Necessity and sufficiency of circumstances for termination of the contract under Art. 451 GK

Necessity and sufficiency of circumstances for termination of the contract under Art. 451 GK. Arbitrage practice.

By virtue of Art. 451 of the Civil Code of the Russian Federation, a significant change in the circumstances from which the parties proceeded when concluding an agreement is the basis for its change or termination, unless otherwise provided by the agreement or follows from its essence.

In the framework of the present case, the Supreme Court of the Russian Federation addressed the question of what circumstances are necessary and sufficient for the application of Article 451 of the Civil Code of the Russian Federation and the termination of the contract due to a significant change in circumstances.

Case plot:

1. JSC Trade House Perekrestok (tenant) filed a lawsuit against the individual entrepreneur (landlord) with a request to terminate the lease agreement for non-residential premises due to a drop in demand and sales levels due to the introduction of a regime of self-isolation of citizens. JSC indicated a significant change in the circumstances from which it proceeded when concluding the contract, in connection with the application of measures to counteract the spread of Covid-19.

2. According to the lessor, restrictive measures did not apply to the JSC, the Company's activities are not included in the list of the most affected sectors of the economy. At the same time, the growth rate of Perekrestok's numerical revenue increased, and the change in economic indicators in a particular store cannot be taken into account.

3. At the same time, the defendant noted that he acquired the premises at the expense of credit funds in ruble equivalent at the US dollar rate and is currently incurring losses due to the increased exchange rate. A decrease in rent will result in the inability of the lessor to repay the loan and interest on it.

Judicial act: Ruling of the Supreme Court of the Russian Federation of December 23, 2021 in case No. 305-ES21-12558

Court's findings:

1. The court of first instance and the cassation concluded that there were grounds for terminating the lease agreement, since the spread of Covid-19 is a significant change in circumstances. Since the terms of the contract have become onerous for the company, it can no longer continue to work in the rented premises.

2. The Supreme Court upheld the position of the appeal. One of the characteristics of force majeure circumstances is a relative nature, in connection with which the recognition of a pandemic as a force majeure cannot be universal for all categories of debtors, it is necessary to take into account the circumstances of a particular case.

3. Application of the provisions of art. 451 of the Civil Code of the Russian Federation is possible in the presence of a combination of facts indicating the exclusivity, unforeseeability and materiality of the circumstances that have arisen.

4. Even in cases where a pandemic can be recognized as a force majeure event, its spread, as a general rule, is not a basis for terminating or changing Mr. obligation.

5. When applying Article 451 of the Civil Code, it is necessary to establish a causal relationship between the circumstances caused by the threat of the spread of Covid-19 and restrictive measures, as well as the occurrence of significant damage for a particular debtor.

Comment:

1. When resolving a dispute, the courts have repeatedly confused such legal categories as “force majeure circumstances” and “significant change in circumstances”. However, these are different legal constructions in terms of the consequences of their application in legal relations.

2. If the fact of a “force majeure circumstance” (Article 401 of the Civil Code of the Russian Federation) is recognized as narrower in its content, the party is released from liability (collection of damages, penalties, etc.). If the fact of “significant change in circumstances” is recognized, the parties are in the regulatory stage of relations and, in accordance with Art. 451 of the Civil Code can terminate the contract. Key difference: Art. 401 of the Civil Code, a prerequisite is the impossibility of execution + force majeure. For the application of 451 of the Civil Code, it is sufficient that the execution is clearly unprofitable for the parties.

3. In itself, a change in consumer demand cannot be the basis for recognizing a significant change in circumstances, since this is included in the entrepreneurial risk of a party to the contract.

4. The reasons for the changes must be of a nature that determines the impossibility of overcoming them by the plaintiff. The destructive effect of such changes on the position of the plaintiff must be very significant.

5. It is the plaintiff who wishes to apply the provisions of Art. 451 of the Civil Code of the Russian Federation, must prove a significant change in circumstances: indicate what measures were taken to reduce costs, the impossibility of taking measures to make a profit in future periods, etc.

6. Application of Art. 451 of the Civil Code should be carried out taking into account the mutual interests of the parties and the mutual distribution of risks.

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