Creditor .............................. 91 Article 364. Premature Performance of an Obligation ................................................ 92 Article 365. Performance of an Obligation in Absence of a Time Period Fixed for its Performance ................................................................................................................ 92 Article 366. Inadmissibility of Claiming Premature Performance of an Obligation...... 92 Article 367. Right to Demand Immediate Performance of an Obligation ..................... 92 Article 368. Performance of an Obligation in the Case of a Conditional Deal ............ 92 Article 369. Renunciation of Performance of an Obligation ......................................... 92 Article 370. Consumer Credit ..................................................................................... 92 Article 371. Performance of a Obligation by a Third Person........................................ 93 Article 372. Satisfaction of a Creditor by a Third Person ............................................ 93 Article 373. Acceptance of Performance of an Obligation by an Authorized Person.... 93 Article 374. Alternative Obligations............................................................................. 93 Article 375. Selection of Obligations to Be Performed ................................................. 93 Article 376. Procedure for Choosing Alternative Obligations....................................... 94 Article 377. Choice of More Than Two Obligations to be Performed............................ 94 Article 378. Performance of an Obligations in Parts.................................................... 94 Article 379. Right of a Creditor to Accept Another Performance .................................. 94 Article 380. Quality of Performance of an Obligation .................................................. 94 Article 381. Performance of an Obligation in the Case of an Individually Specified Thing....................................................................................... 94 Article 382. Performance of an Obligation in the Case of a Generic Thing.................. 94 CHAPTER 2. PERFORMANCE OF A MONEY OBLIGATION ......................................... 95 Article 383. Concept .................................................................................................... 95 Article 384. Procedure for Assessing Annual Interest ................................................. 95 Article 385. Procedure for Withdrawing Money Paid Without an Obligation............... 95 Article 386. Place of Performance of a Money Obligation ............................................ 95 Article 387. Regular Succession of Meeting Money Obligations .................................. 95 Article 388. Priority of Cover of Court Expenses.......................................................... 96 Article 389. Payment of a Money Obligation in the Case of Alteration of a Monetary Unit;s Exchange Rate.............................................. 96 CHAPTER 3. DELAY BY A CREDITOR......................................................................... 96 Article 390. Concept .................................................................................................... 96 Article 391. Liability of a Creditor for Indemnification of Damage .............................. 96 Article 392. Liability of a Debtor Upon Delay by a Creditor ........................................ 96 Article 393. Consequences of Delay by a Creditor ...................................................... 96

9

SECTION 3. BREACH OF OBLIGATIONS..................................................................... 97 CHAPTER 1. GENERAL PROVISIONS.......................................................................... 97 Article 394. A Claim for Damages Upon Breach of Obligation .................................... 97 Article 395. Inadmissibility of a Preliminary Agreement on Release from the Liability for Damages .................................................................................... 97 Article 396. Liability of a Debtor for Action of His Representative .............................. 97 Article 397. Liability of a Debtor in Accepting the Object of Performance from Another Person............................................................................... 97 Article 398. Amendment of a Contract in Connection with Changed Circumstances.. 98 Article 399. Renouncement of Long-term Obligations.................................................. 98 CHAPTER 2. DELAY BY A DEBTOR ........................................................................... 99 Article 400. Concept .................................................................................................... 99 Article 401. Impossibility of Performing an Obligation ................................................ 99 Article 402. Liability of a Debtor.................................................................................. 99 Article 403. Inadmissibility of Interest-On-Interest Payment ...................................... 99 Article 404. Right of a Creditor to Compensation of Damage ...................................... 99 CHAPTER 3. BREACH OF AN OBLIGATION IN A BILATERAL CONTRACT................. 99 Article 405. Fixing an Additional Time Period for Breach of an Obligation ................. 99 Article 406. Right to Accept Counter-Performance.....................................................100 Article 407. Indemnification of Damage in Withdrawing from a Contract.................100 SECTION 4. LIABILITY TO COMPENSATE FOR DAMAGE .........................................101 Article 408. Liability to Restore the Original State ....................................................101 Article 409. Impossibility of the Original State Restoration.......................................101 Article 410. Inadmissibility of a Preliminary Refusal to a Claim for Compensation of Damage .....................................................................................................................101 Article 411. Compensation of Damage for the Unreceived Income............................101 Article 412. Damage to Which a Compensation Liability Applies.............................101 Article 413. Compensation of Damage for Non-property Damage .............................102 Article 414. Estimation of Damage............................................................................102 Article 415. Fault of a Victim in the Origin of Damage ..............................................102 SECTION 5. ADDITIONAL MEANS FOR SECURING A CLAIM ...................................102 Article 416. Types of Additional Means for Securing a Claim ...................................102 CHAPTER 1. PENALTY ..............................................................................................102 Article 417. Concept ..................................................................................................102 Article 418. Form of Determining a Penalty...............................................................102 Article 419. Inadmissibility of Simultaneous Claiming of Payment of a Penalty and Performance of an Obligation ....................................................................................103 Article 420. Decrease of a Penalty by a Court...........................................................103 CHAPTER 2. EARNEST..............................................................................................103 Article 421. Concept ..................................................................................................103 Article 422. Offsetting an Earnest .............................................................................103 Article 423. Offsetting an Earnest on Account of Compensation of Damage.............103 CHAPTER 3. DEBTOR’S GUARANTEE ......................................................................103 Article 424. Concept ..................................................................................................103 Article 425. Validity of a Guarantee..........................................................................104 Article 426. Form of a Guarantee ..............................................................................104 SECTION SIX. ............................................................................................................104 TERMINATION OF OBLIGATIONS.............................................................................104 CHAPTER 1. TERMINATION OF AN OBLIGATION BY PERFORMANCE ....................104 Article 427. Termination of an Obligation by Performance in Favour of a Creditor...104 Article 428. Termination of an Obligation by Novation.............................................104 Article 429. Acceptance of Performance of an Obligation ..........................................104 Article 430. Requisites of Performance Acceptance Documents ................................104 Article 431. Right to Claim a Document of Debt ........................................................105 Article 432. Compensation of Expenses in Connection with the Issue of Documents of Acceptance ................................................................................................................105

10

Article 433. Refusal of Performance for Non-performance of Obligations by a Creditor ..........................................................................................105 CHAPTER 2. TERMINATION OF AN OBLIGATION BY A DEPOSIT ............................105 Article 434. Concept ..................................................................................................105 Article 435. Transfer of Deposited Property to a Creditor ........................................105 Article 436. Depositable Things.................................................................................106 Article 437. Place of Keeping.....................................................................................106 Article 438. Claim of Acceptance of a Thing from a Creditor.....................................106 Article 439. Compensation of Expenses in Connection with Keeping .......................106 Article 440. Recall of a Kept Thing by a Debtor.........................................................106 Article 441. Period of Keeping of the Object of Performance......................................106 CHAPTER 3. TERMINATION OF AN OBLIGATION BY SET-OFF OF COUNTERCLAIMS Article 442. Possibility of Set-off of Obligations.........................................................106 Article 443. Possibility of Set-off in the Case of Limitation........................................107 Article 444. Claims to be Set-Off ...............................................................................107 Article 445. Several Claims to be Set-off ...................................................................107 Article 446. Set-off of Obligations in the Case of Different Places of Performance ....107 Article 447. Instances of the Inadmissibility of Set-Off .............................................107 CHAPTER 4. TERMINATION OF AN OBLIGATION BY FORGIVENESS OF A DEBT ...108 Article 448. Concept ..................................................................................................108 Article 449. Consequences of the Forgiveness of a Debt for Other Joint Debtors......108 Article 450. Consequences of the Forgiveness of a Debt for the Principal Debtor .....108 Article 451. Consequences of the Waiving of a Claim in Bilateral Contracts ...........108 CHAPTER 5. OTHER GROUNDS FOR TERMINATION OF AN OBLIGATION ..............108 Article 452. Termination of an Obligation Where the Debtor and the Creditor Are One Person............................................................................................108 Article 453. Termination of an Obligation by the Death of a Person .........................108 Article 454. Termination of an Obligation by the Liquidation of a Legal Person .......109 SECTION 7. PLURALITY OF CREDITORS OR DEBTORS IN AN OBLIGATION ..............................109 CHAPTER 1. JOINT AND SEVERAL CREDITORS ......................................................109 Article 455. Joint and Several Authority ...................................................................109 Article 456. Ground for Origin of Joint and Several Authority...................................109 Article 457. Performance of an Obligation in Favour of Any Creditor........................109 Article 458. Performance of an Obligation to One of the Creditors ...........................109 Article 459. Consequences of a Waive by One of the Joint and Several Creditors ...109 Article 460. Inadmissibility of the Application of Facts Associated With Another Creditor................................................................................................110 Article 461. Rights of Heirs of a Joint and Several Creditor......................................110 Article 462. Liability of a Joint and Several Creditor Before the Rest of Joint and Several Creditors...................................................................................110 CHAPTER 2. JOINT AND SEVERAL DEBTORS..........................................................110 Article 463. A Joint and Several Obligation...............................................................110 Article 464. Ground for Origin of a Joint and Several Obligation ..............................110 Article 465. Right of a Creditor to Demand Performance From Any Debtor..............110 Article 466. Defense of a Joint and Several Debtor Against a Creditor...................111 Article 467. Consequences of Performance of an Obligation in Full by One of the Debtor ......................................................................................................111 Article 468. Inadmissibility of the Application of Facts Associated With Another Joint and Several Debtor ............................................................................111 Article 469. Claims Against One of the Joint and Several Debtors ...........................111 Article 470. Consequences of a Delay in Accepting Performance.............................111 Article 471. Rights of Heirs of a Joint and Several Debtor ........................................111 Article 472. Consolidation of a Creditor’s Claim With a Debt of One of the Joint and Several Debtors .........................................................................................112 Article 473. Right of Recourse in Performing a Joint and Several Duty

11

by One Debtor ..........................................................................................................112 Article 474. Consequences of a Joint and Several Debtors Insolvency .....................112 Article 475. Compensation of a Joint and Several Debtor.........................................112 Article 476. Consequences of the Period of Limitation Expiry ...................................112 SPECIAL PART. SECTION 1. CONTRACT LAW....................................................................................112 PART 2......................................................................................................................112. CHAPTER 1. PURCHASE AND SALE. EXCHANGE....................................................112 1.General Provisions .................................................................................................112 Article 477. Concept. Essence ...................................................................................112 Article 478. Selling Expenses of a Movable Thing.....................................................113 Article 479. Selling Expenses of an Immovable Thing...............................................113 Article 480. Duties of a Seller in Shipping Goods......................................................113 Article 481. Duties of a Land Plot Seller ....................................................................113 Article 482. Passing of the Risk of Accidental Loss of Goods....................................114 Article 483. Assumption of Acceptance of Goods ......................................................114 Article 484. Grounds for Repudiating a Contract ......................................................114 Article 485. Sale of Goods to Several Persons...........................................................114 Article 486. Delivery of Sold Goods by Installments .................................................114 Article 487. Obligation to Deliver a Faultless Good...................................................114 Article 488. Materially Faultless Goods ....................................................................115 Article 489. Legally Faultless Things ........................................................................115 Article 490. Duties of the Seller During Sale of a Faulty Thing .................................115 Article 491. Right of a Buyer to Repudiate a Contract .............................................115 Article 492. Price Decrease Claim .............................................................................115 Article 493. Non-acceptance of Goods .......................................................................116 Article 494. Procedure for Indemnification of Damage Resulting from Purchase and Sale ....................................................................................................116 Article 495. Acceptance a Faulty Thing by the Buyer ...............................................116 Article 496. Life of a Thing ........................................................................................116 Article 497. Seller’s Responsibility Release ..............................................................116 Article 498. Passing of Right or Other Property.........................................................117 Article 499. Repeated Sale of a Thing .......................................................................117 Article 500. Lien on a Thing ......................................................................................117 Article 501. Return of a Thing by the Buyer..............................................................117 Article 502. Storage Expenses...................................................................................117 Article 503. Right of a Thing Keeper..........................................................................117 Article 504. Peculiarities of a Perishable Thing Storage ...........................................118 II. HIRE-PURCHASE SALE.........................................................................................118 Article 505. Concept ..................................................................................................118 Article 506. Form of a Hire-Purchase Agreement ......................................................118 Article 507. Presumption of Making a Contract as of the Date of Delivery of a Thing ....................................................................................................118 Article 508. Bilateral Restitution in Non-Performing an Obligation ...........................118 III. REDEMPTION.......................................................................................................119 Article 509. Concept ..................................................................................................119 Article 510. Redemption Price ...................................................................................119 Article 511. Accessories in Purchase and Sale..........................................................119 Article 512. Indemnification of Damage Incurred Before Redemption.......................119 Article 513. Invalidity of Alienation of a Thing Before Redemption...........................119 Article 514. Limitation of the Right of Redemption ....................................................119 Article 515. Option.....................................................................................................119 IV. RIGHT OF FIRST REFUSAL..................................................................................120 Article 516. Concept ..................................................................................................120 Article 517. Obligation to Notify About the Possible Sale of a Thing ......................120 Article 518. Invalidity of an Agreement on the Non-Exercise of the

12

Right of First Refusal.................................................................................................120 Article 519. Performance of an Additional Liability...................................................120 Article 520. Purchase and Sale Subject to Approval of Goods ..................................121 V. EXCHANGE...........................................................................................................121 Article 521. Concept ..................................................................................................121 Article 522. Unequal Value of Exchangeable Property ..............................................121 Article 523. Rules Applicable to Exchange ................................................................121 CHAPTER 2. DONATION............................................................................................121 Article 524. Concept ..................................................................................................121 Article 525. Making a Donation Agreement. Promise of a Gift .................................121 Article 526 Inadmissibility of Donation. ...................................................................122 Article 527. Defect of Doneted Property.....................................................................122 Article 528. Common Weal ........................................................................................122 Article 529. Revocation of Donation Because of Unconscientiousness of the Donee.122 Article 530. Withdrawal of a Donated Thing.............................................................122 CHAPTER 3. TENANCY .............................................................................................122 Article 531. Concept ..................................................................................................122 Article 532. Transfer of a Tenement in Proper Condition ..........................................123 Article 533. Obligation of a Faultless Thing Transfer................................................123 Article 534. A Legally Faultless Thing.......................................................................123 Article 535. Materially Faultless Thing .....................................................................123 Article 536. Reduction of Rental Because of a Thing’s Fault ....................................123 Article 537. Indemnification of Damage Resulting From a Faulty Thing ...................123 Article 538. Consequences of Non-claiming a Faulty Thing ......................................124 Article 539. Invalidity of an Agreement With Regard to Release from Responsibility...........................................................................................................124 Article 540. Impact Forbearance Obligation Upon Tenancy of a Lodging..................124 Article 541. Right to Renounce a Contract.................................................................124 Article 542. Termination of a Contract of Tenancy of a Lodging by the Tenant ........124 Article 543. Duties of the Tenant Upon Finding of a Faulty Tenanted Thing ............125 Article 544. Fate of the Legal Burden Existing on a Thing ........................................125 Article 545. Obligation of the Lessor .........................................................................125 Article 546. Right of the Tenant to Things Added to the Tenement...........................125 Article 547. Responsibility for Normal Wear of a Thing.............................................125 Article 548. Routine Repair Costs..............................................................................125 Article 549. Lessor’s Consent to a Subtenancy.........................................................126 Article 550. Inadmissibility of the Lessor’s Refusal to Subtenancy ..........................126 Article 551. Fate of Subtenancy Upon Completion of Tenancy Relations..................126 Article 552. Extent of Tenancy Relations Security ....................................................126 Article 553. Procedure for Paying Rental...................................................................126 Article 554. Consequences of Nonpayment of Rental Through the Tenant’s Fault ...127 Article 555. Contract Termination Before Due on the Lodging Tenant’s Initiative.....127 Article 556. Tenant’s Counter Demands Against the Lessor.....................................127 Article 557. Termination of a Contract on the Lessor’s Initiative...............................127 Article 558. Termination of a Contract as a Result of Nonpayment of Rental ...........127 Article 559. Termination of Tenancy Relations Upon Expiry .....................................127 Article 560. Right to Demand the Prolongation of a Contract of Tenancy for Indefinite Time......................................................................................128 Article 561. Contract Termination Term ...................................................................128 Article 562. Termination of a Contract of Lodging Tenancy in Existence of Essential Causes .................................................................................128 Article 563. Form of a Contract Termination .............................................................128 Article 564. Duties of a Tenant Upon Termination of a Contract of Tenancy ............128 Article 565. Inadmissibility of the Right of Retention ................................................129 Article 566. Transfer of Tenancy to Third Person......................................................129 Article 567. Indemnification of Damage Caused by Non-return of a Tenanted Thing129

13

Article 568. Right of Pledge on the Tenant’s Thing....................................................129 Article 569. Form of a Contract of a Land Plot Tenancy............................................129 Article 570. Procedure for Revocation of a Contract Concluded for More than Ten Years............................................................................................129 Article 571. Transfer of Rights of a Tenant to Members of His Family......................130 Article 572. Substitution of Rights Upon Alienation of a Tenanted Thing130 Article 573. Limitation of Indemnification of Damage ...............................................130 Article 574. Dispute Between Spouses Upon Divorce................................................130 Article 575. Protection of the Tenant’s Rights............................................................130 CHAPTER 4. LEASING...............................................................................................130 Article 576. Concept. Content....................................................................................130 Article 577. Form of a Leasing Contract ....................................................................131 Article 578. Responsibility of the Lessor ...................................................................131 Article 579. Responsibility of the Lessee...................................................................131 Article 580. Other Rules Applied to Leasing..............................................................131 CHAPTER 5. RENTING ..............................................................................................132 Article 581. Concept ..................................................................................................132 Article 582. Revocation of a Renting Contract Concluded for More than Ten Years..132 Article 583. Renting of Land with Inventory..............................................................132 Article 584. Risk of Accidental Loss of Inventory ......................................................132 Article 585. Inadmissibility of Prohibition of Disposal of Individual Parts of Inventory ......................................................................................................133 Article 586. Right of Pledge on Inventory ..................................................................133 Article 587. Subrental................................................................................................133 Article 588. Return of Rented Property Before Time..................................................133 Article 589. Revocation of a Rental Contract of Unlimited Duration..........................134 Article 590. Termination of a Contract in the Case of the Lessee’s Decease ...........134 Article 591. Indemnification of Damage Upon Non-return of Property.......................134 CHAPTER 6. LEASE OF AGRICULTURAL LAND........................................................134 Article 592. Concept ..................................................................................................134 Article 593. Form of Agreement.................................................................................134 Article 594. List of Leased Property ..........................................................................135 Article 595. Condition of Leased Property. Its Repair ..............................................135 Article 596. Right of Pledge on Fruit..........................................................................135 Article 597. Demand to Reduce Rental......................................................................135 Article 598. Obligation to Compensate for Necessary Expenses...............................135 Article 599. Compensation for Expenses Made by the Lessor’s Consent..................135 Article 600. Compensation for Non-harvested Yield..................................................136 Article 601. Obligation of the Lessee Before the New Lessee....................................136 Article 602. Obligation to Return the Leased Property ..............................................136 Article 603. Rights of a Lessee Individual Parts of Property ....................................136 Article 604. Demand to Continue Lease Relations ....................................................136 Article 605. Termination of Lease Relations Because of Expiry ................................137 Article 606. Termination of Lease Relations in the Case of An Agreement of Unlimited Duration ....................................................................................................................137 CHAPTER 7. FRANCHISING......................................................................................137 Article 607. Concept ..................................................................................................137 Article 608. Obligations of a Franchiser ...................................................................137 Article 609. Obligations of a Franchisee ...................................................................138 Article 610. Obligation to Keep Received Information ...............................................138 Article 611. Form of Agreement.................................................................................138 Article 612. Duration of Agreement ...........................................................................138 Article 613. Bona Fide Competition...........................................................................138 Article 614. Obligation of the Franchiser...................................................................139 CHAPTER 8. LEND (FREE USE).................................................................................139 Article 615. Concept ..................................................................................................139

14

Article 616. Obligation of Lender...............................................................................139 Article 617. Obligation to Indemnify Damage in the Case of Concealment of a Thing’s Fault................................................................................139 Article 618. Purposeful Use of a Lent Thing ..............................................................139 Article 619. Obligation to Bear Usual Costs ..............................................................139 Article 620. Wear and Tear of a Lent Thing ..............................................................140 Article 621. Obligation to Return a Lent Thing .........................................................140 Article 622. Effects of the Death of the Lend-Recipient .............................................140 CHAPTER 9. LOAN ....................................................................................................140 Article 623. Concept ..................................................................................................140 Article 624. Form of a Loan Agreement .....................................................................140 Article 625. Loan Interest ..........................................................................................140 Article 626. Termination of an Agreement and Return of a Debt ..............................141 Article 627. Right of Immediate Debt Payment..........................................................141 Article 628. Loan Promise.........................................................................................141 CHAPTER 10. CONTRACT.........................................................................................141 Article 629. Concept ..................................................................................................141 Article 630. Agreement on Compensation .................................................................142 Article 631. Effects of Exceeding a Rough Estimate..................................................142 Article 632. Obligation of Personal Performance of Work..........................................142 Article 633. Obligation of the Customer to Indemnify Damage .................................142 Article 634. Right of Pledge on a Movable Thing .......................................................142 Article 635. Right of Hypothecation on a Land Plot Under Construction...................143 Article 636. Termination of Agreement ......................................................................143 Article 637. Termination of Agreement on Contractor’s Initiative ..............................143 Article 638. Right to Claim a Portion of Remuneration ..............................................143 Article 639. Obligation to Present a Faultless Thing .................................................143 Article 640. A Legally Faultless Product....................................................................143 Article 641. A Materially Faultless Product ...............................................................143 Article 642. Demand for Additional Performance ......................................................144 Article 643. Elimination of a Product’s Fault by the Customer..................................144 Article 644. Repudiation of Agreement Because of a Product’s Fault .......................144 Article 645. Remuneration Reduction Because of a Product’s Fault .........................144 Article 646. Performance of Work With the Contractor’s Materials ...........................144 Article 647. Obligation to Warn .................................................................................145 Article 648. Remuneration of Performed Work ..........................................................145 Article 649. Acceptance of Work................................................................................145 Article 650. Responsibility of the Contractor for Loss of the Customer’s Property ....145 Article 651. Contractor’s Risk....................................................................................146 Article 652. Effects of Accepting a Faulty Product.....................................................146 Article 653. Guarantee Period ...................................................................................146 Article 654. Effects of Intentional Concealment of a Fault by the Contractor............146 Article 655. Period of Limitation ................................................................................146 Article 656. Reading of the Period of Limitation in Accepting the Work by Installments ..........................................................................................146 CHAPTER 11. TOURIST SERVICE ............................................................................147 Article 657. Concept ..................................................................................................147 Article 658. Third Person in Travel............................................................................147 Article 659. Shortcomings on Travel..........................................................................147 Article 660. Discount for Shortcomings in Travel.......................................................147 Article 661. Termination of Contract for Shortcomings on the Tourist’s Initiative ..148 Article 662. Compensation for Loss Caused by Shortcomings of Travel ..................148 Article 663. Limitation under the Contract on Travel (Voucher).................................148 Article 664. Limited Liability .....................................................................................149 Article 665. Renunciation of Contract Before Beginning of Travel.............................149 Article 666. Force Majeure.........................................................................................149

15

Article 667. Inadmissibility of Agreements to the Prejudice of a Traveler .................149 CHAPTER 12. TRANSPORTATION.............................................................................149 1. Shipment Contract.................................................................................................149 Article 668. Concept ..................................................................................................149 Article 669. Carrier’s Responsibility .........................................................................150 Article 670. Obligation of Contract ...........................................................................150 Article 671. Transportation by Different Transport Means........................................150 Article 672. Shipment Contract Form .......................................................................150 Article 673. Rule of Making Waybill ..........................................................................150 Article 674. Waybill Essential Elements ...................................................................150 Article 675. Consignor’s Responsibility.....................................................................151 Article 676. Carrier’s Obligation for Acceptance of Goods.........................................152 Article 677. Presumption of Entering into the Shipment Contract. ...........................152 Article 678. Consignor’s Responsibility for Damage Occurred for Defective Packing of Goods .......................................................................................152 Article 679. Consignor’s Obligation to Provide Necessary Information .....................152 Article 680. Consignor’s Rights .................................................................................153 Article 681. Consignee’s Rights within Consignment................................................154 Article 682. Failure in Execution of Contract ............................................................154 Article 683. Circumstances Hindering Consignment of Goods..................................154 Article 684. Right on Indemnification under Consignor’s Instructions ......................154 Article 685. Lien on Goods ........................................................................................155 II. Carrier’s Responsibility.........................................................................................155 Article 686. Concept. Subject.....................................................................................155 Article 687. Onus of Proof..........................................................................................156 Article 688. Delay in Delivery Term...........................................................................156 Article 689. Resumption of Loss of Goods.................................................................157 Article 690. Right on Extra Charge Claim .................................................................157 Article 691. Order of Delivery of Dangerous Goods...................................................157 Article 692. Value of Goods in Case of Total or Partial Loss .....................................158 Article 693. Compensation for Damage of Goods......................................................158 Article 694. Indicating Particular Interest in Waybill.................................................158 Article 695. Claiming Interest for Provided Compensation of Damage.....................159 Article 696. Non-contractual Claims within Transportation ......................................159 Article 697. Inadmissibility of Carrier’s Relief...........................................................159 III. Claim....................................................................................................................159 Article 698. Concept. Subject.....................................................................................159 Article 699. Limitation of Rights Regarding Transportation ......................................160 Article 700. Termination of Limitation .......................................................................160 IV. Transportation by Consecutive Carriers ..............................................................160 Article 701. Responsibility in Case of Consecutive Carriers .....................................160 Article 702. Obligation on Transfer of Appropriate Documents .................................161 Article 703. Claim on Compensation from Consecutive Carriers...............................161 Article 704. Right on Recourse in Compensation of Loss ..........................................161 Article 705. Consequences of Insolvency of a Carrier ...............................................161 Article 706. Litigation on the Exercised Right of Recourse ........................................161 Article 707. Agreement among Consecutive Carriers ................................................162 Article 708. Invalidity of Agreements Contradicting the Law....................................162 CHAPTER 13. COMMISSION ...................................................................................162 Article 709. Concept ..................................................................................................162 Article 710. Consideration for Commission ...............................................................162 Article 711. Transferring Commission to a Third Person...........................................162 Article 712. Digression from Principal’s Instructions.................................................162 Article 713. Obligation to Provide Information...........................................................163 Article 714. Obligation to Preserve Secrecy ...............................................................163 Article 715. Obligation to Return Objects Passed for Performance of Commission ...163

16

Article 716. Principal’s Property Presumption ...........................................................163 Article 717. Obligation on Reimbursement of Costs ..................................................164 Article 718. Compensation for Loss without a Fault ................................................164 Article 719. Compensation for Loss Occurred through Fault.....................................164 Article 720. Termination of Agency Contract.............................................................164 Article 721. Consequences of Principal’s Death ........................................................165 Article 722. Consequences of Agent’s Death.............................................................165 Article 723. Commission Contract .............................................................................165 CHAPTER 14. TRUST ...............................................................................................165 Article 724. Concept ..................................................................................................165 Article 725. Rights and Duties of Trustee..................................................................165 Article 726. Compensation of Trustee’s Costs...........................................................166 Article 727. Kind of Trust Contract............................................................................166 Article 728. Attorney’s Responsibility .......................................................................166 Article 729. Applying Provisions of Agency’s Contract..............................................166 CHAPTER 15. DISPATCH .........................................................................................166 Article 730. Concept ..................................................................................................166 Article 731. Demanding Good Faith from a Forwarding Agent ................................166 Article 732. Customer’s Duties..................................................................................166 Article 733. Examination of Goods by Pieces ............................................................167 Article 734. Goods Insurance Obligation...................................................................167 Article 735. Dispatch Insurance Contract..................................................................167 Article 736. Obligation on Timely Notice of Damage..................................................167 Article 737. Consequences of Non-Acceptance of Goods..........................................168 Article 738. Impossibility of Examination of State of Goods on Their Delivery..........168 Article 739. Right to Carry Goods by Own Means ....................................................168 Article 740. Forwarding Agent’s Responsibility ........................................................168 Article 741. Damage Caused by Third Person ..........................................................168 Article 742. Compensation for Loss Caused by Forwarding Agent’s Fault...............169 Article 743. Order of Paying Commission..................................................................169 CHAPTER 16. INTERMEDIARY................................................................................169 I. General Provisions .................................................................................................169 Article 744. Concept ..................................................................................................169 Article 745. Consideration of Services Rendered by a Broker...................................169 Article 746. Exclusive Commission............................................................................169 Article 747. Termination of Intermediary Contract ....................................................170 Article 748. Inadmissibility of Paying Consideration to Broker.................................170 II. Intermediary in Rent .............................................................................................171 Article 749. Rent Broker ............................................................................................171 Article 750. Inadmissibility of Consideration ............................................................171 III. Intermediary in Loans..........................................................................................171 Article 751. Loan Broker............................................................................................171 Article 752. Form of Contract ....................................................................................171 Article 753. Obligation of Consideration....................................................................172 Article 754. Trade Agent............................................................................................172 CHAPTER 17. ANNOUNCING AWARD. COMPETITION.............................................172 Article 755. Concept ..................................................................................................172 Article 756. Cancellation of Announcing Award........................................................172 Article 757. Performing Act by Some Persons............................................................172 Article 758. Establishing Award ...............................................................................172 Article 759. Inadmissibility of Making Amendments in Competition Terms..............173 Article 760. Making Decision on Competition Winners..............................................173 Article 761. Several Winners .....................................................................................173 Article 762. Procedure of Return of Works Presented at Competition .......................173 CHAPTER 18. DEPOSIT............................................................................................173 Article 763. Concept ..................................................................................................173

17

Article 764. Deposit Fee ............................................................................................173 Article 765. Depositary’s Obligation of Depositing Free of Charge............................174 Article 766. Inadmissibility of Transferring Thing to Another Person........................174 Article 767. Inadmissibility of Use of the Deposited Thing........................................174 Article 768. Change of Procedure of Saving of Thing ................................................174 Article 769. Compensation for Damage Caused by Character of a Thing.................174 Article 770. Term of Return of the Deposited Thing...................................................174 Article 771. Obligation of Taking Back the Deposited Thing ...................................174 Article 772. Place of Return of the Deposited Thing ..................................................175 Article 773. Obligation of Transfer of Product of the Deposited Thing.......................175 Article 774. Depositary’s Responsibility for Deliberate or Gross Negligence.............175 Article 775. Obligation of Paying Fee ........................................................................175 Article 776. Right to Seize the Deposited Thing.........................................................175 Article 777. Peculiarities of Deposit of the High-grade Thing ....................................175 Article 778. Peculiarities of Depositing at Hotel ........................................................175 Article 779. Relief for Force Majeure .........................................................................176 CHAPTER 19. DEPOSIT TO WAREHOUSE ..............................................................176 Article 780. Concept ..................................................................................................176 Article 781. Obligation of Fair Performance of Saving ..............................................176 Article 782. Examination of Quantity of Goods by Depositary..................................176 Article 783. Right to Examine the Deposited Goods ..................................................176 Article 784. Obligation of Notification ........................................................................176 Article 785. Obligation of Compensation ...................................................................176 Article 786. Peculiarities of Storage of High-grade Things .......................................177 Article 787. Sale of Deposited Goods ........................................................................177 Article 788. Warehouse Receipt.................................................................................177 Article 789. Essential Elements of Warehouse Receipt .............................................177 Article 790. Warrant..................................................................................................178 Article 791. Order Warehouse Receipt ......................................................................178 Article 792. Responsibility for the Endorsed Warehouse Receipt .............................178 Article 793. Presumption of Accuracy of Endorsement..............................................178 Article 794. Loss of Warehouse Receipt ....................................................................178 Article 795. Mortgage of Deposited Goods ................................................................179 Article 796. Assigning Mortgage Right to a New Holder of W.R. ...............................179 Article 797. Inadmissibility of Claim on Taking the Deposited Goods Back .............179 Article 798. Establishing Additional Term on Acceptance of Goods..........................179 CHAPTER 20. INSURANCE ......................................................................................179 General Provisions.....................................................................................................179 Article 799. Concept ..................................................................................................179 Article 800. Obligation of Entering into the Insurance Contract ................................180 Article 801. Compulsory Insurance ...........................................................................180 Article 802. Insurance Certificate (Policy)..................................................................180 Article 803. Kinds of Insurance Certificate................................................................180 Article 804. Consequences of Loss of Insurance Certificate ......................................180 Article 805. Insurance Broker’s Rights......................................................................181 Article 806. Commencement of Insurance .................................................................181 Article 807. Consequences of Increase in Premium...................................................181 Article 808. Obligation of Providing Information........................................................181 Article 809. Consequences of Incorrect Information ..................................................182 Article 810. Vitiation of Insurance Contract for the Fault of Notification ...................182 Article 811. Term of Vitiation of the Contract for the Fault to Notify Information ......182 Article 812. Vitiation of the Contract on Happening of Contingency .........................182 Article 813. Obligation of Informing Risk Increase ....................................................182 Article 814. Obligation of Informing the Happening of Contingency..........................183 II. Premium ................................................................................................................183 Article 815. Obligation of Payment of Premium.........................................................183

18

Article 816. Initial Premium.......................................................................................183 Article 817. Overdue Premium ..................................................................................183 Article 818. Vitiation of Contract for Overdue Premium.............................................183 Article 819. Termination of Payment of Premium ......................................................184 III. Insurance against Loss ........................................................................................184 Content of Contract ...................................................................................................184 Article 820. Obligation of Reimbursement .................................................................184 Article 821. Limits of Reimbursement........................................................................184 Article 822. Insurance Determination........................................................................184 Article 823. Peculiarities of Property Insurance.........................................................184 Article 824. Insurance of Unearned Value ................................................................184 Article 825. Insurance of Unity of Things .................................................................184 Article 826. Amount of Reimbursement.....................................................................185 Article 827. Reduced or Incomplete Insurance Double Insurance .............................185 Article 828. Nullity of Double Insurance....................................................................185 Article 829. Fault of Insured on Occurrence of Contingency .....................................185 Article 830. Obligation to Perform Insurer’s Instructions...........................................185 Article 831. Insurance against Loss Caused by War or Another Force Majeure Circumstances...........................................................................................................186 Article 832. Claim for Indemnification from a Third Person ......................................186 Article 833. Consequences of Alienation of the Property Insured..............................186 Article 834. Obligation of Information in Case of Alienation of Insured Property .....186 Article 835. Termination of Insurance in Case of Alienation of Property Insurance for Benefit of Another Person....................................................................186 Article 836. Effecting a Policy for Benefit of Another Person ....................................187 Article 837. Rights of Another Person in Policy .........................................................187 Article 838. Rights of the Insured..............................................................................187 Liability Insurance.....................................................................................................187 Article 839. Concept ..................................................................................................187 Article 840. Claim for Indemnity ...............................................................................187 Article 841. Legal and Other Costs ...........................................................................188 Article 842. Insurer’s Relief .......................................................................................188 Article 843. Liability in Case of Compulsory Insurance ...........................................188 IV. Life Insurance ......................................................................................................188 Article 844. Concept ..................................................................................................188 Article 845. Inadmissibility of Refusal of Entering into Contract ..............................188 Article 846. Vitiation of Contract within Periodical Premiums...................................188 Article 847. Assigning Indemnity to the Third Person ...............................................189 Article 848. Improper Third Person............................................................................189 Article 849. Insurer’s Relief from Liability of Indemnification ...................................189 Article 850. Relief from Indemnification in Case of Suicide.....................................189 Article 851. Change of Policy.....................................................................................189 Article 852. Deductions in Case of Termination of Contract......................................190 Article 853. Consequences of Enforcement ...............................................................190 V. Insurance against Incident ...................................................................................190 Article 854. Concept ..................................................................................................190 Article 855. Consequences of Injury..........................................................................190 Article 856. Consequences of Intentional Incident ....................................................190 Article 857. Obligation of Informing about Incident..................................................190 Article 858. Inadmissibility of Recourse ....................................................................191 CHAPTER 21. BANK SERVICE..................................................................................191 Accounts ....................................................................................................................191 Article 859. Concept ..................................................................................................191 Article 860. Obligation of Issue of Extract from the Account .....................................191 Article 861. Charging-off ...........................................................................................191 Article 862. Consequences of Suspension of Account Holder Order .........................191

19

Article 863. Undertaking the Protection of Secrecy ...................................................192 Article 864. Termination of Bank Account Contract ..................................................192 Article 865. Cheque Payment ....................................................................................192 Article 866. Encashment of a Cheque .......................................................................192 II. Bank Credit ...........................................................................................................192 Article 867. Concept ..................................................................................................192 Article 868. Interest Rate of Bank Credit .................................................................192 Article 869. Rate of Interest Fixed by the Law..........................................................193 Article 870. Use of Collateral Security.......................................................................193 Article 871. Suspension of Contract .........................................................................193 Article 872. Compensation of Loss for Pre-term Repayment of Credit.......................194 Article 873. Termination of Credit Terms in Case of Repayment of Credit by Installments ...........................................................................................194 III. Deposit .................................................................................................................194 Article 874. Concept. Liability of Managers of Credit Institutions .............................194 Article 875. Saving Book ...........................................................................................194 IV. Documentary Letter of Credit. Documentary Encashment..................................195 Article 876. Concept ..................................................................................................195 Article 877. Encashment Order .................................................................................195 Article 878. International Circulation Practices .........................................................195 V. Bank Guarantee....................................................................................................195 Article 879. Concept ..................................................................................................195 Article 880. Fee for Bank Guarantee ........................................................................195 Article 881. Independence of Guarantor’s Liability from General Liabilities.............196 Article 882. Inadmissibility of Revocation of Bank Guarantee..................................196 Article 883. Inadmissibility of Conveyance of Beneficiary’s Claim to Another Person ......................................................................................................196 Article 884. Commencement of Bank Guarantee ......................................................196 Article 885. Kind of Presentation of Claim ...............................................................196 Article 886. Guarantor’s Undertaking of Accepting the Beneficiary’s Claim.............196 Article 887. Guarantor’s Refusal to Satisfy Beneficiary’s Claim...............................197 Article 888. Limits of Guarantor’s Liability ...............................................................197 Article 889. Grounds to Terminate the Guarantor’s Liability ....................................197 Article 890. Claim for Recourse Compensation ........................................................197 CHAPTER 22. GUARANTY........................................................................................198 Article 891. Concept ..................................................................................................198 Article 892. Form of Suretyship.................................................................................198 Article 893. Basis of Surety’s Liability ......................................................................198 Article 894. Surety’s Refusal to Satisfy Creditor.......................................................198 Article 895. Joint Responsibility of Surety ................................................................198 Article 896. Joint Liability of Sureties .......................................................................198 Article 897. Responsibility for Liability Undertaken by the Previous Surety.............199 Article 898. Limits of Surety’s Responsibility............................................................199 Article 899. Surety’s Right on Counterclaim..............................................................199 Article 900. Surety’s Refusal of Satisfaction of Creditor ...........................................199 Article 901. Reduction of Surety’s Responsibility.....................................................199 Article 902. Consequences of Overdue Payment by the Principal Debtor .................200 Article 903. Termination of Contract in the Non Fixed Suretyship ............................200 Article 904. Grounds of Relief of Surety ....................................................................200 Article 905. Consequences of Creditor’s Satisfaction by Surety ...............................200 CHAPTER 23. CURRENT ACCOUNT..........................................................................201 Article 906. Concept. Subject.....................................................................................201 Article 907. Annulment of Current Account ...............................................................201 Article 908. Interest for Payments Made ..................................................................201 Article 909. Personal or Property Security of Claim Entered into Current Account ...201 Article 910. Attachment.............................................................................................201

20

CHAPTER 24. LIABILITIES ARISING FROM CIRCULATION OF SECURITIES ..........202 1. Liability from Securities to Bearer .........................................................................202 Article 911. Concept ..................................................................................................202 Article 912. Issuer’s Counterclaims...........................................................................202 Article 913. Assignment ............................................................................................202 Article 914. Issuer’s Rights .......................................................................................202 Article 915. Issuer’s Liability.....................................................................................203 Article 916. Re-registration of Securities to Bearer ...................................................203 Article 917. Substitution of Worthless Securities ......................................................203 Article 918. Declaring Securities Invalid ...................................................................203 Article 919. Issuing New Document to Bearer...........................................................203 Article 920. Limitation ...............................................................................................203 Article 921. Issuing Promissory Notes of Small Value ..............................................204 II. Liability under Order Securities ............................................................................204 Article 922. Concept ..................................................................................................204 Article 923. Assignment. Kinds of Endorsement......................................................204 Article 924. Rule of Use of Document Acquired under Endorsement.........................204 Article 925. Payment under Successive Endorsements ............................................204 Article 926. Demands under the Written Guarantee .................................................205 Article 927. Limitation ...............................................................................................205 III. Personal Securities...............................................................................................205 Article 928. Concept ..................................................................................................205 Article 929. Statement on Payment ...........................................................................205 CHAPTER 25. PARTNERSHIP (JOINT ACTIVITY)......................................................205 Article 930. Concept ..................................................................................................205 Article 931. Form of Contract on Joint Activity ..........................................................205 Article 932. Obligation to Contribute .........................................................................206 Article 933. Inadmissibility of Transfer of Share to a Third Person ..........................206 Article 934. Obligation of Joint Business ..................................................................206 Article 935. Rule of Distribution of Profits .................................................................207 Article 936. Inadmissibility of Transfer of Partner’s Claim to a Third Person ...........207 Article 937. Joint Responsibility of Partners .............................................................207 Article 938. Refusal of Partnership ...........................................................................207 Article 939. Grounds of Termination of Partnership..................................................208 Article 340. Procedure of Termination of Partnership................................................208 CHAPTER 26. LIFE ANNUITY ..................................................................................208 Article 941. Concept ..................................................................................................208 Article 942. Kind of Contract .....................................................................................209 Article 943. Amount of Annuity .................................................................................209 Article 944. Term of Annuity Payment ......................................................................209 Article 945. Inadmissibility of Alienation of the Transferred Property ......................209 Article 946. Dispute on Annuity Payment .................................................................209 Article 947. Payment of Annuity in Kind ...................................................................209 Article 948. Risk of Accidental Loss or Damage of the Transferred Property............209 Article 949. Renunciation of Life Annuity Contract ...................................................209 Article 950. Consequences of Annuitor’s Death ........................................................210 CHAPTER 27. GAMBLING. WAGERING ....................................................................210 Article 951. Concept ..................................................................................................210 Article 952. Lottery ....................................................................................................210 SECTION TWO...........................................................................................................210 LEGAL OBLIGATION RELATIONS .............................................................................210 CHAPTER 1. RIGHT OF COMMON ............................................................................210 Article 953. Concept ..................................................................................................210 Article 954. Equal Shares..........................................................................................210 Article 955. Right of Product......................................................................................211 Article 956. Management of Common Thing..............................................................211

21

Article 957. Making Decisions When Managing the Common Thing .........................211 Article 958. Conveyance of Rule of Management of Common Thing to Successor ....211 Article 959. Order of Disposal of Common Thing .....................................................211 Article 960. Common Thing Maintenance Costs........................................................211 Article 961. Defeat of Right in Common ....................................................................211 Article 962. Agreement on Defeat..............................................................................212 Article 963. Defeat of Right in Common When Dividing in Kind................................212 Article 964. Defeat of Right in Common by Sale of Thing..........................................212 Article 965. Joint Responsibility of Participants........................................................212 Article 966. Satisfaction of Co-Participants’ Claims Against Each Other ..................212 Article 967. Liability of Participants in Case of Defeat of Right of Common..............213 Article 968. Limitation of Defeat of Right in Common................................................213 CHAPTER 2. ACTING FOR OTHER’S BENEFIT WITHOUT COMMISSION .................213 Article 969. Acting for Other’s Benefit Without Commission in Good Faith..............213 Article 970. Obligation of Indemnification .................................................................213 Article 971. Obligation of Notification of Principal .....................................................213 Article 972. Presentation of Report on Executed Work ..............................................213 Article 973. Right on Compensation for the Costs.....................................................213 Article 974. Inadmissibility of Reimbursement..........................................................214 Article 975. Presumption of Own Benefit ..................................................................214 CHAPTER 3. UNJUST ENRICHMENT .......................................................................214 Article 976. Grounds of Claim from a Mock-creditor .................................................214 Article 977. Inadmissibility of Claim for Restitution.................................................214 Article 978. Claim for Restitution by Force or Under Threat......................................215 Article 979. Limits of Restitution ...............................................................................215 Article 980. Rule of Compensation for Expenses and Damage .................................215 Article 981. Reimbursement Obligation.....................................................................216 Article 982. Consequences of Encroachment Upon Other’s Legal Property..............216 Article 983. Accepting Performance by Non-Authorized Person ................................216 Article 984. Relief ......................................................................................................216 Article 985. Claim on Profit........................................................................................217 Article 986. Payment for Other’s Debts by Mistake ..................................................217 Article 987. Bearing Expenses for Other’s Property By Mistake ...............................217 Article 988. Consequences of Performance Under the Mock-Creditor’s Instruction ..217 Article 989. Third Person’s Obligation to Return the Unjust Received.......................218 Article 990. Consequences of Gratuitous Disposal of a Thing by Non-authorized Person .........................................................................................218 Article 991. Consequences of Unjust Enrichment at Other’s Expense ......................218 SECTION THREE .......................................................................................................218 DELICTUAL OBLIGATIONS........................................................................................218 CHAPTER 1. GENERAL PROVISIONS........................................................................218 Article 992. Concept ..................................................................................................218 Article 993. Consequences of Disclosure of Prejudicial Information .........................218 Article 994. Minor’s Responsibility for the Caused Damage .....................................219 Article 995. Compensation for Damage Caused by Insane ......................................219 Article 996. Compensation of Damage Caused in State of Temporary Insanity .......219 Article 997. Compensation of Damage Caused when Performing Official Duties .....219 Article 998. Joint Responsibility for Caused Damage ...............................................220 Article 999. Compensation of Damage Resulted from Operation of Transport Means ...................................................................................................220 Article 1000. Responsibility for Loss Caused by Increased Danger of Structure.....220 Article 1001. Compensation of Loss Resulted within Fire-extinguishing ..................221 Article 1002. Inadmissibility of Prior Relief of Compensation for Loss......................221 Article 1003. Compensation of Loss Caused by Animal ...........................................221 Article 1004. Compensation of Loss Caused by the Felt Building ............................221 Article 1005. Responsibility of State for Damage Caused by Public Servicemen......222

22

Article 1006. Compensation of Damage in Case of Victim’s Death ..........................222 Article 1007. Compensation of Damage Caused by Medical Institution ..................222 Article 1008. Limitation of Compensation of Damage ...............................................222 CHAPTER 2. RESPONSIBILITY FOR DAMAGE CAUSED BY LAW-QUALITY PRODUCTS........................................................................................223 Article 1009. Responsibility of Manufacturer of Low-quality Products......................223 Article 1010. Concept of a Low-quality Product ........................................................223 Article 1011. Concept of Product ...............................................................................223 Article 1012. Onus of Proof.......................................................................................224 Article 1013. Joint Responsibility of Manufacturers of Low-quality Product.............224 Article 1014. Compensation of Damage Caused by Injury .......................................224 Article 1015. Limitation .............................................................................................224 Article 1016. Inadmissibility of Prior Relief ...............................................................224 BOOK FOUR INTELLECTUAL PROPERTY LAW ..............................................................................225 SECTION ONE ...........................................................................................................225 COPYRIGHT LAW ......................................................................................................225 CHAPTER 1. GENERAL PROVISIONS.......................................................................225 Article 1017. Concept of Copyright Law....................................................................225 Article 1018. Sphere of Application of Copyright Law...............................................225 Article 1019. Publication of Works ............................................................................226 Article 1020. Edition of Works...................................................................................226 Article 1021. Public Performance of Works...............................................................226 Article 1022. Public Demonstration of Works ............................................................226 Article 1023. Public Broadcast of Works ...................................................................226 CHAPTER 2. COPYRIGHT..........................................................................................227 Article 1024. Objects of Copyright.............................................................................227 Article 1025. Works of Science, Literature and Art ...................................................227 Article 1026. Protection of Remade and Collected Works .........................................228 Article 1027. Independence of Copyright from Property Right ..................................228 Article 1028. Works Not to Be Applied With Copyright .............................................228 Article 1029. Author ..................................................................................................228 Article 1030. Copyright .............................................................................................228 Article 1031. Copyright Protection Mark....................................................................229 Article 1032. Presumption of Authorship...................................................................229 Article 1033. Co-authorship. .....................................................................................229 Article 1034. Rights of Collection Author...................................................................230 Article 1035. Rights of Author of Remake .................................................................230 Article 1036. Translator’s Rights...............................................................................230 Article 1037. Exclusive Rights of Editor ....................................................................230 Article 1038. Audiovisual Works ..............................................................................231 Article 1039. Author of Audiovisual Work ................................................................231 Article 1040. Producer of Audiovisual Work.............................................................231 Article 1041. Rights of Author of Work Included in Audiovisual Work.....................231 Article 1042. Copyright on Official Work ...................................................................231 Article 1043. Personal Non-property Rights of the Author.........................................232 Article 1044. Exercising Author’s Personal Non-property Rights ..............................233 Article 1045. Sole Rights of Author............................................................................233 Article 1046. Distribution of Published Works...........................................................233 Article 1047. Sole Right on Use of Architectural Designs .........................................234 Article 1048. Royalty.................................................................................................234 Article 1049. Rights of Author of Works of Fine Art...................................................234 Article 1050. Reproducing Copies of Lawfully Published Works...............................234 Article 1051. Royalty for Reproducing for Personal Purposes...................................235 Article 1052. Payers of Royalty and Rule of Its Payment When

23

Reproducing for Personal Use ...................................................................................235 Article 1053. Release from Payment of Royalty ........................................................235 Article 1054. Reprographic Copying of Works...........................................................236 Article 1055. Right to Use Works Without the Author’s Consent...............................236 Article 1056. Right to Use Works on Places of Public Assemblage............................237 Article 1057. Public Performance of Legally Published Musical Works .....................237 Article 1058. Reproducing of Works for Legal Proceedings .......................................237 Article 1059. Short-term Recording of Works by a Broadcast Organization .............237 Article 1060. Free Use of Software and Data Base...................................................238 Article 1061. Right to Decompile Software ................................................................238 CHAPTER 3. VALIDITY OF COPYRIGHT....................................................................238 Article 1062. Appearance of Copyright and Its Duration ..........................................238 Article 1063. Validity of Copyright ............................................................................239 Article 1064. Copyright without Time-limit................................................................239 Article 1065. Rule of Use of Expired Copyright .........................................................239 CHAPTER 4. COPYRIGHT ASSIGNMENT .................................................................240 Article 1066. Grounds for Assignment of Copyright..................................................240 Article 1067. Assignment of Author’s Property Right ................................................240 Article 1068. Exclusive License .................................................................................240 Article 1069. Ordinary License..................................................................................241 Article 1070. Use of Work After Transfer of Exclusive License..................................241 Article 1071. Author Contract....................................................................................241 Article 1072. Invalidity of Author Contract................................................................242 Article 1073. Form of Author Contract......................................................................242 Article 1074. Contract on Creation of Work...............................................................242 Article 1075. Obligations of Parties to Contract ........................................................242 Article 1076. Obligation to Compensate the Loss......................................................243 CHAPTER 5. RIGHTS RELATED TO COPYRIGHT.....................................................243 Article 1077. Related Rights......................................................................................243 Article 1078. Subjects of Related Rights ...................................................................243 Article 1079. Related Rights Protection Mark............................................................243 Article 1080. Performer..............................................................................................243 Article 1081. Personal and Property Rights of Performer ..........................................244 Article 1082. Sole Right to Use Performance .............................................................244 Article 1083. Agreements Between Performer and Possessors of Other Related Rights .................................................................................................244 Article 1084. Official Performance.............................................................................245 Article 1085. Producer of Phonogram ........................................................................245 Article 1086. Sole Rights of Producer of Phonogram .................................................245 Article 1087. Producer of Videogram.........................................................................246 Article 1088. Sole Rights of Producer of Videogram ..................................................246 Article 1089. Distribution of Phonogram and Videogram ..........................................246 Article 1090. Program of Broadcast Organization.....................................................246 Article 1091. Sole Rights of Broadcast Organization ................................................247 Article 1092. Free Use of Objects of Related Rights ..................................................247 Article 1093. Use of Phonograms Produced for Commercial Purposes......................248 Article 1094. Right on Short-term Use of Phonogram ................................................248 CHAPTER 6. VALIDITY OF RELATED RIGHTS ..........................................................249 Article 1095. Validity of Related Rights ....................................................................249 CHAPTER 7. PROTECTION OF COPYRIGHT AND RELATED RIGHTS.......................249 Article 1096 Consequences of Violation of Copyright................................................249 Article 1097. Counterfeit Product ..............................................................................250 Article 1098. Seizure of Counterfeit Product..............................................................250 CHAPTER 8. COLLECTIVE MANAGEMENT OF PROPERTY RIGHTS.........................250 Article 1099. Establishment of Organization for Management of Copyright ............250

24

SECTION TWO INDUSTRIAL PROPERTY............................................................................................251 Article 1100. Protection of Rights on Invention, Working Model and Industrial Sample ......................................................................................................251 Article 1101. Protection of Selection Rights ...............................................................251 Article 1102. Protection of Sole Rights on Trade Mark ..............................................251 Article 1103. Right on Geographical Indication and Name of Origin .........................251 Article 1104. Protection of Firm Name .......................................................................251 Article 1105. Protection of Industrial and Commercial Secret ...................................251 BOOK FIVE MATRIMONIAL LAW ..................................................................................................253 SECTION ONE MARRIAGE ................................................................................................................253 CHAPTER 1. PROCEDURE AND CONDITIONS OF CONSUMMATION OF MARRIAGE...........................................................................................................253 Article 1106. Concept of Marriage .............................................................................253 Article 1107. Conditions of Consummation of Marriage............................................253 Article 1108. Marriageable Age .................................................................................253 Article 1109. Consent of Bride and Groom Marriage Promise...................................253 Article 1110. Registration of Consummation of Marriage..........................................253 Article 1111. Registration of Marriage.......................................................................254 Article 1112. Submitting Application for Consummation of Marriage........................254 Article 1113. Duties of Registry Office.......................................................................254 Article 1114. Registration of Marriage out of Registry Office ....................................254 Article 1115. Marriage in Festive Conditions ............................................................254 Article 1116. Duty on Providing Information of Health Status ..................................255 Article 1117. Participation of Witnesses within the Registration of Marriage ...........255 Article 1118. Procedure of Consummation of Marriage of Aliens ..............................255 Article 1119. Appeal against Refusal of Registration................................................255 Article 1120. Circumstances Impending the Marriage ..............................................255 Article 1121. Procedure of Repeated Marriage..........................................................255 CHAPTER 2. TERMINATION OF MARRIAGE .............................................................256 Article 1122. Grounds of Termination of Marriage ....................................................256 Article 1123. Inadmissibility of Dissolution of Marriage ...........................................256 Article 1124. Procedure of Dissolution of Marriage ...................................................256 Article 1125. Dissolution of Marriage under Application of One Spouse ...................256 Article 1126. Dissolution of Marriage in Case of Difference between Spouses ........257 Article 1127. Consideration of Case in Dissolution of Marriage by Court .................257 Article 1128. Passing Decision on Residence of Children and Their Maintenance ...257 Article 1129. Passing Decision on Maintenance of a Spouse ....................................257 Article 1130. Passing Decision on Division of Spouses’ Property..............................258 Article 1131. Fee for Issue of Certificate on Dissolution of Marriage.........................258 Article 1132. Execution of Judgement on Dissolution of Marriage ............................258 Article 1133. Right to Restore the Pre-marriage Surname.........................................258 Article 1134. Application for Restoration of Pre-marriage Surname..........................258 Article 1135. Restoration of Marriage on Return of a Spouse Declared Dead or Recognized as Missing ..........................................................................................258 Article 1136. Right on New Marriage ........................................................................259 Article 1137. Registration of Dissolution of Marriage According to Residence ..........259 Article 1138. Registration of Dissolution of Marriage ...............................................259 Article 1139. Procedure of Dissolution of Marriage with Confined Spouse ..............259 CHAPTER 3. INVALIDITY OF MARRIAGE..................................................................260 Article 1140. Grounds of Invalidity of Marriage ........................................................260 Article 1141. Presumption of Validity of Marriage....................................................260 Article 1142. Invalidity of Marriage with Person not Attained to the Marriage Age ..260

25

Article 1143. Recognition of Invalidity of Marriage for Impediment Circumstances..260 Article 1144. Recognition of Invalidity of Marriage under Compulsion .....................261 Article 1145. Recognition of Invalidity of Fictitious Marriage ....................................261 Article 1146. Moment of Invalidity of Marriage .........................................................261 Article 1147. Indemnification of Conscientious Spouse.............................................261 Article 1148. Recognition of Marriage Invalid by Court Only ....................................262 Article 1149. Inadmissibility of Invalidity of Marriage after Death of Spouses.........262 Article 1150. Repeated Marriage on Recognition of Marriage Invalid .......................262 CHAPTER 4. RIGHTS AND DUTIES OF SPOUSES.....................................................262 General Provisions.....................................................................................................262 Article 1151. Significance of Consummation of Marriage..........................................262 Article 1152. Equality of Spouses .............................................................................262 Article 1153. Prohibition of Discrimination ................................................................262 II. Personal Rights .....................................................................................................262 Article 1154. Rights to Choose Surname...................................................................262 Article 1155. Joint Settlement of Family Affairs........................................................263 Article 1156. Freedom in Choice of Activity...............................................................263 Article 1157. Free Choice of Residence .....................................................................263 III. Proprietary Rights and Duties Established by Law.............................................263 Article 1158. Common Property of Spouses ..............................................................263 Article 1159. Management of Common Property by Mutual Consent........................263 Article 1160. Disposal of Common Property by Mutual Consent...............................263 Article 1161. Individual Property of Spouses ............................................................263 Article 1162. Things of Individual Use Purchased During Marriage .........................264 Article 1163. Recognition of Property of a Spouse as Common Property of Spouses 264 Article 1164. Division of Common Property of Spouses............................................264 Article 1165. Destiny of Things Required for Professional Activity within Division of Common Property ....................................................................................264 Article 1166. Compensation of Share on Division of Property ...................................264 Article 1167. Division of Common Property within the Period of Marriage................265 Article 1168. Foreseeing of Interests of Minor Children within Division of Common Property .....................................................................................................265 Article 1169. Rule of Division of Common Debts of Spouses.....................................265 Article 1170. Rule of Payment of Debt of One of the Spouses...................................265 Article 1171. Limitation of Claim for Division of Common Property...........................266 IV. Contractual Property Terms of Spouses...............................................................266 Article 1172. Marriage Contract ................................................................................266 Article 1173. Entering into Marriage Contract...........................................................266 Article 1174. Contract Form ......................................................................................266 Article 1175. Entering into Marriage Contract by a Person with Limited Capability.266 Article 1176. Content of Marriage Contract...............................................................266 Article 1177. Rule of Bearing Family Expenses .......................................................267 Article 1178. Restriction of Rights and Duties Stipulated by Marriage Contract .....267 Article 1179. Duties Not to Be Changed by Marriage Contract .................................267 Article 1180. Termination of Marriage Contract ........................................................267 Article 1181. Changing Terms and Conditions of Marriage Contract by Court .........267 CHAPTER 5. Obligation of Mutual Support of Spouses .............................................267 Article 1182. Person Entitled to Get Support .............................................................267 Article 1183. Right of Disabled Spouse on Support...................................................268 Article 1184. Release from Obligation of Support by Court.......................................268 Article 1185. Determination of Support Amount........................................................268 Article 1186. Losing Right on Support .......................................................................268 PART TWO RELATIONSHIP OF PARENTS, CHILDREN AND OTHER RELATIVES. .....................269 CHAPTER 1. ESTABLISHMENT FILIATION OF CHILDREN ......................................269 Article 1187. Basis of Origin of Rights and Obligations of Parents and Children ....269

26

Article 1188. Establishment of Filiation of a Child in the Case of the Death of Father ........................................................................................................269 Article 1189. Confirmation of Filiation of a Child from the Married Parents. ..........269 Article 1190. Establishment of Filiation of a Child from Unmarried Parents. ........269 Article 1191. Entry of Married Parents into the Birth Registration. ..........................270 Article 1192. Procedure of Unmarried Parents. .........................................................270 Article 1193. Entry of Father when Fatherhood is not Determined. .........................270 Article 1194. Given Name of Child. ..........................................................................270 Article 1195. Given Surname of Child. .....................................................................270 Article 1196. Change of Surname of Child. ..............................................................270 CHAPTER 2. RIGHTS AND OBLIGATIONS OF PARENTS TOWARDS CHILDREN......271 Article 1197. Equal Rights of Parents Towards Children..........................................271 Article 1198. Obligations of Parents Towards Children ...........................................271 Article 1199. Rights and Obligations of Divorced Parents Towards Children...........271 Article 1200. Raising of Children with Mutual Agreement of Parents .......................271 Article 1201. Residence of Minors in Case of Parents Living Apart ..........................271 Article 1202. Obligations of a Parent Living Apart from a Child ...............................272 Article 1203. Rights of Grandparents Towards Minor Grandchildren ......................272 Article 1204. Right of Claiming the Return of a Minor..............................................272 Article 1205. Deprivation of Parental Rights .............................................................272 Article 1206. Levying Alimony from Parents Deprived of Parental Rights ................273 Article 1207. Rights of a Child of a Person Deprived of Parental Rights. .................273 Article 1208. Granting the Right to Visit with a Child ...............................................273 Article 1209. Restoration of Parental Rights .............................................................273 Article 1210. Removal of Child Without Deprivation of Parental Rights...................273 Article 1211. Rights of a Parent Who Has Been Removed a Child From...................274 CHAPTER 3. DUTY OF MAINTENANCE OF PARENTS AND CHILDREN ...................274 Article 1212. Obligations of Support for Child...........................................................274 Article 1213. Definition of Support Amount by Parents ............................................274 Article 1214. Definition of Support Amount by Court ...............................................274 Article 1215. Obligation of Participation in Additional Expenses .............................274 Article 1216. Support for Children in Child Care Institution ....................................274 Article 1217. Court Decision on Payment of Support Expenses of a Child ...............274 Article 1218. Obligation of Children Towards Parents .............................................275 Article 1219. Participation of Children in the Support of Parents Incapacitated for Work ............................................................................................275 Article 1220. Participation of Children in the Additional Expenses ..........................275 Article 1221. Claim to Reduce the Amount of Support ..........................................275 Article 1222. Change of the Amount of Support Due to a Change in Material or Family Condition ...............................................................................275 CHAPTER 4. DUTY OF MAINTENANCE OF OTHER FAMILY MEMBERS..................276 Article 1223. Obligation of Mutual Support of Siblings .............................................276 Article 1224. Support Obligation of a Grandchild Towards Grandparents ...............276 Article 1225. Support Obligations of Grandparents Towards Grandchildren ..........276 Article 1226. Support Obligations of Step-parents .................................................276 Article 1227. Support Obligations of a Step-child......................................................276 Article 1228. Obligation to Support a Child Taken for Permanent Raising and Support .................................................................................................277 Article 1229. support Obligations Towards Factual Tutor .......................................277 Article 1230. Procedure for Establishing the Amount of Support ..............................277 Article 1231. Change of the Amount of Support ........................................................277 CHAPTER 5. SUPPORT ORDER.................................................................................277 Article 1232. Voluntary Payment of Support ............................................................277 Article 1233. Obligation of the Administration of an Employing Organization During Payment of Support .................................................................278 Article 1234. Claiming Support .................................................................................278

27

Article 1235. Payment of Arrears ..............................................................................278 Article 1236. Determination of Support Arrears ........................................................278 Article 1237. Release from Payment of Support........................................................279 Article 1238. Termination of Support Obligation ......................................................279 CHAPTER 6. ADOPTION............................................................................................279 Article 1239. Concept ...............................................................................................279 Article 1240. Confirmation of Adoption Upon Decease of a Guardian ......................279 Article 1241. Inadmissibility of Adoption Upon Decease of Child .............................279 Article 1242. Decision on Adoption ...........................................................................280 Article 1243. Inadmissibility of Adoption through a Representative ........................280 Article 1244. Registration of a Decision on Adoption ................................................280 Article 1245. Adoptive Parent....................................................................................280 Article 1246. Adoption by Spouses .........................................................................280 Article 1247. Consent of a Spouse for Adoption........................................................280 Article 1248. Adoption by One of the Spouses .........................................................281 Article 1249. Adoption of a Married Person ............................................................281 Article 1250. Age of an Adoptive Person .................................................................281 Article 1251. Consent of Parents for Adoption ..........................................................281 Article 1252. Adoption of a Child Born Outside Marriage ........................................281 Article 1253. Adoption of a Child Under Guardianship ............................................281 Article 1254. Adoption of a Child Without Consent of Parent ...................................282 Article 1255. Adoption of a Ten-Year Old Child .......................................................282 Article 1256. Refusal to Adoption..............................................................................282 Article 1257. Granting a Surname to Adopted Child...............................................282 Article 1258. Entry of Adoptive Parents in Birth Registration .................................282 Article 1259. Relative Relations of Adopted Person ..................................................283 Article 1260. Relations of Adopted Person with His/Her Parents.............................283 Article 1261. Invalidity of Adoption...........................................................................283 Article 1262. Other Grounds for Invalidity of Adoption ............................................283 Article 1263. Confidentiality of Adoption ..................................................................283 Article 1264. Ensuring Confidentiality of Adoption ...................................................284 Article 1265. Invalidation of Adoption by Court .......................................................284 Article 1266. Termination of Effected Without Consent.............................................284 Article 1267. Submission of a Claim to Invalidate Adoption ....................................284 Article 1268. Invalidity Adoption by the Demand of a Child Care Institution ..........284 Article 1269. Inadmissibility of Invalidation of Adoption ..........................................285 Article 1270. Consequences of Declaration of Invalidity of Adoption........................285 Article 1271. Moment of Termination of Adoption .....................................................285 Article 1272. Grounds for Invalidation of Adoption..................................................285 Article 1273. Moment of Invalidation of Adoption ....................................................286 Article 1274. Participation of a Child Care Institution in Discussions on Invalidation of a Child Adoption ..........................................................................286 PART THREE. GUARDIANSHIP AND CURATORSHIP ...............................................286 CHAPTER 1. GENERAL PROVISIONS........................................................................286 Article 1275. Concept ................................................................................................286 Article 1276. Guardianship .......................................................................................287 Article 1277. Curatorship ..........................................................................................287 Article 1278. Guardianship and Care Bodies (GCB) .................................................287 Article 1279. Establishment of Guardianship and Curatorship ...............................287 Article 1280. Appointing a Guardian for a Person Declared Incapable ....................287 Article 1281. Appointing a Guardian or a Curator ...................................................287 Article 1282. Procedure for Appointing a Guardian or a Curator ..............................288 Article 1283. Persons not Eligible to be Guardian or Curator...................................288 Article 1284. Supervision of Activities of Guardian or a Curator.............................288 Article 1285. Obligations of a Child Care Institution ...............................................288 Article 1286. Appointment of a Property Guardian ..................................................288

28

CHAPTER 2. RIGHTS AND OBLIGATIONS OF GUARDIAN OR A CURATOR ...........289 Article 1287. Rights of Guardian or Curator ............................................................289 Article 1288. Gratuitous Performance of Guardianship and Curatorship .................289 Article 1289. Duties of Guardian and Curator ........................................................289 Article 1290. Representative Authority of Guardian and Curator ............................289 Article 1291. Obligation of Residing With Minors Under Guardianship ...................289 Article 1292. Obligation of Guardian in Case an Insane Ward Gets Better ..............290 Article 1293. Consent of Guardian and Curator to Transactions.............................290 Article 1294. Limitation of Authority of Guardian and Curator ...............................290 Article 1295. Procedure for Transferring Perishable Goods .....................................290 Article 1296. Prohibition of Gifting on Behalf of Ward...............................................290 Article 1297. Prohibition of Representation on Behalf Guardian and Curator ..........290 Article 1298. Appealing Against Actions of Guardian and Curator..........................290 Article 1299. Release of a Guardian and Curator from Obligations.........................291 Article 1300. Consequences of Inadequate Performance of Duties ...........................291 Article 1301. Release Curator from Duties at the Request of Ward .........................291 Article 1302. Grounds for Terminating Curatorship ..................................................291 Article 1303. Termination of Guardianship Due to Reaching the Age of Curatorship ..............................................................................................291 Article 1304. Grounds for Termination Guardianship ...............................................292 Article 1305. Appealing Against Guardianship and Curatorship Matters ...............292 BOOK SIX. SUCCESSION LAW CHAPTER 1. GENERAL PROVISIONS........................................................................293 Article 1306 . Concept ...............................................................................................293 Article 1307. Successors ..........................................................................................293 Article 1308. Legal Person as Successor...................................................................293 Article 1309. Child Born Outside Marriage as Successor of Father ........................293 Article 1310. Unworthy Successor ............................................................................293 Article 1311. Parents Not Eligible to Succession .......................................................294 Article 1312. Deprivation of the Right of Succession by Court ..................................294 Article 1313. Forgiveness of an Unworthy Successor ...............................................294 Article 1314. Succession with the right of Representation .......................................294 Article 1315. Right of Succession to Other Testator’s Property .................................294 Article 1316. Duty of Person Declared as Unworthy Successor ................................294 Article 1317. Limitation Period of a Claim for Declaration of Unworthiness to Succeed .........................................................................................295 Article 1318. Share of Estate of Person Unworthy to Succeed..................................295 Article 1319. Opening of Succession ........................................................................295 Article 1320. Time of Opening of Succession ............................................................295 Article 1321. Succession of Persons Deceased on the Same Day ............................295 Article 1322. Opening of Succession After Declaring Person Deceased ..................295 Article 1323. Opening of Succession in Family ........................................................295 Article 1324. Place of Opening of Succession ...........................................................296 Article 1325. Place of Opening of Succession of Persons Residing Abroad ..............296 Article 1326. Opening of Succession of Persons Permanently Residency Abroad ....296 Article 1327. Opening of Succession Abroad ..........................................................296 Article 1328. Parental Estate ..................................................................................296 Article 1329. Future Estate .......................................................................................296 Article 1330. Inadmissibility of Transfer of Personal Rights and Obligations by Succession ........................................................................................297 Article 1331. Protection of Non-proprietary Rights of Testator .................................297 Article 1332. Property Outside Succession................................................................297 Article 1333. Consequences of Increase of Immovable Property Under Will .............297 Article 1334. Co-successors ......................................................................................297

29

Article 1335. Claiming a Thing from Estate ..............................................................297 CHAPTER 2. INTESTATE SUCCESSION....................................................................298 Article 1336. Intestate Successors ............................................................................298 Article 1337. Order in Instate Succession ................................................................299 Article 1338. Rights of Incapacitated Persons in Succession ..................................299 Article 1339. Right of Surviving Spouse to Co-ownership Share ..............................299 Article 1340. Condition of Divorced Spouses in Succession .....................................299 Article 1341. Withdrawal of Succession Right During Divorce .................................299 Article 1342. Loss of the Right to Succeed Due to Invalidation of Marriage .............299 Article 1343. Transfer of Non-succeeded Property to the Treasury ..........................299 CHAPTER 3. TESTATE SUCCESSION .......................................................................300 Article 1344. Concept .........................................................................................300 Article 1345. Person Eligible to Writing a Will ..........................................................300 Article 1346. Holographic Will ..................................................................................300 Article 1347. Joint Will ..............................................................................................300 Article 1348. Specification of a Share by Testator ...................................................300 Article 1349. Distribution of Estate Among Testate Successors ...............................300 Article 1350. Succession to Property Outside a Will .................................................301 Article 1351. Equal Increase of Shares Among Testate Successors .........................301 Article 1352. Inadmissibility of Participation of a Third Person in Share Specification...............................................................................................301 Article 1353. Impossibility of Clear Definition of Successors ....................................301 Article 1354. Deprivation of a Right of Intestate Succession ....................................301 Article 1355. Retaining the Right of Succession........................................................301 Article 1356. Prevention of Intestate Succession ......................................................302 CHAPTER 4. FORM OF A WILL .................................................................................302 Article 1357. Notarial Form ......................................................................................302 Article 1358. Notarized Will ......................................................................................302 Article 1359. Persons Equated with Notary ............................................................. 302 Article 1360. Deputy Signatory ................................................................................303 Article 1361. Will of a Deaf and Dumb and Blind ....................................................303 Article 1362. Witnesses of Will................................................................................303 Article 1363. Confidentiality of a Will........................................................................303 Article 1364. Domestic Will .......................................................................................303 Article 1365. Will Deposited with Notary .................................................................304 Article 1366. Making of a Will by Using Technical Means .......................................304 Article 1367. Closed Will ...........................................................................................304 Article 1368. Date of Making Will .............................................................................304 Article 1369. Acquaintance of Interested Persons with the Content of a Will ........304 CHAPTER 5. NOMINATION OF ALTERNATIVE SUCCESSOR ....................................305 Article 1370. Alternative Successor...........................................................................305 CHAPTER 6. COMPULSORY PORTION .....................................................................305 Article 1371. Concept ................................................................................................305 Article 1372. Claiming of Compulsory Portion...........................................................305 Article 1373. Size of Compulsory Portion .................................................................305 Article 1374. Definition of a Compulsory Portion of Each Successor.......................305 Article 1375. Inclusion of the Received Property into a Compulsory Portion ............306 Article 1376. Effects of Renunciation of a Testamentary Obligation .........................306 Article 1377. Allocation of a Compulsory Portion out of the Property not Envisaged in Will................................................................................................306 Article 1378. Increase of a Compulsory Portion at the Expense of a Gift Item .........306 Article 1379. Right of Claiming Replenishment of a Portion .....................................306 Article 1380. Refusal of a Compulsory Portion..........................................................306 Article 1381. Removal of Right to Compulsory Portion .............................................307 Article 1382. Transfer of Compulsory Portion to Testate Successors .......................307 CHAPTER 7. TESTAMENTARY OBLIGATION (LEGACY)............................................307

30

Article 1383. Concept ................................................................................................307 Article 1384. Object of Legacy ..................................................................................307 Article 1385. Usage of Dwelling Place on the Basis of a Legacy ..............................307 Article 1386. Non-alienation of Right of Usage of Dwelling Place ..........................307 Article 1387. Extent of Execution of Legacy .............................................................308 Article 1388. Execution of Legacy by Other Successors............................................308 Article 1389. Suspension of Execution of a Legacy .................................................308 Article 1390. Execution of Legacy in Proportion to Share in Legacy.........................308 Article 1391. Period of Execution of Legacy ..............................................................308 Article 1392. Legacy in Receiving Compulsory Portion ...........................................308 Article 1393. Responsibilities of Legatee .................................................................308 Article 1394. Renunciation of Legacy ......................................................................309 Article 1395. Release from Execution of legacy .......................................................309 Article 1396. Giving Legacy to Successors ..............................................................309 Article 1397. Testamentary Obligation for the Purpose of General Benefit ..............309 CHARTER 8. AMENDMENT OR REVOCATION OF WILL ...........................................309 Article 1398. Means of Amendment of Will ............................................................309 Article 1399. Inadmissibility of Restoration of a Revoked Will .................................310 Article 1400. Several Wills .......................................................................................310 Article 1401. Preference of Notarial Will....................................................................310 Article 1402. Grounds for Invalidating a Will ............................................................310 Article 1403. Void Will ............................................................................................310 Article 1404. Invalidity of Individual Testamentary Dispositions .............................310 Article 1405. Invalidation of Testamentary Disposition for Its Unfeasibility ...........311 Article 1406. Consequences of Invalidation of One of Testamentary Dispositions ..311 Article 1407. Accepting Succession in Void Will .......................................................311 Article 1408. Claiming Will Validity ........................................................................311 Article 1409. Date of a Claim ...................................................................................311 CHAPTER 9. EXECUTION OF WILL..........................................................................311 Article 1410. Subjects of Will Execution .................................................................311 Article 1411. Appointment of Executor of Will .........................................................312 Article 1412. Refusal of Execution of Will ................................................................312 Article 1413. Appointment of Executor of Will by a Third Person.............................312 Article 1414. Full or Partial Execution of Will ..........................................................312 Article 1415. Protection and Management of Estate ................................................312 Article 1416. Protection and Management of Estate by Several Executors...............312 Article 1417. Compensation of Expenses for Will Executor ......................................312 Article 1418. Report of Executor................................................................................313 Article 1419. Removal of Executor of Will .................................................................313 Article 1420. Liability of Executor of Will ..................................................................313 CHAPTER 10. ACCEPTANCE AND RENUNCIATION OF SUCCESSION ....................313 Article 1421. Acceptance of Succession ...................................................................313 Article 1422. Acceptance of Succession by Incapacitated Person ...........................313 Article1423. Acceptance of Succession through Representative ..............................314 Article 1424. Term for Acceptance of Succession .....................................................314 Article 1425. Special Term for Acceptance of Succession .........................................314 Article 1426. Extension of Term for Acceptance of Succession ................................314 Article 1427. Inadmissibility Estate Management ...................................................314 Article 1428. Right to Income Received Before Claiming ..........................................314 Article 1429. Consequences of Sale of Individual Items of Succession.....................315 Article 1430. Transfer of Estate ...............................................................................315 Article 1431. Consequences of Renunciation of Succession Through Transmission 315 Article 1432. Inventory of Estate..............................................................................315 Article 1433. Origination of Title in Estate .........................................................315 Article 1434. Term for Renunciation of Succession ..................................................315 Article 1435. Disallowance of Partial Acceptance Succession ..................................316

31

Article 1436. Renunciation of Agricultural Land ......................................................316 Article 1437. Acceptance of Several Shares in Estate ..............................................316 Article 1438. Renouncement of Part of Estate ........................................................316 Article 1439. Renunciation for the Benefit of Other Persons ....................................316 Article 1440. Increase in Share of Estate in Renouncing Estate .............................316 Article 1441. Renunciation of Succession by Sole Successor .................................317 Article 1442. Renunciation for Benefit of Several Successors ..................................317 Article 1443. Renunciation of Succession for the Benefit of Grandchild ..................317 Article 1444. Disallowance of Renunciation of Succession by Treasury...................317 Article 1445. Disallowance of Renunciation after Applying to Notary Bureau.........317 Article 1446. Irrevocability of Renunciation of Succession ......................................317 Article 1447. Renunciation in Case of Actual Ownership .........................................317 Article 1448. Transfer of the Right to Renounce by Succession ..............................318 Article 1449. Renunciation of succession through Representative...........................318 Article 1450. Term for Claiming Acceptance of Succession .....................................318 Article 1451. Origin of Legal Effects of Acceptance of Succession ..........................318 CHAPTER 11. DIVISION OF ESTATE.........................................................................318 Article 1452. Concept ...............................................................................................318 Article 1453. Definition of a Manner of Division of Estate by Testator....................318 Article 1454. Separation of a Share in Estate in Kind .............................................319 Article 1455. Inclusion of Gift into Successor’s Share .............................................319 Article 1456. Sale of Estate by Agreement of Co-Successors ...................................319 Article 1457. Transfer of Estate to One Co-Successor...............................................319 Article 1458. Suspension of Division of Estate........................................................319 Article 1459. Share Ownership on Indivisible Property .........................................319 Article 1460. Division of Agricultural Land Among Successors ...............................319 Article 1461. Disallowance of Division of an Agricultural Land ...............................320 Article 1462. Compensation of Share ......................................................................320 Article 1463. Transfer of Estate by Succession........................................................320 Article 1464. Common Ownership in a Family Estate ............................................320 Article 1465. Right of a Conceived Successor Upon Division of Estate ....................320 Article 1466. Imposition of Liabilities on One of Successors ..................................321 Article 1467. Obligation of Securing Share Reception ............................................321 Article 1468. Proportional Decrease ......................................................................321 Article 1469. Settlement of Dispute in Dividing Estate.............................................321 Article 1470. Right of a Share Disposition...............................................................321 Article 1471. Termination of Right of First Refusal ..................................................321 Article 1472. Satisfaction of Creditors in Alienating a Share ...................................322 Article 1473. Share Accretion ..................................................................................322 Article 1474. Results of Exclusion of Exclusion........................................................322 Article 1475. Consideration of a Special Merit in Equalizing ...................................322 Article 1476. Inadmissibility of Claiming Equalization ...........................................322 Article 1477. Demand of Fair Distribution ...............................................................322 Article 1478. Obligation of identifying Location of a Successor.................................323 Article 1479. Consequences of Non-appearance of Successor .................................323 Article 1480. Priority Right of Succession ................................................................323 Article 1481. Priority Right of Receiving Dwelling House .......................................323 Article 1482. Consideration of Property Interests of Successors...............................323 Article 1483. Postponement of Compensation .........................................................324 CHAPTER 12. SATISFACTION OF CREDITORS BY SUCCESSORS ...........................324 Article 1484. Responsibilities of Successors Towards Creditors .............................324 Article 1485. Burden of Proof ....................................................................................324 Article 1486. Liability of Successor to Pay Debts .....................................................324 Article 1487. Obligation to Notify Creditors Upon Opening of a Succession..............324 Article 1488. Term for Submission of Claims of Creditors .......................................324 Article 1489. Application of Total Limitation Period .................................................325

32

Article 1490. Postponement of Execution Period ......................................................325 Article 1491. Superiority of Creditors of an Inheriting Person ..................................325 Article 1492. Responsibility of a Treasury Towards Creditors ................................325 Article 1993. Consequences of Acceptance of Estate by Creditor ............................325 Article 1494. Creditor Satisfaction ...........................................................................325 CHAPTER 13. PROTECTION OF ESTATE .................................................................325 Article 1495. Concept ...............................................................................................325 Article 1496. Property Protection Obligation by a Notary Bureau .............................326 Article 1497. Inventory of Property ...........................................................................326 Article 1498. Nomination of Administrator of Estate ................................................326 CHAPTER 14. SUCCESSION CERTIFICATE ..............................................................326 Article 1499. Concept ................................................................................................326 Article 1500. Term for Issuing Succession Certificate .............................................326 Article 1501. Consent for Entry in Succession Certificate ........................................327 Article 1502. Issue of Succession Certificate to Successor’s Descendants ..............327 Article 1503. Issue of Succession Certificates to Co-successors .............................327 Transitional and Concluding Provisions of the Civil Code.........................................327 Article 1504. Entry into force of the Civil Code of Georgia ........................................327 Article 1505. List of Invalidated Laws .....................................................................327 Article 1506. Invalidated Subordinated Normative Deeds ........................................328 Article 1507. Action of the Civil Code in Time ..........................................................328 Article 1508. Application of Copyright Law Norms on Relations Arisen Before .......329 Article 1509. Legal Entities of Private and Public Law .............................................329 Article 1510. Non-commercial Legal Entities ..........................................................330 Article 1511. Re-registration of Non-commercial Legal Entities ...............................331 Article 1512. Partnerships of Apartment Owners ...................................................331 Article 1513. Ownership of Household Land ............................................................331 Article 1514. Registration of Immovables in the Transitional Period .......................331 Article 1515. Ensuring Openness of Registration Data.............................................331 Article 1516. Teaching of the Civil Code....................................................................332 Article 1517. Introduction of Bank Service Agreements ............................................332 Article 1518. Conclusion of Public Utility Agreement ................................................332 Article 1519. Ensuring of Unity of Definitions ...........................................................322 Article 1520. Organizational Issues for Introduction of the Civil Code......................322

33

CIVIL CODE OF GEORGIA

BOOK ONE

GENERAL PROVISIONS

PROVISION OF THE CIVIL CODE

Introductory Provisions

Article 1. Concept. Sphere of Activity

This Code governs the property, family, and personal relations of persons that are of

private nature and based on the equality thereof.

Article 2. Civil Legislation

1. The Civil Code, other norms of private law, and definitions thereof shall confirm to the

Constitution of Georgia.

2. In the case of collision of norms of one and the same level, a special and newer law is

applied. In the case of collision between general norms and special norms, the special

norms are applied.

3. Subordinated normative acts are applied to govern civil relations only if they

complement the norms of law. If these acts contravene the law, the law will apply.

4. Usage is applied only if it does not contravene the generally accepted standards of

justice and morality, or public order.

Article 3. Entry into Force of the Civil Law

1. The law and subordinated normative acts enter into force only following their publication

in the official press for general familiarization.

2. Ignorance of the law or its misunderstanding may not serve as a ground for

inapplicability of the law or for release from liability provided for by the law.

3. The law becomes invalid if the new law directly indicates it, or if the former law

contravenes the new one, or if the new law comprises the relations governed by the

former one, or if the relation governed by the law no longer exists.

4. A general law does not annual a special law unless such annulment constitutes a direct

purpose of the legislator.

5. The annulment of the law, which had annulled the former law, does not mean the

enactment of the former law.

2

Article 4. Inadmissibility of Refusal from the Administration of Justice in Civil

Proceedings

1. A court may not refuse to administer justice on civil cases even if the legal rule does not

exist or is unclear.

2. A court may not refuse to apply the law on grounds that it considers the rule of law as

being unjust or immoral.

Article 5. Analogy of Law

1. In order to govern relations that are not expressly stipulated by the law, the legal rule

governing more similar relations is applied (analogia legis).

2. Were it is impossible to use analogy of law, the relations shall be governed on the basis

of the general principles and the requirements of justice, good faith, and morality

(analogia juris).

3. Rules governing special relations (exclusionary rules) may not be applied by analogy.

Article 6. Retroactive Force of Civil Legislation Acts

Acts and bylaws of civil legislation do not have retroactive force, except for the cases

where this is directly provided for by law. A law may not be given retroactive force if it

inflicts damage or aggravates the situation of a person.

Article 7. Objects of Private Law

An object of the private legal relations may be a property or non-property material and

non-material value which pursuant to the law-established procedure is not withdrawn from

circulation.

Article 8. Subjects of Private Law

1. Any natural or legal person may be a subject of the private legal relations. This rules

applies to both entrepreneurial and non-entrepreneurial persons, whether Georgian or

foreign.

2. The private legal relations of legal persons of state bodies and public law with other

persons are also governed under civil legislation, unless these relations, proceeding

from state or public interests, are governed by public.

3. Participants in legal relations are required to exercise the rights and duties thereof in

good faith.

3

Article 9. Objective of Civil Legislation

The acts of civil legislation ensure the freedom of civil circulation on the territory of Georgia

unless the exercise of this freedom prejudices the rights of third parties.

Article 10. Independence of Civil Rights from Political Rights. Imperative Rules of Civil

Legislation

1. The exercise of civil rights does not depend on political rights which are specified by the

Constitution or other acts of public law.

2. Participants in civil relations may exercise any action not prohibited by law, including

those which are not expressly stipulated by law.

3. Imperative rules protect the freedom of others from abuse of their civil rights. The

actions which run counter to these rules are void, except for the cases where the law

expressly sets forth distinct results. Individual usage is prohibited by means of

administrative rules unless these rules are applied on the basis of a particular law.

SECTION ONE

PERSONS

CHAPTER 1. NATURAL PERSONS

Article 11. Legal Capacity

1. The legal capacity of a natural person - the capacity to have civil rights and duties -

originates at his birth.

2. The right of succession originates as soon as at his conception; the exercise of this right

depends on the birth.

3. The legal capacity of a natural person terminates upon his death. The termination of the

brain functioning is considered the moment of death.

4. A natural persons may not be deprived of his legal capacity.

Article 12. Capability

1. The capacity of a natural person to acquire and exercise civil rights and duties in full by

his own will and acts (capability) arises upon his majority.

2. A person is considered adult upon his attaining the age of eighteen years.

3. A person is considered capable upon his entering into marriage prior to reaching the

age of eighteen.

4. A minor under the age of seven is considered incapable.

4

5. A person who, as a result of mental disorder, is declared to be incapable by a court is

also considered incapable. Rights of such person are exercised by his legal

representative (guardian).

6. In the event that the person declared to be incapable recovers or his health significantly

improves, the court will declare him to be capable.

Article 13. Inadmissibility of Restriction of Capability under an Agreement

The restriction of capability is allowed only in the cases provided for by a law. The

restriction of capability under an agreement is impermissible.

Article 14. Restricted Capability

1. A minor between the ages of seven and eighteen is of restricted capability.

2. An adult over whom a guardianship is established by a court is also considered

incapable. A person restricted in capability is equalized by his capability with a minor.

3. The restriction of capability is revoked if the grounds upon which a person was restricted

in capability are no longer present.

Article 15. Consent of the Representative during Restricted Capability

The will expressed by a person restricted in capability is valid only subject to his legal

representative’s consent, except in the cases where the person restricted in capability

receives gains by way of a transaction.

Article 16. Restriction of Capability as a Result of the Abuse of Alcoholic Beverages or

Narcotic Substances.

1. An adult who, as a result of the abuse of alcoholic beverages or narcotic substances,

places his family in a grave material position may be restricted in capability by a court.

A curatorship is established thereover. He may conclude a property disposition

transaction, and also dispose of wages, a pension, and other income only with the

consent of the curator, except when concluding petty, ordinary transactions.

2. The restoration of capability in full revokes the curatorship.

Article 17. Right to a Name

1. Any natural person is entitled to use his own name that includes his own name and

surname.

2. A change of name is permissible. It will require the person’s justified application to be

considered by a respective body under established procedure.

5

3. A change of name is not grounds for termination or alternation of the rights and duties

acquired under the previous name. The person is required to take the necessary

measures to inform his creditors and debtors about the change of his name.

Article 18. Personal Non-property Rights

1. A person whose right to a name is contested, or whose interests are harmed as a result

of the wrongful use of his name is entitled to demand from the offender the termination

of such action or giving it up.

2. A person is entitled to demand in court the refutation of information defaming his

honour, dignity, confidentiality of personal life, inviolability of the person, or business,

reputation unless the disseminator of such information proves that it is true. The same

procedure applies in the case of an incomplete publication of factual information if it

defames the person’s honour, dignity, and business reputation.

3. If information defaming the honour dignity, confidentiality of the personal life, or

business reputation of a person has been disseminated in mass-information media, it

must be retracted to the same mass-information media. If said information is contained

in a document emanating from an organization, the document has to be replaced and

the person concerned notified about that.

4. A person with respect of whom mass-information media have published information

defaming his honour and dignity is entitled to the publication of his reply in the same

mass-information media.

A person is entitled to the right of demand provided for in items 1 and 2 of this Article

also when his depiction (photo, film, video, etc.) has been published without his

consent. The consent of a person is not required where the film shooting (video

shooting, etc.) is associated with his public recognition, the position held, the

requirements of justice or police, the purposes of science, education, or culture, or

where the film shooting (video shooting, etc.) took place in public circumstances, or the

person received remuneration for posing.

The protection of good provided for in this Article is effected irrespective of the

offender’s guilt. Where the offence is inflicted as a result of guilty actions a person may

demand the compensation of the harm (damage). The harm may be compensated in

the form of revenue received by the offender. In the case of a guilty offence an

authorized person is entitled to demand also the compensation of non-property (moral)

harm. Moral harm may be compensated independently from the compensation of

property harm.

6

Article 19. Protection of Personal Rights after Death

The rights specified in Article 18 may also be applied by a person who, though not being

a bearer of a name or personal dignity right, has an interest worth protecting. He may

demand the implementation of such protection of his name and dignity which

determines the person’s being and continues after his death too. A demand for

compensating moral harm for defaming a person’s name, honour, dignity, or business

reputation is inadmissible after his death.

Article 20. Place of Residence

1. The place of residence of a natural person is considered the place which he chooses as

usual residence. A person may have several places of residence.

2. The place of residence of a minor is deemed to be the place of residence of his parents,

adoptive parents, or guardian - if the person is under guardianship.

3. The place of residence of a person is not revoked if he leaves the place under

compulsion or with the purpose of performance of a state duty for a certain period of

time.

Article 21. Declaring a Person to be Missing

1. Upon the application of an interested person, a natural person may be declared to be

missing by a court if, during the course of two years, his whereabouts are unknown and

he does not appear at his place of residence. Upon entry of the court judgment into

force, the legal successors acquire powers to manage property of the person declared

to be missing in the form of entrusted property, including gains from it. On account of

this property allowances will be paid to dependents of the missing person and debts will

be covered.

2. In the event that a person declared to be missing appears or his whereabouts become

known, a court revokes the judgment concerning the management of the property of

this person. The person is not entitled to receipt of the gains from the management of

his property in the course of his being missing.

Article 22. Declaring a Person to be Deceased

1. A person may be declared to be deceased by a court if there is no information at his

place of residence in the course of five years concerning his whereabouts, or of six

months if he disappeared without being heard from under circumstances threatening

death or giving grounds to assume that he has died in a particular accident.

7

2. A military serviceman or other person who disappeared without being heard in

connection with military operations may be declared by a court to be deceased not

earlier than after the expiration of two years from the date of cessation of the military

operations.

3. The date of entry into legal force of a court judgment declaring a person to be deceased

is deemed to be date of his death.

In the cases provided for in item 1 and 2 of this Article a court may declare that the day

of the presumed death is the day this person died.

Article 23. Consequences of the Appearance of a Person Declared to be Deceased

1. In the event that a person declared to be deceased appears or his whereabouts become

known, the relevant judgment will be revoked by a court.

2. Regardless of the time of appearance, a person may demand the return of property

presented which passed to another person gratuitously subsequently to the declaration

of the person to be deceased.

3. A person to whom property of a person declared to be deceased has passed with

consideration is required to return this property thereto if it is proven that, when

acquiring the property, he knew that the person declared to be deceased was alive.

4. If property of a person declared to be deceased passed to the treasury, and was

realized thereby, then subsequently to the revocation of the judgment concerning the

declaration of the person to be deceased the amount received from the property

realization will be returned to the person.

CHAPTER 2. LEGAL PERSON

1. General Provisions

Article 24. Concept. Types

1. A legal person is an organizational formation founded for achieving a definite objective

that has own property and is independently liable for its obligations with its property,

may in its own name acquire rights and duties, and appear as a plaintiff or defendant in

court.

2. A legal person may be: corporatively organized, based on membership, dependent or

independent on the position of members, and engaged or not engaged in

entrepreneurial activity.

8

3. Legal persons of public law participate in the civil legal relations like legal persons of

private law. The procedure for their establishment, organization and activity is

established by a law.

4. The state participates in the civil and legal relations like a legal person of private law.

The powers of the state at the time will be exercised by its bodies (ministries, state

departments, etc.) which are not legal persons.

Article 25. Legal Capacity of a Legal Person

1. A legal person of public law is entitled to exercise any activity conforming to the aims

provided for in a law or its founding documents.

2. A legal person of private law (commercial or non-commercial) is entitled to engage in

any type of activity not prohibited by a law, irrespective of whether this activity is

stipulated in a charter.

3. A legal person may only engage in certain kinds of activity, a list of which is established

by a law, on the basis of a special permit (a license). The right to carry out this activity

originates as of the moment of receipt of the permit (license).

4. The legal capacity of a legal person originates as of the moment of its foundation and

terminates as of the moment of completion of its liquidation.

Article 26. Name of a Non-entrepreneurial (Non-commercial) Legal Person

1. A non-entrepreneurial legal person has its own name containing an indication of its

organizational-legal form. A firm name of a entrepreneurial legal person is regulated by

the law on entrepreneurs.

2. A person who wrongfully uses the name of another legal person is required, at the

demand of the authorized person, to cease the use thereof and to indemnify the

damage caused.

In the case of defamation of the honour, dignity, or business reputation of a legal

person, the rules of Article 18 are applied.

Article 27. Seat of a Legal Person

1. The seat of a legal person is deemed to be the place where its administration is located.

A legal person may only have one seat (legal address).

2. Other seat of a legal person shall be deemed to be the seat of its branch.

9

Article 28. Branch of a Legal Person

1. A branch of a legal person is a distinct division which is located outside the place of its

seat and exercises all or a part of its functions.

2. A branch does not enjoy legal personality. It operates on the basis of regulations

confirmed by the legal person.

Article 29. Entrepreneurial (Commercial) Legal Persons

A legal person whose aim is entrepreneurial activity may be founded in accordance with

the Law of Georgia «On Entrepreneurs».

Article 30. Non-entrepreneurial (Non-commercial) Legal Persons

1. A legal person whose aim is not entrepreneurial activity may be founded in the form of a

union (association) or a fund. The entrepreneurial activity, which is of auxiliary nature

and serves to achieving of the common aim, does not replace the character of a non-

commercial legal person. The distribution of profit obtained from such activity among

members of a union and contributors to a fund is inadmissible.

2. A union is a legal person whose common aim is set by several persons and whose

existence depends on the change of its membership. Five founding members at least

are necessary in order to found a union.

3. A fund is a legal person without membership founded by several persons on the basis of

transfer of special property to the ownership of an independent subject pursuing

socially-useful aims.

II. General Rules on a Union and Fund

Article 31. Registration of a Union and Fund

1. The registration of a union is carried out by a court, while the registration of a fund - by

the Ministry of Justice.

2. The claim of registration exists where the charter confirms to the law and the aims of a

legal person presented for registration do not contravene the legislation in force, the

recognized moral standards or the constitutional-legal principles of Georgia. In the case

of a fund, the property shall correspond to the aims set.

3. An application signed by all founders and members of the board of management and

the charter confirmed thereby are necessary for registration. The materials required for

registration are presented to a court operating at the place of seat of the union.

10

4. A court shall decide on the registration within a month’s period as of the date of filing an

application. If, within this period, the court fails to make a decision, the registration shall

be deemed to be effected. The same rule applies where registration is carried out by

the Ministry of Justice.

5. The refusal of registration shall be justified and shall provide for the possibility of

appealing. An appeal may be brought in court against the refusal of registration.

Article 32. Charter of a Union and Fund

1. The organization and structure of a union and fund are governed by the charter.

2. The charter shall include:

a) aims of activity;

b) name;

c) seat (legal address);

d) procedure for property liquidation and distribution;

e) names, surnames, date of birth, occupation and the place of residence of all

founders, contributors, members of the board of management of a union or fund,

regulations for calling board meeting and decision making thereon;

f) powers of a union members.

3. The charter may also include other data, namely:

a) functions of other bodies of management and control;

b) competence of the meeting of members of a union.

4. The charter of a fund, apart from the data indicated in item 2 of this Article, shall include:

a) minimum amount and type of contributions;

b) instructions on the use of the amount.

5. The charter shall be subject to notarial authentication.

Article 33. Registration Data

1. A registration document of a union or fund includes the following data: the name and

seat of a legal person, aims of activity, date of adoption of the charter, personality of

founders, personality of members of the board of management and the possible

restrictions of their representative authority.

2. The registration data shall be published.

11

3. Any person may familiarize himself with records of the register and demand excerpts in

writing therefrom.

Article 34. Registration of Alterations

The alterations requiring registration shall be immediately presented to court (Ministry of

Justice) in the notarially-authenticated form. They are entered into the register and

published.

Article 35. State Supervision over the Activity of a Union or Fund

The court (Ministry of Justice) must revoke registration if a union or fund has essentially

switched over to entrepreneurial activity, or if the achievement of aims specified by the

charter becomes impossible.

Article 36. Management and Representation

1. Members of the board and, in certain cases, special representatives have the right of

management, which concurrently is the duty thereof.

2. The limits of management are defined by the charter in accordance with the aims of a

union or fund.

3. The charter may envisage the authority of one person to manage the affairs, or

establish the joint management by two or several persons.

4. The charter may provide for the requirement of the consent of other supervisory bodies

for the conduct of this or that activity.

Article 37. Competence of the Board in Relations with Third Parties

1. The board represents a union or fund in relations with third parties. The charter shall

regulate whether the authorized representatives would act individually, in several

persons, or all together.

2. The right of representation may be restricted under the charter. These restrictions shall

apply to third parties only if they are recorded in the register, except for the cases

where the third parties knew about these restrictions.

3. The charter may provide for the existence of a special representative of a union or fund.

The charter shall regulate the limits of his representative powers and the form of

representation, which are also subject to registration.

12

Article 38. Indemnification of Damage

1. A union and fund are liable for the damage incurred to third parties in performing by

members of the board or other representatives the duties assigned to them as a result

of the activity entailing the damage indemnification liability.

2. Authorized representatives must conduct affairs in good faith. If they fail to fulfill this

duty, they shall be liable before a union or fund for the caused damage. A refusal to

indemnify the damage is invalid if it necessary for meeting demands of third parties.

3. Members of a union or fund are not liable for the obligations thereof, as well as the

union or fund are not liable for obligations of their members.

Article 39. Reorganization and Liquidation of a Union and Fund

1. The reorganization of a union or fund (merger, accession, division, separation,

transformation) is effected under the procedure established by legislation.

2. The liquidation of a union or fund is effected in the instances provided for in the charter,

as a result of achieving the aim, bankruptcy, or revocation of registration.

3. During liquidation the current affairs shall be completed, the requirements established,

the remaining property expressed in money terms, creditors satisfied and the remaining

property distributed among authorized persons.

4. Persons entitled to the receipt of property, may be determined by the charter. The court

or the Ministry of Justice shall transfer the remaining property accordingly to one or

several unions or funds which serve the same or related aims like the liquidated union

or fund. In the case such organizations are absent, a decision may be made on the

transfer of the property to a charitable organizations or to the state.

5. Information concerning liquidation shall be published. The property may be distributed

within one year as of the date of publication.

6. Liquidation is carried out by the management. In the case of exceptional circumstances

the court (the Ministry of Justice) may appoint other liquidators. The liquidators are

liable in the same manner as members of the management

III. Special Rules on a Union

Article 40. Boards of Management

1. The board of management is elected by the general meeting of the members for a

period of four years unless the charter specifies otherwise. The powers of the

management are in force after the expiration of this term and until a new board of

13

management is elected. The charter may also provide for the remuneration of the

activity of the members of the board of management.

2. A decision on the election of the board of management may be revoked at any time.

The question of revocation may be connected with the existence of sufficient grounds.

3. If the number of the members of the board of management fails to reach the required

minimum provided for in the charter, a court may appoint the members for the

transitional period from the same union. In this case, the members of the board of

management shall convene the general meeting of the members to make the final

decision.

Article 41. General Meeting of the Members of a Union

1. The general meeting of the members of a union is convened by the board of

management once a year at least, or where interests of the union so require. The

general meting may be convened by a request in writing of one-tenth of the members

with indication of the meeting’s agenda.

2. All members shall be notified in writing on the convocation of the meeting or through

publication of the information in an official publication body of the union in advance of

two weeks at least before the meeting.

3. The meeting of the members decides on all the matters of the union being outside the

board’s competence. A decision is valid only if it has been included in the agenda of the

meeting.

4. Decisions at the meeting are made by a majority vote of the members present, and a

decision on the alteration of the agenda - be a majority vote of two-thirds. A decision on

the alternation of the union’s aim shall require four-fifth of the votes of all the members.

The members, who cannot be present at the meeting, may vote in writing. They have

equal rights with the members present and voting.

Article 42. Commissions

The meeting of the members may under the charter set up commissions, delegating to

them powers of the meeting in between the meetings, especially for exercising control over

the union’s activity. Members of a commission may be elected only from among the union

members.

14

Article 43. Advisory Bodies

In the course of achieving its aims the meeting of the members may establish special

advisory councils if the charter so provides. Such bodies may also unitl those who are not

the union members.

Article 44. Union Membership

1. Admittance of members to a union if effected on the basis of a written application or in

other cases provided for in the charter.

2. Any member of the union may withdraw from it. The charter may provide for a fixed term

of withdrawal which shall not exceed one year. If the withdrawal from the union is

caused by a justifiable reason, the establishment of a withdrawal term will not be a

must.

3. Membership is not transferred to another person and is not to be inherited unless the

charter provides otherwise.

4. In the cases provided for in the charter or sufficient grounds the general meeting of the

members may expel a member from the union. The expelled member is entitled to

appeal the decision against in court.

5. Where the union performs a significant function for the membership applicant in the

implementation of vital social or other tasks, the person has the right to claim joining the

union unless his membership contradicts the basic principles of the union.

Article 45. A Non-registered Union

1. The matters of arranging and make-up of a non-registered union are decided under

mutual agreement of the members. A non-registered union is not a legal person.

2. Membership contributions and the assets acquired on the basis of such contributions

constitute the common property of the union.

3. A non-registered union may be represented in a court or court-outside relations through

its members or duly-authorized persons.

4. Creditor claims may be satisfied from the common property of a union. At the same

time, the persons acting on behalf of the union shall be liable in person, and as joint

debtors.

IV. Special Rules on a Fund

15

Article 46. Fund for Destinataires

The fund’s aim, apart from the one provided for in item 3 of Article 30, may be also the

support of definite persons or their concretely defined circles.

Any person entitled to a share from the fund’s property (destinataire) may, subject to the

unanimous decision of all the members of the management, dissolve the fund or alter the

fund’s aim unless the Ministry of Justice is against. The property remaining after liquidation

is distributed among the destinataires.

Article 47. Fund Contribution Liability

1. A founder (founders) shall, under a notarially authenticated founding documents,

assume a liability for contributing property to a fund in the amount which is necessary

for achieving the fund’s aim. If the property is insufficient , he shall be refused the fund’s

registration.

2. A refusal for the property transfer may be made at any time prior to registration. The

property shall be transferred in full within one month from the date of registration;

otherwise the registration shall be invalidated.

3. Aims of the fund shall be financed from the income received from the property unless

the charter provides otherwise. Where these income is not sufficient for a definite period

of time, the activity of the fund shall be accordingly restricted or suspended, while the

revenues shall be added to the fund property.

4. A report on the state of property shall be drawn up annually in the established form.

Article 48. Supervisory Body

1. With the purpose of appointing, withdrawing and controlling the board of management

and special representatives the charter shall provide for the creation of a supervisory

body (curatorship) whose members are invited by the founders of the fund. Upon

decease of the founders the composition of the supervisory body may be increased with

new members by way of cooperation by destinatairs or within the limits specified by the

charter.

2. In all other cases, the Ministry of Justice supervises that the fund management be

exercised in accordance with a law and the charter. The Ministry of Justice may, at any

time, obtain information on the fund activity and check its documentation.

3. The supervisory body (curatorship) may suspend the board’s decisions and measures,

declare them invalid or require their revocation if they run counter to a law or the

charter.

16

4. The supervisory body ensures that the appointment of the management and other

bodies corresponds to the charter. If the charter fails to sufficiently regulate these

relations, the body may issue additional instructions.

Article 49. Altering Fund’s Aim

If the aim set may not be achieved without destinataires or other grounds exist for

liquidation of the fund, the Ministry of Justice may, unless it is indicated in the charter,

require altering of the fund’s aim instead of its liquidation, or exercise merger with other

initial aim; in case any of the founders is alive, his consent shall be a must.

SECTION TWO

TRANSACTIONS

CHAPTER 1. GENERAL RULES

Article 50. Concept

A transaction is a unilateral, bilateral or multilateral expression of the will directed towards

the establishment, alteration, or termination of legal relations.

Article 51.Validity of a Unilateral Will Expression

1. The expression of the will which requires its approval by the other party shall be

deemed to be valid when it reaches the other party.

2. The expression of the will is not valid if the other party renounces it in advance or

immediately.

3. The validity of the will expression may remain uneffected by the decease of the

transactor or the loss of his capability if these events took place after the expression of

the will.

Article 52. Defining the Expression of the Will

In defining the expression of the will, the will shall be established as a result of reasonable

consideration and not only from the oral word-by-word sense of the expression.

Article 53. Non-existence of a Transaction for Non-definition of its Content

A transaction does not exist if neither its appearance nor other circumstances may serve

for the accurate establishment of the transactions content.

Article 54. Illegal and Immoral Transactions

A transaction concluded for a purpose contrary to the principles of legal order or morality is

void.

17

Article 55. Invalidity of a Transaction for the Abuse of Authority

1. A transaction may be considered as void if between the performance stipulated by the

transaction and the compensation provided for this performance there is an obvious

discrepancy, and the transaction was concluded only owing to the fact that one party to

the transaction had abused his market authority or profited by the grave circumstances

of another party or by his inexperience (naivety).

2. Void is a transaction concluded by abusing influence of one party upon another when

their relations are based on particular trust.

Article 56. Fictitious and Sham Transactions

1. A transaction which is concluded only for appearance without the intent to create the

legal consequences corresponding thereto (a fictitious transaction) is void.

2. If by concluding a fictitious transaction the parties intend to conceal another transaction,

then the rules applicable to the concealed transactions are used (sham transaction).

Article 57. Invalidity of a Transaction for Non-seriousness of the Expression of the Will

1. An expression of the will which is made in a non-serious manner (jokingly) under

assumption that the non-seriousness would be guessed is void.

2. A recipient of the will shall be indemnified the damage resulting from the fact the he

trusted the expression to be serious if he did not know and could not have known about

the non-seriousness.

Article 58. Invalidity of a Transaction for Incapability or Mental Disorder

1. An expression of the will by a minor or a person declared by a court incapable is void.

2. An expression of the will during a loss of consciousness or temporary mental disorder

may be considered void.

3. An expression of the will by a mentally ill person which does not correspond to the

correct perception of reality is void, even if he is not declared incapable by a court.

Article 59. A Transaction Concluded Contrary to the Form

1. A transaction concluded contrary to the necessary form provided for in a law or

agreement is void, as well as a transaction concluded without permission where the

transaction is subject to licensing.

2. A contestable transaction is void as of the moment of its conclusion if it has been

contested. A contest is effected by other party to the agreement.

3. The right of contest shall have any interested person.

18

Article 60. Conversion of a Transaction

If a void transaction satisfies the requirements provided for other transactions, the latter

shall apply if upon understanding invalidity of the transaction the parties wish for its

validity.

Article 61. Significance of Confirmation in Voidable Transactions

1. An incontestably voidable transaction is considered void as of the moment of its

conclusion.

2. If a person, who concludes an incontestably voidable transaction, confirms it, his actions

will be regarded as a repeated conclusion of the transaction.

3. If a transaction is confirmed by a person entitled to contesting, he loses his right to

contest by doing so.

4. If the bilateral parties confirm an incontestably void transaction, they are required to

return to each other everything they would have received should the transaction had

been initially valid.

5. The confirmation will become valid only on condition that the transaction is not contrary

to the principles of morality and public order.

Article 62. Invalidity of a Part of a Transaction

The invalidity of a part of a transaction does not involve the invalidity of its remaining parts

if it can be assumed that the transaction would also have been concluded without the

inclusion of its invalid part.

CHAPTER 2. CAPABILITY AS A TRANSACTION VALIDITY CONDITION

Article 63. A transaction Concluded by a Minor

1. If a minor concludes a bilateral transaction (agreement) without the consent of his legal

representative, the validity of the transaction depends on whether his representative will

approve it or not, except for the cases where he receives gains.

2. If a minor becomes competent, he himself will decide on the validity of the expression of

his will.

Article 64. Repudiation of a Transaction Concluded by a Minor

Prior to the approval of an agreement concluded by a minor, the other party has the right

to repudiate the agreement.

19

If the other party knew about minority of the person, he has the right to repudiation only in

the event where the minor deceived him about his receiving the consent from the legal

representative.

Article 65. Emancipation of a Minor

1. An agreement concluded by a minor without the consent of his legal representative is

valid if the minor, for the purpose of fulfilling the actions stipulated by the agreement,

disposed of the means transferred to him by his legal representatives or - upon consent

of these representatives - by third parties for said purpose or for the purpose of free

disposal.

2. If a legal representative assigns the right to freely manage the enterprise to a minor who

has reached the age of sixteen years, then he becomes absolutely competent in the

relations usual for the given activity. This rule also applies to the establishment and

liquidation of an enterprise as well as to the initiation or completion of labour relations.

3. The right to manage an enterprise is subject to the consent of a legal representative in

agreement with the guardianship and care agency.

Article 66. Invalidity of a Transaction Concluded without the Necessary Consent of the

Representative

A unilateral transaction concluded by a minor without the consent of the legal

representative is void. Such transaction is also void where the consent of the legal

representative exists, but the minor fails to produce a written document attesting it, for

which reason the other party to the transaction shall immediately repudiate it. Such

repudiation is inadmissible if the other party was informed about this consent of the legal

representative.

Article 67. Necessity of a Consent Prior to the Capability Restriction

A transaction concluded prior to the restriction of capability requires the consent if it is

proven that the grounds upon which the restriction of capability took place expressly

existed at the time of concluding the transaction.

CHAPTER 3. FORM OF A TRANSACTION

Article 68. Significance of a Form for Validity of a Transaction

The validity of a transaction requires the compliance with a form established by a law.

Should such a form be lacking, the parties themselves may establish it.

20

Article 69. Types of Forms

1. In the case of a simple written form the signatures of the parties to the transaction will

be sufficient for the transaction validity.

2. The use of a facsimile reproduction of a signature with the assistance of mechanical or

other means of copying is allowed where it is an approved usage, namely in affixing

handwritten signatures on securities issued in great numbers.

3. Where the form of transaction requires notarial authentication, the authentication shall

be made by a notary, a court, or by other person duly authorized by a law.

Article 70. Transfer of Signature to Another Person

If as a consequence of physical defect, illness or illiteracy, a person cannot affix his

handwritten signature, at his request another person may sign the transaction. The

signature of the latter must be authenticated officially, with a concurrent identification of the

reasons why the person concluding the transaction could not affix his handwritten

signature thereto.

Article 71. Conclusion of a Transaction with Drawing Up of Several Documents

Where a transaction is concluded with drawing up of several documents of the same

content, it is sufficient that each party signs the copy of the document which is intended for

the respective party.

CHAPTER 4. VOIDABLE TRANSACTIONS

I. Transactions Concluded under the Influence of Error

Article 72. Concept

A transaction may become voidable if the expression of the will took place on the basis of

an essential error.

Article 73. Types of an Essential Error

An error is deemed to be essential where:

a) a person intended to conclude a transaction other than that to which he has consented;

b) a person misunderstands the content of a transaction which he intended to conclude;

c) the circumstances to be considered by the parties, proceeding from the principles of

good faith, as the grounds for a transaction do not exist.

21

Article 74. Errors in Relation to the Identity of a Contracting Party

1. An error in relation to the identity of a contracting party is essential only where the

identity of the contracting party itself or the regard for his personal qualities is the main

grounds for concluding a transaction.

2. An error in relation to the basic qualities of the object is deemed to be essential only if

has significance in determining the value of the object.

Article 75. Errors in Relation to Rights

An error in relation to a right is of essential significance only in the case where it was a

sole and main ground in concluding a transaction.

Article 76. An Error in Relation to the Motives of a Transaction

An error in relation to the motives of a transaction shall not be considered essential, except

for the cases where a motive constitutes the object of a transaction.

Article 77. Consent of a Contracting Party in Transactions Concluded under the

Influence of Error

An expression of the will under the influence of error may not be violable if the other party

agrees to fulfil the transaction in accordance with the wish of the party seeking to make the

transaction voidable.

Article 78. Minor Errors

Minor errors in calculation or in the written expression of the will assign the right only to

correct and not to claim.

Article 79. Validity of Claiming

1. A claim shall be effected within one month as of the moment the grounds for claiming

have become known.

2. If a transaction becomes voidable and the error arises by guilt of the person entitled to

claim, he shall be liable to indemnify to the other party the damage caused by invalidity

of the transaction. The damage indemnification liability does not arise if the other party

knew about the error, or it was unknown to him owing to his carelessness.

Article 80. An Error Caused by an Agent

An expression of the will which has been mistakenly notified by a person operating as an

agent may become voidable on the same conditions as the transaction concluded under

the influence of error pursuant to Article 73.

II. Transactions Concluded under Influence of Fraud

22

Article 81. Concept

1. If a person was deceived for a purpose of concluding a transaction, he is entitled to

claim invalidity of such transaction. This takes place where it is evident that without

fraud the transaction would not be concluded.

2. If one of the parties keeps silence with regard to circumstances owing to which the other

party would not express his will, then the deceived party may claim invalidity of the

transaction. A liability to disclose exists only if the party expected it in good faith.

Article 82. Invalidity of a Transaction under Influence of Fraud

For declaring a transaction concluded under influence of fraud void it is of no importance

whether by notifying the incorrect data the party aimed at receiving any gains or incurring

damage to the other party.

Article 83. Fraud by a Third Party

1. In the case of fraud on part of a third party a transaction may be claimed to be declared

void if the person receiving gains from the transaction knew or should have known

about the fraud.

2. If both parties to a transaction acted fraudulently, none of them is entitled to claim

invalidity of the transaction or indemnification of the damage.

Article 84. Deadline of a Claim

A transaction concluded under influence of fraud may become voidable within one year.

The term shall be counted off as of the moment when the person entitled to claim has

become aware of the existence of the claiming grounds.

III. Transactions Concluded under Influence of Force

Article 85. Concept

Using force (violence or threat) against a person for the purpose of concluding a

transaction shall entitle the person to claim invalidity of the transaction even where the

compulsion was effected by a third person.

Article 86. Nature of Compulsion

1. A transaction becomes void by such compulsion which, owing to its nature, may affect a

person and make him think about the real danger threatening his personality or

property.

2. In assessing the nature of compulsion, the age, sex, and living circumstances of person

are taken into account.

23

Article 87. Compulsion against a Person's Relations

Compulsion constitutes the grounds for declaring a transaction void also if it is directed at

the spouse, other family members or close relations of one of the parties to the

transaction.

Article 88. Compulsion through Legitimate Actions

In accordance with Articles 85-87, the actions which are not carried out either for illegal

purposes or with application of illegal means are not regarded as compulsion, except for

the cases where a means and the purpose run counter to each other.

Article 89. Deadline of a Claim

A transaction concluded under influence of force may become voidable within a year as of

the moment of the compulsion completion.

CHAPTER 5. CONDITIONAL TRANSACTIONS

Article 90. Concept

A transaction is conditional where it is dependent on a future and unknown circumstance

with regard to which the postponement of the transaction's fulfillment is effected prior to its

occurrence, or the transaction's suspension - upon its occurrence.

Article 91. Invalidity of an Illegal or Immoral Condition

A condition not complying with the requirements of a law or the principles of morality, or

which cannot be fulfilled is void. A transaction dependent on any of such conditions is void

in full.

Article 92. A Will-dependent Condition

A condition is deemed to be dependent on the will if its occurrence or non-occurrence

depends only on the parties to the transaction. A transaction concluded under such

condition is void.

Article 93. Positive Condition

1. If a transaction is concluded on condition that any event occurs at a fixed period, then

the transaction is void if the period has passed and the event has not occurred.

2. If the period is not fixed, the condition may be fulfilled at any time. The condition may be

considered as void where it is evident that the occurrence of the event is no longer

possible.

24

Article 94. Negative Condition

1. If a transaction is concluded on condition that any event does not occur at a fixed

period, then the condition is regarded as unfulfilled, provided the indicated period

passes without occurrence of the event. The condition is also regarded as unfulfilled

where prior to the expiration of the period it is evident that the occurrence of the event is

no longer possible.

2. If the period is fixed, the condition is regarded an unfulfilled only where it is evident that

the event will not occur.

Article 95. Inadmissibility of Impact Prior to Occurrence of a Condition

1. A person, who has concluded a transaction on a certain condition has no right to

perform any action which may impede the fulfillment of his obligation prior to occurrence

of the condition.

2. If a condition occurs at a fixed time and a person has already performed such action,

then he is liable to indemnify to the other person the damage caused by such action.

Article 96. A Transaction on Condition of Postponement

A transaction on condition of postponement is considered concluded if the origin of the

rights and duties provided for in the transaction is dependent of a future and unknown

circumstance, or upon the circumstance which has already occurred but is yet unknown to

the parties.

Article 97. A Transaction on Condition of Cancellation

A transaction on condition of cancellation is considered concluded where the occurrence

of the condition results in cancellation of the transaction and restoration of the state which

existed prior to conclusion of the transaction.

Article 98. Significance of Good Faith Upon Occurrence of a Condition

1. If the occurrence of a condition has been impeded in bad faith by a party for which such

occurrence is unfavourable, the condition is deemed to have been occurred.

2. If the occurrence of a condition has been facilitated in bad faith by a party for which

such occurrence is favourable, the condition is deemed to have not been occurred.

CHAPTER 6. CONCEPT IN TRANSACTIONS

Article 99. Concept

1. If validity of a transaction depends on the consent of a third party, then both the consent

and the refusal thereto may be expressed before either one or the other party.

25

2. Consent does not require observance of the form established for a transaction.

3. If a transaction , which validity depends on the consent of a third party, is concluded

with his consent, the 2nd and 3rd sentences of Article 66 shall accordingly apply.

Article 100. Preliminary Consent (Permit)

A preliminary consent (permit) may be revoked prior to conclusion of a transaction, unless

the parties agree otherwise. The revocation of the consent (permit) shall be notified to both

parties.

Article 101. Subsequent Consent (Approval)

A subsequent consent (approval) has not a retroactive force as of the moment of the

conclusion of a transaction, unless otherwise provided.

Article 102. Disposition of a Thing by an Unauthorized Person

1. The disposition of a thing by an unauthorized person is valid provided it is carried out

with the preliminary consent of an authorized person.

2. A disposition becomes valid provided an authorized person approves it.

CHAPTER 7 . Representation in Transaction

Article 103. Concept

1. A transaction may be concluded through a representative as well. Authority of a

representative proceeds from this law or originates on the basis of a assignment (power

of attorney).

2. This rule does not apply where, proceeding from the nature of a transaction, it is to be

concluded directly by the person, or where the conclusion of a transaction through a

representative is not allowed by a law.

Article 104. Addressee of Results of a Transaction in Representation

1. A transaction, concluded by a representative within the limits of his authority in the

name of a person whom be represents, creates civil rights and duties only of the person

represented.

2. If a transaction is concluded in the name of another person, then the absence of the

power of attorney may not be used by the other party to the transaction, provided the

representative created the circumstance under which the other party to the transaction

thought the existence of such power of attorney in good faith.

3. If, upon conclusion of a transaction, a representative fails to indicate his power of

attorney, the transaction will create results directly for the person represented, provided

26

the other party should have supposed about the representation. The same rule applies

where it does not matter for the other party whom a transaction will be concluded with.

Article 105. Limited Legal Capacity of a Representative

A transaction concluded by a representative at the time where he has the limited legal

capacity is also valid.

Article 106. Will Expression Deficiency in Representation

1. In claiming a transaction because of the will expression deficiency, the will of a

representative shall be decisive.

2. If the will expression deficiency relates to circumstances preliminarily determined by the

person represented, the indicated deficiency shall create the right to claim only if this

deficiency proceeds from the person represented.

Article 107. Power of Attorney

1. The issuance of a power of attorney is effected through an expression of the will vis-à-

vis a representative or a third person for representation.

2. The expression of the will does not require the form necessary for conclusion of a

transaction for which a power of attorney is issued. This rule does not apply where a

special form is established.

Article 108. Obligation of Notification in Altering a Power of Attorney

The alterations in a power of attorney and the revocation thereof shall be notified to third

persons. In the case of non-performance of this requirement the alterations and the

revocation of the power of attorney may not apply to third persons, except for the cases

where the parties during the conclusion of an agreement knew or should have known

about it.

Article 109. Grounds for Termination of a Power of Attorney

1. The validity of a power of attorney is terminated as a result of:

a) expiration of the time period from which the power of attorney was issued;

b) renunciation by the person to whom the power of attorney was issued;

c) revocation of the power of attorney by the person who issued it;

d) death of the person who issued the power of attorney or declaration that he lacks

legal capacity unless the agreement provides otherwise;

e) completion.

27

Article 110. Obligation of a Representative in Terminating a Power of Attorney

Upon termination of a power of attorney, the representative is required to return the power

of attorney to the person who has issued it. He has no right to keep the document.

Article 111. Conclusion of a Transaction without a Power of Attorney

1. If a person concludes a transaction in the name of another person without a power of

attorney, the validity of this transaction depends on the consent of the person

represented.

2. If the other person requires the consent from the person represented, then this consent

must be notified only to him. The consent may be given within two weeks as of the date

of the requirement. If this fails to happen, then the requirement for the consent is

deemed to be rejected.

Article 112. Right to Repudiate an Agreement

Prior to giving the consent for concluding an agreement, the other party is entitled to

repudiate the agreement, except for instances where he knew about the power of attorney

deficiency during the conclusion of the agreement. A repudiation of the agreement may be

also expressed in relation to the representative.

Article 113. Obligation of a Representative in the Existence of the Power of Attorney

Deficiency

1. If a person concluding an agreement as a representative fails to confirm his authority,

he is liable on demand of the other party either fulfil the obligation assumed or indemnify

the damage, provided the person represented negates the consent to the agreement.

2. If the representative did not know about the power of attorney deficiency, he is liable to

indemnify only the damage caused to the other party because he trusted this power of

attorney.

3. The representative is not liable if the other party knew or should have known about the

power of attorney deficiency. The representative is not also liable where his legal

capacity is limited, except for instances where he acted with the consent of his legal

representative.

Article 114. Inadmissibility of Entering into a Transaction with Own Self

Unless the consent provides otherwise, a representative may not enter into a transaction

with himself in his own name or, as a representative of a third party, conclude a

transaction, except for instances where the transaction already exists for the performance

of any obligation.

28

SECTION THREE.

EXECUTION OF RIGHTS

Article 115. Inadmissibility of a Detrimental Exercise of a Right

A civil right shall be exercised properly. The exercise of a right with the purpose of inflicting

damage to others is inadmissible.

Article 116. A Damage Incurred within the Necessary Rebuff

1. An action carried out within the limits of a necessary rebuff is not illegal and does not

entail the indemnification of the caused damage.

2. A necessary rebuff is the protection necessary to rebuff a real attack against own self or

other.

Article 117. A Damage Caused under Emergency

1. A damage caused as a result of preventing the danger which could not be prevented

under the circumstances by other means and if the damage caused is less significant

than the damage prevented, shall be indemnified by the damaging party (emergency).

2. With due regard for the actual circumstances under which the damage was caused, the

indemnification may be claimed from a third person in whose interests the damaging

party was acting, or both the third person and the damaging party be released from

indemnification in full or in part.

Article 118. Self-help

If the assistance of competent bodies is delayed and without a speedy intervention a

danger for non-exercise of a right exists, or its exercise would be significantly complicated,

then action of the person, who for the purpose of self-help takes away, destroys or

damages a thing, or with the same purpose captures the responsible person who may

escape, or breaks down opposition of the responsible person against the action to be

performed shall not be considered as illegal.

Article 119. Limits of Self-help

1. The self-help may not be outside the limits which are necessary for preventing a danger.

2. In the case of a take-away of a thing, an immediate notice of seizure of the thing shall

be a must.

3. In the case of a capture of the responsible person, he shall be immediately handed over

to corresponding bodies.

29

Article 120. Liability of Indemnity

A person, who carries out an action provided for in Article 118 on the false assumption that

it was necessary for preventing an illegal action, is liable to indemnify to the other party the

damage resulting therefrom.

SECTION FOUR. TIME PERIODS

CHAPTER 1. CALCULATION OF TIME PERIODS

Article 121. Area of Application of Rules for Calculation of Time Periods

The rules provided for in this Chapter are applied to the time periods fixed in laws, court

decisions, and transactions.

Article 122. Commencement of a Time Period Expressed as a Period of Time

If a certain occurrence of the event or a certain period of the day is taken as the

commencement of a time period, then the day on which the event falls or the above period

of the day is not taken into account in calculating time periods.

Article 123. Completion of a Time Period

1. A time period calculated in days expires on the last day of the time period.

2. A time period calculated in weeks, months or in a period comprising several months - a

year, a half-year, a quarter, - completes on the last day of the last week or month

corresponding to the day of occurrence of the event or the above time period.

3. If the expiration of a time period calculated by months falls in a month in which there is

no relevant date, then the time period expires on the last day of that month.

Article 124. Notions

1. A half-year means a six-month period, a quarter - a three-months period to be

calculated from the beginning of a year, while a half-month - a period of fifteen days.

2. If a time period consists of one or several full or half-months, fifteen days shall be

calculated in the end.

Article 125. Calculation of a Time Period in the Event of Its Extension

In the event that a time period is extended, a new time period shall be calculated as of the

completion of the expired time period.

Article 126. Calculation of a Time Period by Months

1. If a time period is calculated in months or years in the way that their joint expiration is

not necessary, then a month is equal to thirty days, and a year - to three hundred and

sixty five days.

30

2. The beginning of a month is considered to be the first day of the month, a half-month -

the fifteenth day, and the end of the month - the last day of the month.

Article 127. Days off and Holidays

If the action is to be carried pout on a certain day and this day or the last day of a time

period falls on a non-working day, or on a holiday or other day off, then the first

subsequent working day is applied instead.

CHAPTER 2. LIMITATION

Article 128. Concept. Types

1. A limitation applies to a right of demand from other person the performance of any

action or refrain from such action.

2. A period of limitation is not applied to:

a) personal non-property rights, unless otherwise provided by a law;

b) claims of depositors against a bank concerning the release of deposits.

3. The general time period of a limitation is established as ten years.

Article 129. A Period of Limitation for Contractual Claims

1. A period of limitation for contractual claims constitutes three years, while in the case of

claims relating to immovable things - six years.

2. A period of limitation for claims arising from time to time from an obligation to be

performed is three years.

3. In separate cases other periods of a limitation may also be established under a law.

Article 130. Commencement of a Limitation Period

A limitation commences as of the date of claim. The date of claim is deemed to be the time

when a person was aware or should have been aware that his right was violated.

Article 131. Origin of a Claim

If the origin of a claim depends on an action of a creditor, the limitation period commences

as of the date of performance of the action by the creditor.

Article 132. Suspension of the Running of the Limitation Period

The running of the limitation period is suspended:

a) by virtue of postponement of the performance of obligations by executive power

(moratorium);

31

b) if bringing suit has been prevented by an extraordinary, and in the given conditions,

unavoidable circumstance (insurmountable force);

c) if the creditor or the debtor is a member of the Armed Forces that are transferred to

martial law;

d) in other cases provided for in a law.

Article 133. Suspension of the Running of the Limitation Period during Marriage

While the marriage exists, the running of the limitation period for claims between spouses

is suspended. The same rule applies to claims between parents and children until the

majority of the children, as well as to claims between guardians (tutors) and persons

under guardianship for the whole period of guardianship.

Article 134. Suspension of the Running of the Limitation Period upon Participation of an

Incapable Person

If a claim proceeds from an incapable person or a person with limited capability who lacks

a legal representative, or is directed at such person, the period of limitation is deemed to

be suspended until the person becomes completely capable or a legal representative is

appointed thereof.

Article 135. Time During which the Running of the Limitation Period is Suspended

The time during which the running of the limitation period is suspended is not included in

the time period of limitation.

Article 136. Moment of the Suspension of the Running of the Limitation Period

1. The running of the limitation period is suspended if the circumstances specified in Article

132 have arisen or continued to exist for the last six months of the limitation period, and

if this period is less than six months, for the running of the limitation period.

2. From the day of cessation of the circumstances serving as the grounds for suspension

of the limitation, the time period is extended to six months, or up to the time period of

the limitation - if the limitation period is less than six months.

Article 137. Interruption of the Running of the Limitation Period

The running of the limitation period is interrupted by the payment of advance interest,

issuance of a guarantee by the obliged person to the authorized person which evidence

acknowledgment of the claim.

32

Article 138. Interruption of the Running of the Limitation Period Where a Suit is

Considered

The running of the limitation period is interrupted if the authorized person brings a suit to

satisfy or establish the claim, or tries to satisfy the claim by other means, such as applying

to a state body or court in regard to the existence of the claim, or the performance of the

executive action. Articles 139 and 140 shall apply accordingly.

Article 139. Duration of the Suspension of the Running of the Limitation Period

1. The suspension of the running of the limitation period on the basis of bringing a suit

continues until the court verdict has entered into force, or the process has been

otherwise completed.

2. Where the process is interrupted under agreement of the parties or as a result of the

impossibility of further continuation, the running of the limitation period shall be

suspended upon completion of the last proceedings of the parties or the court. In the

event that one of the parties again continues the process, the limitation period

commences anew after the suspension shall suspend in the same manner as the

running of the limitation period is suspended upon bringing a suit.

Article 140. Running of the Limitation Period Where a Suit is Not Considered

1. Where a court does not consider a suit, or the claimant renounces his claim, the running

of the limitation period continues in the normal procedure.

2. If an authorized person brings within six months a new suit, then the limitation period is

considered to be suspended as of the date of the first suit.

Article 141. Calculation of the Commencement of Running of the Limitation Period Anew

If the running of the limitation period is interrupted, then the time period prior to the

interruption is not taken into account, and the time period commences anew.

Article 142. Limitation Period of a Claim Confirmed by a Court Decision

1. The limitation period of a claim confirmed by a court decision is ten years even where

this claim is subject to a lesser limitation.

2. If the confirmation concerns regularly repeated actions to be performed in the future,

then the limitation established by item 2 of Article 129 shall apply thereto.

33

Article 143. The Limitation Period With Respect to Actions in Rem

If a thing, with respect to which an action in rem exists, is transferred to a third person’s

possession by way of succession, the period of limitation of the predecessor in title shall

likewise apply to the successor in title.

Article 144. Performance of an Obligation upon the Lapse of the Limitation Period

1. An obliged person is entitled to recall his performance after the period of limitation has

lapsed.

2. If an obliged person performs his obligation after the period of limitation has lapsed, he

is not entitled to recall his performance even if, at the moment of performance, said

person did not know that the limitation had lapsed.

3. The same rule applies also to the means of recognition and provision of the obliged

person.

Article 145. Application of the Limitation Period to Additional Claims

The time period of a limitation for additional claims expires upon the lapse of the time

period of the limitation for the principal claims, even if the limitation for these claims has

not lapsed.

Article 146. Invalidity of an Agreement to Alter Time Periods of a Limitation

Time periods of a limitation and the procedure for the calculation thereof may not be

altered by agreement of the parties.

34

BOOK TWO

RIGHT OF OWNERSHIP AND OTHER RIGHTS IN REM

SECTION 1. PROPERTY

Article 147. Concept

All things and non-material property values which may be possessed, used, and alienated

by natural or legal persons and which may be acquired unrestrictedly, unless this is

prohibited by a law and runs counter to moral standards, are property pursuant to this

Code.

Article 148. Types of a Thing

A thing may be movable or immovable.

Article 149. Concept of an Immovable Thing

A land plot with its mineral resources, plants grown on it, as well as buildings and

structures that are solidly connected with the land belong to immovable things.

Article 150. Essential Constituent Part of a Thing

1. A constituent part of a thing, the division of which is impossible without destruction of

the whole thing or its part, or without changing their destination (the essential

constituent part of a thing), may be among the objects of individual rights only in

instances provided for in a law.

2. Buildings, structures, and things that are solidly connected with the land and are not

destined for temporary use, which may be stipulated under a contract, may belong to

the essential constituent part of a land plot.

Article 151. Accessory

1. An accessory is a movable thing which, though not being a constituent part of the

principal thing, is intended to serve the principal thing and is connected therewith by a

common economic destination, because of which it is in spatial relation with the

principal thing and according to accepted opinion is considered to be an accessory.

2. A thing that is connected with the land and the displacement of which is possible without

the loss of its commodity destination or substantial harm is also considered to be an

accessory.

35

Article 152. Concept of a Non-Material Value

A non-material value is the requirements and rights which may be passed from one

person to another or are intended for yielding a material profit to their owner, or entitling

him to demand anything from others.

Article 153. Accessory and Limited Rights

1. Accessory is a right which is so connected with another right that cannot exist without it.

2. Limited is a right which is derived from another more extensive right loaded with this

limited right.

Article 154. Fruits of a Thing and Right

1. Fruits of a thing are the income, accumulation and/or advantage derived as a result of

the use of the thing.

2. Fruits of a right are the income or/and the advantage derived as a result of the use of

the right.

3. Fruits of a thing or right are also the income and the advantage the provision of which is

ensured by the thing or right through legal relations.

4. A power of attorney for a thing or right makes it possible to receive fruits of this thing or

right in accordance with the period and scope of this power of attorney.

5. If a person is obliged to return fruits, he may demand the indemnification of expenses

incurred provided that these expenses result from proper economic activity and do not

exceed the value of fruit.

SECTION 2. HOLDING

Article 155. Concept. Types

1. Holding originates by taking actual possession of a thing at will.

2. A person though exercising the actual possession of a thing but doing this in favour of

another person on the basis of a power of attorney received from that person, is not

deemed to be the holder. Only the person issuing a power of attorney is considered to

be the holder.

3. If a person possesses a thing on the basis of legal relations entitling him to own the

thing or obliging him thereto, then this person is considered to be a direct holder, while

the assignor of the right or obligation is deemed to be an indirect holder.

4. If one thing is held jointly by several persons, they are considered to be joint holders.

36

5. If parts of one thing are held by several persons, they are considered to be the holders

of individual parts.

Article 156. Termination of Holding

Holding terminates where the holder waives the right of holding forever or where the right

of holding to a thing is relinquished otherwise.

Article 157. Transfer of Holding to Successors

The transfer of holding to successors is effected in the same kind in which it existed with

the testator (legator).

Article 158. Presumption of Holding

1. A person being in possession of a thing is deemed to be its holder.

2. This rules does not apply where the nature of holding relation is exposed from the public

register. The holding presumption is not applied also to the former holder if he has lost

the thing, it has been stolen or otherwise passed from his holding. The holding

presumption acts in favour of the former holder only during the period of his holding.

Article 159. Bona Fide Holder

A person who holds a thing legally or who may be considered to be an authorized person

in economic relations on the basis of a detailed inspection is the bona fide holder.

Article 160. Demand of the Bona Fide Holder for the Return of a Thing from Illegal

Holding

If the bona fide holder is dispossessed of holding, he is entitled to claim the return of the

thing from the new holder within three years. This rule does not apply where the new

holder has a better right of holding. The demand for the return of holding may be also

applied to the holder with a better right provided that he has acquired the thing with force

or by fraud.

Article 161. Demand of the Bona Fide Holder for the Elimination of Illegal Obstacles

If the bona fide holder is not dispossessed of a thing but is otherwise obstructed in the

exercise of his right of holding, he, like the owner, may demand for the elimination of

obstacles. At the same time, he may demand for the indemnification of the damage

resulting from the obstruction. This procedure for the indemnification of damage is also

applicable where the demand for the elimination of obstacles may not be effected.

37

Article 162. Rights of the Bona Fide Holder

1. The bona fide holder may not be demanded for the return of a thing. Fruits of the thing

and right are considered to be his possession during the legal holding.

2. This rule is also applicable to relations between the direct holder and the indirect holder.

Article 163. Duties of the Unauthorized Bona Fide Holder

1. The bona fide holder, who initially had no right to hold a thing or lost that right, is

required to return the thing to the authorized person. Until the authorized person

exercises this right of his, fruits of the thing and right belong to the holder.

2. The bona fide holder may demand from the authorized person the indemnification of

improvements and expenses incurred by him during the bona fide holding and which is

not compensated for the use of the thing and derived fruits therefrom. The value of fruits

not derived through the holder’s fault shall be deducted. The same rule applies to the

improvements as a result of which the value of the thing increased provided that the

increased value was still existent at the moment of the thing’s return.

3. The bona fide holder may refuse the return of a thing until his demand has been

satisfied.

Article 164. Duties of the Unfair Holder

The unfair holder shall return both the thing and the derived proceeds to the authorized

person, as well as fruits of the thing or right. The holder is required to return fruits not

derived through his fault. He may demand for the reimbursement of improvements made

and expenses incurred only if at the moment of the return of the thing they resulted in the

enrichment of the authorized person. Other demands against the unfair holder remains

unchanged.

Article 165. Acquisition of the Right of Ownership on Movable Things through Limitation

1. If a person holds a movable thing uninterruptedly for five years as his own, he acquires

the right of ownership to this thing (acquisition of property through limitation).

2. The acquisition of a movable thing is inadmissible if the acquirer held the thing illegally,

or if he became subsequently aware that the thing did not belong to him.

Article 166. Assumption of Continuity of Holding a Thing

If a person held a thing at the beginning of a certain time period and at the end thereof, the

thing is assumed to be held in the interval as well.

38

Article 167. Acquisition of the Right of Ownership on an Immovable Thing through

Limitation

If a person is entered in the public register as the owner of a land plot or any other

immovable property for which he has not acquired the right of ownership, he will acquire

this right on condition that the registration existed within fifteen years during which he was

holding them as his own.

Article 168. Termination of the Right of Holding on the Basis of the Owner’s Claim

The right of holding of a thing terminates where the owner makes a justified claim against

the holder.

Article 169. Right of Fruit Refusal

The holder, who within ten years has been legally holding or using a thing, shall have the

right of first refusal to this thing unless otherwise provided by a law.

SECTION THREE. OWNERSHIP

CHAPTER 1. CONTENT OF OWNERSHIP

Article 170. Concept. Content of the Right of Ownership

1. An owner is entitled at his discretion to freely possess and use his property (thing) which

is not contrary to a law and other legal acts, do not allow the use of the property by

other persons, alienate the property unless this violates rights of neighbours or other

persons, or this action represents a detrimental use of the right.

2. Detrimental is the use of a right where damage is inflicted upon others and where the

priority of the holder’s interests is not marked out and the necessity of his actions is not

justified.

3. The right of use also comprises the possibility for a person not to use his thing. The

burden of using or maintaining property may be established under a law if the non-use

or a failure to maintain the thing violates the common interests. In such a case the

owner may be imposed with the burden or the thing is passed over into possession of

another person for remuneration.

Article 171. Right of Ownership to an Essential Constituent Part of a Thing

The right of ownership to a thing apples likewise to the essential constituent part thereof.

39

Article 172. Demand for the Return of a Thing from Illegal Ownership and for the

Elimination of Obstacles

1. The owner may demand from the holder the return of a thing, except for instances

where the holder was entitled to hold the thing.

2. If encroachment on the property or other impediments are effected without the seizure

or dispossession of a thing, the owner may demand from the encroacher to discontinue

such actions. If such actions still continue, the owner may demand for the termination of

the actions by bringing a suit in a court.

Article 173. Common Ownership

1. Common (joint or shared) ownership originates in the instances provided for by a law or

contract. Each joint owner may claim third persons in relation to the property in common

ownership. Each joint owner is entitled to withdraw his right to a thing only in favour of

all joint owners.

2. By agreement of the participants of joint ownership, a thing in common ownership may

be pledged or otherwise legally encumbered in favour and for interests of one of the

joint owners.

3. The expenses for maintenance and presentation of a thing in common ownership are

borne by the joint owners equally unless otherwise provided for by a law or contract.

4. Each joint owner enjoys a preferential right to purchase a share in common ownership.

CHAPTER 2. LAW OF NEIGHBOURING TENEMENTS

Article 174. Concept. Duty of Mutual Respect

Owners of a neighbouring land plot or other immovable property shall, besides other

duties and rights provided for by a law, hold each other in respect. Any land plot or other

immovable property from which a two-way influence may proceed is considered to be

neighbouring.

Article 175. Duty of Forbearance of Neighbouring Influences

1. The owner of a land plot or other immovable property is not entitled to prohibit

influences of gas, steam, smell, smell of burning, noise, heat, shakes or other similar

actions from the neighbouring plot to his own unless they prevent him from using his

plot or significantly infringe his right.

2. The same rule applies in the instance where the influence is essential but results from

the casual use of the other land plot or other immovables and may not be terminated by

40

measures which are considered to be the normal economic activity for this type of a

user.

3. If the owner is required to forbear such an influence, he may demand from the owner of

an influencing land plot a corresponding monetary compensation in the case where the

influence exceeds the use regarded as casual in the given place and economically

admissible limits.

Article 176. Inadmissible Encroachment

The owner of a land plot may demand the prohibition of erection on the neighbouring land

plots of such structures and operation thereof which inadmissibly encroach the right to use

the plot and which is expressly clear.

Article 177. Demand for Danger Elimination

Where a land plot is endangered with the wrecking of a building located on the

neighbouring plot, the owner may demand from the neighbour to undertake necessary

measures to prevent the danger. The change of direction of waters and underground

waters flowing on several land plots or the manipulation of these waters in a manner which

may result in the lessening of the amount of water on the other land plot and/or in the

deterioration of quality thereof is inadmissible. The encroachment upon the natural flow of

rivers is inadmissible.

Article 178. Right of the Owner of a Neighbouring Plot to Fruits

1. If fruit of a tree or bush have fallen on the neighbouring land plot, they are considered to

be fruit of that plot.

2. The owner of a land plot may cut the roots, branches of a tree or bush which have

reached his plot.

Article 179. Money Compensation for the Obligation of Forbearance

1. The owner of the neighbouring plot shall forbear the unintentional crossing of his plot

borders by the owner of a land plot in the course of construction, except for instances

where he announced thereagainst in advance or upon notification.

2. The border-violating neighbour shall pay monetary compensation therefor subject to

advance annual payment.

Article 180. Necessary Road

1. Where a land plot lacks the required communication with public roads, electricity, oil,

gas, and water supply lines, then the owner may demand from the neighbour the

forbearance of the use of his land plot for ensuring such required communication. The

41

neighbours, on whose plot the necessary road or communications pass, are entitled to a

commensurate indemnification which may, upon agreement of the parties, be effected

as a single payment.

2. The forbearance of the necessary road or communication does not arise where the

existing communication of the land plot has been revoked under self-willed actions of

the owner.

Article 181. Obligation to Fix Boundaries

1. The owner of a land plot may demand from the owner of the neighbouring plot to

participate in fixing stable boundaries or in restoring of the existing but obliterated or

damaged boundaries. The expenses in connection with the fixing of boundaries shall

equally be borne by the neighbours unless otherwise provided by a mutual agreement

or other legal relations.

2. Where the accurate boundaries cannot be fixed, the actual ownership of the neighbours

shall have priority for fixing boundaries. Where the accurate ownership cannot be fixed,

then the plot in dispute shall be equally allocated between the plots. If such allocation

results in unfair outcomes, the boundaries shall be fixed by a court upon a suit of one of

the parties.

Article 182. Right to Use the Neighbouring Structure

1. If two land plots are delimited from each other by a fence or other structure used as a

boundary, it is supposed that the owners of the land plot have equal rights to make use

of the structure unless the outside of the structure directly points out the ownership of

one of the neighbours.

2. If both neighbours are entitled to the joint use of the structure used as boundary, each of

them shall use the structure with due regard for other party’s rights thereto.

3. The expenses in connection with maintenance of the structure shall be borne equally by

the neighbours.

4. A long as one of the neighbours is connected with the existence of the structure, it may

not be demolished or replaced without agreement of the neighbour.

CHAPTER 3. ACQUISITION AND ALIENATION OF OWNERSHIP

I. Acquisition of the Right of Ownership to Immovable Things

Article 183. Grounds for Acquisition of the Right of Ownership to an Immovable Thing

1. A notarially authenticated document and the acquirer’s registration in the public register

shall be necessary for acquiring an immovable thing.

42

2. The document shall accurately specify the grounds for acquisition of an immovable

thing. Where one of the parties acts through a representative, the document shall

accurately specify thereabout.

Article 184. Alienation of the Right of Ownership to an Immovable Thing

An application of the authorized person concerning alienation of this right and registration

of this application in the public register shall be necessary for alienation of the right of

ownership to an immovable thing or to the other right. The application for alienation of the

right of ownership shall acquire obligatory force only subject to its filing with the register

maintaining service.

Article 185. Protection of the Acquirer’s Interests

Proceeding from the acquirer’s interests, the alienator is deemed to be the owner if

registered as such in the public register, except for the instances where the acquirer was

aware that the alienator had not been the owner.

II. Acquisition of the Right of Ownership to Movable Things

Article 186. Grounds for Acquisition of the Right of Ownership to a Movable Thing

1. The transfer of ownership to a movable thing is effected subject to the handing over of

the thing to the acquirer by the owner on the basis of the actual right.

2. The following shall be deemed to be a transfer: the handing over of a thing to the

acquirer in the direct possession thereof; the transfer of the indirect ownership under a

contract where the previous owner may remain the direct owner; the assignment of the

right to claim property from a third party to the acquirer by the owner.

Article 187. Bona Fide Acquirer

1. An acquirer shall become the owner of a thing even if the alienator was not the owner of

the thing but the acquirer acted in good faith towards the fact. The acquirer is not

regarded as bona fide if he knew or should have known that the alienator was not the

owner. The bona fides fact must exist prior to the transfer of a thing.

2. An acquirer of movable things may not be bona fide if the owner has lost the things,

they were stolen or he has been dispossessed of them against his will, or if the acquirer

has received them gratis. These restrictions do not apply to money, securities or the

things alienated at an auction.

Article 188. Conditional Ownership

1. If the alienator has conditioned the transfer of ownership to the acquirer only upon

payment of the value of a thing, it is supposed that the right of ownership will be

43

transferred to the acquirer after payment of the full value thereof. If the acquire delays

the payment, and the alienator renounces the contract, the parties shall return the

bilaterally effected completion.

2. The condition indicated in the part one shall be considered as completed even if the

alienator is satisfied by any way other than payment of the value, or if the acquirer

indicates the claim limitation.

Article 189. Transfer of Ownership by Means of Securities

If the transfer of a security instead of the transfer of a thing is necessary for the transfer of

ownership to the acquirer, the ownership shall be considered to be transferred as of the

moment of transfer of the security to the acquirer by the alienator.

Article 190. Acquisition of the right of Ownership to an Ownerless Thing

2. If a person takes an ownerless thing into possession, he will acquire the right of

ownership thereto unless its acquisition is forbidden by a law or the rights of the person

entitled to the acquisition of the thing are violated.

1. A movable thing is considered to be ownerless provided that its previous owner has

waived the right of ownership thereto.

Article 191. Find

1. The finder of a lost thing is required to immediately inform the person who lost it, the

owner, the authorized person, or if the personality thereof is unknown, - the police or a

body of local self-government, and to return the found thing.

2. The finder of a lost thing acquires the right of ownership thereto upon the expiration of

one year from the moment of declaring, except for the cases where the owner has

become known to him, or the owner’s right to the thing has been already declared to the

police. All other rights to the thing shall be lost upon the acquisition of the right of

ownership thereto.

3. If the found thing is returned to the person empowered to receive it, the finder may claim

therefrom remuneration in the amount of five percent of the value of the thing. Besides,

the finder may receive from the person empowered or the relevant body reimbursement

of the expenses connected with the safekeeping of the thing.

4. If the finder of a thing refuses to acquire the found thing into ownership, a competent

body may, upon expiration of a year’s period, sell it at an auction and obtain profit, or, in

the event of its low value, alienate it gratis, or destroy it.

44

5. In the event of the find of animals, perishable goods or the things the safekeeping of

which is connected with much expense, the one-year period shall not apply and the

owner shall receive the amount obtained from the alienation thereof.

Article 192. Treasure

Where a thing is discovered, which has been buried in the earth for so long a time that its

owner cannot be established (treasure), it will become in equal shares the property of the

finder and of the person to whom the property belongs, where the treasure was

concealed.

Article 193. Acquisition of the Right of Ownership to the Essential Constituent Part of a

Land Plot

If a movable thing is so connected with a land plot that becomes an essential constituent

part of this plot, then the owner of the land plot shall, pursuant to part two of Article 150,

concurrently become the owner of the thing as well.

Article 194. Shared Ownership of a Thing Resulting from a Merger of Movable Things

1. If movable things are so interconnected that they have become essential constituent

parts of a new single thing, or the movable things have merged, the previous owners

will become joint owners of the new thing. The share shall be defined according to the

value of the things at the time of their merger.

2. If one of the things, according to established opinion, is considered to be the principal

thing, then the owner thereof will acquire the accessory into ownership as well.

Article 195. Shared Ownership of a New Movable Thing Created by Reprocessing

Materials

If a new movable thing is manufactured by means of reprocessing materials or remaking,

the manufacturer and the owner of the materials will become joint owners of the new thing.

The share shall be defined proportionally to the cost of the materials and manufacture

unless otherwise established by a contract.

Article 196. Termination of Rights Upon Transfer of Ownership

If ownership is transferred in accordance with Articles 193-195, then all other rights to the

given thing shall be terminated.

Article 197. Demand for Indemnification of Damage from the New Holder

1. Person who, pursuant to Articles 193-195, loses his property or his rights are otherwise

violated may demand indemnification of damage from the person who has become the

owner. A demand for restoring the initial state is inadmissible.

45

2. The demand as provided for in item 1 of this Article does not arise if the new owner has

acquired the thing from a third person under a paid contract.

III. Acquisition of the Right of Ownership to Rights and Claims

Article 198. Concept. Content

1. A claim or right, which may be assigned or pledged, may be transferred by the owner

thereof to another person. Claims and rights are transferred to a new person in the

same state as they were in the hands of the former owner.

2. The former owner is required to hand over to a new owner all the documents being into

his possession which relate to the claims and rights as well as all information which is

necessary for the application of these demands and rights.

3. The former owner is also required to hand over at request to the acquirer a property

authenticated document about the assignment of the right and claim. The expenses in

connection with authentication of the document shall be borne by the new owner.

Article 199. Assignment of a Claim

1. An owner of a claim (creditor) may assign the claim to a third person without the

debtor’s consent thereto, unless it contradicts the essence of the obligation, his

agreement with the debtor or the law (assignment of a demand). An agreement with the

debtor on the inadmissibility of assignment may be possible only where the debtor’s

considerable interest exists.

2. The assignment of a claim is effected under a contract concluded between the creditor

and a third person. In such cases the third person takes the place of the original owner.

Article 200. Right of the Debtor in Assigning a Claim

Before a debtor is notified about the assignment of a demand, he is entitled to perform his

obligation before the original creditor.

Article 201. Transfer of Defenses in Assigning a Demand

1. Upon assignment of a demand, the new owner will also acquire defenses as well as

other rights relating thereto.

2. The debtor may raise to the new owner all the defenses he had in relation to the initial

owner at the time of receipt of the notification on the assignment of a demand.

Article 202. Order of Priority of Creditors

If a creditor has agreed on the assignment of one and the same claim with several persons

the person with whom the creditor came into relations first shall be authorized before the

46

debtor. In the event that the establishment thereof is impossible, the priority shall have the

person on whom the debtor was informed first.

Article 203. Passing of a Debt

1. Under an agreement concluded with the creditor, a debt may be undertaken by a third

person as well (passing of a debt). In such case the third person shall take the place of

the debtor.

2. The original debtor is entitled to disagree with the agreement between the creditor and

the third person and pay the debt himself.

Article 204. Consent of the Creditor in Passing a Debt

If the passing of a debt has been agreed between a third person and the debtor, the

validity of passing shall be subject to the creditor’s consent.

Article 205. Rights of a New Debtor

A new debtor is entitled to raise defenses against a claim of a creditor based on the

relations between the creditor and the original debtor. He is not entitled to dismiss the

claims which belonged to the original debtor.

Article 206. Termination of Defenses in Passing of A Debt

Upon passing of a debt, the suretyship and the pledge provided for defending the claim

shall terminate unless the surety or the pledgor refuse to continue this relationship.

Article 207. Assignment of a Claim on the Basis of a Law

The regulations for the acquisition of the right of ownership to rights and claims shall

accordingly apply to the assignment of the claims which are effected on the basis of a law,

a decision of the court or a competent state body.

CHAPTER 4. RIGHT OF OWNERSHIP TO AN APARTMENT IN APARTMENT BUILDING

I. General Provisions

Article 208. Concept

1. In apartment buildings there exists the right of ownership to an apartment (apartment

ownership) and to the part of the building which is not used as an apartment (non-

residential area ownership).

2. The apartment ownership and the non residential area ownership are deemed to be the

individual property.

47

3. A land plot, part of a building and the structures and facilities which do not constitute the

individual property are the common property. The number of shares in the common

property is determined according to the number of apartments.

4. The individual property may exist only for separate apartments or other separate

portions of the building. Parking lots are considered to be separated if their boundaries

are outlined as a result of the continuous use.

Article 209. Right of First Option to an Apartment

1. Tenants, who have lived in an apartment for more than three years, shall have the

priority right to purchase the apartment. They shall address the last owner of the

apartment with an application concerning the application of this right.

2. If a person acquires the rented apartments, he shall take the lessor’s place.

Article 210. Grounds for Acquiring an Apartment

A notarially authenticated transaction and its registration in the public register are

necessary for the acquisition or termination of the right individual ownership to an

apartment.

Article 211. Object of the Individual Ownership

1. The area specified in accordance with item 2 of Article 208 is an object of the individual

ownership, as well as the constituent parts thereof which may be remade, separated, or

added to the area in such a way as to avoid the unjustified violation of the common

property or the right of any owner of the apartment based on the individual ownership,

or the alteration of the outward appearance of the building.

2. Parts of the building, which are necessary for the stability and safety of the building, as

well as the structures being in the common ownership of owners may not be an object

of the individual ownership even if they are located on the areas within the individual

ownership.

Article 212. Determination of a Share in the Common Property

1. A share of the apartment owner in the common property is determined in proportion to

the area being in his individual ownership to the total area being in the individual

ownership.

2. In the event of liquidation of a partnership of dwelling owners the share of the common

owners is determined pursuant to item 1 of this Article.

48

Article 213. Inadmissibility of Alienation of the Individual Property without the

Appropriate Share in the Common Property

1. Alienation, rental or other encumbrance of the individual property without due regard for

the appropriate share in the common property shall be inadmissible.

2. An owner of the apartment shall concurrently be a shareholder in the common

property.

Article 214. Apartment Ownership Registration in the Public Register

1. A separate sheet shall be filled in for each owner of the apartment in the public register.

2. The registration materials in the public register concerning the apartment ownership

shall be supplemented with a construction certificate, the building lay-out, as well as

location and dimensions of parts of the building which are in the common ownership

certified by the building agency.

II. Relations Among Apartment Owners

Article 215. Registration of Agreements in the Public Register

1. Relations among apartment owners are regulated by this Code. The agreements, under

which the apartment owners regulate their relations in contrast to the norms of this

Code, as well as the alteration or revocation of such agreements, shall be valid for third

persons only if these agreement are registered in the public register.

2. The decisions which, pursuant to this Code or an agreement of the apartment owners,

require a majority vote shall be valid upon their making for the owners who did not

participate in voting or voted against.

Article 216. Concept of Partnership of Dwelling Owners

A totality of individual owners constitutes a partnership of dwelling owners which is not a

legal person.

Article 217. Inadmissibility of a Demand for Dissolution of a Partnership of Dwelling

Owners

An owner is not entitled to demand for the dissolution of a partnership of dwelling owners.

Such a demand is admissible only if the building is being completely or partially destroyed.

Article 218. Rights of Dwelling Owners

1. A dwelling owner may use at his option the parts of the building being in the individual

ownership and exclude any impact of other persons thereupon unless by doing so he

violates a law or rights of third persons.

49

2. Pursuant to Article 219 and 220, each apartment owner is entitled to use the common

property. For other use of the common property each apartment owner shall be given a

corresponding share pursuant to the provision provided for in Article 212.

3. The matters stipulated by items 1 and of this Article are specified in detail in the

regulations of the partnership of dwelling owners to be submitted by chairman of the

partnership and approved by the general meeting of dwelling owners in compliance with

item 4 of Article 224.

Article 219. Duties of Apartment Owners

1. An apartment owner shall:

a) maintain and use parts of a building held in individual ownership as well as the

common property in such a way as not to violate the rules of joint habitation of the

owners and without causing damage thereto;

b) see to it that the person engaged in his production located in the building or those to

whom he transfers the existing land plot or parts of the building held in his individual

or common ownership for use observe the duties indicated in subparagraph «a»;

c) forbear impacts on parts of the building held in his individual ownership and on the

common property insofar as the impacts are in compliance with the terms provided

for in subparagraphs «a» and «b»;

d) allow authorized persons to enter into parts of the building held in individual

ownership and use them provided it is required for bringing them to a proper

condition and effecting routine repairs thereof; the damage incurred during the

period shall be subject to indemnification;

e) forbear measures required for arranging communication means and supply

facilities. An owner, to whose benefit such measures are effectuated, shall

indemnify the damage which may result during the period.

2. In the event of the building’s destruction where the damage is not secured by insurance

or other alike means, individual owners shall not take part in the restoration and

reconstruction of the building. In such case the partnership shall be dissolved.

Article 220. Right to Use the Common Property

1. Any apartment owner may use the common property proportionally to his share therein.

2. In the building, despite its location, every apartment owner shall be liable before other

apartment owners to bear the common property expenses proportionally to his share, in

50

particular the maintenance, current repair, management and the common property use

expenses.

3. An apartment owner, who has not voted for the measures not connected with the

maintenance and routine repair of the building, shall not be held liable for indemnifying

the expenses resulting from such measures. Concurrently, they shall not be entitled to

the benefits proceeding from such measures.

4. A share is determined pursuant to Article 212.

Article 221. Determination of a Share Upon Dissolution of a Partnership

Upon dissolution of a partnership, a share of joint owners is determined according to the

value of apartments thereof as of the date of dissolution. If the value of a share in the

common property has changed as a result of the measures not backed by an apartment

owner, such change shall be taken into account while assessing the value of the share.

Article 222. Imposing an Apartment Alienation Obligation

1. If an apartment owner violates his obligations before other apartment owners in such

gross a manner that the further partnership with him is impossible, other owners may

demand from him the alienation of the apartment.

2. The prerequisite of item 1 of this Article shall apply, in particular, where an apartment

owner, in spite of a written notice, is in gross violation of the duties provided for in Article

219.

3. A decision concerning provisions of item 1 of this Article shall be taken by a two-thirds

majority vote of the persons voting.

Article 223. Bodies of Management in a Partnership of Apartment Owners

The management of the common property shall be assigned to apartment owners

pursuant to Article 224-228, and to chairman of the partnership of apartment owners

pursuant to Articles 229-231, while upon establishment of an advisory council, the

management shall be carried out pursuant to Article 232.

Article 224. Common Property Management

1. The common property management is effected jointly by apartment owners unless this

Code or an agreement of apartment owners provides otherwise.

2. An apartment owner is entitled to take necessary measures for preventing the damage

directly endangering the common property without a consent of other apartment

owners. An apartment owner is entitled to indemnification of losses incurred by him.

51

3. Each apartment owner may demand the performance of activities pursuant to the

agreements and decisions made, or in accordance with the general interests of the

apartment owners - should such be missing.

4. The proper management of the general interests of apartment owners shall, in

particular, include:

a) the proper maintenance and repair of the common property for residential fitness of

the building, where necessary;

b) the proper insurance of the common property;

c) the adoption of economic plans;

d) the accomplishment of all the measures which are required for arranging the

communication and supply facilities to the benefit of the apartment owners.

e) adoption of the economic plan;

f) implementation of all measures those are necessary for arranging the

communicational and supply objects for the benefit of the apartment owners.

Article 225. Joint Competence of Apartment Owners

Apartment owners shall settle jointly such the matters as drawing up the economic and

financial plans, full or partial restoration of a building, adoption of regulations, election and

dismiss of a chairperson of the partnership, determination of amount of expenditures for

maintenance of the building.

Article 226. Meeting of Apartment Owners

1. Apartment owners shall make decisions at the meeting of apartment owners.

2. A decision shall be valid if its object was announced at the time of holding a meeting.

3. A decision may also be taken without a meeting provided the apartment owners have

agreed to it in writing.

Article 227. Calling a Meeting of Apartment Owners

1. A meeting of apartment owners shall be called by the chairman of partnership once a

year at least.

2. A meeting of apartment owners shall also be called by the chairman of partnership if so

required by more than one fourth of the apartment owners. If the chairman is absent or

avoids the calling of a meeting to the detriment of general interests, a meeting may be

called by the apartment owners as well.

52

3. A meeting shall be called within a week’s period as of the date of written notice thereon;

in the case of urgency, the meeting shall be called immediately.

4. A meeting of apartment owners shall be presided over by the chairman of partnership

unless the meeting decides otherwise.

5. A decision of the meeting shall be recorded in minutes to be kept by the chairman. Each

apartment owner is entitled to check up the minutes.

Article 228. Competence of a Meeting

1. Each owner shall have one vote. If the apartment has several owners, they shall vote

only jointly.

2. A meeting shall be competent if attended by more than half of the apartment owners.

3. If, pursuant to item 2 of this Article, a meeting is not competent to decide, the chairman

may call a new meeting wssith the same agenda. This meeting shall be competent in

spite of the number of participants which is to be noted upon calling the meeting.

4. ??????

Article 229. Rights and Duties of the Chairman of Partnership of Apartment Owners

1. The chairman of partnership of apartment owners shall be entitled and liable:

a) to implement decisions made at the meeting of apartment owners and to see to the

observance of the rules of the house;

b) to take necessary measures for proper maintenance and routine repairs of the

common property;

c) to take measures which are necessary for observance of any term or for avoidance

of any negative legal outcome;

d) to be in charge of the common funds.

2. The chairman shall, on behalf of all apartment owners, be authorized:

a) to demand, receive and pay the amounts to cover the expenses incurred and debts

as well as mortgage interests, provided they relate to general matters of the

apartment owners; ?????

b) to effect settlements, accomplish liabilities and other money transactions which are

connected with the current management of the common property;

c) to conclude contracts and submit necessary documents provide they relate to the

interests of apartment owners.

53

3. The chairman shall keep the amounts of the apartment owners separately from own

property.

4. The chairman shall, where necessary, act under an assignment issued by the apartment

owners including the extent of his representative power.

Article 230. Economic Plan

1. The economic plan shall be worked out by the chairman prior to the beginning of each

calendar year.

2. The economic plan shall include:

a) prospective revenues and outlays in managing the common property;

b) a liability on expenses in proportion to a share of the apartment owners.

3. Each apartment owner shall be entitled to carry out measures for the proper

maintenance and routine repair of the building in person or through a third person. In

this case the chairman shall take into account, assess this activity, and enter in into the

economic plan. Installments of an apartment owner to repay the expenses shall be

subject to a reduction according to the work performed.

4. The apartment owners are required on the basis of the chairman’s requisition to pay a

certain advance to secure the economic plan. In the event of difficulties with regard to

payments, the chairman may apply to respective bank credits.

5. Making a decision in relation to the economic plan entitles the chairman to take a loan

as well.

6. The chairman is required to present a financial report at the end of the calendar year.

7. The apartment owners are entitled to demand from the chairman the account of the

work performed, whenever they consider it fit.

Article 231. Apartment Repair Obligations

1. Each apartment owner shall be obliged before other apartment owners to undertake

expenditures in connection with the maintenance, routine repair, management of the

building as well as other expenses.

2. The expenditures and payment indicated in item 1 of this Article shall be paid

proportionally to share of each apartment owner.

3. The expenses provided for the current year shall be paid in twelve equal installments

unless otherwise specified. Should the collection of funds for the proper maintenance of

54

the building not be envisaged, the chairman may require an advance payment of these

amounts before making a statement on the repair of the building.

Article 232. Advisory Council

1. The apartment owners may, by a simple majority vote, form an advisory council. The

council shall be composed of a chairman and two members.

2. The advisory council shall assist the chairman in carrying out his tasks.

3. Financial and economic plans, the results of execution thereof, a report, an estimate of

cost shall be subject to a check-up and conclusion of the advisory council prior to the

consideration thereof at the meeting of apartment owners.

CHAPTER 5. RESTRICTED ENJOYMENT OF PROPERTY BELONGING TO OTHERS

I. Right to Build

Article 233. Concept

1. A land plot may be transferred to another person for a fixed-term enjoyment in such a

way as to entitle him to erect on the land plot or thereunder any construction and

alienate, transfer by inheritance, lend or lease this right (right to build).

2. The right to build may apply to a portion of the land plot which is not necessary for

construction but provides a better opportunity for using the construction erected

thereon.

3. The term of the right to build is to be fixed by agreement of the parties, but not in excess

of fifty-nine years.

Article 234. Grounds for Giving Rise to the Right to Build

1. The rules of acquisition of immovable things shall likewise apply to the occurrence and

acquisition of the right to build.

2. A construction erected on the basis of the right to build shall be considered as an

essential constituent part of the right to build.

Article 235. Alienation of the Right to Build

Where the alienation or leasing of the right to build under agreement of the parties requires

a consent of the land plot owner thereto, the owner may waive such consent only upon the

existence of sufficient grounds thereof.

55

Article 236. Compensation for the Right to Build

1. A person entitled to the right to build may be contractually liable to pay a compensation

therefor. This right of the land plot owner shall be inseparable from the right of

ownership to the plot.

2. The right to build may be subject to a unilateral termination on the part of the owner only

subject to a two-year non-payment of the charge.

3. Parties may define a charge for the right to build as a ten-year period. If economic

conditions are essentially altered, the parties shall agree on the charge initially.

Article 237. Registration of the Right to Build

The right to build shall be recorded in the public register among the proprietary rights of

non-owners to a land plot only as a right of the first order. This order shall not be subject to

alteration.

Article 238. Termination of the Right to Build

1. A consent of the owner is required for termination of the right to build.

2. The right to build shall not terminate upon demolition of the building erected on the land

plot.

Article 239. Termination of the Payable Right to Build

1. If the right to build was payable, the land plot owner shall, upon lapse of the term of the

right to build, provide the person entitled to the right to build with a proper compensation

for the building erected on the plot. The amount which does not constitute at least two-

thirds of the value of the building shall not be considered as the proper compensation.

2. The land plot owner may extend the right to build to the person entitled thereto for the

presumable period of the building’s existence instead of providing compensation

therefor. If the person entitled to the right to build waives this extension, he shall

likewise forfeit the right of compensation.

3. Upon termination of the right to build, the person entitled thereto shall not have the right

to take away the building or the constituent parts thereof.

Article 240. Registration of a Compensation Claim in the Public Register

1. Upon termination of the right to build, a claim for compensation arising therefrom shall

take the place of the right to build, replacing it in the same order.

2. If the right to build remains encumbered at the time of its expiration, the encumbrancer

shall be entitled to the compensation therefor.

56

Article 241. Succession in Title Upon Termination of the Right to Build

Upon termination of the right to build, the owner of a land plot shall become a participant to

a rental or lease agreement concluded by the person entitled to the right to build.

II. Usufruct

Article 242. Concept

An immovable thing may be transferred to another person’s possession in such a way as

to entitle him, as the owner, to use the thing and disallow its use by third persons.

However, unlike the owner, he shall not be entitled to alienate, lease or transfer the thing

by inheritance (usufruct). A consent of the owner is required for lending or leasing of the

thing. Upon termination of usufruct, the owner shall become a participant to the existing

rental or lease relations.

Article 243. Legal Regulation of Usufruct Establishment

The rules applicable to the acquisition of immovable things shall equally apply to the

establishment of a usufruct.

Article 244. Types of Usufruct

1. A usufruct may be payable and gratis.

2. A usufruct may exist temporarily or during a life period of its reception (usufructuary). A

usufruct shall terminate upon the death of the natural person or liquidation of the legal

person to whose benefit it was established.

Article 245. Rights and Duties of a Usufructuary

1. Before initiation of a usufruct, the parties may describe the condition of the object

transferable under a usufruct.

2. The usufructuary may not alter the object of use without the owner’s consent.

3. The usufructuary is entitled to receive both the fruits and benefit of the thing which are

not received as a result of the ordinary economic use of the thing. In this case he shall

indemnify to the owner the damage caused to him by such use of the thing.

4. The usufructuary shall not be liable for natural wear of the thing. He shall reimburse the

current expenses, repair the thing, as well as take care of the normal economic

maintenance thereof.

5. The usufructuary shall secure an appropriate insurance of the thing within the existence

of a usufruct.

57

6. If a thing has been destroyed, damaged, or unforeseen expenses in connection with its

safe keeping have arisen, the usufructuary shall forthwith notify the owner thereon. He

shall forbear the measures performed by the owner to avoid the situation. The owner

shall not be liable to take appropriate measures. If these measures are carried out by

the usufructuary proper, he may, upon completion of the usufruct, remove from the

thing the objects which have been added by him through these measures, or demand

from the owner a proper compensation therefor.

7. If within the normal economic activity framework the usufructuary alienates individual

objects, the objects purchased by him shall take the place of the alienated objects.

Article 246. Termination of Usufruct

1. The usufructuary shall, upon completion of a usufruct, return the thing to the owner.

2. A usufruct shall be invalidated if together with the property it goes into the hands of one

person.

III. Servitudes

Article 247. Concept

1. A land plot or other immovable property may be used (encumbered) to the benefit of the

owner of another land plot or immovable property in such a way as to entitle this owner

to enjoy in separate instances this plot, or to prohibit the performance of certain actions

thereon, or to exclude the use of some rights of the encumbered land plot owner toward

another plot (servitude).

2. A compensation therefor may be specified in the form of a recurrent payment.

Article 248. Terms of Servitude

1. A servitude may exist only if it provides an authorized person with benefits to enjoy his

land plot.

2. In effectuating a servitude, an authorized person shall take care of interests of the

enjoyed (encumbered) land plot owner.

Article 249. Building Maintenance Obligation

If the proper execution of a servitude comprises the buildings located on the encumbered

land plot, the authorized person shall be obliged to the proper maintenance of the

buildings thereon. At the same time, the parties may agree that the building maintenance

obligation be assigned to the land plot owner if the authorized person’s interests so

require.

58

Article 250. Consequences of the Division of a Land Plot

If a land plot of the authorized person is divided, the servitude shall be extended for each

plot individually. The use of a servitude at this time is possible only on the condition that

the state of the encumbered land plot owner will not be deteriorated.

Article 251. A Portion not Encumbered by a Servitude as a Result of Division

If the encumbered land plot has been divided and the servitude applies to one portion only,

the portion of the land plot which as a result of the division was free from a servitude shall

remain as such.

Article 252. Protection of the Authorized Person’s Right

If the authorized person is impeded in exercising his right, he shall enjoy the same rights

as the bona fide owner to prevent thereabout.

Article 253. Personal Servitude

1. An immovable thing may be encumbered by a servitude to the benefit of any person

according to the provision of Article 247. Such encumbrance may be the effect that the

authorized person may enjoy the building or a part thereof for himself or his family

without consideration of the owner.

2. Such restricted personal servitude as provided for in item 1 of this Article shall not be

transferable to other persons.

CHAPTER 6. PROPERTY AS THE MEANS OF SECURING PERFORMANCE OF

OBLIGATIONS

I. Pledge

Article 254. Concept

1. A movable thing and non-material property wealth transferable to other persons may be

used as the means of securing an obligation in such a way as to entitle a creditor

(pledgee) to receive in preference to other creditors satisfaction from the value of the

pledged property.

2. The right of pledge may apply to future or contingent claims if these claims may be

defined at the moment of the origin of a pledge.

Article 255. Procedure for Pledging Movable Things and Securities

1. A pledge of movable things and endorsable securities, where necessary, as well as

other non-material property wealth is effectuated under the procedure for acquisition

59

thereof. Where there is a claim towards third persons with regard to property, the

pledge of a thing shall be notified to a third person for the origin of the right of pledge.

2. The pledgee and pledgor may notarize the pledge. In such instance a pledge originates

as of the date of such registration in the public register in a way which excludes the

mandatory transfer of property into the pledgor’s possession and making of a statement

for other creditors. The document shall include an indication of the personality of the

pledgee, the prospective third debtor, the pledgor, as well as the extent of the secured

claim, the satisfaction, and the period of security.

Article 256. Substitution

Where a claim is pledged and the debtor performs his obligation prior to the expiration of

the term of pledge, the performance shall replace the claim (substitution).

Article 257. Rights of a Bona Fide Pledgee

Where the transfer of the object of a pledge (pledge) to another person is effectuated by

the transfer of a document and at the moment of the origin of pledge the pledgor owns the

thing (right) without powers of its pledge, the pledgee shall be considered as a bona fide

acquirer if he does not know and could not have known thereabout. This bona fides of the

pledgee shall give him priority in comparison with a third person.

Article 258. Pledge Limits

A pledge shall secure the claim and other additional right related thereto.

Article 259. Rights of Third Persons

1. Where the pledgor is not concurrently a personal debtor of a claim secured by a pledge,

he still may raise the objections to the pledgee to which the debtor is entitled in the first

place. These objections relate to the offsetting of liabilities and appealing against a

claim.

2. Where a claim is secured by the property of the debtor or a third person, third persons

may claim the satisfaction of the claim of the creditors by the debtor’s property to take

place earlier than the enjoyment of their property. The same procedure applies towards

the authorized person when the claim is secured by various property of the debtor and

the authorized person is entitled only to some of them.

Article 260. Extension of a Pledge to Property Values Comprised by the Object of a

Pledge

A pledge shall extend to all property values which are comprised by the object of a pledge

in ownership.

60

Article 261. Pledge with the Transfer of Pledged Property

1. If a pledge is secured by transfer of a thing to the possession of the pledgee, the

pledgee shall ensure its proper preservation. He is entitled to receive profit to be added

to the secured claim. He is also entitled to demand from the pledgee the indemnification

of necessary expenses incurred in relation to the thing.

2. If the pledgee fails to properly fulfil the obligations assumed, the pledgor may demand

the transfer of a thing to a third person.

3. Where there is a risk of destruction of the pledged thing or of essential reduction of the

value thereof, the pledgor may claim the return of the thing, and provide the pledgee

with another means of securing performance of the obligation. The pledgee shall

immediately inform the pledgor about the risk of destruction of the pledged thing or

essential reduction of its value and establish the term of proposing another means of

securing performance of the obligation. If the pledgor fails to provide the pledgee with

other means of securing performance of the obligation within the term, the pledgee may

sell the thing. The procedure for realizing a pledge shall apply during the sale. The

amount obtained from the sale shall replace the pledged thing. The amount shall be

kept subject to collection of appropriate interest.

Article 262. Right of the Pledgor Upon Registration of the Right of a Pledge

1. If the right of a pledge is being registered, the pledgor is required to ensure the proper

preservation and maintenance of the thing of a pledge. He shall be entitled to obtain

profit from the thing.

2. Where there is a possibility that the pledgor fails this obligation of his, the pledgee may

demand the transfer of the thing to himself being under registration. The pledgee is

entitled to notify the third debtor thereabout. Upon notification, the debtor shall be liable

to secure the pledgee’s claim when due.

Article 263. Subsequent Pledge

A preliminary consent of the pledgor is required for subsequent pledge of the object of a

pledge.

Article 264. Concluding Contract of Pledge

A preliminary consent of the pledgee is required for concluding a contract of pledge.

Article 265. Repeated Pledge of a Thing

One and the same thing may be repeatedly pledged. The order of priority shall be

established pursuant to the moment of a pledge.

61

Article 266. Protection of the Pledgee’s Rights

If the pledgee was impeded in exercising his rights, he may apply against the impeding

person the same rights as the owner would.

Article 267. Transfer of the Right of a Pledge to a New Creditor

1. The transfer of a claim to another person also means the transfer of the right of a pledge

to that person (new creditor).

2. Any third person whose legal position may deteriorate as a result of the alienation of a

pledge shall be entitled to cover the claim and thus secure the right of a pledge for

himself.

3. A pledge may not be transferred to another person without the transfer of a respective

claim. If, upon transfer of a claim, the transfer of a pledge is excluded, the right of a

pledge shall be likewise invalidated.

Article 268. Termination of a Pledge

A pledge terminates upon termination of the obligation secured by the pledge.

Article 269. Termination of a Pledge by Waiving the Right of a Pledge

1. A pledge terminates upon waiver of the right of a pledge by the pledgee.

2. If a pledge is secured by the transfer of ownership, it shall terminate upon the return of

ownership to the pledgor.

Article 270. Termination of a Pledge as a Result of Transfer of a Pledge to the

Possession of the Pledgee

A pledge terminates upon transfer of the pledge to the possession of the pledgee. This

rule shall not apply until the rights of a third person are encumbered with the obligation

secured by the pledge.

Article 271. Duties of the Pledgee Upon Termination of a Pledge

If a pledge has terminated, the pledgee shall be liable to return the thing being in his

possession to the pledgor or owner.

Article 272. Satisfaction of the Pledgee

1. The satisfaction of the pledgee is effected through sale of the object of a pledge or

through other appropriate realization of the object.

2. The pledgee is entitled to realize the object upon full or partial maturity of the monetary

claim.

62

Article 273. Invalidity of an Agreement on Direct Transfer of the Right of Ownership to

the Pledgee

An agreement, under which the right of ownership to the object is directly transferred to the

pledgee, shall be invalid if his claim is not satisfied or is satisfied with delay.

Article 274. Right to Realize Pledged Property

The pledgee is entitled to realize the pledged property only if this is necessary for

satisfaction of his claim.

Article 275. Realization of a Repeatedly Pledged Thing

If one and the same thing has been repeatedly pledged, the right of its realization shall

have only the pledgee whose right of a pledge has a priority over the right of a pledge of

other persons. If the pledgee waives the application of this right, the right to realize the

thing shall be enjoyed by the next pledgee as well.

Article 276. Transfer of the Object of a Pledge to a Person Entitled to Realization

1. The object of a pledge may be transferred to the pledgee who has the right to realize

the pledged property.

2. If the realization of a claim depends on the performance of any legal action, the pledgee

may demand from the pledgor the performance thereof. If the pledgor fails to satisfy the

pledgee’s claim within two weeks’ period, the pledgee is entitled to exercise this right on

behalf of the pledgor towards third persons.

Article 277. Obligation of Expected Realization Notice

The pledgee is obliged to preliminarily notify the owner about the expected realization of a

thing and indicate, concurrently, the amount of realization. The realization may not take

place earlier than two weeks after the date of notice.

Article 278. Realization of Pledged Property at an Auction

1. Pledged property shall be realized by means of a sale at an auction.

2. If the pledged property has a market or exchange price, the pledgee may assign the

sale thereof to a specialized trading company.

Article 279. Inadmissibility of Realization of Pledged Property at a Price Lower Than the

Cost of Material

Pledged property may not be alienated at a price lower than the cost of material. At the

request of a pledgor, the price shall be determined by an independent expert prior to the

sale.

63

Article 280. Other Procedure for Realization

The owner and the pledgee may agree on other procedure for realization of the pledged

property different from the procedure stipulated in this chapter. Where a third person has

the right of a pledge which is lost upon alienation of the pledged property, a consent of the

third person shall be required for alienation of the pledged property. If the parties fail to

reach an agreement, the decision shall be made by a court.

Article 281. Participation of the Pledgee and the Owner in an Auction

The pledgee and the owner may jointly participate in an auction. The owner’s offer may be

rejected unless he pays in cash.

Article 282. Cash Payment Obligation at an Auction

Pledged property may be sold only on condition that the buyer effects immediate cash

payment. Otherwise, he shall forfeit this right. Where the sale is effected in violation of this

condition, the sale price shall be considered as received by the pledgee.

Article 283. Consequences of the Fair Alienation of Pledged Property

1. The property free from encumbrance is transferred to the acquirer by means of fair

alienation and transfer of the pledged property.

2. If a thing, as a pledge, is alienated in such a way that the alienator has not the right of a

pledge, or if for the satisfaction of a demand the realization is not necessary, the bona

fide acquirer shall, all the same, acquire the property free from encumbrance.

Article 284. Claim Realization Procedure

The realization of a claim is effected by means of a payment by the debtor in favour of the

creditor.

Article 285. Realization Revenue

Since the incomes from the realization of the pledged property are envisaged for

satisfaction of pledgees, the claim shall be regarded to be satisfied by the debtor in favour

of the creditor. Otherwise the revenue shall take the place of the pledged property.

II. Hypothecation

Article 286. Concept

1. An immovable thing may be enjoyed (burdened) for satisfaction of claim in such a way

as to entitle the creditor to the preferential satisfaction of his claim from the thing

(hypothecation) over other creditors.

64

2. Hypothecation may be also used in connection with the meeting of the prospective or

conditional claims provided the claim may be defined at the time the hypothecation is

established. Likewise may be determined the maximum amount within which the claim

from the immovable thing shall be satisfied. This amount shall be determined by its

entry into the public register.

3. A claim secured by hypothecation may be substituted with another claim. This will

require the agreement of the owner and the creditor (mortgagee) and its registration in

the register.

Article 287. General Hypothecation

If a claim is secured by a hypothecation of several immovable things (general

hypothecation), each thing shall be used for the general claim satisfaction. The creditor

may satisfy the claim by any thing at his discretion.

Article 288. Owner’s Hypothecation

If a claim, for the satisfaction of which a hypothecation exists, has not arisen, it shall be

repudiated or passed to the owner of the immovable thing. In this case the hypothecation

shall also pass to the latter (owner’s hypothecation).

Article 289. Registration of Hypothecation

1. Hypothecation arises as a result of the registration in the public register. The registration

is effected under the established procedure with the presentation of notarially

authenticated documents by the immovable thing owner and the mortgagee. The

documents shall indicate the immovable thing owner, the mortgagee, the prospective

debtor, as well as the amount of the secured claim, the profit, and the terms of

performance.

2. Hypothecation may also be established in such a way that the creditor’s right

proceeding from the hypothecation shall be determined only in accordance with the

claim content, during which the creditor shall not be entitled to refer to the registration in

order to prove the existence of the claim. Such hypothecation is entered in the register

as a guarantee (security) hypothecation. Hypothecation of large amounts may exist only

as guarantees.

Article 290. Repeated Encumbrance of an Immovable Things

1. One and the same thing may be repeatedly encumbered by a hypothecation. The order

of priority shall be established according to the hypothecation establishment time.

65

2. If the immovable thing owner assumes an obligation to terminate the hypothecation

before another person, this obligation may be registered in the public register when,

together with the property, it is found in the hands of one person. This termination

obligation may be registered in the public register.

Article 291. Right of the Owner not Being the Hypothecation-Secured Claim Personal

Debtor

1. If the immovable thing owner is not concurrently the personal debtor of a claim secured

by a hypothecation, he is still entitled to raise a counter-claim against the mortgagee like

the personal debtor; especially, these are counter-claims resulting from offsetting

monetary obligations and appealing against claims.

2. If a claim satisfaction period depends on the frustration of legal relations, the frustration

shall be valid only subject to the statement thereof of the owner to the creditor or vice

versa.

Article 292. Right of the Owner Upon Satisfaction of the Creditor

1. The immovable thing owner is entitled to satisfy the creditor upon maturity of the claim

performance date, or when the personal debtor is entitled to perform the respective

action.

2. If the owner is not the personal debtor, the claim shall pass to him when the owner has

satisfied the creditor.

3. During satisfaction of the creditor the owner may demand the documents which are

required for making an appropriate entry in the public register or for suspending the

hypothecation.

Article 293. Extension of Hypothecation to Fruits of an Immovable Thing

1. A hypothecation shall extend to fruits of an immovable thing as well unless they result

from the normal economic activity or until the alienation thereof.

2. Interest on the claim and court expenses shall also be covered from the immovable

thing by force of hypothecation.

Article 294. Obligation of Maintenance of a Thing Secured by a Hypothecation

1. The owner is obliged to preserve the real value of a thing. If, due to the deterioration of

circumstances, the existence of a hypothecation is endangered, the creditor may

specify to the owner a corresponding term to prevent said danger.

2. If a thing is insured, the insurer may pay the sum of insurance to the policyholder

because of the deterioration of circumstances only after the fact of the damage has

66

been notified to the creditor. The creditor may prevent the payment of the sum if he

apprehends that the sum will not be used for recovery of the thing.

3. If the owner is found to fail his obligation, the creditor may claim the transfer of the thing

to his management. The decision on such a claim shall be made by a court.

4. An agreement, by which the owner becomes obliged before the creditor to avoid the

usage or other encumbrance of the thing, shall be invalid. The validity of such a

transaction for a third person shall not be subject to the consent of creditors.

Article 295. Assignment of a Hypothecation and a Claim Based on It to Another Person

The hypothecation and the claim on which it is based may pass to another person only

concurrently and jointly. The hypothecation shall be also transferred upon the assignment

of the claim to a new creditor. The assignment of a claim shall be valid only if the new

creditor is provided with a notarially authenticated instrument on the establishment of a

hypothecation and he is recorded in the public register as a new creditor.

Article 296. Obligation of a Debtor Before the New Creditor

If, after the passing of a claim to a new creditor, the debtor pays to the original creditor,

this payment shall not release him from his obligation before the new creditor even if he

knew nothing about the passing thereof.

Article 297. Presumption of Accuracy of an Entry in the Public Register Upon Passing

of a Hypothecation and a Claim to a New Creditor

The hypothecation and claim shall pass to a new creditor as they were in the hands of the

original creditor. The entry recorded in the public register shall, proceeding from the

creditor’s interests, be deemed to be accurate. In this case the debtor may not indicate

that the claim was not existent. This rule shall not apply where the new creditor was aware

of an inaccurate entry in the public register.

Article 298. Rights of a Third Person

1. Any third person, whose condition has deteriorated as a result of the realization of a

hypothecation, is entitled to secure the claim himself and undertake the hypothecation

by means thereof. Upon satisfaction of the creditor, he may demand an appropriately

authenticated instrument and his registration as a mortgagee.

2. If the personal debtor satisfies the creditor, the hypothecation shall be passed to him is

such a way as to entitle him to claim compensation from the owner.

67

Article 299. Refusal of a Creditor to Satisfy the Claim of Hypothecation

1. If a creditor refuses to satisfy the claim or hypothecation, the mortgagee shall become

the owner. The refusal shall have the legal force if recorded in the public register.

2. If a creditor refuses to satisfy the hypothecation but not the claim, the personal debtor

shall nevertheless remain free if he has managed to get satisfaction from the

hypothecation.

3. If the owner has the right of an action under which the long-term use of hypothecation is

not provided for, he may demand from the creditor to waive the hypothecation.

Article 300. Demand for Realization of a Thing Secured by a Hypothecation

If a debtor delays the satisfaction of the demand secured by a hypothecation, the

mortgagee shall be entitled to claim the realization of the immovable thing.

The realization shall be effected in accordance with the rules given in this Charter and

norms of the Civil Procedure Code. The norms of the Civil Procedure Code shall apply

as special norms.

Article 301. Compulsory Sale at a Public Auction

1. The compulsory sale at a public auction takes place on the basis of the creditor’s

application by a court which shall designate a specialist (expert) thereof.

2. The court’s award shall be made public. Besides, the court shall be obliged to notify the

authorized persons entered in the public register about the prospective auction.

Article 302. Other Forms of Realization of an Immovable Thing

1. A court may, under the joint application of the owner and the creditor, establish a form of

realization other than by auction. The court shall hear our the parties prior to making

such a decision.

2. An agreement under which the ownership of an immovable thing directly passes to the

creditor’s possession shall be invalid provided the creditor is not satisfied or is satisfied

with delay.

Article 303. Rights of a Debtor to a Realized Dwelling Structure

1. A debtor forfeits fruits of a thing as of the date of a receipt of the decision on the sale of

the thing at an auction.

2. Where a debtor alone or together with his family lives in the building or part of the

building secured by a hypothecation, he is entitled to remain a tenant and is liable to

pay the rent in accordance with market terms.

68

Article 304. Averting a Public Sale

1. The owner or a third person whose rights may be prejudiced as a result of a public sale

is entitled to avert the holding of a public sale by means of the satisfaction of the claim

prior to the auction.

2. The holding of a public sale may be suspended by submission of an application of the

owner to a court, but not in excess of six months, provided the authorized person

considers that the auction may be averted by such suspension; the same rule shall

apply where the suspension is acceptable proceeding from the personal and economic

relations of the owner or in accordance with the debt nature. The application shall not

be accepted if the temporary suspension invokes discrepantly negative consequences

for the creditor.

Article 305. Participation of the Creditor, Debtor and Owner in a Public Sale

The creditor, debtor and owner are entitled to take part in a public sale themselves

provided they present the security acceptable for the expert.

Article 306. Repeated Holding of a Public Sale

If during the first public sale the bid is lower than seventy percent of the initial sales price

of the thing valued by the expert, the public sale shall be subject to repeated holding. The

second public sale shall be declared in the same form as the first one, but with indication

of its repeated holding. The lowest bid during the second public sale shall cover the

process expenses and the creditor claims at least. Should these requirements not be met,

the public sale would be declared not to have taken place, and the expenses thereof would

be borne by the owner.

Article 307. Termination of a Hypothecation as a Result of the Realization of a Thing

1. The purchaser of a thing at a public sale shall be liable to transfer to the expert who has

effected the compulsory execution the value of purchase less the execution expenses.

2. The purchaser shall become the owner of a thing only upon payment of the price

thereof.

3. Upon transfer of the property all hypothecations and rights in rem by which the thing

was secured once and which have been registered after the hypothecation of the

creditor performing the compulsory execution shall be void. The earlier registered

restricted rights to the thing shall remain unchanged.

69

4. A new owner shall become participant to the existing rental and lease relations upon the

transfer of property. By transfer of the property to a new owner the original owner shall

be deemed to be a tenant in accordance with market terms.

Article 308. Procedure for Distribution of Income from the Realization of a Thing

1. If a person authorized for the realization of a thing is registered as a sole mortgagee, or

the income received from the public sale, less the expenses, covers the claims of all

creditors, the expert shall, after the expenses are defined, distribute the price of

purchase among the creditors, while the remainder shall be given to the person whose

thing has been sold.

2. If the amount received from the realization of the thing is insufficient to cover all the

claims, the expert shall specify the costs, enter the remaining amount in a special

account, draw up the distribution plan according to the order of property in the public

register and submit it to a court. The court shall approve the plan and instruct experts

to effect the distribution on the basis of the plan.

Article 309. Joint Responsibility of the State for Inadequate Holding of a Public Sale

If an officially designated expert fails to fulfil the obligations assigned thereto in connection

with the holding of a public sale, the state shall, together with the expert, bear joint

responsibility before the participants for the damage caused.

Article 310. Compulsory Management (Sequester) of a Thing

1. On the basis of an application of a mortgagee with regard to the compulsory execution a

court my establish the compulsory management (sequester) of a thing instead of the

compulsory taking at a public sale. In such a case the court shall designate a manager

or shall delegate the management function to the owner.

2. Prior to the decision-making, the court shall hear out the persons recorded in the public

register, whose rights may be prejudiced by compulsory management.

3. The compulsory management may be established only if the incomes gained from the

compulsory management are expected to exceed the current management costs.

4. If the debtor himself or together with his family lives in the building or part thereof

encumbered by compulsory management, he shall be liable to pay rental under market

terms from the beginning of compulsory management.

5. The manager shall obtain fruits from the thing and distribute them at the year’s end less

all the costs, including the management costs, on the basis of the distribution plan to be

drawn up by himself and approved by a court.

70

6. Compulsory management shall be terminated when the creditor has been satisfied or it

is obvious that the creditor’s satisfaction by way of management is impossible.

SECTION FOUR

PUBLIC REGISTER

Article 311. Purpose of the Public Register

1. The public register is accessible for familiarizing to any person concerned. The public

register shall record the rights of ownership on immovables and other rights in rem. The

public register may also record the right of use of immovable thing surety and other

rights.

2. The procedure for arranging the register shall be defined under a separate law.

Article 312. Presumption of the Register Data Reliability and Completeness

1. The presumption of reliability and completeness is applicable to data of the public

register, i.e. the register records are deemed to be accurate unless their inaccuracy is

proved.

2. A register entry made in favour of the person who on the basis of a transaction acquires

from another person any right and this right was registered in the register in the name of

the alienator shall be regarded as correct, except for the cases where the entry has

been appealed against or the acquirer knew that the entry was incorrect.

Article 313. Demand of a Consent for Correcting an Inaccurate Entry

1. If the register contains a right entered therein in the name of a person whereto it no

longer belongs, the person whose rights and legal status have been prejudiced as a

result of registration may demand a consent for correcting the entry from the person to

whose right the correction relates.

2. A complaint may be lodged as regards the incorrectness of the entry in order to

establish the owner. The lodging of a complaint presupposes the registry entry

incorrectness.

Article 314. Order of Priority of Rights Recorded in the Register

1. The order of priority of the rights recorded in the register is established in sequence of

the time of registration. The day of filing an application for registration is deemed to be

the date of registration.

71

2. The order of priority may be subject to further alteration. This shall be subject to

agreement of the persons replacing each other and to registration of the alteration in the

register.

3. In registering any right, the owner may make a reservation that some right will be

registered in advance of another right. this reservation shall also be subject to

registration.

Article 315. Preliminary Entry in the Public Register

1. A preliminary entry may be made in the public register to ensure the demand of the

thing registration. The making of such a preliminary entry is permissible for ensuring

prospective or conditional demands.

2. The registration made after the preliminary entry had been effected does not exert any

influence upon a person secured by the preliminary entry registration unless this

registration infringes or annuls his demand.

3. The preliminary entry registration is effected to establish the owner on the basis of the

person’s permit to whose registration thing the entry relates.

4. If the person, to whose thing the preliminary entry relates, has the right to object and

this objection rules out a long-term application of the demand secured by the

preliminary entry, he is entitled to demand from the creditor the preliminary entry

revocation.

5. If the acquisition of any right is void for the person in whose favour a preliminary entry

has been made, he is entitled to demand from the right acquirer the consent for

registration which will be necessary for performing the claim secured by the preliminary

entry.

72

BOOK THREE

LAW OF OBLIGATION

GENERAL PART

General Provisions on Obligations

Article 316. Concept

1. By virtue of an obligation the creditor is entitled to demand from the debtor the

performance of any action. The performance may also be expressed as refraining from

actions.

2. With regard to its content and nature, an obligation may entrust each party with special

consideration of the other party’s rights and property.

Article 317. Grounds for Origin of an Obligation

1. Obligations originate under a contract if the parties, except for the cases where an

obligation originates as a result of causing of harm (delict), unjust enrichment or on

other grounds provided for in a law.

According to duties stipulated by Article 316, an obligation may likewise originate on the

basis of a contract preparation.

2. A participant in a negotiation may demand from the other participant the indemnification

of the expenses incurred by him for concluding the contract, however this contract has

not been concluded due to the other participant’s action in tort.

Article 318. Obligation of Furnishing Information

A right of receipt of any information may flow from an obligation. The information furnishing

shall be ensured where it is of significance for determining the essence of an obligation,

and a contractor may furnish this information without prejudice to own rights. The

expenses in connection with information furnishing shall be reimbursed to the person in

charge by the recipient thereof.

SECTION 1. CONTRACT LAW

PART ONE

CHAPTER 1. GENERAL PROVISIONS

Article 319. Freedom of Contract. Contract Conclusion Obligation

1. Subjects of private law may within limits of a law, freely conclude contracts and

determine the essence thereof. They may conclude contracts which are not provided for

by a law, but do not contradict it. If for protection of the essential interests of the society

73

or individuals the validity of a contract depends on the state’s permit, this shall be

governed by a separate law.

2. If one of the parties to a contract holds the dominant position on the market, it shall

assume the duty to conclude a contract in the given sphere of activity. It may not offer to

the contractor the unequal terms of a contract without valid reasons.

3. The persons who acquire or use property and services for non-commercial purposes or

the satisfaction of essential requirements may not be refused without grounds from the

conclusion of contract provided the other party to the contract operates within the scope

of its entrepreneurial activity.

Article 320. Invalidity of Contract for Future Property

Invalid shall be a contract by which one party assumes the obligation to transfer its entire

property or part thereof to the other party or secure it by a usufruct, except for the

instances where the contract has been signed for individual things of the future property.

Article 321. A Contract for the Transfer of Property

A contract, under which one party assumes the obligation to transfer its current property or

part thereof to the other party or secure it by a usufruct, shall be subject to notarial

authentication, except for the instances where the contract has been signed for individual

things of the existing property.

Article 322. Invalidity of a Contract for Inheritable Property

1. A contract concluded by other persons with regard to a person’s inheritance in his life-

time shall be void. The same rule applies to contracts in relation to the natural portion

and/or the hereditary obligation flowing from the inheritance of a person in his life-time.

2. The rule of item 1 of this Article shall not apply to a contract which is concluded between

expectant legal heir for the legal portion and the natural portion of one of them.

Article 323. Procedure for Alteration of an Immovable Thing

1. A contract, under which one party assumes the obligation to transfer ownership of an

immovable thing to another person or to acquire it, shall be subject to notarial

authentication.

Article 324. Limits of a Contract for Encumbrance of a Thing

If a person assumes the obligation to alienate or encumber his thing, this obligation shall

also extend to the possession thereof unless the contract provides otherwise.

74

Article 325. Definition of Terms of an Obligation on a Fair Basis

1. If an obligation performance terms are to be defined by one of the parties to a contract

or by a third person, then, in case of doubtfulness, such definition is supposed to be

effected on a fair basis.

2. Should a party consider the terms to be unfair, or their definition is delayed, the decision

shall be made by a court.

Article 326. Application of the Rules of Contractual Obligations Towards Non-contractual

Obligations

The rules of contractual obligations shall likewise apply to other non-contractual

obligations unless otherwise follows from the nature of the obligation.

CHAPTER 2. CONCLUSION OF A CONTRACT

Article 327. Basic Provisions on Concluding a Contract

1. A contract is considered to be concluded where agreement regarding all the material

terms and conditions of the contract has been reached in the required form.

2. Those terms and conditions are material regarding which an agreement must be

reached by a statement of one of the parties, or which are named in a law.

3. An obligation to conclude a future contract may originate by a contract. The form

provided for a contract shall also apply to future contracts.

Article 328. Form of a Contract

1. If a specific form has been established by a law for validity of a contract, or if the parties

have provided for such a form for contracts, it is considered to be valid only upon

meeting of such requirement.

2. If the parties have agreed on a written form, a contract may be concluded by means of

drawing up one document signed by the parties, as well as by means of the exchange

of documents by means of postal, telegraph, electronic or written communications.

Article 329. Making Offer

1. A proposal (offer) for concluding a contract is considered to be made if in this proposal

which is addressed to one or several persons it is expressed that the person who has

made the proposal (offerer) is ready to fulfil his proposal in the case of agreement

(acceptance).

2. A proposal addressed to an indefinite circle of persons is an invitation to make an offer

unless otherwise expressly specified in the proposal.

75

Article 330. An Offer Made to Present and Absent Persons

1. An offer made to the present person shall be replied immediately.

2. An offer made to the absent person may be accepted only up to the time within which

the offerer may wait for the reply.

Article 331. Acceptance

1. If the offerer set forth a time period for acceptance, the acceptance may be fulfilled only

within the limits of the time period specified therein.

Article 332. Acceptance Received Late

In instances where the notification of acceptance sent on a timely basis has been received

late, the acceptance is not considered to be late if the party that has sent the offer does

not inform the other party immediately about the late receipt of the acceptance.

Article 333. New Offer

1. An acceptance to the offer received late is considered to be a new offer.

2. A reply concerning consent to conclude a contract upon terms and conditions other that

those proposed in the offer is deemed to be a rejection of the offer and, at the same

time, a new offer.

Article 334. Assumption of Offerer’s Consent

Where in business relations the acceptance is made under changed terms and conditions,

a contract is deemed to be concluded if the acceptor was entitled to assume the offerer’s

consent and the latter did not immediately communicate his refusal.

Article 335. Silence as a Form of Acceptance

1. If an entrepreneur, who is to perform business transactions of other persons, receives

an offer for performance of such business from a person with whom he is in business

relations, he is required within a reasonable time period to answer to this offer; his

silence shall be deemed to be acceptance. The same rule applies where the

entrepreneur accepts an offer from the person from whom he required the performance

of such business.

2. In the case where an entrepreneur rejects the offer, while the goods have been already

shipped, he is required to ensure temporary keeping of the goods at the expense of the

offerer in order to avoid damage.

76

Article 336. A Contract Concluded in Street

A contract concluded between the consumer and a person in street, in front of the house

and in alike place within the trader’s own trade is valid only unless the consumer rejects

the contract in writing within a week, with the exception of cases where the contract is

performed upon its conclusion.

Article 337. Interpretation of Individual Expressions of a Contract

In the event of ambiguity of individual words and expressions of a contact, the property is

given to those which are usually accepted at the place of residence of the parties to the

contract. If the parties have different places of residence, the acceptor’s place of residence

shall be decisive.

Article 338. Mutually Exclusive and Polysemantic Expressions

In the case of mutually exclusive and polysemantic expressions in a contract, priority shall

have the expression which most closely corresponds to the contractor’s content.

Article 339. Trade Customs and Traditions

Trade customs and traditions may be taken into account in determining the rights and

duties of the parties.

Article 340. Definition of Mixed Transactions

In defining mixed transactions, account shall be taken of the standards concerning those

contracts which are most close to the essence of performance and correspond thereto.

Article 341. Acknowledgement of a Debt Existence

1. A written acknowledgement is necessary for validity of a contract under which the

existence of an obligation (existence of debt) has been acknowledged. If another form is

provided for the origin of an obligation which existence has been acknowledged, the

acknowledgement shall also require that form

2. If the existence of a debt is acknowledged on the basis of settlement (payment) or by

way of a deal, the observance of the form is not required.

CHAPTER 3. MODEL TERMS AND CONDITIONS OF A CONTRACT

Article 342. Concept

1. The model terms and conditions of a contract are the preliminary established terms and

conditions intended for a multiple use which are worked out by one party (offer) or to

another party and through which the rules differing from the norms established under a

law or complementing them shall be determined.

77

2. Where the terms and conditions of a contract have been specified by the parties in

detail, they shall not be regarded as model terms and conditions of a contract.

3. The terms and conditions agreed upon directly by the parties shall have priority over the

model terms and conditions.

Article 343. Transformation of Model Terms and Conditions into a Integral Part of a

Contract

The model and conditions of a contract turn into an integral part of a contract concluded

between the offerer and the other party to the contract only where:

a) the offerer makes a visual note at the place of conclusion of a contract and indicates the

terms and conditions;

b) the other party to the contract has a possibility to acquaint himself with the essence of

these terms and conditions and accept them in the case of agreement thereto.

2. Where the other party to a contract is an entrepreneur, the model terms and conditions

turn into an integral part thereof when he should have taken it into account in revealing

necessary responsiveness in business relations.

Article 344. Unusual Provisions of Model Terms and Conditions of a Contract

Provisions of the terms and conditions of a contact which in their form are so unusual that

could not have been taken into account by the other party do not turn into an integral part

of the contract.

Article 345. Interpretation of Ambiguous Text in Favour of the Other Party

Where the text of model terms and conditions of a contract is ambiguous, it shall be

interpreted in favour of the other party.

Article 346. Invalidity of Terms and Conditions Contrary to Principles of Confidence and

Fairness

Model terms and conditions contrary to the principles of confidence and fairness and

damaging to the other party to a contract shall be invalid in spite of their inclusion in the

contract. At the same time, account shall be made of the circumstances under which these

terms and conditions have been included in the contract, the bilateral interests of the

parties, etc.

Article 347. Invalidity of Model Terms and Conditions of a Contract

1. The following provisions shall be invalid in model terms and conditions of a contract

applied by the offerer towards natural persons not engaged in entrepreneurial activity:

78

a) a provision under which the offerer establishes unacceptably protracted or short terms

of acceptance or rejection of the offered proposals or performance of a work (terms of

acceptance and fulfilment of an offer);

b) a provision under which the offerer establishes unacceptably protracted or short terms

of the fulfillment of own obligations which differ from the standards established under a

law (terms in the case of violation of obligations);

c) a provision which entitles the offerer to waive unjustifiably and contrary to the grounds

indicated in the contract the fulfilment of his obligations (waiver of a contract);

d) a provision entitling the offerer to alter the agreed-on work or deviate from it provided

the agreement thereon is unacceptable to the other party (term of amendment);

e) a provision entitling the offerer to demand from the other party the unacceptably high

reimbursement of expenses (unacceptably high reimbursement of the incurred

expenses).

Article 348. Other Grounds for Invalidity of Model Terms and Conditions of a Contract

1. In model terms and conditions of a contract applied by the offerer towards natural

persons not engaged in entrepreneurial activity also invalid shall be:

a) a provision providing for a price increase in the unjustifiably short terms (a short-term

price increase);

b) a provision restricting or excluding:

c) the right of a performance waiver to which the party to a contract is entitled under this

Law;

or

d) the right of the party to a contract to waive performance unless the other party fulfils the

assumed obligation ( a waiver of performance);

e) a provision under which a party to a contract is deprived of a right to waive a reasonable

or court-established demand (offsetting of counter-claims);

f) a provision under which the offerer is released from the obligation established under a

law to warn the party to a contract or to set a term for fulfilling the obligation (warning on

the obligation fulfillment; fixing a date);

g) an agreement on claiming a sum in excess of the amount of damage (claim for

excessive compensation);

79

h) a provision excluding or restricting responsibility for the damage caused as a result of

gross violation of the obligation by the offerer or his representative (responsibility for

carelessness);

i) a provision under which upon violation of the basic obligation by the offerer:

j) the other party to a contract is deprived or restricted of a right to repudiate the contract,

or

k) the other party to a contract is deprived or, contrary to paragraph “f”, restricted of a right

to claim the compensation of a damage for non-fulfillment of the contract (violation of

the basic obligation fulfillment);

l) a provision under which the other party to a contract in the cases of a partial non-

fulfillment of the obligation by the offerer is deprived of a right to claim the compensation

of damage for non-fulfillment of the entire contract or repudiate the contract provided he

has lost interest for a partial fulfillment (loss of interest in the case of a partial fulfillment

of the interest);

m) provisions which, in contrast to the rules provided for by a law, restrict responsibility of

the offerer for a faulty goods in delivering newly-manufactured goods and fulfilling

works.

CHAPTER 4. CONTRACT IN FAVOUR OF THIRD PERSONS

Article 349. Concept

Performance of a contract in favour of a third person may be demanded by both the

creditor and a third person unless otherwise provided by a law or a contract, or otherwise

proceeding from the essence of the obligation proper.

Article 350. Interpretation of a Contract in Favour of Third Persons

1. In the absence of a special reservation, the circumstances of the matter, namely the

objective of the contract shall establish:

a) whether a third person shall acquire the right;

b) whether this right originates immediately or subject to a definite pre-requisite;

c) whether the contractual parties are entitled to terminate or amend the right of a third

person without his consent.

2. A party who has made a special reservation in a contract in favour of a third person

preserves a right to replace the third person indicated in the contract irrespective of the

counterpart’s consent.

80

Article 351. A third Person’s Waiver of a Right Under a Contract

Where a third person waives a right granted to him under a contract, a creditor may

himself require performance of the obligation unless otherwise proceeding from the

essence of the contract or obligation.

CHAPTER 5. WITHDRAWAL FROM CONTRACT

Article 352. Consequences of Repudiation of a Contract

1. If one of the parties to a contract repudiates the contract in the existence of the

conditions provided for by Article 405, the received performance and benefit shall be

returned to the parties (return in kind).

2. A debtor shall be liable to indemnification instead of the return in kind if:

a) proceeding from the acquisition nature, its return is impossible;

b) the good received is used, alternated, encumbered, processed or altered by the party;

c) the received good has been damaged or destroyed; the tear and wear resulting from its

use is not taken into account.

3. Where a contract provided for reciprocal performance, the indemnification shall be

submitted with this performance.

4. Indemnification liability does not originate if:

a) the fault of a thing giving the right to repudiate a contract was revealed in processing or

altering the thing;

b) the damage or destruction of the thing took place through the creditor’s fault;

c) the thing was damaged or destroyed at an authorized person irrespective of the fact

that he was treating it with the same care as in the case of his own thing, and what has

remained is returnable.

A creditor may claim the indemnification of damage for violation of the obligations

proceeding from item 1 of this Article according to Article 394.

Article 353. Liability of a Debtor for Non-Receipt of Benefit for Violating Rules of

Improper Use of a Thing

1. If a debtor does not receive benefit for violating rules of proper use of a thing, though he

could receive it, he is required to indemnify to the creditor the damage caused from

non-receipt of the benefit.

81

If a debtor returns a thing, compensates in money, or if pursuant to paragraphs “a” and

“b” of item 4 of Article 352 the indemnification of damage is admissible, he shall be

entitled to the compensation of necessary expenses. Other expenses shall be

indemnified only where the creditor has received benefit on the basis thereof.

Article 354. Performance of Obligations Arising as a Result of Withdrawal from a

Contract

The obligations arising as a result of withdrawal from a contract shall be performed by the

parties simultaneously.

Article 355. Liability of a Notice in Withdrawing from a Contract

Withdrawal from a contract shall be effected by notifying the other party thereon.

Article 356. Term of Withdrawal from a Contract

Where term of withdrawal from a contract is not established, such term may be specified

for the withdrawing person by the other party. The term shall be reasonable. The right of

withdrawal from a contract is forfeited unless the refusal is declared prior to the expiration

of the term.

Article 357. Withdrawal from a Contract by Several Persons

Where several persons participate on this or that part of a contract, the right to repudiate

the contract may be exercised jointly by all participants of the party withdrawing from the

contract upon notification of all participants of another party. If the right of withdrawal from

a contract is forfeited for one of the authorized persons, this right shall be forfeited for all of

them.

Article 358. Inadmissibility of a Withdrawal from a Contract

A withdrawal from a contract for non-performance of an obligation is inadmissible if the

debtor was able to perform the obligation by way of its cover and upon withdrawal

immediately states on the cover of the obligation.

Article 359. Creditor’s Repudiation of a Contract

If a contract has been concluded on reservation that the debtor, pursuant to the contract,

forfeits his rights in the case of non-performance of his obligations, the creditor shall in that

case be entitled to withdraw from the contract.

Article 360. A Mistake in Grounds of a Deal

1. Invalid is a deal under which a dispute or difference between the parties is settled by

way of reciprocal concessions (agreement) provided the deal is based on the

82

circumstances inconsistent with the reality and the dispute or difference would not have

arisen should the parties be aware of the actual situation.

2. A doubtful performance of an obligation is equated to difference.

SECTION 2. PERFORMANCE OF AN OBLIGATION

CHAPTER 1. GENERAL PROVISIONS

Article 361. Presumption of Existence of an Obligation

1. Each performance implies the existence of an obligation.

2. An obligation shall be performed properly, conscientiously, in time and at the place

agreed.

Article 362. Place of Performance of an Obligation

1. If the place of performance is not determined and is not evident from the essence of the

obligation relationship, the delivery of thing must be effected:

a) with regard to an individually defined thing – at the place where the thing is located at

the moment of origin of the obligation;

b) with regard to a thing defined according to identity – at the place where the debtor

enterprise is located, and if such is absent – at the place of his residence (legal

address).

Article 363. Changing a Place of Location of a Debtor or Creditor

1. Where prior to performance of an obligation the place of residence of a debtor or the

location of an enterprise is changed and the creditor has as a result to bear additional

expenses the debtor shall indemnify these expenses to the creditor.

2. Where prior to performance of an obligation the creditor’s place of residence or legal

address is changed resulting in the increase of expenses or endangering performance,

the creditor shall be assigned with both the indemnification of the increased expenses

and the risk of a possible-handing over of the thing.

Article 364. Premature Performance of an Obligation

A debtor is entitled to perform an obligation before the time period fixed unless the creditor

refuses to accept performance through a reasonable cause.

83

Article 365. Performance of an Obligation in Absence of a Time Period Fixed for its

Performance

Where an obligation does not provide for a time period for its performance and it is not

evident from other circumstances, a creditor may at any time require its performance, and

a debtor may immediately perform it.

Article 366. Inadmissibility of Claiming Premature Performance of an Obligation

Where time is fixed, then in the case of doubts it is implied that a creditor is unable to

perform an obligation before that time period, and a debtor is able to perform the obligation

prematurely.

Article 367. Right to Demand Immediate Performance of an Obligation

Where time period is fixed for performance of an obligation in favour of the debtor, the

creditor may demand immediate performance if the debtor proved insolvent, decreased

the promised security; or failed to submit it at all.

Article 368. Performance of an Obligation in the Case of a Conditional Deal

If validity of a deal depends on the maturity of any condition, the obligation must be

performed from the day when such condition matures.

Article 369. Renunciation of Performance of an Obligation

A person obliged on the basis of a bilateral contract may renounce performance of an

obligation until retaliation, except for the cases when he was obliged to perform his

obligation prematurely.

Article 370. Consumer Credit

1. In the case of a consumer credit, a beneficiary of credit may reject the repayment of the

credit provided the counter claim following from the paid contract in connection with this

credit would grant him a right to renounce performance of his obligation.

2. A sale contract together with a credit contract make up an interconnected deal if the

credit serves financing of the purchase price and both contracts are regarded as an

economic entity. The economic entity comprises the application of the seller’s

participation by the creditor in preparing or concluding a credit contract.

Article 371. Performance of a Obligation by a Third Person

1. Unless the duty of a debtor to personally perform an obligation follows from a law, a

contract, or the essence of the obligation, the obligation may be performed by a third

person.

84

2. A creditor may reject performance of an obligation offered by a third person if a debtor is

against it.

Article 372. Satisfaction of a Creditor by a Third Person

If a creditor applies to the compulsory execution against a thing belonging to a debtor, any

person exposed to the danger of losing his right to the thing as a consequence of the

compulsory execution may satisfy the creditor. In this event, the right of claim passes to

that person.

Article 373. Acceptance of Performance of an Obligation by an Authorized Person

1. A debtor is liable to perform an obligation to a creditor or a person authorized under a

law to accept performance.

2. If performance of an obligation has been accepted by an authorized person, the

obligation shall be regarded as performed when the creditor agreed thereto or received

benefit from the performance.

Article 374. Alternative Obligations

If one obligation is to be performed from among several ones (alternative obligations), the

debtor shall have the right of choice unless otherwise follows from a law, the contract, or

the obligation.

Article 375. Selection of Obligations to Be Performed

If it turns out that a debtor may reject one of the two obligations to be performed, the

obligation of a second action performance shall be in force.

Article 376. Procedure for Choosing Alternative Obligations

Pursuant to Article 374, the choice of an obligation is made by a statement before the

other party or effecting performance. The chosen obligation shall initially be recognized as

an obligation to be performed.

Article 377. Choice of More Than Two Obligations to be Performed

The rules of Articles 374 to 376 are applied in the cases when more than two

performances constitute the subject of choice of an obligation.

Article 378. Performance of an Obligations in Parts

A debtor is entitled to perform an obligation in parts (partial performance of an obligation)

provided the creditor agrees thereon.

85

Article 379. Right of a Creditor to Accept Another Performance

A creditor is not obliged to accept another performance except the one provided for by a

contract. This rule is also applied when performance is of high value.

Article 380. Quality of Performance of an Obligation

Where the quality of performance is not specified in detail in a contract, a debtor is liable to

perform an average quality work at least and transfer a thing of average quality.

Article 381. Performance of an Obligation in the Case of an Individually Specified Thing

Where the subject of a contract is an individually specified thing, a creditor is not liable to

accept another thing even if it being of higher value.

Article 382. Performance of an Obligation in the Case of a Generic Thing

Where the object of performance is a thing which may be replaced (generic thing), a

debtor must always perform an obligation.

CHAPTER 2. PERFORMANCE OF A MONEY OBLIGATION

Article 383. Concept

A money obligation must be exercised in the national currency. The parties may establish

a money obligation in a foreign currency as well unless it is prohibited by a law.

Article 384. Procedure for Assessing Annual Interest

If, according to a law or the contract, an obligation is interest bearing, the limiting rate of

annual interest shall be assessed under a special legal act.

Article 385. Procedure for Withdrawing Money Paid Without an Obligation

The money paid without an obligation may be withdrawn according to the rules concerning

unjust enrichment.

Article 386. Place of Performance of a Money Obligation

1. If the place of performance is doubtful, a money obligation shall be performed according

to a creditor’s location (place of residence or legal address).

2. If a creditor has a bank account for placing money at that place or in that country where

the payment is to be effected, a debtor may perform his money obligation by placing

money on that account except for the case where the creditor is against.

Article 387. Regular Succession of Meeting Money Obligations

1. If a debtor is liable to performance of several alike obligations which follow from various

obligations and that which has been performed is insufficient to cover all debts, the

86

obligation chosen by the debtor on performing shall be covered first; and where there is

no choice made – first shall be covered the debt which matured first.

2. Where the term of payment of claims matured concurrently, the claim which is the

hardest to pay for a debtor shall be performed first.

3. Where the claims are equally hard, the claims less secured shall be performed first.

Article 388. Priority of Cover of Court Expenses

The amount of payment made by a debtor which is insufficient for the performance of a

due money obligation in full shall cover first of all the court expenses and, thereafter the

principal amount of performance (debt), and finally the interest.

Article 389. Payment of a Money Obligation in the Case of Alteration of a Monetary Unit;s

Exchange Rate

If a monetary unit (rate) increases or decreases prior to maturing, or a currency has

changed, a debtor shall pay at the rate corresponding the time of origin of an obligation. In

changing a currency, the exchange relations shall be based on the rate which existed

between the units of money at the date when the currency was changed.

CHAPTER 3. DELAY BY A CREDITOR

Article 390. Concept

1. A creditor is deemed to be in default if he refuses to accept performance offered when it

is due.

2. Where a creditor is required to perform a certain action to meet an obligation; the non-

performance thereof shall be deemed to be a delay.

Article 391. Liability of a Creditor for Indemnification of Damage

A creditor shall indemnify the damage incurred to a debtor by the delay in accepting proper

performance.

Article 392. Liability of a Debtor Upon Delay by a Creditor

In the case of delay by a creditor, a debtor shall be liable for non-performance of an

obligations only if such non-performance resulted from the debtor’s intent or gross

carelessness.

Article 393. Consequences of Delay by a Creditor

1. In the case of delay by a creditor in spite of his fault:

a) he shall be liable to compensate to a debtor additional costs in connection with storage

of the object of the contract;

87

b) he shall bear a risk for the occasional damage or destruction of the thing;

c) he shall not be entitled to interest from a money obligation.

SECTION 3. BREACH OF OBLIGATIONS

CHAPTER 1. GENERAL PROVISIONS

Article 394. A Claim for Damages Upon Breach of Obligation

1. A creditor may claim a debtor for damages caused by the failure to perform an

obligation. This rule is not applied when the debtor is not liable for breaching

obligations.

2. Upon delay of a debtor, a creditor may fix time to the debtor required for performing an

obligation. If the debtor fails to perform the obligation in this time, the creditor shall be

entitled to demand the indemnification of damage instead of performance of the

obligation.

3. Fixing additional time is not required where it is obvious that it will not yield any result, or

when there exist extraordinary conditions which, with due regard for interests of both

parties, justify the immediate application of the claim for damages.

Article 395. Inadmissibility of a Preliminary Agreement on Release from the Liability for

Damages

1. A debtor shall be liable for the damage caused by an intentional or negligible action

unless otherwise provided and otherwise follows from the essence of an obligation.

2. A preliminary agreement of the parties concerning the release of a debtor from liability

for damages in the case of breach of an obligation through an intentional action is

inadmissible.

Article 396. Liability of a Debtor for Action of His Representative

A debtor shall be liable for action of his legal representative or persons whose assistance

he applies in performing own obligation to the same extent as for his own faulty action.

Article 397. Liability of a Debtor in Accepting the Object of Performance from Another

Person

A debtor shall also be liable for performance when he was to accept the object of

performance from another person and failed to do so unless otherwise follows from the

contract or other circumstances.

88

Article 398. Amendment of a Contract in Connection with Changed Circumstances

1. If the circumstances, which served as the basis for concluding a contract, have so

changed that if the parties could reasonable have foreseen this, the contract would not

have been concluded at all or would have been concluded on significantly different

terms and conditions, this may serve as grounds for bringing the contract into

conformity with the changed circumstances. Otherwise, taking into consideration

separate circumstances, a party to the contract may not be required the strict

observance of the unamended contract.

2. The instances where the understandings serving as the basis of a contract have proved

to be incorrect are equated to the change of circumstances.

3. The parties shall try to bring the contract into conformity with the changed

circumstances. If the parties have not reached agreement thereon, the party whose

interests are affected may repudiate the contract.

Article 399. Renouncement of Long-term Obligations

1. Any party to a contract may, upon justifiable grounds, renounce the long-term liability

relations without observing the established term for termination of a contract. Grounds

are justifiable when the contract-terminating party due to a concrete situation, including

the insurmountable force and bilateral interests, may not be required the continuation of

the contractual relations prior to the expiry of the agreed term or the established term

for termination of the contract.

If grounds are the breach of obligations as well, a contract may be terminated only

subject to the unsuccessful expiry of a term fixed for overcoming deficiencies or the

unsuccessful warning. Item 2 of Article 405 shall be applied accordingly.

2. An authorized person may repudiate a contract in reasonable time after having been

familiarized with the contract termination grounds.

3. If the already performed is no longer of any interest to the authorized person as a result

of the contract termination, the termination of the contract may likewise extend to the

performance thereof. For securing the return of what has been already performed,

Articles 352-354 shall apply accordingly.

Article 407 shall accordingly apply to the claim of damages.

CHAPTER 2. DELAY BY A DEBTOR

Article 400. Concept

1. A debtor is deemed to be in default if

89

a) he has failed to perform an obligation at the fixed time;

b) upon maturity of performance and warning by a creditor, he still fails to perform an

obligation.

Article 401. Impossibility of Performing an Obligation

The non-performance of an obligation due to the circumstances beyond the debtor’s fault

are not deemed to be a delay.

Article 402. Liability of a Debtor

A debtor in default is liable for any negligence. He shall be liable to the incidental nature of

a delay too unless he proves that the damage might have been incurred during the timely

performance of an obligation as well.

Article 403. Inadmissibility of Interest-On-Interest Payment

1. A debtor who delays the payment of a sum of money is liable to pay the interest

established under a law for the time of the delay if a creditor, proceeding from other

ground, is unable to claim more.

2. The interest-on-interest payment is inadmissible.

Article 404. Right of a Creditor to Compensation of Damage

A creditor is entitled to claim compensation of the damage caused by a delay.

CHAPTER 3. BREACH OF AN OBLIGATION IN A BILATERAL CONTRACT

Article 405. Fixing an Additional Time Period for Breach of an Obligation

1. If one of the parties to a contract breaches obligations proceeding from a bilateral

contract, the other party to the contract may repudiate the contract after an additional

time period fixed by at for performance of an obligation has unsuccessfully passed. If,

proceeding from the nature of the obligation, the additional time period is not applied, a

warning shall be equal to the determination of an additional time period. Where the

obligation is breached only in part, the creditor may repudiate the contract only in the

instance if the performance of the remaining part of the obligation has lost interest for

him.

2. The establishment of an additional time period or a warning is not necessary if:

a) it is obvious that it will yield no result;

b) an obligation has not been performed at the time fixed under the contract, and a creditor

has connected the continuation of relations with timely performance of the obligation;

90

c) proceeding from special grounds and with regard to bilateral interests, the immediate

termination of a contract is justified;

3. A contract may not be repudiated if:

a) the breach is insignificant;

b) the provisions of item 2 of Article 316 are violated and, despite this, a creditor may be

required to maintain the contract in force;

c) a creditor is liable in full or mainly himself for non-performance of an obligation;

d) a claim is opposed with a counter-claim which a debtor has made or will immediately

make after repudiation of the contract.

4. A creditor is entitled to repudiate a contract prior to maturity if the grounds for

repudiating the contract are obvious.

5. A debtor is entitled to establish to a creditor a reasonable time period for repudiating a

contract.

Article 406. Right to Accept Counter-Performance

1. A debtor in a bilateral contract is entitled to refuse from an obligation assigned to him,

and the circumstances giving him this right are caused through a creditor’s fault, he

shall retain the right to accept counter-performance.

2. This rule is not applied if grounds for counter-performance originated at the time when a

creditor was delaying the acceptance of performance.

Article 407. Indemnification of Damage in Withdrawing from a Contract

1. In withdrawing from a contract, a creditor may claim indemnification of the damage

caused to him by non-performance of the contract.

2. This rule does not apply when grounds for withdrawing from a contract are not

originated through a debtor’s fault.

SECTION 4. LIABILITY TO COMPENSATE FOR DAMAGE

Article 408. Liability to Restore the Original State

1. A person who is liable for damage shall restore the state which would have existed

unless the compensation-binding circumstances occurred.

2. If an injured person has lost his activity to work or it has been restricted as a result of an

injury to his body or health, or his requirements increase, he shall be entitled to the

compensation of damage through payment of a monthly allowance.

91

3. A victim is entitled to demand the payment of treatment expenses in advance. The

same rule applies when the professional retraining becomes necessary.

4. A victim may demand the receipt of a compensation instead of an allowance provided

there are sufficient grounds therefor.

Article 409. Impossibility of the Original State Restoration

Where the compensation of damage through the restoration of the original state is

impossible or requires unreasonably high expenses, a creditor may be given a monetary

compensation.

Article 410. Inadmissibility of a Preliminary Refusal to a Claim for Compensation of

Damage

A refusal to a claim for compensation a damage due to a breach of an obligation under a

preliminary agreement is inadmissible.

Article 411. Compensation of Damage for the Unreceived Income

A damage shall be compensated not only for the actual material loss but also for the

unreceived income. Unreceived is the income which is not received by a person and which

he would receive had the obligation been properly performed.

Article 412. Damage to Which a Compensation Liability Applies

Only the damage which was preliminary expected by a debtor and which is a direct

consequence of the damage-inflicting action shall be subject to compensation.

Article 413. Compensation of Damage for Non-property Damage

1. Money compensation for non-property damage may be claimed only in the instances

strictly defined under a law in the form of a reasonable and legitimate compensation.

2. In the cases of body or health injuries the victim may claim compensation for non-

property damage as well.

Article 414. Estimation of Damage

An interest which a creditor had towards proper performance of an obligation is to be taken

into account in estimating the damage. The time and place of performance of a contract

shall be taken into account for estimating the damage.

Article 415. Fault of a Victim in the Origin of Damage

1. If the origin of damage was facilitated by the victim’s action as well, the damage

compensation liability and the extent thereof shall depend on which party is more faulty

for the damage.

92

2. This rule is also applied when the victim’s fault is expressed in his inactivity to prevent or

decrease the damage.

SECTION 5. ADDITIONAL MEANS FOR SECURING A CLAIM

Article 416. Types of Additional Means for Securing a Claim

In order to secure performance of an obligation the parties may, under the contract,

provide for additional means as well: a penalty, earnest, and a debtor’s guarantee.

CHAPTER 1. PENALTY

Article 417. Concept

A penalty – an amount of money specified under agreement of the parties – shall be paid

by a debtor in the event of the failure to perform or the improper performance of an

obligation.

Article 418. Form of Determining a Penalty

1. The parties to a contract may freely determine a penalty which may exceed a possible

damage.

2. An agreement as to a penalty must be concluded in writing.

Article 419. Inadmissibility of Simultaneous Claiming of Payment of a Penalty and

Performance of an Obligation

1. A creditor is not entitled to claim simultaneously the payment of a penalty and

performance of an obligation unless a penalty is not provided for the cases when a

debtor fails to perform his obligations in the fixed time.

2. A creditor is always entitled to claim a damage compensation.

Article 420. Decrease of a Penalty by a Court

A court may decrease an unreasonably high penalty with an allowance for circumstances

of the case.

CHAPTER 2. EARNEST

Article 421. Concept

A sum of money handed over by one of the contracting parties to the other party as

evidence of the conclusion of the contract is deemed to be an earnest.

Article 422. Offsetting an Earnest

An earnest shall be offset on account of payment, or must be returned after completion of

the contract – if not offset.

93

Article 423. Offsetting an Earnest on Account of Compensation of Damage

1. If the party that has given the earnest is liable for failure to perform an obligation

assigned to it, it remains with the other party. At the same time the earnest is offset on

account of a damage compensation.

2. If the party that has received the earnest is liable for failure to perform an obligation, it is

required to pay the other party twice the amount of the earnest. At the same time, the

party that has given the earnest may demand the compensation of damage.

CHAPTER 3. DEBTOR’S GUARANTEE

Article 424. Concept

The assignment by a debtor of performance of any unconditional action or such action

which goes beyond the object of a contract is deemed to be a debtor guarantee.

Article 425. Validity of a Guarantee

A guarantee is valid if it does not contravene the rules provided for by a law or does not

assign excessive liability to a debtor.

Article 426. Form of a Guarantee

A guarantee must be made in writing.

SECTION SIX.

TERMINATION OF OBLIGATIONS

CHAPTER 1. TERMINATION OF AN OBLIGATION BY PERFORMANCE

Article 427. Termination of an Obligation by Performance in Favour of a Creditor

An obligation terminates by performance of an obligation in favour of a creditor.

Article 428. Termination of an Obligation by Novation

An obligation terminates when a creditor accepts performance of other obligation

(novation) instead of performance provided for by the original obligation.

Article 429. Acceptance of Performance of an Obligation

1. A creditor who accepts performance is required upon demand of a debtor to issue him

a receipt acknowledging performance in whole or in the relevant part.

2. A document drawn up with regard to acceptance of debt in which nothing is said about

the interest implies that the interest has been paid and the money obligation has been

completely terminated.

94

3. Where the payment of debt is effected from time to time, in parts, the document on the

payment of the last part, unless otherwise confirmed, presupposes the payment of the

previous part.

Article 430. Requisites of Performance Acceptance Documents

A document concerning performance drawn up by a creditor or duly authorized person

shall include data on the extent and type of the debt, the full name of the person who pays

the debt, the time and place of performance.

Article 431. Right to Claim a Document of Debt

Where a document of debt is issued, a debtor may together with the document of

performance claim the return of this document or its revocation. If a creditor can not return

the document, the debtor is entitled to demand the issue of an officially certified receipt

acknowledging termination of the obligation.

Article 432. Compensation of Expenses in Connection with the Issue of Documents of

Acceptance

1. A debtor is liable to bear expenses relating to the issue of documents of performance

unless otherwise followed from the agreement between himself and the creditor.

2. If a creditor changes the place of residence or dies leaving heirs at another place of

residence, the expenses increased in connection with the issue of documents of

performance shall be borne by the creditor or his heirs.

Article 433. Refusal of Performance for Non-performance of Obligations by a Creditor

If a creditor refuses to issue documents concerning performance, to return or revoke a

document of debt, or to note the fact of the impossibility of return, or to acknowledge the

writing off of a debt, a debtor may refuse performance. In such case the creditor shall be

deemed to be a person faulty for the delay.

CHAPTER 2. TERMINATION OF AN OBLIGATION BY A DEPOSIT

Article 434. Concept

1. If a creditor delays the acceptance of performance, or his place of residence is

unknown, a debtor is entitled to hold the object of performance in the court or notary’s

office, and deposit money or securities to the deposit account.

2. By depositing a debtor is exempt from liability before a creditor.

95

Article 435. Transfer of Deposited Property to a Creditor

Deposited property shall be transferred by a judge or notary to the creditor. The court or

notary shall chose a keeper, while the documents are retained with them.

Article 436. Depositable Things

A thing shall be fit for depositing. Perishable things shall not be accepted for depositing.

Article 437. Place of Keeping

The keeping shall be effected at the place of performance.

Article 438. Claim of Acceptance of a Thing from a Creditor

A court or notary shall notify a creditor on the acceptance of the object of performance for

keeping and claim from him the acceptance of the thing.

Article 439. Compensation of Expenses in Connection with Keeping

All expenses connected with keeping shall be borne by a creditor.

Article 440. Recall of a Kept Thing by a Debtor

1. A debtor is entitled to recall the kept thing prior to its acceptance by a creditor unless

he initially refused to recall it. Where the debtor recalls the thing, the keeping shall not

be deemed to have taken place.

A debtor may recall the deposited thing if a creditor refuses to accept it or if the term

established by Article 441 has expired.

2. If a debtor recalls the thing, he shall also borne the keeping expenses.

Article 441. Period of Keeping of the Object of Performance

A court or notary shall keep the object of performance up to the period of three years. If

during this period a creditor fails to accept the object, it shall be deemed to be the state

property.

CHAPTER 3. TERMINATION OF AN OBLIGATION BY SET-OFF OF COUNTERCLAIMS

Article 442. Possibility of Set-off of Obligations

1. A counterclaim between two persons may be terminated by setting-off if the time period

of performance of these claims has ensued.

2. The set-off of obligations may be also possible when the time period of performance of

one of the claims has not ensued yet, but the party entitled to the claim supports the

set-off. The set-off if effected by notification of the other party.

96

Article 443. Possibility of Set-off in the Case of Limitation

The legal limitation does not exclude the set-off of obligations if the claim was not limited at

the time when its set-off was possible.

Article 444. Claims to be Set-Off

If the claims to be set-off cannot cover each other in full, only the claim the extent of which

is less than the extent of another claim shall be set-off.

Article 445. Several Claims to be Set-off

If a contractual party who has been notified about setting-off has several claims to be-set-

off, the provisions of Article 387 shall apply.

If besides the principal obligation a party is subject to the payments of interest and other

charges, the provisions of Article 388 shall apply.

Article 446. Set-off of Obligations in the Case of Different Places of Performance

Performance may be set-off also in the cases where different places of performance are

provided for.

Article 447. Instances of the Inadmissibility of Set-Off

The set-off of claims is not allowed:

a) if upon agreement the set-off was preliminary excluded;

b) if the object of an obligation may not be chargeable, or the object of an obligation is

maintenance;

c) if an obligation provides for the indemnification of harm caused to the life or health;

d) in other instances provided for by a law.

CHAPTER 4. TERMINATION OF AN OBLIGATION BY FORGIVENESS OF A DEBT

Article 448. Concept

The forgiveness of a debt by agreement of the parties terminates an obligation.

Article 449. Consequences of the Forgiveness of a Debt for Other Joint Debtors

The forgiveness of a debt for one of the joint debtors releases other joint debtors as well

from the duties imposed thereon except for the cases where the creditor retains a claim

towards them. In such case the creditor may bring against the remaining joint debtors only

one claim less the released debtor’s share.

Article 450. Consequences of the Forgiveness of a Debt for the Principal Debtor

1. The forgiveness of a debt for the principal debtor shall release guarantor as well.

97

2. The guarantor’s release from the debt payment does not release the principal debtor

from performance of an obligation.

3. The release of one of the guarantor’s from the debt payment shall release other

guarantors as well.

Article 451. Consequences of the Waiving of a Claim in Bilateral Contracts

The waiving of a claim by one of the parties to bilateral contracts does not terminate the

obligation. It shall be liable to perform its obligation under the contract unless the other

party waives its claim.

CHAPTER 5. OTHER GROUNDS FOR TERMINATION OF AN OBLIGATION

Article 452. Termination of an Obligation Where the Debtor and the Creditor Are One

Person

An obligation is terminated where the debtor and creditor are one and the same person.

Article 453. Termination of an Obligation by the Death of a Person

1. An obligation is terminated by the death of the debtor where performance cannot be

made without the personal participation of the debtor.

2. An obligation is terminated by the death of the creditor where performance was

intended personally for the creditor.

Article 454. Termination of an Obligation by the Liquidation of a Legal Person

An obligation is terminated as of the date of registration of the liquidation of a legal person.

SECTION 7.

PLURALITY OF CREDITORS OR DEBTORS IN AN OBLIGATION

CHAPTER 1. JOINT AND SEVERAL CREDITORS

Article 455. Joint and Several Authority

If several persons are entitled to demand performance of an obligation in such a way that

each may demand performance in full, while the debtor is required to perform on the

non-recurrent basis, they represent solidarily liable persons – joint and several creditors.

Article 456. Ground for Origin of Joint and Several Authority

A joint and several authority originates under a contract, law or by indivisibility of the

object of obligation.

98

Article 457. Performance of an Obligation in Favour of Any Creditor

A debtor is entitled to perform an obligation at his discretion in favour of any creditor

unless one of the creditors has brought a counter-claim against him under the provision

as per Article 455.

Article 458. Performance of an Obligation to One of the Creditors

The performance of an obligation in full to one of the joint and several creditors discharges

the debtor from the obligation before the rest of creditors.

Article 459. Consequences of a Waive by One of the Joint and Several Creditors

If one of the joint and several creditors waives an obligation before the debtor, the debtor

shall be released from payment of the portion only which was due to the creditor.

Article 460. Inadmissibility of the Application of Facts Associated With Another Creditor

A debtor may not apply towards one of the creditors the facts associated with another

creditor.

Article 461. Rights of Heirs of a Joint and Several Creditor

If a joint and several creditor has several heirs, each heir shall be assigned only to a

portion of the right of debt which corresponds to his share of inheritance.

Article 462. Liability of a Joint and Several Creditor Before the Rest of Joint and Several

Creditors

1. A joint and several creditor that has received performance from a debtor in full is

required to compensate the other creditors in equal shares for that which is due.

2. Joint and several creditors have equal shares in their relations unless otherwise

agreed among them.

CHAPTER 2. JOINT AND SEVERAL DEBTORS

Article 463. A Joint and Several Obligation

Where several persons are required to perform an obligation so that each of them is to

take part in performance of obligation in full (a joint and several obligation), while the

creditor is entitled to a single claim of performance only, they represent joint and several

debtors.

Article 464. Ground for Origin of a Joint and Several Obligation

A joint and several obligation originates under a contract, law or by indivisibility of the

object of obligation.

99

Article 465. Right of a Creditor to Demand Performance From Any Debtor

A creditor is entitled to demand at his discretion performance from any debtor as regards

all or a portion of the debt. The remaining debtors remain bound until the obligation is

performed in full.

Article 466. Defense of a Joint and Several Debtor Against a Creditor

A joint and several debtor is entitled to raise against a creditor all the defenses which

follow from the essence of an obligation, or to which he is entitled alone, or it is common

for all joint and several debtors.

Article 467. Consequences of Performance of an Obligation in Full by One of the Debtor

The performance of an obligation in full by one of the debtors discharges the remaining

debtors from performance. The same rule applies where a joint and several obligation is

terminated by setting-off a counter-claim of one of the debtors.

Article 468. Inadmissibility of the Application of Facts Associated With Another Joint and

Several Debtor

The facts associated with one of the joint and several debtors may be applied only to this

person unless otherwise follows from the relations therebetween.

Article 469. Claims Against One of the Joint and Several Debtors

The bringing of a claim against one of the joint and several debtors does not deprive the

creditor of bringing a claim against other debtors as well.

Article 470. Consequences of a Delay in Accepting Performance

1. The consequences of a delay in the acceptance of performance from one of the joint

and several debtors are in force to the remaining joint and several debtors as well.

2. The consequences of a delay of performance by one of the joint and several debtors

may not be applied in relation to the remaining joint and several debtors as well.

Article 471. Rights of Heirs of a Joint and Several Debtor

Where one of the joint and several debtors has several heirs, each of them is required to

perform the claim according to his share of inheritance. This rule is not applied when the

claim is indivisible.

100

Article 472. Consolidation of a Creditor’s Claim With a Debt of One of the Joint and

Several Debtors

If a creditor’s claim is consolidated with a debt of one of the joint and several debtors, the

claim against the remaining debtors shall be ceased in the amount falling on the

debtor’s share.

Article 473. Right of Recourse in Performing a Joint and Several Duty by One Debtor

1. A debtor who has performed a joint and several duty has a right of recourse against the

other debtors in equal shares, deducting the share which fall on himself unless

otherwise provided by the contract or a law.

2. Where the extent of the debtor’s liability may not be determined, they shall be liable to

each other in equal shares.

Article 474. Consequences of a Joint and Several Debtors Insolvency

If one of the debtors proves to be insolvent, the share established for him shall be equally

distributed among other solvent debtors.

Article 475. Compensation of a Joint and Several Debtor

If a joint and several debtor has received benefit from a joint and several duty, the joint and

several debtor who has not received such benefit may demand compensation for

performing his duty.

Article 476. Consequences of the Period of Limitation Expiry

The suspension or termination of the period of limitation by one of the joint and several

debtors, is not valid towards the other debtors.

SPECIAL PART.

SECTION 1. CONTRACT LAW

PART 2.

CHAPTER 1. PURCHASE AND SALE. EXCHANGE

1.General Provisions

Article 477. Concept. Essence

1. Pursuant to a purchase contract, the seller is required to transfer to the buyer a title to

property, the document associated therewith, and deliver goods.

2. The buyer is required to pay the agreed price to the seller and accept the purchased

property.

101

3. Where the price is not directly specified in the contract, the parties may agree upon the

means of its determination.

Article 478. Selling Expenses of a Movable Thing

The expenses in connection with the delivery of a sold thing, in particular the expenses of

weighing and packing, are born by the seller, while the expenses of the acceptance and

carriage of goods from the place of making the contract to another place by the buyer

unless the contract provides otherwise.

Article 479. Selling Expenses of an Immovable Thing

A buyer of a land plot and other immovable thing shall bear expenses in connection with

drawing up a purchase contract, notarial authentication of the transfer of title to property,

registration in the public register, and submission of the document required therefor.

Article 480. Duties of a Seller in Shipping Goods

1. If the seller delivers goods to the carrier under the contract and these goods are not

clearly marked either by any identification mark or documents required for shipment, or

by any other means, the seller shall notify the buyer about the shipment of goods,

providing concurrently a detailed list of the consignment.

2. If the seller is obliged to ship the goods, he shall conclude contracts that are required

for shipping the consignment to the determined place and on the terms peculiar to such

shipment.

3. If the seller is not obliged to insure the consignment for transportation, he shall, at

request of the buyer, deliver to him all the available information which is necessary for

drawing up such contract of insurance.

Article 481. Duties of a Land Plot Seller

1. A land plot seller is required to pay all the expenses incurred in connection with

development of the plot and taking similar measures prior to the contract making,

irrespective of the time when the payment liability originates.

2. A land plot seller is not liable for a public liability which may not be registered in the

public register.

Article 482. Passing of the Risk of Accidental Loss of Goods

1. The risk of accidental loss or determination of sold goods passes when they are

delivered to the buyer unless the parties agree otherwise.

102

2. Where the seller delivers the sold goods to the place other than that stipulated in the

contract, the risk of accidental loss or determination of goods shall pass to the buyer

when the seller has handed goods to the carrier or to the person responsible for the

performance thereof.

Article 483. Assumption of Acceptance of Goods

Goods are deemed to be accepted where the buyer has fulfilled an action evidencing their

acceptance.

Article 484. Grounds for Repudiating a Contract

1. Each contractual party may repudiate the performance of its obligations under the

contract if following the contract making it turns out that there is a real danger for the

other party’s failing to accomplish an essential portion of its obligations.

2. The repudiation is inadmissible where the party’s security is insured.

Article 485. Sale of Goods to Several Persons

If the seller has sold one and the same goods to several persons, the priority shall be

given to the customer into whose possession they went first, while in the case where

goods have not been delivered to any of them – to the person with whom the contract was

made first.

Article 486. Delivery of Sold Goods by Installments

In delivering goods by installments, a party may repudiate the contract where due to the

non-performance of a single obligation there arises a real danger for non-performance of

future delivery obligations as well.

Article 487. Obligation to Deliver a Faultless Good

The seller is required to deliver to the customer a good being free from material and legal

faults.

Article 488. Materially Faultless Goods

1. A good is materially faultless if it is of determined quality. Where quality is not

preliminary determined, the good shall be regarded as faultless if it is fit for the use

under the contract or casual usage.

2. The following is equated to a fault: the delivery of only one part of the good, the

delivery of an entirely different good, or if one part of the good is faulty except for the

cases where it does not significantly affect the performance.

103

Article 489. Legally Faultless Things

1. A thing is legally faultless where a third person may not state a claim against the

customer as regards his rights.

2. A non-existent right entered in the public register is equated to legal fault.

Article 490. Duties of the Seller During Sale of a Faulty Thing

1. Where the sold thing is faulty, the seller shall either eliminate the fault or, in the case of

a generic thing, substitute the thing within the necessary for it time.

2. The seller shall bear expenses necessary for eliminating the fault, including the

charges for transportation, road, fulfillment of work and the cost of material.

3. The seller may reject both the elimination of the fault and the substitution of the thing

where this requires unreasonably large expenses.

4. Where the seller with the purpose of eliminating the fault delivers to the buyer a

faultless thing, he may demand from the buyer the return of the faulty thing.

Article 491. Right of a Buyer to Repudiate a Contract

The buyer may claim repudiation of the contract because of the fault of a thing

according to Article 352.

1. The seller shall compensate for the costs incurred to the buyer.

Article 492. Price Decrease Claim

Where the buyer does not demand the elimination of the fault of a thing or its substitution

with a new one after expiry of the specified for the purpose time period, either the

repudiation of the contract, he may claim the price decrease in the amount necessary for

elimination of the fault. The price existing at the date of making the contract shall be taken

into account.

Article 493. Non-acceptance of Goods

1. The buyer is entitled to reject the acceptance of goods where the seller has delivered

to him goods in the quantity less than that stipulated by the contract. Where the buyer

accepts such goods, he will pay the price thereof in proportion to the contractual price.

2. Where the quantity of goods exceeds that provided for by the contract, the buyer may

accept this quantity and shall pay the contractual price, or accept only the quantity

which is provided for by the contract, returning the excess at the expense of the seller.

104

Article 494. Procedure for Indemnification of Damage Resulting from Purchase and Sale

1. The damage caused by the fault of a thing or default of other terms stipulated by the

contract is indemnified according to the general rules.

2. The buyer shall not entitled to indemnification of damage because of a faulty thing if at

the time of making the contract he knew about it.

Article 495. Acceptance a Faulty Thing by the Buyer

1. Where the buyer is an entrepreneur, he shall immediately check a thing; if within a

corresponding period after detecting the fault, or within the period during which he

should have known about the fault he fails to bring against the seller a claim, he shall be

deprived of a right to claim because of a faulty thing.

2. Where the seller intentionally kept silence on the fault of a thing, he shall not be entitled

to apply to the right provided for by this Article.

Article 496. Life of a Thing

Where the seller specifies life of a thing, it is supposed that a fault detected during this

period entitles the buyer to claim

Article 497. Seller’s Responsibility Release

Responsibility of the seller in selling a faulty thing may be restricted or released under the

contract; such agreement, however, shall be invalid if the seller intentionally kept silence

as regards the thing’s fault.

Article 498. Passing of Right or Other Property

1. The rules governing the purchase and sale of a thing shall be equally applied to the

purchase and sale of a right or other property.

2. In the case of sale of a right the seller shall undertake the costs of evidencing the

right’s validity and passing.

3. Where sold is the right providing the possibility of holding a thing, the seller is required

to deliver to the buyer a materially and legally faultless thing.

Article 499. Repeated Sale of a Thing

Where a thing is sold repeatedly, an obligation ensuring right shall pass to every

subsequent buyer. The buyer may, within the limits of his rights, claim against the

respective seller in this succession of sales.

105

Article 500. Lien on a Thing

Where the buyer fails to timely receive a thing or pay the price thereof, the seller is

required to keep the thing; the seller is entitled to retain the thing or detain it in traffic until

the buyer compensates for the appropriate costs.

Article 501. Return of a Thing by the Buyer

Where the buyer has accepted a thing but is justifiable willing to return it, he shall take

care after its keeping; the buyer is entitled to retain the thing until the seller compensates

for the appropriate costs.

Article 502. Storage Expenses

A party liable for storing a thing may store the thing in the warehouse of a third person at

the expense of the other party unless this leads to unreasonable costs.

Article 503. Right of a Thing Keeper

1. A party which, pursuant to provisions of Articles 500-502, keeps thing may sell the

thing with the observance of appropriate rules. Where the other party delays

acceptance of the thing or compensation for the storage costs; it is to notify the other

party thereabout.

2. A party selling a thing is entitled to retain from the sale proceeds an amount

proportional to the storage and sale expenses of the thing, returning the remaining

amount to the other party.

Article 504. Peculiarities of a Perishable Thing Storage

Where in the instances provided for by Articles 500 and 501 a thing is perishable, or is

subject to depreciation, or its storage is connected with substantial costs, the party liable

for storing the thing is obliged to sell it in accordance with the provisions stipulated by

Article 503.

II. HIRE-PURCHASE SALE

Article 505. Concept

In the case of a hire-purchase sale, the seller is obliged to deliver a thing to the buyer

before payment of the price. The payment of the thing’s price is effected by installments

within fixed time intervals.

Article 506. Form of a Hire-Purchase Agreement

1. A hire-purchase agreement shall be made in writing.

2. The agreement shall indicate:

106

a) the cash payment amount;

b) the amount of the payment by installments and the time of payment;

c) the amount of annual interest.

3. The seller shall hand over to the buyer a copy of the hire-purchase sale documents.

Article 507. Presumption of Making a Contract as of the Date of Delivery of a Thing

Where a contract is made in violation of the provisions of Article 506, the contract shall be

deemed to have been concluded as of the date of the thing’s delivery. In this case the

buyer is liable to pay only the price of the thing excluding interests.

Article 508. Bilateral Restitution in Non-Performing an Obligation

Where the seller retains a right to repudiate a contract for the case when the buyer fails to

perform the obligations assumed, each party upon repudiation shall return to each other

what they have received under the contract. An agreement contrary thereto shall be

invalid.

III. REDEMPTION

Article 509. Concept

Where the seller has a right of redemption under a purchase-and-sale contract the

execution of this right depends on the seller’s will.

Article 510. Redemption Price

Redemption is effected at the initial price. Simultaneously, the buyer is entitled to claim

also the amount by which the value of goods has increased as a result of useful expenses

before the moment of redemption, and the seller may claim the deduction of the amount by

which the value of goods has decreased before their redemption.

Article 511. Accessories in Purchase and Sale

The buyer is required to return the bought thing together with accessories.

Article 512. Indemnification of Damage Incurred Before Redemption

Where the buyer deteriorated (damaged) or replaced a bought thing prior to the execution

of the right of redemption, he shall be liable to indemnify the damage caused thereby.

Article 513. Invalidity of Alienation of a Thing Before Redemption

Where the buyer alienated the bought thing prior to the execution of the right of

redemption, such alienation is invalid.

107

Article 514. Limitation of the Right of Redemption

The redemption period shall not exceed five years. The extension of this period is

inadmissible.

Article 515. Option

The parties may agree that the buyer is entitled to unilaterally acquire any goods before a

definite time or definite event (purchase option), or, under the same conditions, the seller

is entitled to sell a thing to the buyer (put option). The rules of a purchase-and-sale

contract are applied to an option contract unless the parties agree otherwise.

IV. RIGHT OF FIRST REFUSAL

Article 516. Concept

1. A person having the right of first refusal may execute this right if the liable person

concludes a purchase-and-sale contract regarding the given thing with a third person.

2. The right of first refusal is neither transferable to another person nor inheritable unless

otherwise provided.

Article 517. Obligation to Notify About the Possible Sale of a Thing

1. An obliged person shall immediately notify the person having the right of first refusal

about the essence of a contract he intends to conclude with third persons.

2. The right of first refusal is exercised for the obliged person upon notification. By means

of the notification a purchase-and-sale contract is made between the entitled person

and the obliged person upon terms offered by the obliged person to a third person.

3. A person having the right of first refusal may exercise this right only in the time

stipulated by the obliged person.

Article 518. Invalidity of an Agreement on the Non-Exercise of the Right of First Refusal

An agreement between the obliged person and a third person is invalid if under it a

purchase-and-sale contract becomes dependent on the non-exercise of the right of first

refusal, or the obliged person may repudiate the contract should the right of first refusal be

exercised.

Article 519. Performance of an Additional Liability

1. Where a third person has assumed an additional liability under a contract which cannot

be performed by the person having the right of first refusal, he shall pay the value of the

liability instead.

108

2. Where money valuation of the additional liability is impossible, the right of first refusal

may not be applied. An agreement with regard to the additional liability is invalidated if

the contract was made to evade the right of first refusal.

Article 520. Purchase and Sale Subject to Approval of Goods

A purchase-and-sale contract may be made on condition of approval of good unless the

buyer rejects the goods. In the case of rejection the parties are required to return to one

another what they have received under the contract.

V. EXCHANGE

Article 521. Concept

1. Under an exchange agreement, the parties shall be subject to the reciprocal exchange

of the right of property.

2. Each party to an exchange agreement is deemed to be the seller of the property which

it exchanges and the buyer of that which it receives in exchange.

Article 522. Unequal Value of Exchangeable Property

Where the exchangeable property is of unequal value, a part of the property may be

compensated in money under agreement of the parties.

Article 523. Rules Applicable to Exchange

The appropriate rules of purchase and sale are applied to an exchange agreement.

CHAPTER 2. DONATION

Article 524. Concept

Under a donation agreement, the donor gratuitously transfers property into possession of

the donee with the consent thereof.

Article 525. Making a Donation Agreement. Promise of a Gift

1. A donation agreement to deemed to have been made as of the date of the property

transfer.

2. Where the object of gift is comprised of the property to which the right of ownership

originates only subject to the observation of a law-established form, the observation of

this form shall be obligatory for a donation agreement.

3. The promise of a gift invokes the donation obligation only if it is notarially evidenced.

109

Article 526. Inadmissibility of Donation

A person is not entitled to donate property if its donation deprives the donor or the

dependents thereof of means of subsistence.

Article 527. Defect of Donated Property

In the case a donor conceals a defect of the donated property by an ill-intention, he shall

be obliged to compensate the damages resulted thereunder to the donee.

Article 528. Common Weal

1. Parties may establish that the validity of a donation agreement is dependent on the

performance of concrete condition or the achievement of an indefinite objective. This

objective may also be the common weal.

2. The performance of a condition, besides the donor, may be also demanded by the

person in whose interests it was specified.

3. Where the donee fails to perform the condition, the donor may repudiate the

agreement.

Article 529. Revocation of Donation Because of Unconscientiousness of the Donee

1. A donation may be revoked if the donee outrages or reveals serious

unconscientiousness towards the donor or his next of kin.

2. Where a donation is revoked, the donated property may be withdrawn by a donor.

3. A donation may be revoked within a year after the donor becomes aware of the

circumstance giving him a right of revocation of the donation.

Article 530. Withdrawal of a Donated Thing

1. Where, following donation, the donor finds himself to be hard up and is unable to keep

himself or his dependants, he is entitled to call back the donated thing provided the

latter actually exists and the withdrawal would not put the donee in the hard condition.

2. A donated thing may not be withdrawn where the donor has knowingly or recklessly

turned to be hard up.

CHAPTER 3. TENANCY

Article 531. Concept

Under a contract of tenancy, the lessor is obliged to transfer a thing to the lessee in use for

a definite time-period. The lessee is obliged to pay a fixed rental to the lessor.

110

Article 532. Transfer of a Tenement in Proper Condition

The lessor is obliged to transfer a tenanted object to the lessee for the contract-stipulated

use in proper condition and preserve the condition for the whole tenancy.

Article 533. Obligation of a Faultless Thing Transfer

The lessor shall transfer to the lessee a legally and materially faultless thing.

Article 534. A Legally Faultless Thing

A tenanted thing is legally faultless if a third party may not claim the lessee because of the

thing.

Article 535. Materially Faultless Thing

A tenanted thing is materially faultless if it possesses fixed properties. In the event the

properties have not been fixed, the tenanted thing shall be considered to be faultless

provided it is fit for the contract-stipulated activity or for casual application.

Article 536. Reduction of Rental Because of a Thing’s Fault

1. If a tenanted thing is found to be faulty, the amount of the rental for the lessee shall be

reduced proportionally to the amount by which the thing fitness has decreased because

of the fault.

2. A contract of tenancy which is obviously damaging to the tenant of a lodging shall be

void.

Article 537. Indemnification of Damage Resulting From a Faulty Thing

1. If a fault, which decreases the thing’s fitness, exists at the time of signing the contract

or appears due to the circumstances for which the lessor is liable, or if the lessor delays

the elimination of the fault, the lessee may claim indemnification of the damage,

retaining concurrently the right to claim the reduction of the rental.

2. If the lessor delays the elimination of the thing’s fault, the lessee may eliminate it

himself and claim reimbursement of the expenses.

Article 538. Consequences of Non-claiming a Faulty Thing

If upon signing a contract the lessee is aware of the thing’s fault and he does not declare

his claim thereof, he shall not be entitled to the right as stipulated in Article 536.

Article 539. Invalidity of an Agreement With Regard to Release from Responsibility

An agreement, under which the lessor is released from the responsibility for the fault of a

tenanted thing or it is restricted, shall be invalid if the lessor has deliberately concealed the

fault.

111

Article 540. Impact Forbearance Obligation Upon Tenancy of a Lodging

The tenant of a lodging shall forbear the impacts applied to the tenement which are

required for the maintenance of the lodging or the building. The lessor shall notify the

lessee about the measures, where possible, and refrain from the actions which are not

caused by force of necessity.

Article 541. Right to Renounce a Contract

1. Where a tenanted thing is transferred in full or in part to the lessee with delay, or where

subsequently he is deprived of the right of use, the lessee may renounce the contract

without observing the term which is provided for the termination of a contract. The

contract renunciation is possible only if the lessor fails to eliminate the use-impeding

circumstances by the date fixed by the tenant.

2. The date fixing is not required if, due to the circumstances which provide grounds for

renouncing the contract, the tenant has lost his interest to the contract.

Upon tenancy of a lodging, an agreement which prohibits or restricts the right to

renounce a contract stipulated by paragraph 1 of this Article shall be void.

Article 542. Termination of a Contract of Tenancy of a Lodging by the Tenant

Where a lodging or other accommodation intended for dwelling of people is in such

condition that its use significantly endangers the health of the dwellers thereof, the tenant

may terminate the contract of tenancy without observing the term. The tenant is entitled to

act so even if upon signing the contract he was aware of the danger but laid no claim

thereto.

Article 543. Duties of the Tenant Upon Finding of a Faulty Tenanted Thing

If the tenanted thing is found to be faulty, or necessary measures are to be taken for

protecting the thing from the unforeseen damage, the tenant shall immediately inform the

lessor thereabout. The same rule shall also apply where a third person declares his title to

the thing.

Article 544. Fate of the Legal Burden Existing on a Thing

The carrier of the legal burden existing on the thing shall be lessor.

Article 545. Obligation of the Lessor

1. The lessor shall be liable to reimburse to the tenant the necessary expenses incurred in

connection with the thing.

112

2. The obligation of reimbursement of other expenses shall be defined without a

commission in accordance with the procedure for fulfilling the affairs of others.

Article 546. Right of the Tenant to Things Added to the Tenement

1. The tenant is entitled to retain what he has added to the tenement.

2. The lessor of a lodging may substitute the exercise of the said right with the appropriate

compensation, except for the instances where the tenant disagrees thereto on the

grounds of essential circumstances.

Article 547. Responsibility for Normal Wear of a Thing

The tenant shall not be responsible for the changes or deterioration of a tenanted thing

resulting from the use provided for by the contract.

Article 548. Routine Repair Costs

1. The conduct of a routine repair shall be usually entrusted to the tenant. He shall not be

entitled to the remake or reconstruction of a lodging without the lessor’s consent

thereto.

2. The tenant shall perform the works at his own expense.

3. The lessor may demand the indemnification of the damage caused by the tenant for

non-observance of the duty provided for by paragraph 1 of this Article.

Article 549. Lessor’s Consent to a Subtenancy

The tenant has no right to transfer the tenanted thing to a third person (subtenancy)

without the lessor’s consent thereto. Members of the tenant’s family shall not be regarded

as a third person.

Article 550. Inadmissibility of the Lessor’s Refusal to Subtenancy

The lessor may not refuse the subtenancy of a lodging if given a valid cause the tenant

wants to let the tenanted lodging in full or in part to a third person. This rule does not

apply where the subtenant presents an unwanted for the lessor person, or the lodging

has been overcrowded, or where due to other circumstances the subtenancy is

unacceptable to the lessor.

Article 551. Fate of Subtenancy Upon Completion of Tenancy Relations

Where subtenancy is aimed at evading the guarantees for termination of a contract of

tenancy, then upon completion of the tenancy relations the lessor shall assume the

rights and duties which existed between the tenant and subtenant.

113

Article 552. Extent of Tenancy Relations Security

1. Where under a contract of tenancy of a lodging the tenant is entrusted with the

submission of the obligation security means, the security amount shall not exceed the

threefold amount of a monthly rental. If the sum of money is payable in advance, the

tenant shall be entitled to pay it monthly by equal installments within three months.

2. The security paid in advance shall include the interests determined by a law and shall,

upon completion of the tenancy relations, be returned to the tenant together with the

interests.

3. Any other contract concluded to the detriment of the tenant shall be void.

Article 553. Procedure for Paying Rental

1. The rental shall be paid upon expiry of the contract of tenancy. If the payment of rental

is determined as time intervals, it shall be paid after these time intervals are over.

2. The payment of extra costs shall be compulsory only given an agreement between the

parties thereon.

Article 554. Consequences of Nonpayment of Rental Through the Tenant’s Fault

If the tenant is impeded in using the tenement through his own fault, he shall not be

released from the rental.

Article 555. Contract Termination Before Due on the Lodging Tenant’s Initiative

The tenant of a lodging is entitled to terminate the contract of tenancy before due provided

he notifies the lessor thereon in advance of a month and offers him a solvent and

acceptable tenant who agrees to being a tenant within the remaining term of tenancy.

Article 556. Tenant’s Counter Demands Against the Lessor

If counter to the rental demand, the tenant has the right to retain or to set off other

demands proceeding from the tenancy relations, the tenant may use his right even

where the contract provides otherwise on conditions that he notifies the lessor thereon

in advance.

Article 557. Termination of a Contract on the Lessor’s Initiative

The lessor may terminate a contract before due time if the tenant notwithstanding the

lessor’s notice, significantly damages the tenanted object or creates a real danger for the

essential damage.

114

Article 558. Termination of a Contract as a Result of Nonpayment of Rental

The lessor may terminate a contract before time if the tenant fails to pay rental within three

months.

Article 559. Termination of Tenancy Relations Upon Expiry

1. The tenancy relations shall terminate after the contract has expired.

2. If the tenant makes use of the object after the contract has expired and the lessor does

not object thereto, the contract shall be renewed for an indefinite period.

3. Where the term of a contract of tenancy is not defined, the tenancy relations shall

terminate upon statement of the contract termination.

Article 560. Right to Demand the Prolongation of a Contract of Tenancy for Indefinite

Time

If a contract of lodging tenancy is concluded for a definite time period, the tenant may, not

later than within two months before the tenancy relations termination, demand the

prolongation of the contract of tenancy by means of an application in writing for an

indefinite period of time, provided the lessor declares his consent thereto.

Article 561. Contract Termination Term

The term for a contract termination is three years, except for the cases where otherwise

proceeds from the circumstances of the case or the agreement of the parties.

Article 562. Termination of a Contract of Lodging Tenancy in Existence of Essential

Causes

1. The lessor may terminate a contract of tenancy of a lodging only given the valid causes.

2. A cause is valid if:

a) the tenant is in significant default of his contractual obligations;

b) the lessor needs the lodging directly for himself or near relations;

c) the tenant refuses to pay the increased by the lessor rental which is in compliance with

market rentals;

d) the tenant has committed against the lessor such unlawful or immoral action which

makes the continuation of their interrelation impossible.

3. Where the object of tenancy is a furnished lodging, the lessor always may terminate the

contract of tenancy if observing the contract termination term.

115

Article 563. Form of a Contract Termination

A contract of tenancy of a lodging shall terminate by means of registration in writing.

Article 564. Duties of a Tenant Upon Termination of a Contract of Tenancy

Upon termination of a contract of tenancy of a thing, the tenant is obliged to return the

thing to the lessor in the condition which he had during the receipt with regard for the

natural wear and tear, or in the condition as specified by he contract.

Article 565. Inadmissibility of the Right of Retention

The tenant of a land plot has not the right of its retention for satisfying his demands.

Article 566. Transfer of Tenancy to Third Person

If the tenant has transferred a thing to a third person for use, the lessor may, upon

termination of the contract of tenancy, demand from the third person the return of the

thing.

Article 567. Indemnification of Damage Caused by Non-return of a Tenanted Thing

1. If the tenant does not return the tenanted thing after the tenancy relations have been

over, the lessor may demand the payment of the fixed rental during the delay as the

indemnification of damage.

2. A contract under which the tenant is to indemnify the damage in excess of the amount

caused shall be void.

Article 568. Right of Pledge on the Tenant’s Thing

For the satisfaction of demands proceeding from the tenancy relations the lessor of a land

plot, house or lodging has the right of a pledge on the things brought therein. The right of a

pledge shall lose its effect concurrently with the removal of the things from the tenanted

space provided this took place in accordance with usual life relations.

Article 569. Form of a Contract of a Land Plot Tenancy

A contract of a land plot tenancy shall be worked out in writing for a period exceeding one

year. Where the form is not observed, a contract shall be deemed to be concluded for an

indefinite time period. The contract may be terminated only after the first year of tenancy

has been over.

Article 570. Procedure for Revocation of a Contract Concluded for More than Ten Years

If a contract of tenancy has been concluded for a term exceeding ten years, each party

shall be entitled to revoke the contract after ten years by the date fixed in accordance with

Article 561.

116

Article 571. Transfer of Rights of a Tenant to Members of His Family

If a contract of tenancy is concluded for a lodging where the tenant keeps the house jointly

with his family members, in the event of the tenant’s decease his family members shall

enter into legal relations with the lessor. They shall be entitled to terminate the contract of

tenancy by the time established by a law.

Article 572. Substitution of Rights Upon Alienation of a Tenanted Thing

If the lessor alienates a tenanted thing to a third person after its transfer to tenants, the

acquirer shall substitute the lessor, assuming concurrently the rights and duties flowing

from the tenancy relations.

Article 573. Limitation of Indemnification of Damage

1. Because of the alteration or deterioration of a tenanted thing, the lessor is entitled to

demand the indemnification of damage, and the tenant is entitled to claim against the

indemnification within six months.

2. The limitation of the lessor’s claim for the damage indemnification shall start to flow as

of the date of the tenanted thing’s return, while the limitation of the tenant’s claim - as of

the moment of the tenancy contract’s termination.

Article 574. Dispute Between Spouses Upon Divorce

1. A dispute of the spouses arising upon their divorce with regard to their rights to the

lodging which fails to be settled amicably shall be decided in a court.

2. It is of no importance for a court which of the spouses is the tenant. If a court

recognized the right to the lodging of the spouse who is not the tenant, this spouse shall

become a participant in the tenancy relations.

Article 575. Protection of the Tenant’s Rights

The tenant has a right to protect his tenancy from any infringer, including the owner

proper.

CHAPTER 4. LEASING

Article 576. Concept. Content

1. Under a leasing contract, the lessor is obliged to transfer to the lessee in possession

thereof a certain property for a fixed term. The lessee shall be liable to pay a fee under

the established periodicity.

2. The lessor shall be liable to manufacture or acquire the property provided for by the

contract.

117

3. Under a leasing contract, the lessee may be assigned with an obligation or a right, after

the contract expiry, to buy an object of leasing or hire it unless the contract ends with

the complete depreciation of the thing. The depreciation fact shall be taken into account

in all the instances in calculating the final value. Where the contract lacks such a

provision, the lessee shall be entitled to buy the object of leasing.

Article 577. Form of a Leasing Contract

A leasing contact shall be done in writing and include:

a) the whole price;

b) the amount of the leasing payment and the terms thereof;

c) the amount of the final payment or the procedure for its calculation in case the contract

is completed before due.

Article 578. Responsibility of the Lessor

1. The lessor is responsible, pursuant to the rules of a contract of tenancy, before the

lessee for delay in the delivery or non-delivery of the property, as well as for delivery of

the faulty property.

2. The parties may agree that the lessee shall, prior to claiming against the lessor,

demand satisfaction from the property supplier.

Article 579. Responsibility of the Lessee

In the case of termination of a contract before time through the lessee’s fault, the lessor

may not put against him the demands which exceed his interests in connection with the

performance. In specifying a demand, account shall be made for the remaining value of

the leasing property the remaining interests on the leasing fee, and other saved costs.

Article 580. Other Rules Applied to Leasing

The rules of a contract of tenancy, which do not contradict Articles 578-579, shall apply to

leasing.

CHAPTER 5. RENTING

Article 581. Concept

1. Under a rent, the lessor is obliged to transfer to the lessee a certain property in

temporary use and to secure a possibility of obtaining fruits within the period of renting

provided they have been obtained as the profit as a result of the proper management of

the rented property. The lessee is obliged to pay to the lessor the stipulated rental. The

118

rental may be determined both in cash and in kind. The parties may also agree upon

other means of determination of the rental.

The rules of a contract of tenancy shall apply to a renting contract unless otherwise

provided by Article 581-606.

Article 582. Revocation of a Renting Contract Concluded for More than Ten Years

If a renting contract is concluded for more than ten years, each party shall be entitled to

revoke the renting relations after the term has expired.

Article 583. Renting of Land with Inventory

1. If a land plot is rented with the inventory, the lessee shall be liable for the maintenance

and care of each part of the inventory.

2. The lessor shall be required to replace the parts of the inventory which have become

unfit due to the circumstances beyond the lessee’s control. The lessee is obliged to

restitute the loss of animals ascribed to the inventory irrespective of the proper

management of the economy.

3. The lessee shall keep the inventory in the condition and shall replenish it to the extent

which conforms to the regulated economy. The individual inventory acquired by the

lessee shall become the lessor’s property by its pooling with the common property.

Article 584. Risk of Accidental Loss of Inventory

1. If a land plot lessee receives the inventory under valuation and assumes an obligation

of returning it upon termination of the contract also under valuation, he shall assume the

risk of accidental loss and damage. He may dispose of individual parts of the inventory

within the scopes of the proper management of the economy.

2. Upon expiry of a rent, the lessee shall return the inventory to the lessor. The lessor may

refuse the acceptance of the inventory acquired by the lessee provided it is not

necessary for proper management of the land plot or is excessively expensive;

Concurrently with the refusal the right of ownership to the unaccepted inventory is

transferred to the lessee. Given the difference in the valuations of the accepted and

returned inventory, the difference shall be compensated by money. The prices operating

at the date of the contract termination shall serve as the basis for the valuation.

Article 585. Inadmissibility of Prohibition of Disposal of Individual Parts of Inventory

The provisions of a contract which oblige the lessee not to dispose of parts of the inventory

or dispose of them only subject to the lessor’s consent shall be valid only if the lessor

119

undertakes the obligation to acquire the inventory under the inventory valuation upon

termination of the renting relations.

Article 586. Right of Pledge on Inventory

1. The lessee of a land plot has the right of a pledge on the inventory in his possession in

relation to the claims of the lessor which relate to the inventory received under a renting

contract.

2. The lessor may avoid the lessor’s right of a pledge if submits other means of security.

He may release all parts of the inventory from the right of pledge by offering a means of

appropriate compensation of the value of the parts.

Article 587. Subrental

1. The lessee has no right of subrental without the lessor’s consent.

2. The lessor may refuse the rental of individual parts of the rented property if this is

connected with essential damage to his interests.

3. The lessee shall be liable before the lessor for the application of a thing by the

subrenter or the renter contrary to he lessor’s consent. The lessor may directly suspend

such application of the property by the subrenter or the renter.

Article 588. Return of Rented Property Before Time

1. If the lessee returns the property prior to the termination of the rental relations, he shall

be exempt from the rental only if he offers a new solvent and acceptable to the lessor

lessee. The new lessee shall agree to the acceptance of the renting contract on the

same terms and conditions.

2. If the lessee fails to offer such a lessee. he shall pay the rental until the termination of

the rental relations.

Article 589. Revocation of a Rental Contract of Unlimited Duration

1. Where the rental terms are not specified upon rental of a land plot or a right, the

contract may be revoked only at the end of the calendar year; it may be revoked not

later than within one month from the end of the rental year.

2. This rules shall also apply where the rental relations may be terminated prior to the term

as established by a law.

Article 590. Termination of a Contract in the Case of the Lessee’s Decease

1. In the case of the lessee’s decease both his heirs and the lessor may terminate the

rental relations within six months from the end of the calendar year.

120

2. The heirs may refuse the termination of the contract and demand the continuation of the

rental relations provided they are able themselves or through third persons to secure

proper management of the rented property.

Article 591. Indemnification of Damage Upon Non-return of Property

If the lessee fails to return the rented property upon termination of the rental relations, the

lessor may demand the payment of the agreed rental for the delay in returning property;

the lessor may also claim the compensation of other damage as well.

CHAPTER 6. LEASE OF AGRICULTURAL LAND

Article 592. Concept

1. Under an agricultural land lease agreement, a land plot is transferred for farming with

or without dwelling or production structures (farm) intended for economic use.

2. The rules of lease apply to the lease of agricultural land unless otherwise provided for

the lease of agricultural land.

Article 593. Form of Agreement

An agricultural land lease agreement shall be made in writing. Where this form is not

observed, the agreement is understood to have been made for unlimited duration.

Article 594. List of Leased Property

In starting lease relations, the parties shall draw up a consolidated list (inventory) of leased

property, indicating its amount and condition at the time of leasing. The same rule

applies upon completion of the lease relations. The list is to be signed by both parties

and the date of its making is to be indicated therein.

Article 595. Condition of Leased Property. Its Repair

The lessor is required to transfer the leased property to the lessee in the usable under the

agreement condition and maintain it in such condition for the entire period of lease. The

lessee shall carry out routine repair of the property at his expense, repair living and

industrial premises, roads, communications, fences. He is required to use the property

taken on lease according to economic destination.

Article 596. Right of Pledge on Fruit

For the satisfaction of demands proceeding from the lease relations the lessor has the

right of a pledge on the things added by the lessee and the income (fruit) received from

the leased property.

121

Article 597. Demand to Reduce Rental

Where more than half of the annual harvest obtained as a result of lease is accidentally

lost the lessee is entitled to demand a corresponding reduction of the rental charge. The

lessee may demand a reduction of rental only before harvesting.

Article 598. Obligation to Compensate for Necessary Expenses

The lessor is required to compensate the lessee for the necessary expenses made on the

leased property.

Article 599. Compensation for Expenses Made by the Lessor’s Consent

All other expenses to which the lessor has consented, apart from the ones stipulated in

Article 598, shall be compensated by him upon termination of the lease relations to the

lessee.

Article 600. Compensation for Non-harvested Yield

Where the lease relations are terminated during the lease year, the lessor shall

compensate the lease in accordance with the proper management rules for the yet non-

harvested but to be harvested before the end of the current year yield’s value.

Article 601. Obligation of the Lessee Before the New Lessee

1. Upon expiration of an agricultural lease agreement, the lessee shall leave to the lessee

replacing him the buildings in the proper condition, while the machinery and farm

produce – in the amount which is necessary for continuing farming until the next

harvest.

2. Where the lessee is obliged to leave the produce in a larger amount or better quality

than was received by him upon starting the lease, he may demand from the lessor the

compensation for the cost.

Article 602. Obligation to Return the Leased Property

The lessee is obliged, upon termination of the lease relations, to return the property taken

on lease in the condition securing continuation of proper management of the economy

which existed before the return.

Article 603. Rights of a Lessee Individual Parts of Property

1. The lessee is entitled to separate the devices with which he equipped the property

taken on lease; the lessor may substitute the right of separation with a respective

compensation except for the case when the lessee has a considerable interest for

separation.

122

An agreement excluding the right of the lessee provided for in item 1 of this Article is

valid only where such agreement envisages an appropriate compensation.

Article 604. Demand to Continue Lease Relations

The lessee may demand from the lessor the continuation of the lease relations where:

a) the lease of the farm represents a subsistence basis for the lessee;

b) a land plot is vitally necessary for preserving the lessee’s farm and the termination of

lease, even under the agreement, is so painful for the lessee or his family that it has no

justification even by the considerable interest of the lessor.

Article 605. Termination of Lease Relations Because of Expiry

The lease relations are terminated upon expiry of the agreement. An agreement made for

the term of more than three years may be prolonged for the indefinite period if the

proposal of one of the parties to continue the lease agreement is not rejected by the

other party within three months. The proposal and refusal thereto shall be made in

writing.

Article 606. Termination of Lease Relations in the Case of An Agreement of Unlimited

Duration

1. Where the period of lease is not specified every party to it may, within not later than ten

days from the beginning of the lease year, announce the termination of the agreement

in the next calendar year. If the parties have agreed on a shorter period, it shall be

subject to the registration in writing.

2. Where the lease relations may be terminated before the period established by a law, it

will be possible only by the end of the lease year.

CHAPTER 7. FRANCHISING

Article 607. Concept

A franchising agreement is a long-term obligatory relation by which independent

enterprises undertake bilaterally, where necessary, through performance of specific

obligations to promote the production and marketing of goods and rendering of services.

Article 608. Obligations of a Franchiser

1. A franchiser is obliged to present to a franchisee the non-material proprietary rights,

trademarks, specimens, packing, concepts of production, purchase and sale of goods,

and the business organizations, as well as other information necessary for marketing in

the form applied by it.

123

2. The franchiser is obliged to protect the system of joint action from interference of third

persons, to continuously develop it, and to support the franchisee through sharing

business skills, provision of information and improvement of skills.

Article 609. Obligations of a Franchisee

A franchisee is liable to pay a fee the amount of which is essentially calculated with regard

to the contribution made in the implementation of the system of franchising,

energetically and honestly carry out entrepreneurial activities, receive services, and

acquire goods through the franchiser or persons duly authorized thereby, where it is

directly related to the objective of the agreement.

Article 610. Obligation to Keep Received Information

In making a franchising agreement, the parties shall openly and completely inform one

another about the circumstances relating to franchising, in particular – the system of

franchising, honestly providing one another with information. They are obliged not to

disclose the information received even if an agreement is not made.

Article 611. Form of Agreement

A franchising agreement is valid if made in writing. Besides bilateral obligations of the

parties, the duration, termination or prolongation and other essential elements, the

agreement shall contain a comprehensive description of the system of franchising.

Article 612. Duration of Agreement

1. Duration of an agreement is determined by the parties with regard to the requirements

associated with the realization of the given goods and services.

2. Where the duration of an agreement exceeds ten years, each party is entitled to

terminate the agreement with observance of the necessary one-year term. Where

neither party applies to this right of termination of an agreement, the agreement is

prolonged for two years. In the case of expiry or termination of the agreement on the

parties’ initiative, the parties shall try to continue the agreement on the same or altered

terms on the basis of the principles of mutual confidence until the factual completion of

business relations.

Article 613. Bona Fide Competition

1. Even after the completion of contractual relations, the parties are obliged to exercise

bona fide competition in relation to one another. Within this limits, the prohibition of

competition may be applied to the franchisee within a definite territory which shall not

exceed a one-year term.

124

2. Where the prohibition of competition may endanger professional activity, the franchisee

shall be given an appropriate financial compensation irrespective of the expiry of the

agreement.

Article 614. Obligation of the Franchiser

The franchiser shall be liable for the rights and information provided for by the system of

franchising. Where it infringes the contractual obligations, the franchisee is entitled to

reduce the fee. The amount of reduction shall be finally determined by the opinion of an

independent expert whose services are to be paid by the parties.

CHAPTER 8. LEND (FREE USE)

Article 615. Concept

Under a lending agreement, a lender assumes an obligation to transfer to a lend-recipient

goods in temporary free use.

Article 616. Obligation of Lender

The lender shall be responsible only for the damage caused knowingly or recklessly.

Article 617. Obligation to Indemnify Damage in the Case of Concealment of a Thing’s

Fault

Where the lender knowingly conceals the right fault or defect of the lent thing to the lend-

recipient, he shall be obliged to indemnify the incurred damage.

Article 618. Purposeful Use of a Lent Thing

The lend-recipient may not use a lent thing otherwise than stipulated by the agreement. He

has no right to transfer the thing for use by a third person without the lender’s consent

thereto.

Article 619. Obligation to Bear Usual Costs

1. The lend-recipient shall bear usual costs necessary for maintaining the lent thing.

2. Obligations of the lender to compensate for other expenses are determined under

regulations for performing uninstructed affairs.

Article 620. Wear and Tear of a Lent Thing

The lend-recipient shall not be liable for alteration or deterioration of a lent thing where it

results from the use corresponding to the agreement.

Article 621. Obligation to Return a Lent Thing

1. The lend-recipient is liable to return the lent thing after expiry of the lending agreement.

125

2. Where the term is not fixed by the agreement, the lender may ensure the return of the

thing after the period necessary for the purposeful use of the thing has expired; while in

the case where the purpose is not defined, he is entitled to claim for the thing’s return at

any time.

3. The lend-recipient may return the thing at any time.

Article 622. Effects of the Death of the Lend-Recipient

Where the lend-recipient dies, or the lender is in need of the thing due to unforeseen

circumstances, he may terminate the agreement.

CHAPTER 9. LOAN

Article 623. Concept

Under a loan agreement, the lender transfers to the borrower’s possession money or other

generic thing, while the borrower assumes an obligation to return the things of the same

type, quality and amount.

Article 624. Form of a Loan Agreement

A loan agreement is made orally. The parties may agree on a written form as well. In

making an oral agreement its validity may not be established only under evidences of

witnesses.

Article 625. Loan Interest

A loan interest may be envisaged by the parties which shall be in reasonable conformity

with the limits established by the National Bank or by interbank credit auction. An

agreement made in violation of this rule is invalid.

Article 626. Termination of an Agreement and Return of a Debt

1. Where the debt return period is not specified, the debt shall be returned by the creditor

or debtor upon termination of the agreement.

2. The agreement termination period constitutes three months. Where interest is not

reserved, the debtor may return the debt before due. The return of the interest bearing

loan before due is admissible only under a preliminary agreement of the parties or

subject to the lender’s consent.

3. Interest shall be paid after passing of each year. Where the loan is preliminary termed,

both the debt and interest shall be paid when due.

126

Article 627. Right of Immediate Debt Payment

The lender is entitled to immediately claim the return of the debt if the borrower’s

proprietary condition significantly deteriorates, endangering the debt return claim. This

right is also valid where the borrower’s proprietary condition’s deterioration preceded

the making of the agreement, and the lender became aware thereof only after making

the agreement.

Article 628. Loan Promise

In promising a loan, the promising party may refuse to grant loan if the property condition

of the other party has so deteriorated that the debt return may be endangered. A loan

promise shall be made in writing.

CHAPTER 10. CONTRACT

Article 629. Concept

1. Under a contract, the contractor assumes an obligation to perform the work provided

for by the agreement, while the customer shall pay the contractor the agreed

remuneration.

2. Where contract envisages the manufacture of any product, and the contractor

manufactures it with the material acquired by itself, it shall transfer the title in the

manufactured product to the customer. Where a generic thing is manufactured, the

rules of purchase and sale shall apply.

3. The making up of an estimate related to contract is not compensated unless the

agreement provides otherwise.

Article 630. Agreement on Compensation

1. Compensation is understood to be agreed upon where, according to circumstances,

contract is expected only on the compensation basis.

2. Where the compensation amount is not agreed upon, a tariff rate shall be deemed to

be agreed upon, where available, or a usual compensation – where tariffs are not

available.

Article 631. Effects of Exceeding a Rough Estimate

1. Where the contractor significantly exceeds the rough estimate it may demand only the

agreed remuneration, except for the cases when the overexpenditure could not be

foreseen.

127

2. The contractor shall immediately notify the customer about such overestimation which

could not be foreseen when making the agreement. Where the customer terminates the

contract because of overestimation, it shall be liable to compensate for the work

performed according to the rough estimate.

Article 632. Obligation of Personal Performance of Work

The contractor shall perform the work personally only in the event when this proceeds from

concrete circumstances or nature of the work.

Article 633. Obligation of the Customer to Indemnify Damage

1. The contractor may claim the indemnification of damage where the customer does not

accept the work. The customer shall indemnify the damage also if it fails to perform an

action necessary for the execution of work.

2. The damage indemnification extent is defined by the delay in performance, on the one

part, and according to the amount which the contractor would have received by using its

workforce otherwise, had not the customer exceeded the time limit.

Article 634. Right of Pledge on a Movable Thing

In order to secure its claims, the contractor may apply the right of pledge on a movable

thing manufactured or repaired by itself where this thing is in possession of the

contractor with the purpose of manufacture or repair.

Article 635. Right of Hypothecation on a Land Plot Under Construction

Where a structure or individual parts of the structure constitute the object of an

agreement, the contractor may, on the basis of the agreement, claim or hypothecation

on the land plot under construction.

Article 636. Termination of Agreement

The customer is entitled to terminate the agreement at any time prior to the completion of

the work provided it shall compensate the contractor for the work performed and the

damage resulting from such termination.

Article 637. Termination of Agreement on Contractor’s Initiative

A contractor may terminate the agreement before competition of the work only in the

manner enabling the customer to receive services otherwise except for the cases when

there exist sufficient grounds for such termination. In this case the obligation to

compensate for damage is no longer valid.

128

Article 638. Right to Claim a Portion of Remuneration

Where the contractor terminates obligations pursuant to Article 637, it may claim a

portion of the remuneration conforming to its previous services provided the customer

has any interest towards such services.

Article 639. Obligation to Present a Faultless Thing

Where services comprise the manufacture of any product, the contractor shall present a

materially and legally faultless product to the customer.

Article 640. A Legally Faultless Product

A product is legally faultless if third persons may not apply any rights against the customer.

Article 641. A Materially Faultless Product

1. A product is materially faultless if it conforms to stipulated conditions; where these

conditions are not stipulated, the product is deemed to be materially faultless provided it

is fit for the use under the agreement or usual use.

2. It is equated to a material fault where the contractor manufactures a product differing

from the ordered one or in a smaller quantity.

Article 642. Demand for Additional Performance

1. Where a product is faulty, the customer may demand additional performance from the

contractor. The contractor may, at its option, either eliminate the fault or manufacture a

new product.

2. With the purpose of additional performance, the contractor is liable to bear necessary

costs, including transport, work and material expenses. The contractor may refuse to

carry out additional performance where it requires unreasonable expenses.

3. Where the contractor manufacturers a new product, it may demand the return of the

faulty product from the customer.

Article 643. Elimination of a Product’s Fault by the Customer

1. Where the contractor does not refuse to execute additional performance because of

unreasonable costs, but the period specified for the additional performance has passed

without any result, the customer may eliminate the fault itself and demand

compensation for the expenses incurred.

129

Specification of an additional term is not necessary in the cases as per item 2 of Article

405.

2. The customer may demand from the contractor an advance for the fault elimination

expenses.

Article 644. Repudiation of Agreement Because of a Product’s Fault

Because of a product’s fault the customer may, pursuant to Article 405, repudiate the

agreement. In this case the contractor is required to compensate the customer for the

expenses connected with the agreement.

Article 645. Remuneration Reduction Because of a Product’s Fault

A customer which neither accepts an additional performance of the agreement after

passing of the period specified therefor nor repudiates the agreement may reduce

remuneration by the amount with which the fault reduces the product’s value.

Article 646. Performance of Work With the Contractor’s Materials

1. Where the contractor performs the work with its materials, it shall be responsible for

the quality thereof.

2. The contractor is responsible for the improper use of the customer’s materials. The

contractor shall present to the customer a material consumption account and return the

remaining materials.

Article 647. Obligation to Warn

1. The contractor is obligated to timely warn the customer that:

a) the materials received from the customer are of low quality and unfit;

b) should the customer’s instructions be fulfilled, the work will be unstable and unfit;

c) there exist other circumstances beyond the contractor’s control endangering the work’s

durability and fitness.

2. Where the customer, despite timely warning by the contractor, fails to replace within

the appropriate time the unfit or substandard materials, fails to amend the given

instruction on the work performance procedure, or fails to eliminate other circumstances

which may endanger the work’s serviceability or durability, the contractor is entitled to

repudiate the contract and demand the indemnification of the damage incurred thereby.

Article 648. Remuneration of Performed Work

The customer is obliged to remunerate the contractor after the work has been performed

unless the agreement provides payment by installments.

130

Article 649. Acceptance of Work

Where according to the agreement or proceeding from the type of work it is subject to

transfer, the customer is liable to accept the performed work. As soon as the work is

accepted, the customer is obliged to pay the remuneration. The work is deemed to be

accepted where the customer fails to accept the performed work by the time fixed by

the contractor.

Article 650. Responsibility of the Contractor for Loss of the Customer’s Property

The contractor shall be responsible for loss of the customer’s property or damage during

carelessness too.

Article 651. Contractor’s Risk

1. The contractor shall assume a risk for accidental loss or damage of the performed work

until transfer of the performance to the customer. The risk of accidental loss or damage

passes to the customer upon transfer of the work. The delayed acceptance by the

customer is equated to the passing.

2. The risk of accidental loss or damage shall be assigned to the materials supplying

party.

Article 652. Effects of Accepting a Faulty Product

Where the customer is aware of the fault and it still accepts it without bringing a claim, the

customer shall not have any right to claim because of this fault.

Article 653. Guarantee Period

Where the contractor has assumed a guarantee period, the detected fault shall invoke

corresponding rights within this period.

Article 654. Effects of Intentional Concealment of a Fault by the Contractor

Where the contractor intentionally conceals a fault, it may not refer to the agreement which

excludes or restricts the customer’s rights because of the product’s fault.

Article 655. Period of Limitation

A customer may bring a claim because of a performance fault within one year, while a

claim concerning a structure – within five years from the date of the performed work’s

acceptance.

131

Article 656. Reading of the Period of Limitation in Accepting the Work by Installments

Where, pursuant too the agreement, the work has been accepted by installments, the

period of limitation because of the fault starts from the date of the complete acceptance

of the work.

132

CHAPTER 11. TOURIST SERVICE

Article 657. Concept

A person arranging travel under a contract (a tourist enterprise) shall render the agreed service to a tourist (traveler). The tourist shall pay to that person the agreed consideration for the rendered service.

Article 658. Third Person in Travel

1. Prior to the beginning of the travel a tourist may require participation of a third person in travel instead of him. The person arranging the travel may renounce participation of a third person if the latter does not satisfy conditions required for the travel.

2. The person arranging the travel may require consideration of those additional expenses caused by participation of the third person in travel from the tourist.

Article 659. Shortcomings on Travel

1. The person arranging the travel shall arrange it so to prevent shortcomings that may devalue or reduce the significance of travel for ordinary purposes or those ones provided by the contract.

2. If the travel has such shortcomings the tourist may require their elimination. The person arranging travel has the right to refuse elimination of shortcomings if this requires unreasonably big costs.

3. If the person arranging travel does not eliminate such shortcomings in the reasonable term defined by the tourist, the tourist may eradicate the defects himself and require compensation for costs charged. Definition of the term is not required if the person arranging the travel refuses to eradicate the shortcomings or if the tourist is interested in the immediate eradication of shortcomings.

Article 660. Discount for Shortcomings in Travel

1. If the travel is defective its cost is reduced with respect of the duration of those shortcomings.

2. The cost shall not be reduced if the tourist does not notify the person arranging the travel on shortcomings through his fault.

147

Article 661. Termination of Contract for Shortcomings on the Tourist’s Initiative

1. If the tourist incurred significant loss for shortcomings mentioned in Article 659, he/she may terminate the contract. The same shall be applied if he is not able to take part in the travel for good reasons known to the person arranging the travel.

2. The contract may be terminated if the person arranging the travel does not eradicate shortcomings in the term defined by the tourist. Definition of the term is not required if shortcomings cannot be eliminated or the person arranging the travel refuses to eliminate them, or termination of the contract is justified by the particular interest of the tourist.

3. Upon termination of the contract the person arranging the travel loses the right on the agreed consideration but has the right to require consideration for the perfect service rendered.

4. If the contract provided the return travel of the tourist, the person arranging travel is obliged to return the tourist after termination of the travel contract. In such event the extra charges shall be borne by the person arranging the travel.

Article 662. Compensation for Loss Caused by Shortcomings of Travel

1. If shortcomings of travel occurred as a result of circumstances under the control of the person arranging travel the tourist may require compensation for loss caused by shortcomings without restriction of the right on discount in payment or termination of the contract.

2. If the travel was upset or were arranged improperly, the tourist may require the appropriate money compensation for the holiday spent in vain.

Article 663. Limitation under the Contract on Travel (Voucher)

1. The tourist may claim as provided in Articles 659-662 against the person arranging travel within 1 month on expiration of the travel term fixed in the contract. On expiration of the term the tourist may claim unless he is in default of claim.

2. Limitation of a tourist’s claim makes up 6 months. This term begins from the day of the end of travel under the contract. If the tourist claims before the term of limitation, the term will be stopped before the day when the person arranging the travel declines the claim.

148

Article 664. Limited Liability

The person arranging the travel may limit his liability at the three-fold amount of cost of the service, under the contract with the tourist, if:

a) the loss caused to the tourist was not provoked by deliberate or gross negligence; or

b) the person arranging the travel does not bear sole entire liability before the tourist for the loss occurred in result of a fault of the executive before the person arranging the travel.

Article 665. Renunciation of Contract Before Beginning of Travel

1. A tourist may renounce the contract at any time before the beginning of travel.

2. Upon the tourist’s renunciation of the contract the person arranging travel loses the right to the agreed consideration. At the same time he may claim a appropriate consideration the amount of which shall be defined on the basis of the agreed consideration less the amount that he might have received in result of the otherwise use of his service.

Article 666. Force Majeure

1. If the travel was essentially complicated, or any other danger arose, or the tourist occurred the loss as a result of force majeure after execution of the contract, both the tourist and the person arranging the travel may terminate the contract.

2. In the event stipulated by paragraph 1 of this Article the rules provided by paragraph 3 and the first sentence of paragraph 4 of Article 661 shall be applied on termination of the contract. Each party undertakes a half of extra charges for the return travel. In other cases extra charges are borne by the tourist.

Article 667. Inadmissibility of Agreements to the Prejudice of a Traveler

Rules provided by this Chapter cannot be changed to the prejudice of a traveler.

CHAPTER 12. TRANSPORTATION

1. Shipment Contract

Article 668. Concept

Under the shipment contract a carrier shall carry goods or passengers to the place of destination by the agreed consideration.

149

Article 669. Carrier’s Responsibility

1. The carrier bears responsibility for the damage caused to a passenger and damage or loss occurred to his baggage.

2. Responsibility does not arise if the loss is caused by force majeure, or by a passenger himself, or his/her baggage.

3. Carrier’s responsibility shall not be waived, or limited under the contract.

Article 670. Obligation of Contract

A person who openly offers the transportation of goods and passengers shall enter into the shipment contract unless the ground of waiver exists.

Article 671. Transportation by Different Transport Means

If the loaded motorcar in one length of the way is shipped by sea, rail or air and, in accordance with the cases stipulated in Article 682, the goods are not reloaded, the norms of this Chapter will be applied for total shipment.

Article 672. Shipment Contract Form

The shipment contract is executed in kind of a waybill (or other document). In absence of the waybill, irrespective of its defects or loss, the content and identity of the shipment contract shall be determined by the norms of this Chapter.

Article 673. Rule of Making Waybill

1. A waybill is made in three copies to be signed by a consignor and carrier. The first copy shall be kept at the consignor, the second one - accompanies the goods, the third copy is kept by the carrier.

2. If the goods to be carried are divided by different transport means, or the business concerns various kinds of goods or goods to be sent in separate lots, both the consignor and carrier may demand making so many waybills how may kind of transport or goods are.

Article 674. Waybill Essential Elements

1. A waybill shall include the following data:

a) date and place of issue;

b) consignor’s name and address;

c) carrier’s name and address;

d) day and place of consignment, place of delivery of goods;

150

e) consignee’s name and address;

f) name of goods and kind of packing, universally recognized marks as regards the dangerous goods;

g) quantity, marks and number of carried goods;

h) weight of goods or their quantity;

i) transportation costs (price of transportation, extra costs, customs duty and other expenses from the moment of entering into the contract till the delivery of goods);

j) customs or other similar service notes;

k) note indicating that the shipment regardless the mutual agreement is subject to the norms of this Charter.

2. In case of need the waybill shall contain the additional data:

a) prohibition of carriage by another transport;

b) costs to be borne by the consignor;

c) amount of goods margin within transportation;

d) goods value and note of particular interest;

e) consignor’s instructions on insurance of goods to the consignee;

f) the agreed term of delivery;

g) the list of documents handed to the carrier.

3. The parties may make other entries to the waybills which they will consider expedient.

Article 675. Consignor’s Responsibility

1. The consignor is responsible for all those expenses and losses arisen for the reason of incorrect or incomplete presentation of:

a) data mentioned in subparagraphs “b”, “d”, “e”, “f”, “g”, “h” and “j” of point 1 of Article 674;

b) data mentioned in point 2 of Article 674;

c) all other information or consignor’s instructions concerning the making of a waybill or entries in it.

2. If a carrier makes entries listed in point 1 of this Article in the waybill at the consignor’s request, then till otherwise is proved, it is presumed that the carrier acted on the consignor’s behalf.

3. If a waybill does not contain the data mentioned in subparagraph “k” of point 1 Article 674 the consignor bears responsibility for all those costs and losses occurred to the owner of goods for the absence of those data.

151

Article 676. Carrier’s Obligation for Acceptance of Goods

1. When accepting the goods the carrier shall examine:

a) a number of pieces, correctness of their marks and numbers mentioned in the waybill;

b) outer state of goods and its packing.

2. If the carrier cannot properly examine the data mentioned in subparagraph “a” of point 1 Article 676 he enters those terms in the waybill which shall be fulfilled. In the same way he shall enter such terms that concern the outer state and the packing. Those terms are not binding upon the consignor except those cases when he has clearly recognized them in the waybill.

3. The consignor may demand from the carrier to examine the weight of goods or their quantity. He may also demand examination of the goods content. The carrier has the right to require compensation for costs related to such examination. Checkup results shall be indicated in the waybill.

Article 677. Presumption of Entering into the Shipment Contract.

1. Until otherwise is proved the waybill (consignment or other kinds used in the transportation) is the proof of entering into the transportation agreement, determining of its content and acceptance of goods by the carrier.

2. Unless the waybill mentions the terms of transportation, until otherwise is proved, it is presumed that within acceptance of the goods by the carrier, the goods and packing were in good outer state and numbers of pieces, marks and numbers tally with those data given in the waybill.

Article 678. Consignor’s Responsibility for Damage Occurred for Defective Packing of Goods

The consignor bears responsibility before the carrier for damage occurred by the defective packing to the persons, goods and other property as well as for charges borne for such packing except those cases when the defect was evident or the carrier knew about it when accepted the goods and did not claim on this fact.

Article 679. Consignor’s Obligation to Provide Necessary Information

1. Consignor shall attach to the waybill all those documents required for delivery of goods for executing of customs and similar deeds, or pass those documents to the carrier and provide him with all necessary information.

2. The carrier is not obliged to check up if those documents and information are correct and sufficient. The consignor is responsible before the carrier for

152

damage occurred for the incompleteness and incorrectness of documents and entries except the cases taken place through the carrier’s fault.

3. The carrier bears responsibility for the loss or misuse of documents mentioned in the waybill, attached to it or passed to him by the consignor; he shall not assume more responsibility than he assumes in case of loss of goods.

Article 680. Consignor’s Rights

1. The consignor is entitled to dispose goods, demand the termination of shipment; he is also entitled to demand from the carrier not to change the place of destination of goods, not to give goods to a person other than that one mentioned in the waybill.

2. This right elapses when the copy of waybill is passed to the consignee, or he enjoys his right according to part Article 681. From this moment the carrier shall execute the consignee’s instructions.

3. The consignee acquires the right of disposal upon the registration of the waybill if the consignor has made appropriate note in the waybill.

4. If when exercising the right of disposal the consignee issues instructions on delivery of goods to the third person, the latter, on his hand, is not entitled to nominate another consignee.

5. Right on disposal shall be exercised with observance of the following rules:

a) the consignor or, in the case mentioned in point 3 of this Article, the consignee, willing to exercise his right on disposal, shall present the first copy of waybill where the new instructions given to the carrier shall be mentioned, and compensate him for all costs and losses occurred as a result of execution of those instructions;

b) instructions shall be available for execution at the moment when they abroad to the person who should execute them. This person shall not hinder the carrier to execute his ordinary productive activity and shall not cause any damage to other goods of a consignor or consignee.

c) the instructions shall not give rise to the division of goods.

6. If the carrier cannot execute the given instructions on the grounds of subparagraph “b” of point 5 of this Article he should without delay notify the person who issued those instructions.

7. A carrier executing the given instructions without observance of requirements of this Article or executing them without request of the first copy of waybill, is responsible before the authorized person for the loss occurred.

153

Article 681. Consignee’s Rights within Consignment

On delivery of goods to the place of destination the consignee is entitled to demand from the carrier the second copy of waybill certifying the acceptance of goods, and the goods are considered as delivered. If the defect of goods is revealed, or goods are not delivered in the term provided by Article 688, the consignee may apply his rights against the carrier under the transportation contract on his behalf.

Article 682. Failure in Execution of Contract

1. If before the acceptance of goods at the place of destination there becomes obvious that the terms mentioned in the waybill cannot be executed, the carrier shall demand the instructions on goods from the authorized person according to Article 680.

2. If circumstances make possible the transportation in terms differing from those ones mentioned in the waybill, and the carrier could not receive the instructions on goods from the authorized person as provided by Article 680 in the appropriate term, he shall take such measures that would be the best proceeding from the authorized person’s interests.

Article 683. Circumstances Hindering Consignment of Goods

1. If upon delivery of goods to the place of destination there arise the circumstances hindering the consignment of goods, the carrier shall require the instructions from the consignor. If the consignee refuses of acceptance of goods, the consignor is entitled to dispose the goods without presentation of the first copy of waybill.

2. The consignee may demand the delivery of goods after his refusal of acceptance of goods until the carrier will receive the contrary instructions from the consignor.

3. If the circumstances hindering the delivery of goods arise after the issuing of instructions on delivery of goods to the third person from the consignee as per point 3 of Article 680, then, when applying points 1 and 2 of this Article, the consignee appears as the consignor and the third person – as the consignee.

Article 684. Right on Indemnification under Consignor’s Instructions

1. The carrier has the right to claim indemnification for those costs borne for the acceptance or implementation of instructions except those cases when those costs are caused through his fault.

2. In cases provided by point 1 of Article 682 and Article 683 the carrier may urgently reship the goods at the expense of the authorized person; after re-

154

shipment the transportation is considered as executed. Then the carrier shall keep the goods for the authorized person. He may entrust the third person with keeping of goods; in such case he bears responsibility only for selection of the third person. All requirements and expenses under the waybill shall be compensated from the value of goods.

3. The carrier may sell perishable goods or those goods the state of which justifies such action, or when storage costs increases the value of goods without waiting for the authorized person’s instructions. He may sell goods in other cases if he does not receive instructions from any party within the fixed term.

4. If the goods are sold under this Article the amount less the expenses related to the goods shall be transferred to the authorized person. If those expenses exceed the income the carrier may claim the compensation of the difference.

5. The rule of sale is determined by the law and usage of that place where the goods are situated.

Article 685. Lien on Goods

The carrier obtains the lien on goods for the costs arisen out of the transportation contract while he is entitled to dispose those goods.

II. Carrier’s Responsibility

Article 686. Concept. Subject

1. The carrier bears responsibility for total or partial loss and damage of goods if the goods were damaged or lost within the period from their acceptance till the delivery as well as for delay in delivery term.

2. The carrier is relieved from responsibility if the goods were lost, damaged or delivery was delayed through the fault of the authorized person or under such instructions of the authorized person which were not within the responsibility of the carrier, as well as if the defect of goods were caused by such circumstances beyond the carrier's control.

3. The carrier may refer neither to the defect of the transport means used for transportation nor to the fault of a person or the personnel of a person who leased this transport, in order to be relieved.

4. In case of availability of terms provided by points 2-5 of Article 687 the carrier is relieved from responsibility, if the loss or damage of goods has caused particular danger related to the following circumstances, namely, when:

a) the open, uncovered transport is used if it was directly agreed and indicated in the waybill;

155

b) the goods are not packed or packed badly and it creates danger of loss or damage of the goods;

c) examination, loading, stowing or unloading of goods is executed by the consignor, consignee or their authorized third person;

d) for the peculiarities of separate goods, they expect that the goods may totally or partially lost or damaged, namely, under the destruction, rusting, corrosion, wastage, spillage, ordinary losses or influence of insects and rodents.

e) the shipped goods are not marked or numbered in proper way;

f) animals are transported.

Article 687. Onus of Proof

1. Proof that loss, damage of goods or delay in delivery were caused by circumstances mentioned in point 2 of article 686 is borne by the carrier.

2. If the carrier proves that proceeding from the concrete facts of the case, the losses or damage might be caused from one or some dangers named in point 4 of Article 686, it is presumed that the damage was caused by those circumstances. The authorized person may prove that the damage is not caused by this danger or only by this danger.

3. The presumption given in point 2 of this Article is not applied to the loss or total actual loss of the transported goods in extreme conditions in the cases provided by subparagraph “a” of item 4 of Article 686.

4. If transportation is executed by transport means with special equipment protecting against heat, cold, temperature variation or wind, the carrier may refer to the point 4 of Article 686 in this case only, if he proves that he has executed necessary actions for selection, operation and use of this equipment and observed all requirements submitted to him.

5. The carrier may apply the subparagraph “d” of item 4 of Article 686 only if he proves that he has fulfilled all the undertaken measures and observed all instructions given to him.

Article 688. Delay in Delivery Term

The term of delivery of goods is considered as delay when the goods are not delivered in the agreed term or, in case the term is not fixed, in the common term required for transportation, with respect of those circumstances related to the partial shipment with definition of the time required for assembling of those parts, if the term to be observe by the carrier in the ordinary course of transportation is infringed.

156

Article 689. Resumption of Loss of Goods

1. The authorized person may consider the goods as lost without presentation of additional proofs, if the goods are not delivered at the place of destination within 30 days after expiration of the agreed term or, if such term is not fixed – after 60 days from acceptance of goods by the carrier.

2. In case of compensation for damage occurred for the lost goods the authorized person may claim in writing to be notified without delay if the lost goods appear within 1 year after compensation for the loss. Response on this claim shall be made in writing as well.

3. Within 30 days after receipt of such notice the authorized person may claim the delivery of goods after satisfaction of the rights under the waybill and in condition of payment back of the received compensation, in case of need – less expenses arisen out of compensation for damage; his claims on compensation for loss occurred as a result of infringement of the transportation term remain unchangeable as per Articles 692 and 694.

4. If the claim provided by point 2 of this Article is not made, or it is not referred to 30 days term stipulated by 3 point of this Article, or the goods were found after expiration of 1-year term following the payment of compensation, the carrier may dispose the foods in compliance with the rules applicable at the place where the goods appear.

Article 690. Right on Extra Charge Claim

If the goods were delivered to the consignee without payment of those extra charges which the carrier should receive after delivery of goods to the place of destination, the carrier may, referring to the retroactive right, make claim on compensation for damage.

Article 691. Order of Delivery of Dangerous Goods

1. If a consignor forwards the dangerous goods he shall provide the carrier with correct information and warn him about these goods, in case of need he shall insure these goods. If this obligation is not entered into the waybill the consignor and consignee shall prove that the carrier was well informed about the kind of goods and expected danger by other remedies.

2. If the carrier knew nothing about the dangerous goods and harm they might cause as per item 1, he may at any time and at any place unload, destroy them or render them harmless not bearing the obligation on compensation of damage; the consignor also is responsible for damage and expenses thereof.

157

Article 692. Value of Goods in Case of Total or Partial Loss

1. If as per rules of this Chapter, the carrier is obliged to compensate damage for total or partial loss of goods, the amount of compensation will be counted according to the price of goods applicable at the place and time of delivery of goods.

2. Value of goods is determined by the exchange rate and in case of non-availability of such rate, by the market price; in case of non-availability of such price, similar to goods of alike kind and value.

3. Cost of transportation, customs and other similar costs shall be compensated in total amount in case of total loss of goods, and partially, in case of partial loss of goods.

4. If the term of delivery is exceeded and the authorized person proves that the damage has occurred, the carrier shall compensate him up to amount of the value of those goods. Claim for the more compensation may be made only when, there existed the particular interest regarding that shipment, or the value of goods was indicated as per Article 694.

Article 693. Compensation for Damage of Goods

1. In case of damage of goods the carrier shall pay the amount of reduction in the value of goods, to be counted according to the value of goods fixed in items 1, 2 and 3 of Article 692.

2. Compensation of damage shall not exceed the amount, that:

a) should be paid in case of total loss of the goods if the total value of goods were reduced for their damage;

b) should be paid in case of loss of the part of goods not reduced in price if only a part of goods were reduced in price as a result of damage.

Article 694. Indicating Particular Interest in Waybill

1. The consignor may on the grounds of payment of the agreed margin, indicate his particular interest in this shipment in those cases when the goods will be lost or damaged or the delivery term will be exceeded.

2. If the particular interest in the given shipment has been already expressed, then, regardless the compensation of damage provided by Article 692 and 693, delivery term there may be made claim on compensation for additional damage in amount expressed in the interest.

158

Article 695. Claiming Interest for Provided Compensation of Damage

1. The person authorized for goods may demand annual 5% for the provided compensation of damage. Counting of interest begins from the day of making claim to the carrier, or, if the claim has not been made – from the day of lodging action.

2. If compensation for damage is fixed in such monetary unit that is not applied in the country and the payment is claimed, the exchange rate shall be determined according to the exchange rate effective at the place of payment of compensation by that very day.

Article 696. Non-contractual Claims within Transportation

1. If the loss, damage or overdue date occurred within the shipment determined by this Chapter, may cause non-contractual claims under the applicable rules, then the carrier may counterclaim under those rules of this Chapter which exclude his responsibility, or determine or limit the amount of compensation for damage.

2. If claims for non-contractual responsibilities for loss, damage and delay are applied against one person, this person may apply those rules of this Chapter which exclude his responsibility, or determine or limit the amount of compensation for damage.

Article 697. Inadmissibility of Carrier’s Relief

The carrier cannot apply or relief those rules of this Chapter which exclude or limit his responsibility or release him from onus of proof, if the damage occurred through his fault.

III. Claim

Article 698. Concept. Subject

1. If the consignee accepts the goods without its examination together with the carrier and does not make the general claim to the carrier for the loss and damage of the goods, then till otherwise is proved, it is deemed that the consignee accepts the goods in the condition mentioned in the waybill; the said claim shall be made at the very day of delivery of goods if the matter concerns the losses and damage to be revealed at sight, and in case of losses and damage not revealed at sight, not later 7 days from their delivery. If the matter concerns the losses and damage not revealed at sight, the claim shall be made in writing.

2. If the consignee and carrier examined the condition of goods together the rebuttal is allowed in this case only, if the matter concerns the losses and

159

damage not revealed at sight and the consignee does not make literal claim within 7 days from acceptance.

3. Claim for compensation of damage due to the delay in delivery may be made only if the consignee makes literal claims against the carrier within 21 days from the delivery of goods.

4. When counting the terms stipulated in this Chapter, the days of dispatch, examination and acceptance of goods by the consignee shall not be included.

5. The carrier and consignee shall assist each other in carrying out of necessary examination and establishment of required facts.

Article 699. Limitation of Rights Regarding Transportation

The limitation of rights regarding the transportation determined in this Chapter is one year. In case of deliberate gross negligence the limitation is three years. The term of limitation begins:

a) in case of partial loss, damage or delay in delivery of goods – from the day of its dispatch;

b) in case of total loss of goods – from the 30th day of expiration of the agreed term of transportation or, if such term has not been agreed, - at the 60th day from acceptance of goods by the carrier.

c) in all other cases – on expiration of three months from the day of entering into the transportation contract.

Article 700. Termination of Limitation

Limitation is terminated on the grounds of literal claim by the day when the carrier rejects a claim and returns the enclosed documents. If the claim is partially admitted the limitation for the disputable part of claim is to be prolonged. The onus of proof of admittance of claim or counterclaim, as well as of return of documents is undertaken by the person who applies them. Other claims concerning the same subject cannot terminate the limitation.

IV. Transportation by Consecutive Carriers

Article 701. Responsibility in Case of Consecutive Carriers

If transportation under one contract is executed by the consecutive carriers each carrier bears responsibility for execution of total transportation; the second and each consequent carrier becomes the party to contract when accepting the goods and waybill.

160

Article 702. Obligation on Transfer of Appropriate Documents

1. A carrier accepting goods from the previous carrier shall give the document certifying the acceptance of goods dated and signed by him. He shall indicate his name and address on the second copy of waybill. In case of need the carrier shall introduce in the second copy of waybill the terms provided by item 2 of Article 676 and certificate on acceptance of goods.

2. Terms between the consecutive carriers are regulated by article 677.

Article 703. Claim on Compensation from Consecutive Carriers

Claims on compensation for loss due to loss, damage of goods or delay in delivery, except those counterclaims or right on appeal, may be applied against the first, the last or that carrier within transportation of whom the goods were lost, damaged or delayed in delivery; one and the same action may be brought against some carriers.

Article 704. Right on Recourse in Compensation of Loss

If the carrier has already compensated the damage as per this Chapter, he has the right of counterclaim in the following cases:

a) if a carrier who caused loss or damage of goods shall solely compensate the damage to be compensated by him or some carriers;

b) if the loss or damage of goods is caused by two or some carriers, each of them shall compensate the amount in proportion to his quota of responsibility; if such cannot be established each carrier is responsible in proportion of his share in the consideration received for transportation;

c) if it is impossible to establish which carrier shall undertake the compensation of loss, all carriers shall pay in proportion given in subparagraph “b”.

Article 705. Consequences of Insolvency of a Carrier

If any carrier is insolvent, the amount to be paid but not yet paid by him shall be divided among other carriers in proportion to their shares in the consideration received for transportation.

Article 706. Litigation on the Exercised Right of Recourse

A carrier against whom the counterclaim was exercised as per Article 704 and 705, cannot claim that the carrier who exercised the counterclaim paid the amount groundless if the decision on payment was made by court and if this carrier was properly notified about this trial and was able to take part in it.

161

Article 707. Agreement among Consecutive Carriers

The carriers have right to agree on matters differing from Articles 704 and 705.

Article 708. Invalidity of Agreements Contradicting the Law

1. Except the rules given in Article 707 any agreement that directly or indirectly does not comply with the rules of this Chapter, is null and void. Invalidity of such agreements does not cause invalidity of other provisions of the contract in total.

2. Any agreement under which the carrier waives the claims occurred the insurance of goods and any other similar agreement by which the onus of proof is transferred to another person, is null and void.

CHAPTER 13. COMMISSION

Article 709. Concept

A person authorized under the agency contract shall perform one or some acts entrusted (commissioned) to him on his behalf and at expense of a principal.

Article 710. Consideration for Commission

1. A principal shall pay to the agent consideration in cases provided only by the contract or under the law.

2. Consideration is deemed to be agreed without fault if performance of the acts with respect of circumstances is expected only by consideration.

3. If the amount of consideration is not determined then in case of any available tariff, this tariff is deemed as the agreed consideration, in case of lack of tariff – the common consideration.

Article 711. Transferring Commission to a Third Person

1. The agent shall perform the commission in person, except those cases when he is given permit to transfer it to the third person, or is forced to do so for some circumstances. Assisting persons are allowed.

2. If transfer of commission to a third person is permitted, the agent will be responsible for that fault only which he undertakes when transferring commission and selecting this person.

Article 712. Digression from Principal’s Instructions

1. The agent is obliged to execute the principal’s instructions.

162

2. The agent may digress from the principal’s instructions if, proceeding from the circumstances, he may deem, that the principal would approve such digression if he knew the course of matter. Prior to the digression from commission the agent shall notify the principal and wait for his decision unless such delay endangers the principal.

3. If execution of commission by the agent may cause significant damage to the principal, the agent may perform such instructions only after he notifies the principal about this fact and the latter does not change his instructions.

Article 713. Obligation to Provide Information

1. The agent is obliged to provide the principal with required information and, at the principal’s request, to provide him with information about the course of performance of the commission, and after completion of commission he shall submit a report to him.

2. The agreement restricting or excluding the agent’s obligations as per item 1 of this Article shall be made in writing.

Article 714. Obligation to Preserve Secrecy

1. The agent is obliged not to disclose the facts known to him within his activity, if the principal is reasonably interested in their secrecy, unless the law provides disclosure or the principal gives the agent permit to disclose it.

2. Obligation not to disclose the facts survives the contractual terms.

Article 715. Obligation to Return Objects Passed for Performance of Commission

1. The agent is obliged to return to the principal all he has received for performance of the commissioned action and has not utilized for such, as well as those things and instruments he has acquired in connection with performance of the commissioned actions.

2. If the agent uses for his purposes the money which he should return to the principal or use it in the latter’s favour, the agent is obliged to return money with the interest accrued.

Article 716. Principal’s Property Presumption

The property acquired by the agent for performance of the commissioned action at the principal’s expense on his own behalf, or transferred to him by the principal for performing of the commissioned action shall be deemed in terms between the creditors and the agent, as the principal’s property.

163

Article 717. Obligation on Reimbursement of Costs

1. The principal shall reimburse to the agent all necessary costs charged for performance of the commissioned act.

2. The claim as per item 1 of this Article is not available if the are to be covered with the consideration.

3. The agent may claim the advance payment of reimbursement of costs from the principal.

Article 718. Compensation for Loss without a Fault

1. The principal shall also compensate the loss occurred without his fault within performance of the commissioned deed by the agent if the loss occurred for the principal’s instructions resulted in significant danger connected with the performance of the commissioned deed.

2. The claim is per item 1 is not available if the occurred damage is to be covered by the consideration, or if the damage was occurred by the principal’s action. If compensation for loss with consideration is disputable the onus of proof is undertaken by the agent.

Article 719. Compensation for Loss Occurred through Fault

If the agent performs the commissioned act free of charge he is responsible only for loss occurred by his deliberate or gross negligence.

Article 720. Termination of Agency Contract

1. The parties may terminate the agency contract at any time. Any waiver is null and void.

2. If the agent terminated the contract when the principal was lack of possibilities to secure his interests in other way, the agent shall compensate for loss caused by termination of the contract except those cases when the agent had significant grounds for this.

3. If the contract is terminated by the principal, he shall compensate the agent of all costs charged for performance of the commissioned deed and, if the contract was executed in the paid terms, pay the agent the consideration for the work done.

164

Article 721. Consequences of Principal’s Death

1. The contract is not terminated for the death or incapability of the principal unless otherwise agreed, or the content of power of attorney provides otherwise.

2. In case of termination of the contract because of the principal’s death or his incapability, the agent shall continue the performance of the commissioned deed, if the delay may occur the risk to the principal or his successors until the successor or principal’s legal authorized person will take necessary measures, the contractual terms are concurrently deemed as prolonged.

3. If the contract is terminated for the principal’s death or his incapability, it is deemed as prolonged for the agent until he will be notified about the grounds of termination of the contract.

Article 722. Consequences of Agent’s Death

1. The contract is terminated in case of the agent’s death unless otherwise, agreed, or the content of power of attorney provides otherwise.

2. In case of the agent’s death his successors are obliged to notify the principal and take necessary measures for protection of the principal’s interests.

Article 723. Commission Contract

The commission contract is to be ruled under the Law of Entrepreneurs.

CHAPTER 14. TRUST

Article 724. Concept

Under the trust contract the principal transfers the property to the trustee who accepts and manages the property in compliance with the principal’s interests.

Article 725. Rights and Duties of Trustee

1. The trustee manages the trusted property on his behalf but at risk and expense of the principal.

2. In terms with third persons a trustee enjoys the owner’s rights. If a trustee on contrary to the principal’s interests does not display the good faith as he would display regarding his personal business, he is obliged to compensate the loss caused by his activities.

165

Article 726. Compensation of Trustee’s Costs

1. The trustee does not get remuneration from the principal for business related to the trusted property unless the agreement between the parties provides otherwise.

2. All expenses thereof are borne by the principal.

3. Product of property remains to the principal.

Article 727. Kind of Trust Contract

The trust contract is made in writing.

Article 728. Attorney’s Responsibility

In terms with a third person the trustee bears responsibility.

Article 729. Applying Provisions of Agency’s Contract

The appropriate provisions of the agency’s contract are applied to the trust.

CHAPTER 15. DISPATCH

Article 730. Concept

1. Under the dispatch contract the forwarding agent undertakes to carry out activities connected with transportation of goods on his behalf and at the customer's expense. The customer is obliged to pay the agreed commission.

2. The provisions of agency contract will be accordingly applied to the dispatch unless otherwise is provided in this Chapter.

Article 731. Demanding Good Faith from a Forwarding Agent

A forwarding agent shall ship the goods in fair and honest manner, select the participants in the shipment; concurrently, he shall protect the consignor’s interests and perform his instructions.

Article 732. Customer’s Duties

1. The customer shall, at the forwarding agent’s request, timely provide him with the appropriate information of the goods as well as give instructions required for execution of the transport documents, provide him with the necessary information for execution of customs and other acts, and, in case of need, those ones required for payment of customs duties. In addition, the customer

166

shall pass the necessary documents certifying the accuracy of the said information.

2. In case of dangerous goods the customer shall warn the forwarding agent about the exact kind of danger and, in case of need, instruct him on the safety measures.

3. The goods the dangerous character of which has not been known to the forwarding agent may be unloaded, destroyed or made harmless at any time and any place without commitment of compensation of the loss.

4. The customer shall, if the kind of goods requires this, pack the goods in accordance with the transportation requirements.

5. If identification of goods requires the special marks these marks should be made so to be well seen until the delivery.

6. The customer bears responsibility for that loss occurred to the forwarding agent for failure to fulfill the obligations provided by the previous item of this Article except those cases when according to items 3 and 4 of this Article, the forwarding agent has not made any remark on absence or lack of packing or special mark though it has been obvious, or he has been informed of that fact before the acceptance of goods.

Article 733. Examination of Goods by Pieces

The customer may, paying the special consideration, demand the examination of goods by the pieces from the forwarding agent on acceptance of goods.

Article 734. Goods Insurance Obligation

The forwarding agent undertakes to insure the goods only when he receives instructions on that from the customer. In absence of the special instructions the forwarding agent shall insure the goods in the common terms only.

Article 735. Dispatch Insurance Contract

Unless the customer evidently declares the refusal in writing, the forwarding agent shall insure the risk which may be caused to the customer by the forwarding agent’s action when executing the order, at the customer’s expense. The forwarding agent shall notify the customer about the name of insurer thereof.

Article 736. Obligation on Timely Notice of Damage

According to Article 735 the customer shall under the executed insurance contract, take care about the timely notice of damage. If the notice on damage is

167

sent to the forwarding agent he is obliged to resend the notice to the insurer(s) without any delay.

Article 737. Consequences of Non-Acceptance of Goods

If the consignee does not receive goods at the lace of destination, or delivery of goods is impossible under other grounds, the rights and obligations of the forwarding agent shall be determined by the contractual provisions.

Article 738. Impossibility of Examination of State of Goods on Their Delivery

If the state of goods cannot be examined in presence of the parties, then until the otherwise is proved, the acceptance of goods is considered as confirmation of the fact that the goods were delivered without any defect and damage, except those cases when the consignee indicates the general character of damage. If it concerns the evident defect or damage the fact shall be indicated on delivery of goods, and if it does not concern such defect or damage – not later 3 days after the day of acceptance of goods.

Article 739. Right to Carry Goods by Own Means

1. Unless another agreement is available, the forwarding agent is entitled to carry goods by own means. Exercising this right shall not contradict the customer’s rights and interests.

2. If the forwarding agent applies this right he concurrently obtains rights and obligations of the carrier.

Article 740. Forwarding Agent’s Responsibility

As the rule, the forwarding agent bears responsibility for liabilities under the dispatch contract, in case of fault of him or his assistant.

Article 741. Damage Caused by Third Person

If the damage is caused by a third party to the contract the forwarding agent, at the customer’s request, shall pass to the customer his claim against the third person, except those cases when the forwarding agent under the special agreement undertakes the application of claim at the customer’s expense and risk by himself.

168

Article 742. Compensation for Loss Caused by Forwarding Agent’s Fault

1. The forwarding agent cannot apply these rules which exempt or limit his responsibility, or transfer the onus of proof if he caused the damage by his deliberate or gross negligence.

2. The same rule is applied to the non-contractual responsibility of the assistant if he was blamed according to item 1 of this Article.

Article 743. Order of Paying Commission

The commission shall be paid upon the delivery of goods by the forwarding agent to the transport organization.

CHAPTER 16. INTERMEDIARY

I. General Provisions

Article 744. Concept

A person who undertakes to pay consideration to another person for intermediary rendered in making the contract shall pay this consideration only if the contract is made as a result of this intermediary. If a contract is made in a term of postponement, the consideration may be demanded after the happening of this term. If the amount of consideration is not defined the current consideration is accounted as agreed. The contract contradicting the first and second sentences of this Article to the prejudice of the customer is null and void.

Article 745. Consideration of Services Rendered by a Broker

1. Consideration of a broker for service provided by the contract but not included in the intermediary, may be agreed without respect whether the contract will be made or not.

2. According to Article 744 a broker cannot claim for the advance payment or receive it.

3. A broker will be compensated for costs only if agreed. The same is applied when the contract is not concluded. The agreement providing consideration for these costs not required for execution of agency contract is null and void.

Article 746. Exclusive Commission

1. If a customer refuses to use another broker within the defined period (exclusive commission) the broker shall promote the conclusion of contract within this period. If the customer acts on contrary to the obligation mentioned in the first sentence, the broker may, if the contract is made with

169

intermediary of another broker, claim for compensation of a damage. The contract may provide the lumpsum of compensation according to the proof of damage. This amount shall not exceed 2% of the contractual value if the contract is made as intermediary on sale contract.

2. A customer is entitled to make contract with a third person without intermediary. At the same time there may be an agreement were the customer pays the appropriate consideration even when he makes the contract without intermediary. The consideration shall not exceed 2% of the contractual value if the contract is made as intermediary of the sale contract.

3. An agreement made to the prejudice of a customer on contrary to those provisions is null and void.

4. An agreement on exclusive commission requires the written from.

Article 747. Termination of Intermediary Contract

1. Intermediary contract may be terminated at any time if the term of contract is not defined.

2. The exclusive commission may be terminated under essential grounds only. On expiration of 6 months it my be terminated at any time.

3. The right to terminate the contract may be deemed as not allowed when more than 6 months expire but peculiarities of kind and subject of contract to be made in intermediary terms demand such.

Article 748. Inadmissibility of Paying Consideration to Broker

1. Paying consideration or compensation for costs to a broker is not allowed if the contract made with the third person concerns the thing owned by the broker; the same is applied when in presence of exclusive circumstances there may arise the danger hindering the broker to exercise the customer’s interests, those are, when:

a) a broker is a legal person or a company where a third person is a partner;

b) a third person is a legal person or a company where the broker is a partner;

c) broker is in official or labour terms with the a person;

d) a broker is the spouse of a third person.

2. A broker obtains the right to be paid consideration or be compensated for costs if he notifies the customer on such circumstances prior to entering into the contract with a third person.

3. A broker loses the right on consideration or compensation if he acts on the contrary to the contractual terms in favour of the third person.

170

4. The contract contradicting provisions of items 1 and 2 of this Article is null and void.

II. Intermediary in Rent

Article 749. Rent Broker

1. The contract under which the person undertakes the intermediary in making the rent contract (rent broker) shall be ruled by the general intermediary provisions unless otherwise proceeds from the intermediary of rent.

2. Norms of rent intermediary are not applied to those contracts the subject of which is intermediary in tourism and business trips.

Article 750. Inadmissibility of Consideration

1. The rent broker cannot claim for consideration or compensation, if:

a) the rent contract provides the prolongation of the current rent term to the same dwelling, or will be changed otherwise;

b) the rent contract is made on the living space managed by the rent broker.

2. The contract made to the prejudice to the customer is null and void.

III. Intermediary in Loans

Article 751. Loan Broker

The contract under which a person undertakes the intermediary in a credit contract (loan broker) is regulated by the general intermediary provisions unless Articles 752 and 753 provide other specific rules.

Article 752. Form of Contract

1. A contract shall be made in writing.

2. The contract shall indicate the amount of brokerage mentioning the interest of the loan; in additional, the contract shall indicate: amount of loan, term. interest, maturity term, exchange rate, interest term, additional costs, total amount to be paid by the customer, name and address of the creditor. These rules are not applied when the commission concerns the loan secured under the mortgage of land or loan issued for purchase of land as well as to the loan which is to be used by the customer for his independent professional or productive and official activity.

3. Contract text shall not be connected with the intermediary in issuing loan. The loan broker shall give the copy of contract to the customer.

171

Article 753. Obligation of Consideration

1. The customer shall pay consideration only if he receives loan as result of intermediary. The agreement made to the prejudice to the customer’s interests is null and void.

2. The loan broker cannot claim consideration other then that one provided in item 1 of this Article, for those acts connected with intermediary in obtaining loan.

Article 754. Trade Agent

The trade agent is applied with the Law on Entrepreneurs.

CHAPTER 17. ANNOUNCING AWARD. COMPETITION

Article 755. Concept

A person who announces award for execution of work, namely, for attaining to some result, shall grant the award to that person who executes the deed. The person has the right to get the award even if he has acted not for the announcement of award.

Article 756. Cancellation of Announcing Award

1. Announcement of award may be cancelled before the execution of announced action. Cancellation of announcing award is valid if it is announced via the same medium as announcement of award, or via special notification.

2. Announcement of award may contain the note on refusal of its cancellation; it is deemed that announcement is cancelled if the action is not executed in the fixed term.

Article 757. Performing Act by Some Persons

1. If the act for performing of which the award is announced has been performed by some persons the person who performs this act first will be awarded.

2. If the act was performed by some persons simultaneously, each executor will be awarded in equal terms. If the award cannot be divided due to its nature, or, according to the content of announcement, only one person should receive it, the matter will be settled by sortition.

Article 758. Establishing Award

1. A person who establishes award for the best execution of the specified work by announcement shall hand it to the best executive.

172

2. Announcement of competition is valid only if it provides the defined term for execution of work.

Article 759. Inadmissibility of Making Amendments in Competition Terms

Making such amendments in the terms of competition that may prejudice the competitors is not allowed.

Article 760. Making Decision on Competition Winners

The decision on whether the work presented in the fixed term meets the competition conditions, or which work is the best, is to be made by a person mentioned in the announcement of competition, or if such is not mentioned, by the person who announced competition.

Article 761. Several Winners

If the work for which the award is announced is made by several persons, they will be applied with the appropriate rules provided for the announcement of award.

Article 762. Procedure of Return of Works Presented at Competition

The person who announced the competition shall return works presented at the competition to the competitors unless the announcement of competition establishes otherwise.

CHAPTER 18. DEPOSIT

Article 763. Concept

Under the deposit contract a depositary undertakes to save movable thing deposited by a depositor.

Article 764. Deposit Fee

1. Deposit is free of charge unless the agreement provides otherwise. If a depositary carries out saving within the limits of entrepreneurship the fee will be deemed as under a silent consent.

2. If the fee amount is not determined the tariff rate will be deemed as agreed (if tariffs are available), or the general consideration (if tariffs are not available).

173

Article 765. Depositary’s Obligation of Depositing Free of Charge

If deposit is free of charge the depositary shall save the thing with the same faith as he would save his own thing.

Article 766. Inadmissibility of Transferring Thing to Another Person

1. The depositary has no right to transfer the thing to deposit to the third person without the depositor’s consent.

2. If transfer to deposit of a third person took place under consent the depositary bears responsibility for the fault of selection of a third person or place of saving.

Article 767. Inadmissibility of Use of the Deposited Thing

The depositary has no right to use the thing deposited to him without the depositor’s consent except those cases if the use of thing is required within its saving.

Article 768. Change of Procedure of Saving of Thing

The depositary has the right, in case of need, to change the procedure of saving of the thing. He shall notify the depositor about it. The depositary shall also notify the depositor about the third person’s claims for the deposited thing.

Article 769. Compensation for Damage Caused by Character of a Thing

The depositor shall compensate the depositary for the damage caused by character of the deposited things except those cases when did not and could not know about dangerous features of this thing.

Article 770. Term of Return of the Deposited Thing

The depositor may demand the return of the deposited thing at any time, in this case also, if the deposit term was fixed.

Article 771. Obligation of Taking Back the Deposited Thing

1. The depositary may at any time demand from the depositor to take the deposited thing back if the deposit term is not fixed.

2. The depositary may exercise this right in such way only that the depositor could save the thing in other manner except the case when essential grounds for return of the deposited thing are available.

174

Article 772. Place of Return of the Deposited Thing

The thing shall be returned in the place mentioned in the contract except the case if there is agreed that the thing should be returned in another place. Transport expenses are borne by the depositor.

Article 773. Obligation of Transfer of Product of the Deposited Thing

1. The depositary shall transfer to the depositor the product he has received within the period of deposit.

2. The depositor shall compensate to the depositary the necessary costs of saving of the thing.

Article 774. Depositary’s Responsibility for Deliberate or Gross Negligence

If the term for taking the thing away is fixed after expiration of this term the depositary is responsible for the gross or deliberate negligence.

Article 775. Obligation of Paying Fee

If deposit is payable, the depositor shall pay to the depositary the fixed fee on termination of the contract.

Article 776. Right to Seize the Deposited Thing

The depositary may refuse of the return of the deposited thing until he will be paid of fee and compensation for saving.

Article 777. Peculiarities of Deposit of the High-grade Thing

If the high-grade thing is deposited so that the ownership shall be transferred to the depositary and the depositary shall return the thing of the same grade, quality and quantity the appropriate norms of loan contract shall be applied thereby.

Article 778. Peculiarities of Depositing at Hotel

A hotel, resort-house and rest-house bears responsibility for the loss caused to the guest under the loss, destruction or damage of his property. This rule is not applied to money and valuables unless they are deposited in special manner.

175

Article 779. Relief for Force Majeure

Responsibility shall not be borne if the damage is caused by force majeure, by a guest himself or his accompany person, or by character of the thing.

CHAPTER 19. DEPOSIT TO WAREHOUSE

Article 780. Concept

The contract on deposit to a warehouse is regulated by the appropriate norms of deposit contract unless this Chapter provides otherwise.

Article 781. Obligation of Fair Performance of Saving

The warehouse depositary shall perform the obligations of deposit of goods with the good faith of a honest entrepreneur.

Article 782. Examination of Quantity of Goods by Depositary

1. Depositary is not obliged to examine quantity, measurements, weight, kind, quality or other features of goods on their acceptance unless the rules of this Chapter provide otherwise.

2. If the goods passed to the depositary for depositing happened to be damaged or uncompleted on their delivery, the is revealed at sight, the depositary shall notify the depositor about this fact without delay. If he does not fulfill this obligation he shall compensate the caused damage.

Article 783. Right to Examine the Deposited Goods

The depositary shall allow the depositor to examine the deposited goods, take samples or perform other necessary acts within the working time.

Article 784. Obligation of Notification

The depositary shall without delay notify the depositor if he transfers the deposited goods to another warehouse, or if he has revealed that the features of goods changed, or might be changed. He shall notify this fact to the last owner known to him by storage certificate. In case of default he shall compensate the caused loss.

Article 785. Obligation of Compensation

The depositary is responsible for the loss caused because of damage and/or loss of the deposited goods except the case when the fair depositor could not prevent this fact.

176

Article 786. Peculiarities of Storage of High-grade Things

1. Within the storage of high-grade things the depository has right to mix them with the things of same kind and features only if the depositor’s permit is available.

2. Depositors have the common property right on product resulted after such mixture. The share of each depositor is determined in accordance with the amount of goods deposited.

3. The depository shall return the deposited goods to each depositor in accordance with his share without consent of other depositors.

Article 787. Sale of Deposited Goods

If the goods put in storage are spoiled or so changed that may be reduced in price and the depository has lack of time or cannot notify the authorized person he is entitled to sell the goods.

Article 788. Warehouse Receipt

Upon acceptance of goods the depositary shall issue the warehouse receipt to the depositor.

Article 789. Essential Elements of Warehouse Receipt

1. The warehouse receipt shall indicate:

a) date of issue and registration No. of the W.R.

b) parties and their addresses;

c) place of storage;

d) rule of storage of goods;

e) description of goods to be stored (amount, size or weight) and quality; if goods are packed – description of packing;

f) amount of storage fee and other necessary expenses;

g) the insurance amount, if the goods to be stored shall be insured;

h) term of contract;

i) depositary’s signature affixed by the appropriate seal.

2. If terms mentioned in this Article are not fully reflected in W.R., this does not relieve parties from responsibility. The parties are entitled to enter other terms in W.R. as well.

177

Article 790. Warrant

A holder of W.R. may under the mortgage certificate pledge the goods deposited for storage as security for other liabilities so that those goods not to be taken from the warehouse (warrant).

Article 791. Order Warehouse Receipt

If the depositary issues the order warehouse receipt this receipt may be transferred to the third person by the endorsement.

Article 792. Responsibility for the Endorsed Warehouse Receipt

1. If the warehouse receipt is issued by endorsement the depositary bears responsibility before the holder of this receipt for the accuracy of terms indicated in it, except the case when the receipt evidently indicates that these data are grounded on the depositor’s or the third person’s information.

2. If the depositor knew that data were false he is responsible in the case he made the indication mentioned in item 1 of this Article as well.

3. When carrying out mixed storage the depositary has no right to make the indication mentioned in item 1.

Article 793. Presumption of Accuracy of Endorsement

1. The depository who has issued the order warehouse receipt shall, when returning the goods deposited for storage, give them only to the legal holder of W.R.

2. If the mortgage warehouse certificate is issued the depositary shall demand its return.

3. The depositary is not obliged to check up the accuracy of endorsement. Transfer shall be certified by the appropriate inscription in the W.R.

Article 794. Loss of Warehouse Receipt

1. In case of loss or destruction of W.R. or mortgage certificate the legal holder of it has the right to apply to the court and claim for recognizing the lost document as null and void and issuing the new certificate instead of it. The court considers the application under the special procedure.

2. The depositary issues the W.R. or mortgage certificate for the second time on the grounds of the court ruling.

178

Article 795. Mortgage of Deposited Goods

1. For pledging the goods deposited for storage in warehouse the owner shall make the special note (endorsement) on the mortgage certificate and transfer it to the person concerned.

2. The endorsement shall provide the personality of depositor, creditor and amount of liability.

3. The depositary shall be notified on transfer of the mortgage certificate to the creditor and make the proper note.

Article 796. Assigning Mortgage Right to a New Holder of W.R.

1. The depositary obtains the mortgage right on goods which exists until the goods are in his disposal, proceeding from the storage costs.

2. If the W.R. is transferred by endorsement the mortgage right is assigned to the new holder of W.R.

Article 797. Inadmissibility of Claim on Taking the Deposited Goods Back

The depositary cannot demand taking the goods away from the depositor before the expiration of the agreed term, and if such term is not fixed, before the expiration of three months following the deposit.

Article 798. Establishing Additional Term on Acceptance of Goods

1. If upon the expiration of the storage term the holder of W.R. does not intend to take the goods from the warehouse the depositary shall fix the additional two-week long term for the depositor to take the goods. If the W.R. holder does not take the goods in this term as well the depositary has the right to sell them.

2. The amount gained after the sale of goods less the costs of depositary, shall be given to the W.R. holder.

CHAPTER 20. INSURANCE

1. General Provisions

Article 799. Concept

1. In a insurance contract the an insurer undertakes to indemnify an insurant against loss upon the happening of a certain event in accordance with the terms and conditions of the contract. When insuring at the fixed insurance amount the insurer shall pay the lumpsum or perform another undertaken act.

2. An insurant pays the insurance fee (premium).

179

Article 800. Obligation of Entering into the Insurance Contract

A person who openly offers the insurance contract shall make this contract unless essential grounds for refusal exist.

Article 801. Compulsory Insurance

The law may provide the compulsory insurance to be applied with the rules of this Chapter unless this contradicts the law on the compulsory insurance. Terms connected with the insurance are regulated under the law.

Article 802. Insurance Certificate (Policy)

1. An insurer shall give to an insurant the signed document on the insurance contract (insurance certificate -policy) to the insured.

2. Insurance certificate shall contain:

a) personal data and addresses of the parties to contract (place of residence or legal address);

b) object of insurance and name of the insurant;

c) definition of the risk;

d) commencement and duration of the insurance;

e) amount of insurance payment;

f) amount of premium, place and term of its payment.

3. If the object of insurance is the life of a person, in addition there shall be given information of the insurer’s profit and terms of distribution of this profit.

Article 803. Kinds of Insurance Certificate

If the insurance certificate is issued to the holder in kind of nominal certificate or order certificate the insurer may forward to the holder of this certificate all those requirements he obtain against the initial insurant. This rule is not applied if the holder of insurance certificate notifies the insurer about the rights conveyed to him in connection with the insurance, and the insurer does not declare his demands without delay.

Article 804. Consequences of Loss of Insurance Certificate

1. If the contract specifies that the insurer shall perform his obligations only after presentation of policy and the policy is lost or destroyed, the insurant may

180

demand the performance only in that case if the policy is declared invalid under the special procedure.

2. In case of loss or destruction of the policy the an insurant may require a copy from the insurer. The expenses for copy are borne by the insurant.

Article 805. Insurance Broker’s Rights

1. If an insurance broker (representative) is entitled to make the insurance contract he may change the contractual terms as well, prolong its validity or terminate it.

2. An insurance broker performing the intermediary function when entering into the insurance contract, has the right to make such contract.

Article 806. Commencement of Insurance

1. The insurance commences at 24:00 of the day of entering into contract and terminates at 24:00 of the last day of term stipulated by the contract.

2. If the insurance contract is made for term of more than 5 years, each party may terminate the contract on expiration of three months after notification.

Article 807. Consequences of Increase in Premium

If the insurant increases the premium the insured may terminate the contract with observance of the one-month term. Small increase in the premium does not arise such right.

Article 808. Obligation of Providing Information

1. On making the contract the insurant shall inform the insurer of all circumstances known to him which have essential significance upon the happening of risk or event stipulated by the insurance. Those circumstances are essential which may effect on the insurer’s decision to renounce the contract or make it changed.

2. The circumstance on which the insurer will apply to the insured clearly and directly in writing is essential too.

3. If on contrary to the rules of the first item of this Article the insurer has not been informed of the essential circumstances, he may renounce the contract. The same arises if the insured deliberately avoids notification of essential circumstances.

4. The contract shall not be terminated if the insurer has known about the latent circumstances or has not blamed the insured of the default thereof.

181

Article 809. Consequences of Incorrect Information

1. The insurer may renounce the contract if notification of the essential circumstances contains incorrect information.

2. The renunciation contract is not allowed if the incorrectness of information was known to the insurer, or if the insurer has not blamed for providing of the incorrect information. Within 1 month following the notification of those data the insurer may terminated the contract.

Article 810. Vitiation of Insurance Contract for the Fault of Notification If the insured is to respond the written questions about the dangerous circumstances the insurer has the right to vitiate the contract for the fault to notify about those circumstances, however, not questioned but the insured was silent about them deliberately.

Article 811. Term of Vitiation of the Contract for the Fault to Notify Information

1. The insurer may vitiate the contract within one month after the fault to notify the information specified by this Chapter. This term begins from the moment when the insurer gets known of the default thereof.

2. The insured shall be informed of the vitiation of contract.

Article 812. Vitiation of the Contract on Happening of Contingency

If the insurer vitiates the contract after the happening of the contingency he is not released from the performance of his duties, if this circumstance upon which the obligation of notification was infringed had no effect on happening of contingency and performance of insurer’s obligation.

Article 813. Obligation of Informing Risk Increase

1. The insured shall without delay inform the insurer of risk increase occurred after the making of contract if it would effect on the making of contract.

2. In the event provided by item 1 of this Article the insurer is entitled to vitiate the contract observing the one-month term or demand the appropriate increase of premium. If the insured deliberately increases the risk the insurer may vitiate the contract without observing the term.

182

Article 814. Obligation of Informing the Happening of Contingency

1. On realizing the happening of contingency the insured shall inform the insurer.

2. The insurer may, after the happening of contingency demand from the insured any information necessary of establishment of the contingency or amount of claim.

3. The insurer cannot apply the agreement under which his is released of his obligations, if the insured does not perform the obligation of informing and this does not infringe the insurer’s interests essentially.

4. The insurer shall perform his obligation after establishment of contingency and determination of reimbursement amount.

II. Premium

Article 815. Obligation of Payment of Premium

1. The insured shall pay the premium only after receipt of the document certifying the insurance.

2. If the insured interest is lost the insurer may demand that part of the premium that corresponds to the duration of undertaken risk. The insurer may demand the payment of appropriate consideration for the service.

Article 816. Initial Premium

Before the timely payment of initial or lumpsum premium the insurer is freed from his liabilities.

Article 817. Overdue Premium

1. If premium is not paid in time the insurer may fix in writing the two-week term of payment, and, shall, concurrently, mention those consequence which occur on expiration of this term.

2. If the contingency occurs after the expiration of term and the insured has exceeded the term of payment of premium or interest by that time, the insurer is freed from his liabilities.

Article 818. Vitiation of Contract for Overdue Premium

If the insured has not pay the premium in time, the insurer may one month prior warn the insured about the vitiation of contract and execute such on expiration of this term.

183

Article 819. Termination of Payment of Premium

The insurer may terminate the payment of premium if after entering into contract there appears that the insurer’s standing has been worsened so that the real peril of default upon occurrence of contingency exists.

III. Insurance against Loss

A. Content of Contract

Article 820. Obligation of Reimbursement

In case of insurance against loss the insurer shall indemnify in money.

Article 821. Limits of Reimbursement

The insurer reimburse in limits of insurance payment only.

Article 822. Insurance Determination

1. If it is revealed that the insurance payment rather exceeds the value of interest insured (insurance value), both the insured and insurer may, for prevention of the excessive insurance, demand the decrease of the insurance payment with simultaneous appropriate decrease in the premium.

2. In the insured makes the contract by the increase of insurance for the deliberate gaining of the illegal income, the contract is null and void. Premiums paid to the insurer before the annulment of contract remain at the insurer, if by the moment of entering into the contract he has not known of its invalidity.

Article 823. Peculiarities of Property Insurance

Unless the circumstances of event provide otherwise, in case of property insurance the value of property shall be the insurance payment.

Article 824. Insurance of Unearned Value

The insurance is applied to unearned value for the loss occurred if it is provided by the agreement.

Article 825. Insurance of Unity of Things

If the unity of things is insured the insurance is applied to any thing thereof.

184

Article 826. Amount of Reimbursement

The insurer is not obliged to pay to the insured more then the amount of occurred loss even if the insurance payment exceeds the insurance value by the moment of occurrence of contingency.

Article 827. Reduced or Incomplete Insurance Double Insurance

1. If the insurance payment is less then the insurance value by the moment of occurrence of contingency (reduced or incomplete insurance) the insurer shall reimburse in accordance with the balance of the insurance payment and insurance value.

2. A person who insured one and the same interest simultaneously at some insurers shall notify each insurer about this fact. The notification shall indicate the personality of each insurer and amount of insurance payment.

3. If the given interest is insured against one and the same risk at some insurers and insurance payment in total exceeds the insurance value, or, for other reasons the sum of payment to be paid by each insurer in case of non-existence of other contract exceeds the total loss (double insurance), the insurers are liable before the insured as the joint debtors in limits of that sum which they has executed by the contract made with the insurer, but the insurer has no right to receive the amount exceeding in total the actual loss.

Article 828. Nullity of Double Insurance

If the insured executed the double insurance for gaining the illegal income each contract made for this purpose is null and void.

Article 829. Fault of Insured on Occurrence of Contingency

The insurer is relieved from his liabilities if the insured causes the event stipulated by insurance by his deliberate or gross negligence.

Article 830. Obligation to Perform Insurer’s Instructions

1. The insured shall on occurrence of event stipulated by insurance to prevent or reduce the loss and follow the insurer’s instructions regarding this.

2. The insurer shall compensate the expenses borne under his instructions.

185

Article 831. Insurance against Loss Caused by War or Another Force Majeure Circumstances

The insurer is liable for the loss caused by war or another force majeure circumstance only if it is stipulated by special agreement.

Article 832. Claim for Indemnification from a Third Person

1. If the insured may claim for indemnification from a third person, this claim shall be transferred to the insurer if he reimburses the loss of insured. If the insured waives his claim against the third person or satisfaction of his claim, the insurer is freed from the liability of indemnification in the amount he might receive for compensation of his expenses with respect of exercising of his right or forwarding the claim.

2. If the right of insured on indemnification concerns the members of his family residing with him, assignment of this right is excluded when a member of his family deliberate causes the loss.

Article 833. Consequences of Alienation of the Property Insured

If the insured property is alienated the insurance interests and liabilities are transferred to the assignee.

Article 834. Obligation of Information in Case of Alienation of Insured Property

The insurer shall be notified about the alienation of the insured property, without delay. If the assignee does not notify the insurer on the aforesaid promptly the insurer is freed from the liability if the contingency occurs after two weeks following the moment when the insurer should got the notification.

Article 835. Termination of Insurance in Case of Alienation of Property

1. The insurer has the right to terminate the insurance with the assignee observing the one-month term of the vitiation of contract. The right of vitiation of the contract has no effect if the insurer has not enjoyed it within one month following the moment when he was notified about the alienation of the property.

2. The assignee has right to vitiate the insurance contract only immediately or by the end of the current period of insurance. The right of vitiation elapses if the assignee does not enjoy this right within a month; if the assignee, however, has not known about the insurance, the vitiation is valid until the expiration

186

of one month from the moment when the assignee was notified on the insurance.

3. If the insurance contract is vitiated on the grounds of those rules the assignee shall pay to the insurer the premium but not exceeding the sum to be paid within the insurance period, inclusive the moment of vitiation; in such event the assignee is not responsible for payment of the premium.

B. Insurance for Benefit of Another Person

Article 836. Effecting a Policy for Benefit of Another Person

The insured may effect a policy with the insurer on his behalf for the benefit of another person. This person may be not named.

Article 837. Rights of Another Person in Policy

1. In case of insurance for the benefit of another person those rights arisen from this policy are assigned to this person. Only the insured may demand the insurance certificate.

2. The beneficiary may enjoy his rights without agreement with the insured and claim for his rights through the court only if he has the insurance certificate.

Article 838. Rights of the Insured

1. The insured may enjoy the rights which belong to the beneficiary under the policy.

2. If the insurance certificate is issued, the insured may receive indemnity without consent of beneficiary or assign the right to the beneficiary if only the insured holds the insurance certificate.

3. The insurer is obliged to pay to the insured for the benefit of beneficiary if only the insured confirms that the beneficiary agrees with the policy.

C. Liability Insurance

Article 839. Concept

The insurer shall free the insured under the contract of liability insurance from those liabilities undertaken for the liability arisen within the period of insurance before the third person.

Article 840. Claim for Indemnity

The insurer in extent of his liabilities shall directly indemnify the loss of the person on claim.

187

Article 841. Legal and Other Costs

The insurance contains the legal and other costs to be rendered in defense against the third person’s claim, if proceeding from the circumstances of the case, such costs shall be rendered.

Article 842. Insurer’s Relief

The insurer is freed from the liability if the insured intentionally has occurred those circumstances which make him liable before the third person.

Article 843. Liability in Case of Compulsory Insurance

1. If the insurer totally or partially is free before the insured from the liability, his liability before the third person holds good in the cases provided by the law on compulsory insurance.

2. If the insurer satisfies the third person’s claim, the claim of third person against the insured conveys to the insurer.

IV. Life Insurance

Article 844. Concept

1. Life insurance may concern the insured or another person.

2. If contract of life insurance is made for benefit of another person the written consent of this person or his legal representative is required.

Article 845. Inadmissibility of Refusal of Entering into Contract

If within the insurance contract the insured infringes his obligation of information the insurer cannot renounce the contract after expiration of 5 years of policy term. Renunciation of the contract is allowed if the obligation of information was not intentionally fulfilled.

Article 846. Vitiation of Contract within Periodical Premiums

If the premium is paid periodically the insurer may vitiate the insurance terms anytime, by the end of the current insurance period.

188

Article 847. Assigning Indemnity to the Third Person

1. The insured may assign the accruable benefit to the third person as well as may substitute the third person with another person unless the policy provides otherwise.

2. The third person enjoying the benefit may exercise it only on happening of the contingency unless the insured have other instructions.

Article 848. Improper Third Person

1. If in case of accruable insurance the third person’s right does not correspond to the insurer’s liability, this right is enjoyed by the insured.

2. If in case of accruable insurance the third person does not apply his right on benefit this right is enjoyed by the insured.

Article 849. Insurer’s Relief from Liability of Indemnification

1. If the insurance contract is effected on the death of another person the insurer if freed from his liability in the event when the insured causes the death of such person by illegal action intentionally.

2. If in case of life insurance the third person has the right of benefit, this right will not be recognized if he causes the death of the person, whose life was insured, by his illegal action inventively.

Article 850. Relief from Indemnification in Case of Suicide

1. In case of life insurance the insurer is freed from his liability if a person whose life was insured committed suicide.

2. The successor of the assured is entitled to claim the payment of the premium back.

Article 851. Change of Policy

1. The insured may at any time before the completion of the current insurance period demand the substitution of insurance contract with the premium-free contract.

2. If the assured demands such substitution, then from this moment the insurance or benefit amount is replaced with such amount that corresponds to the insurer’s liability with respect of the age of assured, if the reserve of accrued premiums is accounted as the lumpsum premium.

189

Article 852. Deductions in Case of Termination of Contract

If the life insurance contract is terminated by renunciation, vitiation or appeal, the insurer is obliged to pay back the amount of premium he received under this contract. The insurer may execute the appropriate deductions as well.

Article 853. Consequences of Enforcement

1. If the enforcement is made on the claim of insurance, or the legal proceeding is carried out in connection with the insurer’s bankruptcy, a person who was named concretely as a beneficiary is entitled to replace the insured in the policy. If the beneficiary is a party to policy he shall satisfy all claims of the creditor or extinguish the bankruptcy mass within that amount which the insured might have received from the insurer in case of termination of the policy.

2. If a beneficiary has no insurable interest or is not named, such right is assigned to the spouse and children of the assured.

V. Insurance against Incident

Article 854. Concept

1. Insurance contract against incident may be concluded on the incident that may occur both to the insured and another person.

2. If insurance contract is effected not by the insured himself, but for his benefit, it is ruled by life insurance regulations.

Article 855. Consequences of Injury

If the insurer’s liability depends on intentional injury caused to the health, the absence of intention is presumed. until the otherwise is proved.

Article 856. Consequences of Intentional Incident

1. The insurer is freed from his liability if in the insurance of another person the beneficiary intentionally causes the incident by his illegal action.

2. If another person has the right on benefit he will be deprived of this right if he causes the incident with his intentional illegal action.

Article 857. Obligation of Informing about Incident

If liabilities are to be performed for the benefit of beneficiary, this person is obliged to announce the incident. This rule is also applied to obligations of notification and transfer of documents.

190

Article 858. Inadmissibility of Recourse

The insured has no recourse against that person who is answerable for the loss.

CHAPTER 21. BANK SERVICE

1. Accounts

Article 859. Concept

1. Under the account contract, a credit institution undertakes to conduct payments from the settlement account of its customer within the limits of amounts existing on the account, and enter the amounts in that account.

2. Under the instruction of the account holder, the same transactions may be conducted in cash.

3. If so agreed between the parties, the amount holder undertakes the payment of bank costs.

Article 860. Obligation of Issue of Extract from the Account

1. A credit institution shall keep the accounting book on the both cash accounts and clearings.

2. A credit institution shall, in the term fixed by the contract, provide the account holder with information of his account (extracts from account); and the account holder is entitled to demand information of his account and accounting records at any time.

Article 861. Charging-off

A credit institution shall charge off the moneys under permit or instructions of the account holder. Otherwise it shall compensate the caused loss and enter the default amount in the credit of amount holder.

Article 862. Consequences of Suspension of Account Holder Order

1. The account holder is entitled to suspend the order issued to the credit institution before the transfer will actually take place. Otherwise, the credit institution shall notify without delay the appropriate persons about the fault.

2. In case of timely suspension of the order the credit institution shall restore the amount on the holder’s account.

191

Article 863. Undertaking the Protection of Secrecy

1. A credit institution undertakes to protect the secrecy connected with the account and such other facts known to it in the business terms with the account holder, except the cases provided by the law, or, if the case concerns the ordinary bank information not infringing the account holder’s interests.

2. The credit institution shall fulfill this obligation upon the termination of the contract as well.

Article 864. Termination of Bank Account Contract

1. A contract on bank account may be terminated by the both parties at any time.

2. A credit institution may terminate the contract only in such way that the account holder may enjoy the settlement service in another way, except the case when the reasonable grounds for the termination exists.

Article 865. Cheque Payment

In case of appropriate agreement the credit institution shall pay the cheque signed by the account holder in limits of his credit in accordance with the Law on Cheque. At that time the rules of clearing contract are applied.

Article 866. Encashment of a Cheque

A credit institution is obliged before the account holder, on the grounds of the account contract and without the additional agreement, to encash the cheques presented by the holder of account on their timely presentation, and in case of lack of funds – to take the necessary measures of securing.

II. Bank Credit

Article 867. Concept

Under the contract on bank credit the creditor issues or shall issue the repayable credit to the borrower in kind of a loan.

Article 868. Interest Rate of Bank Credit

1. If so agreed between the parties, the creditor may fix the stable or floating rate of interest.

2. If the agreement provides the floating rate of interest and its amount may be determined by the creditor, the latter undertakes to determine it in the good

192

faith basis, he also undertakes to comply his rate of interest with the increase or decrease on the market rate of interest.

3. The floating interest shall correspond to the discount rate of the National Bank of Georgia or the rate of interest fixed at the interbank credit auction.

4. When entering into the credit contract the limit of increase and decrease in the interest rate and the minimal interim of floatation shall be determined.

5. A creditor undertakes to notify a borrower in the acceptable way about the rate of interest for credit.

6. Unless the annual rate of interest is indicated, the annual interest provided by the law shall be applied only. Unless the costs are accounted in the annual interest, those costs shall not be paid.

Article 869. Rate of Interest Fixed by the Law

1. If a borrower delays in payment under the bank credit contract, the sum of debt shall be charged with sum increased by the 3% amount of the discount rate or the rate of interest fixed by this period at the interbank credit auction.

2. If the creditor terminates the bank credit contract for the delay in repayment of loan the claim for rate of interest fixed by the law is to be arisen. Those rules are not applied to the right of creditor or borrower to prove the availability of more or less loss in several cases.

Article 870. Use of Collateral Security

1. If within the issue of credit the pledge or personal guarantee is agreed, the creditor may demand the use of collateral security in case of incomplete repayment.

2. The creditor undertakes, at the borrower’s request, to return the security exceeding the limits agreed for repayment.

Article 871. Suspension of Contract

1. If the credit provides the fixed rate of interest for the certain period, the borrower may terminate the credit contract if the interest liability is completed prior to the term determined for repayment and no new agreement on the rate of interest is made. The term of suspension is one month.

2. If the borrower is a consumer and the credit is not secured with mortgage, the right of suspension is arising after 6 months following the issue of credit. The term of suspension is three months.

3. On expiration of ten years the right on suspension exists in any case. The term of suspension is 6 months.

193

4. The debtor may, at any time, suspend the loan obtained with the floating rate of interest observing the three-month term of suspension.

Article 872. Compensation of Loss for Pre-term Repayment of Credit

If the borrower repays prior to the expiration of the credit term, the creditor may demand the appropriate compensation for loss. At the same time, the compensation of loss shall account the spare costs and the benefit the creditor would receive from the other use of the lent currency, or if the borrower would not intentionally allow obtaining of the credit.

Article 873. Termination of Credit Terms in Case of Repayment of Credit by Installments

A creditor may terminate the credit terms if repayment is provided by installments and the borrower exceeds at least two terms on running. Termination is effective when the payment is not performed on expiration of the additional two-week term.

III. Deposit

Article 874. Concept. Liability of Managers of Credit Institutions

1. With the deposit of money a credit institution obtains the ownership of it and undertakes to return the received amount in the same currency on the expiration of term.

2. If the term is not fixed, the sum may be claimed for at any time.

3. The deposits shall be accrued with the interest.

4. A depositary and managers of credit institutions undertake to provide the depositor with information of liquidity and credit solvency of the bank.

5. A person who intentionally gives the false information or refuses to provide with necessary information shall compensate for the loss caused to the depositor by provision of false information or default.

6. The bank directors (managers) bears joint responsibility for publication of false information of the bank liquidity and credit solvency by means of prospects or otherwise.

Article 875. Saving Book

In case of issue of saving books a credit institution is entitled to fill it for person named, or to the bearer. If a bearer is not authorized, the credit institution is

194

freed from responsibility if only when filling in the book it has not acted with intentional or gross negligence.

IV. Documentary Letter of Credit. Documentary Encashment

Article 876. Concept

1. By opening the letter of credit a credit institution (bank-issuer) undertakes, at request and instructions of a customer, to pay the money to the third person (remittent) under the order of this person in exchange for the said document, or pay a bill presented by a remittent, honor a bill, or commission another bank with this transaction if the credit terms were committed.

2. A customer undertakes to pay the agreed commission.

Article 877. Encashment Order

Under the encashment order a credit institution authorized for collection (a bank) undertakes to issue negotiable securities under the customer (principal)’s order in exchange for acceptance and/or, in case of need, for payment.

Article 878. International Circulation Practices

Unless otherwise agreed, the rights and obligations of the parties are determined in compliance with the practices based on documentary letters of credit or documentary encashment in the international circulation.

V. Bank Guarantee

Article 879. Concept

By a bank guarantee a bank, other credit institution or insurance organization (guarantor) under the request of another person (principal), undertakes the written obligation that in accordance with the undertaken obligation it will pay to the creditor (beneficiary) of a principal the amount on the grounds of beneficiary’s written order on payment.

Article 880. Fee for Bank Guarantee

1. The bank guarantee secures the proper performance of the principal’s liability before the beneficiary.

2. The principal pays the agreed fee to the guarantor for issue of the bank guarantee.

195

Article 881. Independence of Guarantor’s Liability from General Liabilities

The guarantor’s liabilities before the beneficiary provided by the bank guarantee under the terms made between them, does not depend on those general liabilities which it shall provide even if the guarantee contains the mentioning of those liabilities.

Article 882. Inadmissibility of Revocation of Bank Guarantee

A bank guarantee cannot be revoked by the guarantor unless the guarantee provides otherwise.

Article 883. Inadmissibility of Conveyance of Beneficiary’s Claim to Another Person

The beneficiary’s claim against the guarantor proceeding from the bank guarantee cannot be conveyed to another person unless the guarantee provides otherwise.

Article 884. Commencement of Bank Guarantee

The bank guarantee is effective from the day of its issue unless the guarantee provides otherwise.

Article 885. Kind of Presentation of Claim

1. The beneficiary’s claim under the bank guarantee on payment shall be presented to the guarantor in writing with documents, mentioned in the guarantee, enclosed. In the claim, or its enclosure the beneficiary shall indicate the default of principal for which the guarantee is issued.

2. The beneficiary’s claim shall be presented to the guarantor before the expiration of the guarantee term.

Article 886. Guarantor’s Undertaking of Accepting the Beneficiary’s Claim

1. On acceptance of the beneficiary’s claim the guarantor shall without delay notify the principal about this fact and hand him over the copy of claim with all relative documents.

2. The guarantor shall consider the beneficiary’s claim with the documents enclosed in the reasonable term and show the reasonable approach in order to establish if the claim and the documents enclosed conform to the terms of guarantee.

196

Article 887. Guarantor’s Refusal to Satisfy Beneficiary’s Claim

1. The guarantor shall refuse the beneficiary of satisfaction of his claim if this claim or the documents enclosed do not conform to the guarantee terms, or they are presented to the guarantor on expiration of the guarantee term. The guarantor shall without delay notify the beneficiary about refusal to satisfy his claim.

2. If before the satisfaction of the beneficiary’s claim the guarantor has got known that the general liability secured by the bank guarantee is performed totally in the appropriate portion, is terminated under another grounds or is null and void, he without delay shall notify the beneficiary and principal about this fact. After such guarantor’s notification the repeated claim of beneficiary is subject to satisfaction by the guarantor.

Article 888. Limits of Guarantor’s Liability

The guarantor’s liability provided by the bank guarantee before the beneficiary is limited by the payment of sum secured by this guarantee.

Article 889. Grounds to Terminate the Guarantor’s Liability

1. The guarantor’s liability before the beneficiary is terminated:

a) with payment of the guarantee amount to the beneficiary;

b) on expiration of the guarantee term;

c) in case of revocation of the rights proceeding from the guarantee by the beneficiary and their return to the guarantor.

2. The guarantor who has got known about the termination of guarantee shall without delay notify the principal about this.

Article 890. Claim for Recourse Compensation

1. The guarantor’s right to claim from the principal the recourse payment of the amount he has paid to the beneficiary under the bank guarantee is specified by the agreement made between the principal and guarantor for execution under this guarantee.

2. The guarantor is not entitled to claim from the principal the payment of the amount which was paid to the beneficiary on contrary to the guarantee terms, or for the guarantor’s default before the beneficiary unless the guarantee agreement with the principal provides otherwise.

197

CHAPTER 22. GUARANTY

Article 891. Concept

1. Under the contract of suretyship the surety undertakes to appear as a surety of a third person before a creditor for performance of liabilities of the third person.

2. The suretyship may be also applied to the future and contingent liabilities.

Article 892. Form of Suretyship

1. The suretyship is valid if accompanied with the surety’s application and if the document (contract) of suretyship indicates the maximal amount of surety’s liability.

2. If anyone states on suretyship within the limits of his professional activity, observation of the form is not required.

Article 893. Basis of Surety’s Liability

The basis of determination of the surety’s liability is availability of appropriate general liabilities. The contract entered into by the principal debtor after obtaining of the suretyship shall not extend the surety’s liability as well as the surety’s liability is not applied to the terms under that contract.

Article 894. Surety’s Refusal to Satisfy Creditor

A surety may refuse to satisfy a creditor until the creditor will make attempt to apply enforcement to the principal debtor.

Article 895. Joint Responsibility of Surety

If a surety undertakes the liability jointly or in another similar way, he may be claimed without the attempt or enforcement, if the principal debtor exceeds the date due and was directly warned, or his insolvency is evident.

Article 896. Joint Liability of Sureties

If some persons are sureties of one and the same liability, they are liable as the joint debtors even if they have not undertaken the suretyship jointly.

198

Article 897. Responsibility for Liability Undertaken by the Previous Surety

A surety undertaking the liabilities of the previous sureties before the creditor is responsible jointly with them as the ordinary surety with the principal debtor.

Article 898. Limits of Surety’s Responsibility

1. A surety is responsible only in limits of amount indicated in the document of suretyship, in any case.

2. Unless another agreement exists, the surety is responsible up to the amount of the said limits:

a) for the appropriate amount of principal debt, as well as when the principal debt is changed for the principal debtor’s fault or overdue payment. The surety is responsible for the penalty under the contract or total amount of loss, provided by the day of execution of the contract, only when it is specially agreed;

b) for termination of contract and legal costs to be compensated by the principal debtor even if the surety has been able to present it by satisfaction of the creditor;

c) for interest due in accordance with the principal debtor’s contract if directly agreed.

Article 899. Surety’s Right on Counterclaim

1. A surety may put forward the counterclaims vested in the principal debtor. If the principal debtor dies the surety cannot be provoked of the limited responsibility of a successor.

2. A surety does not lose the right on counterclaim for the reason that the principal debtor rejected it.

Article 900. Surety’s Refusal of Satisfaction of Creditor

A surety may refuse of satisfaction of the creditor until the principal debtor will be entitled to make disputable the transaction based on his liability.

Article 901. Reduction of Surety’s Responsibility

If a creditor reduces the mortgage rights or other means and benefits of security in order to incur a loss to the surety, the surety’s responsibility is reduced by appropriate amount of the said reduction.

199

Article 902. Consequences of Overdue Payment by the Principal Debtor

1. If the principal debtor exceeds the date due, the creditor shall notify the surety about this. At the surety’s request the creditor shall at any time provide him with information concerning the state of principal debt.

2. If the creditor does not perform one of those actions, he loses his claims against the surety in the amount of the loss caused by default.

Article 903. Termination of Contract in the Non Fixed Suretyship

1. If the suretyship term is not fixed the surety shall observe the three-months term of termination of the contract.

2. Upon expiration of 5 years following the fixed suretyship the contract may be terminated with observance of the three-months term.

3. In case of unilateral termination the surety shall perform the liabilities undertaken before the termination.

Article 904. Grounds of Relief of Surety

1. If a surety undertakes the suretyship under the instructions of the principal debtor, or in accordance with the rules of proceeding of other cases the surety will be granted with the attorney’s powers before the principal debtor, he may demand the relief from the suretyship, if:

a) the principal debtor’s standing is essentially worsened;

b) after establishment of the suretyship the payment from the side of principal debtor has been essentially complicated for his change of place of residence or location;

c) the creditor has the enforcement document against the surety.

2. If the maturity date of principal liabilities is not due yet, the debtor may provide the surety with the security instead of relief.

Article 905. Consequences of Creditor’s Satisfaction by Surety

If the surety satisfies the creditor he will convey the creditor’s claim against the principal debtor, the counterclaims of principal debtor proceeding from the current legal terms between him and the surety are inviolable.

200

CHAPTER 23. CURRENT ACCOUNT

Article 906. Concept. Subject

1. Under the current account agreement the parties undertake the liability to enter the claims and payments arising from the business terms into the account and consider them inviolable before the closing of account.

2. The balance is subject to payment in the agreed term. If on the closing of account the party owning the rest of amount does not demand the amount it shall be placed on the current account.

3. The closing of account arises the claim for balance occupying the place of claim on the current account for the performance.

4. Closing of account takes place once a year unless otherwise established.

Article 907. Annulment of Current Account

In case of any doubt the current account may be at any time annulled and the account closed.

Article 908. Interest for Payments Made

The scheduled payments specified the interest at the rate provided by the law unless the contract provides otherwise.

Article 909. Personal or Property Security of Claim Entered into Current Account

1. If the claim entered into the current account obtains the personal or property security the creditor may, after the closing of account, demand the satisfaction from this security for the existing balance amount for his benefit.

2. The rule provided by item 1 of this Article is applied also in case of joint responsibility for the claim.

Article 910. Attachment

If a creditor of any party to agreement obtains the attachment of the balance amount, owned by the debtor from the current account, those parts of the debt arisen under the new contract after the attachment will not be provided to the creditor. The contract having been executed on the grounds of claims existed before the contract, is not considered as the new contract.

201

CHAPTER 24. LIABILITIES ARISING FROM CIRCULATION OF SECURITIES

1. Liability from Securities to Bearer

Article 911. Concept

1. If anybody issues a document under which he undertakes to pay to the bearer therein, the bearer may demand payment according to the pledge except the case he has no right on it.

2. The authenticity of signature on the issued document may be protection according to the special form to be mentioned in the document. The signature may be executed in any technically possible way.

Article 912. Issuer’s Counterclaims

The issuer of document may put forward against the holder of securities only such counterclaims, that concerns the authenticity of legalization, the document itself, or those once the issuer obtains directly against the holder.

Article 913. Assignment

1. The right granted in a document shall be assigned in accordance with the rules established for the transfer of the movable property. It may be also assigned under the agreement made with a third person.

2. A person who will acquire a document having been lost in any way, except the case when he acted with intentional or gross negligence while acquiring the documents is deemed as a legal holder.

Article 914. Issuer’s Rights

1. The issuer may challenge any holder that he has not issued him the securities. In addition he may present any counterclaim against the holder resulted from the document.

2. If the issuer uses technical means to sign the document he cannot plead the lack of right on use of those means before the holder, except the case when the holder knew about the counterfeit, or acted with the gross negligence.

3. If the document is passed to the holder’s ownership the issuer cannot present him counterclaims resulted from his direct terms with the previous holder, except the case when the further holder, intentionally acted to prejudice of the issuer.

4. If a counterclaim is not resulted from the direct terms it may be presented to that holder only who owned the document through alienation and acted with the intentional or gross negligence.

202

Article 915. Issuer’s Liability

1. The issuer shall perform his liability only if the securities are handed to him.

2. A debtor who is liable before the holder of document is freed from his liability if he has not acted with intentional or gross negligence and is able to prove the unfairness of the holder.

3. A debtor who is freed from his liability before the holder of document, acquires ownership of the handed document.

Article 916. Re-registration of Securities to Bearer

The securities to bearer may be re-registered on behalf of a certain person by the issuer only. At the same time the issuer is not obliged to re-register the securities to bearer.

Article 917. Substitution of Worthless Securities

If the securities to bearer are worthless for their damage, the holder may, if the content and essential definitive elements can be identified yet, demand the new securities instead of delivery of the damaged document. The relevant expenses shall be borne by the holder and paid in advance.

Article 918. Declaring Securities Invalid

1. The lost or destroyed securities may be declared invalid by the court unless the document provides otherwise.

2. The issuer shall, at the previous holder’s request, provide him with information required for consideration of case in announcing the securities invalid and for ban on payment; he also shall issue the appropriate certificate. Costs of certificate are to be paid by the previous holder in advance.

Article 919. Issuing New Document to Bearer

A person who obtained the announcement of bearer liabilities as invalid, notwithstanding the performance of demand resulted from the document, may demand the issue of a new bearer document from the issuer instead of that invalid one. He shall compensate the issue costs in advance.

Article 920. Limitation

The limitation proceeding from the securities is 30 years from the expiration of term of performance of liabilities provided by the documents.

203

Article 921. Issuing Promissory Notes of Small Value

If the issuer has issued promissory or other similar documents of small value where the creditor is not mentioned and the facts of case indicate that the issuer wills to pay to the holder, the rules of item 1 of Article 911, Articles 913-915 and 920 are applied.

II. Liability under Order Securities

Article 922. Concept

1. A promissory document upon the presentation of which the issuer promises to pay to the named person may be issued in kind of order securities.

2. The signature may be performed in any technically possible way.

Article 923. Assignment. Kinds of Endorsement

1. The right granted in the document may be assigned by the endorsement and transfer of the document

2. Endorsement is made in the document or its supplement. Use of technical means is allowed.

3. The endorsement does not require the mentioning of the endorsee and may comprise of the signature only (blank endorsement). The blank endorsement may be filled in by the authorized holder on his or other’s behalf. The authorized holder may issue the document unfilled or endorse it to the certain person by himself.

Article 924. Rule of Use of Document Acquired under Endorsement

If the order promissory document is acquired under the endorsement, the Article 914 is applied accordingly.

Article 925. Payment under Successive Endorsements

1. Under the successive endorsements the holder of the certified order securities may demand the payment under the pledge instead of the delivered endorsed document unless he has no right on this.

2. Payment to the non-authorized person who confirms his right through the successive endorsements frees the debtor unless he acted with deliberate or gross negligence.

3. A debtor who performed his liability before the endorsee becomes the owner of the endorsed document.

204

Article 926. Demands under the Written Guarantee

If the order securities guarantee in writing not only the claims of small value the rules of issue and invalidation of documents substituting the bearer promissory documents are accordingly applied.

Article 927. Limitation

The limitation proceeding from the order promissory documents are accordingly regulated by the rules of bearer promissory documents.

III. Personal Securities

Article 928. Concept

1. A document drawn up in the name of a certain person may be issued in the condition that the debtor will undertake the payment upon delivery of the document by this person only.

2. Unless otherwise determined the right granted in the document is assigned according to the rules established for this right.

3. If a document is lost or destroyed it shall be invalidated by special proceeding unless otherwise provided. This rule is not applied to the loss of the document of small value.

Article 929. Statement on Payment

If a document issued in the certain name states that the undertaken payment may be performed to any bearer, any transaction between the debtor and holder of document, including the payment, is valid, unless the debtor acted with the deliberate or gross negligence.

CHAPTER 25. PARTNERSHIP (JOINT ACTIVITY)

Article 930. Concept

Under the partnership contract two or more persons undertake to act jointly for achievement of the common economic or other purposes through the means determined by the contract, without incorporation.

Article 931. Form of Contract on Joint Activity

1. The contract on joint activity may be made in written or oral form.

2. If the contract is made in writing it shall contain:

a) names and addresses of the partners;

205

b) information of kinds and purpose of partnership;

c) rights and duties of partners;

d) structure and functions of managing bodies;

e) rule and terms of distribution of profits and loss among the partners;

f) rule of withdrawal from the contract;

g) duration of activity;

h) rule of termination of the contract and distribution of the remained property.

Article 932. Obligation to Contribute

1. Parties shall contribute under the contract. If the contract does not provide the amount of contribution each partner shall contribute equally.

2. A contribution may be made in kind of property and services.

3. Unless the contract provides otherwise contributions constitute the collective property of partners. Objects acquired under the right of collective property or gained as compensation for destruction, damage or seizure of the collective property, constitute the collective property of partners as well.

Article 933. Inadmissibility of Transfer of Share to a Third Person

1. A share in kind of property or right cannot be assigned to a third person without consent of other parties to the contract. Refusal of consent is allowed if the good reasons are available.

2. Other parties to the contract have the right of first refusal on the share to be assigned to a third person.

Article 934. Obligation of Joint Business

1. Unless the contract provides otherwise the parties to contract shall jointly carry out business and represent the partnership in terms with the third persons. Any transaction requires consent of all partners. If the contract provides that the decision shall be made by the majority of votes, the votes will be determined in accordance with the total number of partners but not by the amount of shares.

2. If the contract provides the management by one or more partners so that each has the right to act independently each of them may dispute against the other in the transaction. In case of such dispute the transaction shall not be made.

3. If the contract provides the management by a sole partner, this partner shall represent the partnership in terms with third persons and transactions made by him are valid.

206

4. A partner may be withdrawn of the power of management by the majority of votes and if only he violates his obligations under the contract. The party to contract may refuse of participation in the management. Such person may demand the required information from the board at any time.

5. Unless the contract provides otherwise the functions of managing persons are determined according to the rules of commission.

Article 935. Rule of Distribution of Profits

1. Unless the contract provides otherwise the profits are distributed among the partners in accordance with their share.

2. Each partner has the right to demand performance of obligations proceeding from the joint activity in good faith.

Article 936. Inadmissibility of Transfer of Partner’s Claim to a Third Person

The claims of partners against each other, resulted from the contract on partnership, cannot be transferred to other persons.

Article 937. Joint Responsibility of Partners

1. Parties to contract bear joint responsibility for the liabilities arisen from the partnership. Amount of responsibility in terms with each other is determined in accordance with the partner’s share, unless the contract provides otherwise.

2. Partners shall not disclose the confidential information gained in result of this activity.

Article 938. Refusal of Partnership

1. Unless the contract directly determines the term of partnership, any partner may refuse of partnership at any time. Withdrawal from the contract is not allowed at the time or in those circumstances which will be prejudicial for partnership.

2. If the partners agreed on the term of partnership the withdrawal from the contract is allowed if only the good reasons are available.

3. Withdrawal of one partner causes termination of partnership. The contract may provide the withdrawal of one partner without termination of partnership. In such event the share of a withdrawn partner is divided among other partners. The withdrawn partner is compensated for its share in cash. At the same time uncompleted transactions by the time of withdrawal shall be

207

considered. If, by the moment of withdrawal the total assets does not cover the total liabilities, the withdrawn partner shall pay to the other partners the appropriate amount of his share. Liability of the withdrawn partner before the creditors by the moment of withdrawal is unchangeable.

4. The agreement abrogating or restricting the partner’s right on withdrawal is invalid.

Article 939. Grounds of Termination of Partnership

1. The grounds of termination of partnership are:

a) expiration of the agreed term of partnership;

b) partners decision;

c) institution of bankruptcy case on the partnership assets;

d) disability of implementation of purposes of partnership.

2. Unless the contract provides otherwise, the grounds for termination of partnership are as well:

a) death of one party to contract;

b) institution of bankruptcy case in the assets of one partner;

c) dissolution of contract.

Article 340. Procedure of Termination of Partnership

1. In case of termination of the partnership the transactions in progress shall be completed, the inventory list shall be drawn up and the rest property shall be divided in proportion to the shares of partners.

2. While distributing the property, the liabilities arisen within he partnership shall be covered. If assets are not sufficient to meet the liabilities, the partners shall pay for the debts according to their shares.

CHAPTER 26. LIFE ANNUITY

Article 941. Concept

A person who undertakes to pay the life annuity (annuitor) shall pay it to annuitant within the whole life unless the contract provides otherwise. The life annuity may be fixed in cash or in kind (dwelling, nutrition, care or other required aid).

208

Article 942. Kind of Contract

The life annuity contract shall be made in writing. In case of transfer of the immovables the contract shall be notarized.

Article 943. Amount of Annuity

The annuity amount is determined by the agreement between the parties.

Article 944. Term of Annuity Payment

The term of annuity payment is fixed with respect of its nature and purposes under agreement between the parties.

Article 945. Inadmissibility of Alienation of the Transferred Property

1. Within the annuitant’s life the annuitor has no right to alienate, lease or otherwise burden the transferred property without the written consent of the annuitant. Attachment on this property for the annuitor’s debts is not allowed.

2. When transferring the immovables to the annuitor the annuitant obtains the right on lease of this property for security of claim.

Article 946. Dispute on Annuity Payment

Payment of life annuity may be appealed by other persons who obtain the right to receive the allowance from the annuitor, but could not receive if because the annuitor pays the life annuity. In case of termination of the contract the property is to be returned to the annuitant.

Article 947. Payment of Annuity in Kind

The contract on payment of annuity in kind may provide the substitution of annuity in kind with cash.

Article 948. Risk of Accidental Loss or Damage of the Transferred Property

Accidental loss or damage of property transferred to the annuitor does not free him from the payment of allowance.

Article 949. Renunciation of Life Annuity Contract

1. Both the annuitor and annuitant have the right to renounce the contract on life annuity if the resulted from the infringement of the contractual liabilities,

209

the terms between the parties become intolerable, or if other essential reasons complicate or make impossible its continuation.

2. On termination of the contract the transferred immovable property is returned to the annuitant and the expenses rendered by the annuitor before the termination of the contract are not reimbursed unless the contract provides otherwise.

Article 950. Consequences of Annuitor’s Death

1. Upon the annuitor’s death the annuity obligation is conveyed to his successors who get the transferred property.

2. In case of successor’s refusal of this obligation this property is returned to the annuitant. The contract is terminated then.

CHAPTER 27. GAMBLING. WAGERING

Article 951. Concept

1. Gambling or wagering does not occur the claim. This rule is applied to the loan and advance payment intentionally made for gambling or wagering as well as on exchange or similar bets made on delivery of goods or securities which obtain the gambling or wagering nature.

2. Recourse of performance under the gambling or wagering is not allowed.

Article 952. Lottery

The contract on lottery or similar games arises liability if they are allowed by the state.

SECTION TWO

LEGAL OBLIGATION RELATIONS CHAPTER 1. RIGHT OF COMMON

Article 953. Concept

If the right is vested in some persons jointly, the rules of this Chapter are applied unless the law provides otherwise.

Article 954. Equal Shares

Unless otherwise is specially established each participant owns equal share.

210

Article 955. Right of Product

1. Each participant owns a part of product equal to his share.

2. Each participant has right to use the common thing so that not to inflict damage to the use of other participants.

Article 956. Management of Common Thing

1. Participants manage the common thing jointly.

2. Each participant has the right to carry out arrangements required for maintenance of the thing without consent of other shareholders.

Article 957. Making Decisions When Managing the Common Thing

1. The decision on management and use of the common thing with respect of its peculiarities may be made by the majority of votes. Majority of votes is counted according to the shares.

2. Each participant may, with respect of the fair view, demand the management and use according to the interest of all participants unless it is regulated under the agreement or by the majority of votes.

3. Discrimination of an individual participant’s right on the share is not allowed without his consent.

Article 958. Conveyance of Rule of Management of Common Thing to Successor

If participants determine the rule of management and use of the common thing in common thing this rule is applied regarding the successor as well.

Article 959. Order of Disposal of Common Thing

Each participant may dispose his share, and disposal of the common thing takes place jointly only. In case of sale of a share the other participants have the right of first refusal.

Article 960. Common Thing Maintenance Costs

Each participant is obliged before other participants to undertake costs connected with the common thing equal to his share.

Article 961. Defeat of Right in Common

1. Each participant may demand the defeat of right in common at any time.

211

2. If under the agreement the claim for defeat is excluded forever or for the fixed term the defeat, however, may be demanded if good reasons are available.

3. The agreement under which the claim for defeat is excluded or restricted on contrary to those rules is not valid.

Article 962. Agreement on Defeat

If the participants have excluded the claim on defeat of the right in common for some term, the agreement ceases to be in force with the death of a participant unless otherwise provided.

Article 963. Defeat of Right in Common When Dividing in Kind

The right in common is defeated when dividing in kind if the common thing (things) may be divided into homogenous parts without reduction in price. Distribution of equal shares among the participants is made by voting.

Article 964. Defeat of Right in Common by Sale of Thing

1. If division in kind is excluded the right in common is defeated by sale of the thing, lease of common thing or land and distribution of the gains. If alienation of the common thing is not allowed the thing shall be sold by the auction among the participants.

2. If the thing is not sold any participant may demand the auction once again, at the same time, he shall borne the expenses if the second attempt is in vain.

Article 965. Joint Responsibility of Participants

1. If participants, as the joint debtors, are responsible for liabilities to be performed in proportion to their shares in accordance with Article 600, or undertake the performance of those liabilities, each shareholder may claim for defeat of the right in common in order to pay the debt from the common thing.

2. If sale of the common thing is required for payment of liability it shall take place in accordance with Article 964.

Article 966. Satisfaction of Co-Participants’ Claims Against Each Other

If a participant obtains a claim against another participant based on the right in common he may, for defeat of this right, demand to meet his claim from the share of common thing owning by the debtor.

212

Article 967. Liability of Participants in Case of Defeat of Right of Common

If in case of defeat of the right of common the common thing is owned by one participant, each participant of those remained bears responsibility as a vendor bears responsibility for defect of a thing or right, in accordance with his share.

Article 968. Limitation of Defeat of Right in Common

Claim for defeat of the right of common is not subject to limitation.

CHAPTER 2. ACTING FOR OTHER’S BENEFIT WITHOUT COMMISSION

Article 969. Acting for Other’s Benefit Without Commission in Good Faith

A person (executor) acting for benefit of another person (principal) without commission or another ground shall act in good faith.

Article 970. Obligation of Indemnification

1. If the benefit is aimed to the prevention of the risk that endangers the principal, the executor bears responsibility only for the deliberate or gross negligence.

2. Executor who occurred damage for the prevention of the risk which actually endangered another person or property, if the prevention of risk was not the executor’s legal duty shall be compensated for the loss from the person who created the risk, or from the person the values of whom the executor tried to save.

Article 971. Obligation of Notification of Principal

The executor shall as soon as possible notify the principal about his benefit. The executor shall continue the business in progress until the principal will be able to act by himself.

Article 972. Presentation of Report on Executed Work

The executor shall present to the principal the report on execution and transfer to him all he gained as a result of performance.

Article 973. Right on Compensation for the Costs

The executor has the right to demand compensation for the costs which were considered as essential with respect of the facts of case.

213

Article 974. Inadmissibility of Reimbursement

1. An executor cannot claim on compensation for the costs if contradicts the principal’s will or does not conform to his benefit. If the executor could be informed about it, he shall indemnify for the caused loss.

2. This rule is not applied if the principal’s will contradict the norms of law.

Article 975. Presumption of Own Benefit

The rules of this Chapter are not applied if when performing for the other’s benefit a person presumed that it was his benefit.

CHAPTER 3. UNJUST ENRICHMENT

Article 976. Grounds of Claim from a Mock-creditor

1. A person who has given something to another person for fulfillment of obligation may claim from the mock-creditor (recipient) the restitution, if:

a) the liability is not available for its invalidity or for another ground, is not arisen or is terminated in future;

b) such counterclaim was put forward against his liability that makes impossible to claim for the long period.

2. Claim for restitution is precluded, if:

a) fulfillment complies with the moral obligation, or

b) the limitation expires, or

c) the recipient might have presumed that the executor willed to give this thing, notwithstanding the availability of terms of the first part of this Article, or

d) claim for restitution in case of execution of the void credit contract contradicts the function of observance of norms on repudiation.

Article 977. Inadmissibility of Claim for Restitution

1. A person who gives to another person something not for fulfillment of liability, but for the purpose that the latter shall perform or not perform any action, may claim for restitution if the other person’s action does not correspond to the expected purpose.

2. Claim for restitution is precluded, if:

a) the object could not have been achieved just from the outset, and the person who has given the thing knew this, or

b) the person who gave the thing deliberately hindered the achievement of the object.

214

Article 978. Claim for Restitution by Force or Under Threat

A person who will give to another person something not for performance of liability but having been forced to it or under the threat, may claim for restitution except those cases when the recipient has had the right on the received thing.

Article 979. Limits of Restitution

1. The claim for restitution is extended to the purchased, received values as well as to anything that the recipient has purchased as compensation for destruction, damage or withdrawal of the received thing.

2. If restitution is impossible for the condition of a thing or, when the recipient cannot return the thing for some reason, he shall compensate its total value. The value shall be determined by the time of occurrence of restitution.

3. Obligation for indemnification is not available if the recipient has enriched neither by the thing nor by its value following the use of this thing, assigning it to another person, destruction, deterioration of this thing or by any other grounds.

4. If the parties to the bilateral agreement are to return something the received under this agreement for the voidance of the agreement, but one party cannot perform the restitution by the grounds provided by part 2 of this Article, the party does not undertake to restitute if it follows from the essence of those rules of law on the grounds of which the agreement was made null and void.

5. Loss or deterioration of the object to agreement, what for the executor is responsible within the period of validity of the agreement, always releases the recipient from obligation of indemnification.

Article 980. Rule of Compensation for Expenses and Damage

1. If the recipient has borne expenses or suffered property damage in connection with the fact that he believed the thing was purchased by him forever, he shall restitute under the condition of compensation for expenses and loss. This rule is not applied if the given thing cannot be the ground for considering it as purchased forever.

2. Obligation for compensate, pursuant to Articles 979 and 980, shall be performed concurrently. Expenses and risk of restitution are borne by the performer.

215

Article 981. Reimbursement Obligation

1. If on acceptance the recipient knew, or has not known of availability of legal grounds defects for the gross negligence and he got known of this later, or the claim for assignment was taken to the legal proceeding, the recipient shall bear responsibility from the time of acknowledge of the defects, or from time of taking the case to the legal proceeding, under parts 1 and 2 of Article 979, Article 980 and rules given below.

2. If the recipient does not get benefit, he could get in result of the proper management, reimbursement obligation will be undertaken if he is found guilty. Cash debt shall be accrued with the interest. Income gained from the thing shall be returned.

3. The recipient shall reimburse the damage occurred after the loss or deterioration of the thing transfered for the performance only if he is found guilty. The recipient may claim compensation of expenses which he has borne in connection with the subject of performance as per the rules of performance of the other’s business without assignment. No other expenses are reimbursed except the necessary ones.

4. Those rules are not applied to the debtor’s responsibility for delay.

Article 982. Consequences of Encroachment Upon Other’s Legal Property

1. A person who encroaches upon legal property of the other person without the latter’s permit, through their disposal, spending, use, joining, mixing, processing, or by another way, shall compensate the authorized person for the such loss.

2. In case of void disposal the authorized person may claim the irrevocable reimbursement from the person who encroaches upon other’s property.

Article 983. Accepting Performance by Non-Authorized Person

If the performance intended for the authorized person is accepted by the non-authorized person, the latter is obliged to return the received to the authorized person.

Article 984. Relief

1. If an encroacher has not known of the inferiority of powers for the gross negligence, he is relieved if by the time of passing the reimbursement claim to the legal proceedings there are no signs of enrichment.

2. Expenses borne by the encroacher for the used property does not reduce the amount of his enrichment.

216

Article 985. Claim on Profit

1. If the encroacher did not deliberately stipulate the powers of other person the latter may claim on this profit exceeding the property loss.

2. The encroacher shall present documents certifying what kind of profit he has gained from disposal of the other’s property.

Article 986. Payment for Other’s Debts by Mistake

A person who has intentionally or by mistake paid other’s debts may claim on reimbursement from that person.

Article 987. Bearing Expenses for Other’s Property By Mistake

1. A person who has borne expenses for the other person’s property intentionally or by mistake may claim from him reimbursement, if the other person has enriched by this.

2. Availability of enrichment is determined by that moment when the debtor will get back his thing, or receive the benefit in another way following the increase in its value.

3. Claim is precluded, if:

a) a person who is claimed against, may claim for withdrawal of expenses and withdraws it, or

b) a claimant has put forward the claim on expenses, or

c) a person who is claimed against made expenses disputable before their realization.

Article 988. Consequences of Performance Under the Mock-Creditor’s Instruction

1. A person who, as per Article 976, will give something to the third person under instruction of the mock-creditor may claim performance from the mock-creditor as if he has given the thing to the latter. If mock-creditor’s instruction is doubtless the claim on restitution may be applied against the third person only.

2. A person who, in accordance with Article 976, will give something to a new mock-creditor after the laying of claim, may claim restitution from the initial mock-creditor as if he has given something to the latter. If the initial mock-creditor’s instruction is doubtless the counterclaim may be laid against the new mock-creditor only.

217

3. Articles 979 and 980 are accordingly applied to the reimbursement obligation.

Article 989. Third Person’s Obligation to Return the Unjust Received

1. If in cases stipulated in Articles 976 and 988 the recipient who is obliged to restitute the received thing, gives it to the third person free of charge, the third person will be also obliged to restitute the received thing if he has received something from the creditor without legal grounds if satisfaction from the side of recipient is impossible.

2. Requirements of Articles 979-981 are applied accordingly to reimbursement.

Article 990. Consequences of Gratuitous Disposal of a Thing by Non-authorized Person

1. If a non-authorized person disposes any thing gratuitously and this disposal is evident before the authorized person, the person who has received the direct legal benefit resulted from this disposal is obliged to give it to the authorized person.

2. In case of availability of fault the requirements of Articles 984 and 985 are also applied accordingly.

Article 991. Consequences of Unjust Enrichment at Other’s Expense

A person who has unjustly enriched at other person’s expense by means other than those stipulated in this Chapter is obliged to restitute the owner.

SECTION THREE

DELICTUAL OBLIGATIONS CHAPTER 1. GENERAL PROVISIONS

Article 992. Concept

A person who will prejudice another person by his illegal, deliberate or negligent action shall compensate him this damage.

Article 993. Consequences of Disclosure of Prejudicial Information

1. A person who spreads or disclose, deliberately or carelessly the facts that bring property damage to another person shall compensate the caused damage if those facts are obviously false.

218

2. Obligation of compensation is not arisen for such statements which serves protection of legal public interests.

Article 994. Minor’s Responsibility for the Caused Damage

1. A person under 10 is not responsible for the damage he caused to another person.

2. Parents or other persons liable for supervision over a person under 10 shall compensate the loss caused by the illegal action of this minor to another person. Their responsibility is excluded if the persons liable for supervision cannot prevent the damage.

3. A person attained to 10 and older, but a minor one, is responsible for the damage he caused to another person except those cases when he could not understand the significance of his action when causing damage. If this person has no adequate property or income to compensate the caused damage the additional responsibility is borne by his representatives as well.

Article 995. Compensation for Damage Caused by Insane

1. If a feeble-minded or insane causes damage to another person by his illegal action (delict) he does not bear liability for compensation of loss.

2. If the person undertakes supervision over the person caused damage he is liable to compensate damage except those cases when he could not prevent this damage.

Article 996. Compensation of Damage Caused in State of Temporary Insanity

A person being in temporary unconscious or insane state is not responsible for the caused damage. If the person led himself to such state by use of alcoholic drink or similar remedy he is not relieved except the cases when he found himself in such condition not for his fault.

Article 997. Compensation of Damage Caused when Performing Official Duties

A person shall compensate the damage caused to the third person by illegal action of his employee when on duty. Responsibility does not arise if the employee acted not for his fault.

219

Article 998. Joint Responsibility for Caused Damage

1. If some persons take part in the occurrence of damage they will be responsible as joint debtors.

2. Not only that person who has directly caused the damage is responsible for it but those persons who assisted him or accompanied him as well as those ones who deliberately took benefit from the loss caused to another person.

Article 999. Compensation of Damage Resulted from Operation of Transport Means

1. An owner of transport means for transportation of passengers and goods, if operation of his transport means caused human death, disability or injury, or damage of a thing, shall compensate the occurred loss to the victim.

2. Obligation of compensation for loss stipulated by part 1 of this Article is not applied, if:

a) the transported goods are damaged except those cases when the passenger accompanies those goods;

b) the thing taken by the owner of transport means on deposit is damaged.

3. Obligation of compensation for loss stipulated by the first part of this Article is not applied when the damage is caused by force majeure except those cases when the damage occurred within operation of air transport.

4. If a person uses the transport means without the owner’s permit, he shall compensate the loss instead of the owner. The owner concurrently shall compensate the caused loss if use of the transport means became possible for his fault. The first sentence of this part is not applied if the user was assigned by the owner to operate the transport means, or if that transport means was given to him by the owner.

Article 1000. Responsibility for Loss Caused by Increased Danger of Structure

1. If any structure is a reason of the increased damage for energy produced, placed or provided in this structure, or for fire-dangerous, explosive, poisonous or toxic substances, the owner of this structure shall, if this danger was resulted in the human death, injury or disability, or damage of a thing, compensate a victim for the occurred loss. The same responsibility is applied against the owner of fire-dangerous, explosive, poisonous or toxic substances if the increased danger is resulted from those substances.

2. If the increased danger is resulted from this or that structure or thing under another ground than those mentioned in the first part, the owner of structure

220

or thing shall compensate the loss occurred in result of this damage in similar way.

3. Obligation of compensation for loss stipulated by part 1 and 2 of this Article is excluded if the damage is caused by force majeure except those cases when the loss is caused by damage of electrotransmission lines, or damage of facilities supplying oil, gas, water or petroleum products.

4. Damage caused by use of radioactive substances shall be compensated by the user of them.

Article 1001. Compensation of Loss Resulted within Fire-extinguishing

The damage caused to other persons within fire-extinguishing and preventing the fire to spread on neighboring apartments and buildings shall be compensated by the person found guilty for fire-rising.

Article 1002. Inadmissibility of Prior Relief of Compensation for Loss

Obligation to compensate the loss stipulated by Articles 999 and 1000 if concerns the damage caused to the person, shall not be excluded or limited beforehand. The same rule is applied to the damage caused to a thing except those cases when relief or limited responsibility was agreed between a person liable for compensation of loss and legal person of public law, public-legal fund or enterprise. Agreements and provisions contradicting this are null and void.

Article 1003. Compensation of Loss Caused by Animal

The owner of animal shall compensate the loss caused to another person by his animal. At the same time, it is of no importance if the animal was supervised, lost or escaped. Obligation to compensate the loss is not applied if the owner of animal took necessary measures for protection of the third person.

Article 1004. Compensation of Loss Caused by the Felt Building

1. The owner of building shall compensate the loss occurred after the fall of the building or destruction of its separate parts except those cases when the loss is not caused by improper maintenance of the felt building or the building defect.

2. If the loss is caused by throwing out, falling out or flowing out of the thing the responsibility is borne by a person who occupies a dwelling except those cases when the damage is caused by force majeure or for the fault of victim.

221

Article 1005. Responsibility of State for Damage Caused by Public Servicemen

1. If a public serviceman by deliberate or gross negligence violates his official functions before other persons, the state or that body where the serviceman is engaged, shall compensate the occurred loss. In case of deliberate or gross negligence the serviceman bears joint responsibility with the state.

2. Obligation to compensate loss will not arise if a victim of deliberate or gross negligence did not try to prevent damage by legal way.

3. The loss caused to the rehabilitated person by illegal conviction, illegal taking legal actions against him, illegal application of enforcement measures in kind of imprisonment or recognizance not leave, illegal accusation in administrative delict and sentencing to imprisonment or corrective labor, is compensated by the state notwithstanding the fault of inquiry, preliminary investigation bodies and prosecutor’s office and judicial officials. In case of deliberate or gross negligence those persons bear joint responsibility with the state.

Article 1006. Compensation of Damage in Case of Victim’s Death

1. In case of death of a victim a person who caused damage shall compensate the loss to those persons depended on the victim, by establishment of allowance. This obligation preserves its force until the time when the victim is obliged to pay allowance.

2. Instead of allowance a victim may claim disposable compensation if the reasonable grounds are available.

Article 1007. Compensation of Damage Caused by Medical Institution

The damage caused to a person’s health within treatment at the medical institution (consequence of the surgical operation or incorrect diagnosis) is compensated on the universal basis. A person who caused damage is relieved if he proves that the occurrence of damage was not of his fault.

Article 1008. Limitation of Compensation of Damage

The term of limitation of compensation of damage caused by delict is three years from the moment when the victim discovers the damage or a person who is obliged to pay compensation.

222

CHAPTER 2. RESPONSIBILITY FOR DAMAGE CAUSED BY LAW-QUALITY PRODUCTS

Article 1009. Responsibility of Manufacturer of Low-quality Products

1. A manufacturer of low-quality products bears responsibility for damage caused with those products notwithstanding the fact if he was or was not in contractual terms with the victim, except the cases, when:

a) he did not take that product for sale;

b) proceeding from the circumstances of the case there may be presumed that the defect caused damage was not available in the product in time of its taking for sale;

c) a manufacturer produced this product not for sale or any other commercial purpose and not in frames of his professional activity;

d) the product had defect which in time of its taking for sale complied with the applicable norms, or

e) it was impossible to find out this defect taking into account that level of science and technical means available at the time of taking this product for sale.

2. Responsibility of a manufacturer for the part of product is also excluded if the defect is caused by the structure of this product the component of which was that part.

3. Obligation of manufacturer to compensate loss is brought down or excluded if the damage occurred by fault of a victim or his authorized person.

4. Manufacturer’s responsibility is not brought down if the damage is caused by the defect of product and, concurrently, the act of the third person.

Article 1010. Concept of a Low-quality Product

1. A product is deemed as law-quality if it does not provide the reliability to be expected from this product in consideration of all circumstances.

2. The product shall not be recognized as low-quality for such reason only that further a better-quality product was taken for sale.

Article 1011. Concept of Product

1. Pursuant to this Code, any movable thing as well as the component of other movable or immovable thing and electric current, is recognized as product. Products of cattle-breeding, agriculture, fishing and farming not processed yet (natural agricultural products) are not referred to them. The same rule is applied to products of hunting.

223

2. Pursuant to this Code, a person who produced the final product, its main element or component, is recognized as a manufacturer. Any person who appears as manufacturer on his behalf, with a trade or other distinctive marks, a manufacturer is recognized as the manufacturer, too.

3. A person who takes product for sale, lease, leasing or another economic purpose in the sphere of his business and observing the terms and conditions stipulated by this Code, is recognized as manufacturer too.

4. If the personality of manufacturer cannot be established, any provider is recognized as a manufacturer, except those cases when he, within 1 month following the claim, presents to the victim the personality of manufacturer, or that person who has provided him with this product. This rule is also applied to the imported goods when personality of initial distributor cannot be established notwithstanding the fact that manufacturer’s name is known.

Article 1012. Onus of Proof

Onus of proof in responsibility for damage caused by a low-quality product is undertaken by a victim.

Article 1013. Joint Responsibility of Manufacturers of Low-quality Product

If obligation to compensate the loss for one and the same damage is undertaken by some manufacturers, they are responsible as joint debtors.

Article 1014. Compensation of Damage Caused by Injury

Obligation to compensate loss as per Article 1009 is applied to the loss caused by death or injury.

Article 1015. Limitation

1. The term of limitation, as per Article 1009, is three years from the moment when a person enjoying the right to be compensated for loss, found out or should find out the damage, defect or a person obliged to compensate the loss.

2. The claim, as per Article 1009, elapses after 10 years following the moment when the manufacturer took the product that caused damage, for sale.

Article 1016. Inadmissibility of Prior Relief

The manufacturer’s responsibility for a low-quality product cannot be excluded and limited beforehand. Any agreement contradicting this is null and void.

224

BOOK FOUR INTELLECTUAL PROPERTY LAW

SECTION ONE

COPYRIGHT LAW CHAPTER 1. GENERAL PROVISIONS

Article 1017. Concept of Copyright Law

The copyright law protects property and personal non-property copyright arisen on creation and use of works of science, literature and art (copyright) and some related rights referred to a performer, producers of phonogram and videogram and broadcast organization (related rights).

Article 1018. Sphere of Application of Copyright Law

The copyright law is applied to:

a) he work of science, literature and art, performance, phonogram and videogram, on which a citizen of Georgia or a natural person permanently residing on the territory of Georgia, or a legal person registered in accordance with the procedure established by the law of Georgia, obtains the copyright or related rights.

b) the work of science, literature and art, phonograms and videograms, edited on the territory of Georgia for the first time; works, phonogram and videogram are also considered as edited in Georgia for the first time if they are edited on the territory of Georgia within thirty days following their first edition abroad;

c) the performance conducted on the territory of Georgia for the first time; the performance recorded on the phonogram or videogram protected under item “b” of this Article; the performance not recorded on the phonogram or videogram but included in the program of broadcast organization protected under item “d” of this Article;

d) the programs of broadcast organizations if they are legal persons under the law of Georgia and conduct transmission by transmission facilities located on the territory of Georgia;

e) on works of architecture, located on the territory of Georgia notwithstanding the nationality and residence of their authors;

f) other works of science, literature and art, performance, phonogram and videogram, programs of broadcast organizations, protected under the international treaties where Georgia is the party.

225

Article 1019. Publication of Works

The act conducted with consent of the author or another person enjoying copyright and related rights as a result of which the work, performance, phonogram, videogram, program of broadcast organization becomes open for universal familiarization for the first time through public transmission, public demonstration, edition and other way, is considered as publication.

Article 1020. Edition of Works

1. Issuing of copies of works and phonogram, with consent of the author or another person enjoying copyright and related rights, in public turnover, sale, lease, or otherwise transfer of ownership of works, phonogram, videogram in the quantity that will satisfy the reasonable demand of the public, is considered as edition.

2. A work and phonogram is also considered as edited if it is available through the electronic information systems.

Article 1021. Public Performance of Works

1. Presentation of a work, performance, phonogram, videogram, program of broadcast organization by recitation, playing, signing, dancing or otherwise, both directly (live) and via any broadcast and by any process on the place (places) where it may be performed without necessity of transmission stipulated by Article 1023, and where those persons attend or may attend which are not the members of a performer’s family, or the circle close to his family, is considered as public performance.

2. Demonstration of audiovisual images in succession is considered as public performance of audiovisual works.

Article 1022. Public Demonstration of Works

Any demonstration of original or copy of a work, performance, videogram, program of broadcast organization directly or on screen by means of a film, slide, close-up or otherwise on the place (places), where the public showing may be performed without necessity of transmission stipulated by Article 1023, and where persons who are not the members of family or the circle close to family, attend or may attend, is considered as public demonstration.

Article 1023. Public Broadcast of Works

Broadcast of image and/or voice of a work, performance, phonogram, videogram, program of broadcast organization by communication means so that image

226

and/or voice of program may be perceived by those persons who are not members of family or the circle close to the family on the place (places) which are remote from the place of broadcast by such distance that the image or voice cannot be performed without such broadcast, is considered as public broadcast (broadcast for general familiarization).

CHAPTER 2. COPYRIGHT

Article 1024. Objects of Copyright

1. The copyright is applied to those works of science, literature and art which are the result of intellectual and creative activity, irrespective of purpose, quality, genre, amount of works as well as the form and means of their representation.

2. The copyright is applied both to the published and unpublished works existing in any objective form.

Article 1025. Works of Science, Literature and Art

The works of science, literature and art are as follows:

a) works of literature (book, brochure, article, software, data base, etc.);

b) dramatic or musical-dramatic works, works of choreography or pantomime and various stage works;

c) musical works with or without text;

d) audiovisual works (movies, tele-and video-film and other);

e) sculpture, painting, drawing, lithography, and similar works;

f) works of decorative-applied and monumental art;

g) works of theatrical-decorative art;

h) works of architecture, town-planning and gardening and planting parks art;

i) photographic works or works created by similar means; a close-up of audiovisual work is not considered as a photographic work;

j) map, scheme, sketch, draft, illustration and similar works referred to geography, photography or other fields;

k) remade works, translation, word-for-word translation, adaptation, review, dramatization, compilation, musical arrangement of works of art and other remade of works of science, literature and art;

l) collection (encyclopedia, anthology, data base) and other collected works which are the result of intellectual and creative activity with respect of selection and placing of material.

227

Article 1026. Protection of Remade and Collected Works

1. Protection of copyright on remade and compiled works is performed notwithstanding if those works on which they are based or of which they are complied, objects of copyright or not.

2. Protection of remade and compiled works is performed as production of the original works.

Article 1027. Independence of Copyright from Property Right

1. The copyright does not depend on the property right on those material objects in kind of which the works are reflected.

2. Assignment of ownership of a material object does not arise assignment of copyright reflected in this object except the case stipulated in Article 1049.

Article 1028. Works Not to Be Applied With Copyright

1. The copyright is not applied to the following works:

a) official documents (laws, court rulings, other texts of administrative and normative nature) as well as their official translations;

b) state symbols (flag, emblem, anthem, awards, banknotes, other state official signs and symbols);

c) information about events and facts.

2. In case of use of works named in item “b” of first paragraph of this Article on other’s behalf, protection of copyright may be applied.

Article 1029. Author

A person whose intellectual and creative activity was resulted in creation of a work is deemed as the author of this work.

Article 1030. Copyright

1. The copyright on the works of science, literature and art arises from the moment of their creation. The works are deemed as created when they are expressed in the objective form required for their performance and reproduction.

2. Registration of works, their special legalization or observance of other formalities is not obligatory for arising and exercising of the copyright.

228

Article 1031. Copyright Protection Mark

For declaration of his right the person enjoying copyright may use the copyright protection mark to be put on each copy of the work and composed of three elements:

a) Latin letter C in a circle: ©

b) Name (title) of a person enjoying sole copyright;

c) Year of the first edition of the works.

Article 1032. Presumption of Authorship

1. In case of doubt in personality of the author, unless otherwise is provided, a person who is properly indicated as the author on the original or copy of the work, is deemed as the author. The given clause is applied when the work is published under a pen-name if the author is well-known by this pen-name.

2. When the works are published under the pen-name or anonymously (except the case when the author is well-known by his pen-name), the editor, the name or title of whom is indicated on the work, is deemed as the representative of author, unless the opposite is proved. This clause is applied until the author of work will disclose his personality.

Article 1033. Co-authorship.

1. The copyright on the work created as a result of the joint creative activity of two or more persons (co-authors) jointly belongs to the co-authors notwithstanding if this work is the integrated entirety or is composed of parts each obtaining independent significance. The relationship between the co-authors may be determined by the agreement made between them.

2. Neither author has the right to ban the use of such work without reasonable grounds for such ban.

3. Co-authors may publish the work under the joint, common pen-name.

4. Each co-author is entitled to publish the part of the work created by him that obtains the independent significance, unless the agreement made between them provides otherwise.

5. A part of the work created by the co-author is deemed as obtaining independent significance, if it may be used without other parts of the work.

229

Article 1034. Rights of Collection Author

1. The author of collection or other compiled works (compiler) obtains the copyright on selection or placing of material that is the result of his intellectual and creative activity.

2. The compiler enjoys the copyright in condition of protection of the rights of all authors whose works are composed in the collection.

3. The authors of works compiling the collection are entitled to use their works independent of the composed works unless the author contract provides otherwise.

4. The copyright of compiler does not prevent other persons to select and place the same material independently for creation of their own collections.

Article 1035. Rights of Author of Remake

1. The author of remake obtains the copyright on remaking, adaptation, arrangement and other work up, conducted by him.

2. The author of remake shall observe the copyright of the author of the remake, arranged or worked up work.

3. The copyright of author of remake does not prevent other persons to remake the same work.

Article 1036. Translator’s Rights

1. The translator obtains copyright on his translation.

2. A translator shall observe the copyright of author of the translated work.

3. A translator’s copyright does not prevent other persons to translate the same work.

Article 1037. Exclusive Rights of Editor

1. The editors of encyclopedias, continuous collections of periodic scientific works, newspapers, magazines and other periodicals enjoy the sole right on use of such works. The editor is entitled to indicate his name or claim such indication for any use of such work.

2. The authors whose works are composed by the editors mentioned in paragraph 1 of this Article preserve the sole right of use of their own works, unless the author contract provides otherwise.

Article 1038. Audiovisual Works

230

Any work composed of the series of images connected with each other (with or without a soundtrack), that creates the impression of movement and may be perceived by sight and/or hearing, is deemed as audiovisual work. Audiovisual works include cinematographic and other works expressed by means similar to the cinematographic (telefilm, videofilm, slide film, etc.), irrespective of means of their initial and further recording.

Article 1039. Author of Audiovisual Work

Authors (co-authors) of audiovisual works are as follows: director, script writer, author of a musical work with or without libretto, created specially for this audiovisual work, unless the agreement made between them or with producers of audiovisual work provides otherwise.

Article 1040. Producer of Audiovisual Work

1. A natural or legal person who undertakes initiative and bears responsibility for making such work is deemed as the producer of audiovisual work; in case of doubt on personality of the producer of audiovisual work, unless the opposite is proved, that natural or legal person whose name or title is properly indicated on this work, is deemed as the producer of audiovisual work.

2. Making contract on creation of audiovisual work arises assignment of the sole right on use of this work by the co-authors to the producer of audiovisual work, unless the contract provides otherwise.

3. The producer of audiovisual work is entitled to indicate his name or claim such indication in any case of use of this work.

Article 1041. Rights of Author of Work Included in Audiovisual Work

The author of the created work that is remade or included as a component in the audiovisual work as well as the author of those works created within the process of making audiovisual work, preserve the copyright on their works obtaining independent significance, and are entitled to use such works independently, unless the contract provides otherwise, in condition that such use will not prevent the normal use of audiovisual work.

Article 1042. Copyright on Official Work

1. The copyright on work created under the direct official instructions of the employer (official work) belongs to the author of official work.

2. The sole right on use of official work conditioned by content and purpose of the task belongs to a person with whom the author is in labor terms

231

(employer) unless the contract between him and the author provides otherwise.

3. Upon expiration of five years following the transfer of work by the author to the employer the sole right on use of this work is assigned to the author unless the contract made between him and the employer provides otherwise.

4. If within three years after transfer of the work the employer does not use the work the sole right in its use is assigned to the author; the said rule is applied also in the case when use of the work is terminated for the term exceeding two years without a good reason. The mentioned term may be reduced under the agreement of parties.

5. The employer is entitled to indicate his name (title) or claim such indication in each case of use of the official work.

6. In any case of use of official work the amount and payment of royalty may be determined by the contract made between the author and employer.

7. This Articles is not applied to the works determined by Article 1037 and created as the official task.

Article 1043. Personal Non-property Rights of the Author

1. The personal non-property rights of the author are as follows:

a) right on authorship;

b) right on title;

c) right on publication;

d) right to allow other persons to make changes both in the work and its title and author’s name as well as to restrict making changes in the work without his consent;

e) the right to restrict corruptions or such change of the work that may compromise the author’s dignity or business reputation;

f) the right to give permit to attach his work with the works of other authors (illustration, introduction, concluding remarks, comments, explanation, etc.);

g) the right to make alterations and supplements in the published works;

h) the right to claim termination of use of the work (right to recall the works). In such case the author shall declare on recalling the work in public.

2. The right on recall of the work is not applied in connection with the official works.

232

Article 1044. Exercising Author’s Personal Non-property Rights

1. The right stipulated by items “g” and “h” of paragraph first of Article 1043 is exercised at the author’s expense. The author is entitled to take away from turnover the copies of work prepared at his expense for their spreading at his expense.

2. Personal rights belong to the author independent of his property rights and are preserved in case of assignment of those rights.

3. After the author’s death the personal rights are exercised in accordance with procedure established by the law.

Article 1045. Sole Rights of Author

1. The author or other person enjoying copyright obtains the sole right to use the work in any kind and by any means.

2. The sole right on use of the work means the right to perform, allow or ban:

a) reproducing of the work (right of reproducing);

b) distribution: sale, lease, etc. of original work of its copies by any means (right on distribution);

c) importing copies of his work for distribution, including those copies prepared with consent of the author or other person obtaining copyright (right on import);

d) public showing of the work (right on public show);

e) public performance of the work (right on public performance);

f) public broadcast of the work (broadcast of the work for general familiarization), including cable transmission (right on public broadcast);

g) broadcast of the work for general familiarization, including the first and/or further broadcast (right on broadcast);

h) transmission via cable for general familiarization, including the first and/or further transmission (right on transmission via cable);

i) translation of the work (right on translation);

j) remake, arrangement or other kind of working up of the work (right on remake);

3. Restriction the property rights stipulated by paragraph 2 of this Article is determined by the law.

Article 1046. Distribution of Published Works

1. If the copies of lawfully published works are sold their further distribution is allowed without the author’s permit and payment of royalty.

233

2. The authors or other persons obtaining copyright on the musical works expressed in music, on software, data base, works fixed on phonograms and videograms enjoy the sole right of distribution of the originals or copies of the said works by lease notwithstanding the property right on those originals and copies.

Article 1047. Sole Right on Use of Architectural Designs

The sole right on use of architectural, town-planning and planting design includes also the right of implementation of such designs.

Article 1048. Royalty

The amount of royalty, the rule of its calculation for use of any copy shall be fixed by the author contract as well as by agreement made with the beneficiaries by those organizations who manage the author’s property right on the collective basis.

Article 1049. Rights of Author of Works of Fine Art

1. The author of work of fine art is entitled to demand from the owner of his work possibility of reproducing his works (right of distribution); at the same time the owner cannot be obliged to deliver the work to the author.

2. After the alienation of original of the work of fine art for the first time in each separate case of public sale of such work (auction, art saloon, fine art gallery, shop or by other means), the author or his heir has the right to receive royalty from the seller in amount of 5% of the selling price.

3. Alienation of the right mentioned in paragraph 2 of this Article is not allowed in the author’s life, it is transferred, by the law or will, to the heirs for the term of validity of the copyright only.

Article 1050. Reproducing Copies of Lawfully Published Works

1. Reproducing of copies of the lawfully published works by natural persons is allowed only for their personal use without consent of the author or another person obtaining the copyright and payment of royalty, except those cases determined by Articles 1051 and 1052.

2. Clauses stipulated by paragraph 1 of this Article are not applied:

a) in case of reproducing works of architecture in kind of building and similar construction;

b) reproducing data bases;

234

c) reproducing software except those cases stipulated by Article 1060;

d) when reprographically reproducing books (in whole), music and works of fine art (copy-making);

Article 1051. Royalty for Reproducing for Personal Purposes

In case of reproducing by natural persons for their personal purpose the author of audiovisual works or works fixed on the phonogram, or other person obtaining copyright, is entitled in contradistinction to the rule mentioned in paragraph 1 of Article 1, to receive the appropriate royalty.

Article 1052. Payers of Royalty and Rule of Its Payment When Reproducing for Personal Use

1. Payment of royalty is performed by manufacturers and importers of equipment (audio- and videorecorders and other facilities) and material bearers (phono- or/and videofilm, cassettes, laser disks, CD’s and other material bearers) to be applied for reproducing for personal use.

2. Collection and distribution of those royalties are executed by one of those organizations which manages the property rights of authors, performers and manufacturers of phonograms and videograms on the collective basis in accordance with the agreement between those organizations.

3. Amount of royalty and terms of payment shall be determined by the agreement made, on the one hand, by the said manufacturers and importers, and, on the other hand, those organizations who manage the property rights of authors, performers, manufacturers of phonograms and videograms on the collective basis. If the parties do not come to such agreement, the royalty is distributed by a specially authorized body among the authors and other persons obtaining copyright or/and related rights on those works, which are mentioned in Articles 1051 and 1052 and regarding which in ordinary conditions we may propose that reproducing of their works took place for personal purpose.

Article 1053. Release from Payment of Royalty

1. The royalty will not be paid in connection with those facilities and material bearers stipulated in Article 1051 and 1052, which are:

a) object of export;

b) professional facilities not intended for home use;

2. The royalty will not be paid also in case of import of the said facilities and materials by natural persons for their personal purposes.

235

Article 1054. Reprographic Copying of Works

Reprographic copying (copy-making) not for gaining direct and indirect profit is allowed without consent of the author or another person obtaining copyright, and payment of royalty, is allowed only with obligatory indication of the author and borrowing source and, in separate cases, in the amount that is determined for the said purpose. Such reprographic copying is allowed:

a) in a single copy by libraries and archives for substitution of the lost, worthless copies of lawfully edited works; for substitution of lost, or worthless copies of works to be passed to other libraries if receipt of such copies in ordinary conditions otherwise is not available;

b) in a single copy of the lawfully edited separate articles and other small works or short extracts of written works (less software) by the libraries and archives – at request of natural persons for study, scientific or personal purposes;

c) separate articles and other small works edited lawfully or short extracts of written works (less software) by educational institutions – for studies.

Article 1055. Right to Use Works Without the Author’s Consent

The following is allowed without the consent of author or another owner of copyright and payment of royalty only with obligatory indication of the author and borrowing source:

a) quotation from the lawfully published works in original or translated for the scientific, research, polemic, critical and informational purposes – in the amount which is justified by the quotation purpose, including reproducing of short extracts from newspapers and magazines, in kind of printed review;

b) use of small extracts from the lawfully published works in kind of illustration, in editions, radio- and tele-programs, in audio- and videorecords of educational nature – in the amount determined by the expressed purpose;

c) reproducing articles on the current economical, political, social and religious problems legally published in the periodicals or similar works broadcast by newspaper and magazines or their public broadcast – in those cases when such reproducing or public broadcast is not specially prohibited by the author or another owner of copyright. At the same time, the author preserves the right to publish such work in collection.

d) reproducing or public broadcast of works shown or heard within the process of current events in review of the current events by photography, broadcast or cable transmission in the amount justified by the informational purpose;

e) reproducing in newspapers and magazines and other periodicals or public broadcast of the political reports, speech, address, lecture, sermon and other similar works, including speeches made at the legal proceedings in the

236

amount determined by the informational purpose. At the same time, the author preserves the sole right to edit such works in a separate collection or a book;

f) reproducing legally published works with a raised point type face or with other special means created for the blinds, not for purpose of gaining profit, except those works specially created for such means of use.

Article 1056. Right to Use Works on Places of Public Assemblage

Reproducing or public broadcast of works of architecture permanently located in places open for easy visit, photography, fine art is allowed without consent of the author or another owner of copyright and payment of royalty – except those cases when image of works represents the main object of such reproducing or public broadcast, or when image of works is used for gaining profit.

Article 1057. Public Performance of Legally Published Musical Works

Public performance of legally published musical works without consent of the author or another owner of copyright and payment of royalty, is allowed within official, funeral and religious ceremonies – in amount justified by the character of such ceremony.

Article 1058. Reproducing of Works for Legal Proceedings

Reproducing of works without consent of the author or another owner of copyright and payment of royalty is allowed for the legal proceedings in amount determined for such purpose.

Article 1059. Short-term Recording of Works by a Broadcast Organization

A broadcast organization may record those works on broadcast of which this organization obtained the right on broadcast, without consent of the author or other owner of copyright and paying them additional royalty, with observance of the following conditions:

a) recording by the broadcast organization by its own facilities and for own program;

b) deletion of such record on expiration of 6 months after recording unless the longer term is agreed with the author of recorded work; such record may be kept without consent of the author in the official archives, if the record is of a documentary nature only.

237

Article 1060. Free Use of Software and Data Base

1. A person who legally owns a copy of software or database, is entitled, without consent of the author or another owner of copyright and paying then royalty:

a) to made changes in software or database which are required for maintenance of consumer’s facilities as well as conduct any action connected with maintenance of software or database, including recording and saving in the computer memory (for one computer or one user of network) and correction of evident errors unless the author contract provides otherwise;

b) to make reserve copy of software or database in condition that this copy is intended only of archives purposes and for substitution of the lost, destroyed or worthless copy of the legal owner;

2. The reserve copy of software or database cannot be used for the purpose other than those determined by paragraph 1 of this article and shall be destroyed on expiration of the term of right of software or database owner.

Article 1061. Right to Decompile Software

A person who legally owns a copy of software is entitled, without consent of the author or another owner of copyright and paying him royalty, to make decompilation of software (to reproduce and process the objective code in initial text); that person may also entrust other persons to make decompilation in case when it is necessary to obtain the ability of coordination between the software independently created by such person and other software, with observance of the following conditions:

a) if information required for obtaining ability of coordination was not available for that person from other sources;

b) the mentioned actions are limited with those parts of decompiled software which are required for obtaining ability of coordination;

c) information received as a result of decompilation will be used only for obtaining the ability of coordination between the independently processed software and other software; it shall not be passed to other persons and cannot be used for processing of new software similar in their subject with the decompiled programs, or for performing such other action that infringes the copyright.

CHAPTER 3. VALIDITY OF COPYRIGHT

Article 1062. Appearance of Copyright and Its Duration

1. The copyright appears on creation of the work and is effective within the author’s life and 50 years after his death, except the cases stipulated by Article 1063.

238

2. Counting of term stipulated by Articles 1062 and 1063 begins from January 1 of the year following the year when the legal fact arises, which was the basis of beginning of counting the said term.

Article 1063. Validity of Copyright

1. The copyright on work published anonymously or under the pen-name is effective within 50 years following the date of legal publication of such work. If within the said term the author of work published anonymously or under the pen-name discloses his personality, or if his personality is doubtless, the clause mentioned in paragraph 1 of Article 1062 is applied.

2. The copyright of work created in co-authorship is effective within the life and 50 years following the death of the last author.

3. After the author’s death the copyright on the work published for the first time is effective within 50 years following its publication.

4. The copyright on works mentioned in Article 1037 is effective within 50 years following the date of their publication, if the work was not published – 50 years following the date of its creation.

5. The copyright a producer of audiovisual work is effective within 50 years following the date of its publication, and, if the works were not published – 50 years following the date of its creation.

Article 1064. Copyright without Time-limit

1. Protection of copyright connected with the concrete work, right on name and right of inviolability of the work is performed without time-limit.

2. After expiration of the copyright term use of the title for the work of the same genre by another author is not allowed if such use arises confusion of authors that may bring the public into the mistake.

3. Publication of works under such pen-name that may arise the likening of authors and bring the public into mistake, is also not allowed.

Article 1065. Rule of Use of Expired Copyright

1. Works with expired validity of copyright may be freely used by any person without paying royalty, at the same time the right of inviolability of authorship, name and title of the work shall be protected. This rule is applied also to those works which were not protected on the territory of Georgia.

2. The law of Georgia may fix special fees for use of those works on the territory of Georgia, the validity of copyright of which is expired. The income received from such fees will be transferred to the authors trade funds and

239

organizations managing the authors property rights on the collective basis. The amount of said fees shall not exceed 3% of profit gained from the use of such works.

CHAPTER 4. COPYRIGHT ASSIGNMENT

Article 1066. Grounds for Assignment of Copyright

1. The copyright shall be assigned by succession under the law or will.

2. Pursuant to the law the sole rights on use of the work provided by Article 1045 are transferred to the heir with the limits of validity of copyright unless the will provides otherwise.

3. The right on authorship title and right on inviolability of the work are not succeeded. The successors are entitled to protect the said personal rights. Such their power are not limited in the term.

4. Unless the author determined otherwise in his life, the following of his personal rights are succeeded:

a) the right to give permit for attaching the work to the works of other authors (illustration, introduction, post face, comments, interpretation, etc.). The said right is succeeded for the term of validity of copyright;

b) the right to publish the unpublished works. The said powers of successors is not limited in term.

Article 1067. Assignment of Author’s Property Right

1. The author or another possessor of the copyright may assign their property rights to other person – a legal successor. Under such agreement the successor is assigned with all sole rights on use of works stipulated by Article 1045.

2. The author or another possessor of copyright also may give permit to another person for use of the work by the defined means.

3. The permit for use of the work by the defined means will be given on the grounds of author contract on issue of sole or ordinary license.

Article 1068. Exclusive License

1. According to the author contract on assignment of sole rights (exclusive license), the author or another possessor of copyright assigns the sole right to use the work by the defined means and in limits fixed by the contract to that person (licensee) only who is assigned with those rights, and grants him with the right to ban such use of the work by other persons (including the author himself).

240

2. The right to ban use of the work by other persons may be exercised by the author if the licensee does not observe this right.

Article 1069. Ordinary License

1. According to the author contract on assignment (ordinary license) the author or another possessor of copyright gives permit to the licensee to use the work on equal terms with those persons who obtain permit for use of such work by the same means as well.

2. The right assigned under the author contract is deemed as ordinary right unless the contract provides otherwise.

Article 1070. Use of Work After Transfer of Exclusive License

In case of assignment of sole rights on use of the work (exclusive license) the author preserves the right to use such work only when publishing his complete works five years after the publication of the work as a result of assignment of sole rights. At the same time the author has no right to use such work independent of the complete works.

Article 1071. Author Contract

1. The author contract shall provide: the exact description of work to be used (amount, genre, title), concrete means of use of the work, the term and territory within which assignment is effective; amount of royalty or/and the rule of determination of the amount of royalty for any means of use of the work, rule and term of payment as well as other terms considered significant by the parties.

2. The right to use the work by those means which directly are not determined by the contract belongs to the author.

3. If the author contract does not provide the means of use of the work (concrete rights assigned under the author contract), the contract is deemed as made on such means of use of the work which may be considered as necessary by the parties for execution of that purpose they’ve had when making the contract.

4. If the contract does not provide the term of assignment the contract may be terminated by the author on expiration of three years after the making of it. The beneficiary shall be notified about this in writing six months prior to the termination of contract.

5. If the author contract does not stipulate the territory of assignment the validity of the right assigned under the contract is limited by the territory of Georgia.

241

6. Amount of royalty and payment of it shall be determined in the author contract by agreement between the parties.

7. If royalty for edition or another reproducing of the work is determined in the author contract at the fixed amount, the contract shall fix the maximum copies of the work as well.

8. The rights assigned under the author contract may be totally or partially be transferred to other persons if directly provided in the contract.

Article 1072. Invalidity of Author Contract

1. The clause of author contract is void if it restricts the author’s right to create the work on the defined subject or in defined sphere in future.

2. The subject of author contract cannot include assignment of the right on all those works which the author is able to create in future.

Article 1073. Form of Author Contract

The author contract shall be made in writing. The author contract on use of the work in periodicals may be made in verbal form. The contract on occasional broadcast of oral work via television or radio may be made in verbal form too.

Article 1074. Contract on Creation of Work

According to the contract on creation of the work the author undertakes to create the work according to the terms and conditions of the contract and pass it to the customer; the customer undertakes to accept the work and pay royalty to the author.

Article 1075. Obligations of Parties to Contract

1. The author is obliged to create the work by himself unless the contract provide otherwise. Entering another person in creation of the work or change in composition of the authors collective is allowed only with prior consent of the customer.

2. The customer is obliged on expiration of the term stipulated by the contract to look through the work and notify the author in writing about approval of the passed work, or – on the grounds of terms and conditions stipulated by the contract – rejection of it, or necessity of making alterations in it.

3. If the written notification is not sent to the author in the term fixed by the contract, the work is deemed as approved by the customer.

242

4. The term, rule and amount of advance payment to the author is determined by the contract.

Article 1076. Obligation to Compensate the Loss

A party failed to perform the obligation under the contract or performed it not in proper way shall compensate the loss caused to the other party, including the unearned income.

CHAPTER 5. RIGHTS RELATED TO COPYRIGHT

Article 1077. Related Rights

1. The rights related to the copyright do not impede protection of the copyright.

2. The related rights are exercised with respect and protection of the copyright.

Article 1078. Subjects of Related Rights

1. The subjects of related rights are performers, producers of phonograms or videograms and broadcast organizations.

2. Producers of phonograms or videograms and broadcast organizations shall exercise the rights stipulated by this Section in limits of rights granted by the contract made with performers of the work recorded on phonogram or videogram or the broadcast or transmitted via cable and the author.

3. The performer shall exercise the rights mentioned in this section on condition of observance of copyright on the performed work.

Article 1079. Related Rights Protection Mark

Observance of any formalities is not obligatory for appearance and exercising of the related rights. Producer of phonogram or videogram or performer may for declaration of their rights use the mark of protection of related rights to be placed on each copy of phonogram or videogram or/and on its container and composed of three elements:

a) Latin letter P in circle: ® b) Name (title) of a possessor of the sole related right;

c) Year of the first edition of phonogram or videogram.

Article 1080. Performer

An actor (of theatre, cinema, etc.), singer, musician, dancer or other persons who plays role, recites, signs, declaims, plays musical instrument or otherwise

243

performs the work of literature or art, including music-hall turn, trick, puppet turn is deemed as a performer. The director and conductor are deemed as performers too.

Article 1081. Personal and Property Rights of Performer

The performer obtains the following personal and property rights on his performance:

a) right on title;

b) right to protect performance from any perversion or another interference that may cause damage to the performer’s dignity and reputation (right on respect of reputation);

c) right to use his performance in any form, including the right to receive honorarium for any use of performance.

Article 1082. Sole Right to Use Performance

1. The sole right to use performance implies the right to allow or ban:

a) recording of performance that was not recorded before;

b) reproducing the record of performance except those cases when reproducing of performance recorded with the performer’s consent takes place for the same purpose when the performer’s consent on such record was given;

c) broadcast or cable transmission of the performance, or another public transmission of performance, except those cases when there is transmitted with the performer’s consent of performance recorded or transmitted earlier.

d) broadcast or cable transmission of performance unless recording of this performance for the first time was carried out for the purpose of gaining profit;

e) let of that published phonogram or videogram which includes performance with participation of the performer.

2. The permit stipulated in paragraph 1 of this Article will be used by the performer and, for performance by the collective of performers – by the manager of such collective on the grounds of written contract made with the beneficiary.

Article 1083. Agreements Between Performer and Possessors of Other Related Rights

1. Making agreement between the performer and broadcast organization or broadcast or cable transmission of performance arises assignment of the performer’s right on recording, its further broadcast and reproducing only if

244

this is directly provided by the agreement made between the performer and broadcast organization. In case of such use the amount of royalty to be paid to the performer shall be determined by the said agreement.

2. Making agreement between the performer and producer of audiovisual work on creation of audiovisual work arises assignment of the performer’s rights stipulated by Article 1082. Transfer of rights by the performer is limited by use of audiovisual works and, unless the agreement provides otherwise, does not contain the right of separate use of voice and image fixed in the audiovisual work.

3. Making agreement between the performer and producer of phonogram or videogram on recording of performance on the phonogram or videogram arises assignment of the performer’s right on lease of phonogram or videogram. At the same time, according to Article 1093, the performer preserves the right on royalty for lease of phonogram or videogram copy.

Article 1084. Official Performance

1. The performer obtains the right on name for that performance which is created by him as the official duty or performance of task of the employer. The sole right on use of such performance belongs to a person with whom the performer has the labor relationship, unless the contract between them provides otherwise.

2. Sole rights of the performer stipulated by Article 1082 may be transferred to another person under the contract.

Article 1085. Producer of Phonogram

A natural or legal person who undertakes initiative and responsibility for performance of the first sound recording of performance or other voices is deemed as a producer of phonogram; unless opposite ground exist, a natural or legal person mentioned on then phonogram or its container in proper way, shall be deemed as the producer of phonogram.

Article 1086. Sole Rights of Producer of Phonogram

1. The producer of phonogram obtains the sole right to use the phonogram in any form, including the right to receive fee for any use of phonogram.

2. The sole right on use of phonogram implies the right to allow or prohibit:

a) a phonogram reproducing;

b) phonogram remake or processing with any other means;

c) distribution of phonogram copies by any means: sale, lease, etc;

245

d) importing phonogram copies for distribution, including those copies which are produced with consent of producer of this phonogram.

Article 1087. Producer of Videogram

A natural or legal person who undertakes initiative and responsibility for performance of the first record of image succession with or without soundtrack, unless the opposite grounds exist, is deemed as the producer of videogram. A natural or legal person who is mentioned on the videogram or its container in proper way is deemed as the producer of videogram.

Article 1088. Sole Rights of Producer of Videogram

1. The producer of videogram obtains the sole right to use the videogram in any form, including the right to receive fee for any use.

2. The sole right on use of videogram implies the right to allow or prohibit:

a) a videogram reproducing;

b) remake or processing of videogram with other means;

c) distribution of videogram copies by any means: sale, lease, etc;

d) importing videogram copies for distribution, including those copies which are produced with consent of producer of this videogram.

Article 1089. Distribution of Phonogram and Videogram

1. If the copies of legally published phonogram or videogram are sold their further distribution is allowed without consent of the producer of phonogram or videogram and paying fee to him.

2. The right to distribute copies of phonogram or videogram by lease belongs to their producer independent of the ownership of those copies.

3. The sole rights of producers of phonogram or videogram stipulated by Article 1086 and 1088 may be transferred to another person under the agreement.

Article 1090. Program of Broadcast Organization

A program created by a broadcast or cable transmission organization, or, under its order and by its funds, by another organization, is deemed as the program of that broadcast organization.

246

Article 1091. Sole Rights of Broadcast Organization

1. The broadcast organization obtains the sole right to use its program in any form, including the right to receive fee for any use of the program.

2. The sole right on use of the program implies the right of broadcast organization to allow or prohibit:

a) program recording;

b) reproducing of program record except the case when the program is recorded with consent of broadcast organization and reproducing is conducted for the same purpose for which the record performed;

c) synchronous broadcast of the program by another broadcast organization;

d) broadcast of the program;

e) public broadcast of the program at the place where the entrance is payable.

Article 1092. Free Use of Objects of Related Rights

1. Use of performance, phonogram, videogram, program of broadcast organization and use of their records is allowed with consent of the performer, producer of phonogram or videogram and broadcast organization and without payment of royalty to them in the following cases:

a) when quoting in kind of short extracts from the performance, phonogram, videogram, program of broadcast organization if such quoting takes place for the scientific, research, polemical, critical and informational purposes, in the amount determined for the said purpose;

b) when studying or scientific researching in kind of short extract, illustration, in the amount determined by the said purpose;

c) when including short extracts from the performance, phonogram, videogram, program of broadcast organization in the review of current events;

d) in other cases established in connection with restriction of the property rights of authors of works of science, literature and art.

2. Use by natural persons of the performance, program of broadcast organization and their records as well as reproducing of phonograms and videograms for the personal use purpose is allowed without consent of the performer, producer of phonogram or videogram, broadcast organization. Such reproducing is carried out on condition of payment of the royalty in accordance with the rule stipulated by Article 1051 and 1052.

247

Article 1093. Use of Phonograms Produced for Commercial Purposes

1. The following is allowed for purpose of gaining profit without consent of the producer of the phonogram or videogram and the performer recorded on such phonogram or videogram but with payment of royalty:

a) public performance of phonogram or videogram;

b) broadcast of phonogram or videogram;

c) cable transmission of phonogram or videogram;

2. Collection, distribution and payment of royalty stipulated by paragraph 1 of this Article is performed by one of those organizations managing the right of phonogram producer and performer on the collective basis according to the agreement between those organizations.

3. Amount of royalty and terms of its payment is determined by the agreement between the user or users of phonogram, on one hand, and one of those organizations managing the rights of producers of phonograms and videograms and performers, on the other hand, and, if the parties do not achieve to such agreement, by a specially authorized body. Amount of royalty is established for any kind of use of phonogram and videogram.

4. The users of phonograms shall present to the organizations mentioned in paragraph 2 of this Article their programs (plans) which shall contain true information about the amount of use of phonograms and videograms as well as other information and documents required for collection and distribution of the royalty.

Article 1094. Right on Short-term Use of Phonogram

The broadcast organization is entitled to perform recording of the performance and program for the short-term use and reproducing of such record without consent of the performer, phonogram and videogram producer and broadcast organization if the following terms are available:

a) obtaining preliminary consent of the broadcast organization on the broadcast of that performance or program in connection with which the recording took place or reproducing such record for the short-term use;

b) producing the short-term record by the broadcast organization and its reproducing by own facilities and for own program;

c) deletion of such record in condition stipulated for the short-term records of works of science, literature and art.

248

CHAPTER 6. VALIDITY OF RELATED RIGHTS

Article 1095. Validity of Related Rights

1. The performer’s right stipulated by Article 1082 is effective within 50 years following the first performance.

2. The right on performer’s name and the right on respect of the performer’s prestige are protected without limit in time. Protection of the performer’s personal rights after his death is exercised in accordance with the rule stipulated for protection of the personal non-property rights of the author of a work of science, literature and art.

3. The right of phonogram and videogram producer stipulated by Articles 1086 and 1088 is effective within 50 years following the first publication of phonogram and videogram or its first recording unless a phonogram and videogram is published within this term.

4. The right of broadcast (cable transmission) organization stipulated by Article 1091 is effective within 50 years following the first broadcasting of program by the broadcast organization.

5. Counting of terms stipulated by paragraphs 1, 2 and 3 of this Article begins from January 1 of the year following that year when the jural fact basing the beginning of counting of the said term takes place.

6. The rights stipulated by this Section shall, within the limit of time remained of those terms mentioned in paragraphs 1, 2 and 3 of this Article, be transferred to the successors of a performer, phonogram and videogram producer, broadcast organization, and in case of a legal person – to the assignee.

7. The right of protection of performer’s name and prestige is not transferred by succession. After the performer’s death their protection is exercised in accordance with the rule stipulated for protection of the author’s personal right.

CHAPTER 7. PROTECTION OF COPYRIGHT AND RELATED RIGHTS

Article 1096 Consequences of Violation of Copyright

1. A natural or legal person who does not perform the requirements of this Section shall be deemed as a breaker of copyright and related rights.

2. Possessors of the sole copyright and related rights are entitled to claim from the breaker:

a) recognition of the right;

b) restoration of situation existed before violation of the right and eradication of those actions which violate the right or create the damage of its violation;

c) compensation of the loss, including the unearned income;

249

d) instead of compensation of the loss, payment of that income earned by the breaker in result of violation of the copyright and related rights;

e) payment of indemnity the amount of which is determined by the court instead of compensation of the loss and seizure of income;

f) taking other measures connected with their rights those stipulated by the law of Georgia.

3. Measures stipulated by items “c”, “d”, “e”, “f” of paragraph 2 of this Article are taken with the choice of a possessor of copyright and related rights.

Article 1097. Counterfeit Product

1. Copies of works and phonograms or videograms the production of distribution of which arises violation of copyright and related rights shall be deemed as counterfeit copies.

2. Copies of those works or phonograms which are protected in Georgia in accordance with this Code and which are imported into Georgia without consent of the possessors of copyright and related rights from those countries when those works and phonograms have never been protected, or their protection was suspended, are deemed as counterfeit as well.

Article 1098. Seizure of Counterfeit Product

1. The court may pass a judgement on seizure of counterfeit copies of works or phonograms and videograms as well as materials and facilities required for their reproduction. The counterfeit copies of work or phonograms may be passed to the possessor of copyright and related rights at the latter’s request.

2. The counterfeit copies of works or phonograms and videograms not requested by a possessor of copyright and related rights as well as materials and facilities required for their reproduction are subject to destruction by the court decision.

3. Counterfeit copies of works or phonograms and videograms fairly purchased by the third persons are not subject to seizure.

CHAPTER 8. COLLECTIVE MANAGEMENT OF PROPERTY RIGHTS

Article 1099. Establishment of Organization for Management of Copyright

The authors of works of science, literature and art, performers, producers of phonograms and other possessors of copyright and related rights are entitled for exercising of their property rights (public performance, broadcasting and cable transmission, reproducing of works by mechanical, magnetic or other recording) to establish organizations which will manage the property rights on the collective

250

basis. The procedure of establishment of such organizations and limits of their powers are determined by the law of Georgia.

SECTION TWO

INDUSTRIAL PROPERTY

Article 1100. Protection of Rights on Invention, Working Model and Industrial Sample

1. Protection of rights on invention, working model and industrial sample is exercised by issue of patents in accordance with the Patent Law of Georgia.

2. The right on obtaining patent belongs to the author of invention, working model and industrial sample or his assignee.

3. The right on authorship of invention, working model and production industrial is inalienable and unlimited in term.

4. The patent holder enjoys the sole right within the term of validity of patent.

Article 1101. Protection of Selection Rights

Protection of sole right on a species of plant or animal (selection achievement) is exercised by issue of certificate under the appropriate law.

Article 1102. Protection of Sole Rights on Trade Mark

Protection of sole right on the trade mark is exercised under the appropriate law on the grounds of its registration. The right to get certificate on the trade mark belongs to the entrepreneur.

Article 1103. Right on Geographical Indication and Name of Origin

The right on name and geographical indication of origin of goods (services) is regulated under the appropriate law.

Article 1104. Protection of Firm Name

Protection of the sole right on firm name is exercised under this Code, Law on Entrepreneurs and other regulatory acts of Georgia on industrial property.

Article 1105. Protection of Industrial and Commercial Secret

1. An entrepreneur who possesses the industrial and commercial secret (“know-how”) which is the technological, organizational or commercial information of

251

top significance as it is confirmed by necessary and adequate measures taken for keeping it secretly, obtains the sole right on such information.

2. Protection of the sole right on “know-how” is exercised under this Code and other legislative acts on industrial property.

252

BOOK FIVE MATRIMONIAL LAW

SECTION ONE

MARRIAGE CHAPTER 1. PROCEDURE AND CONDITIONS OF CONSUMMATION OF

MARRIAGE

Article 1106. Concept of Marriage

Marriage is the voluntary union of a woman and a man aimed at creation of a family registered at the registry office.

Article 1107. Conditions of Consummation of Marriage

The following is required for consummation of marriage:

a) marriageable age;

b) consent of the bride and groom.

Article 1108. Marriageable Age

1. The marriageable age is established at 18.

2. In exclusive cases consummation of marriage is allowed from 16 with the prior written consent of the parents or other legal representatives.

3. In the case of parents’ or other legal representatives’ refusal of consent the permit for consummation of marriage in availability of good motives may be given by the court on the grounds of application of the bride and groom.

Article 1109. Consent of Bride and Groom Marriage Promise

1. The prior consent (promise) of bride and groom does not arise the obligation of marriage in future.

2. Marriage promise is not the grounds for claim on the enforceable marriage in the court.

3. Gifts connected with the marriage promise shall be returned to the parties in case of non-consummation of marriage.

Article 1110. Registration of Consummation of Marriage

1. Consummation of marriage is registered on expiration on one month following the day when persons willing to consummate marriage submit the application

253

to the registry office. The application is effective within two months following the expiration of the one-month term.

2. In some cases on availability of good motives the one-month term may be reduced by the registry office.

3. In case of exclusive circumstances as a child’s birth, real danger for the life of any party and other similar circumstances, the marriage may be registered at the very day of submission of application.

Article 1111. Registration of Marriage

Registration of marriage takes place at the registry office in accordance with the place chosen by the bride and groom.

Article 1112. Submitting Application for Consummation of Marriage

Persons willing to consummate marriage shall personally submit the application to the registry office. In the application they shall confirm that there are no circumstances hindering the marriage, as those stipulated by Article 1120, that they are informed about the marital status of each other as well as they know how many times each of them were married and have they children or not.

Article 1113. Duties of Registry Office

1. The registry office which accepts the application of persons willing to marry shall inform them about the conditions and procedure of marriage registration as well as explain them the rights and duties of a married couple and parents stipulated by this code, warn them about their responsibility for concealment of circumstances impeding the marriage.

2. Registry offices shall assure themselves that there are no circumstances impeding the bride and groom to marry and that they are informed of the health and marital status of each other.

Article 1114. Registration of Marriage out of Registry Office

At the request of the bride and groom and on availability of good motives, registration of marriage may take place out of the registry office.

Article 1115. Marriage in Festive Conditions

With consent of the bride and groom the consummation of marriage is carried out in the festive conditions.

254

Article 1116. Duty on Providing Information of Health Status

Within registration of the marriage the bride and groom shall declare that they are informed of the health status of each other.

Article 1117. Participation of Witnesses within the Registration of Marriage

Registration of marriage is carried out in the presence of two full-aged witnesses.

Article 1118. Procedure of Consummation of Marriage of Aliens

1. For consummation of marriage of aliens there is required the certificate of appropriate bodies of their countries on absence of any circumstances impeding this marriage.

2. This rule is not applied to the stateless persons or to the citizens of those countries where the above-mentioned certificates are not issued.

Article 1119. Appeal against Refusal of Registration

Refusal of registration of marriage by the registry office may be appealed at the court.

Article 1120. Circumstances Impending the Marriage

1. Consummation of marriage is not allowed:

a) between the persons at least one of whom is married;

b) between direct ascendants and descendants;

c) between a brother and sister and half-brother and half-sister;

d) between an adopt-parent and adopted child;

e) between those persons at least one of whom is recognized by the court as incapable for his/her mental disease or imbicility.

2. Items “b”, “c”, “d” of paragraph 1 of this Article are applied also in the case of disintegration of relationship as a result of deprivation of the parental rights.

Article 1121. Procedure of Repeated Marriage

1. In case of repeated marriage a person shall present the certificate on dissolution of the previous marriage when passing the registration of marriage.

2. In case of death of one spouse, the other spouse shall present the certificate on death of the spouse for registration a new marriage.

255

CHAPTER 2. TERMINATION OF MARRIAGE

Article 1122. Grounds of Termination of Marriage

The marriage is terminated:

a) with the death of one spouse;

b) in accordance with the rule established by the law, by recognition of one spouse as dead;

c) with dissolution of marriage.

Article 1123. Inadmissibility of Dissolution of Marriage

1. Dissolution of marriage is carried out by legal procedure, and in case stipulated by Article 1124 and 1125 – at the registry office.

2. Within the wife’s pregnancy and one year after the child birth the husband has no right to institute the case in dissolution of marriage without the wife’s consent.

Article 1124. Procedure of Dissolution of Marriage

1. Dissolution of marriage at the civil registry office according to the place of residence of one of the spouses is allowed with the mutual consent of the spouses who have not got minor children and submit joint application for dissolution of marriage.

2. In application on dissolution of marriage the spouses shall confirm not only their mutual consent but the fact that they have not got minor children.

3. Dissolution of marriage may be performed on absence of one of the spouses if he/she cannot appear at the registry office for the good motives, and he/she presents the properly certified application for dissolution of marriage as the confirmation of his/her consent.

4. Dissolution of marriage takes place on expiration of 1 month following the day of submission of application for dissolution of marriage, except the cases stipulated by paragraph 3 of Article 1110.

5. Marriage is deemed as terminated from the moment of registration of the dissolution of marriage at the registry office.

Article 1125. Dissolution of Marriage under Application of One Spouse

Under the application of one spouse the marriage is dissolved at the registry office with the person, who:

a) is recognized as missing in accordance with procedure established by the law;

256

b) is recognized incapable for mental disease or imbecility;

c) is sentenced to three years imprisonment at least.

Article 1126. Dissolution of Marriage in Case of Difference between Spouses

In the case of difference between the spouses or if the spouses have got minor children the case in dissolution of marriage shall be considered by the court.

Article 1127. Consideration of Case in Dissolution of Marriage by Court

1. The court shall consider cases in dissolution of marriage in accordance with legal proceeding established by the Code of Civil Procedure of Georgia.

2. The court shall take measures for reconciliation of spouses; it is entitled to postpone the consideration of the case and appoint the term of reconciliation for the spouses not to exceed six months.

3. Dissolution of marriage will take place if the court resolves that further living together of the spouses and preservation of the family is impossible notwithstanding the measures taken for reconciliation.

4. When passing decision on dissolution of marriage the court takes measures, if necessary, for protection of interests of minor children and disable spouse.

Article 1128. Passing Decision on Residence of Children and Their Maintenance

1. When the spouses are not agreed in the residence of their children and means to the paid for their maintenance after dissolution of marriage, the court shall parallel with dissolution of marriage determine what child will stay with this or that spouse and what parent and at what amount will pay the allowance (alimony).

2. In case stipulated by this Article, if necessary, the guardianship body shall be involved in the case consideration.

Article 1129. Passing Decision on Maintenance of a Spouse

At the request of a spouse who has right to get maintenance from the other spouse, the court shall, parallel to the settlement of case in dissolution of marriage, determine the amount of allowance to be paid to the other spouse.

257

Article 1130. Passing Decision on Division of Spouses’ Property

1. At request of the spouses or one of them, the court shall, parallel to the settlement of case in dissolution of marriage, consider the issue of division of the property which is in co-ownership of the spouses.

2. If such division concerns the rights of a third person the dispute on division of property cannot be settled parallel with the case in dissolution of marriage.

Article 1131. Fee for Issue of Certificate on Dissolution of Marriage

Passing the decision on dissolution of marriage the court shall determine the amount from 50 to 200 lari to be paid by one or the both spouses for issue of the certificate of dissolution of marriage. If the court considers that the fee shall be paid by the both spouses it shall determine the amount to be paid by each spouse.

Article 1132. Execution of Judgement on Dissolution of Marriage

1. The effective judgement on dissolution of marriage is executed at request of one or the both spouses through the registration at the registry office not later three years following the effective date of judgement.

2. The marriage is deemed as dissolved from the moment of registration of dissolution of marriage at the registry office.

Article 1133. Right to Restore the Pre-marriage Surname

A spouse who has changed his/her surname in marriage has the right to bear the same name or restore, at his/her request, the pre-marriage surname, after dissolution of marriage.

Article 1134. Application for Restoration of Pre-marriage Surname

A spouse who wills to bear the pre-marriage surname, shall apply to the registry office within the registration of dissolution of marriage. The registry office shall make the appropriate entry on giving the pre-marriage surname to the spouse.

Article 1135. Restoration of Marriage on Return of a Spouse Declared Dead or Recognized as Missing

1. If a spouse, who was declared dead or recognized as missing in accordance with the procedure established by the law, and the marriage with whom was dissolved on that ground, comes home, and the judgement on him/her declared dead or recognized missing is vacated, the registry office may restore

258

the marriage by the joint application of the spouses, and if their marriage was dissolved by court, the latter will vacate the judgement on dissolution of their marriage at their application.

2. The marriage cannot not be restored if a spouse of the person declared dead or recognized as missing has already been married another person.

Article 1136. Right on New Marriage

The divorced spouses have right on a new marriage.

Article 1137. Registration of Dissolution of Marriage According to Residence

Registration of dissolution of marriage takes place at the registry offices according to the residence of the both or one spouse.

Article 1138. Registration of Dissolution of Marriage

1. Registration of dissolution of marriage on the grounds of judgement is carried out by the registry office at application of the both or one of spouses.

2. In case of registration of dissolution of marriage at application of one spouse the registry office shall notify the other spouse if the address of him as well as of that registry office which has registered the consummation of marriage, is known.

Article 1139. Procedure of Dissolution of Marriage with Confined Spouse

1. Spouse who wills to dissolute marriage on the grounds stipulated by Article 1125, shall present to the registry office the property certificate and effective judgement copy on recognition of the other spouse as missing or incapable, or the copy of court sentence or extract of sentence that his/her spouse was sent to prison for at least three years.

2. The registry office shall notify the imprisoned spouse or the guardian of incapable spouse about the laid application. The notice shall determine the terms of response concerning if there is the difference concerning children, division of common property of the spouses or payment of alimony in favour of that incapable spouse who requires support. The term of response shall not exceed three months.

3. If the information is provided that no dispute exists or the response is not received in the mentioned term, the registry office shall carry out registration of the dissolution of marriage.

259

CHAPTER 3. INVALIDITY OF MARRIAGE

Article 1140. Grounds of Invalidity of Marriage

1. The marriage shall be recognized invalid if conditions established by Articles 1107, 1108 and 1120 are infringed and if registration of marriage was not aimed at creation of a family (fictitious marriage).

2. The marriage may be recognized invalid by the court only.

Article 1141. Presumption of Validity of Marriage

If when consummating marriage the spouse were not informed of those circumstances which are the grounds of invalidity of their marriage, the marriage is terminated by the court from the moment of establishment of those circumstances, but until that time the marriage arises all those legal consequences as the valid marriage.

Article 1142. Invalidity of Marriage with Person not Attained to the Marriage Age

1. Marriage with a person who has not attained to the marriageable age and has not has his/her marriageable age, may be recognized invalid if the interests of the spouse married until attainment of the marriageable age require this.

2. The right to demand the recognition of marriage invalid on this ground is given to the minor spouse, his/her parents or guardian (tutor) as well as to the tutorship and guardianship body.

3. If by the moment of consideration of the case the minor spouse attains to the marriageable age or is pregnant, the marriage may be recognized invalid at his/her request only.

Article 1143. Recognition of Invalidity of Marriage for Impediment Circumstances

1. The marriage registered with violation of conditions stipulated by Article 1120 may be recognized invalid by the court.

2. If by the moment of consideration of the case no impediment circumstances are available, the court may recognize the marriage valid from the moment of passing of those circumstances. The right to demand the recognition of marriage invalid on such grounds is given to the spouses and those persons whose rights are violated by this marriage as well as to the guardianship and tutorship bodies.

260

3. When considering the case in invalidity of marriage with the mentally diseased or person recognized as incapable for his/her imbecility, intervention in consideration of a guardian is obligatory.

Article 1144. Recognition of Invalidity of Marriage under Compulsion

1. In case of marriage under compulsion a spouse(-s) may institute action on recognition of the marriage invalid.

2. The fact of marriage under compulsion shall be established by the court.

Article 1145. Recognition of Invalidity of Fictitious Marriage

1. The marriage not aimed at creation of a family may be recognized invalid.

2. The right to institute action on recognition of the fictitious marriage invalid is given to the registry office and by the other spouse as well if one spouse when married did not aim at creation of the family.

3. The marriage cannot be recognized fictitious if the registered persons have actually created family prior to consideration of the case by court.

Article 1146. Moment of Invalidity of Marriage

1. The marriage recognized invalid is deemed as such from the day of registration of marriage and does not arise the rights and duties of the spouses.

2. The proprietary relationship of those persons whose marriage was recognized invalid, are regulated by the procedure established on the common property by this Code.

3. When passing decision on recognition of invalidity of the marriage, the court is entitled to grant the spouse who was not informed and could not be informed of the existed circumstances impeding the marriage (conscientious spouse), with the right to require allowance from the other spouse in accordance with Articles 1182 and 1183, and when dividing the property, purchased until the recognition of marriage invalid, to apply the rules stipulated by Articles 1158 and 1171.

4. Recognition of marriage invalid does not encroach on the rights of children born in such marriage.

Article 1147. Indemnification of Conscientious Spouse

A conscientious spouse who suffered the loss as a result of the marriage recognized invalid is entitled to claim indemnification.

261

Article 1148. Recognition of Marriage Invalid by Court Only

Nobody may mention marriage as invalid unless the marriage is recognized invalid by the court.

Article 1149. Inadmissibility of Invalidity of Marriage after Death of Spouses

After death of the both spouses nobody may require the recognition of marriage invalid.

Article 1150. Repeated Marriage on Recognition of Marriage Invalid

Those persons the marriage of whom was recognized invalid may married for the second time in accordance with the common procedure if there is not the ground of invalidity of marriage any more.

CHAPTER 4. RIGHTS AND DUTIES OF SPOUSES

1. General Provisions

Article 1151. Significance of Consummation of Marriage

Rights and duties of spouses arise only by consummation of marriage registered at the registry office.

Article 1152. Equality of Spouses

The spouses enjoy equal personal and property rights and undertake equal obligations in the family relations.

Article 1153. Prohibition of Discrimination

No direct or indirect restriction of rights, granting no direct or indirect priority according to the origin, social and property status, race and national belonging, sex, education, language, religious, activity and job, residence and other circumstances is allowed in marriage and matrimonial relations.

II. Personal Rights

Article 1154. Rights to Choose Surname

When consummating the marriage the spouses may choose, at their will, the surname of one spouse as their common surname, or each spouse may leave his/her pre-marriage surname, or add his/her surname to the spouse’s surname.

262

Surnames cannot be added if the both spouses or one of them has the double-barreled surname.

Article 1155. Joint Settlement of Family Affairs

Matters of upbringing of children and other family affairs are settled by spouses jointly.

Article 1156. Freedom in Choice of Activity

Each spouse may freely choose activity and occupation.

Article 1157. Free Choice of Residence

Each spouse may choose the residence at his/her discretion unless this contradicts the family interests.

III. Proprietary Rights and Duties Established by Law

Article 1158. Common Property of Spouses

1. Property purchased by the spouses during their marriage is their common property unless the marriage contract made between them provides otherwise.

2. The right of spouses on such property arises also if one of them has held house, taken care of children or had not independent income for other good reason.

Article 1159. Management of Common Property by Mutual Consent

The spouses obtain equal rights on their common property. Owning, use and disposal of this property is exercised by the mutual consent of spouses.

Article 1160. Disposal of Common Property by Mutual Consent

Disposal of common property of the spouses is exercised under spouses agreement, notwithstanding which spouse disposes this property. A contract made by one of the spouses in connection with disposal of the property may be recognized invalid at request of the other spouse, only if the spouse disposing the property had no such right and if it is proved that he/she knew or should know that he/she had not such powers.

Article 1161. Individual Property of Spouses

Property of each spouse is the following:

263

a) property owned by him/her before the marriage;

b) property received by succession or as a gift during the marriage.

Article 1162. Things of Individual Use Purchased During Marriage

Things of individual use, except the jewellery, though purchased at common expenses of the spouses within the marriage, will be deemed as property of that spouse who used those things.

Article 1163. Recognition of Property of a Spouse as Common Property of Spouses

Property of each spouse may be recognized as common property if it is established that during the marriage period the value of this property was significantly increased at expense of the rendered costs (re-planning, reconstruction, completion of building, etc.). The given rule is not applied if the marriage contract provides otherwise.

Article 1164. Division of Common Property of Spouses

At request of each spouse the common property of spouses may be divided both within the marriage period and after termination of marriage.

Article 1165. Destiny of Things Required for Professional Activity within Division of Common Property

Division of common property of the spouses is performed under the agreement between the spouses, and, if such agreement is not achieved, - by court. The court shall determine what thing belongs to which spouse. The things required for the professional activity (musical instruments, physician’s equipment, library, etc.), though purchased within the period of marriage with the common money of spouses, will be passed to that spouse who requires those things for his/her activity.

Article 1166. Compensation of Share on Division of Property

If within the division of common property one spouse receives such things the value of which exceeds his/her share in the common divisible property, the other spouse shall be compensated the value in cash or otherwise.

264

Article 1167. Division of Common Property within the Period of Marriage

If the common property is divided within the period of marriage, that share of property which is not divided as well as the property which they will purchase in future, shall be deemed as the common property of spouses, unless the marriage contract provides otherwise.

Article 1168. Foreseeing of Interests of Minor Children within Division of Common Property

1. Within the division of common property of the spouses the shares of spouses are equal unless the agreement between them provides otherwise.

2. The court may deviate from the principle of equality in shares of the spouses proceeding from the interests of minor children or noteworthy interests of one of the spouses; in particular, the share of one spouse may be increased, provided that minor children are residing with him/her, that he/she is disable, or, if the other spouse spent the common property to the prejudice of family interests.

3. Under the said grounds the court may recognize the property which was purchased by each of them within the factual termination of the marriage or within their living separately, as the property of each spouse.

Article 1169. Rule of Division of Common Debts of Spouses

Common debts of spouses are divided between them in proportion to their own shares in the common property.

Article 1170. Rule of Payment of Debt of One of the Spouses

1. Payment for covering of the debt of one spouse may be performed from his/her property and/or his/her share in the common property which he/she would receive in case of division of property.

2. Payment from the common property of the spouses for the said debts may be performed if the court decides that the value received under liability was used for the common interests of the family.

3. In case of indemnification of the loss caused by the delict of one spouse the payment may be performed from the common property of spouses only if the verdict fixes that this property was purchased by means earned in result of the committed delict.

265

Article 1171. Limitation of Claim for Division of Common Property

The claims for division of common property of the divorced spouses are applied with the three-years term limitation.

IV. Contractual Property Terms of Spouses

Article 1172. Marriage Contract

The spouses may enter into a marriage contract that determines their proprietary rights and duties within the period of marriage and in case of dissolution of marriage.

Article 1173. Entering into Marriage Contract

1. The marriage contract may be made either prior to the registration of marriage, or in any time after the registration.

2. The marriage contract made prior to the marriage registration is effective from the day of registration of marriage.

Article 1174. Contract Form

The marriage contract shall be made in writing and notarized.

Article 1175. Entering into Marriage Contract by a Person with Limited Capability

A person with limited capability may enter into the marriage contract prior to the registration of marriage with consent of the legal representative only.

Article 1176. Content of Marriage Contract

1. The marriage contract may be concluded both on the available property and property to be purchased in future.

2. By the marriage contract the spouses may change the regulations established by the law for the common property of spouses.

3. The spouses may unite all their property to be accounted as the common property acquired within the period of marriage or refuse in total or partially of such unification and establish their shares or part of property owned by each of them.

266

Article 1177. Rule of Bearing Family Expenses

The spouses have the right to determine by the marriage contract the terms of participation in income, the rule of bearing of family expenses by each of them and property to be passed to each spouse in case of termination of the marriage.

Article 1178. Restriction of Rights and Duties Stipulated by Marriage Contract

The rights and duties stipulated by the marriage contract may be restricted with the defined term or depend on occurrence of certain conditions.

Article 1179. Duties Not to Be Changed by Marriage Contract

1. Under the marriage contract there can not be changed the duty of mutual maintenance of the spouses, parental rights and duties before the children, alimony obligation and, in case of differences, the right to apply to the court.

2. Under the contract there cannot be also stipulated such conditions and terms which put one spouse in a heavy situation as well.

Article 1180. Termination of Marriage Contract

1. The marriage contract may be changed or terminated under the agreement of spouses at any time.

2. An unilateral withdrawal from the marriage contract is not allowed.

3. The marriage contract is terminated upon the dissolution of marriage.

Article 1181. Changing Terms and Conditions of Marriage Contract by Court

In case of existence of good motives and on the grounds of application of the spouse concerned the court may change those terms and conditions of the marriage contract which put one of the spouse in the extremely unfavorable position.

CHAPTER 5. Obligation of Mutual Support of Spouses

Article 1182. Person Entitled to Get Support

The spouses shall render material support to each other. In case of refusal of such support or/and lack of agreement between the spouses on payment of support, the following persons are entitled to get support by the court ruling:

a) a disabled spouse requiring material aid;

267

b) a wife in pregnancy period and within three years following the child’s birth.

Article 1183. Right of Disabled Spouse on Support

A disabled spouse requiring aid from the spouse shall preserve the right on support after the dissolution of marriage as well, if became disable before the dissolution of marriage, or within 1 year following the day of dissolution of marriage.

Article 1184. Release from Obligation of Support by Court

The court may release the spouse from the obligation of support or change this obligation for the defined term if the spouses were married for a short time, or a spouse claiming the material support has committed a low action against the payer of allowance, as well as, if the disability of the spouse claiming the material support is caused by use of alcoholic drinks or drugs, or by commitment by him/her of deliberate crime.

Article 1185. Determination of Support Amount

1. The amount of support to be paid in favour of a spouse shall be determined in kind of a sum to be paid monthly according to the material and marital status of the spouses.

2. In case of change of material or marital status of one spouse each spouse has the right to appeal to the court for change of the support amount.

Article 1186. Losing Right on Support

The right on support from the spouse is lost if the grounds stipulated by Articles 1182 and 1183 elapses as well as if the spouse receiving allowance marries anew.

268

PART TWO

RELATIONSHIP OF PARENTS, CHILDREN AND OTHER RELATIVES.

CHAPTER 1. ESTABLISHMENT FILIATION OF CHILDREN

Article 1187. Basis of Origin of Rights and Obligations of Parents and Children

The mutual rights and obligations of parents and children are based on the filiation of children which is confirmed by the procedure stipulated by law.

Article 1188. Establishment of Filiation of a Child in the Case of the Death of Father

In the case of the death of father, a child is considered to be filiated from married parents if she/he is born not later than ten month from the date of the death of the father.

Article 1189. Confirmation of Filiation of a Child from the Married Parents.

The filiation of a child from married parents is confirmed with an entry about marriage of parents in the relevant document.

Article 1190. Establishment of Filiation of a Child from Unmarried Parents.

1. The filiation of a child from parents not married to each other is determined with a joint application of parents to a Vital Statistics office.

2. In case of the lack of a joint application of parents, fatherhood may be determined with the court rule per statement of one of the parents, guardian (carer) of a child or person who supports the child, also per statement of the child himself upon majority.

3. While determining fatherhood, court takes into consideration cohabitation of the mother of the child and the respondent, also conduction of joint economy by them before the birth of child, or mutual raising or support of the child, or/and a confirming document entirely proving the admittance of fatherhood by the respondent.

4. In establishing fatherhood pursuant to procedure provided for by present Article, children have the same rights and obligations towards parents and their relatives as children born by people married to each other.

269

Article 1191. Entry of Married Parents into the Birth Registration.

1. Married mother and father are entered into the birth registration as parents of a child upon the statement of one of them.

2. A person entered as a mother or a father of a child has a right to contest the entry within one year from the date when she/he learned or should have known about the entry. If by that date the person entered as mother or father of a child was a minor, the period of one year is counted from the date when she/he reaches age of eighteen.

Article 1192. Procedure of Unmarried Parents.

1. If parents are not married to each other, the entry of the mother of a child is executed upon the statement of the mother, and entry of the father - upon the joint statement of parents of the child or upon the court decision.

2. If mother has died, is known as incapable, is deprived of parental rights, or it is impossible to find out the address of domicile, entry of the father of the child is executed per statement of the father.

Article 1193. Entry of Father when Fatherhood is not Determined.

When child is born to an unmarried mother and if there is not joint application of parents or a court decision on the establishment of fatherhood, the birth registration will depict mother’s surname as a surname of the father and the given name of the child’s father will be entered upon the instruction of the mother.

Article 1194. Given Name of Child.

Child is named by the mutual agreement of the parents.

Article 1195. Given Surname of Child.

The surname of a child is determined according to the surname of the parents. If the parents have different surnames, the child is given the surname of the mother or father, or a merged surname by agreement of the parents.

Article 1196. Change of Surname of Child.

1. The termination of a marriage of the parents shall not change the surname of a child.

2. Parents, with whom a minor resides after divorce or annulment of marriage, have a right, in line with the interests of the child, to apply to a court with the

270

request granting their surname to the child. If the child is more than ten years old, his/her agreement on the change of surname is also required.

CHAPTER 2. RIGHTS AND OBLIGATIONS OF PARENTS TOWARDS CHILDREN

Article 1197. Equal Rights of Parents Towards Children

Parents have equal rights and obligations towards children. Child has the right to live and grow in a family.

Article 1198. Obligations of Parents Towards Children

1. Parents are authorized and obliged to raise their children, take care about their physical, mental, spiritual and social development, raise them as worthy members of society considering their interests in the primary instance.

2. Safeguarding of right and interests of minors is to be conducted by their parents.

3. Parents are legal representatives of their below the adult age children and safeguard their rights and interests in relation to third persons - courts inclusive, without special powers.

4. Parental rights shall not be exercised contrary to the interests of children.

Article 1199. Rights and Obligations of Divorced Parents Towards Children

Parents have equal rights towards children and are given equal obligations even in the cases when they are divorced.

Article 1200. Raising of Children with Mutual Agreement of Parents

1. All issues of raising children are settled by mutual agreement of parents.

2. In the case when agreement is not reached, the dispute is settled by court with the participation of the parents.

Article 1201. Residence of Minors in Case of Parents Living Apart

1. If due to a divorce or other reasons parents live apart, they shall agree with which parent a minor shall reside.

2. In case when agreement is not reached, the dispute is resolved by a court taking into consideration the interests of the children.

271

Article 1202. Obligations of a Parent Living Apart from a Child

1. A parent living apart from a child has the right to have relationship with the child and is obliged to take part in her/his raising. A parent with whom the child lives shall not hinder the other parent’s a relationship with the child and taking part in his/her raising.

2. A court has the right to withdraw for a definite period of time the right of relationship with his/her child from the parent living apart, if such a relationship intervenes with the normal raising of the child and has a negative impact on him/her.

Article 1203. Rights of Grandparents Towards Minor Grandchildren Grandparents have the right to have relationship with their minor grandchildren even when they do not directly participate in raising them. If parents refuse grandparents in relationship with the grandchildren, a court may oblige the parents to enable the grandparents to have relationship with the grandchildren under procedure established by the court if it does not intervene with the normal raising of children and will not have a negative impact on them.

Article 1204. Right of Claiming the Return of a Minor

1. Parents have right to claim return of a minor from a person who keeps him/her with himself/herself without a legal basis or a court decision.

2. Court may not fulfil such a claim of parents if it opposes the interests of the child.

Article 1205. Deprivation of Parental Rights

1. Deprivation of parental rights as an extreme measure is possible only at law.

2. Parents (or one of them) may be deprived of parental rights if it becomes clear that they (or of them) systematically avoid the fulfilment of the obligation in raising children or abuse parental rights - are cruel children, have a negative influence on them with their immoral behaviour, also in those cases when parents are chronic alcoholics or drug addicts.

3. If both parents are deprived of parental rights, a child is given to the child care institution.

4. Deprivation of parental rights does not release parents the duty to provide maintenance for children.

272

Article 1206. Levying Alimony from Parents Deprived of Parental Rights

Concurrently with deciding of the deprivation parental rights, a court shall settle the issue of levying alimony from the particular person.

Article 1207. Rights of a Child of a Person Deprived of Parental Rights.

A parent who has been deprived of parental rights losses all rights with respect to a child. A child whose parent was deprived of parental rights, retains the right to residence, also property rights established on relations including the right of succession.

Article 1208. Granting the Right to Visit with a Child

S supervision body may allow a person who has been deprived of parental rights to visit with a child if this does not have a negative influence on the child.

Article 1209. Restoration of Parental Rights

1. Restoration of the right of parenthood is possible only at a law per statement of a child, one of the parents or the supervision body.

2. The restoration of parental rights is possible only if the person has improved his or her conduct and descries and is capable of exercising parental rights, and if the restoration of parental rights is required by the interests of the child.

3. If a child has reached the age of ten, a court shall also take into consideration the wishes of the child.

4. The restoration of parental rights is not permitted if a child is adopted.

Article 1210. Removal of Child Without Deprivation of Parental Rights

1. If leaving of a child with both or one of the parents due to the reasons beyond the parent’s control is harmful for the child, a court decide to remove the child from both or one of the parents and transfer him/her to the nursing and caring body without deprivation of parental rights.

2. If the reasons for removal of a child cease to exist a court may order return of the child to a parent (parents) according to the request of a parent (parents), considering the interests of the child.

273

Article 1211. Rights of a Parent Who Has Been Removed a Child From

A parent (parents) whose rights are limited with removal of a child, may be permitted to have a relationship with his/her child if this will not have a negative influence on the child.

CHAPTER 3. DUTY OF MAINTENANCE OF PARENTS AND CHILDREN

Article 1212. Obligations of Support for Child

Parents are obliged to support their minor children, also those children who are incapacitated to work and need assistance.

Article 1213. Definition of Support Amount by Parents

The amount of support to be paid to minor children or those who are incapacitated for work is defined by parents by mutual agreement.

Article 1214. Definition of Support Amount by Court

If the parents do not reach an agreement on the amount of support, then the dispute is settled by a court. The amount of support is defined by a court on the basis of clever, fair assessment within the framework of normal support-and-raising requirements. While defining the support amount, a court takes into consideration the actual financial condition of the parents as well as the needs of the child.

Article 1215. Obligation of Participation in Additional Expenses

A parent, who provides maintenance to minor children may be assigned an obligation of participation in additional expenses caused by emergency conditions (serious illness, injury of the child, etc.).

Article 1216. Support for Children in Child Care Institution

Expenses on the children placed in Child Care Institutions be payable by parents in favour of these institutions.

Article 1217. Court Decision on Payment of Support Expenses of a Child

If the respondent is entered as a parent of a child at a vital statistics office, according to Articles 1191 and 1192, a court may decide on levying support fees of the child before the conceptual consideration of the case.

274

Article 1218. Obligation of Children Towards Parents

1. Children are obliged to care of their parents and support them.

2. Adult children capable to work are obliged to support the parents who are incapacitated for work, and need assistance.

3. Children may be released from the obligation to support their parents if a court determines that the parents avoided the fulfilment their parental duties.

4. A parent, who has been deprived of partial rights, losses the of claiming support from children.

Article 1219. Participation of Children in the Support of Parents Incapacitated for Work

1. Participation of each child in the support of a parent who is incapacitated to work, and that needs assistance is determined by court in the form of a monthly support payment , taking into consideration the material and family conditions of the parents and children.

2. While determining this amount a court takes into consideration the obligation of every adult child of the parents regardless of whether a claim for support was submitted against some or all of the children.

Article 1220. Participation of Children in the Additional Expenses

Unless otherwise agreed, the children providing maintenance to their parents who are incapacitated for work may be assigned to participate in additional expenses caused by emergency (serious illness, injury of the parents, etc.).

Article 1221. Claim to Reduce the Amount of Support

1. A parent paying support in favour of his/her minor child has the right to file a claim for reduction of the amount of support specified by a court..

2. Upon a charge in the financial situation of a parent or the needs of a child, a court may change the amount of support at the request of an interested person.

Article 1222. Change of the Amount of Support Due to a Change in Material or Family Condition

If the material or family condition of the parents or children has changed after a court has specified the amount to be paid by parents for the benefit of adult children incapacitated for work or by children for the benefit of the parents

275

incapacitated for work and needing assistance, a court may change the specified amount of support in line with a claim filed by one of them .

CHAPTER 4. DUTY OF MAINTENANCE OF OTHER FAMILY MEMBERS

Article 1223. Obligation of Mutual Support of Siblings

Sisters and brothers which have enough means are obliged to support their minor siblings which need assistance and lack ability to get support from parents. Similar obligation is put upon them towards those adult siblings who are incapacitated for work and need assistance if they are not supported by their parents, spouses or children.

Article 1224. Support Obligation of a Grandchild Towards Grandparents

A grandchild who has enough means is obliged to support his/her grandparents who are incapacitated for work and need assistance, if they are not supported by their child or each other.

Article 1225. Support Obligations of Grandparents Towards Grandchildren

Grandparents who have enough means are obliged to support their minor grandchild needing assistance, if she/he is not supported by parents. Similar obligation is put upon them towards the adult grandchild who is incapacitated for work and needs assistance, if she/he is not supported by his/her parents, spouse or children.

Article 1226. Support Obligations of Step-parents

Step-parents who have enough means are obliged to support their minor step-child or without capacity for work and needing assistance, if she/he is with them for bringing up or support and does not have parents or lacks capacity to get support means from them.

Article 1227. Support Obligations of a Step-child

1. A step-child who has enough means is obliged to support his/her step-parents who are incapacitated for work and need assistance, if they were raising or supporting him/her before.

2. A court may release a step-child from the support obligation of his/her step-parents if they were raising or supporting him/her for less than five years, also if they were not fulfilling the obligation of raising their step-child property.

276

Article 1228. Obligation to Support a Child Taken for Permanent Raising and Support

1. A person who takes child for permanent raising and support but later refuses to raise and support him/her is obliged to support both an adult who is incapacitated for work and needs assistance and a minor if she/he does not have parents or lacks support from them.

2. The procedure established by this Article shall not apply to a guardian or/and trustee.

Article 1229. support Obligations Towards Factual Tutor

A person who was on a permanent raising and support is obliged to render support to his/her factual tutor, if he/she is incapacitated for work, needs assistance, but cannot get it from his/her children or spouse.

Article 1230. Procedure for Establishing the Amount of Support

1. The amount of support for persons mentioned in the present chapter is established by a court in every separate case in the form of a monthly payment considering the material and family condition of the receiver and payer of the support .

2. If support of a family is an obligation of several persons at the same time, a court will decide their share in the execution of this obligation; with regard for the material and family condition at the same time, a court takes into consideration all the persons paying support notwithstanding whether all these persons are requested to pay support or only one or some of them.

Article 1231. Change of the Amount of Support

If the material or family condition of a receiver or payer of support changes after a court has determined the support amount for the persons mentioned in this chapter, the court has a right to change the established amount on the basis of a claim submitted by one of them .

CHAPTER 5. SUPPORT ORDER

Article 1232. Voluntary Payment of Support

1. A person who is obliged to pay alimony executes the payment voluntary according to the place of the personal income reception.

2. The procedure for voluntary payment of support does not exclude the right of a support receiver to address a court at any time with a request on the obligatory payment of support.

277

Article 1233. Obligation of the Administration of an Employing Organization During Payment of Support

1. The administration of an employing organisation effects monthly deductions of a support from salary (pension, allowance, etc.) of the support payer on the basis of a written statement or writ of execution and mails it to the person mentioned in the written statement or writ of execution not later than in three days from the pay day of salary (allowance, pension, etc.).

2. The written statement of the person who wishes to make voluntary payment of a support should be presented to the administration of an employing organization according to the work place, or the place of reception of his/her pension or allowance.

Article 1234. Claiming Support

1. A person who has a right to claim support in line with the procedure established by a law, may request through a court to payment of the support till this right expires notwithstanding the period passed from the moment of origination of the right to claim support.

2. The support payment is made obligatory only for future time from the moment of filing a claim with a court. The past time support may be payable within three years if a court determines that before the claim was filed measures had been taken to get the payment but the support has not been received due to the fact that the obliged person was avoiding the payment thereof.

Article 1235. Payment of Arrears

1. According to the execution paper, the payment of support arrears for the past time is possible for not more than three years counted before the execution paper submission.

2. In the case when the deduction of support has not been possible due to the search of the debtor according to the writ of execution, the support arrears is made payable for the entire period passed, notwithstanding the expiration of the limitation period or reaching majority by the support receiver.

Article 1236. Determination of Support Arrears

1. Support arrears are determined from the factual salary (income) received by the debtor in the period when payment was not executed.

278

2. If the debtor was not working at that time and did not submit documents evidencing his/her salary (income), arrears are determined in accordance with the salary (income) received at the execution of payment of arrears.

Article 1237. Release from Payment of Support

1. The release from payment of support or reduction of support arrears is possible only the decision of a court.

2. A court has a right to release fully entirely or partially the support payer from payment of support arrears if it determines that the non-execution of support payment arouse due to illness of the person or upon other persuasive circumstances.

Article 1238. Termination of Support Obligation

A support obligation arisen with the agreement of the parties may be terminated with the death of one of the parties, expiration of the agreement period, or upon other grounds provided for in the agreement.

CHAPTER 6. ADOPTION

Article 1239. Concept

1. Adoption is allowed only for well-being and interests of a minor where it is envisaged that persons adopting and adopted will have relationship existing between parent and children.

2. Adoption of an adult person is possible if persons adopting and adopted already had factual relationship of parent and a child, if it does not oppose interests of the persons adopting and adopted and if adoption is morally justified.

Article 1240. Confirmation of Adoption Upon Decease of a Guardian

Upon decease of a guardian the fact of adoption may be confirmed at law only in the case where a minor was accepted as a child in a family, and also if the adoptive person adopting submitted a statement of adoption to a court during his/her life-time.

Article 1241. Inadmissibility of Adoption Upon Decease of Child

In the case of decease of a child adoption is inadmissible.

279

Article 1242. Decision on Adoption

A decision on adoption is made by a court on the basis by an adoptive parent according to the residence of the adoptive person or the adopted following the opinion of a child care institution.

Article 1243. Inadmissibility of Adoption through a Representative

Adoption is for unspecified term, cannot be conditional and executed through a representative.

Article 1244. Registration of a Decision on Adoption

1. A decision on adoption should be registered at a vital statistics office at the place of decision-making.

2. A court is obliged to inform a vital statistics office on its decision within one month from the moment of the thereof.

3. Adoption is valid from the date of enforcement of the court decision.

Article 1245. Adoptive Parent

Any capable adult, except a person who has been deprived of parental rights or from whom a child has been removed due to inadequate performance of duties, may be an adoption parent. An adoptive parent may not be either a person who due to illness, moral or other private characteristics lacks ability to execute obligations of a parent.

Article 1246 Adoption by Spouses

1. Spouses may adopt a child together. Adoption of one child by two persons other than spouses is not permitted.

2. One of the spouses may adopt his/her own child born outside marriage or a child of his/her spouse.

Article 1247. Consent of a Spouse for Adoption

If a child is being adopted by one of the spouses, consent of the other spouse is needed. Such a consent is not needed if the other spouse has been declared incapable, or if the spouses have terminated their conjugal relations for more than one year, or if the residence of the other spouse is unknown.

280

Article 1248. Adoption by One of the Spouses

If spouses adopt a child together, or if one of them adopts a child of the other one, the child acquires the legal status of a common child of the married spouses.

Article 1249. Adoption of a Married Person

A married person may be adopted only with the consent of his/her spouse.

Article 1250. Age of an Adoptive Person

An adoptive person should be at least sixteen years older than the person to be adopted. Given good, a court may reduce the age difference.

Article 1251. Consent of Parents for Adoption

1. For adopting a child which has parents, their consent is essential. The consent for adoption should be given in a written form.

2. Parents may give their consent to a certain person (persons) or may announce consent for adoption without indication of a certain person, and may give right of selection of an adoptive parent to a child care institution..

3. If consent for adoption is given in the name of a certain adoptive person, the child care institution gives opinion that such adoption is relevant to the interests of the child.

Article 1252. Adoption of a Child Born Outside Marriage

In adopting a child born outside marriage, consent of the mother is necessary. Where adoption of a child is effected by a third person, decision is not made if father of the child has filed an application for determining fatherhood or adopting a child.

Article 1253. Adoption of a Child Under Guardianship

1. A parentless child under guardianship may be adopted only with the written consent of the guardian, while a child being in a child care institution – with the consent of the administration of the institution.

2. The administration of the child care institution shall, upon acceptance of the child, clarify whether the parents of the child consent to adoption of the child.

281

Article 1254. Adoption of a Child Without Consent of Parent

1. A child may be adopted without the consent of the parent if he/she has been declared without active legal capacity or to be missing..

2. A child may be adopted without the consent of the parent (parents) who has been deprived of parental rights after a year from the date of such rights’ deprivation.

Article 1255. Adoption of a Ten-Year Old Child

1. Adoption of a child of ten years of age is not permitted without his/her consent.

2. The consent of the child shall be cleared up by a child care institution..

3. If before the submission of an application for adoption child lived in the family of the adoptive person and was considering him/her as his/her parent, adoption is also possible without the consent of the child, as an exception.

Article 1256. Refusal to Adoption

A parent, an adoptive person, and a child who is at least ten years of age may without consent given for adoption until the adoption decision is made by a court.

Article 1257. Granting a Surname to Adopted Child

1. At the request of an adoptive person, a child is given the surname of the adoptive person.

2. At the request of the adoptive person, the given name of the child may be changed. The change of the given name of an adopted child who is at least ten years of age may be effected only with his or her consent. .

3. A court decision should mention granting of surname to the adopted person as well as the change of his/her given name.

Article 1258. Entry of Adoptive Parents in Birth Registration

1. The adoptive persons may at their request, be entered as parents of the adopted person in the birth registration, which is to be mentioned in a court decision.

2. For the entry envisaged in the first part of the present Article the consent of a ten-year old adopted person is essential.

282

Article 1259. Relative Relations of Adopted Person

An adopted child and his or her descendants shall be deemed to be equal with respect to his or her adoptive parents and their relatives, and the adoptive parents and their relative shall be deemed to be equal with respect to the adopted child and his or her descendants with regard to personal and proprietary rights and obligations.

Article 1260. Relations of Adopted Person with His/Her Parents

1. An adopted child loses personal and proprietary rights and is released from duties with respect to his/her parent and relatives of the parent.

2. If a child is adopted by a man and the child has a mother who remains the mother of the child, or if a child has a father who remains the father of the child, the rights and duties between the child and such parent and the relatives of the parent are preserved..

Article 1261. Invalidity of Adoption

1. An adoption may be declared invalid if the adoptive person avoids his/her obligations of a parent put upon him/her, treats the adopted person severely, is a drug addict or a chronic alcoholic.

2. Considering interests of the adopted person and given good reasons, a court may invalidate the adoption on other grounds as well.

Article 1262. Other Grounds for Invalidity of Adoption

An adoption may also be consented if the adopted person is cruel to the adoptive person and his/her relatives, expresses mere disrespect towards them or conducts a criminal and lewd way of life.

Article 1263. Confidentiality of Adoption

1. The collection and publication of notices on adoption without the consent of the adoptive person is prohibited.

2. A person who violates the duty to maintain confidentiality of adoption shall be held liable pursuant to law.

283

Article 1264. Ensuring Confidentiality of Adoption

In accordance with a request of an adoptive person the place, month and date of birth of the adopted child may be changed to ensure confidentiality of the child’s adoption.

Article 1265. Invalidation of Adoption by Court

The termination and invalidation of adoption is possible only at a law.

Article 1266. Termination of Effected Without Consent

1. An adoption effected without consent of the parents where such consent is essential, may be terminated by a court on the basis of a claim filed by the parents in the case if the court determines that the return of the child to his/her parents meets his/her interests.

2. The termination of adoption at the request of the parents if the adopted person reached the age of ten is possible only with the consent of the adopted person.

Article 1267. Submission of a Claim to Invalidate Adoption

1. A claim to invalidate adoption is submitted to an adoptive person, and in the cases when the identity of the adoptive person is not known to the parents of the child – in claim is submitted to the court in the jurisdiction of the decision made about adoption.

2. In the cases envisaged in the first part of the present Article, the adoptive person shall be notified about proceeding, and is entitled to involve or trust his/her interests to the child care institution.

3. A court may, where necessary, summon the adoptive person as defendant.

Article 1268. Invalidity Adoption by the Demand of a Child Care Institution

1. A child care institution always has the right to demand invalidation of adoption at a law if it is required for the interests of the minor child.

2. Individuals who consider that adoption is not relevant to the interests of a child and is to be invalidated, shall notify the child care institution thereabout, which is to settle the issue of claiming the adoption invalidation.

284

Article 1269. Inadmissibility of Invalidation of Adoption

The invalidation of adoption is inadmissible after an adopted person has reached majority, except for the cases where a consent of the adopted person, his/her parents and the adoptive parent on the invalidation exists.

Article 1270. Consequences of Declaration of Invalidity of Adoption

1. In declaring an adoption invalid, the mutual rights and obligations existing between the adoptee and adopter as well as with their relatives are extinguished, and the mutual rights and obligations between a child and his/her parents as well as with their natural relations are restored.

2. By order of a court, a child is given to his/her parents, or to a child care institution – where it runs counter to the interests of the child.

3. A court, in line with the interests of a child, shall also decide the issue of retaining given name and surname granted to a child in adopting. If the child has reached the age of ten, the court shall take into consideration his/her wish as well.

4. If an adoption is invalidated due to inadequate performance of duties to raise a child, the child is preserving the right to claim support.

Article 1271. Moment of Termination of Adoption

1. An adoption terminates from the date a court order declaring the adoption invalid enters into force.

2. A court shall, within a week after the entry into force of a court order declaring an adoption invalid, send a copy of the court order to the vital statistics office where the birth registration of the child is located.

Article 1272. Grounds for Invalidation of Adoption

1.An adoption may be invalidated in the cases, if:

a) an order on adoption is based on the forged documents;

b) an adoption is fictitious;

c) the adoptive person has been declared as being incapable by a court;

d) the adoptive person has been deprived of parental rights.

2. The invalidation of an adoption is permitted only where it is in the interests of the adoptee.

3. In invalidating an adoption a court shall clarify whether the adoptee who has reached the age of ten agrees thereto.

285

4. An adoption may be declared invalid on demand of the person whose rights are violated by the adoption; as well as on call of a child care institution.

Article 1273. Moment of Invalidation of Adoption

1. An adoption is invalidated from the moment of declaring it invalid. on invalidation of the child adoption.

2. In declaring an adoption invalid the personal and proprietary rights and obligations of the child with respect to his/her parents and natural relatives shall be deemed to be not extinguished.

3. In the case of declaring an adoption invalid, a child is given to his/her parents by order of a court or to child care institution – where it is in the interests of the child.

Article 1274. Participation of a Child Care Institution in Discussions on Invalidation of a Child Adoption

In considering a matter on termination or invalidation of an adoption the participation of a child care institution is a must.

PART THREE. GUARDIANSHIP AND CURATORSHIP CHAPTER 1. GENERAL PROVISIONS

Article 1275. Concept

1. Guardianship and curatorship are established for minor children whose parents are deceased, deprived of parental rights, declared to be without active legal capacity for the purpose of their raising and for protection of their personal and proprietary rights and interests..

2. Guardianship and curatorship are also established for the protection of proprietary and personal rights and interests of a person of age who, due to health condition, is unable to independently fulfil his/her rights and obligations.

Article 1276. Guardianship

Guardianship is established for a child who has not yet reached the age of seven, or to a person who by a court is declared incapable due to mental illness or imbecility.

286

Article 1277. Curatorship

1. Curatorship is established for a minor person between seven and eighteen. Curatorship is also established for an adult with active legal capacity at his/ her request, if she/he, due to his/her health condition, is unable to fulfil his/her rights and obligations independently.

2. Article 16 is used accordingly.

Article 1278. Guardianship and Care Bodies (GCB)

Guardianship and curatorship of a minor are assigned to a local educational body, of a person declared incapable - to a local health care body, and of a person with legal capacity who, due to his/her health condition requires care - to a local social security body.

Article 1279. Establishment of Guardianship and Curatorship

The establishment of guardianship and curatorship is possible in the cases when a child does not live with his/her parents, and the latter avoid the obligation of raising him/her. If a child lives with his/her parents who do not fulfil their duties in raising him/her, a GCB may apply to a court for deciding on the removal of a child from such parents and giving him/her into guardianship and curatorship.

Article 1280. Appointing a Guardian for a Person Declared Incapable

A court which made a decision on declaring a person incapable is obliged to inform a GCB thereabout according the residence of the person needing guardian within not later than three days from the entry of the decision into force.

Article 1281. Appointing a Guardian or a Curator

1. GCBs appoint a guardian or a curator for fulfilling obligations of a guardian or a curator.

2. Guardian or a curator may be appointed only with their consent.

3. Selection of a curator for an adult capacitated for work who due to his/her health condition is unable to protect his/her rights and fulfill his/her obligations independently is possible only with the consent of the person to be the subject to curatorship.

287

Article 1282. Procedure for Appointing a Guardian or a Curator

1. A guardian or a curator is to be appointed within not later than one month from the time when the GCB becomes aware of the necessity of establishing guardianship or curatorship.

2. In selecting a guardian or a curator the following shall be taken into consideration: the personal qualities, capability to perform the task assigned, the relations with the subject of curatorship (guardianship) and, where applicable, the wish of the subject of curatorship (guardianship).

Article 1283. Persons not Eligible to be Guardian or Curator

The following shall not be guardians or curators:

a) minors;

b) persons, without active legal capacity or with restricted legal capacity;

c) persons, who have been deprived of parental rights;

d) adoptive persons where the adoption has been invalidated because of the inadequate performance of duties of adoptive parents;

e) persons who have been relieved of the performance of duties of a guardian or curator due to inadequate performance of the duties thereof.

Article 1284. Supervision of Activities of Guardian or a Curator

1. Supervision of the activities of a guardian or a curator is executed by a GCB at the residence of the subject of guardianship (curatorship).

2. The procedure for and conditions of exercising supervision are defined by statutes of GCBs.

Article 1285. Obligations of a Child Care Institution

1. With respect to a child who is being raised at a child care institution as well as with respect to person who needs guardianship or curatorship and is located at a relevant establishment, the performance of obligations of a guardian or a curator is assigned to the administration of the establishment.

2. For safeguarding the proprietary interests (reception of pensions, management of property, etc.) of the people mentioned in the first part of the present Article, in the case of necessity, a property guardian may be appointed.

Article 1286. Appointment of a Property Guardian

If a person who has been appointed guardianship or curatorship holds property at some other place, the GCB may appoint a property guardian according to the

288

residence of the property, where necessary, and with the consent of a guardian or a curator.

CHAPTER 2. RIGHTS AND OBLIGATIONS OF GUARDIAN OR A CURATOR

Article 1287. Rights of Guardian or Curator

a guardian and a curator are entitled to demand in legal form the return of a child being under guardianship or curatorship by all those people who make a child stay with them without a legal basis.

Article 1288. Gratuitous Performance of Guardianship and Curatorship

The duties of a guardian and a curator are performed free of charge.

Article 1289. Duties of Guardian and Curator

1. A guardian and a curator are obliged to attend to the raising and maintenance of a child under guardianship (curatorship), create essential living conditions, provide him/her with care and medical treatment, safeguard his/her rights and interests.

2. Besides the duties envisaged in the first part of the present Article, a guardian of a mentally sick person is obliged to check constant medical care service of the subject of guardianship.

Article 1290. Representative Authority of Guardian and Curator

A guardian and a curator is the legal representative of a child in relations with third entities, courts included.

Article 1291. Obligation of Residing With Minors Under Guardianship

1. A guardian and a curator are obliged to reside with a minor under guardianship (curatorship). In certain cases, with the consent of a GCB, the separate residence of a guardian and a ward is permitted if the mentioned body concludes that their separate residence will not have a negative impact on the raising of the ward, the safeguarding his/her interests and rights.

2. A guardian and a curator are obliged to notify the GCB on the change of residence.

3. The obligation envisaged in the first part of the present Article is not assigned to the guardian of an incapable adult and the curator thereof.

289

Article 1292. Obligation of Guardian in Case an Insane Ward Gets Better

In the case where the ward previously being insane gets healthy, a guardian is obliged to file petition in a court immediately for declaring the subject of guardianship capable and termination of the guardianship.

Article 1293. Consent of Guardian and Curator to Transactions

1. A guardian is the legal representative of the ward and on his/her behalf enters in all the necessary transactions proceeding from the interests of the subject.

2. A minor between the age of fourteen up to the age of eighteen enters in the transactions to which he/she is not entitled in law, with the consent of his/her curator.

Article 1294. Limitation of Authority of Guardian and Curator

Without prior consent of a GCB, a guardian shall not: enter into a transaction on behalf of the ward, neither a curator shall agree on entering into a transaction on behalf of the ward if the transaction concern the transfer of property, its pledge, leasing for more than ten years, giving away, take a loan or waive collection of a debt decline to accept a succession in the name of a ward, join an entrepreneurial society as a partner, divide property, or in those transaction which may result in the reduction of property.

Article 1295. Procedure for Transferring Perishable Goods

Perishable goods or those intended for sale according to their character, may be sold without permission of the GCB.

Article 1296. Prohibition of Gifting on Behalf of Ward

It is not permitted to enter into an agreement on gift-giving on behalf of a ward.

Article 1297. Prohibition of Representation on Behalf Guardian and Curator

A guardian and a curator, their spouses and close relatives are not entitled to enter into a transaction with a ward. They also shall represent a ward in transactions or in disputes with the guardian, his/her spouse or close relations.

Article 1298. Appealing Against Actions of Guardian and Curator

Actions of a guardian and curator may be appealed against by an interested person including a ward in the GCB according to the residence of the ward.

290

Article 1299. Release of a Guardian and Curator from Obligations

1. A GCB releases guardian and curator from their obligation in the case where a ward is returned to his/her parents, is adopted, or is placed in a special establishment.

2. A guardian and a curator may be released from their obligations on the basis if their personal request of the GCB accepts good reasons of the request (illness, change of material condition, incompatibility with a ward.

Article 1300. Consequences of Inadequate Performance of Duties

1. In the case of inadequate performance of duties of a guardian or curator, the GCB shall release the guardian or curator from performance of their duties.

2. If a guardian (curator) makes an abusive use of guardianship (curatorship) or leaves a ward without supervision and essential assistance, she/he shall be liable under law.

Article 1301. Release Curator from Duties at the Request of Ward

A curator of adult may be released from his/her duties if so desired by the person under curatorship. In such cases the GCB may appoint a different person as a curator with an approval of the person under curatorship.

Article 1302. Grounds for Terminating Curatorship

1. Curatorship terminates upon:

a) death of a ward;

b) a child ward becoming and adult, except for the cases where he/she has been declared incapable by law;

c) return of a minor ward to parents;

d) declaring an incapable ward capable.

2. In cases envisaged by the first part of the present Article, guardianship is terminated by the decision of the GCB.

Article 1303. Termination of Guardianship Due to Reaching the Age of Curatorship

If minor ward reaches the age of seven, the guardianship is terminated and without a special decision of the GCB the guardian becomes the curator.

291

Article 1304. Grounds for Termination Guardianship

1. Guardianship terminates upon:

a) death of a ward;

b) a child ward becoming an adult;

c) marriage of a minor ward;

d) with respect to other wards – elimination of the reason for appointing a guardian.

2. In the cases envisaged in the first part of the present Article curatorship is suspended by the decision of the GCB.

Article 1305. Appealing Against Guardianship and Curatorship Matters

A decision of the GCB on the appointment of a guardian (curator), his/her removal and release, as well as all other matters of guardianship and curatorship may be appealed against in a court by an interested person.

292

BOOK SIX. SUCCESSION LAW CHAPTER 1. GENERAL PROVISIONS

Article 1306 . Concept

1. The transfer of the property of a person upon his/her death (testator) to other persons (successors) is executed under law or by a will, or on the basis of both.

2. Intestate succession – the transfer of the property of the deceased to the persons indicated in the law – is valid if the testator has not left a will, or the will concerns only a share of the estate, or the will is declared void in full or partially.

Article 1307. Successors

Successors may be:

a) intestate successors – the persons alive at the time of the testator’s death, as well as the testator’s children born alive after his/her death.

b) testate successors – the persons alive at the time of the testator’s death, as well as those conceived in his life and born after his/her death irrespective of whether his/her children or not, also legal persons.

Article 1308. Legal Person as Successor

In the case of testamentary succession a legal person established at the time of opening of the succession will be invited to accept the succession.

Article 1309. Child Born Outside Marriage as Successor of Father

A child born outside marriage is deemed to be a successor of his/her father if paternity has been recognized under the procedure established by a law. If he/she dies before the father, his/her descendants may demand a share of the estate to which their deceased parent would have had the right.

Article 1310. Unworthy Successor

A person is unworthy to be either an intestate successor or testamentary successor if the person knowingly hindered the testator in making a testamentary disposition and in doing so made for invitation of own or his/her near persons as successors or for increase their share in the estate, or has committed a deliberate offence or other immoral action contrary to the last will expressed by the testator

293

in the testament if these circumstances are acknowledged by a court (unworthy successor).

Article 1311. Parents Not Eligible to Succession

Parents whom a court has deprived of parental rights and who are not restored in these rights at he time of opening of a succession may not be intestate successors of their children. Intestate successors may not also be the persons who knowingly and unlawfully shirk their obligations to maintain the testator if these circumstances have been acknowledged in legal form.

Article 1312. Deprivation of the Right of Succession by Court

A circumstance which constitutes grounds for deprivation of the right of succession of an unworthy successor shall be established by a court on the basis of the person’s claim for which the deprivation of the right of succession is conductive to definite proprietary consequences for the unworthy successor.

Article 1313. Forgiveness of an Unworthy Successor

A person recognized in the performance of the actions conductive to the deprivation of the right of succession is nevertheless admitted as a successor if the testator forgives him/her and explicitly expresses this decision of his in the will. The forgiveness hall not be withdrawn.

Article 1314. Succession with the right of Representation

The loss of the right of representation shall not intervene with the succession of relatives.

Article 1315. Right of Succession to Other Testator’s Property

The deprivation of the right of succession shall not intervene with the right of the deprived person to succeed other testator’s property.

Article 1316. Duty of Person Declared as Unworthy Successor

If a person is declared by a court an unworthy successor after acceptance of the succession, he/she is required to return all received under succession together with the fruit and income.

294

Article 1317. Limitation Period of a Claim for Declaration of Unworthiness to Succeed

The limitation period of a claim for declaration of a person unworthy to succeed by interested persons shall be five years from the time when the person succeeded to property.

Article 1318. Share of Estate of Person Unworthy to Succeed

1. A share of estate of a person unworthy to succeed is transferred to other persons invited as successors and is divided equally thereamong.

2. The procedure specified in item one of this Article is not valid if the person unworthy to succeed has appointed a successor..

Article 1319. Opening of Succession

A succession opens upon the death or declaration of death of the testator by a court.

Article 1320. Time of Opening of Succession

The time of opening of a succession is the date of death of the testator or the date when a court order on declaration of death of the person entered into force.

Article 1321. Succession of Persons Deceased on the Same Day

In the case of the decease of persons with the sequential right of succession on the same day, the succession will open after each independently.

Article 1322. Opening of Succession After Declaring Person Deceased

The result provided for by Article 1321 will also occur where a court declares persons deceased as a result of their missing in the same circumstances; at the same time, the time of the entry into force of the decision on declaring them deceased is of no importance.

Article 1323. Opening of Succession in Family

A succession of the common property in a family opens upon the death of the last family member.

295

Article 1324. Place of Opening of Succession

1. The place of opening of a succession is deemed to be the residence of the testator, or the location of the estate where it is not known.

2. If the succession is located at different places, the place of opening of the succession shall be the location of the immovable property or of its valuable portion, or the location of the movable property or of its main portion – where the immovable property is not available.

Article 1325. Place of Opening of Succession of Persons Residing Abroad

The place of opening of a succession upon the death of a citizen of Georgia who temporarily resided abroad and died there is his/her residence in Georgia before leaving abroad, or the location of the estate or of its main portion – where it is unknown.

Article 1326. Opening of Succession of Persons Permanently Residency Abroad

The place of opening of succession upon the death of persons who were permanently residing abroad is the country where they lived.

Article 1327. Opening of Succession Abroad

A citizen of Georgia residing abroad shall accept a succession pursuant to legislation of that state.

Article 1328. Parental Estate

1. An estate (parental estate) comprises an aggregate of both of the testator’s proprietary rights (parental assets) and obligations (parental liabilities) which he/she had at the time of the death.

2. The estate includes a share of the testator in the common property, or the value of this property where the property is not divisible in kind..

Article 1329. Future Estate

A testator may provide for in the will such estate not held by him/her upon making the will where at the time of opening a succession such property will be in his/her possession.

296

Article 1330. Inadmissibility of Transfer of Personal Rights and Obligations by Succession

A succession shall not include the proprietary rights and obligations being of personal nature and belonging only to the testator, as well as the rights and obligations provided for by a law or agreement which are valid only in the life of the creditor and debtor and terminate upon their death.

Article 1331. Protection of Non-proprietary Rights of Testator

The non-proprietary rights of the testator being outside succession may be fulfilled and protected by successors under the procedure established by a law.

Article 1332. Property Outside Succession

1. Patrimonial books (or entries), family chronicles, spiritual and other religious objects, and the grave do not comprise a succession and are not divisible among successors. These things are transferred to a successor with the right of ownership under the established custom. These things may be also received by the successor who has refused to accept the succession.

2. The documents relating to the testator’s personality, his/her family or the entire estate remain as the common property.

Article 1333. Consequences of Increase of Immovable Property Under Will

If a testator after making a will increased the immovable property specified in the will by acquiring additional property, such property though being attached to the immovable property will not be included in the estate unless there is a new disposition as regards the property acquired after making of the will.

Article 1334. Co-successors

If inheritors are several, the estate, prior to its division among them, shall be in their common ownership. The expenses for the testator’s maintenance, treatment, funeral, the protection and management of the estate, payment of wages and salaries, and other necessary expenses in connection with the fulfillment of the will may be payable from this property. These claims shall be satisfied from the value of the estate before all other claims, including the ones secured with hypothecation and other pledge.

Article 1335. Claiming a Thing from Estate

1. If a testator has incorrectly given a thing as a succession to a successor, he/she has the right to claim it back in according with established procedure.

297

2. If the estate of the deceased contains the property of another person, the part of the property shall be revealed and transferred to a proper person.

CHAPTER 2. INTESTATE SUCCESSION

Article 1336. Intestate Successors

In intestate succession, successors with equal shares succeed in the following order:

1. First order successors - the children of the deceased, a child of the deceased born after his/her death, spouse, parents (adoptive parents).

Adopted child and his/her descendants, as heirs of the adoptive parent or his/her relatives are equalized with children of the adoptive parent and his/her descendants. An adopted child is not considered to be an intestate successor any more after the death of his/her parents and other biological relatives on the ascending line, as well as after the death of the sisters and brothers.

Grandchildren. Children of grandchildren and children of the latter are considered to be intestate successors if by the time of opening of a succession their parent is not alive. They succeed in equal shares to the share of the estate to which their deceased parent would have had the right.

Grandchildren. Descendants of grandchildren and children of the latter will not become successors if their parents have refused to accept the succession.

An adoptive parent and his/her relatives, as heirs of the adopted child and his/her descendants are equated with the parents of the adopted child and his/her natural relatives. Parents of the adopted child, other natural relatives on the ascending line and siblings are not eligible to intestate succession after the death of the adopted child or his/her descendants.

2. Second order successors - sisters and brothers of the deceased, his/her nieces and nephews and their children are considered to be intestate successors if by the time of opening of a succession their parent is not alive. They succeed in equal shares to the share of the estate to which their deceased parents would have had the right.

3. Third order successors - grandparents, parents of grandparents on the mother’s as well as on father’s side. Parents of grandparents are considered to be instate successors if by the time of opening of a succession grandparents are not alive.

4. Fourth order successors - uncles (mother’s brother and father’s brother) and aunts.

5. Fifth order successors - cousins, or their children where the cousins are absent.

298

Article 1337. Order in Instate Succession

The existence of at least one successor of the previous order excludes the subsequent order succession.

Article 1338. Rights of Incapacitated Persons in Succession

Incapacitated persons which had been supported by an the testator and are incapable to support themselves independently have a right to claim support from the succession if they are not mentioned in the will. The support amount may be reduced taking into consideration the amount of assets of the estate.

Article 1339. Right of Surviving Spouse to Co-ownership Share

The succession right of the surviving spouse does not apply to that share of the estate which belongs to him/her out of co-ownership of spouses.

Article 1340. Condition of Divorced Spouses in Succession

Divorced spouses may not be successors after the death of each other.

Article 1341. Withdrawal of Succession Right During Divorce

At a court decision a spouse may be withdrawn the right of intestate succession if it is confirmed that the marriage with a successor was actually suspended three years before opening of the succession and that the spouses had been living separately.

Article 1342. Loss of the Right to Succeed Due to Invalidation of Marriage

A surviving spouse loses the right to succeed if there existed a ground for the invalidation of marriage and a claim had been filed by the successor.

Article 1343. Transfer of Non-succeeded Property to the Treasury

1. If there are no successor either by law or by will, or if none of the successors received the succession, or when all the successor have been withdrawn the right to succeed, the non-succeeded property is transferred to the treasury; and if the testator had been supported by establishments for the old, disabled, medical care, educational and other social security establishments, than the succession is transferred into their ownership.

299

2. A non-succeeded property in an entrepreneurial society or co-operative is transferred to them in the form of a share if there is no other provision envisaged by law.

CHAPTER 3. TESTATE SUCCESSION

Article 1344. Concept

A natural person may leave his/her estate or its part by a will in the event of his/her death to one or several persons from either the circle of successors or outside persons.

Article 1345. Person Eligible to Writing a Will

A person making a will may be an adult, capable person which by the time of composing his/her will may wisely justify his/her action and clearly express his/her desire.

Article 1346. Holographic Will

A will shall be made personally by the testator. The making of a will through a representative is not permitted.

Article 1347. Joint Will

A will shall include disposition of one testator. The making of a will by two or more persons jointly is not permitted. Only spouses may make a reciprocal will on joint legacy, which may be revoked by one of the spouses but still during lifetime of both of them.

Article 1348. Specification of a Share by Testator

1. A testator may specify shares of successors in the estate, or indicate which property will be given to a particular successor. If there is no such indication in a will the estate is equally distributed among successors.

2. If several successors are nominated in a will, but only one successor’s share is specified the successors whose shares are unspecified succeed in equal shares to the part of the estate not included in shares of the estate.

Article 1349. Distribution of Estate Among Testate Successors

If several successor are nominated in a will and the property specified for one of the successors comprises the entire estate, all the successors by the will shall have equal shares.

300

Article 1350. Succession to Property Outside a Will

If a share of the successors nominated in a will does not comprise the entire estate, the property remaining outside the will - shall be subject to intestate succession, which also applies to the intestate successors which were bequeathed a part of the property unless otherwise provided by the will.

Article 1351. Equal Increase of Shares Among Testate Successors

If there are only testate successors will, their shares will be equally increased if each of the successors’ share is specified in the will, but the shares left to them total less than the entire estate.

Article 1352. Inadmissibility of Participation of a Third Person in Share Specification

A testator may not entrust by a will another person to specify who is a person to receive a share in the estate and in what amount.

Article 1353. Impossibility of Clear Definition of Successors

If a testator makes a disposition in a will for the benefit of a person who he/she describes in a manner which applies to several persons and it is unclear who is meant, the disposition shall be deemed to be made for the benefit of all the persons in equal shares.

Article 1354. Deprivation of a Right of Intestate Succession

1. A testator may deprive one, several or all the successors of instate succession and is not obliged to indicate a reason therefor.

2. A person, who has been deprived of succession by a direct disposition in a will, may not be either an intestate successor of that part of the estate which was not included in the will, also in the case when the testate successors have refused to accept the succession.

Article 1355. Retaining the Right of Succession

Intestate successors which are not specified in a will retain a right to a share of the estates which was not referred to in the will; they will also get property envisaged by the will if by the time of opening of a succession the testate successors are no longer alive, or if all of them have refused to accept the succession.

301

Article 1356. Prevention of Intestate Succession

If by a will the entire parental estate was divided among testate successors and if in this case one of the successors is no longer alive by the time of opening of a successor, the intestate succession will not arise and his share of the estate will be distributed among other testate successor in equal shares..

CHAPTER 4. FORM OF A WILL

Article 1357. Notarial Form

1. A will shall be made in a written form. A written will may be in a notarial form or without it.

2. A notarial form requires a will to be prepared and signed by the testator and attested by a notary and where a notary is not available the above mentioned function shall be executed by a local self-government body.

Article 1358. Notarized Will

1. It is permitted that a will in words of the testator be written down by a notary in the presence of two witnesses. The usage of generally accepted technical means while writing down a will is permitted.

2. A will written down by a notary in words of the testator shall be read by the testator and signed by him/her in the presence of a notary and a witness.

Article 1359. Persons Equated with Notary

In attesting a will the following persons are equated with a notary:

a) head physician, head, their deputy in medicine of a civil or military hospitals, other medical establishments, recreation houses; doctor on duty, director or head physician of the house for the old and disabled if the testator is being treated or lives at the mentioned establishments;

b) head of search, geographic and other similar expeditions if the testator is in such an expedition;

c) captain of a ship or a commander of an aircraft if the testator is on the ship or the aircraft;

d) leader (chief) of a military unit, formation, establishment and educational centre if a notary is not available in the location point of military units and if the testator is a military man or a civilian serving at a military unit, or a member of their family;

e) chief of a place of confinement if the testator is at the places of confinement.

302

Article 1360. Deputy Signatory

If the testator due to any reason is unable to sign his/her will, may be done by another person per his/her request. In such case, the reason why the testator is unable to sign the will shall be noted in the will.

Article 1361. Will of a Deaf and Dumb and Blind

1. If the testator is a deaf and dumb or a blind illiterate person, she/he shall make his/her disposition in front of a notary in the presence of two witnesses and such a person which can make him/her understand the crux of the matter and confirm by his/her signature that the content of the will expresses the wish of the testator.

2. The testator who is blind and illiterate shall make a testamentary disposition in front of a notary in the presence of three witnesses on which a special remark shall be made to be read to him/her.

3. A person making a writing and the person reading the text out may also be the witnesses, but the person making writing shall not be the person reading the text out.

4. The writing shall indicate the persons making and reading it out by their names. This remark shall be signed by the witnesses and confirmed by the notary.

Article 1362. Witnesses of Will

Witnesses of a will may not be minors, persons declared incapacitated, testate successors and their relatives with in ascending and descending lines, sisters, brothers, spouse and the recipient of a testamentary disposition (legatee).

Article 1363. Confidentiality of a Will

A notary, other person who has confirmed a will, a witness, as well as the persons who have signed the will on behalf of the testator have no right to disclose information referring to the content of the will, its making, amendment or revocation before the opening of a succession.

Article 1364. Domestic Will

A testator may make a will in his own handwriting and sign it.

303

Article 1365. Will Deposited with Notary

1. A testator may deposit a will written and signed by himself/herself in a sealed envelope with a notary (or with another appropriate official) in the presence of tree witnesses to be confirmed by signatures on the envelope.

2. The safe-keeping of the mentioned will shall be secured by its official depositing with a notary (or with another appropriate official).

Article 1366. Making of a Will by Using Technical Means

The text of a will may be made with generally accepted technical means, but it shall be signed by the testator. In this case the making of a will and its signing by the testator shall be executed in the presence of two witnesses, who will confirm that the will had been executed with technical means in their presence. The conformation of a will by witnesses shall be conducted immediately after the testator signs the will by making a relevant notice in the will in the presence of the testator and the both witnesses indicating the first and family names and dwelling addresses of the witnesses.

Article 1367. Closed Will

1. At request of the testator witnesses shall confirm the will so that they do not know the content of the will (closed will). In this case the witnesses should be present at the signing of the will.

2. In confirming a closed will the witnesses shall indicate that the will was made personally by the testator and that they did not become aware of the content of the will.

Article 1368. Date of Making Will

A will shall indicate the date of its making. Non-existence of the date shall make the will void only where a doubt relating to the capacitation of the testator is not resolved while making, amending or revoking the will or in the existence of several wills.

Article 1369. Acquaintance of Interested Persons with the Content of a Will

Upon the death of the testator, a notary shall appoint a day when interested persons are acquainted with the content of the will for which a relevant statement is to be made. If an envelope containing the will was sealed, a note on the integrity of the seal shall be made.

304

CHAPTER 5. NOMINATION OF ALTERNATIVE SUCCESSOR

Article 1370. Alternative Successor

1. A testator may nominate in his/her will another successor (alternative successor) if a person nominated as a successor dies before the opening of the succession, renounces the succession, does not accept the succession or is unworthy to succeed.

2. The refusal of a testate successor to accept the succession for the benefit of an alternative successor is not allowed.

3. An alternative successor may be nominated from among any persons entitled to succession pursuant to Articles 1307-1309.

CHAPTER 6. COMPULSORY PORTION

Article 1371. Concept

The children, parents and the spouse of the testator are eligible to a compulsory portion an estate notwithstanding the content of a will which shall be one-half of the share of an estate which each of them would have received in intestacy (compulsory portion).

Article 1372. Claiming of Compulsory Portion

The right to claim a compulsory portion arises from the moment of the opening of a succession. The right of such a claim is transferred by succession.

Article 1373. Size of Compulsory Portion

The total amount of a compulsory portion is determined on the basis of the entire estate including the property which is envisaged for the execution of a testamentary obligation or for performance of any action with the of generally useful purpose.

Article 1374. Definition of a Compulsory Portion of Each Successor

In defining a compulsory portion of each successor all intestate successors shall be taken into consideration, which would have been invited to receive the succession had not there been a will. The testate successors are not taken into consideration.

305

Article 1375. Inclusion of the Received Property into a Compulsory Portion

A person eligible to a compulsory portion is obliged to include into the compulsory portion everything that has been received from the testator in his/her lifetime indicating that the received is to be included into the compulsory portion.

Article 1376. Effects of Renunciation of a Testamentary Obligation

A person who is entitled to receive a compulsory portion and at the same time is the recipient of a testamentary obligation (legacy) may claim the compulsory portion if he/she refuses to receive a testamentary obligation; if she/he does not refuse to receive a testamentary obligation, she/he loses the right to a compulsory portion within the value of the testamentary obligation.

Article 1377. Allocation of a Compulsory Portion out of the Property not Envisaged in Will

If the entire estate is not envisaged in a will, a compulsory portion shall be first allocated from the property not envisaged in the will, and if it is not enough - from the property envisaged in the will.

Article 1378. Increase of a Compulsory Portion at the Expense of a Gift Item

If a testator made gifts to a third person, the person eligible for a compulsory portion may claim its fulfillment in proportion to the size of the gift. Gifts will not be taken into account if ten years have passed from the moment of gifting to the moment of the opening of a succession.

Article 1379. Right of Claiming Replenishment of a Portion

If a person eligible to a compulsory portion has succeeded a property which is less than a half of the portion he/she would have got in intestacy, he/she may claim that share by which is/her portion received under testate succession is less than half of the portion which he/she would have received in intestacy.

Article 1380. Refusal of a Compulsory Portion

1. A successor eligible to a compulsory portion may refuse to receive it, but this will not cause an increase in the compulsory portion of co-successors. His/her portion is transferable to successors by a will.

2. The reception or refusal of a compulsory portion shall be effected in the periods set for the reception or refusal of the succession.

306

Article 1381. Removal of Right to Compulsory Portion

1. A right to a compulsory portion may be removed in the existence of grounds which cause the removal of right of succession in general.

2. The withdrawal of the right to a compulsory portion may be effected by a testator still during his/her lifetime by applying to a court.

3. A decision made by a court in removing the right to a compulsory portion is effective from the moment of the opening of a succession. The same is true also in the cases when the application to a court was made by the testator during his/her lifetime, but the decision was made after his/her death.

Article 1382. Transfer of Compulsory Portion to Testate Successors

The compulsory portion of a successor who is disinherited of the compulsory portion transfers to the testate successors.

CHAPTER 7. TESTAMENTARY OBLIGATION (LEGACY)

Article 1383. Concept

A testator may place an obligation on his/her successor to be fulfilled for the benefit of one or several persons at the expense of the estate (testamentary obligation – legacy).

Article 1384. Object of Legacy

An object of a legacy may be the transfer of things included in to the parental property to the recipient of legacy (legatee) into possession, usage and other rights in rem, the purchase and transfer of the property for him/her that is not included into the estate; implementation of a certain work, rendering services, etc.

Article 1385. Usage of Dwelling Place on the Basis of a Legacy

A testator may oblige a successor to whom a dwelling house, apartment or other dwelling place is transferred the right of the usage thereof defined to a person who lived together with the testator during not less than one year before the opening of a succession. Upon further transfer of the right of ownership of the dwelling the permanent usage retains its validity.

Article 1386. Non-alienation of Right of Usage of Dwelling Place

1. A right of the permanent usage of a dwelling place is non-alienable and is not transferable to the successors of the legatee.

307

2. The right of usage of a dwelling place does not represent the basis for living of the family members of the legatee in this place unless otherwise provided by the will.

Article 1387. Extent of Execution of Legacy

A successor who executes a legacy is required to execute it within to the extent of the property received from the estate excluding the portion of debts of the testator payable by him/her.

Article 1388. Execution of Legacy by Other Successors

If a successor who was obliged to execute a legacy dies before the succession is opened or she/he has refused to accept his/her succession the obligation to execute the legacy transfers to other successors who have received his/her share, unless otherwise provided by the will.

Article 1389. Suspension of Execution of a Legacy

In the event of decease of the successor who was obliged to execute a legacy, the obligation to execute the legacy will be suspended if the execution is possible without his/her participation.

Article 1390. Execution of Legacy in Proportion to Share in Legacy

If the execution of a legacy is to be effected by several successors, each of them does so in proportion to their shares in the legacy otherwise provided by the will.

Article 1391. Period of Execution of Legacy

A legatee has the right to request the execution of the a legacy within three years as of the date of the opening of succession.

Article 1392. Legacy in Receiving Compulsory Portion

If a testate successor is to execute a legacy is entitled to the reception of a compulsory portion, she/he executes a legacy only to the extent of the portion that was given to him/her in excess of the compulsory portion.

Article 1393. Responsibilities of Legatee

A legatee is not responsible for debts of the testator.

308

Article 1394. Renunciation of Legacy

A legatee has the right to renounce a legacy. In such case a relevant share of the estate is left to the successor who executes a legacy.

Article 1395. Release from Execution of legacy

If a legatee does not accept a legacy, a successor who executes the legacy is released from the execution thereof.

Article 1396. Giving Legacy to Successors

If a legatee dies after the opening of a succession failing to give his/her consent to acceptance of a legacy of the right on its acceptance is transferred to his/her successors who replace him/her.

Article 1397. Testamentary Obligation for the Purpose of General Benefit

1. A testator may oblige a successor to execute an action with the purpose of general benefit being of both the property and non-property nature.

2. If the action to be executed refers to property, the norms governing testamentary obligations will be used.

3. In the case of the death of the successor who was to execute an action in line with the will with the purpose of general benefit, this obligation is transferred to other successors who have received the succession.

4. An executor of the will may demand the performance of the action to be conducted by the relevant successor through a court, and in the case the executor of a will does not exist – by every successor as well as interested public and religious organizations, funds, state and local self-government bodies.

CHARTER 8. AMENDMENT OR REVOCATION OF WILL

Article 1398. Means of Amendment of Will

A testator may amend or revoke a will at any time:

a) by making a new will which directly revokes the previous will or the part thereof which contradicts the new will;

b) by filing a statement to a notary office;

c) by destruction of every copy of a will by the testator or by a notary by order of the testator.

309

Article 1399. Inadmissibility of Restoration of a Revoked Will

A will that has been revoked by a later will may not be restored even if the latter will is further revoked filing a statement.

Article 1400. Several Wills

If a testator has made several wills but they complete and do not entirely substitute each other, than all these wills are valid. The previous will remains valid as long as its provisions are not amended with the following will.

Article 1401. Preference of Notarial Will

1. If a person made several wills out of which one is made in a notarial form, while others are not, the notarial will is to be preferred.

2. A notarial will may not be revoked by a will in other form.

Article 1402. Grounds for Invalidating a Will

A will is invalidated if:

a) a person for the benefit of whom this will was made dies before the testator;

b) the parental estate is lost during the lifetime of the testator, or the testator has alienated it;

c) the sole successor refuses to accept the succession.

Article 1403. Void Will

1. A will is void upon existence of the conditions that invalidate a transaction in general.

2. The testamentary disposition that contradict a law and public interests, as well as those being incomprehensible or contradictory are void.

3. A court may declare a will invalid if it is made in violation of rules established by a law as well as where a person was unable to comprehend the importance of his/her actions and manage them.

Article 1404. Invalidity of Individual Testamentary Dispositions

1. A testamentary disposition on the basis of which a successor is offered to receive such a thing that does not exist in the estate in void.

2. If any succeeds to a money sum that does not exist in the estate, such testamentary disposition is void .

310

3. A testamentary implying that a successor will acquires the estate for a definite period of time, or not from the date of the death of the testator but later, also when indicating the person who will succeed to the estate after the death of the testator is void.

Article 1405. Invalidation of Testamentary Disposition for Its Unfeasibility

A testamentary disposition which may not be fulfilled by a successor due to the state of health or other objective reasons may be declared void subject to the know successor’s claim.

Article 1406. Consequences of Invalidation of One of Testamentary Dispositions

If out of several testamentary dispositions void one is or invalidated and if the testator has not left other disposition, the other testamentary dispositions remains in force.

Article 1407. Accepting Succession in Void Will

Upon declaration of a will void, a successor who has been deprived of the right to succeed is entitled to succession on the usual terms.

Article 1408. Claiming Will Validity

Validity of a will may be claimed by testate successors and other interested persons because of the circumstances that cause invalidation of a transaction.

Article 1409. Date of a Claim

1. An action for invalidation of a will shall be submitted within two years as of the date of the opening of a succession.

2. This period does not apply to the action of an owner when the testator has wrongfully bequeathed other person’s property to a successor as his/her own.

CHAPTER 9. EXECUTION OF WILL

Article 1410. Subjects of Will Execution

Where a will does not contain an indication, the execution of a shall be assigned to testate successors. They may, upon mutual agreement, appoint one of the successors or an other person as an executor of a will.

311

Article 1411. Appointment of Executor of Will

For the purpose of exact execution of testamentary dispositions a testator may appoint in a will one or several executors of the will from among the testate successions as well as other persons who are not successors. In the latter case a consent of the will executor is required that she/he has to express in a written notice on the will itself or in a statement attached to the will.

Article 1412. Refusal of Execution of Will

An executor of a will has the right to refuse at any time performance of the duty of executor of the will on which a prior notice shall be given to the testate successors.

Article 1413. Appointment of Executor of Will by a Third Person

A testator may assign a third person to appoint a will executor. The third person shall appoint a will executor immediately after the opening of a succession and shall notify the successor about it. He/she has the right to refuse performance of this duty which likewise shall be communicated to the successors.

Article 1414. Full or Partial Execution of Will

A will executor may be obliged to execute a will in full or its individual dispositions.

Article 1415. Protection and Management of Estate

A will executor is obliged to initiate protection and management of an estate from the date of the opening of succession. He/she is authorized to perform all the actions that are required for the execution of a will. Within the limits of this authority the successors lose the right to manage the estate.

Article 1416. Protection and Management of Estate by Several Executors

If will executors are several, the sole action is permitted only for the purpose of protection of the estate, in other cases the agreement between them is required.

Article 1417. Compensation of Expenses for Will Executor

1. A will executor performs his/her duties free of charge though he/she may receive a compensation if it is envisaged by the will.

2. A will executor has the right to get compensation for those essential expenses that he/she made for protection and management of the estate.

312

3. A will executor who is not a successor does not have right to make expenses out of the estate other than those envisaged by Article 1427.

Article 1418. Report of Executor

Upon execution of a will, a will executor shall report on the executor’s activity at request of the successors. A will executor accomplishes his/her functions before reception of the estate by all the successors.

Article 1419. Removal of Executor of Will

If an executor of a will fails to perform the executor’s duties, a court may remove the executor at the request of a successor who has an interest in the estate.

Article 1420. Liability of Executor of Will

If a will executor willfully or due to gross carelessness fails to performs his/her duties under the will and incurs damage to the successors, he/she shall be liable for the damage incurred.

CHAPTER 10. ACCEPTANCE AND RENUNCIATION OF SUCCESSION

Article 1421. Acceptance of Succession

1. A succession is accepted by a successor, be it an intestate or testate successor.

2. A succession is considered to be received by a successor when he/she files, a statement on its acceptance to a notary bureau at the place of the opening of a succession, or actually starts to own or manage the estate which truly testifies that he/she has accepted the succession.

3. If a successor actually started to own a part of estate, it is considered that he/she has accepted the succession in full in which he/she is to be expressed and where he/she has to be.

4. If one of the successors renounces a part of the succession for the benefit of the another successor, such an action will be considered as an acceptance of the succession.

Article 1422. Acceptance of Succession by Incapacitated Person

A succession may be accepted by a capacitated person. Incapacitated persons and also people with restricted legal capacity accept their succession through their lawful representatives.

313

Article1423. Acceptance of Succession through Representative

A succession may be accepted by a successor personally or through his representative.

Article 1424. Term for Acceptance of Succession

A succession shall be accepted within six months as of the date of the opening of a succession.

Article 1425. Special Term for Acceptance of Succession

If the right to accept a succession arises when other successors do not accept the succession, it shall be accepted within the remaining term established for acceptance of succession, and if this period is less than three months - it shall be prolonged to a three-month period.

Article 1426. Extension of Term for Acceptance of Succession

1. A term stipulated for acceptance of a succession may be extended by a court if the reason for exceeding a deadline is considered to be justified. After the term is over, the succession may be accepted also without applying to a court if all the successors agree thereto.

2. In the case envisaged in the first part of this Article the successor failing to use the term for acceptance of a succession will get in kind the remaining part from his/her due property which has been accepted by other successors or which has been transferred to treasury; she/he is also given the value of the other part of the estate.

Article 1427. Inadmissibility Estate Management

A successor who does not await for announcement of other successors and starts to own or manage the estate does not have the right to manage the estate until six months have elapsed from the date of the opening a succession, or till reception of a succession certificate, except for the expenses for care and treatment during illness and burial of the testator, for the support the testator’s dependants, for payment of salaries and for protection and management of the estate.

Article 1428. Right to Income Received Before Claiming

If an intestate successor who did not know about the existence of a will starts to own the estate, and if testate successor did not know about the renunciation of the will, or if the intestate or testate successors did not know about the existence

314

of other closer intestate successors or of another will, they shall return the income received from the succession before an action was filed; they also have the right to claim back the entire capital invested in the estate.

Article 1429. Consequences of Sale of Individual Items of Succession

If items included in an inheritance are sold before a dispute arises, the sale will be considered to be valid and will remain such and the amount received from the sale of goods will be given to a true successor.

Article 1430. Transfer of Estate

If a successor dies after the succession is opened but before its acceptance, his/her share from it shall be transferred to his/her successors. The successor of the deceased successor shall receive the inheritance within the remaining period before the deadline for acceptance of succession. If this period is less than three months, it shall be extended up to three months.

Article 1431. Consequences of Renunciation of Succession Through Transmission

1. The renunciation of a succession through transmission does not prohibit a successor from the possibility to accept the succession that was directly to be given to the deceased successor.

2. In renouncing a succession through transmission, the property is transferred to those persons who were invited to accept the succession together with the deceased successors.

Article 1432. Inventory of Estate

A successor has the right to demand the preparation of an inventory of the estate for which a period of two months is given included in the general term stipulated for acceptance of a succession.

Article 1433. Origination of Title in Estate

An accepted succession is considered to be a property of the successor from the date of the opening of a succession.

Article 1434. Term for Renunciation of Succession

A successor may renounce a succession within three months from the date when he/she has learned about his/her invitation for acceptance of the succession. In

315

the case of a good reason this term may be extended by a court but for not more than two months. The renunciation of a succession shall be authorized at the notary bureau.

Article 1435. Disallowance of Partial Acceptance Succession

1. An acceptance or renunciation of a succession in part with a condition or a term is not allowed.

2. If a successor renounces partial acceptance or states a condition for its acceptance it is considered that he/she renounces the estate.

Article 1436. Renunciation of Agricultural Land

A successor who is not engaged in agriculture may renounce acceptance of agricultural land, machinery, means of labour and animals, but this will not be considered as a renunciation of a general succession.

Article 1437. Acceptance of Several Shares in Estate

If a successor is eligible to several shares in the estate on various bases, he/she may accept one share and renounce the other one, or all of them.

Article 1438. Renouncement of Part of Estate

A successor has the right to renounce that part of the estate to which he/she is eligible with the right of accretion, notwithstanding the remaining part of the estate.

Article 1439. Renunciation for the Benefit of Other Persons

A successor may renounce a succession for the benefit of other persons being intestate or testate successors. The renunciation for the benefit of these persons who were considered to be unworthy inheritors or who were deprived of the right to succeed is not permitted. Such a renunciation may be claimed against at a court by other successors.

Article 1440. Increase in Share of Estate in Renouncing Estate

If a successor has not accepted or renounced the succession without specifying the shares of the successors, his/her share shall be accrued to the shares of the intestate successors, or if the entire estate is divided under a will – to the shares of the testate successors and shall be allocated among them in proportion to the size of their shares unless otherwise provided by the will.

316

Article 1441. Renunciation of Succession by Sole Successor

If a successor who has renounced a succession is the sole successor among those of that particular order, the succession shall be transferred to the successors of the next order.

Article 1442. Renunciation for Benefit of Several Successors

If a successor has renounced a succession for the benefit of several successors, he/she may specify shares of each of them. In the case of back of such an indication his/her share shall be divided equally among those successors for the benefit of whom the renunciation was made.

Article 1443. Renunciation of Succession for the Benefit of Grandchild

The renunciation of a succession for the benefit of a grandchild is permitted if by the date of the opening of a succession his/her parent who should have been a successor of the testator is deceased, or if a grandchild is testate successor.

Article 1444. Disallowance of Renunciation of Succession by Treasury

The treasury does not have the right to renounce a succession transferred thereto.

Article 1445. Disallowance of Renunciation after Applying to Notary Bureau

The renunciation of a succession is not allowed after the testator has filed a a statement on acceptance of a succession certificate to a notary bureau at the place of the opening of the succession.

Article 1446. Irrevocability of Renunciation of Succession

1. A statement of a successor on renunciation of a succession is irrevocable.

2. If a successor is incapacitated person or a person with restricted legal capacity, the renunciation of a succession is allowed with a court permission.

Article 1447. Renunciation in Case of Actual Ownership

A successor who has actually started to own or manage an estate may renounce the succession within the period stipulated for acceptance of a succession, regarding which she/he should apply to a notary bureau.

317

Article 1448. Transfer of the Right to Renounce by Succession

1. The right to renounce a succession is transferred by succession.

2. If a successor dies before the expiry of term for acceptance or renunciation of a succession, this term will be valid until the time remaining after the successor has not expired.

3. Each of several successors of the deceased successor may renounce only his/her succession share in the estate.

Article 1449. Renunciation of succession through Representative

The renunciation of a succession through a representative is possible if in the instruction (the power of attorney) a special indication is made on the authority to renounce.

Article 1450. Term for Claiming Acceptance of Succession

The acceptance or renunciation of a succession may be claimed within two months from the date when an interested person learned about a proper ground for it.

Article 1451. Origin of Legal Effects of Acceptance of Succession

Legal effects of acceptance or renunciation of succession originate as of the date of opening of a succession.

CHAPTER 11. DIVISION OF ESTATE

Article 1452. Concept

Division of an estate is executed with an agreement of successors eligible to succession on the basis of the shares die thereto by law or a will.

Article 1453. Definition of a Manner of Division of Estate by Testator

A testator may define in a will a manner of division of estate. Namely, he/she may authorize a third person to divide the estate. A decision of the third person is not obligatory for the successors if it is definitely unfair. In such a case the estate is divided at a court decision.

318

Article 1454. Separation of a Share in Estate in Kind

Each successor may request the separation of his/her share in kind from the movable as well as immovable property if such separation is possible or is not prohibited by law.

Article 1455. Inclusion of Gift into Successor’s Share

Upon division of an estate, the share of each successor shall include the value of the property that was received by him/her from the testator during five years before the opening of the succession.

Article 1456. Sale of Estate by Agreement of Co-Successors

By agreement of co-successors, the sale of the entire estate and division of the received amount in proportion to their shares is allowed.

Article 1457. Transfer of Estate to One Co-Successor

By agreement of co-successors, the transfer of the entire estate to one co-successor is allowed, who in his/her turn, is obliged to provide a relevant compensation to other co-successors.

Article 1458. Suspension of Division of Estate

Co-successors may agree to suspend division of an estate for a certain period of time.

Article 1459. Share Ownership on Indivisible Property

Unless otherwise provided by the agreement of all the successors of an estate the property which division will result in abolishment or limitation of its economic nature is not subject to division and becomes common property of the successors according to their shares.

Article 1460. Division of Agricultural Land Among Successors

1. If an owner of agricultural land, on which a family estate is established, has left it as a succession to several successors by a will, or if a will has not be left and there are several intestate successors, the agricultural land and a family estate established on it may be divided among the successors if parts of land for each successor as a result of the land division ensure the existence of a viable economy.

319

2. Division is permitted only in the case when the successor plan to run the economy themselves. If none of the successors wishes to run the economy the land and the economy established on it may be sold by agreement of successors and they will receive their shares in the form of money.

Article 1461. Disallowance of Division of an Agricultural Land

If division of an agricultural land is impossible, the land shall go to the successor who lives in the family estate and who ran it together with the testator. If such a testator does not exist, the land shall go to the one who is able and wiulling to run the economy.

Article 1462. Compensation of Share

A successor who fails to receive a part of land shall get an appropriate share from other property, and if the other property is insufficient, he/she shall get a corresponding compensation under the established procedure.

Article 1463. Transfer of Estate by Succession

1. If an estate is the household of a family and if the last member of the family has not left a will the common property of the family shall go to the estate successors on condition that the family economy shall not be divided.

2. In case the last family member appoints several successors in his/her will, the rule which applies to a family economy in general shall be applied.

Article 1464. Common Ownership in a Family Estate

By agreement of co-successors, land and a family estate established thereon may remain in common ownership.

Article 1465. Right of a Conceived Successor Upon Division of Estate

1. If a successor inheritor is conceived, the division of an estate is possible only after the birth of this successor.

2. If a conceived successor is born alive, other successors have the right to divide the estate only after separation of his/her share. For safeguarding interests of the new-born his/her representatives shall be invited for participation in the division.

320

Article 1466. Imposition of Liabilities on One of Successors

By agreement of co-successors, liabilities may be imposed entirely on one of the successors instead in exchange of giving him/her an accordingly increased share from the estate.

Article 1467. Obligation of Securing Share Reception

Each co-successor is obliged to secure reception of corresponding shares by other co-successors. When a co-successor gets the right of demand as a result of the estate division, other inheritors are obliged to facilitate solvency of a debtor according to their shares in the estate at the moment of division, or the period for accomplishment of such obligation has not come, the aforesaid is executed at the moment of execution of an obligation.

Article 1468. Proportional Decrease

If it becomes obvious that the sum of shares envisaged in a will exceeds the entire estate, the shares of each successor shall be according decreased.

Article 1469. Settlement of Dispute in Dividing Estate

In case of a dispute between co-successors with regard to division of an estate it will be considered by a court which upon division of the estate shall take into consideration the nature of the divisible property, activities of each co-successor and other concrete circumstances.

Article 1470. Right of a Share Disposition

1. Each co-successors may dispose of his/her share in the estate. An agreement by which one of the co-successors disposes of his/her share shall be confirmed by a notary.

2. A co-successor may not dispose of separate items from his/her share.

3. In the case of disposal of his/her share by a co-successor other co-successors have the right of first refuse. The right of first refusal shall be executed within two months. This right is transferred by succession.

Article 1471. Termination of Right of First Refusal

The right of first refusal shall be terminated after the share has been transferred to a co-successor.

321

Article 1472. Satisfaction of Creditors in Alienating a Share

In the case of a share alienation, the purchaser shall assume the obligation of satisfaction of creditors’ demands in accordance with the purchased share.

Article 1473. Share Accretion

The successors who are invited to accept a succession are obliged to add to the estate until before its accretion all that had been received from the testator his/her lifetime in the form of separation from their parents’ property, unless the testator provided otherwise.

Article 1474. Results of Exclusion of Exclusion

If an estate has lost a descendant either before or after its opening, who as a successor would have been obliged to accrual, the right of accretion shall be assigned to a successor eligible to that share.

Article 1475. Consideration of a Special Merit in Equalizing

A descendant (relative in the descending line) who through a labour in a family estate, participation in professional and commercial activities of the testator, be by undertaking substantial expenses or in any other form has made a special merit in maintaining and growth of the property of the testator, has the right to claim equalization with other relatives who are considered to be interstate successors together with him/her and claim succession.

Article 1476. Inadmissibility of Claiming Equalization

Equalization may not be claimed in the case where for servicing the testator a relative received remuneration or it was agreed upon in advance or if the relative may submit a claim on other legal basis for the rendered service.

Article 1477. Demand of Fair Distribution

1. Equalization shall be executed in a fair way according to the rendered service and the size of estate.

2. In dividing the estate the equalization amount shall be deducted from the total amount of the estate and will be added to the share of the co-successor who has the right to claim equalization.

322

Article 1478. Obligation of identifying Location of a Successor

If among the successors there are persons whose location is not known, other successors are obliged to take reasonable measures to identify their location and to invite them for acceptance of a succession.

Article 1479. Consequences of Non-appearance of Successor

1. If a successor who is invited to accept a succession fails to appear present but his/her address is identified, does not renounce the succession within three months, other successors are obliged to notify him/her about their intention to divide the estate.

2. If such a successor does not notify other successors within three months about his/her desire to participate in the agreement on the property distribution, other successors have the right to divide by property with a mutual agreement and to separate the share of the absent successor.

3. If within six months from the date of the opening of a succession it is not possible to identify the location of the absent successor and there is no message from him/her about the refusal to accept the estate, other successors have the right to distribute the estate under the procedure provided for in the second part of this Article.

Article 1480. Priority Right of Succession

Successors who together with the testator enjoy the common ownership right to the property, shall have the priority right of succession of the property that is included in the common ownership.

Article 1481. Priority Right of Receiving Dwelling House

Upon division of an estate, a successor who prior to the opening of a succession had lived with the testator one year at least has the priority right to accept from the estate the dwelling house, apartment or any other dwelling place as swell as household goods.

Article 1482. Consideration of Property Interests of Successors

Upon execution of the priority right the property interests of those other successors who participate in division of the estate shall be taken into consideration. If the property is insufficient for securing their due shares, the successors who execute the priority right shall provide them with relevant money or property compensation.

323

Article 1483. Postponement of Compensation

At request of the successors who execute the priority right a court has right to postpone the payment of the compensation with regard to its size but no longer than ten years.

CHAPTER 12. SATISFACTION OF CREDITORS BY SUCCESSORS

Article 1484. Responsibilities of Successors Towards Creditors

1. Successors are obliged to satisfy interests of creditors of the testator but within the received assets in proportion to shares of each successor.

2. If the testator was a joint and several debtor for the debts transferred to the successors, the successors shall be also joint and several debtors.

3. The successors of the compulsory portion shall be also responsible for debts of the testator.

Article 1485. Burden of Proof

A successor shall prove that debts of the testator exceed the estate except the case when the estate was specified by a notary.

Article 1486. Liability of Successor to Pay Debts

A testator may oblige one or several successors to repay the entire debt or part thereof.

Article 1487. Obligation to Notify Creditors Upon Opening of a Succession

Successors are obliged to notify creditors of the testator about the opening of a succession if they are aware of the debts of the testator.

Article 1488. Term for Submission of Claims of Creditors

1. Within six months from the date when creditors learned about the opening of a succession they shall present their claims to the successors who have accepted the succession notwithstanding the term for claims.

2. If creditors of the testator were not aware of the opening of a succession, they shall present their claims to the successors within one year from the date of commencing the period for claim submission.

3. Non-compliance with these rules will result in the loss of creditors’ claiming right.

324

Article 1489. Application of Total Limitation Period

1. Creditors’ claiming right period does not apply to the claims of expenses made during the last illness of the inheriting person, his/her medical care and nursing, payment of salaries, burial, protection and management of the estate, as well as the claims of third persons concerning the recognition of ownership the right on property and on claiming back their due property.

2. The total limitation periods apply to the claims stipulated in the first part of the present Article.

Article 1490. Postponement of Execution Period

If a claim was presented by a creditor before commencement of the claim execution period, a successor has the right to postpone the execution before the commencement of the consequent period. From the date of the period commencement a creditor has the right to demand the execution of the presented claim during the total limitation period.

Article 1491. Superiority of Creditors of an Inheriting Person

Upon satisfaction of claims, creditors of the inheriting person are superior to creditors of inheritors.

Article 1492. Responsibility of a Treasury Towards Creditors

Upon transfer of a property left without a successor to the treasury, it shall be responsible for debts of the testator as a successor.

Article 1993. Consequences of Acceptance of Estate by Creditor

If a testator left his/her property to his/her creditor, it may not be considered as setting off of the creditor’s claim.

Article 1494. Creditor Satisfaction

Claims of creditors shall be satisfied by successors through a single payment unless otherwise provided by a mutual agreement therebetween.

CHAPTER 13. PROTECTION OF ESTATE

Article 1495. Concept

For protection of interests of absent successors, recipients of testatory disposition and public interests a notary of the place of opening of a succession shall take necessary measures for estate protection on initiative of interested persons, the

325

will executor or his/her own. This shall be confirmed by all the successors before acceptance of a succession or before expiry of the period stated for acceptance of the succession.

Article 1496. Property Protection Obligation by a Notary Bureau

If an estate or part thereof are not located at the place of its opening, a notary bureau ordains notary bureau at the location of the estate to take necessary measures for protection of this property.

Article 1497. Inventory of Property

With the purpose of property protection a notary bureau shall make inventory of the estate and delivery it to a successor or other person for safe-keeping. At the same time, it takes measures to find those inheritors who are not present at the place of the opening of a succession.

Article 1498. Nomination of Administrator of Estate

If an estate needs administration and also when a claim is presented by creditors of the testator, a notary bureau shall nominate an administrator. An administrator is not nominated, successors has accepted the succession or if a will executor is appointed.

CHAPTER 14. SUCCESSION CERTIFICATE

Article 1499. Concept

1. Persons invited as successor may request a succession certificate to be issued to them by a notary bureau at the place of opening succession.

2. In the cases envisaged by a law reception of succession certificates is obligatory.

Article 1500. Term for Issuing Succession Certificate

Succession certificates are issued to successors at any time six months after the date of the opening at a succession. Certificates are issued earlier than six months if a notary bureau holds a certificate that there are no other successors except those inheritors who request a succession certificates to be issued to them.

326

Article 1501. Consent for Entry in Succession Certificate

Successors who have not received succession in the period established by law may be entered in the succession certificate with the consent of all those successors who have received the estate. The consent shall be made in a written form prior to the issue of a succession certificate.

Article 1502. Issue of Succession Certificate to Successor’s Descendants

If a successor who was invited to receive an estate dies after the succession was opened but failed to receive it in the fixed period, his/her descendants may receive the succession certificate for the property left after the death of the original testator.

Article 1503. Issue of Succession Certificates to Co-successors

A succession certificate may be issued for the entire estate as well as on a part of it. The certificate is given to all successors or to each of them separately at their option. The issuance of a succession certificate to one successor for a part of the estate does not deprive other successors from the right to receive the succession certificate for the remaining part of the estate.

Transitional and Concluding Provisions of the Civil Code Article 1504. Entry into force of the Civil Code of Georgia

The Civil Code of Georgia enters into force from November 25, 1997.

Article 1505. List of Invalidated Laws

From November 15,1997 the following shall be invalidated:

1) The Law of the Georgian SSR “On Adoption of the Civil Law Code of the Georgian Soviet Socialist Republic” dated December 26, 1964 (Gazette of the Supreme Council of the Georgian SSR, 1994; #36, Article 662);

2) The Law of the Georgian SSR “On Adoption of the Marriage and Family Code of the Georgian SSR” dated June 18, 1970 (Gazette of the Supreme Council of the Georgian SSR, 1994; #6, Article 96);

3) The Law of the Georgian SSR “On Adoption of the Housing Code of the Georgian SSR” dated June 4, 1983 (Gazette of the Supreme Council of the Georgian SSR, 1983; #6, Article 199);

4) Law of the Republic of Georgia “On the Right of Ownership” dated July 15, 1993 (Gazette of the Parliament of Georgia, 1993; #9-12, Article 169);

327

5) Decree of the Parliament of Georgia “On the Right of Ownership” dated July 15, 1993 regarding the law of the Republic of Georgia (Gazette of the Parliament of Georgia, 1993; #9-12, Article 170);

6) The Law of the Republic of Georgia “On Lease” dated May 24, 1994 (GPG (Georgian Parliamentary Gazette) , 1994; #18, Article 382);

7) Decree of the Parliament of Georgia Regarding the Law of the Republic of Georgia “On Lease” dated May 24, 1994 (GPG, 1994; #18, Article 383);

8) The Law of the Republic of Georgia “On Public Unions of Citizens” dated June 19, 1994 (GPG, 1994; #19, Article 401);

9) Decree of the Parliament of Georgia regarding the law of the Republic of Georgia “On Public Unions of Citizens” dated June 14, 1994 (GPG, 1994; #19, Article 402);

10) The Law of the Republic of Georgia “On Mortgage” dated June 30, 1994 (GPG, 1994; #19, Article 423);

11) Decree of the Parliament of Georgia regarding the Law of the Republic of Georgia “On Mortgage” dated June 30, 1994 (GPG, 1994; #19, Article 424);

12) Law of the Republic of Georgia “On Lease of Agricultural Land” dated June 28, 1996 (GPG, 1996; #19-20);

13) Articles 32-54 of the Law of Georgia “On Insurance” dated May 2, 1997 (GPG, Legislative Annex, 1997, #21-22);

14) Article 7 of the Law of Georgia “On Ownership of Agricultural Land” dated March 22, 1996 (GPG, 1996 #007).

Article 1506. Invalidated Subordinated Normative Deeds

1) All subordinated normative deeds that are irrelevant to the Civil Code shall Georgia to be considered as void.

2) Normative acts issued before entry into force of the Civil Code by appropriate bodies authorized by the President of Georgia, the Government of Georgia, or under the Law of Georgia “On Normative Acts” shall be deemed to be void if they differently govern relations that have been governed by the Civil Code..

Article 1507. Action of the Civil Code in Time

1) The Civil Code applies only to those relations which arise after the entry into force this Code.

2) Towards the relations that were arisen before enforcement of the Civil Code the norms of this Code shall be applied towards the rights and obligations arisen from November 25, 1997.

328

3) Towards relations arisen on the basis of normative deeds invalidated due to the enforcement of the Civil Code these normative deeds are applied except for the cases when the participants wish to settle their relations under this Code or if the Civil Code envisages new rules on immovable goods.

4) According to limitation envisaged by Articles 165-168 of the Civil Code the term of acquiring property is counted from July 23, 1993 from the date of enforcement of the Law of the Republic of Georgia “On Ownership Right”.

Article 1508. Application of Copyright Law Norms on Relations Arisen Before

1) “Copyright Law”- Part One of the Book Four of the Civil Code is applied to the relations connected with the establishment and usage of copyright and similar rights arisen after the enforcement of this Code.

2) The copyright validity periods envisaged by Articles 1062-1063 of this Code are used towards those works those twenty-five year copyright protection has not expired by May 16, 1995, i.e. before Georgia joined Berne Convention “On Protection of Works of Literature and Fiction” .

3) For the performance on which by November 25, 1997 twenty five years are not gone since its first performance, the performer’s executor’s right protection period envisaged by the first part of Article 1095 of the present Code is applied.

4) For phonograms and videograms on which by November 25, 1997 twenty five years are not gone since their first legal publication or composition, in the case if in the mentioned period they were not published, the period of protection of related right envisaged by the 3rd part of Article 1095 shall apply.

5) For programmes of broadcast organizations on which by November 25, 1997 twenty five years are not gone since their first legal publication or composition, in the case when in the mentioned period they were not published, the period of protection of the related right envisaged by the 4th part of Article 1095 of this Code shall apply.

6) Copyright of legal entities which were arisen before enforcement of this Code are valid during fifty years from the date of legal publication of a work or its composition if in the mentioned period this particular work was not published.

Article 1509. Legal Entities of Private and Public Law

1) Legal entities of public law envisaged by the Civil Code are:

a) State;

b) Self-governments;

329

c) Legal entities created by the State on the basis of legislation or administrative deed, which are not established in an organizational and legal form envisaged by the Civil Code or the Law “On Entrepreneurs”;

d) State establishments and state funds that are not composed in line with the Civil Code or the Law “On Entrepreneurs”;

e) Non-state organizations (political parties, religious unions, etc.) established on the legislative basis for of accomplishing public goals.

2) Legal entities of Private Law are:

a) Union;

b) Foundation;

c) Partnership;

d) Limited partnership;

e) Limited liability company;

f) Joint Stock Company;

g) Cooperative;

h) Municipal Enterprise.

Article 1510. Non-commercial Legal Entities

From the moment of enforcement of the Civil Code all non-commercial legal entities of private law shall be established only with the organizational and legal form of a union or a fund.

Article 1511. Re-registration of Non-commercial Legal Entities

1) Before enforcement of the Civil Code non-commercial legal entities established on the basis of the Law of the Republic of Georgia “On Public Unions of Citizens are subject to re-registration before January 1, 1999; the mentioned legal entities are subject to re-registration before this deadline also in the case when their founders or members take a decision to make amendments to their charter or other founding documents.

2) Re-registration requires the following:

a) decision of those bodies of non-commercial legal entities that are authorized in line with the Law of the Republic of Georgia “On Public Unions of Citizens” or charter of these legal entities to take decisions on making amendments to their chapter or on their reorganization;

b) new edition of the Charter that shall be relevant to the requirements of the Civil Code.

330

3) As a result of re-registration the registered non-commercial legal entity is rightful substitutor of the previously registered legal entity.

4) Where non-commercial legal entities do not undergo re-registration, the Ministry of Justice of Georgia or a court on the territory of which these entities are located are obliged to cancel the registration.

5) Non-commercial legal entities pay twenty five per cent of the general registration fee for the re-registration.

Article 1512. Partnerships of Apartment Owners

Housing and construction co-operatives - as legal entities shall be deemed to be as invalidated from November 25, 1997. Their legal successors shall be partnership of apartment owners pursuant to Articles 208-232 of the present Code. At the same time, obligations of the previously created housing and construction co-operatives remain valid.

Article 1513. Ownership of Household Land

Land being in the legal ownership of physical entities on which individual houses are built is considered to be private property of these persons from the moment of enforcement of the Civil Code to which the rules for immovable goods envisaged by the Civil Code shall be applied.

Article 1514. Registration of Immovables in the Transitional Period

Before establishing Public Register Service the transfer of land shall be conducted on the basis of land allotment deeds maintained at technical stock-taking bureau or at local government bodies . All new purchases of land from November 25, 1997 shall be executed at the family estate service (public register) existing in the system of land registration service. The Land Management Department of Georgia shall ensure the establishment of a relevant service, the preparation of public registration forms and the settlement of all those organizational issues that are related to the registration of owners of immovable property originated from the enforcement of the Civil Code.

Article 1515. Ensuring Openness of Registration Data

Before establishment of the Unified Service of Public Register functions of this service stipulated by the Civil Code shall fulfill by stock-taking bureaus. The Ministry of Urbanization and Construction of Georgia and the State Department of Land Management shall ensure openness of the public register data and access of interested persons to it.

331

Article 1516. Teaching of the Civil Code

Ministry of Justice of Georgia shall ensure before November 25, 1997 the following:

a) the settlement of all the organizational issues essential for the registration of funds at the Ministry of Justice;

b) the publication of registration data of legal entities envisaged by the Civil Code through mass media;

c) the teaching of the Civil Code to the personnel of law enforcement bodies, other bodies of the executive authorities as well as of justice bodies.

Article 1517. Introduction of Bank Service Agreements

The National Bank of Georgia shall:

a) take relevant measures for introduction of bank service agreements as envisaged in this Code to enable commercial banks to ensure the opening of bank accounts and constant settlement of those organizational formation that are not legal entities; namely, partnership of apartment owners, non-registered unions, partnership;

b) ensure annulment of limitations related to the opening of settlement or other accounts by physical entities to enable all physical or legal entities to open their needed accounts without delays and to entering bank service agreement without limitation pursuant to this Code.

Article 1518. Conclusion of Public Utility Agreement

Relevant government and State subordinate establishments of the executive power shall ensure entering into agreements with apartment owners and other users before November 25, 1997 on road, water, electricity supply and telephone services.

Article 1519. Ensuring of Unity of Definitions

Definitions and terms used in the Civil Code shall be adequately used in all other legislative deeds.

Article 1520. Organizational Issues for Introduction of the Civil Code

The President of Georgia shall ensure before November 25, 1997:

a) the settlement of organizational issues necessary for registration of unions in courts by the Council of Justice;

332

b) the introduction of the Civil Code as a compulsory subject at all types of high schools of law.

President of Georgia

Eduard Shevardnadze

Tbilisi,

June 26, 1997 No. 786-IIS.

333