The concept and types of forfeit. Types of forfeit in civil law

The penalty exists for a long time and is considered one of the most common methods of securing obligations. In relation to a number of agreements, it is determined by law. For example, this applies to a loan agreement. In other cases, the penalty is established by agreement of the counterparties. However, the terms of the contract should not be contrary to law.

Forfeit: concept and types

The definition of this method of securing the terms of the contract clarifies Art. 330, Clause 1 of the Civil Code. Any types of forfeit represent a certain amount. The debtor must pay its creditor in case of improper fulfillment of the terms of the agreement or evasion of obligations. Distinguish types of forfeit on the basis of occurrence. So, as mentioned above, the amount can be determined by law or by agreement. In the latter case, it will be a contractual penalty. It is established by the parties by mutual agreement. Legal penalty provided by regulatory enactments. For a more visual illustration, the table below is presented:

Forfeit: its types and significance

Art. 330, paragraph 1 clarifies the essence of the definition in question. In particular, the norm states that when making a claim for a penalty, the creditor must not prove the existence of losses. Simply put, a recovery can be made even if damage is not caused due to non-compliance with the terms of the agreement. The essence of the penalty is clearly articulated by Professor Vitryansky. He says that the attractiveness of the forfeit, the widespread use of its types for securing obligations are determined mainly by the fact that this method is a rather convenient means for simplified compensation of losses incurred by the creditor. In this case, the following features are characteristic of this tool:

• The possibility of collecting directly for the fact of violation of the terms of the contract.
• The predetermination of the amount of liability for failure to fulfill an obligation known to the parties at the time of conclusion of the contract.
• No need to prove the damage and the amount of losses.
• The opportunity for the parties to the contract to independently formulate the conditions of the penalty (except for the legal one), including on the issue of its size, accrual procedure, ratio with losses.

All this allows you to adapt it to a specific relationship of the parties, to strengthen the focus of its actions.

Legal aspect

The penalty agreement acts as an additional obligation. Its effect and execution depend on the terms of the main contract. In accordance with Art. 330, clause 2 of the Civil Code, the creditor cannot demand compensation if the debtor, by agreement, is not liable for improper performance or non-performance of the obligation. According to Art. 12 CC types of forfeit in civil law are defined as ways to protect the legal capabilities of the creditor. Along with this, given the above, they also act as a form of property liability of the debtor.

Important point

As you know, to prove losses in accordance with Art. 15 CC it is necessary to confirm the presence of guilt of the counterparty (debtor). In the case of a forfeit, the mere fact of participation in the contractual obligation and non-fulfillment of the conditions will be sufficient.At the same time, if this instrument provides an agreement regarding the implementation of commercial activities, then for the recovery there is no need to prove the fault of the debtor. This is due to the fact that the entrepreneur bears increased responsibility regardless of guilt, except in cases of force majeure. This provision is established in Art. 2 and 401 GK.

Specificity

Any types of forfeit are expressed exclusively in the amount of money. This condition is established in Art. 330, paragraph 1 of the Civil Code. At the same time, in a number of foreign countries non-monetary expression of the penalty is allowed. In domestic law, such an opportunity was established in the Civil Code of 1922.

Law enforcement

This type of penalty does not depend on the will of the participants in the legal relationship. It applies in cases where it is not provided for in the contract or its smaller size is established. The parties may, unless expressly prohibited by law, increase the amount of the penalty. However, participants are not able to reduce its size. It so happens that the penalty is disproportionate to the violated obligation. In this case, under Art. 333 the court has the right to reduce its size. Moreover, the debtor cannot be exempted from payment in full. A three-year (general) statute of limitations applies to recovery claims.

Main classification

The legislation establishes the types of forfeit by the calculation method. So, she can be exacted once. By law, it is defined as a fine in the form of a fine. It can be set in a fixed amount, percent, or in proportion to a certain amount. The penalty in the form of a penalty is collected on an accrual basis, continuously. For example, it may be 100% per annum of the unpaid amount for each overdue day. The penalty is usually set for the untimely fulfillment of the main obligation and is calculated separately for the unpaid loan amount, as well as for unpaid interest on its use.

Combination with other methods of securing obligations

In some cases, the existing types of forfeit cannot provide full coverage for the damage of the creditor related to the violation of contractual obligations by the debtor. This raises the logical question of whether the active party to the agreement may require additional indemnification? Depending on the ability to combine with the recovery of damage, the following types of forfeit are distinguished:

• Alternative.
• Credit.
• Fine.
• Exceptional.

Characteristic

Due to the set-off penalty, the creditor is able to demand, inter alia, compensation for damage in the part that remains uncovered. This method of collection is applied in all cases, unless otherwise provided by law or contract. Using the penalty form, the creditor may demand compensation in full in excess of the penalty. This collection method is considered the most stringent. It is applied in the presence of gross violations of the terms of the contract. Exceptional view does not allow the creditor to compensate for damage from above, or in addition to forfeit. An alternative method involves any one penalty. That is, the creditor may demand either a penalty or compensation for damage. In practice, this method of securing obligations is not widespread.

Expert Conclusions

According to a number of authors, the penalty, in comparison with other types of securing obligations, acts as the most popular tool for protecting the rights of a creditor. This, first of all, is caused by a rather high stimulating effect. Forfeit has a significant impact on the debtor, allowing the lender to compensate for losses. This feature is provided by:

• The certainty of the liability at the time the obligation arises.
• The right to recover the fact of violation, regardless of whether damage is present or not.
• Ample opportunities in determining the amount of compensation, the rules of execution and the correlation with compensation for losses, taking into account the nature and gravity of violations. This right takes place if the penalty is not determined by the contract.

It follows from this that the proper use of this tool allows you to enhance its selectivity, focus to prevent violations of the terms of the main agreement, for example, a loan agreement.

Arbitrage practice

In accordance with a number of decisions of the BAC Presidium, in order to win the case of awarding any property in kind, the creditor must prove that the defendant has the required goods at the time of the proceedings. As a rule, this is extremely difficult. In such circumstances, the ability to recover the type of forfeit, which implies the need to make a decision on the transfer of certain property in kind, becomes doubtful.

Application difficulties

Problems may arise when the terms of the goods penalty are included in the contract. In this case, difficulties arise both for the creditor and for the court in which the dispute is being considered. Taking into account the dispositive nature of a number of provisions of civil law, as well as the principle of freedom of agreement, we should not forget that the law also establishes a number of restrictions. In particular, they relate to inadequate and unreasonable terms of the contract. Limitations of the legislation are also aimed at protecting the weak side from probable abuse, preventing errors, protecting the court proceedings from unnecessary complications of the process. In this regard, the introduction of a penalty solely in monetary amount becomes justified.

Clarification of Lawyers

The above information, however, does not mean at all that the condition of the agreement under which the debtor is obliged to transfer any property or to provide non-monetary provision in case of breach of the contract is invalid.

In accordance with the principle of freedom to conclude a contract, such reservations are considered admissible. They act as a civil-law institution of a specific nature, to which certain rules on forfeit can be applied by analogy. In this case, however, a logical question arises.

What is the point of the legislator to deny the possibility of using non-monetary penalties in order to subsequently recognize that an institution of this kind, despite the fact that it cannot formally be called a forfeit, in principle has the right to exist simultaneously with the permissibility to use the general rules of its imputation by analogy? Maybe in this case it would be more reasonable, as it was done in a number of foreign countries, to acknowledge its non-monetary expression? Regarding this issue, experts note the following:

• First of all, the formally legal exclusivity of the monetary nature of the penalty as a civil institution follows directly from the provisions of the Civil Code. On this issue, the requirements are more than unambiguous.
• Secondly, the envisaged mandatory payment of the penalty in monetary terms is of practical educational value, since it directs the parties to choose the most appropriate and convenient subject for the reservation of this penalty. This, in turn, eliminates the possibility of problems for both the judicial authority and the parties in the process of implementing this condition of the agreement.