Legal relationships associated with non-compliance with the terms of the contract are often accompanied by controversial issues. For example, when returning money received to the account of the service provider in the form of an advance. In order to resolve complex disputes, it is necessary to know the legal aspects of this issue. Therefore, we will try to figure out in which cases the advance payment upon termination of the contract is legitimate, in what time period it is carried out and whether it is possible to terminate it unilaterally.
What is an advance?
In pursuance of the agreements reached during the preparation of the contract, often one party pays cash for a product or service. Payment may be called a deposit, prepayment or advance payment. The payer is entitled to declare the return of advance funds if the goods or services have not yet been provided to the recipient, or if the obligations undertaken under the contract are partially fulfilled. In the first case, the payer is allowed by law to present a demand for an advance payment in full. In the second scenario, a certain part of the advance payment calculated with the deduction of already performed works and services is possible. For this, an advance invoice is required.
Reverse situation
But the opposite situation is also possible, the amount of advance payments is lower than the cost of the work performed, in this case the customer compensates the difference to the contractor. If the contractor wishes to terminate the contract, the other party requires him to pay the difference between the advance payment and the cost of work performed, as well as a penalty for improper performance of contractual obligations. The amount of the penalty is determined by the terms of the agreement and the service contract.
An advance cannot act as a guarantor of fulfillment of obligations. It is paid by the customer as an advance payment for future work and services provided by the contractor. It does not oblige to conclude a contract; it can be returned at any time during the term of the contract. The Civil Code does not give a clear definition of the concept of advance payment. In earlier legislation, the term was set as a partial prepayment. It is not paid in the form of full payment under a contract or other agreement.
In what cases is it possible to return an advance upon termination of the contract?
What could be the reason?
Refund of the deposit or advance is possible if there are the following reasons:
- the party that received the advance did not fulfill its obligations;
- the work of the performer is performed poorly;
- the contractor delayed the start of work and disrupts the delivery time.
We remind you that the customer has the right at any time during the term of the contract to express a refusal of the services of the contractor. However, in this case, the customer returns the advance minus the cost of work performed on the basis of the advance invoice.
The difference between the concepts of advance, deposit and prepayment
All relations between the customer and the contractor are determined by the civil code. A clearly defined description of the deposit is contained in Art. 380 of the Civil Code of the Russian Federation. It says that an agreement on the issuance of a deposit must be drawn up in writing, its exact size is indicated. The deposit is considered a kind of guarantee of the contract. Thus, if the customer terminates the service contract, the deposit remains with the contractor. But the contractor at termination pays the amount in double size. It is not possible to make a deposit in the form of securities.
With the advance, as we said above, the situation is more complicated. The legislator does not disclose this concept, so it happens that the advance and the deposit are often confused. However, this is a mistake, since the advance, prepayment and deposit are understood as different types of payments. Prepayment can always be returned to the buyer in full if the transaction did not take place.
What does the law say?
Law on the protection of rights on the side of consumer interests. Payment is made in full, and this rule works "by default" with rare exceptions. Such exceptions include situations when it was previously envisaged to draw up a preliminary contract of sale or other document certifying and fixing the terms of the transaction before it was completed. So, for example, they do it in the event of a major purchase. As, for example, an advance when buying an apartment. If a contract was drawn up in which the circumstances were clearly specified in which it is possible to withhold prepayment, then their violation leads to the fact that the prepayment can be withheld in whole or in full.
In the second, most common case, in which the prepayment or part of it is usually not returned when the goods are ordered through a store. In this case, prepayment is a compensation for losses that the seller may incur. At the same time, the conditions under which the advance payment is not refundable are usually spelled out in the rules of the trading organization, which the buyer must be warned about.
Well, the last most common case when the prepayment is not returned exactly is the order of services. If the contractor purchased materials and tools to complete your order, then money is unlikely to be returned to you. But at the same time, you need to remember a very important thing: they can withhold prepayment only if you were warned about this in advance.
The procedure for the implementation of the return of the advance upon termination of the contract
The customer draws up a written claim in which he clearly spells out the requirement to return the amount of the advance payment and the reasons why he made this decision. If the return is justified and confirmed by the terms of the contract, the advance payment must be paid to the customer within the time period established by the agreement, if it does not contain clauses indicating other conditions. The contract may be terminated if there is agreement of both parties or as a result of the requirements of one party, but if there is a judicial act. If a unilateral termination of the contract occurs, then in court the applicant presents relevant evidence confirming the fact of non-fulfillment of the conditions.
Transaction violations
Violations of the transaction are considered material if they entail causing significant damage to the other party. Such a case is considered suitable for termination of the contract by one of the parties. Often the problem appears before the start of work, this allows you to pay the full advance payment, and the contract is terminated. However, by concluding a contract, the parties may make a reservation that upon termination of contractual obligations the advance payment paid is not refundable under any conditions. This, of course, is of benefit only to the performer and partly unties the hands of dishonest citizens. But the customer may well lose his money paid in advance. In this case, even the court will be on the side of the contractor. A refund is issued to third parties if such an item is indicated in the contract.
The timing
The contractor, upon unilateral termination of the contract, returns the amount of the advance on the day when the contract has terminated the actual operation. If the case was considered in court, then on the day the decision is made. If there is a refusal to pay advance amounts, then from the moment of termination of the contract for this amount, interest will be calculated for the use of other people's funds. The customer has the opportunity to insure his money by contacting the bank for an advance guarantee.It serves as a guarantor of the coverage of perceived risks in case of violation of the contract by the contractor. Insurance is issued for the duration of the contract, that is, until all parties fulfill all their obligations. In this case, the guarantor who issued the insurance controls the timely implementation of the contract and all the conditions specified therein.
Varieties of terminated transactions
"In the morning money - in the evening chairs"! This is not only Ostap Bender's favorite motto. All sellers prefer to work that way. But even the advance made does not always guarantee the seller that it is these “chairs” that the customer will buy from him. From situations when you have to return an advance, not a single seller is insured. Refund troubles are aggravated by the VAT paid on advance. In this case, you can take the tax deductible, observing certain rules. Firstly, it is necessary to terminate the contract, return the advance to the buyer and reflect this operation in the account. All these operations must be performed within a period not exceeding one year from the moment the failure occurred.
Real Estate Transactions
Separately, it is necessary to stipulate the return of the advance payment when the contract of sale of real estate is terminated. The process of buying or selling real estate in itself is time-consuming, requires a lot of time and effort of all interested parties. An advance when buying an apartment is often paid.
Therefore, termination of the contract in this case causes quite serious damage to both the buyer and seller. But life makes its own adjustments, often our plans change for reasons that are not dependent on us, and we are forced to submit to circumstances.
Grounds for termination of the contract
There are not many reasons and reasons for terminating the contract:
- One of the parties suffered losses or was caused damage through the fault of the other side.
- Refusal to leave the premises.
- Eviction from home in violation of prior arrangements.
- Changes to the material terms of the contract.
Work agreement
Next, consider the advance on the contract.
In a situation when the contract is terminated, an advance payment is also possible. If the situation is obvious: the contractor did not start work, the advance payment is refundable in full. In practice, the contract is usually terminated when the customer has already paid the advance, and the contractor has already managed to complete part of the work (the quality of these works is often the reason for termination of the contract). As in the cases indicated above, the customer is not entitled to demand the full payment of the advance payment.
If the contractor is to blame for the termination of the contract, then the customer has the right to demand, in addition to the advance payment, the payment of a penalty for violation of contractual obligations. At the same time, the contractor is obliged to pay all the amounts received earlier under the contract minus the cost of the work actually performed and documented by acts of acceptance and transfer. The term for the advance payment must be respected.
Arbitrage practice
Situations related to the return of advance payments often lead to conflicts between participants. Each party to the transaction asserts its rights, which is quite natural. If the conflict cannot be settled through negotiations, the party that incurred losses has the right to apply to the court with a statement of claim sent to the location of the defendant.
A lawsuit is drawn up with the name of the judicial authority; information about the participants in the case; grounds for the plaintiff to submit claims, as well as evidence confirming them; information about the preliminary proceedings. The essence of the case is described in detail with the described violations of the rights and legitimate interests of the parties and the list of documents attached to the statement of claim, as well as their copies.
How to return an advance upon termination of the contract? Let's figure it out.
In the event that the customer expresses claims for a refund of the amount spent, the contractor must prove that he has taken all the necessary steps to fulfill the terms of the contract. In order to avoid misunderstandings, litigation and other troubles, it is necessary to take care of the proper preparation of the contract, the clauses of which will reflect all the nuances of the return of advance funds. But in practice, the services of a lawyer are most often resorted to when the problem is already ripe and it needs to be solved in one way or another.
Judicial practice in Russia is replete with such cases, and its analysis allows us to draw the following conclusion. Refund of advance payment upon termination of the contract is not always possible by agreement of the parties. This is a complex multi-level process that requires a thorough study of tax and civil law laws of the Russian Federation.