Cancellation, rescission of contracts and what they result in

Resolution of the Higher Commercial Court of Ukraine, dated March 29, 2017, case No. 906/881/16. Available at http://www.reyestr.court.gov.ua/Review/65678613

Article 599 of the Ukrainian Civil Code states that performance of an obligation in the appropriate manner extinguishes this obligation.

In accordance with parts two and four of Article 604 of the Ukrainian Civil Code an obligation shall be extinguished on the basis of an agreement of the parties on substitution of the old obligation for a new obligation between the same parties (novation). Novation extinguishes additional obligations associated with the old obligation, unless otherwise provided by the agreement.

Novation includes mutual consent of parties on provisions of extinction of a previous obligation and on provisions of a new obligation, on termination of all additional obligations, and on creation of a new obligation between the same parties.

Therefore, novation is not a change of a certain part of a previous obligation. Novation means that the same parties enter into a new obligation, and entering into this new obligation is a basis for extinction of the previous obligation and additional obligations.

Resolution of the Higher Commercial Court of Ukraine, dated December 08, 2015, case No. 904/1224/13-г. Available at http://www.reyestr.court.gov.ua/Review/54204045

Part two of Article 653 of the Ukrainian Civil Code provides that in case of rescission of a contract obligations of the parties shall cease from the moment of reaching an agreement on the rescission of the contract, unless otherwise stipulated by the contract.

It follows that an agreement of the parties to rescind the contract does not exclude settlement of obligations that arose before the rescission, and does not exclude application of sanctions and imposition of liability for failure to perform obligations under the contract.

Resolution of the Higher Commercial Court of Ukraine, dated March 29, 2017, case No. 923/704/16. Available at http://www.reyestr.court.gov.ua/Review/65678527

If parties rescind a contract performed in whole or in part this does not deprive a party to the contract of a right to bring an action for invalidation of the contract. Such an action may be brought even if the contested contract expired.

Resolution of the Higher Commercial Court of Ukraine, dated January 24, 2017, case No. 910/11087/15. Available at http://www.reyestr.court.gov.ua/Review/64289463

A contract duration period is the time during which parties may exercise their rights and should perform their duties in accordance with the contract (part 1, article 631 of the Ukrainian Civil Code).

An obligation shall be extinguished partially or in full on grounds specified by a law or by a contract (Part 1, article 588 of the Ukrainian Civil Code).

Full and proper performance of an obligation extinguishes it (Article 579 of the Ukrainian Civil Code).

Expiration of a contract means neither termination of the contract nor extinction of obligations under the contract, and therefore does not exempt an obliged party from performing the obligation. Therefore, the creditor has a right to demand performance of an obligation as long as the obligation exists, and not only during the period specified for its performance by the parties in the contract.

Resolution of the Supreme Court of Ukraine, dated September 09, 2015, case No. 6-939цс15. Available at http://www.reyestr.court.gov.ua/Review/50239373

As a general rule, rescission of a contract terminates its effect for the future, but does not alter the very fact that the contract was concluded and was effective until its rescission.

Rescission also retains effect of provisions on obligations of the parties, which should be applied in case of breach of obligations and after the rescission of the contract.

Resolution of the Supreme Court of Ukraine, dated December 21, 2016, case No. 905/2187/13. Available at http://www.reyestr.court.gov.ua/Review/63939964

Expiration of a contract performed only by one of the parties does not terminate contractual relations of the parties to the contract and does not exclude the other party’s liability for breach of obligations under the contract.