The plenum of the Supreme Court recently issued a resolution on the application and interpretation of the general provisions of Part 1 of the Civil Code.(1)
The plenum's resolution addresses a number of issues regarding:
- the use of customary practices;
- the registration of real estate objects and notes of objection;
- the validity of contracts;
- the resolution of meetings; and
- representation and power of attorney.
It has been specifically stated in law that a transaction effected to avoid the law or for illegal purposes is subject to the civil legislation norms that it has violated.
A claim for damages cannot be dismissed based on the sole ground that the exact amount of damages cannot be determined.
The resolution also addresses issues relating to the regulation of transactions: the authorisation of transactions and legal notices. In particular, the court indicated that – unless otherwise provided by the law, by a contract or by customary or legal practice – a legal notice may be sent by email, fax or any other means of communication where the sender and recipient can be accurately identified. The burden of proof in respect of sending and receiving a notice lies with the sender.
A significant part of the resolution deals with the invalidity of legal transactions. The court explained that a contract can be considered void when its terms contradict the essence of legislative regulation regarding the corresponding part of an obligation (eg, the term of a property trust management agreement stipulating that transferred assets become the property of a trustee is void). The consequences of the invalidity of transactions are also covered in depth. In particular, when considering a claim regarding the return of something specific, the claimant is not obliged to prove its ownership right to the disputed property. A specified thing is to be returned when it remains with the new owner.
When the body of a legal entity exceeds the restrictions defined by the charter or internal documents, or a representative goes beyond the restrictions specified in the contract or in branch office regulations, Article 174(1) of the Civil Code should apply. This means that the transaction can be declared invalid by the court based on the claim of a person benefiting from these restrictions only in cases where the counterparty to the transaction knew or should have known about such restrictions.
The burden of proof that the counterparty knew or should have known about the restrictions rests with the persons benefiting from such restrictions.
The court also stated that, regardless of subsequent approval provided by a principal of the transaction affected by abuse of authority, the approval must come from a body or another person authorised to effect such transactions or to provide approval. The actions of the principal's employees regarding the fulfilment of an obligation may also be deemed as subsequent approval, provided that the employees have power of attorney or their authority to carry out these actions is evident from the circumstances.
When power of attorney is issued to several persons entitled to act independently, the rejection of this authority by one of the attorneys or his or her release from these duties results in cancellation of power of attorney in respect of that attorney only. When powers provided under power of attorney must be exercised jointly, the refusal of one of the attorneys will result in total revocation of power of attorney. Revocation of power of attorney in respect of one attorney will result in termination of power of attorney of that person only.
For further information on this topic please contact Anna Fufurina or Alexander Titov at Noerr by telephone (+7 495 799 56 96) or email ([email protected] or [email protected]). The Noerr website can be accessed at www.noerr.com.
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