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Unofficial translation of new Armenian Civil Code.
Do not rely on for specific cases unless you have appropriate
local law advice

LAW OF THE REPUBLIC OF ARMENIA

Adopted by the National Assembly

of the Republic of Armenia

June 17, 1998

ON PUTTING THE CIVIL CODE OF THE REPUBLIC OF ARMENIA INTO EFFECT

Article 1. To put the Civil Code of the Republic of Armenia
(hereinafter – the Code) into effect as of January 1, 1999.
Article 2. To repeal as of January 1, 1999:
1) the Civil Code of the Armenian SSR adopted by the Statute
of the Armenian SSR of June 4, 1964, “On Adoption of the Civil
Code of the Armenian SSR” (“Gazette of the Supreme Soviet of the
Armenian SSR,” 1964, No. 17, item 84) with further amendments and
additions;
2) the Edict of the Presidium of the Supreme Soviet of the
Armenian SSR of November 24, 1964, “On the Procedure for Putting
the Civil and Civil Procedure Codes of the Armenian SSR into
Effect” (Gazette of the Supreme Soviet of the Armenian SSR, 1964,
No. 34, item 182);
3) the Statute of the Republic of Armenia of October 31,
1990, “On Ownership in the Republic of Armenia” (Gazette of the
Supreme Soviet of the Republic of Armenia, 1990, No. 20, item
383), and also the Resolution of the Supreme Soviet of the
Republic of Armenia of October 31, 1990, “On Putting the Statute
of the Republic of Armenia ‘On Ownership in the Republic of
Armenia’ into Effect” (Gazette of the Supreme Soviet of the
Republic of Armenia, 1990, No. 20, item 384);
4) the Statute of the Republic of Armenia of March 14, 1992,
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“On Enterprises and Entrepreneurial Activity” (Gazette of the
Supreme Soviet of the Republic of Armenia, 1995, No. 5, item 80)
and also the Resolution of the Supreme Soviet of the Republic of
Armenia of February 26, 1992, “On Putting the Statute of the
Republic of Armenia ‘On Enterprises and Entrepreneurial Activity’
into Effect” (Gazette of the Supreme Soviet of the Republic of
Armenia, 1992, No. 4, item 73) with further amendments and
additions;
5) the Statute of the Republic of Armenia of December 30,
1993, “On Enterprises Acting by Guaranty” (“Gazette of the Supreme
Soviet of the Republic of Armenia, 1993, No. 24, item 397), and
also the Resolution of the Supreme Soviet of the Republic of
Armenia of October 13, 1993, “On Putting the Statute of the
Republic of Armenia ‘On Enterprises Acting by Guaranty’ into
Effect” (Gazette of the Supreme Soviet of the Republic of Armenia,
1993, No. 19, item 333);
6) the Statute of the Republic of Armenia of June 13, 1994,
“On the Individual (or Family) Enterprise” (Gazette of the Supreme
Soviet of the Republic of Armenia, 1994, No. 11, item 202) and
also the Resolution of the Supreme Soviet of the Republic of
Armenia of March 15, 1994, “On Putting the Statute of the Republic
of Armenia ‘On the Individual (or Family) Enterprise” (Gazette of
the Supreme Soviet of the Republic of Armenia, No. 5, item 54);
7) the Statute of the Republic of Armenia of June 28, 1995,
“On Pledge” (Gazette of the Supreme Soviet of the Republic of
Armenia, 1995, No. 11-12, item 143) with further amendments and
additions and also the Resolution of the Supreme Soviet of the
Republic of Armenia of May 18, 1995, “On Putting the Statute of
the Republic of Armenia ‘On Pledge’ into Effect” (Gazette of the
Supreme Soviet of the Republic of Armenia,” 1995, No. 10, item
128);
8) the Statute of the Republic of Armenia “On Immovable
Property” (Gazette of the National Assembly of the Republic of
Armenia, 1996, No. 1-2, item 2).

Article 3. To bring statutes and other legal acts containing
rules of civil law into agreement with the Code by July 1, 2000.
Until the bringing of statutes and other legal acts
containing norms of civil law into agreement with the Code, they
shall be applied to the extent that they do not contradict the
Code.
Normative acts of the President of the Republic of Armenia,
the Government of the Republic of Armenia, ministries and other
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state bodies on questions that, according to the Code, must be
regulated only by Statute, shall be in effect until the putting of
the respective statutes into effect.
Article 4. The Code shall be applied to civil legal
relations that have arisen after the putting of the Code into
effect with the exception of cases provided by the present
Statute.
With respect to contractual and other civil legal relations
that arose before January 1, 1999, the Code shall be applied to
that part of rights and duties that arose after the putting of the
Code into effect.
Article 5. Obligations under contracts concluded before the
putting of the Code into effect shall be preserved unless the
parties voluntarily bring the provisions of these contracts into
accord with the requirements of the Code.
Article 6. From the day of putting the Code into effect
legal persons may be created exclusively in those organizational-
legal forms that are provided by Chapter 5 of the Code.
The organizational-legal forms of enterprises created before
putting the Code into effect and not provided for by Chapter 5 of
the Code are subject to reorganization and registration before
January 1, 12000. In case of non-reorganization and no
registration within the time limit indicated, they shall be
subject to reorganization.
Legal persons having an organizational legal form provided by
Chapter 5 of the Code and created before the putting of the Code
into effect, must bring their founding documents into accord with
the requirements of the rules of Chapter 5 of the Code and
reregister them before January 1, 2000. Founding documents that
are not brought into accord and are not registered within the time
limit indicated shall be considered as invalid.
Article 7. The legal persons indicated in Article 6 of the
present Statute, shall be freed from payment of registration fees
upon reregistration for the purpose of bringing their legal status
into accord with the rules of the Code.
Article 8. The existing procedure for registration of legal
persons shall be retained until the putting of the statute on
state registration of legal persons into effect.
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Article 9. The existing procedure for registration of
property shall be retained until the putting of the statute on
state registration of rights to property into effect.
Article 10. The rules of the Code on the bases and
consequences of invalidity of transactions shall be applied to
transactions, demands for the recognition of which as invalid are
considered by a court, including a private arbitration court,
after January 1, 1999, regardless of the time of making the
respective transactions.
Article 11. The periods of limitation of actions established
by the Code shall be applied to those claims, the periods of
making which provided by legislation previously in effect have not
expired before January 1, 1999.
The period of limitation of actions established for the
respective claim by the legislation previously in effect shall be
applied to claim provided for by Article 317 of the Code for the
recognition of an avoidable transaction as invalid and the
application of the consequences of its invalidity .
Article 12. The effect of Article 187 of the Code
(acquisitive prescription) shall extend also to cases when the
possession of the property began before January 1, 1999, and
continued to the time of putting the Code into effect.
Article 13. The procedure and form for the making of
contracts of individual types shall be applied to contracts offers
to conclude which are sent after January 1, 1999.
The rules of the Code establishing the content of contracts
of individual types shall be applied to contracts concluded after
putting the Code into effect.
Article 14. Rules of the Code obligatory for the parties to
a contract on the bases, consequences, and procedure for
rescission of contracts of individual types shall be applied also
to contracts that continue to be in effect after the putting of
the Code into effect regardless of the date of their making.
Rules of the Code obligatory for the parties to a contract on
liability for the breach of contractual obligations shall be
applied after the respective violations were committed after the
putting of the Code into effect, with the exception of cases when
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in contracts concluded before January 1, 1999, different liability
is provided for such breaches.
Article 15. The effect of Paragraphs 2 and 3 of Article 903
of the Code shall also extend to cases when monetary assets were
received in deposits before the putting of the Code into effect
and the relations that have arisen in effect with this are
maintained after the putting of the Code into effect.
Article 16. The effect of Articles 1063 and 1064 of the Code
shall also extend to cases when the causing of the harm took place
before January 1, 1999, but not earlier that January 1, 1996.
Article 17. The effect of Articles 1078-1087 of the Code
shall also extend to cases when the causing of the harm to the
life or health of a citizen took place before January 1, 1999, but
not before January 1, 1996.
Article 18. The rules of Division 11 of the Code shall be
applied also with respect to those inheritances that were opened
before the putting of the Code into effect, but which were not
accepted by any of the heirs and had not gone by right of
inheritance into the ownership of the state or commune before
January 1, 1999.
PRESIDENT
OF THE REPUBLIC OF ARMENIA R. Kocharian
July 14, 1998
City of Yerevan
ZR-229

CIVIL CODE OF THE
REPUBLIC OF ARMENIA

(Adopted by the National Assembly of the Republic of Armenia in
Third Reading, May 5, 1998)

English Translation by 1998 Peter B. Maggs, Anna S. Tarassova and
Alexei N. Zhiltsov

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YEREVAN 1998

Translation Copyright (c) 1998 P.B. Maggs, A.S. Tarassova &
A.N. Zhiltsov

CIVIL CODE OF THE
REPUBLIC OF ARMENIA
DIVISION 1. GENERAL PROVISIONS
Chapter 1. Civil Legislation and Other Legal Acts Containing
Norms of Civil Law
Article 1. Relations Regulated by Civil Legislation and by
Other Legal Acts Containing Norms of Civil Law
1. The civil legislation of the Republic of Armenia consists
of the present Code and other statutes containing norms of civil
law.
Norms of civil law contained in other statutes must
correspond to the present Code.
2. Civil legislation and also edicts of the President of the
Republic of Armenia and decrees of the Government of the Republic
of Armenia containing norms of civil law (hereinafter – other
legal acts) determine the legal status of the participants in
civil commerce, the bases for the origin and the procedure for the
exercise of the right of ownership and other property rights, of
exclusive rights to the results of intellectual activity
(intellectual property), regulate contractual and other
obligations and also other property relations and personal non-
property relations related to them.
The participants in relations regulated by civil legislation
and other legal acts are physical persons (hereinafter—citizens)
and legal persons and also the Republic of Armenia and communes
(Art. 128).
The rules established by civil legislation and other legal
acts shall be applied to relations with the participation of
foreign citizens, persons without citizenship and foreign legal
persons, unless otherwise provided by a statute.
3. Civil legislation and other legal acts regulate relations
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among persons, conducting entrepreneurial activity or with their
participation.
4. Family and labor relations, relations for the use of
natural resources and for the protection of the environment are
regulated by civil legislation and other legal acts unless family,
labor, land, nature protection, or other specialized legislation
provides otherwise.
5. Relations connected with the exercise and protection of
the inalienable rights and freedoms of man and other nonmaterial
values are regulated by civil legislation and other legal acts,
unless it otherwise follows from the nature of these relations.
6. Civil legislation and other legal acts are not applied to
property relations based on administrative or other authoritative
subordination of one party to another, including tax, finance, and
administrative relations, unless otherwise provided by
legislation.
Article 2. Entrepreneurial Activity
Entrepreneurial activity is independent activity by a person
conducted at its own risk following as a basic purpose the
realization of profit from the use of property, sale of goods,
performance of work, or rendering of services.
Article 3. Basic Principles of Civil Legislation
1. Civil legislation is based on the principles of equality,
autonomy of will, and property independence of the participants in
the relations regulated by it, the inviolability of ownership,
freedom of contract, impermissibility of arbitrary interference by
anyone in private affairs, the necessity of the unhindered
exercise of civil law rights, the guaranty of restoration of
violated rights and their judicial protection.
2. Citizens and legal persons obtain and exercise their
civil law rights by their own will and in their own interest. The
are free in the establishment of their rights and duties on the
basis of contract and in determining any conditions of contract
not contradictory to legislation.
Civil law rights may be limited only by statute, if this is
necessary for the purpose of defending state and societal
security, social order, the health and morals of society, the
defense of the rights and freedoms, honor and good name of other
persons.
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3. Goods, services and financial assets may be freely moved
about on the whole territory of Republic of Armenia.
Limitations of the movement of goods and services may be
introduced in accordance with statute if this is necessary to
guaranty safety, defense of the life and health of people,
protection of nature and of cultural values.
Article 4. Other Legal Acts
1. In accordance with Article 78 of the Constitution of the
Republic of Armenia, within the period established by the National
Assembly of the Republic of Armenia, the relations indicated in
Article 1 of the present Code may also be regulated by decrees of
the Government of the Republic of Armenia having the force of a
staute.
2. On the basis of and in the fulfillment of the present
Code and other statutes, the President of the Republic of Armenia
has the right to adopt edicts containing norms of civil law.
3. On the basis of and in fulfillment of the present Code
and other statutes and edicts of the President of the Republic of
Armenia, the Government of the Republic of Armenia has the right
to adopt decrees containing norms of civil law.
4. In case of contradiction between an edict of the
President of the Republic of Armenia or a decree of the Government
of the Republic of Armenia and the present Code or other statute,
the present Code or respective statute shall be applied.
5. The effectiveness and application of norms of civil law
contained in edicts of the President of the Republic of Armenia
and decrees of the Government of the Republic of Armenia shall be
determined by the rules of the present Chapter.
6. Ministries and other agencies of executive authority and
also bodies of local self-government may issue acts containing
norms of civil law only in the cases and within the limits
provided by the present Code, other statutes and legal acts.
Article 5. The Effect of Civil Legislation and Other Legal
Acts in Time
1. Acts of civil legislation and other legal acts do not
have retroactive force and are applied to relations that have
arisen after they were put into effect.
The effect of a statute extends to relations that arose
before it was put into effect only in the cases when this is
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directly provided by statute.
2. With respect to relations that arose before the putting
into effect of an act of civil legislation or other legal act, it
is applied to rights and duties that arose after it was put into
effect. Relations of parties under a contract concluded before an
act of civil legislation or other legal act was put into effect
are regulated in accordance with Article 438 of the present Code.
Article 6. Civil Legislation, Other Legal Acts and
International Treaties
1. International treaties of the Republic of Armenia are
applied to relations indicated in Article 1 of the present Code
directly, except in cases when, from the international treaty, it
follows that the issuance of an internal state act is required for
its application.
2. If an international treaty of the Republic of Armenia
establishes norms other than those that are provided by civil
legislation and legal acts, the norms of the international treaty
are applied.
Article 7. Customs of Commerce
1. A custom of commerce is a rule of conduct in any area of
entrepreneurial activity that has taken form and is widely
applied, and that is not provided by legislation, regardless of
whether or not it has been fixed in any document.
2. Customs of commerce contradicting obligatory provisions
of legislation or contract shall not be applied.
Article 8. Interpretation of Civil Law
Civil law norms must be interpreted in accordance with the
literal sense of the words and expressions contained therein.
In case of differing meaning of words and expressions used in
the text of legal norms, preference shall be given to the meaning
corresponding to the principles of civil legislation stated in
Paragraph 1 of Article 3 of the Present Code.
Article 9. Application of Civil Law Norms by Analogy
1. In cases when the relations indicated in Article 1 of the
present Code are not directly regulated by statute or agreement of
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the parties and there is no custom of commerce applicable to them,
then, to such relations, if it does not contradict their nature,
norms of civil legislation regulating similar relations (analogy
of statute) shall be applied.
2. In case of impossibility of use of analogy of statute,
the rights and duties of the parties shall be determined
proceeding from the principles of civil legislation (analogy of
law).
3. It is not permitted to apply by analogy norms limiting
civil law rights or establishing liability.
Chapter 2. The Origin of Civil Law Rights and Duties.
Exercising Civil Law Rights
Article 10. Bases for the Origin of Civil Law Rights and
Duties
1. Civil law rights and duties arise from bases provided by
statute and other legal acts, and also from the activities of
citizens and legal persons, which although not provided by statute
or other legal acts, but by the effect of the principles of civil
legislation engender civil law rights and duties.
In accordance with this, civil law rights and duties arise:
1) from contracts and other transactions provided for by law
and also from contracts and other transactions that, although not
provided for by law, do not contradict it;
2) from acts of state bodies, and bodies of local self-
government that are provided for by statute as a basis for the
origin of civil law rights and duties;
3) from a judicial act that has established civil law rights
and duties;
4) as the result of obtaining property on bases permitted by
statute;
5) as the result of the creation of works of scholarship,
literature, or art, of inventions, and of other results of
intellectual activity;
6) as the result of causing harm to another person;
7) as the result of unjust enrichment;
8) as the result of other activities of citizens and legal
persons;
9) as the result of events with which a statute or other
legal act connects the occurrence of civil-law consequences.
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2. Property rights subject to state registration arise from
the time of their registration.
Article 11. Exercise of Civil Law Rights
1. Citizens and legal persons at their discretion exercise
the civil law rights belonging to them, including the right to
their defense.
2. Refusal by citizens or legal persons to exercise rights
belonging to them shall not entail termination of these rights,
with the exception of cases provided for by statute.
Article 12. Limits of Exercise of Civil Law Rights
1. Actions of citizens and legal persons exercised
exclusively with the intention to cause harm to another person are
not allowed, nor is abuse of a legal right allowed in other forms.
Use of civil law rights for the purpose of restricting
competition is not permitted, nor is abuse of a dominant position
in the market.
2. In case of failure to observe the requirements provided
by Paragraph 1 of the present Article, the court, commercial
court, or arbitration tribunal (hereinafter–“court”) may refuse
the person protection of the right belonging to it.
Chapter 3. Protection of Civil Law Rights
Article 13. General Provisions
1. Protection of civil law rights shall be conducted by a
court, in accordance with the jurisdiction over cases established
by the Civil Procedure Code of the Republic of Armenia.
2. A contract may provide for regulation of a dispute among
the parties before going to a court.
3. Protection of civil law rights by an administrative
procedure shall be conducted only in cases provided for by
statute. A decision taken by an administrative procedure may be
protested in court.
Article 14. Means of Protection of Civil Law Rights
The protection of civil law rights shall be conducted by way
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of:
1) recognition of a right;
2) reinstating the situation that existed before the
violation of the right,
3) stopping the activities that violated the right or created
a threat of its violation;
4) applying the consequences of the invalidity of a void
transaction;
5) recognizing an avoidable transaction as invalid and
application of the consequences of its invalidity;
6) recognition of an act of a state body or of a body of
local self-government as invalid;
7) non-application by the court of an act of a state body or
of a body of local government that contradicts a statute;
8) self-protection of a right;
9) a judgment for specific performance of an obligation;
10) compensation for losses;
11) award of a penalty;
12) termination or alteration of a legal relation;
13) by other means provided by statute.
Article 15. Recognition of the Invalidity of an Act of a
State Body or of a Body of Local Self-Government
1. An act of a state body or of a body of local self-
government not corresponding to a statute or other legal acts and
violating civil law rights or other interests protected by statute
of a citizen or legal person may be recognized as invalid by a
court.
In case of recognition by a court of an act as invalid, the
violated right is subject to protection in the other manners
provided by Article 14 of the present Code.
The Constitutional Court of the Republic of Armenia, in accordance
with Article 100 of the Constitution of the Republic of Armenia,
shall determine the correspondence of statutes, resolutions of the
National Assembly of the Republic of Armenia, edicts and orders of
the President of the Republic of Armenia, and decrees of the
Government of the Republic of Armenia to the Constitution of the
Republic of Armenia.
Article 16. Self-Protection of Civil Law Rights
A person has the right to self-protection of civil law rights
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by all means not forbidden by statute.
The means of self-protection must be proportional to the
violation and not go outside the bounds of the actions necessary
for stopping the violation.
Article 17. Compensation for Losses
1. A person whose right has been violated may demand full
compensation for the losses caused to it unless statute or
contract provides for compensation lossesa lesser amount.
2. Losses means the expenses that the person whose right was
violated made or must make to reinstate the right that was
violated, the loss of or injury to his property (actual damage),
and also income not received that this person would have received
under the usual conditions of civil commerce if his right had not
been violated (forgone benefit benefit).
If the person who has violated a right has received income as
thereby, the person whose right has been violated has the right to
demand compensation along with other lossess for forgone benefit
in a measure not less than such income.
Article 18. Compensation for Damage Caused by State Bodies
and Bodies of Local Self-Government
Damages caused to a citizen or legal person as the result of
illegal actions (or non-actions) of state bodies, bodies of local
self-government, or officials of these bodies, including the
promulgation of an act of a state body or body of local self-
government that does not correspond to statute or other legal act,
are subject to compensation by the Republic of Armenia or the
respective commune.
Article 19. Protection of Honor, Dignity, and Business
Reputation
1. A citizen has the right to demand in court the retraction
of communications impugning on his honor, dignity, or business
reputation, unless the person who disseminated such communications
proves that they correspond to reality.
On demand of interested persons, the protection of honor and
dignity of a citizen is permitted also after his death.
2. If the communications impugning the honor, dignity, or
business reputation of a citizen were distributed in media of mass
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information, they must be retracted in the same media of mass
information.
If the aforementioned communications are contained in a
document emanating from an organization, such a document is
subject to replacement or recall.
The procedure for retration in other cases shall be
established by the court.
3. A citizen with respect to whom a medium of mass
information has published communications infringing on his rights
or interests protected by statute has the right to publication of
his answer in the same medium of mass information.
4. A citizen with respect to whom communications have been
disseminated impugning his honor, dignity, or business reputation,
has the right together with the retraction of such information
also to demand compensation for the damages caused by their
dissemination.
5. If it is impossible to identify the person who
disseminated comunications impugning the honor, dignity, or
business reputation of a citizen, the person with respect to whom
such information was disseminated has the right to apply to court
with a request for the recognition of the communications that were
disseminated as not corresponding to reality.
6. The rules of the present article on the protection of the
business reputation of a citizen shall be applied correspondingly
to the protection of the legal reputation of a legal person.
DIVISION 2. PERSONS (SUBJECTS OF CIVIL LAW RIGHTS)
Chapter 4. Citizens
Article 20. The Legal Capacity of a Citizen
1. The ability to have civil rights and bear duties (civil
legal capacity) is recognized in equal measure for all citizens.
2. The legal capability of a citizen arises from the time of
his birth and is terminated by death.
Article 21. The Content of the Legal Capacity of Citizens
Citizens may:
1) have property by right of ownership;
2) inherit and will property;
3) engage in entrepreneurial and any other activity not
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forbidden by statute;
4) create a legal person independently or jointly with other
citizens and legal persons;
5) conclude transactions not contrary to statute and
participate in obligations;
6) select a place of residence;
7) have the rights of the creator of works of science,
literature, and art, inventions, and other results of
intellectual activity protected by statute;
8) have other property and personal non-property rights.
Article 22. The Name of a Citizen
1. A citizen obtains and exercises rights and duties under
his own name, including his family name and given name, and also,
if he wishes, a patronymic.
In cases and by the procedure provided by statute, a citizen
may use a pseudonym (made-up name).
2. A citizen has the right to change his name by the
procedure established by statute. Change of name by a citizen is
not a basis for terminating or changing his rights and duties
obtained under the previous name.
A citizen is obligated to notify his debtors and creditors of
the change of his name and bears the risk of consequences caused
if these persons lack information on his change of name.
A citizen who has changed his name has the right to demand
the entry, at his expense, of the respective changes in documents
formalized in his former name.
3. The name obtained by a citizen at birth and also a change
of name are subject to registration by the procedure established
for registration of acts of civil status.
4. Obtaining rights and duties under the name of another
person is not permitted.
5. Harm caused to a citizen as the result of improper use of
his name is subject to compensation in accordance with the present
Code.
In case of distortion or use of the name of a citizen in ways
or in a form that impinges upon his honor, dignity, or business
reputation, the rules provided by Article 19 of the present Code
shall be applied.
Article 23. Place of Residence of a Citizen
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1. The place of residence is the place where a citizen
permanently or primarily lives.
2. The place of residence of minors who have not attained
the age of fourteen years or of citizens who are under
guardianship is the place of residence of their legal
representatives–parents, adoptive parents or guardians.
Article 24. The Dispositive Capacity of a Citizen
1. The capacity of a citizen by his actions to obtain and
exercise civil law rights, to create for himself civil law duties
and to fulfill them (civil law dispositive capacity) arises in
full with the attainment of majority, i.e., on the attainment of
the age of eighteen.
2. A minor who has attained the age of sixteen may be
recognized as of full dispositive capacity if he works under a
labor contract or, with the agreement of his parents, adoptive
parents, or curator, engages in entrepreneurial activity.
The recognition of a minor as of full dispositive capacity
(emancipation) is made by decision of the agency of curatorship
and guardianship–with the consent of both parents, the adoptive
parents, or the curator or, in the absence of such consent, by
decision of the court.
The parents, adoptive parents, and guardian do not bear
responsibility for the obligations of a minor recognized as of
full dispositive capacity, in particular for obligations arising
as the result of his causing harm.
3. In the case when a statute permits entry into marriage
before attaining the age of eighteen, a citizen, who has not
attained the age of eighteen, obtains dispositive capacity in full
from the time of entry into marriage.
Dispositive capacity obtained as the result of conclusion of
marriage is retained in full also in case of dissolution of the
marriage before attaining the age of eighteen.
In case of recognition of a marriage as invalid, the court my
adopt a decision on the loss by the minor spouse of full
dispositive capacity from a time determined by the court.
Article 25. Impermissibility of Deprivation or Limitation of
the Legal Capability and Dispositive Capacity of a Citizen
1. A citizen may not be limited in legal capacity or
dispositive capability other than in the cases and by the
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procedure established by statute.
2. Nonobservance of the conditions and procedure established
by statute for the limitation of the dispositive capacity of
citizens or of their right to engage in entrepreneurial or other
activity shall entail the invalidity of the act of the state or
other body that has established the respective limitation.
3. A full or partial renunciation by a citizen of legal
capability or dispositive capacity, or other transactions directed
at the limitation of legal capability or dispositive capacity, are
void.
Article 26. Entrepreneurial Activity of a Citizen
1. A citizen has the right to create business organizations
or to be a participant in them for the conduct of entrepreneurial
activity.
2. A citizen has the right to engage in entrepreneurial
activity without the formation of a legal person from the time of
state registration as an individual entrepreneur.
3. The rules of the present Code that regulate the activity
of legal persons that are commercial organizations shall be
applied to entrepreneurial activity of citizens conducted without
the formation of a legal person, unless it otherwise follows from
a statute, other legal acts or the nature of the legal
relationship.
4. A court may apply the rules of the present Code on
obligations connected with the conduct of entrepreneurial activity
to transactions of a citizen who is conducting entrepreneurial
activity in violation of the requirements of Paragraphs 1 and 2 of
the present Article.
Article 27. Property Liability of a Citizen
A citizen is liable for his obligations with all property
belonging to him, with the exception of property upon which, in
accordance with statute, execution cannot be levied.
Article 28. Bankruptcy of a Citizen
1. A citizen, including an individual entrepreneur, by
decision of a court may be recognized as bankrupt if he is not in
a position to satisfy the demands of creditors.
2. The bases and procedure for recognition by a court of a
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citizen as bankrupt shall be established by the Civil Procedure
Code of the Republic of Armenia.
3. In case of recognition of a citizen as bankrupt, the
claims of creditors not satisfied because of the absence or
insufficiency of his property shall remain in effect until their
full satisfaction.
Article 29. Dispositive Capacity of Minors up to the Age of
14
1. For minors who have not attained the age of fourteen
years (infants), transactions with the exclusion of those
indicated in Paragraph 2 of the present Article may be conducted
in their name only by their parents, adoptive parents, or
guardians.
2. Minors of the age of six to fourteen years have the right
to independently conduct:
1) very small everyday transactions;
2) transactions directed at obtaining a cost-free benefit
requiring neither notarial authentication nor state registration
of rights arising from these transactions;
3) transactions for disposition of assets provided by the
legal representative or, with the consent of the latter, by a
third person, for a particular purpose or for free disposition.
3. Property liability under transactions of an infant,
including for transactions conducted by him independently is borne
by his parents, adoptive parents, or guardian, unless they prove
that the obligation was violated without their fault. These
persons, in accordance with statute, also are liable for harm
caused by minors.
Article 30. Dispositive Capacity of Minors of the Age of
Fourteen to Eighteen Years
1. Minors of the age of fourteen to eighteen years, conduct
transactions, with the exception of those listed in Paragraph 2 of
the present Article with the written consent of their legal
representatives–parents, adoptive parents, or curator.
A transaction conducted by such a minor also is valid in case
of its later written approval by his parents, adoptive parents, or
curator.
2. Minors of the age of fourteen to eighteen years have the
right, independently, without the consent of parents, adoptive
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parents, or curator:
1) to dispose of their wages, scholarship, and other income;
2) to exercise the rights of a creator of a work of
scholarship, literature, or art, of invention, or of other result
of intellectual activity protected by statute;
3) in accordance with statute, to make deposits in credit
institutions and to dispose of them;
4) to conduct small everyday transactions and other
transactions provided by Paragraph 2 of Article 29 of the present
Code.
Upon attaining sixteen years, minors also have the right to
be a member of a cooperative in accordance with the statutes on
cooperatives.
3. Minors of the age of fourteen to eighteen years
independently bear property liability for transactions conducted
by them in accordance with Paragraphs 1 and 2 of the present
Article. For harm caused by them, the minors also bear liability
in accordance with the present Code.
4. Where sufficient bases are present, a court on petition
of parents, adoptive parents, or a curator or of an agency of
guardianship and curatorship may limit or deprive a minor of the
age of fourteen to eighteen years of the right to independently
dispose of his wages, scholarship, or other income, with the
exception of cases when such minor obtained dispositive capacity
in full in accordance with Paragraphs 2 and 3 of Article 24 of the
present Code.
Article 31. Recognition of a Citizen as Lacking Dispositive
Capacity
1. A citizen who as the result of mental disorder cannot
understand the significance of his actions or control them may be
recognized by a court as lacking dispositive capacity by the
procedure established by the Civil Procedure Code of the Republic
of Armenia. Guardianship shall be established over him.
2. Transactions in the name of a citizen who has been
recognized as lacking dispositive capacity shall be made by his
guardian.
3. If the bases by virtue of which a citizen was recognized
as lacking dispositive capacity have ceased to exist, the court
shall recognize him as having dispositive capacity. On the basis
of the decision of the court the guardianship established over him
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shall be terminated.
Article 32. Limitation of the Dispositive Capacity of a
Citizen
1. A citizen who, as the result of abuse of liquor or
narcotic substances or engaging ingames of chance, puts his family
in a difficult financial situation, may be limited by a court in
dispositive capacity by the procedure established by the Civil
Procedure Code of the Republic of Armenia. Curatorship shall be
established over him.
He has the right to conduct small everyday transactions
independently.
He may conduct other transactions and also receive wages, a
pension, and other income and dispose of them only with the
consent of the curator. However, such a citizen independently
bears property liability for transactions conducted by him and for
harm caused by him.
2. If the bases, by virtue of which the citizen was limited
in dispositive capacity no longer exist, the court shall terminate
the limitation of his dispositive capacity. On the basis of a
decision of the court, the curatorship established over the
citizen is terminated.
Article 33. Guardianship and Curatorship
1. Guardianship and curatorship are established for the
protection of the rights and interests of citizens lacking
dispositive capacity or not of full dispositive capacity.
Guardianship and curatorship over minors is established also for
the purpose of their upbringing. The corresponding rights and
duties of guardians and curators are established by the Family
Code of the Republic of Armenia.
2. Guardians and curators act in protection of the rights
and interests of their wards in relations with any persons,
including in courts, without special authorization.
3. Guardianship and curatorship over minors shall be
established if they lack parents or adoptive parents, if a court
has deprived the parents of parental rights, and also in cases
when such citizens for other reasons have been left without
parental curatorship, in particular when parents avoid their
upbringing or the protection of their rights and interests.
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Article 34. Guardianship
1. Guardianship is established over minors who have not
attained fourteen years and also over citizens recognized by a
court as lacking dispositive capacity as the result of mental
disorder.
2. Guardians are representatives of the wards by force of
statute and conduct all necessary transactions in their names and
in their interests.
Article 35. Curatorship
1. Curatorship is established over minors of the age of
fourteen to eighteen years, and also over citizens limited by a
court in dispositive capacity as the result of abuse of liquor or
narcotic substances, or engaging in games of chance.
2. Curators give consent to the conduct of those
transactions that citizens who are under curatorship do not have
the right to conduct independently.
Curators render aid to wards in their exercise of their
rights and the performance of duties and also protect them from
abuses on the part of third persons.
Article 36. Agencies of Guardianship and Curatorship
1. Agencies of guardianship and curatorship are established
by statute.
2. A court is obligated within three days from the day of
entry into legal force of a decision on the recognition of a
citizen as lacking dispositive capacity or of limiting his
dispositive capacity to report this to the agency of guardianship
and curatorship at the place of residence of such a citizen for
the establishment of guardianship or curatorship over him.
3. The agency of guardianship and curatorship at the place
of residence of the wards shall conduct supervision of the
activity of their guardians and curators.
Article 37. Guardians and Curators
1. A guardian or curator is appointed by the agency of
guardianship and curatorship at the place of residence of the
persons needing guardianship or curatorship within a month from
the time when the aforesaid agency became aware of the necessity
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of establishment of guardianship or curatorship over a citizen.
Until the appointment of a guardian or curator for the person
needing guardianship or curatorship, the performance of the
obligations of the guardian or curator shall be conducted by the
agency of guardianship or curatorship.
The appointment of a guardian or curator may be protested in
court by interested persons.
2. Adult citizens with dispositive capacity may be appointed
as guardians and curators. Citizens deprived of parental rights
may not be appointed as guardians and curators.
3. A guardian or curator shall be appointed with his
consent. His moral and other personal qualities, ability for
performing the duties of guardian or curator, the relations
existing between him and the person needing guardianship or
curatorship, and if this is possible–also the wish of the ward
must be considered.
4. The guardians and curators of citizens needing
guardianship or curatorship and being located or placed in
respective educational or therapeutic institutions, institutions
of social defense of the public, or other analogous institutions,
are these institutions.
Article 38. Performance by Guardians and Curators of Their
Obligations
1. Obligations for guardianship and curatorship are
performed without compensation, except in cases provided by
statute.
2. Guardians and curators of minor citizens are obligated to
live together with their wards. Separate residence of a curator
from a ward who has attained the age of sixteen is permitted with
the consent of the agency of guardianship and curatorship on the
condition that this is not reflected unfavorably on the upbringing
and protection of the rights and interests of the ward.
The guardians and curators are obligated to notify the
agencies of guardianship and curatorship on change of place of
residence.
3. Guardians and curators are obligated to take care for the
support of their wards, on ensuring their care and medical
treatment, their education and upbringing, protection of their
rights and interests.
4. The duties indicated in Paragraph 3 of the present
Article are not imposed upon curators of adult citizens limited by
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a court in dispositive capacity.
5. If the bases by virtue of which a citizen has been
recognized as lacking dispositive capacity or of limited
dispositive have ceased to exist, the guardian or curator is
obligated to petition a court for the recognition of the ward as
having dispositive capacity and of the removal of guardianship or
curatorship from him.
Article 39. Disposition of the Property of the Ward
1. Income of the citizen under wardship including income due
the ward from the administration of his property, with the
exception of the income that the ward has the right to dispose of
independently is expended by the guardian or curator exclusively
in the interests of the ward and with the preliminary consent of
the agency of guardianship and curatorship.
The guardian or curator has the right to make the
expenditures necessary for the support of the ward at the expense
of amounts due the ward as his income, without the prior consent
of the agency of guardianship and curatorship.
2. The guardian does not have the right, without the prior
consent of the agency of guardianship and curatorship to conclude,
nor a curator–to give consent to the conclusion of, transactions
for the alienation, including the exchange or gift of property of
the ward, to give it out in lease, for uncompensated use, in
pledge, nor of transactions involving a waiver of rights belonging
to the ward, nor the division of his property nor separation of
shares from it, nor to any other transactions involving the
reduction of the property of the ward.
The procedure for administration of the property of the ward
shall be determined by statute.
3. The guardian, the curator, their spouses, and their close
relatives do not have the right to conclude transactions with a
ward, with the exception of the transfer of property to the ward
as a gift or for cost-free use, nor to represent the ward in the
conclusion of transactions or the conduct of judicial proceedings
between the ward and spouse of the guardian or curator and their
close relatives.
Article 40. Entrusted administration of the Property of the
Ward
1. In case of necessity of permanent administration of
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immovable or valuable movable property of the ward, the agency of
guardianship and curatorship concludes with an administrator,
designated by this agency, a contract on entrusted administration
of this property. In this case the guardian or ward retains his
powers with respect to the property of the ward that was not given
to entrusted administration.
In the exercise of powers for the entrusted administraiton of
the property of the ward, the effect of the rules provided by
Paragraphs 2 and 3 of Article 39 of the present Code extend to the
administrator.
2. Entrusted administraiton of the property of the ward
shall be terminated on the bases provided by statute for
termination of a contract for entrusted administraiton of property
and also in case of termination of guardianship or curatorship.
Article 41. Freeing and Removing Guardians and Curators From
the Performance by them of Their Obligations
1. An agency of guardianship and curatorship shall free a
guardian or curator from performing his duties in cases of return
of the minor to his parents or his adoption.
2. In case of placement of the ward in a respective
educational or therapeutic institution, institution of social
protection of the public, or other analogous institution, the
agency of guardianship and curatorship shall free an earlier
appointed guardian or curator from performing his duties, unless
this contradicts the interests of the ward.
3. If there are compelling reasons (illness, change in
financial status, absence of mutual understanding with the ward,
etc.), the guardian or curator may be freed from performing his
obligations on his request.
4. In cases of improper performance by the guardian or
curator of the obligations imposed upon him, including in case of
his use of guardianship or curatorship for selfish reasons or in
case of leaving the ward without supervision or the necessary
help, the agency of guardianship and curatorship may remove the
guardian or curator from performing these dutiess and take the
necessary measures for bringing the guilty citizen to the
responsibility established by statute.
Article 42. Termination of Guardianship and Curatorship
1. Guardianship and curatorship over adult citizens shall be
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terminated in case a court has rendered a decision to recognize
the ward as having dispositive capacity or to terminate
limitations upon his dispositive capacity upon petition of the
guardian, curator, or agency of guardianship and curatorship.
2. Upon attainment by an infant of the age of fourteen
years, guardianship over him shall be terminated, and the citizen
conducting the duties of guardian becomes curator of the minor
without a further decision to this effect.
3. Curatorship over a minor shall be terminated without a
special decision upon the minor ward attaining the age of eighteen
years, and also upon his entry into marriage and in other cases of
his obtaining full dispositive capacity before attaining majority
(Paragraph 2 and 3 of Article 24).
Article 43. Patronage Over a Citizen With Dispositive
Capacity
1. On the request of an adult citizen with dispositive
capacity, who due to the condition of health cannot independently
exercise and protect his rights and perform his duties, patronage
may be established over him.
2. The establishment of patronage does not entail limitation
of the rights of the citizen.
2. The patron (helper) of the adult citizen with dispositive
capacity shall be named by the agency of curatorship and
curatorship with the consent of theiscitizen.
3. Disposition of the property belonging to an adult citizen
with dispositive capacity shall be conducted by the patron
(helper) on the bases of a contract of agency or entrusted
administration made with the ward. The conclusion of everyday and
other transactions directed at the support and the satisfaction of
everyday needs shall be conducted by the patron (helper) with the
consent of the citizen.
4. Patronage established in accordance with Paragraph 1 of
the present Article over an adult citizen with dispositive
capacity shall be terminated upon demand of the citizen who is
under patronage.
The patron (helper) of the citizen who is under patronage,
shall be freed from fulfillment of his duties in the cases
provided by Article 41 of the present Code.
Article 44. Recognition of a Citizen as Missing
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A citizen may, upon request of interested persons, be
recognized by a court as missing, if in the course of a year, at
the place of his residence, there is no information on the place
where he is.
In case it is impossible to determine the day of receipt of
the last information on the missing person, the start of the
calculation of the term for recognition as missing is considered
the first day of the month after that in which the last
information on the missing person was received, and in case it is
impossible to determine this month–the first of January of the
following year.
Article 45. Consequences of Recognition of a Citizen as
Missing
1. The property of a citizen recognized as missing, in case
of the necessity of constant administration of it shall be
transferred on the basis of a decision of the court to a person
who shall be determined by the agency of guardianship and
curatorship and who shall act on the basis of contract of
entrusted administraiton made concluded with this agency.
2. The administrator of the property of the person
recognized as missing shall pay his debts at the expense of the
property of the absent person, shall administer the property in
the interests of this person, and shall provide support for the
citizens whom the missing person was obligated to support.
3. The agency of guardianship and curatorship may even
before the expiration of a year from the day of receipt of the
last information on the place of location of the missing citizen
on the basis of a decision by the court appoint an administrator
for his property.
4. If upon the expiration of three years from the day of
appointment of an administrator the decision of a court on the
recognition of a person as missing has not been vacated and there
has not been an application to the court for the recognition of
the citizen as dead, the agency of guardianship and curatorship is
obligated to apply to court with a request for the recognition of
the citizen as dead.
5. The consequences of recognition of a person as missing
not provided by the present Article are determined by statute.
Article 46. Consequences of Vacating a Decision to Recognize
a Citizen as Missing
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In case of the appearance or of the discovery of the place of
location of a citizen who has been recognized as missing, the
court shall vacate a decision on recognition of him as missing.
On the basis of the decision of the court, the entrusted
administraiton of the property of this citizen is terminated.
Article 47. Declaration of a Citizen as Dead
1. A citizen may be declared dead by a court, if at the
place of his residence there is no information on the place of his
location during three years or, if he disappeared under
circumstances threatening death or giving a basis to assume his
loss from a specific accident, during six months.
2. A military serviceman or other citizen who has
disappeared in connection with military actions may be recognized
as dead by a court not earlier than after the expiration of two
years from the day of the end of the military actions.
3. The day of the death of the citizen who is recognized as
dead shall be considered to be the day of entry into legal force
of the decision of the court recognizing him as dead. In case of
recognition of a citizen as dead who disappeared under
circumstances threatening death or giving a basis to assume his
loss from a specific accident, the court may recognize as the day
of death of this citizen the day of his supposed loss.
Article 48. Consequences of the Appearance of a Citizen Who
has been Recognized as Dead
1. In case of the appearance or of the discovery of the
place of location of a citizen who has been recognized as dead,
the court shall vacate the decision on recognizing him as dead.
2. Regardless of the time of his appearance, the citizen may
demand from any person the return of property still preserved,
which passed without compensation to this person after the
recognition of the citizen as dead, with the exception of the
cases provided by Paragraph 3 of Article 275 of the present Code.
3. Persons to whom the property of a citizen who has been
recognized as dead has passed under compensated transactions are
obligated to return this property to him if it is proved that, in
obtaining this property they knew that the citizen who was
recognized as dead was among the living. In case of impossibility
of return of such property in kind, its value shall be compensated
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for.
4. If the property of a citizen who has been recognized as
dead has passed by right of inheritance to the commune and has
been sold with observance of the conditions provided by the
present Article, then after the vacating of the decision on the
recognition of the citizen as dead, the amount received from the
sale of the property shall be returned to him.
Article 49. Registration of Acts of Civil Status
1. The following acts of civil status are subject to state
registration:
1) birth;
2) marriage
3) dissolution of marriage;
4) adoption of a son (or daughter)
5) establishment of paternity
6) change of name
7) death of a citizen.
2. Registration of acts of civil status shall be done by the
agencies of registration of acts of civil status by entry of the
respective records in the books of registration of acts of civil
status (the books of acts) and issuance to citizens of
certificates on the basis of these records.
3. The correction and change of records of acts of civil
status shall be made by the agencies of registration of acts of
civil status if there are sufficient bases and there is no dispute
among interested persons.
If there is a dispute among interested persons or a refusal
of an agency of registration acts of civil status to correct or
change a record, the dispute shall be decided by a court.
The annulment and reinstatement of records of acts of civil
status shall be done by the agency of registration of acts of
civil status on the basis of a decision of a court.
4. The agencies conducting registration of acts of civil
status, the procedure for registration of these acts, the
procedure for change, reinstatement and annulling of records of
acts of civil status, the forms of the books of acts and the
certificates and also the procedures and the lengths of time for
keeping the books of acts shall be determined by the statute on
acts of civil status.
Chapter 5. Legal Persons
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§ 1. Basic Provisions
Article 50. Definition of a Legal Person
1. A legal person is an organization that has separate
property under ownership and that is liable for its obligations
with this property and that may, in its own name, obtain and
exercise property and personal nonproperty rights, bear duties,
and be a plaintiff and defendant in court.
A legal person must have an independent balance sheet.
2. In connection with participation in the formation of the
property of a legal person, its founders (or participants) have or
do not have rights under the law of obligations with respect to
this legal person.
Legal persons with respect to which their founders (or
participants) have rights under the law of obligations include:
business partnerships and companies, and also cooperatives.
Legal persons with respect to which their founders do not
have rights under the law of obligations include: societal
amalgamations, funds, and unions of legal persons.
Article 51. Types of Legal Persons
1. Organizations seeking to make profit as the basic purpose
of their activity (commercial organizations) or not having making
profit as such a purpose and not distributing profit received
among their participants (non-commercial organizations) may be
legal persons.
2. Legal persons that are commercial organizations may be
created in the form of business partnerships and companies.
3. Depending upon the nature of activity, cooperatives may
be organizations pursuing the extraction of profit as the basic
goal of their activity (commercial organizations) or not having
extraction of profit as such a goal (non-commercial
organizations).
4. Legal persons that are non-commercial organizations may be
created in the form of societal amalgamations, funds, unions of
legal persons, and also in other forms provided by a statute.
Non-commercial organizations may conduct entrepreneurial
activity only to the extent that this serves the attainment of the
purposes for which they are founded and corresponds to these
purposes. For the conduction of entrepreneurial activity, non-
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commercial organizations have the right to create business
companies or to participate in them.
Article 52. Legal Capacity of a Legal Person
1. A legal person may have civil law rights corresponding to
the purposes of activity provided in its founding document and
bear the duties connected with this activity.
Commercial organizations may have civil law rights and bear
civil law duties necessary for conducting any types of activity
not forbidden by a statute.
A legal person may engage in certain types of activity, a
list of which is determined by a statute, only on the basis of
special permission (or a license).
2. A legal person may be limited in rights only in cases and
by the procedure provided by a statute. A decision on limitation
of rights may be protested by the legal person to a court.
3. The legal capacity of a legal person shall arise at the
time of its creation (Paragraph 3 of Article 56) and shall
terminate at the time of completion of its liquidation (Paragraph
7 of Article 69).
The right of a legal person to conduct activity, to engage in
which it is necessary to obtain special permission (or a license),
shall arise from the time of receipt of such a license or at the
time indicated in it and shall terminate on the expiration of the
term of its effectiveness, unless otherwise established by a
statute or other legal acts.
Article 53. Creation of a Legal Person
The founders of a legal person shall conclude a contract in
which they determine the procedure for joint activity for the
creation of the legal person, the conditions of transfer to it of
their property and the conditions of their participation in its
activity.
The charter of the legal person being created shall be
drafted on the basis of the contract by the founders.
Article 54. Liability of the Founders of the Legal Person
The founders of the legal person bear joint and several
liability for obligations connected with the foundation of the
legal person that arose before the state registration of the legal
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person.
Article 55. Founding Document of a Legal Person
1. The founding document of a legal person in the charter
approved by its founders.
A legal person created in accordance with the present Code by
a single founder shall act on the basis of a charter approved by
this founder.
2. The charter of a legal person must indicate the name of
the legal person, its seat, and the procedure for managing the
activity of the legal person and also must contain the other
information required by a statute for legal persons of the
respective type.
In the charter of a non-commercial organization the subject
and purposes of its activity shall be established.
In the charter of a commercial organization, the subject and
purposes of its activity may be established. The charter of
noncommercial organizations and unitary enterprises and, in cases
provided by a statute, also of other commercial organizations,
must define the object and purposes of the activity of the legal
person. The object and defined purposes of the activity of a
commercial organization may be provided by the charter also in
cases when this is not obligatory by a statute.
3. Changes in the charter shall take legal effect for third
persons from the time of their state registration and, in cases
established by a statute, from the time of notifying the agency
conducting state registration of such changes. However, legal
persons and their founders (or participants) do not have the right
to cite the absence of the registration of such changes in
relations with third parties who have acted taking these changes
into account.
Article 56. State Registration of Legal Persons
1. A legal person is subject to state registration by the
procedure established by statute. The data of state registration,
including the firm name of commercial organizations, shall be
included in a state register of legal persons open for public
access.
2. Violation of the procedure established by a statute for
the formation of a legal person or failure of its charter to
correspond to a statute shall entail refusal of state registration
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of the legal person.
Refusal of registration on grounds of the inexperience of
creating the legal person is not permitted.
A refusal of state registration and also avoidance of such
registration may be protested to a court.
2. A legal person shall be considered created from the time
of its state registration.
Article 57. Bodies of a Legal Person
1. A legal person obtains civil law rights and undertakes
civil law duties through its bodies acting in accordance with a
statute, other legal acts, and the charter.
The procedure for appointing or electing bodies of a legal
person shall be determined by a statute and the charter.
2. In cases provided by a statute a legal person may obtain
civil law rights and undertake civil law duties through its
participants.
3. A person who, by virtue of a statute or the charter of a
legal person, acts in its name must act in the interests of the
legal person represented by him in good faith and reasonably. This
person shall be obligated on demand of the founders (or
participants) in the legal person, unless otherwise provided by a
statute or contract, to compensate for the damages caused by him
to the legal person.
Article 58. The Name of a Legal Person
1. A legal person shall have its own name, containing an
indication of its organizational-legal form. The names of a non-
commercial organizations must contain an indication of the nature
of the activity of the legal person.
2. A legal person that is a commercial organization must have
a firm name.
A legal person whose firm name has been registered by the
procedure established by statute has the exclusive right to its
use.
The procedure for registration and use of firm names shall be
determined by a statute and other legal acts in accordance.
3. Obtaining rights and duties under the firm name of
another legal person is not permitted.
A person who has unlawfully used another’s registered firm
name, on demand of the holder of the right to the firm name, shall
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be obligated to stop its use and compensate for the damages
caused.
Article 59. Seat of a Legal Person
The seat of a legal person is the place of location of its
permanently acting body.
Article 60. Liability of a Legal Person
1. A legal person shall be liable for their obligations with
all property belonging to them.
2. The founder of (or a participant in) a legal person shall
not be liable for the obligations of the legal person, and the
legal person shall not be liable for the obligations of the
founder (or participant), with the exception of cases provided by
the present Code or by the charter of the legal person.
Article 61. Representative Offices and Branches
1. A representative office is a separate subdivision of a
legal person located outside the place where the legal person is
located which represents the interests of the legal person and
conducts their protection.
2. A branch is a separate subdivision of a legal person
located outside the place where the legal person is located and
conducting all its functions or part of them, including the
function of representation.
3. Representative offices and branches are not legal persons,
and they act on the basis of regulations approved by the legal
person.
The heads of representative offices and branches are
appointed by the legal person and act on the basis of a power of
attorney from it.
Representative offices and branches must be indicated in the
charter of the legal person that has created them.
Article 62. Institution
1. An institution is an organization created as a legal
person for the conduct of administrative, cultural and societal,
or other functions of a non-commercial character and financed by
it in whole or in part.
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2. An institution is not a legal person and acts on the
basis of a statute approved by a legal person.
3. An institution with respect to the property attached to
it exercises the rights of possession, use, and disposition of its
property within the limits established by statute, in accordance
with the purposes of its activity, with from the legal person, and
the designated purpose of the property
4. Liability for the obligations of an institution shall be
borne by the legal person that founded the institution.
5. The peculiarities of the legal status of individual types
of state and other institutions is determined by statute and other
legal acts.
Article 63. Reorganization of a Legal Person
1. Reorganization of a legal person (merger, accession,
division, spin-off, transformation) may be conducted by decision
of its founders (or participants) or by the body of the legal
person so authorized by the charter.
2. In cases established by a statute, reorganization of a
legal person in the form of a division of it or a spin-off from it
of one or several legal persons shall be done by decision of a
court.
The court shall designate an outside manager for the legal
person and delegate to him the conduct of the reorganization of
this legal person. From the time of designation of an outside
manager, the powers for managing the affairs of the legal person
shall pass to him. The outside manager shall act in the name of
the legal person in court, compile the division balance sheet and
submit it for consideration by the court together with the charter
of the legal persons arising as the result of the reorganization.
Approval by the court of these documents shall be the basis for
state registration of the newly arising legal persons.
3. A legal person shall be considered reorganized, with the
exception of the case of reorganization in the form of accession,
from the time of state registration of the newly arising legal
persons.
In case of reorganization of a legal person in the form of
accession of another legal person to it, the first of them shall
be considered reorganized from the time of making in the single
state register of legal persons of an entry on the termination of
activity of the joining legal person.
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Article 64. Legal Succession Upon the Reorganization of
Legal Persons
1. In case of the merger of legal persons, the rights and
duties of each of them shall pass to the newly arising legal
person in accordance with the transfer document.
2. In case of accession of a legal person to another legal
person, the rights and duties of the acceding legal person shall
move to the latter in accordance with the transfer document.
3. In case of division of a legal person, its rights and
duties shall pass to the newly formed legal persons in accordance
with the division balance sheet.
4. In case of the spin-off from a legal person of one or
several legal persons, the rights and duties of the reorganized
legal person shall pass to each of them in accordance with the
division balance sheet.
5. In case of transformation of a legal person of one type
into a legal person of another type (a change of organizational-
legal form), the rights and duties of the reorganized legal person
shall pass to the newly arising legal person in accordance with
the transfer document.
Article 65. The Transfer Document and the Division Balance
Sheet
1. The transfer document and the division balance sheet must
contain provisions on legal succession for all obligations of the
reorganized legal person with respect to all its creditors and
debtors, including also obligations contested by the parties.
2. The transfer document and the division balance sheet must
be approved by the founders of (or participants in) the legal
person or by the body of the legal person empowered thereto by the
charter that has taken the decision to reorganize the legal person
and must be presented together with the charter for state
registration of the newly arising legal persons or for entering
changes in the charters of existing legal persons.
Failure to present the corresponding transfer document or
division balance together with the charter, and also the absence
in them of provisions on legal succession to the obligations of
the reorganized legal person shall entail a refusal of state
registration for the newly arising legal person.
Article 66. Guaranties of Rights of Creditors of a Legal
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Person Upon Its Reorganization
1. The founders of (or participants in) the legal person or
the body of the legal person thereto authorized by the charter
that has adopted a decision to reorganize the legal person, and in
the cases provided by Paragraph 2 of Article 63 of the present
Code, the outside manager, are obligated to notify the creditors
of the reorganized legal person of this in writing.
2. A creditor of the reorganized legal person shall have the
right to demand termination or early performance of legal
obligations for which the reorganized legal person is a debtor and
compensation for damages.
3. If the division balance sheet does not provide the
possibility of determining the legal successor of the reorganized
legal person, the newly arisen legal persons bear joint and
several liability for the obligations of the reorganized legal
person to its creditors.
Article 67. Liquidation of a Legal Person
1. Liquidation of a legal person shall entail its termination
without transfer of rights and duties by way of legal succession
to other persons.
2. A legal person may be liquidated:
1) by a decision of its founders (or participants) or of the
body of the legal person empowered thereto by the charter,
including in connection with the expiration of the term for which
the legal person was created, with the achievement of the purpose
for which it was created;
2) in case of recognition by a court that the registration of
a legal person is invalid in connection with violations of a
statute or other legal acts committed at its founding;
3) by a decision of a court in case of conduct of activity
without appropriate permission (or license) or of activity
prohibited by a statute, or with other multiple or gross
violations of a statute or other legal acts, or in case of
systematic conduct by a societal organization or fund of activity
contradicting its charter purposes, and also in other cases
provided by the present Code.
3. A demand for the liquidation of a legal person on the
bases indicated in Paragraph 2 of the present Article may be
presented in court by a state agency or an agency of local self-
government to whom the right for presenting such a demand has been
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granted by a statute.
A decision of a court for the liquidation of a legal person
may impose obligations for the conduct of the liquidation of the
legal person on its founders (or participants) or the body
authorized for the liquidation of the legal person by its charter.
4. A legal person also may be liquidated in accordance as the
result of bankruptcy.
5. If the value of the property of such a liquidated legal
person is insufficient for satisfaction of the claims of
creditors, it may be liquidated only as through bankruptcy.
Article 68. Duties of a Person Who has Taken a Decision to
Liquidate a Legal Person
1. The founders of (or participants in) a legal person or the
body of a legal person authorized thereto by the charter that has
taken a decision to liquidate a legal person are obligated to
immediately report about this in writing to the agency that
conducts state registration of legal persons, which shall enter in
the state register of legal persons information to the effect that
the legal person is in the process of liquidation.
2. The founders of (or participants in) the legal person or
the body of a legal person authorized thereto by the charter that
has taken the decision to liquidate the legal person shall appoint
a liquidation commission (or liquidator) and shall establish, in
accordance with the present Code, the procedure and periods for
liquidation.
3. From the time of appointment of a liquidation commission,
the powers for the management of the affairs of the legal person
shall pass to it. The liquidation commission may appear in court
in the name of the legal person being liquidated.
Article 69. The Procedure for Liquidation of a Legal Person
1. The liquidation commission shall place, in the press media
in which data on state registration of a legal person are
published, a publication about its liquidation and about the
procedure and period for the submission of claims by its
creditors. This period may not be less than two months after the
time of publication about the liquidation.
The liquidation commission shall take measures for the
discovery of creditors and for the receipt of debtor indebtedness
and also shall inform creditors about the liquidation of the legal
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person.
2. After the end of the period for the presentation of claims
by creditors, the liquidation commission shall compile an
intermediate liquidation balance sheet, which shall contain
information on the composition of the property of the legal person
undergoing liquidation, on a list of the claims presented by
creditors, and also about the results of their consideration.
The intermediate liquidation balance sheet shall be confirmed
by the founders of (or participants in) the legal person or by the
body of the legal person authorized thereto by the charter that
made the decision to liquidate the legal person.
3. If the monetary assets available to the legal person being
liquidated are insufficient for the satisfaction of the claims of
creditors, the liquidation commission shall conduct the sale of
the property of the legal person at a public auction by the
procedure established by the statute on public auctions.
4. Payment of monetary sums to creditors of the legal person
being liquidated shall be made by the liquidation commission in
the order of priority established by Article 70 of the present
Code, in accordance with the intermediate liquidation balance
sheet, beginning from the day of its approval.
5. After settlement of accounts with creditors, the
liquidation commission shall compile a liquidation balance sheet,
which shall be approved by the founders of (or participants in)
the legal person or by the body of the legal person authorized
thereto by the charter that took the decision for the liquidation
of the legal person. The liquidation commission shall, in an
appropriate manner, send the approved liquidation balance to the
agency conducting state registration of legal persons.
6. Property of the legal person remaining after the
satisfaction of the claims of creditors shall be transferred to
its founders (or participants), unless otherwise provided by a
statute, other legal acts or the charter of the legal person.
7. The liquidation of the legal person shall be considered
complete and the legal person shall be considered to have ceased
its existence from the time of the entry of a notation to this
effect in the single state register of legal persons.
Article 70. Satisfaction of the Claims of Creditors
1. In the liquidation of a legal person, the claims of its
creditors shall be satisfied in the following order:
in the first priority, claims of creditors secured by pledge
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of property of the legal person being liquidated shall be
satisfied;
in the second priority, claims of citizens to whom the
entrepreneur is liable for causing of harm to life or health shall
be satisfied by capitalization of the respective periodic
payments;
in the third priority, settlements shall be made for the
payment of severance allowances and payment for labor with persons
working under a labor agreement and also for payment of
compensation under publishing contracts;
in the fourth priority, indebtedness for obligatory payments
to the fisc shall be covered;
in the fifth priority, accounts shall be settled shall be
made with other creditors.
The claims of each priority shall be satisfied after the full
satisfaction of the claims of the previous priority.
2. In case of refusal by the liquidation commission to
satisfy the claims of a creditor or of declining to consider them,
the creditor shall have the right, before the approval of the
liquidation balance sheet, to bring a suit in court against the
liquidation commission.
3. Claims of creditors presented after the period
established by the liquidation commission for their presentation
shall be satisfied from the property of the legal person
undergoing liquidation that remains after the satisfaction of the
claims of creditors presented on time.
4. Claims of creditors of the legal person undergoing
liquidation that were not recognized by the liquidation commission
and also claims for which the creditor has been refused
satisfaction by a decision of a court shall be considered
canceled.
Article 71. Bankruptcy
1. A legal person by decision of a court may be declared
bankrupt if it is not in a position to satisfy the claims of
creditors.
The grounds and procedure for a declaration by a court of a
legal person bankrupt shall be established by the Civil Procedure
Code of the Republic of
§ 2. Commercial Organizations
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1. General Provisions on Business Partnerships and Companies
Article 72. Basic Provisions on Business Partnerships and
Companies
1. Business partnerships and companies are commercial
organizations with charter (or investment) capital broken down
into the shares of the founders (or participants). Property
created at the expense of the contributions of the founders (or
participants) and also that produced or obtained by the business
partnership or company in the process of its activity shall belong
to it by right of ownership.
In cases provided by the present Code, a business company may
be created by one person.
2. Business partnerships may be created in the form of a
general partnership or a limited partnership.
3. Business companies may be created in the form of a company
with limited or supplementary liability or a joint-stock company.
4. Only individual entrepreneurs and/or commercial
organizations may be participants in general partnerships and the
general partners in limited partnerships.
Citizens and legal persons may be participants in business
companies and investors in limited partnerships.
State agencies and agencies of local self-government do not
have the right to be participants in business partnerships and
companies.
5. Business partnerships and companies may be founders of (or
participants in) other business partnerships and companies with
the exception of cases provided by the present Code and other
statutes.
6. An investment in the property of a business partnership or
company may be money, securities, commercial paper, other property
or other rights having a monetary evaluation.
The monetary evaluation of the investment of a participant in
a business company shall be made by agreement among the founders
of (or participants in) the company and shall be subject to
independent expert review (or audit).
Article 73. Rights and Duties of Participants in a Business
Partnership or Company
1. Participants in a business partnership or company shall
have the right:
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1) to participate in the administration of the affairs of the
partnership or company with the exception of the cases provided by
Paragraph 2 of Article 92 of the present Code and the statute on
joint-stock companies;
2) to receive information on the activity of the partnership
or company and to be acquainted with its books and other
documentation by the procedure established by the charter;
3) to take part in the distribution of profit;
4) to receive, in case of liquidation of the partnership or
company, the part of the property left after settlements with
creditors, or its value.
Participants in a partnership or company may also have other
rights provided by the present Code, statutes on business
companies, or the charter of the partnership or company.
2. Participants in a business partnership or company are
obligated:
1) to make their investments by the procedure, in the
amounts, by the means, and within the periods that are provided by
the charter;
2) not to divulge confidential information about the activity
of the partnership or company.
Participants in a business partnership or company may also
bear other obligations provided by its charter.
Article 74. Transformation of Business Partnerships and
Companies
1. Business partnerships and companies may be transformed
into business partnerships and companies of another type by
decision of the general meeting of members by the procedure
established by the present Code.
2. In case of the transformation of a partnership into a
company, each general partner that has become a participant (or
stockholder) of the company shall bear for two years subsidiary
liability with all his property for obligations that have passed
to the company from the partnership. The alienation by the former
partner of the shares (or stock) belonging to him shall not free
him from such liability.
Article 75. Subsidiary Business Company
1. A business company is a subsidiary business company if
another (or principal) business company or partnership by virtue
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of dominant participation in its charter capital or in accordance
with a contract concluded between them has the possibility of
determining decisions taken by such a company.
2. A subsidiary company is not liablefor the debts of the
principal company (or partnership).
3. A principal company (or partnership) that has the right
to give the subsidiary company instructions obligatory for it
shall answer jointly with the subsidiary company for transactions
concluded by the latter in the fulfillment of such instructions.
A principal company or partnership shall be considered to
have the right to give a subsidiary company instructions
obligatory for it only in the case when this right is provided in
a contract with the subsidiary company.
4. The participants (or shareholders) of a subsidiary
company shall have the right to compensation by the principal
partnership or company for damages caused by its fault to the
subsidiary company. Damages shall be considered caused by the
fault of the principal partnership or company only in the case
when they have occurred as the result of the execution by the
subsidiary company of instructions obligatory for it of the
principal partnership or company.
5. In case of bankruptcy of the subsidiary company due to
the fault of the principal company partnership or company, the
latter shall bear subsidiary liability for its debts. Bankruptcy
of the subsidiary company shall be considered as having occurred
due to the faulty of the principal partnership or company only in
the case when it has occurred as the result of performance by the
subsidiary company of instructions obligatory for it of the
principal partnership or company.
Article 76. Dependent Business Company
1. A business company is dependent if another (the dominant
or participant) company has more than twenty percent of the
charter capital of a limited liability company or more than twenty
percent of the voting shares of stock of a joint-stock company
2. A business company that has obtained more than twenty
percent of the charter capital of a limited liability company or
more than twenty percent of the voting shares of stock of a joint-
stock company is obligated to immediately publish information on
this by the procedure provided by the statutes on business
companies.
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2. Full Partnership
Article 77. Basic Provisions on a Full Partnership
1. A full partnership is one whose participants (general
partners), in accordance with the charter are engaged in
entrepreneurial activity in the name of the partnership and bear
liability for its obligations with the property belonging to them.
2. A person may be a participant in only one full
partnership.
3. The firm name of a full partnership must contain the names
(or designations) of all its participants and the words “full
partnership” or the name (or designation) of one or more
participants with the addition of the words “and partners” and the
words “full partnership.”
Article 78. The Charter of a Full Partnership
The charter of a full partnership must contain, in addition
to the information indicated in Paragraph 2 of Article 55 of the
present Code, terms on the amount and composition of the
contributed capital of the partnership; on the amount of and
procedure for change in the shares of each of the participants in
the contributed capital; on the composition of and procedure for
making their contributions, and on the liability of the
participants for violating duties to make contributions.
Article 79. Management in a Full Partnership
1. Management of the activity of a full partnership shall be
conducted by the general agreement of all the participants. The
charter of the full partnership may provide cases when a decision
may be taken by a majority of votes of the participants.
2. Each participant in a full partnership shall have one
vote, unless the charter provides a different procedure for
determining the number of votes of its participants.
3. Each participant in a partnership, regardless of whether
he is authorized to conduct the affairs of the partnership, shall
have the right to be acquainted with all documentation for the
conduct of affairs. A waiver of this right or a limitation of it,
including by agreement of the participants in the partnership,
shall be void.
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Article 80. Conduct of the Affairs of a Full Partnership
1. Each participant in a full partnership has the right to
act in the name of the partnership unless the charter establishes
that all its participants conduct affairs jointly or the conduct
of affairs is delegated to individual participants.
In the joint conduct of the affairs of a partnership by its
participants, the consent of all the participants in the
partnership is required for the making of each transaction.
If the conduct of the affairs of a partnership has been
delegated by its participants to one or more of them, then the
remaining participants, to conduct affairs in the name of the
partnership, must have a power of attorney from the participant
(or participants) to whom the conduct of the affairs of the
partnership is assigned.
In relations with third persons the partnership does not have
the right to rely upon provisions of the charter limiting the
authority of participants in the partnership with the exception of
cases when the partnership shows that the third person at the time
of making a transaction knew or obviously should have known of the
absence for a participant in the partnership of the right to act
in the name of the partnership.
2. Authorizations for the conduct of the affairs of a
partnership granted to one or several participants may be
terminated by a court on demand of one or several of the other
participants in the partnership in case of serious grounds
therefore, in particular as the consequence of a gross violation
by the authorized person (or persons) of his obligations or of his
revealed inability for the sensible management of affairs. On the
basis of the judicial decision, the appropriate changes shall be
made in the charter of the partnership.
Article 81. Duties of a Participant in a Full Partnership
1. A participant in a full partnership is obligated to
participate in its activity in accordance with the terms of the
charter.
2. A participant in a full partnership is obligated to
contribute his contributions to the contributed capital of the
partnership before its registration.
3. A participant in a full partnership does not have the
right, without the consent of the remaining participants, to
conduct in his own name in his own interests or in the interests
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of third persons transactions of the same type as those that
constitute the subject of activity of the partnership.
In case of violation of this rule the partnership shall have
the right at its choice to demand from such a participant
compensation for the losses caused to the partnership or to
transfer to the partnership of all benefits obtained from such
transactions.
Article 82. Distribution of the Profit and Losses of a Full
Partnership
1. The profit and losses of a full partnership shall be
distributed among its participants in proportion to their shares
in the contributed capital unless otherwise provided by the
charter or by other agreement of the parties. An agreement for the
elimination of a participant in the partnership from participation
in the profit or in the losses is void.
2. If, as the result of losses incurred by the partnership,
the value of its net assets becomes less than the amount of its
contributed capital, profit received by the partnership shall not
be distributed among the participants until the value of the net
assets exceeds the amount of its contributed capital.
Article 83. Liability of the Participants in a Full
Partnership for Its Obligations
1. The participants in a full partnership jointly and
severally bear subsidiary liability with their property for the
obligations of the partnership.
2. A participant in a full partnership who is not a founder
shall bear liability equally with other participants for
obligations that arose before his entry into the partnership.
A partner who has left a partnership shall be liable for
obligations of the partnership that arose up to the time he left
equally with the remaining participants for two years from the day
of approval of the report on the activity of the partnership for
the year in which he left the partnership.
3. An agreement of participants in a partnership for the
limitation or elimination of the liability provided in the present
Article is void.
Article 84. Change in the Membership of the Participants in
a Full Partnership
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1. In cases of the exit or death of one of the participants
in a full partnership; of the declaration of one of them as
missing, without dispositive capacity or with limited dispositive
capacity, or insolvent (or bankrupt); of the commencement with
respect to one of the participants of reorganization procedures by
decision of a court; of the liquidation of a legal person
participating in the partnership; or of the levying by a creditor
of one of the participants of execution on part of the property
constituting his share in the contributed capital, the partnership
may continue its activity if this is provided by the charter of
the partnership or by agreement of the remaining participants.
2. The participants in a full partnership have the right to
demand by judicial procedure the exclusion of any of the
participants from the partnership by unanimous decision of the
remaining participants and in case of the existence of serious
grounds therefore, in particular as the result of gross violation
by this participant of his obligations or of his revealed
inability for sensible management of affairs.
Article 85. Exit of a Participant from a Full Partnership
1. A participant in a full partnership has the right to exit
from it, by stating his refusal to participate in the partnership.
A refusal to participate in a full partnership must be stated
by the participant not less than six months before actual exit
from the partnership.
2. An agreement among participants in the partnership to
refuse the right to exit from the partnership is void.
Article 86. Consequences of Exit of a Participant from a
Full Partnership
1. A participant who has exited from a full partnership shall
be paid the value of the part of the property of the partnership
corresponding to the share of this participant in the contributed
capital, unless otherwise provided by the charter. By agreement of
the exiting participant with the remaining participants, payment
of the value of the property may be replaced by turning over
property in kind.
The part of the property due the exiting participant or its
value shall be determined according to the balance sheet compiled,
with the exception of the situation provided in Article 88 of the
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present Code, at the time of his exit.
2. In case of the death of a participant in a full
partnership, his heir may enter the full partnership only with the
consent of the other participants, unless otherwise provided by
the charter of the partnership.
A legal person that is the legal successor of a reorganized
legal person that participated in a full partnership shall have
the right to enter the partnership with the consent of its other
participants unless otherwise provided by the charter of the
partnership.
Settlement with an heir (or legal successor) who has not
entered the partnership shall be made in accordance with Paragraph
1 of the present Article. The heir (or legal successor) of the
participant in a full partnership shall bear liability for the
obligations of the partnership to third persons for which in
accordance with Paragraph 2 of Article 83 of the present Code a
participant who exited would have been liable, within the limits
of the property of the exited member of the partnership that
passed to him.
3. If one of the participants has exited from the
partnership, the shares of the remaining participants in the
contributed capital of the partnership shall be correspondingly
increased unless otherwise provided by the charter or by other
agreement of the participants.
Article 87. Transfer of the Share of a Participant in the
Contributed Capital of a Full Partnership
A participant in a full partnership has the right, with the
consent of its remaining participants, to transfer his share in
the contributed capital or part of it to another participant in
the partnership or to a third person.
In case of transfer of a share (or part of a share) to
another person, the rights belonging to the participant who
transferred the share (or part of a share) pass to it in full or
in corresponding part. The person to whom a share (or part of a
share) passes shall bear liability for the obligations of the
partnership by the procedure established by subparagraph 1 of
Paragraph 2 of Article 83 of the present Code.
The transfer of a whole share to another person by a
participant in the partnership terminates the participant’s
participation in the partnership and entails the consequences
provided by Paragraph 2 of Article 83 of the present Code.
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Article 88. Levy of Execution on a Participant’s Share in
the Contributed Capital of a Full Partnership
Levy of execution on a participant’s share in the property of
a full partnership for its debts not connected with participation
in the partnership (personal debts) shall be permitted only in
case of insufficiency of his other property to cover the debts.
Creditors of such a participant have the right to demand of the
full partnership the separation of a part of the property of the
partnership proportional to the share of the debtor in the
contributed capital with the purpose of levying execution on this
property. The part of the property of the partnership or its value
subject to separation shall be determined according to a balance
sheet compiled at the time of presentation by creditors of demands
for separation.
The levying of execution on property corresponding to the
share of a participant in the contributed capital of a full
partnership shall terminate his participation in the partnership
and shall entail the consequences provided by subparagraph 2 of
Paragraph 2 of Article 83 of the present Code.
Article 89. Liquidation of a Full Partnership
A full partnership may be liquidated on the bases indicated
in Article 67 of the present Code and also in the situation when a
single participant remains in the partnership. Such a participant
shall have the right for six months from the time when he became
the sole participant in the partnership to transform such a
partnership into a business company by the procedure established
by the present Code.
A full partnership shall also be liquidated in the cases
indicated in Paragraph 1 of Article 84 of the present Code if the
charter of the partnership or an agreement of the remaining
participants does not provide that the partnership shall continue
its activity.
3. Limited Partnership
Article 90. Basic Provisions on Limited Partnership
1. A limited partnership is a partnership in which, along
with participants conducting entrepreneurial activity in the name
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of the partnership and answering for the obligations of the
partnership with their property (general partners), there are one
or more investor-participants (limited partners), who bear the
risk of losses connected with the activity of the partnership
within the limits of the amounts of investments contributed by
them and do not take part in the conduct by the partnership of
entrepreneurial activity.
2. The status of general partners participating in a limited
partnership and their liability for the obligations of the
partnership shall be determined by the rules of the present Code
on participants in a full partnership.
3. A person may be a general partner only in one limited
partnership.
A participant in a full partnership may not be a general
partner in a limited partnership.
A general partner in a limited partnership may not be a
participant in a full partnership.
4. The firm name of a limited partnership must contain either
the names (or designations) of all the general partners and the
words “limited partnership” or “special partnership,” or the
name
(or designation) of not less than one general partner with the
addition of the words “and partners” and the words “limited
partnership.”
If the name of an investor is included in the firm name of a
limited partnership, this investor shall become a general partner.
5. The rules of the present Code on a full partnership shall
be applied to a limited partnership to the extent that this does
not contradict the rules of the present Code on the limited
partnership.
Article 91. The Charter of a Limited Partnership
The charter of a limited partnership must contain, in
addition to the information indicated in Paragraph 2 of Article 55
of the present Code, terms on the size and composition of the
contributed capital of the partnership; on the size of and
procedure for change of the shares of each of the general partners
in the contributed capital; on the composition of and procedure
for their contributing their investments; on their liability for
the violation of obligations for the contribution of investments;
and on the total size of investments contributed by the investors.
Article 92. Management of a Limited Partnership and Conduct
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of Its Affairs
1. Management in a limited partnership shall be conducted by
the general partners. The procedure for managing and conducting
the affairs of such a partnership by its general partners is
established by them in accordance with the rules of the present
Code on a full partnership.
2. Limited partners do not have the right to participate in
the management and conduct of affairs of a limited partnership nor
to act in its name without a power of attorney. They do not have
the right to contest the actions of general partners in the
management and conduct of the affairs of the partnership.
Article 93. Rights and Duties of an Investor in a Limited
Partnership
1. An investor in a limited partnership has the obligation to
contribute its investment in the contributed capital. The
contribution of the investment shall be certified by a certificate
of participation issued to the investor by the partnership.
2. An investor in a limited partnership has the right:
1) to receive the part of profit of the partnership due for
its share in the contributed capital by the procedure provided by
the charter;
2) to be acquainted with the annual report and balance sheets
of the partnership;
3) at the end of the fiscal year to leave the partnership and
receive its investment by the procedure provided by the charter;
4) to transfer its share in the contributed capital or part
of it to another investor or a third person. The investors shall
enjoy a priority right before third persons for the purchase of a
share (or parts of it) by analogy with the conditions and
procedure provided by Paragraph 2 of Article 101 of the present
Code. The transfer by an investor of the whole share to another
person shall end his participation in the partnership.
The charter of a limited partnership may also provide other
rights of an investor.
Article 94. Liquidation of a Limited Partnership
1. A limited partnership shall be liquidated upon the exit of
all investors participating in it. However, the general partners
shall have the right instead of liquidation to turn the limited
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partnership into a full partnership.
A limited partnership shall also be liquidated on the bases
for liquidation of a full partnership (Article 89). However, a
limited partnership shall be maintained if at least one general
partner and one investor remains in it.
2. Upon liquidation of a limited partnership, including in
case of bankruptcy, the investors shall have a priority right
ahead of the general partners to receipt of their investments from
the property of the partnership remaining after satisfaction of
the claims of its creditors.
The property of the partnership remaining after this shall be
distributed among the general partners in proportion to their
shares in the contributed capital of the partnership unless
another procedure is established by the charter or by agreement of
the general partners.
4. Limited Liability Company
Article 95. Basic Provisions on the Limited Liability
Company
1. A limited liability company is a company founded by one or
several persons, the charter capital of which is divided into
shares of amounts determined by the charter. The participants in
a limited liability company are not liable for its obligations;
they bear the risk of losses connected with the activity of the
company within the limits of the value of the investments
contributed by them.
2. The firm name of a limited liability company must contain
the name of the company and the words “limited liability company.”
3. The legal status of a limited liability company and also
the rights and duties of its participants shall be determined by
the present Code and the statute on limited liability companies.
Article 96. Participants in a Limited Liability Company
1. The number of participants in a limited liability company
must not exceed the limit established by the statute on limited
liability companies. Otherwise the company will be subject to
transformation into a joint-stock company within a year and, upon
expiration of this period, to liquidation by judicial procedure if
the number of its participants is not reduced to the level
established by the statute.
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2. A limited liability company may not have as a sole
participant another business company consisting of one person.
Article 97. Charter of a Limited Liability Company
The charter of a limited liability company must contain, in
addition to the matters listed in Paragraph 2 of Article 55 of the
present Code, conditions on the size of the charter capital of the
company; on the size of shares of each of the participants; on the
composition of and procedure for the contribution by them of
investments; on the liability of participants for violation of the
obligation to contribute investments; on the composition and
competence of the agencies of administration of the company and
the procedure for their making decisions, including on questions
decisions on which are taken unanimously or by a qualified
majority of votes; and also on other matters provided by the
statute on limited liability companies.
Article 98. The Charter Capital of a Limited Liability
Company
1. The charter capital of a limited liability company
consists of the value of the investments of its participants.
The charter capital determines the minimum amount of the
property of the company guarantying the interests of its
creditors. The amount of charter capital cannot be less than the
amount determined by the statute on limited liability companies.
2. The founders of a limited liability company are obligated
before registration of the company to fully pay in the charter
capital.
3. It is not permitted to free a participant in a limited
liability company from liability for the obligation to contribute
an investment to the charter capital of the company. This
prohibition includes setoff of claims against the company.
4. If at the end of the second or each following financial
year the value of the net assets of a limited liability company is
less than the charter capital, the company is obligated to report
the reduction of its charter capital and to register its reduction
by the established procedure. If the value of these assets of the
society is less than the minimum amount of charter capital set by
a statute, the company is subject to liquidation.
5. A reduction of the charter capital of a limited liability
company is permitted only after notification of all of its
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creditors. The latter have the right in this case to demand early
performance or termination of the respective obligations and
compensation for damages.
Article 99. Management of a Limited Liability Company
1. The highest body of a limited liability company is the
general meeting of its participants.
In a limited liability company an executive body (collegial
and/or one-individual) shall be created that conducts the current
management of its activity and reports to the general meeting of
its participants. A one-individual body of administration may also
be elected from among non-participants.
2. The competence of the bodies of management of the company
and also the procedure for their making decisions and acting in
the name of the company shall be determined in accordance with the
present Code by the statute on limited liability companies and the
charter of the company.
3. The following are in the exclusive competence of the
general meeting of participants in a limited liability company:
1) changing the charter of the company and the size of its
charter capital;
2) forming executive bodies of the company and terminating
their powers early;
3) approving annual reports and accounting balances of the
company and distributing its profits and losses;
4) deciding on the reorganization or liquidation of the
company;
5) electing the auditing commission (or the auditor) of the
company.
The statute on limited liability companies may also assign
the decision of other questions to the exclusive competence of the
general meeting.
Questions assigned by statute to the exclusive competence of
the general meeting of participants in the company may not be
transferred by them for decision by the executive body of the
company.
4. For review of the correctness of the annual financial
report of a limited liability company, the company has the right
to invite each year a professional auditor not connected by
property interests with the company or its founders (an outside
audit). Audit verification of the annual financial report of the
company may also be conducted on demand of any of its
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participants.
In this case the audit review shall be made at the expense of
the participant who has demanded such a review.
The procedure for conducting audit reviews of the activity of
the company shall be determined by a statute and the charter of
the company.
5. Publication by the company of information on the results
of conducting its affairs (or a public report) is not required
with the exception of cases provided by the statute on limited
liability companies.
Article 100. Reorganization and Liquidation of a Limited
Liability Company
1. A limited liability company may be voluntarily reorganized
or liquidated by unanimous decision of its participants.
Other bases for reorganization and liquidation of the company
and also the procedure for its reorganization and liquidation are
determined by the present Code and other statutes.
2. A limited liability company has the right to transform
itself into a joint-stock company.
Article 101. Transfer of a Share in the Charter Capital of a
Limited Liability Company
1. A participant in a limited liability company has the right
to sell or otherwise alienate its share in the charter capital of
the company or part of it to one or several participants in the
given company.
2. Alienation by a participant in the company of its share
(or part of it) to third persons is permitted unless otherwise
provided by the charter of the company.
The participants in the company enjoy a priority right of
purchase of the share of a participant (or part of it) in
proportion to the amounts of their shares, unless the charter of
the company or an agreement of its participants has provided
another procedure for exercising this right. In case the
participants in the company do not use their priority right within
one month from the day of notice or within another period provided
by the charter of the company or agreement of its participants,
the share of the participant may be alienated to a third person.
3. If, in accordance with the charter of a limited liability
company, alienation of the share of a participant (or part of it)
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to third persons is impossible and the other participants in the
company refuse to buy it, then the company is obligated to obtain
the share of the participant.
4. In case a participant’s share (or part of it) has been
obtained by the limited liability company itself, the company is
obligated to sell it to the other participants or third persons
within the periods and by the procedure that are provided by the
statute on limited liability companies and the charter of the
company or to reduce its charter capital in accordance with
Paragraphs 4 and 5 of Article 98 of the present Code.
5. Shares in the charter capital of a limited liability
company pass to the heirs of citizens and to the legal successors
of legal persons that are participants in the company, unless the
charter documents of the company provide that such transfer is
permitted only with the consent of the remaining members of the
company. A refusal of consent to the transfer of the share shall
entail the obligation of the company to pay the heirs (or legal
successors) of the participants its actual value or to give them
property in kind of such value by the procedure and on the
conditions provided by the statute on limited liability companies
and the charter of the company.
Article 102. Levy of Execution on the Share of a Participant
in the Property of a Limited Liability Company
1. Levy of execution on the share of a participant in the
property of a limited liability company for its personal debts is
permitted only in case of insufficiency for this participant of
other property to cover its debts. The creditors of such a
participant have the right to demand from the limited liability
company payment of the value of the part of the company
corresponding to the share of the debtor in the charter capital or
the separation of this property for the purpose of levying
execution on it. The part of the property of the company subject
to separation or its value shall be determined according to a
balance sheet made at the time of presentation of claims by
creditors.
2. Levying execution on the whole share of a participant in
the property of a limited liability company shall terminate his
participation in the company.
Article 103. Exit of a Participant in a Limited Liability
Company from the Company
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A participant in a limited liability company has the right at
any time to exit from the company regardless of the consent of its
other participants.
Article 104. Settlements Upon Exit of a Participant from a
Limited Liability Company
1. A participant who has exited a limited liability company
shall be paid the value of the part of the property corresponding
to its share in the charter capital unless otherwise provided by
the charter of the company.
By agreement of the exiting participant with the company,
payment of the value of the property may be replace by issuance of
property in kind.
The part of the property of the company due to the exiting
participant or its value shall be determined according to a
balance sheet compiled at the time of its departure.
2. If the right of use of property was contributed as a
contribution to the charter capital of a limited liability
company, the respective property shall be returned to the
participant exiting from the company. Reduction in value of such
property as the result of its normal wear shall not be
compensated.
3. Settlements with an heir or legal successor of a
participant that has not entered the company shall be made in
accordance with the rules of the present Article.
5. Company With Supplementary Liability
Article 105. Basic Provisions on Companies With
Supplementary Liability
1. A company with supplementary liability is a company
founded by one or several persons whose charter capital is divided
into shares of sizes determined by the charter. The participants
in such a company jointly and severally bear subsidiary liability
for its obligations with their property in a multiple of the value
of their contributions, which multiple is identical for all of
them and is determined by the charter of the company. In case of
bankruptcy of one of the participants, its liability for the
obligations of the company shall be distributed among the
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remaining participants in proportion to their investments, unless
another procedure for distributing liability is provided by the
charter of the company.
2. The firm name of a company with supplementary liability
must contain the name of the company and the words “company with
supplementary liability.”
3. The rules of a the present Code on the limited liability
company shall be applied to a company with supplementary
liability, unless the present Article does not provide otherwise.
6. Joint-Stock Company
Article 106. Basic Provisions on Joint-Stock Companies
1. A joint-stock company is a company whose charter capital
is divided into defined number of shares of stock.
2. Only joint stock companies have the right to issue shares
of stock.
3. The participants in a joint-stock company (the
stockholders) are not liable for its obligations and bear the risk
of losses connected with the activity of the company within the
limits of the value of the shares of stock belonging to them.
4. A joint-stock company may be founded by one person or may
consist of one person in case of obtaining by one person of all
the shares of stock of the company. Information on this should be
contained in the charter of the company, be registered, and be
published for general notice.
A joint-stock company may not have as a sole participant
another business company consisting of one person.
5. The firm name of a joint-stock company must contain its
name and also the words “open joint-stock company” or “closed
joint-stock company.”
6. The legal status of a joint-stock company and the rights
and duties of the stockholders shall be determined in accordance
with the present Code and the statute on joint-stock companies.
7. The peculiarities of creation of joint-stock companies by
the privatization of state enterprises are determined by statutes
and other legal acts on the privatization of these enterprises.
Article 107. Open Joint-Stock Companies
1. A joint-stock company whose participants can alienate the
shares of stock belonging to them without the consent of the other
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stockholders is an open joint-stock company. Such a joint-stock
company has the right to conduct open subscription to shares of
stock issued by it and to their free sale on the conditions
established by a statute and other legal acts.
2. An open joint-stock company must each year publish for
general information an annual report and a balance sheet.
Article 108. Closed Joint Stock Company
1. A joint-stock company whose shares of stock are
distributed only among its founders or other previously determined
group of persons is a closed joint-stock company. Such a company
does not have the right to conduct an open subscription to shares
of stock issued by it nor otherwise to propose them for
acquisition to an unlimited group of persons.
2. The number of participants in a closed joint-stock
company must not exceed the number established by the statute on
joint-stock companies; otherwise the company will be subject to
transformation into an open joint-stock company within a year, and
on the expiration of this period, to liquidation by judicial
procedure, if their number is not reduced to the limit established
by the statute.
3. In cases provided by the statute on joint-stock
companies, a closed joint-stock company may be obligated to
publish for general information the documents indicated in Article
107 of the Present Code.
Article 109. Transfer of Shares of a Closed Joint-Stock
Company
1. Shareholders of a closed joint stock company have a
preferential right to obtain stock, soled by other shareholders of
this company.
If none of these shareholders uses his preferential right in
the period provided by the charter of the company, the joint stock
company has the right to itself obtain these shares at a price
agreed with their owner. In case the joint-stock company refuses
to obtain the shares or there is a failure to achieve an agreement
on their price, the shares may be sold to any third party.
2. case of pledge of the shares of a closed joint stock
company and the subsequent levy of execution on them, the rules of
Paragraph 1 of the present Article are applied to the pledgee.
3. Shares of a closed joint-stock company pass to the heirs
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of a citizen or the legal successor of a legal person that was a
shareholder unless the charter of the company provides otherwise.
In case of refusal of the company to consent to transfer of
shares to heirs of a citizen or two the legal successor of a legal
person that was a shareholder, the rules of Paragraph 1 of the
present Article are applied.
Article 110. Charter of a Joint-Stock Company
The charter of a joint-stock company, in addition to the
matters indicated in Part 2 of Article 55 of the present Code,
must contain conditions on the categories of shares of stock
issued by the company, their par value and number; on the size of
the charter capital of the company; on the rights of stockholders;
on the composition and competence of the bodies of management of
the company and on the procedure for their making decisions,
including on questions, decisions on which are taken unanimously
or by a qualified majority of votes. The charter of a joint-stock
company also must contain other matters provided by the statute on
joint-stock companies.
Article 111. Charter Capital of a Joint Stock Company
1. The charter capital of a joint-stock company consists of
the par value of the shares of stock of the company obtained by
the shareholders.
2. The charter capital of the company determines the minimal
size of the property of the company guarantying the interests of
its creditors. It may not be less than the size provided by the
statute on joint-stock companies.
3. The founders of a joint-stock company are obligated
before registration of the company to fully pay in the charter
capital. At the founding of a joint stock company all its shares
of stock must be distributed among the founders.
4. It is not permitted to free a shareholder from the
obligation to pay for shares of a company including by way of
setoff of claims against the company.
5. If upon the ending of the second and each subsequent
fiscal year, the value of the free assets of the company is less
than the charter capital, the company is obligated to declare and
register by the established procedure a reduction of its charter
capital. If the value of these assets becomes less than the
minimum amount of charter capital determined by statute (Paragraph
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1 of the present Article), the company is subject to liquidation.
6. A statute or the charter of the company may establish
limitations on the number, the total par value of shares or the
maximum number of votes that one shareholder can have.
Article 112. Increase in the Charter Capital of a Joint-
Stock Company
1. A joint-stock company has the right, by decision of the
general meeting of stockholders, to increase the charter capital
by increasing the par value of shares of stock or by issuing
additional shares of stock.
2. In cases provided by the statute on joint-stock companies,
the charter of a company may establish a preferential right of
stockholders possessing simple (or common) or other voting shares
of stock to purchase additional shares of stock issued by the
company.
Article 113. Reduction of the Charter Capital of a Joint-
Stock Company
1. A joint-stock company has the right, by decision of the
general meeting of stockholders, to reduce the charter capital by
reducing the par value of shares of stock or by purchasing part of
the shares of stock for the purposes of reducing their general
number.
2. The reduction of the charter capital of a company is
permitted after notification to all of its creditors by the
procedure determined by the statute on joint-stock companies. In
such a case the creditors of the company have the right to demand
early performance or termination of the respective obligations and
compensation for their losses.
3. A reduction of the charter capital of a joint-stock
company by purchase and cancellation of part of the shares of
stock is permitted if such a possibility is provided in the
charter of the company.
4. Reduction by the stockholders of the company of charter
capital below the minimum amount set by statute (Paragraph 1 of
Article 111 of the present Code) shall entail liquidation of the
company.
Article 114. Limitations on the Issuance of Securities and
Payment of Dividends of a Joint-Stock Company
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1. A joint stock company has the right to issue preferred
shares of stock that guaranty their holders the receipt of
dividends, as a rule, in fixed percentages of the par value of a
share of stock regardless of the results of commercial activity of
the joint-stock company and also giving them a priority right
before other shareholders to receipt of part of the property left
after liquidation of the joint-stock company and other rights
provided by the conditions of the issuance of such shares.
Preferred shares of stock do not give their holders the right to
participate in the management of the affairs of the joint-stock
company unless otherwise provided by its charter.
The proportion of preferred shares in the overall amount of
the charter capital of the joint-stock company may not exceed
twenty-five percent.
2. A joint stock company has the right to issue bonds in an
amount not
exceeding the amount of the charter capital or the volume of
security provided to the company for these purposes by third
parties.
3. A joint stock company does not have the right to declare
and pay dividends if the value of the clear assets of the joint-
stock company is less than its charter capital or would become
less as the result of the payment dividends.
Article 115. Management in a Joint-Stock Company
1. The body of management of a joint-stock company is the
general meeting of its stockholders.
The following are in the exclusive competence of the general
meeting of stockholders:
1) a change in the charter of the company and the amount of
its charter capital;
2) election of members of the board of directors (or of the
supervisory board) and the auditing commission (or the auditor) of
the company and the early termination of their powers;
3) formation of the executive bodies of the company and the
early termination of their powers, unless the charter of the
company has assigned the decision of these questions to the
competence of the board of directors (or supervisory board);
4) approval of the annual reports, accounting balance sheets,
statements of profits and losses of the company and distribution
of its profit and losses;
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5) a decision on the reorganization or liquidation of the
company.
The statute on joint-stock companies may also assign the
decision of other questions to the exclusive competence of the
general meeting of stockholders.
Questions assigned by a statute to the exclusive competence
of the general meeting of stockholders may not be transferred by
them to the decision of the executive bodies of the company.
2. In a company with over fifty stockholders a board of
directors (or supervisory board) shall be created.
In case of the creation of a board of directors (or
supervisory board), the charter of the company, in accordance with
the statute on joint-stock companies, must determine its exclusive
competence. Questions assigned by the charter to the exclusive
competence of the board of directors (or the supervisory board),
may not be transferred by them to the decision of executive bodies
of the company.
3. An executive body of the company may be collegial (a board
or directorate) and/or one-individual (director or general
director). It shall conduct the current leadership of the activity
of the company and report to the board of directors (or
supervisory board) and the general meeting of stockholders.
The competence of the executive body includes the decision of
all matters not constituting the exclusive competence determined
by a statute or the charter of the company of the other bodies of
administration of the company.
By decision of the general meeting of stockholders, the
powers of the executive body of the company may be given by
contract to another commercial organization or an individual
entrepreneur (or manager).
4. The competence of the bodies of administration of a joint-
stock company and also the procedure for their adopting decisions
and acting in the name of the company shall be determined in
accordance with the present Code by the statute on joint-stock
companies and the charter of the company.
5. In the publication of the documents indicated in Article
107 of the present Code. a joint-stock company must, for
verification and confirmation of the correctness of the annual
financial report, each year involve a professional auditor not
connected by property interests with the company or its
participants.
An audit review of the activity of a joint-stock company must
be conducted at any time upon the demand of stockholders whose
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total share in the charter capital constitutes ten or more
percent.
The procedure for conducting audit reviews of the activity of
a joint-stock company is determined by a statute and the charter
of the company.
Article 116. Reorganization and Liquidation of a Joint-Stock
Company
1. A joint-stock company may be voluntarily reorganized or
liquidated by decision of the general meeting of stockholders.
Other bases and the procedure for reorganization and
liquidation of a joint-stock company shall be determined by the
present Code and other statutes.
2. A joint-stock company has the right to transform itself
into a limited liability company.
§3. Cooperatives.
Article 117. Basic Provisions on Cooperatives
1. A cooperative is a voluntary amalgamation of citizens and
legal persons on the basis of membership with the purpose of
satisfying the material and other needs of the participants, an
amalgamation formed by the combining of property share
contributions by its members.
2. The charter of a cooperative must contain, in addition to
the information indicated in Paragraph 2 of Article 55 of the
present Code, terms on the size of share contributions of members
of the cooperative; on the procedure for making share
contributions and on the liability of members of the cooperative
for violating obligations to make share contributions; the
composition and competence of bodies of administration of the
cooperative and the procedure for their taking decisions,
including on questions decisions for which are taken unanimously
or by a qualified majority of votes; on the procedure for covering
by members of cooperatives of losses incurred by it.
3. The name of a cooperative must contain an indication of
the basic purpose of its activity and also the word “cooperative.”
4. The peculiarities and legal status of individual types of
cooperatives, in particular of consumer cooperatives and
condominiums, and the rights and duties of their members shall be
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established by the present Code and other statutes.
Article 118. Property of a Cooperative
1. Property that is in the ownership of a cooperative is
divided into the shares of its members in accordance with the
charter of the cooperative.
2. A member of the cooperative is obligated to pay in his
share contribution in full before registration of the cooperative
unless otherwise provided by the charter of the cooperative.
3. The charter of a cooperative may establish that a certain
part of the property belonging to the cooperative constitutes
indivisible funds used for purposes defined by the charter.
A decision on the formation of indivisible funds shall be
taken by the members of the cooperative unanimously, unless
otherwise provided by the charter of the cooperative.
4. Members of a cooperative are obligated within two months
after the approval of the annual balance sheet to cover losses
that have occurred by additional contributions. In case of
failure to fulfill this obligation the cooperative may be
liquidated by judicial procedure upon demand of creditors.
The members of a cooperative jointly and severally bear
subsidiary liability for its obligations within the limits of the
uncontributed part of the supplementary contribution of each of
the members of the cooperative.
Article 119. Management in the Cooperative
1. The highest body of management of a cooperative is the
general meeting of its members.
In a cooperative with more than fifty members, a supervisory
board may be formed, which shall exercise supervision of the
activity of the executive bodies of the cooperative. Members of
the supervisory board do not have the right to act in the name of
the cooperative.
The executive bodies of the cooperative are the board and/or
its chairman. They shall conduct the current administration of the
activity of the cooperative and report to the supervisory board
and the general meeting of members of the cooperative.
Only members of the cooperative may be members of the
supervision board, of the administration of the cooperative, or
chairman of the cooperative. A member of the cooperative may not
simultaneously be a member of the supervisory board and a member
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of the administration or chairman of the cooperative.
2. The competence of the bodies of administration of the
cooperative and the procedure for their adopting decisions is
determined by a statute and the charter of the cooperative.
3. The following are in the exclusive competence of the
general meeting of members of the cooperative:
1) changing the charter of the cooperative;
2) forming a supervisory board and terminating the powers of
its members and also forming executive bodies of the cooperative
and terminating their powers, unless this right has been
transferred by the charter to supervisory board;
3) accepting and excluding members of the cooperative;
4) approving annual reports and accounting balance sheets of
the cooperative and distributing its profits and losses;
5) deciding on the reorganization and liquidation of the
cooperative.
Statutes on cooperatives and the charter of a cooperative
also may assign the decision of other questions to the exclusive
competence of the general meeting.
Questions assigned to the exclusive competence of the general
meeting or the supervisory council of the cooperative may not be
transferred by them for decision by the executive bodies of the
cooperative.
4. A member of the cooperative has one vote in the adoption
of a decision by the general meeting.
Article 120. Termination of Membership in a Cooperative and
Transfer of a Share
1. A member of a cooperative has the right to leave the
cooperative. In this case he must be paid the value of his share
or given property corresponding to his share and also other
payments must be made that are provided by the charter of the
cooperative.
Payment of the value of a share or giving of other property
to an exiting member of the cooperative shall be made at the end
of the fiscal year and upon the approval of the accounting balance
of the cooperative, unless otherwise provided by the charter of
the cooperative.
2. A member of the cooperative may be excluded from the
cooperative by decision of the general meeting in case of
nonfulfillment or improper fulfillment of the obligations placed
upon it by the charter of the cooperative, and also in other cases
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provided by a statute or the charter of the cooperative.
A member of a supervisory board or executive body may not be
a member of an analogous cooperative.
A member of a cooperative who is excluded from it has the
right to receive his share and the other payments provided by the
charter of the cooperative in accordance with Paragraph 1 of the
present Article.
3. A member of a cooperative has the right to transfer his
share or part of it to another member of the cooperative, unless
otherwise provided by a statute and by the charter of the
cooperative.
The transfer of a share (or part of it) to a citizen who is
not a member of the cooperative is permitted only with the consent
of the cooperative. In this case other members of the cooperative
enjoy a priority right of purchase of such a share (or part of
it). If a member of the cooperative does not use his priority
right during the period provided by the charter of the
cooperative, the share may be alienated to a third party.
4. In case of the death of a member of the cooperative, his
heirs may be accepted as members of the cooperative unless
otherwise provided by the charter of the cooperative. In the
contrary case the cooperative shall pay the heirs the value of the
share of the deceased member of the cooperative.
5. The levy of execution on a share of a member of a
cooperative for the personal debts of the member of the
cooperative is permitted only in case of insufficiency of his
other property to cover such debts by the procedure provided by a
statute and the charter of the cooperative. Execution for the
debts of a member of a cooperative may not be levied on the
indivisible funds of the cooperative.
Article 121. Reorganization and Liquidation of Cooperatives
A cooperative may be voluntarily reorganized or liquidated by
decision of the general meeting of its members.
Other grounds for and the procedure for reorganization and
liquidation of a cooperative are established by the present Code
and other statutes.
§4. Noncommercial Organizations
1. Societal Amalgamations
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Article 122. Basic Provisions on Societal Amalgamations
1. Societal amalgamations are voluntary amalgamations of
citizens who have joined in the manner provided by a statute on
the basis of communality of their interests to satisfy spiritual
or other non-material needs.
2. Property transferred to a societal amalgamation by its
founders (or participants) is the property of the societal
amalgamation. A societal amalgamation shall use this property for
the purposes defined in its charter.
3. Participants in (or members of) societal amalgamations do
not retain the right to property transferred by them to these
organizations in ownership, nor to membership contributions. They
are not liable for the obligations of societal amalgamations in
which they participate as members and these amalgamations are not
liable for the obligations of their members.
4. In case of liquidation of a societal amalgamation, its
property shall be put to the purposes indicated in the charter of
the societal amalgamation and if this is impossible, to the state
fisc.
5. The peculiarities and legal status of individual types of
societal amalgamations are established by the present Code and
other statutes.
2. Funds
Article 123. Basic Provisions on Funds
1. A fund is a non-commercial organization not having
membership, founded by citizens and/or legal persons on the basis
of voluntary property contributions, pursuing social, charitable,
cultural, educational, and other socially-useful purposes.
2. Property transferred to the fund by its founders (or
founder) is in the ownership of the fund. A fund shall use
property for the purposes defined in its charter.
3. A fund is obligated to publish reports annually on the
use of its property.
4. The founders are not responsible for the obligations of a
fund created by them and the fund is not responsible for the
obligations of its founders.
5. The procedure for managing a fund and the procedure for
forming its executive bodies are determined by its charter
approved by the founders.
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6. The charter of a fund, in addition to the matters
indicated in Paragraph 2 of Article 55 of the present Code, must
contain: the name of the fund, including the word “fund,”
information on the purposes of the fund; indication of the
executive bodies of the fund, including the trusteeship board
exercising supervision over the activity of the fund, on the
procedure for appointing official persons of the fund and
discharging them, on the procedure for disposition of the property
of the fund in case of its liquidation.
7. The peculiarities and legal status of individual types of
funds, in particular of charitable organizations are established
by the present Code and other statutes.
Article 124. Amendment of the Charter and Liquidation of the
Fund
1. The charter of the fund may be changed by the executive
bodies of the fund, if the charter provides the possibility of
changing it by such a procedure.
If the preservation of the charter in unchanged form entails
consequences that would have been impossible to foresee at the
founding of the fund, and the possibility of changing the charter
is not provided in it, or the charter is not changed by the
authorized persons, the right of making changes shall belong to a
court upon request of executive bodies of the fund or of the body
authorized by the charter of the fund to exercise supervision of
its activity.
2. A decision on the liquidation of a fund may be taken only
by a court upon request of interested persons.
A fund may be liquidated:
1) if the property of the fund is insufficient for conducting
its purposes and an expectation of receiving the necessary funds
is unrealistic;
2) if the purposes of the fund may not be attained, and the
necessary changes of purposes of the fund may not be made;
3) in case of deviation of the fund in its activities from
the purposes provided in the charter;
4) in other cases provided by a statute.
3. In case of liquidation of the fund, its property shall be
put to the purposes indicated in the charter of the fund and, if
this is impossible, to the state fisc.
3. Unions of Legal Persons
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Article 125. Basic Provisions on Unions of Legal Persons
1. Commercial organizations for the purpose of coordination
of their entrepreneurial activity and also the representation and
protection of common property interests may create unions.
If by decision of the participants, the implementation of
entrepreneurial activity is assigned to a union, the union shall
be transformed into a business partnership or company by the
procedure provided by the present Code or it may create a business
company for the conduct of the entrepreneurial activity or
participate in such a company.
2. Non-commercial organizations, for the purpose of
coordination of their activity and also for representation and
protection of their common interests, may create unions.
An association (or union) of non-commercial organizations is
a non-commercial organization.
3. Members of an a union retain their independence and the
rights of a legal person.
4. Property transferred to a union by its founders (or
participants) is in the ownership of the union. The union shall
use this property for the purposes indicated in the charter.
5. A union is not liable for the obligations of its members.
Members of a union bear subsidiary liability for its obligations
in the amount and by the procedure provided by the charter.
6. The name of a union must contain an indication of the
basic object of activity of its members and also the word “union.”
7. In case of liquidation of a union, its property shall be
put to the purposes indicated in the charter of the union and, if
this is impossible, to the state fisc.
8. The peculiarities and legal status of individual types of
unions are established by the present Code and other statutes.
Article 126. Charter of a Union
The charter of a union must contain, in addition to the
information indicated in Paragraph 2 of Article 55 of the present
Code, terms on the size, makeup, and procedure for making
contributions by participants in the union and their liability for
violation of the obligation for making contributions, on the
composition and competence of the bodies of administration of the
union and the procedure for their making decisions, including on
questions decision on which must be adopted unanimously or by a
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qualified majority of votes by members of the or union, and on the
procedure for distribution of property remaining after the
liquidation of a union.
Article 127. Rights and Duties of Members in a Union
1. Members of a union have the right to use its services free
of charge unless otherwise provided by its charter.
2. A member of a union has the right at its discretion to
exit from the association (or union) at the end of the financial
year. In this case, it bears subsidiary liability for obligations
of the union proportional to its contribution for one year from
the time of exit, unless a different period is provided by the
charter of the union.
A member of a union may be excluded from it by decision of
the remaining participants in the cases and by the procedure
established by the charter of the union. The rules applicable to
exit from a union shall be applied with respect to the liability
of an excluded member of the union.
3. With the consent of members of the union, a new
participant can enter the union. Entry into a union of a new
member may be conditioned on its subsidiary liability for the
obligations of the union that arose before its entry.
Chapter 6. Participation of the Republic of Armenia and
Communes in Relations Regulated by Civil Legislation and Other
Legal Acts
Article 128. The Republic of Armenia and Communes are
Subjects of Civil Law
1. The Republic of Armenia and communes enter into relations
regulated by civil legislation on equal principles with other
participants in these relations–citizens and legal persons.
2. The norms determining the participation of legal persons
in relations regulated by civil legislation and other legal acts
shall be applied to the subjects of civil law indicated in
Paragraph 1 of the present Article, unless otherwise follows from
a statute or the peculiarities of the given subjects.
Article 129. The Procedure for Participation by the Republic
of Armenia and Communes in Relations Regulated by Civil
Legislation and Other Legal Acts
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1. State bodies, within the limits of their competence, may,
in the name of the Republic of Armenia, obtain and exercise
property and personal non-property rights and obligations and also
appear in court.
2. Bodies of local self-government, within the limits of
their competence established by the acts determining the status of
these bodies, may, in the name of communes, by their actions,
obtain and exercise the rights and duties indicated in Paragraph 1
of the present Article.
3. In the cases and by the procedure provided by a statute,
edicts of the President of the Republic of Armenia, and decrees of
the Government of the Republic of Armenia, legal acts of communes,
and also legal persons and citizens may act by their special
authorization and in their names.
Article 130. Liability for Obligations of the Republic of
Armenia or of a Commune
1. The Republic of Armenia or a commune shall be liable for
its obligations with property belonging to it by right of
ownership.
2. Levy of execution on land and other natural resources
that are under state ownership or the ownership of a commune is
permitted in cases provided by a statute.
Article 131. Peculiarities of the Liability of the Republic
of Armenia in Relations Regulated by Civil Legislation and Other
Legal Acts
The peculiarities of liability of the Republic of Armenia in
relations regulated by civil legislation and other legal acts with
the participation of foreign legal persons, citizens, or states
shall be determined by the statute.
DIVISION 3. OBJECTS OF CIVIL LAW RIGHTS
Chapter 7. General Provisions
Article 132. Types of Objects of Civil Law Rights
Objects of civil law rights include:
1) property, including money, securities and commercial
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paper, and property rights;
2) work and services;
3) information;
4) results of intellectual activity, including exclusive
rights to them (intellectual property);
5) non-material values.
Article 133. Transferability of Objects of Civil Law Rights
1. Objects of civil law rights may be freely alienated or
transfer from one person to another by the procedure for universal
legal succession (inheritance, reorganization of a legal person)
or in another manner unless they are removed from circulation or a
limited in circulation.
2. The types of objects of civil law rights whose presence
in circulation is not permitted (objects removed from
circulation), must be directly indicated in a statute.
3. Types of objects of civil law rights that may belong only
to defined participants in circulation or whose presence in
circulation is permitted by special permission (objects with
limited circulation), shall be determined by a procedure
established by statute.
Article. Immovable and Movable Property
1. Immovable property (immovables) are land parcels, subsoil
parcels, separate water objects, forests, perennial plantings,
buildings, structures, and other property firmly connected with
land, i.e., objects whose movement without disproportionate damage
to their use is impossible.
Property not classified as immovables is movable property.
Movable property is property not classified as immovables.
Article 135. State Registration of Rights to Property
1. The right of ownership and other property rights to
immovable property, limitations on this right, their arising,
transfer, and termination are subject to state registration.
Subject to registration are: the right of ownership, the right of
use, mortgage, servitudes, and also other rights to immovable
property in cases provided by the present Code and other statutes.
2. Rights to movable property are subject to state
registration only in cases provided by statute.
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3. The procedure for state registration of rights to
property and the bases for refusal of registration shall be
established by the statute on registration of rights to property.
Article 136. Divisible and Indivisible Property
1. Property may be divisible or indivisible.
Property is indivisible if it may not be divided without
change in its purpose or is not subject to division by force of a
requirement of statute.
2. The procedure for separation of a share in the right of
ownership of to indivisible property is determined by the rules of
Article 197 of the present Code.
Article 137. Complex Property
1. If property of different types form one whole, that
provides for its use for a common purpose, it shall be considered
as one property (a complex property).
2. The effect of a transaction concluded with respect to a
complex property extends to all its constituent parts unless a
contract has provided otherwise.
Article 138. Main Property and Appurtenance
Property used for serving another (main) property and
connected with it by common purpose (appurtenance), follows the
fate of the main property, unless a contract establishes
otherwise.
Article 139. Individually Defined Property and Property
Determined by Generic Characteristics
1. Individually defined property is property is property
separated from other property by characteristics belonging only to
it. Individually defined property is nonsubstitutable.
2. Property defined by generic characteristics is property
having characteristics belonging to all property of the same type
and determined by number, weight, and measure. Property
determined by generic characteristics is substitutable.
Article 140. Intellectual Property
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In cases and by the procedure established by the present Code
and other statutes, an exclusive right (intellectual property) of
a citizen or legal person is recognized to objectively expressed
results of intellectual activity and to means equated to them of
individualization of a legal person, of individualization of
production, of work or service performed (name, trade mark,
service mark, etc.).
Article 141. Information Constituting an Employment,
Commercial, or Banking Secret
1. Information constitutes an employment, commercial, or
banking secret when the information has an actual or potential
commercial value by virtue of its being unknown to third persons,
there is not free access to it on a legal basis, and the holder of
the information takes measures for the protection of its
confidentiality.
2. Information that cannot constitute an employment,
commercial, or banking secret is determined by statute and other
legal acts.
3. Information constituting an employment, commercial, or
banking secret is protected by the means provided by the present
Code and other statutes.
4. Persons who by illegal methods have obtained information
that constitutes a an employment, commercial, or bank secret, are
obligated to compensate to compensate for the harm caused. The
same obligation is imposed on contract partnres who have divulged
an employment, commercial, or bank secret in violation of a civil
law or labor contract.
Persons who by illegal means have received information that
constitutes an employment or commercial secret are obligated to
compensate for losses caused. The same obligation is imposed on
employees who have revealed an employment or commercial secret in
violation of a labor contract and on contract partners who have
done this in violation of a civil law contract.
Article 142. Money (Currency)
1. The monetary unit in the republic of Armenia is the dram.
2. The dram is the legal means of payment obligatory for
acceptance at face value on the whole territory of the Republic of
Armenia.
3. Payments on the territory of the Republic of Armenia
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shall be made by way of cash and non-cash settlements.
4. The cases, procedure and conditions for use of foreign
currency on the territory of the Republic of Armenia shall be
determined by statute.
Article 143. Currency Valuables
The types of property that are recognized as currency
valuables and the procedure for making transactions with them are
determined by the statute on currency regulation and currency
control.
The right of ownership to currency valuables is protected in
the Republic of Armenia on general bases.
Article 144. Fruits, Products, and Incomes
Receipts obtained as the result of use of property (fruits,
production, incomes) belong to the person using this property on a
lawful basis unless otherwise provided by statute, other legal
acts, or a contact on the use of this property.
Article 145. Animals
The general rules on property are applied to animals unless a
statute or other legal act has established otherwise.
Chapter 8. Commercial Paper and Securities
Article 146. Commercial Paper and Securities
1. Commercial paper and securities are documents certifying,
with the observation of the established form and obligatory
requisites, property rights, the exercise or transfer of which are
possible only upon their presentation.
With the transfer of commercial paper or securities all
rights certified by it pass.
2. In the cases and by the procedure provided by a statute,
for exercise or transfer of the rights certified by commercial
paper or securities, proof of their confirmation in a special
register (ordinary or computerized) is sufficient.
Article 147. Requirements for Commercial Paper and
Securities
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1. The types of rights that are certified by commercial paper
and securities, the obligatory requisites for commercial papers
and securities, the requirements for the form of commercial paper
and securities, and other necessary requirements shall be
determined by the statute on commercial paper and securities or by
a procedure established by it.
2. The absence of the obligatory requisites of a commercial
paper or security or the failure of a commercial paper or security
to correspond to the form established for it shall entail its
invalidity.
Article 148. Subjects of the Rights Certified by Commercial
Paper and Securities
1. The rights evidenced by a commercial paper or security may
belong:
1) to the bearer of the commercial paper or security (a
bearer commercial paper or security);
2) to a person named in the commercial paper or security
(named commercial paper or security);
3) to a person named in the commercial paper or security who
may itself exercise these rights or may designate by his
instruction (or order) another authorized person (an order
commercial paper or security).
2. A statute may exclude the possibility of the issuance of
commercial paper or securities of a specific type as bearer,
named, or order..
Article 149. Transfer of Rights Under Commercial Paper and
Securities
1. For the transfer to another person of the rights certified
by bearer commercial paper or securities, handing the commercial
paper or securities to this person is sufficient.
2. The rights certified by named commercial paper or
securities may be transferred by the procedure established for
assignment of claims (cession). In accordance with Article 405 of
the present Code, the person who has transferred a right under the
commercial paper or securities bears liability for the invalidity
of the respective claim, but not for its performance.
3. Rights under order commercial paper or securities may be
transferred by making upon this paper or security a transfer
notation (an indorsement). A person transferring rights under an
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order commercial paper or securities (an indorser) bears liability
not only for the existence of the right but for its exercise.
An indorsement made on commercial paper or a security
transfers all rights certified by the commercial paper or security
to the person to whom or to whose order the rights on the
commercial paper or the security are transferred (the indorsee).
An indorsement may be blank (without an indication of the person
to whom performance should be made) or order (with an indication
of the person to whom or to the order of whom performance should
be made).
An indorsement may be limited only to an authorization to
exercise the rights certified by the commercial paper or security
without the transfer of these rights to the indorsee (an
authorization indorsement). In this case the indorsee shall act as
a representative.
An indorsement made on a commercial paper and securities
transfers all rights evidenced by the commercial paper and
securities to the person or to whose order the rights under the
commercial paper and securities are transferred (the indorsee).
An indorsement may be blank (without an indication of the person
for whom performance must be made) or order (with an indication of
the person for whom or at whose order, performance must be made).
An indorsement may be limited only to an authorization to
exercise the rights evidenced by the commercial paper and
securities without transfer of these rights to the indorsee (an
agency indorsement). In this case the indorsee acts as
representative.
Article 150. Performance on Commercial Paper and Securities
1. A person who has made a commercial paper or security and
all persons who have indorsed it are liable jointly and severally
to its lawful holder. In case of satisfaction of a claim of the
lawful holder of the commercial paper or security by it by one or
several persons from among those who were obligated on the
commercial paper or security, they obtain the right of claim back
(subrogation) against the remaining persons who are obligated
under the commercial paper or security.
2. A refusal to perform an obligation certified by a
commercial paper or security with reliance on the absence of a
basis of the obligation or its invalidity is not permitted.
A holder of commercial paper or security who has discovered a
counterfeiting or forgery of the commercial paper or security
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shall have the right to make, to the person who transferred the
paper or security to it, a demand for proper performance of the
obligation certified by the commercial paper or security and for
compensation for losses.
Article 151. Reinstatement of a Commercial Paper or a
Security
Reinstatement of rights under lost commercial paper and
securities shall be made by a court in the manner provided by the
Civil Procedure Code of the Republic of Armenia.
Article 152. Undocumented Commercial Paper and Securities
1. In cases provided by a statute or by a procedure
established by a statute, a person who has received a special
license may make a fixation of the rights confirmed by a named or
order commercial paper or security, including in undocumented form
(with the aid of means of computer technology, etc.). The rules
established for commercial paper and securities shall be applied
to such a form of fixation of rights unless otherwise follows from
the peculiarities of fixation.
A person who has conducted the fixation of a right in an
undocumented form is obligated upon demand of the holder of the
right to issue to it a document evidencing the protected right.
The rights certified by means of such fixation, the procedure
for official fixation of rights and of rightholders, the procedure
for documentary confirmation of records and the procedure for
making operations with undocumented commercial paper and
securities shall be determined by a statute or by a procedure
established by a statute.
2. Operations with undocumented commercial paper and
securities may be made only by application to the person who makes
recordings of rights. Transfer, granting, and limitation of rights
must be fixed officially by this person, who shall bear liability
for the safekeeping of official records, ensuring their
confidentiality, providing correct data on such records, and
making of official records of operations conducted.
§2. Types of Commercial Paper and Securities
Article 153. General Provisions
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1. Commercial paper and securities includes: a bond, check,
simple bill of exchange, transfer bill of exchange, stock, bill of
landing, bank record (bank book or bank certificate of deposit),
double warehouse receipt, simple warehouse receipt, and other
documents that the statutes on commercial paper and securities
have classified as security papers.
2. A bond and a share of stock are investment securities.
3. A check, a simple bill of exchange, and a transferable
bill of exchange are payment commercial papers.
4. A bill of lading, a double warehouse receipt, and a
single warehouse receipt are title commercial paper.
Article 154. Bond
A bond is a security evidencing the right of its holder to
receive from the person who has issued the obligation at the time
provided in it the face value of the obligation or other property
equivalent. A bond grants its holder in addition the right to
receive interest on the face value of the bond or other property
rights.
Bonds may be bearer or named.
Article 155. Check
A check is a commercial paper or security containing an
unconditional written instruction of the check drawer to the bank
to pay the holder of the check the amount indicated in it.
Article 156. Bill of Exchange
A bill of exchange is a commercial paper evidencing the
unconditional obligation of the bill of exchange maker (a simple
bill of exchange) or other payor indicated in the bill of exchange
(a transfer bill of exchange) to pay upon the expiration of the
time indicated by the bill of exchange an amount to the holder of
the bill of exchange (the bill of exchange holder).
Article 159. Stock
1. Stock is a security evidencing the right of its possessor
(shareholder) to receipt of part of the profit of a joint-stock
company in the form of dividends, to participation in the
management of the business of the joint-stock company, and to part
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of the property remaining on its liquidation.
Stock may be bearer or named, freely circulating or with a
limited range of circulation and common or preferred.
Article 158. Bill of Lading
A bill of lading is document for disposition of goods,
evidencing the right of its holder to dispose of the freight
listed in the bill of lading and to receive the freight after the
completion of transport.
A bill of lading may be bearer, order, or named.
Article 159. Bank Record
A bank record (bank book or bank certificate) is a commercial
paper evidencing the amount of a deposit and the right of the
depositor to receipt on the expiration of a period the amount of
the deposit and interest on at the bank or in any branch of this
bank.
A bank record may be bearer or named.
Article 160. Double Warehouse Receipt
A double warehouse receipt is an order commercial paper
evidencing acceptance by a goods warehouse for storage.
A double warehouse receipt consists of two parts–a warehouse
receipt and a pledge certificate (warrant), each of which are
commercial papers.
Article 161. Simple Warehouse Receipt
A simple warehouse receipt is a bearer commercial paper
evidencing acceptance of goods for storage.
Chapter 9. Nonmaterial Values
Article 162. Definition of Nonmaterial Values
1. Life and health, dignity of personality, personal
inviolability, honor and good name, business reputation,
inviolability of private life, a secret of personal and family
life, the right of freedom of movement, of choice of place of
abode and residence, right to one’s name, right of authorship,
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other personal nonproperty rights, and other nonmaterial values
belonging to a citizen from birth or by virtue of a statute are
inalienable and nontransferable in any other manner. In cases and
by the procedure provided by a statute, personal nonproperty
rights and other nonmaterial values belonging to a decedent may be
exercised and protected by other persons including heirs of the
rightholder.
2. Nonmaterial values shall be protected in accordance with
the present Code and other statutes in cases and by the procedure
provided by them and also in those cases and within those limits
in which the use of methods of protection of civil law rights
(Article 14) follows from the nature of the violated nonmaterial
right and the nature of the consequences of this violation.
DIVISION 4. THE RIGHT OF OWNERSHIP AND OTHER PROPERTY RIGHTS
Chapter 10. General Provisions
Article 163. Definition and Content of the Right of
Ownership
1. The right of ownership is the right recognized and
protected by statute and other legal acts of a subject at its
discretion to possess, use, and dispose of property belonging to
it.
The right of possession is the legally supported possibility
to exercise actual control of the property.
The right of use is the legally supported possibility to
extract from the property its natural useful characteristics and
to also use the benefits from it. The benefits may occur in the
form of income, growth, fruits, offspring, and in other forms.
The right of disposition is the legally supported possibility
of determining the legal fate of the property.
2. The owner has the right at his discretion to make in
connection with the property belonging to it any actions not
contradicting a statute not violating the rules and interests
protected by statute of other persons, including alienating his
property to the ownership of other persons, transferring it, the
rights of possession, use, and disposition of the property, to
give the property in pledge or to dispose of it in another way.
4. The owner may transfer its property in entrusted
management to another person (an entrusted manager). The transfer
of property in entrusted management does not entail the transfer
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of the right of ownership to the entrusted manager, who is
obligated to conduct the entrusted management of the property in
the interests of the owner or of a third person named by the
owner.
Article 164. Burden of Maintaining Property
The owner shall bear the burden of maintaining property
belonging to it unless otherwise provided by a statute or
contract.
Article 165. Risk of Accidental Loss of Property
The risk of accidental loss of or accidental harm to property
shall be borne by its owner unless otherwise provided by a statute
or contract.
Article 166. Subjects of the Right of Ownership
1. Property may be in the ownership of citizens, legal
persons, and also of the Republic of Armenia and or communes.
2. The peculiarities of obtaining and terminating the right
of ownership to property the possession, use, and disposition of
it, depending upon whether the property is in the ownership of a
citizen or legal person, in the ownership of the Republic of
Armenia or communes may be established only by statute.
The types of property that may only be in state ownership or
in the ownership of communes are defined by statute.
3. The rights of all owners are defended in the same manner.
Article 167. The Right of Ownership by Citizens and Legal
Persons
1. Any property may be owned by citizens and legal persons,
with the exception of individual types of property that, in
accordance with a statute, may not belong to citizens or legal
persons.
2. The quantity and value of property that is owned by
citizens and legal persons is not limited, except when such
limitations are established by a statute for the purposes provided
by Paragraph 2 of Article 3 of the present Code.
3. Commercial and noncommercial organizations are the owners
of property transferred to them as investments or contributions of
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their founders (or participants or members) and also of property
obtained by these legal persons on other bases.
Article 168. The Right of State Ownership
1. Property belonging by right of ownership to the Republic
of Armenia is in state ownership.
2. Land and other natural resources that are not in the
ownership of citizens, legal persons, or a commune are in state
ownership.
3. The bodies and persons indicated in Article 129 of the
present Code exercise the rights of the owner in the name of the
Republic of Armenia.
4. The funds of the state fisc are in the ownership of the
Republic of Armenia.
Article 169. The Right of Ownership by Communes
1. Property belonging by right of ownership to city, rural,
and district communes is in ownership by communes.
2. The bodies and persons indicated in Article 129 of the
present Code exercise the rights of an owner in the name of
communes.
3. The funds of the local budget are in ownership by the
commune.
Article 170. Property Rights of Persons who are Not Owners
1. Property rights, alongside the right of ownership are:
1) the right of pledge,
2) the right of use of property,
3) servitudes.
2. Property rights may belong to persons who are not the
owners of this property.
3. The transfer of the right of ownership to property to
another person shall not be a basis for the termination of other
property rights to this property.
4. Property rights of a person who is not an owner shall be
protected in the manner provided by Article 278 of the present
Code from violation of them by any person, including the owner.
Article 171. Privatization of State Property
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The state may transfer property that is in state ownership to
ownership by citizens and legal persons by the procedure provided
by the statutes on the privatization of state property.
Chapter 11. Acquisition of the Right of Ownership
Article 172. Bases for Obtaining the Right of Ownership
1. The right of ownership to new property made or created by
a person for itself with an observance of a statute and other
legal acts is obtained by this person.
The right of ownership to fruits, products, and incomes
received as the result of the use of property may be obtained on
the bases provided by Article 144 of the present Code.
2. The right of ownership to property that has an owner may
be obtained by another person on the basis of a contract of
purchase and sale, of barter, of gift, or on the basis of another
transaction for the alienation of this property.
3. In case of the death of a citizen the right of ownership
to property belonging to him shall pass by inheritance to other
persons in accordance with a will or by a statute.
4. In case of reorganization of a legal person the right of
ownership to property belonging to it shall pass to the legal
person (or legal persons) that is the legal successor of the
reorganized legal person.
5. In cases and by the procedure provided by the present
Code, a person may obtain the right of ownership to property that
does not have an owner, to property, the owner of which is
unknown, or to property that the owner has abandoned or to which
he has lost the right of ownership on other grounds provided by a
statute.
6. A member of a housing, vacation-home, garage, or other
cooperative, and other persons having the right to share
accumulation, who have fully made their share contribution for an
apartment, vacation-home, garage, or other structure, provided to
these persons by the cooperative obtain the right of ownership to
this property.
Article 173. Origin of the Right of Ownership to Newly
Created Immovable Property
The right of ownership to newly created immovable property
subject to state registration shall arise from the time of such
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registration.
Article 174. Processing
1. Unless otherwise provided by contract, the right of
ownership to new movable property prepared by a person by
processing materials not belonging to it shall be obtained by the
owner of the materials. If the value of the processing
substantially exceeds the value of the materials the right of
ownership to the new property shall be obtained by the person who,
acting in good faith, conducted the processing for itself.
2. Unless otherwise provided by contract, the owner of
materials who has obtained the right of ownership to property
prepared from them is obligated to compensate for the value of the
processing to the person who conducted it and in the case of
obtaining the right of ownership to new property by this person,
the latter is obligated to compensate the owner of the materials
for their value.
3. The owner of materials who has lost them as the result of
the bad faith actions of the person who conducted the processing
has the right to demand the transfer of the new property to his
ownership and compensation for the losses caused to it.
Article 175. Bringing of Property Generally Accessible for
Gathering Into Ownership
In cases when, in accordance with a statute, general
permission given by the owner, or in accordance with local custom
in forests, bodies of water, or on other territory the gathering
of fruit, the catching of fish, the capture of animals or the
gathering of other generally accessible property is permitted, the
right of ownership to the respective property shall be obtained by
the person who conducted their gathering or capture.
Article 176. Time of Origin of the Right of Ownership for a
Recipient of Property Under a Contract.
1. The right of ownership for a recipient of property by
contract arises from the time of its transfer unless otherwise
provided by statute or contract.
2. In cases when the right to property is subject to state
registration, the right of ownership for the recipient party
arises from the time of its registration.
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Article 177. Transfer of Property
1. Transfer is the handing over of property to the recipient
and also submission to a carrier for sending to the recipient or
submission to a courier organization for transfer to the recipient
of property alienated without the obligation of delivery.
Property shall be considered handed over to the recipient
from the time of its actually reaching the possession of the
recipient or of a person designated by it.
2. If at the time of making of a contract for the alienation
of a property, the property already was in the possession of the
recipient, the property shall be recognized as transferred to it
from this time.
3. The transfer of a bill of lading or other goods-disposing
document for the property shall be equated to the transfer of the
property.
Article 178. Ownerless Property
1. Property is ownerless where it does not have an owner or
where its owner is unknown or where its owner has renounced the
right of ownership for it.
2. The right of ownership to ownerless movable property may
be obtained according to the rules of Articles 179-186 of the
present Code.
3. The right of ownership to ownerless immovable property
may be obtained by virtue of acquisitive prescription (Article
187).
4. The bases and procedure for recognition of the right of
ownership to ownerless property is established by the Civil
Procedure Code of the Republic of Armenia.
Article 179. Movable Property that the Owner Has Renounced
1. Movable property discarded by the owner or otherwise left
by it with the purpose of renouncing the right of ownership to it
(discarded property) may be brought by other persons into their
ownership in the manner provided by Paragraph 2 of the present
Article.
2. A person, in the whose ownership, possession, or use there
is a land parcel, body of water, or other object, where there is
an abandoned property whose value is clearly less than an amount
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corresponding to fifty times the minimum monthly wage or discarded
scrap metal, defective products, sunken logs from lumber floating,
slag and waste formed in the obtaining of useful minerals,
production scrap and other scrap shall have the right to bring
this property into his ownership by starting to use them or taking
other actions evidencing the bringing of the property into
ownership.
Other discarded property enters into ownership by the person
who has gone into possession of them if, on request by this
person, they are recognized as ownerless by a court.
Article 183. Found Property
1. The finder of lost property is obligated immediately to
inform the person who lost it, or the owner of the property, or
someone else of persons known to him that have the right to
receive it and to return the found property. If property is found
in premises or on a means of transportation, it is subject to
submission to the owner or possessor of the premises or means of
transport. In this case the person to whom the property found is
given shall obtain the rights and bears the duties of the person
who found the property.
2. If a person who has the right to demand the return of a
found property or the place of its whereabouts is unknown, the
finder of the property is obligated to report about the found
property to the police or to a body of local self-government.
3. The finder of a property has the right to keep it at the
finder’s own place or to submit it for storage at the police, a
body of local self-government, or to a person indicated by them.
Highly perishable property, or a property for which the costs
of storage are incommensurately high in comparison with its value
may be sold by the person who found the property, with the receipt
of written evidence confirming the amount received. Money received
from the sale of a found property shall be subject to return to
the person authorized to receive the property.
4. The finder of property shall be liable for loss of or harm
to it only in the case of intent or gross negligence and within
the limits of the value of the property.
Article 181. Obtaining the Right of Ownership to Found
Property
1. If in the course of six months from the time of reporting
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a found property to the police or to a body of local self-
government (Paragraph 2 of Article 180), the person authorized to
receive the found property is not established or does not himself
report its right to the found property to the person who found it
nor to the police nor to the body of local self-government, the
finder of the property obtains the right of ownership to it.
2. If the finder of property declines to take the found
property in ownership it goes into ownership by the commune.
Article 182. Compensation for Expenses Connected With a
Found Property and Reward to the Finder of Property
1. One who has found and returned property to a person
authorized to receive it has the right to obtain from this person,
and in cases of transfer of the property to ownership by a
commune, from the respective body of local self-government
compensation for necessary expenses connected with the storage,
submission, or sale of the property and also expenses for finding
the person authorized to receive the property.
2. The finder of the property has the right to demand from
the person authorized to receive the property a reward for finding
the property in an amount of up to twenty percent of the cost of
the property. If the found property is of value only for the
person authorized to receive it, the amount of the reward shall be
determined by agreement with this person, and in case of failure
to reach agreement, by a court. In the case when a person having
the right to demand the return of found property has publicly
promised a reward for finding it, compensation shall be paid on
the conditions of the public announced reward.
The finder of the has the right until payment of compensation
to hold the found property.
3. The right to compensation does not arise, if the finder
of the property has not declared about the found property or has
tried to hide it.
Article 183. Unsupervised Animals
1. A person who has caught unsupervised or straying livestock
or other unsupervised domestic animals is obligated to return them
to the owner, and if the owner of the animals or the place of its
location is unknown then not later than three days from the time
of catching to report about the found animals to the police or to
a body of local self-government, which will take measures to
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search for the owner.
2. During the time of search for the owner of the animals,
they may be left with the person who caught them, at his place for
maintenance and use or they may be submitted for maintenance and
use to another person. On the request of the person who has caught
unsupervised animals, the finding of a person having the necessary
conditions for their maintenance and the transfer to him of the
animals may be conducted by the police or a body of local self-
government.
3. The person who has caught unsupervised animals and the
person to whom they have been given for maintenance or for use are
obligated to keep them properly and in case of fault are liable
for the death of or harm to the animals within the limit of their
value.
Article 184. Obtaining the Right of Ownership to
Unsupervised Animals
1. If in the course of six months from the day of report of
catching unsupervised domestic animals their owner has not been
found or has not itself declared its right to them, the person who
has the animals for maintenance and for use shall obtain the right
of ownership to them.
In case of refusal by this person to obtain the animals
maintained at its place in ownership, they shall go into ownership
by the commune and shall be used in the manner determined by the
body of local self-government.
2. In case of appearance of the previous owner of the animals
after their transfer to ownership to another person, the previous
owner has the right, in the presence of circumstances evidencing
the continuation of attraction to him on the part of these animals
or of cruel or other improper treatment of them by the new owner,
to demand their return on conditions agreed with the new owner
and, in case of nonachievement of agreement, by a court.
Article 185. Compensation for Expenditures for Maintaining
Unsupervised Animals and Reward for Them
In case of return of unsupervised animals to the owner, the
person at whose place they were located for maintenance has the
right to compensation by their owner for necessary expenditures
connected with the maintenance of the animals, less the benefit
extracted from the use of them.
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The person who has caught unsupervised domestic animals has
the right to a reward in accordance with Paragraph 2 of Article
182 of the present Code.
Article 186. Treasure Trove
1. Treasure trove, i.e. money or valuable objects buried in
the ground or in other property or hidden in another manner whose
owner cannot be established or by virtue of a statute has lost the
right of ownership to them, shall go into the ownership of the
person to whom the property (land parcel, structure, etc.)
belongs, where the treasure trove was hidden and the person who
found the treasure trove in equal shares unless an agreement
between them provides otherwise.
2. In case of discovery of a treasure trove by a person who
has made excavations or a search for valuables without the consent
of the owner of the land parcel or other property where the
treasure trove was hidden, the treasure trove shall be subject to
transfer to the owner of the land parcel or other property where
the treasure trove was discovered.
3. In case of discovery of a treasure trove containing
property that classified as items of historical or cultural value,
it shall be subject to transfer into state ownership. In such a
case the owner of the land parcel or other property where the
treasure trove was hidden and the person who have found the
treasure trove have the right to receive together a reward in the
amount of fifty percent of the value of the treasure trove. The
reward shall be distributed among these persons in equal shares
unless an agreement between them has established otherwise.
In case of discovery of such a treasure trove by a person who
has made excavations or searches for valuables without the consent
of the owner of the property where the treasure trove was hidden,
the reward shall go entirely to the owner of the property.
4. The rules of the present Article shall not be applied to
persons in the scope of whose labor and employment duties were
included the conduct of excavations and search directed at finding
treasure trove.
Article 187. Acquisitive Prescription
1. A citizen or legal person who is not the owner of property
but who has in good faith, openly, and uninterruptedly possessed
as its own immovable property for ten years or other property for
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three years, shall obtain ownership of this property (acquisitive
prescription).
2. A person relying on prescription by possession may join to
the time of its possession all the time during which the property
was possessed by the one to whom this person is a legal successor.
3. Until obtaining of the right of ownership to the property
by virtue of acquisitive prescription, a person possessing
property as its own has the right to protection of its possession
against third persons who are neither owners of the property nor
have the right of possession by virtue of another basis provided
by a statute or contract.
4. The right of ownership to immovable property arises from
the time of state registration for a person who has obtained this
property by virtue of acquisitive prescription.
Article 188. Unauthorized Building
1. An unauthorized building is a dwelling house, other
structure, construction, or other immovable property made on a
land parcel not allocated for this purpose by the procedure
established by a statute and other legal acts or created without
receipt of the necessary permissions thereto or with substantial
violation of city planning and construction norms and rules.
2. A person who has made an unauthorized building does not
obtain the right of ownership to it. It does not have the right to
dispose of the building, to sell, give, lease out, or make other
transactions.
3. The right of ownership to an unauthorized building may be
recognized by a court for the person in whose ownership is the
land parcel where the building was made. In this case the person
for whom the right of ownership to the building is recognized
shall compensate the person who made it for the building
expenditures in an amount determined by the court.
The right of ownership to an unauthorized building may not be
recognized for these persons if the keeping of the building
violates the rights and interests protected by a statute of other
persons or creates a threat to the life and health of citizens.
Chapter 12. Common Ownership
Article 189. Definition of and Grounds for the Origin of
Common Ownership
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1. Property that is owned by two or more persons belongs to
them by right of common ownership.
2. Property may be in common ownership with a definition of
the share of each of the owners in the right of ownership (share
ownership) or without the definition of such shares (joint
ownership).
3. Common ownership of property is share ownership with the
exception of cases when a statute provides for the formation of
joint ownership to this property.
4. Common ownership shall arise when two or more persons
enter into ownership of property that cannot be divided without
changing its purpose (indivisible property) or is not subject to
division by force of a statute.
Common ownership of divisible property shall arise in
situations provided by a statute or contract.
5. By agreement of the participants in joint ownership and in
case of failure to reach agreement, by decision of a court, share
ownership of these persons may be established to the common
property.
Article 190. Determination of Shares in the Right of Share
Ownership
1. Shares shall be considered equal, if the shares of the
participants in share ownership cannot be determined on the basis
of a statute and have not been established by agreement of all of
its participants.
2. By agreement of all the participants in share ownership a
procedure may be established for determining and changing their
shares depending upon the contribution of each of them to forming
and developing the common property.
3. A participant in share ownership who has made at its own
expense, with observance of the established procedure for use of
the common property, inseparable improvements to this property
shall have the right to a corresponding increase in its share in
the right to the common property.
Separable improvements to the common property, unless
otherwise provided by agreement of the participants in share
ownership, shall go into the ownership of the one of the
participants who made them.
Article 191. Possession and Use of Property that is in Share
Ownership
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1. Possession and use of property that is in share ownership
shall be conducted by agreement of all its participants, and, in
case of failure to achieve agreement, by a procedure established
by a court.
2. A participant in share ownership has the right to the
granting for its possession and use of a part of the common
property corresponding to its share, and in case of impossibility
of this has the right to demand corresponding compensation from
the other participants who are possessing and using property
related to its share.
Article 192. Disposition of Property that is in Share
Ownership
1. Disposition of property that is in share ownership shall
be made by agreement of all its participants.
2. A participant in share ownership has the right at its
discretion to sell, give, will, or pledge its share or to dispose
of it in another manner with an observance in case of its
compensated alienation of the rules provided by Article 195 of the
present Code.
Article 193. Fruits, Products, and Income from the Use of
Property that is in Share Ownership
The fruits, products, and income from the use of property
that is in share ownership shall go into the common property and
shall be distributed among the participants in share ownership in
proportion to their shares unless otherwise provided by agreement
among them.
Article 194. Expenditures for the Maintenance of Property
that is in Share Ownership
1. Each participant in share ownership is obligated, in
proportion to its share, to participate in the payment of taxes,
fees, and other payments related to the common property and also
in the costs of its maintenance and preservation.
2. Expenditures that are not necessary and are made by one
of the owners without the consent of the others are not subject to
compensation on the part of the other owners. Disputes arising in
this connection shall be decided by judicial procedure.
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Article 195. Preferential Right of Purchase
1. In case of sale of a share in the right of common
ownership to an outside person, the remaining participants in
share ownership have a preferential right of purchase of the share
sold at the price at which it is being sold and on other equal
conditions with the exception of sale at public auction.
In the absence of consent of all the participants in share
ownership, a public auction for the sale of a share in the right
of common ownership may be conducted in the cases provided by the
second part of Article 200 of the present Code and in other cases
provided by a statute.
2. The seller of a share is obligated to inform the remaining
participants in the share ownership in written form of the intent
to sell its share to an outside person with an indication of the
price and of the other conditions on which he is selling it. If
the remaining participants in the share ownership refuse to
purchase or do not obtain the share sold in the right of ownership
to movable property within a month or in the right of ownership to
movable property within ten days from the date of notice, the
seller shall have the right to sell its share to anyone.
3. In case of the sale of a share with a violation of the
preferential right of purchase, any other participant in the share
ownership has the right within three months to demand by judicial
procedure the transfer to it of the rights and duties of the
purchaser.
4. Assignment of the preferential right to purchase a share
is not permitted.
5. The rules of the present Article shall also be applied in
case of alienation of a share under a contract of barter.
Article 196. Time of Transfer of a Share in the Right of
Common Ownership to a Recipient Under a Contract
A share in the right of common ownership shall pass to a
recipient under a contract from the time of conclusion of the
contract unless an agreement of the parties provides otherwise.
The time of transfer of a share in the right of common
ownership under a contract of a right for which state registration
is required shall be determined in accordance with Paragraph 2 of
Article 176 of the present Code.
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Article 197. Division of Property that is in Share Ownership
and Separation of a Share from It
1. Property that is in share ownership may be divided among
its participants by agreement among them.
2. A participant in share ownership has the right to demand
the separation of its share from the common property.
3. In case the participants in share ownership fail to reach
an agreement on the method and conditions of division of the
common property or the separation of the share of one of them, a
participant in share ownership shall have the right, by court
procedure, to demand the separation in kind of its share from the
common property.
If the separation of a share in kind is not permitted by a
statute or is impossible without disproportionate damage to the
property that is in common ownership, the separating owner shall
have the right to payment to itself of the value of its share by
the other participants in the share ownership.
4. Disproportionality of property separated in kind for a
participant in share property on the basis of the present Article
to its share in the right of ownership shall be eliminated by the
payment of the corresponding monetary amount or other
compensation.
Payment to a participant in shared ownership by the remaining
owners of compensation in place of separation of its share in kind
shall be permitted with its consent. In cases when the share of an
owner is insignificant, cannot actually be separated, and the
owner does not have a substantial interest in the use of the
common property, a court may even in the absence of the consent of
the owner obligate the remaining participants in share ownership
to pay compensation to it.
5. With the receipt of compensation in accordance with the
present Article the owner shall lose the right to a share in the
common property.
6. In case of the clear inexperience of making a division of
common property or of the separation of a share from it according
to the rules established in Paragraphs 3-5 of the present Article,
the court has the right to take a decision on the sale of the
property at public auction with the subsequent distribution of the
amount obtained among the participants in common ownership
proportionally to their shares.
Article 198. Possession, Use, and Disposition of Property
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that is in Joint Ownership
1. Participants in joint ownership, unless otherwise provided
by an agreement among them, possess and use the common property in
common.
2. Disposition of property that is in joint ownership shall
be made by agreement of all the participants which shall be
presumed regardless of which of the participants conducts a
transaction for disposition of the property.
3. Each of the participants in joint ownership has the right
to make transactions for the disposition of the common property
unless otherwise follows from an agreement of all the
participants. A transaction made by one of the participants in the
joint property connected with the disposition of the common
property may be recognized as invalid on demand of the remaining
participants on motives of the absence for the participant who
made the transaction of the necessary powers only in the case if
it is shown that the other participant in the transaction knew or
clearly should have known of this.
Article 199. Division of Property That is in Joint Ownership
and Separation of a Share from It
1. Division of common property among participants in joint
ownership and also separation of the share of one of them may be
made after a preliminary determination of the share of each of the
participants in the right to the common property.
2. In division of common property and separation of shares
from it, unless otherwise provided by a statute or agreement of
the participants, their shares are considered equal.
3. The bases for and the procedure of division of common
property and the separation of shares from it shall be determined
by the rules of Article 197 of the present Code.
Article 200. Levying of Execution on a Share in Common
Property
A creditor of a participant in share or joint ownership in
case of insufficiency of the other property of the owner shall
have the right to make a claim for separation of the share of the
debtor in the common property in order to levy execution on it.
If in such cases the separation of a share in kind is
impossible or if the remaining participants in share or joint
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ownership object to this, the creditor shall have the right to
demand the sale by the debtor of its share to the remaining
participants in common ownership at the market price, with the use
of the funds received from the sale in payment of the debt. In
case of refusal of the remaining participants in common ownership
to obtain the share of the debtor, the creditor shall have the
right to demand in court the levying of execution on the share of
the debtor in the right of common ownership by the sale of this
share at public auction.
Article 201. Common Ownership by Spouses
1. Property earned by spouses during marriage is in their
joint ownership unless a contract between them establishes
otherwise.
2. Property that belonged to each of the spouses before entry
into marriage and also property obtained by one of the spouses
during marriage by gift or by way of inheritance is in this
spouse’s ownership.
Property for individual use (clothing, shoes, etc.), with the
exception of valuables and other items of luxury, although
obtained during marriage at the expense of the general assets of
the spouses, shall be recognized as owned by the spouse that used
them.
The property of each of the spouses may be recognized as in
their joint ownership if it is established that during marriage,
at the expense of the common property of the spouses or the
personal property of the other spouse investments were made that
significantly increased the value of this property (major repair,
reconstruction, reequipment, etc.). The present rule shall not be
applied if a contract between the spouses provides otherwise.
3. For obligations of one of the spouses execution may be
levied on property that is in his ownership and also on his share
in the common property of the spouses.
Chapter 13. Right of Ownership and Other Property Rights in Land
Article 202. A Land Parcel as an Object of the Right of
Ownership
1. The territorial boundaries of a land parcel shall be
defined by the procedure established by statute, on the basis of
documents issued to the owner by an authorized state agency.
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2. Unless otherwise established by a statute, the right of
ownership to a land parcel extends to the surface (or soil) layer
and closed bodies of water located within the boundaries of this
parcel, forest and plants located on it.
3. The owner of a land parcel has the right to use all that
is located above and below the surface of this parcel unless
otherwise provided by a statutes or it violates the rights of
other persons.
4. Land parcels of agricultural and other designation whose
use for other purposes is not allowed or is limited shall be
designated by statute.
Article 203. Access to a Land Parcel
1. Citizens have the right freely, without any permission to
be on land parcels not closed for general access that are in state
ownership or in ownership by a commune and to use the natural
objects present on these parcels within the limits allowed by a
statute, other legal acts, and also by the owner of the respective
land parcel.
2. Access to a land parcel that is in the ownership of a
citizen or legal person without permission of its owner is not
allowed unless a statute has provided otherwise.
Article 204. Construction on a Land Parcel
1. The owner of a land parcel, on condition of observance of
city planning and construction norms and rules and also
requirements on the use of the land parcel (Paragraph 4 of Article
202). may erect buildings and structures on it, may conduct their
reconstruction or removal, and permit construction on its parcel
by other persons.
2. Unless otherwise provided by a statute or contract, the
owner of a land parcel shall obtain the right of ownership to a
building, structure, or other immovable property erected or
created by the owner for itself on a parcel belonging to the
owner.
The consequences of unauthorized building done by an owner on
a land parcel belonging to it shall be determined by Article 188
of the present Code.
Article 205. Bases for Obtaining the Right of Use of a Land
Parcel
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1. A land parcel may be granted by its owner to other
persons in use, including in lease.
2. The right of use of a land parcel that is in state
ownership or in ownership by a commune shall be granted to
citizens and legal persons on the basis of a decision of the state
body or body of local self-government authorized to grant land
parcels for such use by the procedure established by statute.
3. The right o fuse of a land parcel also may be obtained by
the owner of a building, structure, or other immovable property in
the cases provided by Paragraph 1 of Article 207 of the present
Code.
Article 206. Possession and Use of a Land Parcel
1. A person who is not the owner of a land parcel shall
exercise rights belonging to it of possession and use of the
parcel on the conditions and within the limits established by
statute or by contract with the owner.
2. A person to whom a land parcel is granted for use has the
right to transfer this parcel by lease or into uncompensated use
only with the permission of the owner of the parcel., unless
otherwise provided by law, to independently use the parcel for the
purposes for which it is provided, including the building or
creation in another manner on this parcel of buildings,
structures, and other immovable property. The buildings,
structures, and other immovable property created by this person
for himself are his property.
Article 207. The Right of Use of a Land Parcel by the Owner
of an Immovable
1. The owner of an immovable located on a land parcel
belonging to another person has the right of use of the part of
the land parcel upon which this immovable is located.
2. In case of transfer of the right of ownership to an
immovable that is on another’s land parcel to another person, it
acquires the right of use of the respective part of the land
parcel on the same conditions and in the same amount as the
previous owner of the immovable.
The transfer of the right of ownership to the land parcel to
another person is not a basis for the termination or change of the
right of use of the parcel by the owner of an immovable located on
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this land parcel.
3. The owner of an immovable that is on another’s land parcel
has the right to possess, use, and dispose of this immovable,
including to remove the respective buildings and structures if
this does not contradict the conditions of use of the given parcel
established by a statute or contract.
Article 208. Consequences of Termination of the Right of Use
of a Land Parcel
Unless otherwise provided by contracts between the owner of a
land parcel and a land user, then after the termination of the
right of use of the land parcel, the right of ownership to
buildings, structures, and other immovable property built on this
land parcel pass to the owner of the land parcel.
Article 209. Transfer of the Right to a Land Parcel in Case
of the Alienation of Buildings or Structures Located on It
In case of transfer of the right of ownership to a building
or structure belonging to the owner of the land parcel on which it
is located, the rights to the land parcel determined by agreement
of the parties shall pass to the recipient of the building (or
structure). Unless otherwise provided by the contract on
alienation of the building or structure, the right of ownership to
that part of the land parcel that is occupied by the building (or
structure) and is necessary for its use shall pass to the
recipient.
Article 210. The Right of Limited Use of Another’s Land
Parcel (Servitude)
1. The owner of a land parcel has the right to demand from
the owner of a neighboring land parcel and in necessary cases also
from the owner of another land parcel (the neighboring parcel) the
grant of the right of limited use of this parcel (a servitude).
2. A servitude may be established to allow walking and
riding through the neighboring land parcel, installation and
exploitation of lines of electric transmission, communications and
pipelines, provision of water supply and melioration and also
other needs of the owner of the immovable property that cannot be
ensured without establishment of the servitude.
3. The burdening of a land parcel with a servitude does not
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deprive the owner of the parcel of the right of possession, use,
and disposition of this parcel.
4. A servitude may not be an independent object of purchase
and sale, pledge, or lease.
5. A servitude may be voluntary or compulsory.
Article 211. Voluntary Servitude
1. A voluntary servitude is established by a written
agreement, certified by notarial procedure, between the party
seeking the establishment of the servitude and the owner of a
neighboring parcel.
2. In the contract on establishing a voluntary servitude, the
period of effectiveness and the conditions of the servitude must
be indicated. A map of the immovable property burdened by the
servitude with an indication of the location of the servitude
shall be attached to contract.
Article 212. Compulsory Servitude
1. A compulsory servitude shall be established by a court on
suit by a person demanding establishment of the servitude in the
case of failure to achieve agreement on the establishment or
conditions of a voluntary servitude.
2. The decision of the court on the establishment of a
compulsory servitude must contain the conditions indicated in
Paragraph 2 of Article 211 of the present Code.
Article 213. State Registration of a Servitude
A servitude is subject to state registration by the procedure
established by the statute on state registration of rights to
property.
Article 214. Payment for a Servitude
The owner of a parcel burdened with a servitude has the
right, unless otherwise provided by statute or contract, to demand
payment for the use of the parcel from the persons in whose
interest the servitude was established. In case of a voluntary
servitude the amount of payment shall be determined by agreement
of the parties, and in the case of a compulsory servitude by
decision of a court.
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Article 215. Preservation of a Servitude Upon Transfer of
Rights to a Land Parcel
A servitude shall remain in force in case of transfer of
rights to a land parcel that is burdened by this servitude to
another person.
Article 216. Termination of a Servitude
1. On demand of the owner of a land parcel burdened by a
servitude, the servitude may be terminated in view of the lapse of
the bases on which it was established.
2. In cases when a land parcel belonging to a citizen or
legal person, as a result of a burden by a servitude, may not be
used in accordance with the purpose of the parcel, the owner has
the right to demand termination of the servitude in court.
Article 217. Burdening Buildings and Structures With a
Servitude
Analogously to the rules provided in Articles 210-216 of the
present Code, buildings, structures and other immovable property,
the limited use of which is necessary can be burdened with a
servitude.
Article 218. Compulsory Purchase of a Land Parcel for State
or Needs of a Commune
1. A land parcel may be taken from an owner for state or
municipal needs by way of compulsory purchase.
Depending upon for whose needs the land is being taken, the
compulsory purchase shall be made by the Republic of Armenia or a
commune.
2. A decision on the taking of a land parcel for state needs
or needs of a commune shall be adopted by a state agency.
The state agency authorized to take decisions for the taking
of land parcels for state or needs of a commune, and also the
procedure for preparation and adoption of this decision shall be
determined by a statute.
3. A decision of a state agency on the taking of a land
parcel for state needs or needs of a commune is subject to
registration in the agency conducing state registration of rights
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to property.
4. The state agency that has made the decision to take a land
parcel is obligated, to give notice of this to the owner of the
land parcel and the authorized state agency.
Article 219. Compulsory Purchase Price of a Land Parcel
Taken for State Needs or Needs of a Commune
1. The compulsory purchase price for a land parcel taken for
state needs or needs of a commune, the times and other conditions
for compulsory purchase shall be determined by agreement with the
owner of the property. The agreement shall include the obligation
of the Republic of Armenia or the commune the to pay the purchase
price for the parcel taken.
2. In the determination of the purchase price, the market
value of the land parcel and of the immovable property located on
it shall be included in it and also all losses caused to the owner
by the taking of the land parcel, including losses that he bears
in connection with the early termination of obligations to third
persons, including lost profit.
3. By agreement with the owner, it may be granted, in
exchange for the parcel taken for state or municipal needs,
another land parcel, with the subtraction of its value from the
compulsory purchase price.
Article 220. Compulsory Purchase of a Land Parcel for State
or Needs of a Commune by Decision of a Court
1. If an owner does not agree with a decision on the taking
of its land parcel for state needs or needs of a commune or
agreement has not been achieved with the owner on a compulsory
purchase price or other conditions of compulsory purchase, the
state agency that has taken such a decision may bring a suit in
court for the compulsory purchase of the land parcel.
2. A suit for the compulsory purchase of a land parcel for
state or municipal needs may be brought within one year from the
time of sending to the owner of the parcel of the notification
provided by Paragraph 4 of Article 218 of the present Code.
Article 221. Rights of the Owner of a Land Parcel Subject to
Taking for State or Needs of a Commune
The owner of a land parcel subject to taking for state
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needs or needs of a commune, from the time of state registration
of the decision on taking the parcel until the achievement of
agreement or the adoption by a court of a decision on the
compulsory purchase of the land, may possess, use, and dispose of
it at its discretion and make the necessary expenditures ensuring
the use of the parcel in accordance with its purpose.
The owner bears the risk of placement upon itself, in the
determination of the compulsory purchase price of the land parcel,
of expenditures and losses connected with new construction,
expansion, and reconstruction of buildings and structures on the
land parcel in this period.
Chapter 14. Right of Ownership and Other Property Rights in
Housing Premises
Article 222. Ownership of Housing Premises
1. The owner shall exercise the rights of possession, use,
and disposition of housing premises belonging to it in accordance
with its purpose.
2. Housing premises may be rented out by their owners for
dwelling on the basis of a contract.
3. The location of industrial production in housing premises
is not allowed.
Article 223. Peculiarity of the Right of Ownership of an
Apartment in a Multi-apartment Building
To the owner of an apartment in a multi-apartment building
also belongs a share in the right of ownership to the common
property of the building (Article 224).
Article 224. Common Property of the Owners of Apartments in
a Multi-Apartment Building
1. To the owners of apartments in a multi-apartment building
belong, by right of common share ownership, the common premises of
the building, the load-bearing construction of the building, the
mechanical, electrical, technical and sanitary, and other
equipment outside or within the apartment that serve more than one
apartment.
2. The owner of an apartment does not have the right to
alienate its share in the right of ownership to the common
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property of the dwelling building nor to take other actions
entailing transfer of this share separately from the right of
ownership to the apartment.
Article 225. Rights of Use of Housing Premises
1. Members of the family of the owner of housing premises and
other persons have the right to use the housing premises if this
right is registered by the procedure established by the statute on
state registration of rights to property.
2. The arising, conditions of exercise, and termination of
the right of use of housing premises shall be established by a
written agreement with the owner certified by notarial procedure.
In case of the absence of an agreement on the termination of
the right of use of housing premises, this right may be terminated
upon demand of the owner by judicial procedure by the granting by
the owner of appropriate compensation at market prices.
3. The right of use of housing premises may not be an
independent object of purchase and sale, mortgage, or lease.
4. A person having the right to use of housing premises may
demand the elimination of violations of his right to these housing
premises from any person, including the owner.
5. A transfer of the right of ownership to a dwelling house
or an apartment to another person is not a basis for the
termination of the right of use of housing premises
with exception of the case when before the transfer of the right
of ownership the person having the right of use of housing
premises gave a notarially certified promise to waive this right.
Chapter 15. Right of Pledge
§1. General Provisions on Pledge
Article 226. Definition of the Right of Pledge
1. The right of pledge (hereinafter–“pledge”) is a propert
y
right of a pledgee with respect to property of the pledgor, which
simultaneously is a means of ensuring the performance of a
monetary or other obligation of the debtor to the pledgee.
2. A pledge is a supplementary (accessory) obligation of
ensuing the performance of a basic obligation of the pledgor (or
debtor) to the pledgee (or creditor).
3. A creditor under an obligation secured by a pledge (a
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pledgee) has the right in case of nonperformace by a debtor of
this obligation to obtain satisfaction from the value of the
pledged property preferentially before other creditors of the
person to whom this property belongs (the pledgor).
4. The pledgee has the right on the basis of the principle
established by Paragraph 3 of the present article to receive
satisfaction from insurance compensation for the loss of or harm
to the pledged property regardless of for whose benefit it is
insured, provided only that the loss or harm did not happen for
reasons for which the pledgee answers.
5. The general rules on pledge contained in the present
Section shall be applied to mortgage in those cases when other
rules have not been established by the Section on mortgage of the
present Chapter.
Article 227. Bases for Arising of a Pledge
1. A pledge arises by virtue of a contract. A pledge also may
arise on the basis of a statute in case of the occurrence of the
circumstances indicated in it if the statute provides what
property is recognized as being in pledge and for securing the
performance of what obligation.
2. The rules of the present Code on pledge that has arisen
by virtue of a contract shall be applied respectively to a pledge
that has arisen on the basis of a statute, unless the statute
provides otherwise.
Article 228. The Pledgor
1. The pledgor of property may be only its owner.
2. The pledgor may be the debtor itself or a third person.
3. The pledgor of a right may be a person to whom the pledged
right belongs.
Article 229. The Pledgee
The pledgee is the person who, on the bases indicated by
statute or contract, has the property right (right of pledge) with
respect to the property of the pledgor for securing the
performance of a monetary or other obligation of the debtor to it.
Article 230. Subject of a Pledge
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1. The subject of a pledge may be any property, including a
property rights (or claim) with the exception of property excluded
from commerce, of claims inseparably connected with the
personality of the creditor, in particular claims for support
payments, for compensation for harm caused to life or health and
other rights whose alienation to another person is prohibited by a
statute.
2. Pledge of property which may not be divided without
changing its purpose (indivisible property) may not be given in
pledge in parts.
3. Pledge of a right of lease is not allowed without the
consent of the owner of the property.
4. Pledge of individual types of property, in particular of
property of citizens on which levy of execution is not allowed,
may be prohibited or limited by a statute.
Article 231. Pledge of Property that is in Common Ownership
1. Property that is in common ownership may be given in
pledge only with the written consent of all the owners.
2. A participant in common share ownership may pledge his
share in the right to common ownership without the consent of the
other owners.
In case of levy of execution on demand of the pledgee against
this share, for its sale the rules established by Article 195 of
the present Code on preferential right of buyout shall be applied.
Article 232. Property to Which the Rights of the Pledgee
Extend
1. The rights of the pledgee (the right of pledge) to the
property that is the subject of a pledge shall extend to its
accessories unless otherwise provided by the contract.
The right of pledge extends in cases provided by the contract
to fruits, products, and incomes received as the result of the use
of the pledged property.
2. A contract of pledge, and with respect to a pledge that
has arisen on the basis of a statute, the statute may provide for
a pledge of property and property rights that the pledgor will
obtain in the future.
Article 233. The Claim Secured by a Pledge
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Unless otherwise provided by a contract or statute, a pledge
secures a claim of the pledgee in the amount that it has at the
time of actual satisfaction in particular, interest, penalty,
compensation for the damages caused by delay of performance, and
also compensation for necessary expenses of the pledgee for the
maintenance and preservation of the pledged property and expenses
for execution.
Article 234. The Contract of Pledge and Its Form
1. A contract of pledge must be concluded in written form.
2. A contract of pledge must indicate the name (or
designation) and place of residence (or place of location) of the
parties, the subject of the pledge, the nature, amount, and period
for performance of the obligation protected by the pledge.
3. In the cases provided by the present Code, a contract of
pledge is subject to notarial certification and a right of pledge
to state registration.
4. Nonobservance of the rules of the present Article shall
entail the invalidity of the contract of pledge. Such a contract
is considered void.
Article 235. Arising of the Right of Pledge
1. The right of pledge arises from the time of conclusion of
the contract of pledge, and in cases when the right of pledge is
subject to state registration, from the time of its registration.
2. If the subject of the pledge in accordance with law or
contract must be with the pledgee, the right of pledge arises form
the time of transfer to him of the subject of the pledge and if
such transfer was made before the conclusion of the contract from
the time of its conclusion.
Article 236. Subsequent Pledge
Property that is under pledge may become the subject of another
pledge (a subsequent pledge).
2. A subsequent pledge is allowed if it is not forbidden by
prior contracts of pledge.
3. In case of a subsequent pledge, the claims of the
subsequent pledgee shall be satisfied from the value of the
subject of pledge after the satisfaction of the claims of the
prior pledgee.
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Article 237. Maintenance and Preservation of the Pledged
Property
1. The pledgor or pledgee, depending upon which of them has
the pledged property is obligated, unless otherwise provided by a
statute or contract:
1) to insure the pledged property for its full value from the
risks of loss and harm, and if the full value of property exceeds
the amount of the claim secured by the pledge, for an amount not
less than the amount of the claim;
2) to take the measures necessary for ensuring the
preservation of the pledged property, including the protection of
it from encroachments and claims on the part of third persons;
3) to immediately inform the other party of the arising of a
threat of loss of or harm to the pledged property.
2. The pledgee and pledgor have the right to verify by the
documents and in fact the presence, quantity, status, and
conditions of storage of pledged property that the other party
has.
3. In case of gross violation by the pledgee of the
obligations indicated in Paragraph 1 of the present Article
creating a threat of loss of or harm to the pledged property, the
pledgor has the right to demand the early termination of the
pledge.
Article 238. Use and Disposition of the Subject of Pledge
1. A pledgor has the right, unless otherwise provided by the
contract, to use the subject of the pledge in accordance with its
designation, including obtaining from it fruits and income.
2. Unless otherwise provided by a statute or contract, the
pledgor has the right to alienate the subject of the pledge, to
transfer it by lease or use without compensation to another person
or in another manner to dispose of it only with the consent of the
pledgee.
An agreement limiting the right of the pledgor to leave the
pledged property by will is void.
3. A pledgee has the right to use a subject of pledge
transferred to it only in cases provided by a contract, providing
on demand of the pledgor a report on use. Under a contract, the
obligation to obtain fruits and income from the subject of pledge
may be placed upon the pledgee for the purpose of paying off the
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basic obligation or in the interest of the pledgor.
Article 244. Consequences of Destruction of, Loss of, or
Harm to the Pledged Property
1. The pledgor bears the risk of accidental destruction of,
loss of, or accidental harm to the pledged property, unless
otherwise provided by the contract of pledge.
2. The pledgee is liable for the total or partial destruction
of, loss of, or harm to a subject of pledge transferred to it,
unless it shows that it may be freed from liability in accordance
with Article 417 of the present Code.
3. The pledgor is liable for loss of the subject of the
pledge in the amount of its actual value and for its harm in the
amount of the sum by which this value has been reduced regardless
of the sum at which the subject of pledge was valued upon transfer
of it to the pledgee.
If as a result of harm the subject of the pledge has changed
to the extent that it cannot be used for its direct purpose, the
pledgor has the right to refuse it and to demand compensation for
its loss.
A contract may provide for an obligation of the pledgee to
compensate the pledgor also for other damages caused by loss of or
harm to the subject of the pledge.
A pledgor who is a debtor under an obligation secured by a
pledge has the right to count a claim against the pledgee for
compensation for the damages caused by the loss of or harm to the
subject of a pledge in payment of an obligation secured by the
pledge.
Article 240. Replacement and Reinstatement of the Subject of
the Pledge
1. Replacement of the subject of the pledge is allowed with
the consent of the pledgee, unless a statute or a contract
provides otherwise.
2. If the subject of a pledge has perished or has been harmed
or the right of ownership to it or the right of economic
management has been terminated on grounds established by a
statute, the pledgor is obligated within a reasonable time to
restore the subject of pledge or to replace it with other property
of equal value unless a contract provides otherwise.
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Article 241. Protection by the Pledgee of Its Rights to the
Subject of the Pledge
1. A pledgee that had or should have had the pledged property
has the right to reclaim it from another’s unlawful possession,
including from the possession of the pledgor (Articles 274, 275,
278).
2. In cases when, under the terms of the contract, the
pledgee is granted the right to use the subject of the pledge
transferred to it, it may demand from other persons, including
from the pledgor, the elimination of all violations of its right,
although these violations were not connected with deprivation of
possession (Articles 277, 278).
Article 242. Preservation of a Pledge in Case of Transfer of
the Right of Ownership to Pledged Property to Another Person
1. In case of transfer of the right of ownership to pledged
property or the right of economic management of it from the
pledgor to another person as the result of compensated or
uncompensated alienation of this property or by way of universal
legal succession, the right of pledge shall remain in force.
The legal successor of the pledgor shall take the place of
the pledgor and shall bear all the obligations of the pledgor
unless an agreement with the pledgee provides otherwise.
2. If the property of the pledgor that is the subject of the
pledge has passed by way of legal succession to several persons,
each of the legal successors (or purchasers of the property) shall
bear the consequences following from the pledge of nonperformance
of the obligation secured by the pledge in proportion to the part
of this property that has passed to it. However, if the subject of
the pledge is indivisible or on other bases remains in the common
ownership of the legal successors, they shall be considered joint
and several pledgors.
Article 243. Consequences of Compulsory Taking of Pledged
Property
1. In cases when the right of ownership of the pledgor to
the property that is the subject of the pledge is terminated on
the grounds and by the procedure established by law as a result of
a taking (or buyout) for state needs or needs of a commune,
requisition or nationalization, and the pledgor is granted other
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property and/or corresponding compensation, the right of pledge
shall extend to the property granted as a substitute or
respectively, the pledgee shall obtain the right of preferential
satisfaction from the amount of compensation due to the pledgor.
2. In the case when the property that is the subject of the
pledge is taken from the pledgor in the procedure established by
statute as a sanction for the commission of a crime, the pledgee
shall obtain the right of preferential satisfaction of his claim
from the value of this property
3. In the case when the property that is the subject of the
pledge is taken from the pledgor by the procedure established by
law on the ground that in fact the owner of this property is
another person, the pledge with respect to this property shall be
terminated.
4. In the cases provided by the present Article, the pledgee
has the right to demand early performance of the obligation
secured by the pledge.
Article 244. Assignment of Rights Under the Contract of
Pledge
1. The pledgee has the right to transfer its rights under
the contract of pledge to another person with the observance of
the rights on the transfer of the rights of a creditor by the
assignment of a claim (Articles 397-405.)
2. The assignment by a pledgor of its rights under a
contract of pledge to another person is valid if the rights of
claim against the debtor on the principal obligation secured by
the pledge are assigned to the same person.
Article 245. Transfer of the Debt on an Obligation Secured
by a Pledge
With the transfer to another person of the debt under an
obligation secured by a pledge, the pledge is terminated, unless
the pledgor gave the creditor consent to answer for the new
debtor.
Article 246. Early Performance of an Obligation Secured by a
Pledge and Levy of Execution on the Pledged Property
1. The pledgee shall have the right to demand early
performance of the obligation secured by the pledge in cases:
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1) if the subject of the pledge left the possession of the
pledgor with whom it was left, not in accordance with the terms of
the contract on pledge;
2) violation by the pledgor of the rules on replacement of
the subject of the pledge (Article 240);
3) loss of the subject of the pledge due to circumstances for
which the pledgee does not answer, if the pledgor has not used the
right provided by Paragraph 2 of Article 240 of the present Code.
2. The pledgee shall have the right to demand early
performance of the obligation secured by the pledge and if its
demand is not satisfied to levy execution on the subject of the
pledge in cases of:
1) violation by the pledgor of the rules on subsequent pledge
(Article 236);
2) nonperformance by the pledgor of the duties provided by
subparagraphs 1 and 2 of Paragraph 1 and Paragraph 2 of Article
237 of the present Code;
3) a violation by the pledgor of the rules on the use and
disposition of pledged property (Paragraphs 1 and 2 of Article
238).
Article 247. Termination of a Pledge
1. A pledge shall be terminated:
1) with the termination of the obligation secured by the
pledge;
2) on demand of the pledgor if the grounds provided by
Paragraph 3 of Article 237 of the present Code are present.
3) in case of loss of the pledged item or termination of the
pledged right unless the pledgor has used the right provided by
Paragraph 2 of Article 240 of the present Code;
4) in case of sale at public auction of the pledged property.
2. In case of termination of a pledge as the result of
performance of the obligation secured by the pledge or upon demand
of the pledgor (Paragraph 3 of Article 237), a pledgee who has the
pledged property shall be obligated to return it immediately to
the pledgor.
Article 248. Grounds for Levy of Execution on the Pledged
Property
Execution on the pledged property for the satisfaction of
the claims of the pledgee (the creditor) may be levied in case of
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nonperformance or improper performance by the debtor of the
obligations secured by the pledge due to circumstances for which
it answers.
Article 249. Procedure for Levy of Execution on the Pledged
Property
1. Satisfaction of a claim of the pledgee at the expense of
pledged property without resort to a court is allowed on the basis
of a notarially authenticated agreement of the pledgee with the
pledgor. Such an agreement, on the bases established by Section 2
of Chapter 18 of the present Code, may be declared invalid by a
court on suit by a person whose rights are violated by the
agreement.
In the absence of such an agreement, satisfaction of the
claim of the pledgee (the creditor) from the value of the pledged
immovable property shall be made by a decision of a court.
2. Execution may be levied on a subject of a pledge only by
decision of a court in cases when:
1) the agreement or permission of another person was required
for concluding the contract of pledge;
2) the subject of the pledge is property having a significant
historical, artistic, or other cultural value for society;
Article 250. Realization (Sale) of Pledged Property
1. The realization (sale) of pledged property shall be made
by specialized organizations having a license, only by sale at
public auction by the procedure established by the law on public
auctions.
Article 251. Distribution of the Amount Received from the
Sale of the Pledged Property
1. The claims of the pledgee shall be satisfied from the
amount received as the result of sale of the pledged property,
after the deduction from it of the amounts necessary to cover the
expenditures for levying execution on the property and for its
sale, and the remaining amount is transferred to the pledgor.
2. if the amount realized on the sale of the pledged
property is insufficient to cover the claim of the pledgor, he has
the right, in the absence of a contrary indication in the
contract, to receive the short amount from other property of the
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debtor, unless otherwise provided by the contract. In this case
the pledgee does not enjoy the preference based on the pledge.
Article 252. Termination of Levy of Execution on Pledge
Property and of Its Sale
1. The debtor and a pledgor who is a third person have the
right at any time until the sale of the subject of the pledge to
terminate the levying of execution on it and its sale, by
performing the obligation secured by the pledge or that part of it
the performance of which was late.
An agreement limiting this right is void.
2. The person demanding the termination of the levying of
execution on the pledged property or of its sale is obligated to
compensate the pledgee for expenditures borne in connection with
the levy of execution on the property and its sale.
Article 253. Types of Pledge
A pledge may take the form:
1) of a deposit
2) of a pledge of goods in a pawnshop;
3) of a pledge of rights;
4) of a pledge of monetary assets;
5) of a firm pledge;
6) of a pledge of goods in commerce;
7) of a mortgage;
Article 254. Deposit
Deposit is a pledge the object of which is transferred to the
possession of the pledgee.
Article 255. Pledge of Property in a Pawnshop
1. Acceptance from citizens in pledge of movable property
meant for personal use, to secure short term credit may be
conducted as entrepreneurial activity by specialized organizations-
-pawnshops–that have a license for this.
2. A contract of pledge of property in a pawnshop is
formalized by the issuance by the pawnshop of a pledge ticket.
3. Pledged items are transferred to the pawnshop.
The pawnshop is obligated to insure at its own expense, for
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the use of the pledgor, property taken in pledge for the full
amount of their valuation established in accordance with the
market price for property of such type at the time of their
acceptance for pledge.
4. A pawnshop does not have the right to use or dispose of
pledged items.
5. The pawnshop bears liability for loss of or harm to the
pledged property, unless it shows that the loss or harm occurred
as the result of force majeure.
6. In case of failure to return in the established period the
amount of the credit secured by the pledge of property in the
pawnshop, the pawnshop shall have the right to realize (sell) this
property at public auction. After this the demand of the pawnshop
against the pledgor (debtor) is extinguished, even if the amount
received on the disposition of the pledged property is
insufficient for their full satisfaction.
7. The rules of granting of credit to citizens by pawnshops
under pledge of property belonging to citizens shall be
established by a statute.
8. Terms of a contract on the pledge of property in a
pawnshop that limit the rights of the pledgor in comparison with
the rights granted to it by the present Code and other statutes
are void.
Article 256. Pledge of a Right
1. In case of pledge of a right the subject of the pledge is
a right that may be alienated, in particular a lease right to a
land parcel, building, structure, dwelling house (or apartment), a
right to a share in the property of a business partnership or
company, or a debt claim.
2. A right for a term may be a subject of a pledge only
until the expiration of the term of its effectiveness.
3. The debtor of a pledged right must be informed of the
pledge.
4. The pledge of a right subject to state registration is
effective from the time of registration at the state agency
conducting its registration.
5. In case of pledge of a property right evidenced by a
security or commercial paper, it is given to the pledgee or to
deposit in a bank or notarial office unless the contract provides
otherwise.
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Article 257. Pledge of Monetary Assets
Monetary assets that are the subject of a pledge are kept in
a deposit account in a bank or at a notarial office. Interest
calculated on this about belongs to the pledgor unless the
contract provides otherwise.
Article 258. Firm Pledge
A firm pledge is a pledge whose subject remains with under
lock of the pledgee. The subject of the pledge may be left in the
possession of the pledgor with the addition of symbols evidencing
the pledge.
Article 259. Pledge of Goods in Commerce
1. A pledge of goods in commerce is a pledge of goods with
their being left with the pledgor and with the grant to the
pledgor of the right to change the composition and natural form of
the pledged property (stocks of goods, raw material, supplies,
semifabricates, ready products, etc.) on the condition that their
overall value does not become less than indicated in the contract
of pledge.
Reduction of the value of the pledged goods in commerce is
allowed in proportion to the performed part of the obligation
secured by the pledge, unless otherwise provided by the contract.
2. Goods in commerce alienated by the pledgor cease to be the
subject of a pledge from the time of their transfer to the
ownership, economic management, or operative administration of the
purchaser and goods obtained by the pledgor indicated in the
contract of pledge become the subject of a pledge from the time of
arising of a right of ownership or economic management to them for
the pledgor.
3. Unless other conditions of supervision of the activity of
the pledgor are provided by contract, the pledgor of goods in
commerce is obligated to keep a book for recording pledges in
which entries shall be made of the conditions of the pledge of
goods and on all other operations entailing a change of the
composition or the natural form of the pledged goods, including
their processing, on the day of the latter operation.
4. In case of violation by the pledgor of the conditions of
pledge of goods in commerce, the pledgee has the right, by placing
its signs on the pledged goods to stop operations with them until
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the elimination of the violation.
§ 2. MORTGAGE
1. General Provisions on Mortgage
Article 260. Definition of Mortgage
A mortgage is a pledge the subject of which, regardless of
whether it is immovable or movable property, remains in the
possession and use of the pledgor or of a third party.
Article 261. Contract of Mortgage
Under the contract of mortgage one party–the pledgee, who is
a creditor under a credit contract or other obligation secured by
the mortgage (the basic obligation), has a right to receive
satisfaction of his monetary claims against the debtor under this
obligation from the value of the pledged property of the other
party–the pledgor, preferentially before other creditors of the
pledgor.
Article 262. Content of the Contract of Mortgage
1. In a contract of mortgage their must be indicated the
name (or designation) and place of residence (or place of
location) of the parties, the subject of the mortgage, the nature,
size, and term of fulfillment of the obligation secured by the
mortgage.
2. The subject of the mortgage is determined in the contract
by an indication of its designation, place of its location, and a
description sufficient for the identification of this subject.
If the subject of a mortgage is a right of lease belonging to
the pledgor, then the leased property must be defined in the
property just as if it itself were the subject of the mortgage.
4. In the contract of mortgage there must be indicated the
obligation secured by the mortgage, must be named in the contract
of mortgage, its amount, the basis of its origin and the term for
its performance. In those cases when this obligation is based
upon a contract, the parties, date, and place of conclusion of the
contract must be indicated. If the amount of the obligation
secured by the mortgage is subject to definition in the future,
the procedure and other necessary conditions for defining it must
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be indicated in the contract of mortgage.
5. If the obligation secured by the mortgage is subject to
performance in parts, in the contract of mortgage there must be
indicated the terms or periodicity of the respective payments and
their amounts or conditions allowing the determination of such
payments.
Article 263. Form of the Contract of Mortgage
1. The contract of mortgage must be concluded in written
form, by the compilation of a single document signed by the
pledgor and pledgee, and also by the debtor if the pledgor is not
the debtor (property surety).
A contract of mortgage is subject to notarial authentication.
Article 264. State Registration of the Right of Pledge Under
a Contract of Mortgage
1. The right of pledge under a contract of mortgage of
immovable property is subject to state registration.
2. The right of pledge under a contract of mortgage of
movable property is subject to state registration in the cases
when a statute provides for state registration of rights to
movable property (Paragraph 2 of Article 135).
3. The procedure for state registration of the right of
pledge under a contract of mortgage shall be established by the
statute on state registration of rights to property.
2. Mortgage of Parcels of Land
Article 265. Parcels of Land that may be the Subject of
Mortgage
1. By contract of mortgage only parcel of land that are in
the ownership of citizens and legal persons may be pledged.
2. In case of common ownership of a parcel of land, a
mortgage may be established only on a land parcel belonging to a
citizen or legal person physically separated from the land parcel.
Article 266. Mortgage of a Land Parcel on which there is a
Building or Structure of the Pledgor
1. In case of mortgage of a land parcel the right of
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mortgage does not extend to existing or already erected buildings
and structures of the pledgor including housing structures
belonging to him unless a different condition is provided in the
contract on mortgage.
In the absence in the contract of such a condition, the
pledgor in case of levy of execution on the land parcel retains
the right to such building or structure and obtains the right of
limited use (a servitude) of that part of the parcel that is
necessary for the use of the building or structure in accordance
with its purpose. The conditions of use of this part of the
parcel shall be determined by agreement of the pledgor with the
pledgee and in case of dispute, by a court.
2. The pledgor of a land parcel has the right without the
consent of the pledgee to dispose off his buildings and structures
on this parcel to which, in accordance with Paragraph 1 of the
present Article the right of pledge does not extend.
In case of alienation of such a building or structure to
another person and the absence of an agreement with the pledgee to
the contrary, the rights that this person may obtain to the
pledged land parcel are limited by the conditions provided in the
second subparagraph of Paragraph 1 of the present Article.
3. If a building or structure of the pledgor of land parcel
that is on or erected on the same parcel is pledged to the same
pledgee, the pledgor has the right to dispose of this building or
structure only with the agreement of the pledgee.
Article 267. Erection by the Pledgor of Buildings and
Structures on the Pledged Land Parcel
The pledgor has the right, without the consent of the pledgee
to erect buildings and structures by the established procedure on
the land parcel pledged under the contract of mortgage. The right
of pledge does not extend to these parcels and the pledgor may
dispose of them as provided by Paragraph 2 of Article 266 of the
present Code.
However if the erection by the pledgor on the pledged land
parcel entails or may entail a worsening of the security provided
to the pledgee by the mortgage of this parcel, the pledgee has the
right to demand amendment of the contract of mortgage (Paragraph 2
of Article 466) of the present Code, including if necessary, by
extending the mortgage to the erected building or structure.
Article 268. Mortgage of a Land Parcel on which there are
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Buildings and Structures of Third Persons
If a mortgage is established on a land parcel on which there
is a building or structure belonging not to the pledgor but to
another person, then upon levy by the pledgor of execution on this
parcel and its sale, the rights and duties that the pledgor as
possessor of the parcel had with respect to this person pass to
the acquirer of the parcel.
3. Mortgage of Dwelling Houses (or Apartments), Buildings,
and Structures
Article 269. General Provision on the Mortgage of Dwelling
Houses (or Apartments), Buildings, and Structures
1. The mortgage of multi-apartment buildings and individual
houses and apartments that are under state ownership or ownership
by a commune is not allowed.
2. Hotels, dormitories, rest homes, dachas, garden houses,
and other buildings and structures not meant for permanent
residence may be the subject of mortgage on the regular bases.
Article 270. The Mortgage of Apartments in Multi-Apartment
Buildings that are in Common Share Ownership
In case of mortgage of an apartment in a multi-apartment
building, part of which (the foundation, roof, stairwells) is in
common share ownership, the corresponding share in the right of
common ownership of the building is considered mortgaged along
with the apartment.
Article 271. Mortgage of Dwelling Houses, Buildings, and
Structures Under Construction
Upon granting of credit for the construction of a dwelling
house, building, or structure, a mortgage contract may provide for
the securing of an obligation by incomplete construction and
materials and equipment prepared for construction belonging to the
pledgor.
Article 272. Levy of Execution on a Mortgaged Dwelling House
or Apartment
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1. Levy of execution on a mortgaged dwelling house or
apartment and sale of this property is not a basis for the
eviction of persons having the right of use of the dwelling
premises, with the exception of the cases provided in Paragraph 2
of the present Article.
2. After levy of execution on a mortgaged dwelling house or
apartment and sale of this property, the pledgor and persons
having the right of use of the housing premises are obligated on
demand of the owner of the house (or apartment) not later than in
the course of a month to free the living premises on the condition
that:
1) the house (or apartment) was pledged under a contract of
mortgage to secure the return of credit provided for the
acquisition or construction of this home (or apartment);
2) the persons having the right of use of the housing
premises gave before the conclusion of the contract of mortgage, a
notarially certified agreement to waive this right.
3. Persons living in pledged dwelling houses or apartments
on conditions of a contract of lease of housing premises before
the making of the contract of mortgage are not subject to eviction
on sale of the pledged house or apartment unless otherwise
provided by the contract.
Chapter 16. Protection of the Right of Ownership and Other
Property Rights
Article 273. Recognition of the Right of Ownership
The owner has the right to demand recognition of the right of
ownership.
Article 274. Recovery of Property from Another’s Unlawful
Possession
The owner has the right to recover its property from
another’s unlawful possession.
Article 275. Recovery of Property from a Good Faith
Purchaser
1. If property has been obtained for compensation from a
person who did not have the right to alienate it, of which the
purchaser did not know and could not have known (a good faith
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purchaser), then the owner has the right to recover this property
from the purchaser only in the case when the property was lost by
the owner or by a person to whom the property was transferred by
the owner for possession or was stolen from one or the other, or
left their possession in another manner against their will.
2. If the property was obtained without compensation from a
person who did not have the right to alienate it, the owner has
the right to recover the property in all cases.
3. Money and also bearer commercial paper and securities may
not be recovered from a good faith purchaser.
Article 276. Settlements in Case of Return of Property from
Unlawful Possession
In case of recovery of property from another’s unlawful
possession, the owner also has the right to demand from a person
who knew or should have known that its possession was illegal (a
bad faith purchaser), the return of or compensation for all income
that this person obtained or should have obtained during the whole
time of possession; from a good faith purchaser the return of or
compensation for all income that he obtained or should have
obtained from the time when he knew or should have known of the
unlawfulness of its possession or received notice by the lawsuit
of the owner for the return of the property.
A possessor, either good faith or bad faith, in turn has the
right to demand from the owner compensation for necessary
expenditures made by it on the property from the time from which
the owner was due income from the property.
A good faith purchaser has the right to retain improvements
made by it if they can be separated without harm to the property.
If such a separation of improvements is impossible, a good faith
purchaser has the right to demand compensation for expenditures
made for improvement but not more than the amount of increase of
the value of the property.
Article 277. Protection of the Rights of an Owner from
Violations Not Connected With Deprivation of Possession
An owner may demand the elimination of all violations of its
rights even though these violations were not connected with the
deprivation of possession.
Article 278. Protection of the Rights of a Possessor Who is
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Not an Owner
The rights provided by Articles 274-277 of the present Code
also belong to a person who, although not the owner, is the
possessor on a basis provided by a statute or contract. This
person shall have the right to protection of its possession also
against the owner.
Chapter 17. Termination of the Right of Ownership and Other
Property Rights
Article 279. Grounds for Termination of the Right of
Ownership
1. The right of ownership shall be terminated upon the
alienation by the owner of its property, renunciation by the owner
of the right of ownership, destruction of property, and in case of
the loss of the right of ownership in other cases provided by a
statute.
2. Compulsory taking of property from the owner is not
allowed except for cases when on grounds provided by a statute
there is conducted:
1) the levy of execution on property for obligations (Article
281);
2) alienation of property that by force of a statute may not
belong to the given person (Article 282);
3) alienation of immovable property in connection with the
taking of a parcel (Article 283;
4) compulsory purchase of improperly maintained cultural
valuables (Article 284);
5) requisition (Article 285);
6) confiscation (Article 286);
7) reorganization or liquidation of a legal person by
decision of a court (Articles 63 and 67);
8) alienation of property in the cases provided by Paragraph
4 of Article 197 and Articles 208 and 220 of the present Code.
3. Property that is in state ownership may be alienated into
the ownership by citizens and legal persons by the procedure
provided by the statutes on privatization.
4. Converting into state ownership of property that is owned
by citizens and legal persons (nationalization) shall be done on
the basis of a statute with compensation for the value of this
property and other damages by the procedure established by Article
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286 of the present Code.
5. Property rights shall be terminated n the cases provided
by Articles 216 and 247 of the present Code and also in other
cases provided by statute or contract.
Article 280. Renunciation of the Right of Ownership
A citizen or legal person may renounce the right of ownership
to property belonging to it, declaring in writing about this about
this or taking other actions definitely evidencing its removal
from the possession, use, and disposition of the property without
the intention to retain any rights to this property.
Renunciation of the right of ownership does not entail the
termination of the rights and duties of the owner with respect to
the property involved until the obtaining of the right of
ownership to it by another person.
Article 281. Levying Execution on Property for Obligations
of the Owner
1. The taking of property by the levying of execution on it
for obligations of the owner shall be done on the basis of a
decision of a court, unless another procedure for levying
execution is provided by a statute or contract.
2. The right of ownership to property upon which execution is
levied shall be terminated for the owner from the time when the
right of ownership arises on the property taken for the person to
whom this property passes.
Article 282. Termination of the Right of Ownership by a
Person to Property That May Not Belong to It
1. If on grounds allowed by a statute, property is owned by a
person that by virtue of a statute may not belong to it, this
property must be alienated by the owner within the course of a
year from the time of arising of the right of ownership to the
property, unless a statute has established another period.
2. In cases when the property has not been alienated by the
owner within the periods indicated in Paragraph 1 of the present
Article, such property, taking account of its nature and
designation, on decision of a court rendered on request of a state
agency shall be subject to compulsory sale with transfer to the
former owner of the amount received or transfer into state
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ownership with compensation to the former owner of the value of
the property. In such a case the expenditures on the alienation of
the property shall be subtracted.
3. If property, for obtaining which special permission is
necessary, is owned by a citizen or legal person on grounds
permitted by a statute, and the owner is refused issuance of such
permission, this property is subject to alienation by the
procedure established for property that may not belong to the
given owner.
Article 283. Alienation of Immovable Property in Connection
With the Taking of the Parcel on Which It is Located
1. In cases when the taking of a land parcel for state needs
or needs of a commune is impossible without termination of the
right of ownership to buildings, structures, or other immovable
property located on the given parcel, this property may be taken
from the owner by compulsory purchase.
2. A demand for the taking of immovable property is subject
to satisfaction if the state agency or body of local self-
government that has gone to court with this requirement shows that
the use of the land parcel for the purpose for which it is being
taken is impossible without termination of the right of ownership
to the given immovable property.
Article 284. Compulsory Purchase of Improperly Maintained
Cultural Valuables
1. In cases when the owner of cultural valuables categorized
in accordance with a statute as particularly valuable and
protected by the state maintains these valuables improperly so as
to threaten the loss by them of their significance, such
valuables, by decision of a court may be taken from the owner by
compulsory purchase by the state.
2. In case of purchase of cultural valuables compensation
shall be made to the owner for their value in an amount
established by agreement of the parties and in case of dispute, by
a court.
Article 314. Requisition
1. In cases of natural disasters, technological accidents,
epidemics, and in other circumstances having an extraordinary
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nature, property, in the interests of society, on decision of the
appropriate state agencies, may be taken from the owner by the
procedure and on the conditions established by a statute, with
payment to it of the value of the property (requisition).
2. The valuation at which the owner is compensated for the
value of the requisitioned property may be disputed by it in
court.
3. A person whose property has been requisitioned shall have
the right, upon termination of the effect of circumstances in
connection with which the requisition was made, to demand in court
the return to it of the remaining property.
Article 286. Consequences of Termination of the Right of
Ownership by Force of a Statute
In case of adoption by the Republic of Armenia of a statute
terminating the right of ownership, damages caused to the owner as
the result of adoption of this act, including the value of the
property shall be compensated by the state. Disputes over
compensation for damages shall be determined by a court.
Article 287. Valuation of Property Upon Termination of
Ownership
Upon termination of ownership property shall be valued
proceeding from its market price.
Article 288. Confiscation
In cases provided by a statute, property may be taken without
compensation from an owner by sentence of a court as a sanction
for the commission of a crime (confiscation).
DIVISION 5. TRANSACTIONS. REPRESENTATION. PERIODS OF TIME.
LIMITATION OF ACTIONS
Chapter 18. Transactions
§ 1. Definition, Types, and Form of Transactions
Article 289. Definition of a Transaction
Transactions are actions of citizens and legal persons
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directed at the establishment, change, or termination of civil law
rights and duties.
Article 290. Types of Transactions
1. Transactions may be bilateral or multilateral (contracts)
and unilateral.
2. For the conclusion of a contract, an expression of the
agreed will of two parties (a bilateral transaction) or of three
or more parties (a multilateral transaction) is necessary.
3. A unilateral transaction is one for the making of which,
in accordance with a statute, other legal acts, or agreement of
the parties, an expression of will of one party is necessary and
sufficient.
Article 291. Obligations Under a Unilateral Transaction
A unilateral transaction creates obligations for the person
who made the transaction. It may create obligations for other
persons only in cases established by a statute or by agreement
with these persons.
Article 292. Legal Regulation of Unilateral Transactions
The general provisions on obligations and on contracts shall
be applied correspondingly to unilateral transactions if this does
not contradict a statute, the unilateral character of the
transaction, or the nature of the transaction.
Article 293. Transactions Made on a Condition
1. A transaction shall be considered made on a condition
precedent, if the parties have placed the arising of rights and
duties in dependence upon a circumstance with respect to which it
is unknown whether it will occur or not occur.
2. A transaction shall be considered made on a condition
subsequent, if the parties have placed the termination of rights
and duties in dependence upon a circumstance with respect to which
it is unknown whether it will occur or not occur.
3. If the occurrence of a condition is hindered in bad faith
by a party to whom the occurrence of the condition is
disadvantageous, then the condition shall be considered as having
occurred.
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4. If the occurrence of the condition is aided in bad faith
by a party for whom the occurrence of the condition is
advantageous, then the condition shall be considered as not having
occurred.
Article 294. Form of Transactions
1. Transactions may be made orally or in written (simple or
notarial) form.
2. A transaction that may be made orally shall be considered
made in the case when from the conduct of a person his will to
make the transaction is apparent.
3. Silence shall be recognized as an expression of will to
make a transaction in cases provided by a statute or agreement of
the parties.
Article 295. Oral Transaction
1. A transaction for which a statute or agreement of the
parties has not established a written (simple or notarial) form,
may be made orally.
2. Unless otherwise established by agreement of the parties,
all transactions that are performed upon their making may be made
orally, with the exception of transactions for which notarial form
is established and transactions for which nonobservance of simple
written form entails their invalidity.
3. Transactions in performance of a contract concluded in
written form, may by agreement of the parties be made orally, if
this does not contradict a statute, other legal acts, or the
contract.
Article 296. Written Transaction
1. A written transaction must be made by the preparation of a
document expressing its content and signed by the person or
persons making the transaction or persons properly authorized by
them.
Bilateral (or multilateral) transactions may be made by the
means provided by Paragraphs 2 and 3 of Article 450 of the present
Code.
2. A statute, other legal acts, or an agreement of the
parties may establish additional requirements that the form of a
transaction must meet (making on a defined printed form,
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confirmation by a seal, etc.), and may provide the consequences of
the nonobservance of these requirements. If such consequences are
not provided, the consequences of nonobservance of simple written
form of a transaction (Paragraph 1 of Article 298) shall be
applied.
3. The use in the making of a transaction of facsimile
reproduction of a signature with the assistance of means of
mechanical or other copying, electronic-digital signature, or
other analogue of an actual handwritten signature is allowed in
cases and by the procedure provided by a statute, other legal
acts, or agreement of the parties.
4. If a citizen as the result of physical defect, illness, or
illiteracy cannot sign in his own handwriting, then at his request
the transaction may be signed by another citizen. The signature of
the latter must be authenticated by a notary or other official
having the right to take such notarial action, with an indication
of the reasons because of which the person making the transaction
could not sign it in his own handwriting.
Article 297. Transactions Made in Simple Written Form
1. The following must be made in simple written form, with
the exception of transactions requiring notarial authentication:
1) transactions of legal persons with one another and with
citizens;
2) transactions of citizens with one another for an amount
over twenty times the minimum monthly wage established by a
statute and, in cases provided by a statute, regardless of the
amount of the transaction.
2. Observance of simple written form is not required for
transactions that, in accordance with Article 295 of the present
Code, may be made orally.
Article 298. Consequences of Nonobservance of the Simple
Written Form for a Transaction
1. Nonobservance of the simple written form of a transaction
shall deprive the parties of the right, in case of a dispute, to
rely for confirmation of the transaction and its terms upon the
testimony of witnesses, but shall not deprive them of the right to
adduce written and other evidence.
2. In cases directly indicated by a statute or in an
agreement of the parties, nonobservance of the simple written form
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of a transaction shall entail its invalidity.
3. Nonobservance of the simple written form of a foreign
commercial transaction shall entail the invalidity of the
transaction.
Article 299. Notarially Authenticated Transactions
1. Notarial authentication of a transaction shall be
conducted by making on a document meeting the requirements of
Article 296 of the present Code, an authenticating notation by a
notary or other official having the right to make such notarial
action.
2. The procedure for notarial authentication of a
transaction shall be established by the statute on the notary
system.
3. Notarial authentication of transactions is obligatory:
1) in cases indicated in the present Code;
2) on demand of either of the parties even though by a
statute, this form is not required for transactions of the given
type.
Article 300. Consequences of Nonobservance of Notarial Form
for a Transaction
1. Nonobservance of notarial form of a transaction shall
entail its invalidity. Such a transaction is considered void.
2. If one of the parties has performed a transaction in full
or in part that requires notarial authentication and the other
party refuses such authentication of the transaction, the court
has the right on demand of a party who has performed the
transaction to recognize the transaction as valid. In this case
subsequent notarial authentication of the transaction is not
required.
3. A party that has unjustifiably refused notarial
authentication of a transaction must compensate the other party
for the damages caused by delay in the completion of the
transaction.
Article 301. State Registration of Rights Arising from
Transactions
1. Rights arising from transactions with immovable property
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are subject to state registration.
2. Rights arising from transactions with movable property are
subject to state registration in cases provided by the present
Code and other statutes.
3. The procedure for state registration and the bases for
refusal of registration shall be established by the statute on
state registration of rights to property.
Article 302. Consequences of Nonobservance of a Requirement
for the Registration of Rights Arising form a Transaction
1. Nonobservance of a requirement of state registration of
rights arising from a transaction shall entail its invalidity.
Such a transaction is considered void.
2. If a transactions has been made in proper form, but one of
the parties refuses to register the rights arising from the
transaction, the court has the right on demand of the other party
to make a decision on the registration of these rights. In this
case, the rights arising from the transaction shall be registered
in accordance with the decision of the court.
3. A party that unjustifiably refused state registration of
rights arising from the transaction must compensate the other
party for the damages caused by delay in the registration of the
transaction.
§ 2. Invalidity of Transactions
Article 303. Avoidable and Void Transactions
1. A transaction may be invalid on the grounds established by
the present Code by virtue of its declaration as such by a court
(an avoidable transaction) or independent of such declaration (a
void transaction).
2. A claim for the declaration of an avoidable transaction to
be invalid may be presented by the persons indicated in the
present Code.
3. A claim for the application of the consequences of the
invalidity of a void transaction may be presented by any
interested person. The court has the right to apply such
consequences on its own initiative.
Article 304. General Provisions on the Consequences of
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Invalidity of a Transaction
1. An invalid transaction does not entail legal consequences
other than those that are connected with its invalidity. Such a
transaction is invalid from the time of its making.
2. In case of the invalidity of a transaction, each of the
parties is obligated to return to the other everything received
under the transaction and in case of the impossibility of
returning in kind what was received (including when what was
received consisted of the use of property, work performed, or
services provided) to compensate for its value in money, unless
other consequences of the invalidity of the transaction are
provided by a statute.
3. If from the content of an avoidable transaction it follows
that it may only be terminated for the future, the court,
declaring the transaction to be invalid, shall terminate its
effect for the future.
Article 305. Invalidity of Transactions Not Corresponding to
the Requirements of a Statute or to Other Legal Acts
A transaction not corresponding to the requirements of a
statute or of other legal acts is invalid, unless the statute
establishes that such a transaction is void or provides other
consequences for the violation.
Article 306. Invalidity of Mock and Sham Transactions
1. A mock transaction, i.e., a transaction made only for
appearances without an intent to create the legal consequences
corresponding to it, is void.
2. A sham transaction, i.e., a transaction that is made for
the purpose of hiding another transaction, is void. The rules
relating to the transaction that the parties actually had in mind
in making the sham transaction, shall be applied to this
transaction, taking into account the nature of the case.
Article 307. Invalidity of a Transaction Made by a Citizen
Who Has Been Declared Lacking Dispositive Capacity
1. A transaction made by a citizen who has been declared
lacking dispositive capacity as the result of a mental disturbance
is void.
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Each of the parties to such a transaction is obligated to
return to the other in kind everything that was received and, in
case of impossibility of returning what was received in kind, to
return its value in money.
The competent party is obligated, in addition, to compensate
the other side for the actual damage suffered by him, if the
competent party knew or should have known of the incompetence of
the other party.
2. In the interests of a citizen who has been declared
lacking dispositive capacity as the result of a mental
disturbance, a transaction made by him may, on request by his
guardian, be declared valid by a court, if it was made to the
advantage of this citizen.
Article 308. Invalidity of a Transaction Made by a Citizen
Limited in Dispositive Capacity
1. A transaction for the disposition of property made without
the consent of the curator by a citizen limited by a court in
dispositive capacity as the result of abuse of alcoholic beverages
or narcotic substances may be declared invalid by a court on suit
of the curator.
If such a transaction is declared invalid, the rules provided
by the second and third subparagraphs of Paragraph 1 of Article
307 of the present Code shall be applied correspondingly.
2. The rules of the present Code do not apply to minor
everyday transactions that a citizen limited in dispositive
capacity has the right to make independently in accordance with
Article 32 of the present Code.
Article 309. Invalidity of a Transaction Made by a Minor Who
Has Not Attained the Age of Fourteen
1. A transaction made by a minor who has not attained the age
of fourteen (a child) is void. The rules provided by the second
and third subparagraphs of Paragraph 1 of Article 307 of the
present Code shall be applied to such a transaction.
2. In the interests of a child a transaction made by him, on
request of his parents, adoptive parents, or guardian, may be
declared valid by a court, if it was made to the advantage of the
child.
3. The rules of the present Article do not extend to petty
everyday and other transactions of children that they have the
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right to make independently in accordance with Article 29 of the
present Code.
Article 310. Invalidity of a Transaction Made by a Minor of
the Age of Fourteen to Eighteen
1. A transaction made by a minor of the age of fourteen to
eighteen without the consent of his parents, adoptive parents, or
guardian, in cases when such consent is required in accordance
with Article 30 of the present Code may be declared invalid by a
court on suit by the parents, adoptive parents or guardian.
If such a transaction is declared invalid, the rules provided
by the second and third subparagraphs of Paragraph 2 and 3 of
Article 307 of the present Code shall be applied correspondingly.
2. The rules of the present Article do not extend to
transactions of minors who have become of full dispositive
capacity in accordance with the rules of Article 24 of the present
Code.
Article 311. Invalidity of a Transaction Made by a Citizen
Incapable of Understanding the Significance of His Actions or of
Controlling Them
1. A transaction made by a citizen having dispositive
capacity, but being at the time of making it in a condition in
which he was not capable of understanding the significance of his
actions or of controlling them may be declared invalid by a court
on suit of this citizen or of other persons whose rights or
interests protected by a statute have been violated as the result
of the making of the transaction.
2. A transaction made by a citizen later declared lacking
dispositive capacity may be declared invalid by a court on suit of
his guardian if it is shown that at the time of making the
transaction the citizen was not capable of understanding the
significance of his actions or of controlling them.
3. If a transaction is declared invalid on the basis of the
present Article, the rules provided by the second and third
subparagraphs of Paragraphs 2 and 3 of Article 307 of the present
Code shall be applied correspondingly.
Article 312. Invalidity of a Transaction Made Under the
Influence of a Mistake Having Substantial Significance
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1. A transaction made under the influence of a mistake having
a substantial significance may be declared invalid by a court on
suit by the party who acted under the influence of the mistake.
A mistake has a substantial significance if it is with
respect to the nature of a transaction or of the identity or other
qualities of its subject that significantly reduce the possibility
of its use for its purpose. A mistake concerning the motives of
the transaction does not have a substantial significance.
2. If a transaction is declared invalid as made under the
influence of a mistake, the rules provided by Paragraph 2 of
Article 331 of the present Code shall be applied correspondingly.
The party on whose suit the transaction was declared invalid
shall have the right to claim from the other party compensation
for the actual damage caused to it if it shows that the mistake
arose due to the fault of the other party. If this is not shown,
the party, on whose suit the transaction was declared invalid,
shall be obligated to compensate the other party on its demand for
the actual damage caused to it, even if the mistake arose due to
circumstances not depending upon the mistaken party.
Article 313. Invalidity of a Transaction Made Under the
Influence of Fraud, Duress, Threat, of a Bad-Faith Agreement of
the Representative of One Party With Another Party or the
Confluence of Harsh Circumstances
1. A transaction made under the influence of fraud, duress,
threat, a bad-faith agreement of the representative of one party
with another party, and also a transaction that a person was
compelled to make as the result of the confluence of harsh
circumstances on conditions extremely unfavourable for itself that
the other party used (an oppressive transaction) may be declared
invalid by a court on suit of the victim.
2. If a transaction is declared invalid by a court on one of
the bases indicated in Paragraph 1 of the present Article, then
the other party shall return to the victim everything it received
and, if it is impossible to return it in kind, its value in money
shall be compensated. Property received under the transaction by
the victim from the other party and also due to him in
compensation for that transferred to the other party shall go to
the income of the Republic of Armenia. If it is impossible to
transfer the property to the income of the state in kind, its
value in money shall be taken. In addition the victim shall be
compensated by the other party for the actual harm caused to it.
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Article 314. Invalidity of a Transaction by a Legal Person
Exceeding the Limits of Its Legal Capacity
A transaction made by a legal person in contradiction with
the purposes of activity specifically limited in its charter or by
a legal person not having a license to engage in the respective
activity may be found invalid by a court on suit by this legal
person, its founder (or participant) or a state agency exercising
checking or supervision of the activity of the legal person, if it
is shown that the other party to the transaction knew or clearly
should have known of its illegality.
Article 315. Consequences of Limitation of Authority to Make
a Transaction
If the authority of a person to make a transaction is limited
by contract or the authority of a body of a legal person is
limited by its charter in comparison with how they are defined in
a power of attorney, in a statute, or how they could be considered
obvious from the situation in which the transaction is made, and
if at its making such a person or agency went beyond these limits,
the transaction may be declared invalid by a court on suit of a
person in whose interests the limitations were established only in
the cases when it is shown that the other party to the transaction
knew or clearly should have known of these limitations.
Article 316. Consequences of Invalidity of Part of a
Transaction
The invalidity of part of a transaction shall not entail the
invalidity of the other parts of it if the transaction would have
been made without the inclusion of its invalid part.
Article 317. Periods of Limitation of Actions Under Invalid
Transactions
1. A suit for the application of the consequences of the
invalidity of a void transaction may be brought within ten years
from the day when performance of the transaction began.
2. A suit on the declaration of an avoidable transaction
invalid and on applying the consequences of its invalidity may be
brought within a year from the day of the termination of the
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duress or threat under the influence of which the transaction was
made (Paragraph 1 of Article 313) or from the day when the
plaintiff knew or should have known of other circumstances that
are the basis for the declaration of the transaction as invalid.
Chapter 19. Representation
Article 318. Representation
1. A transaction made by one person (a representative) in the
name of another person (the person represented) by virtue of a
power based upon a power of attorney, a provision of a statute or
an act of a state agency or agency of local self-government
empowered thereto directly creates, changes, or terminates the
civil law rights and duties of the person represented.
The power may also appear from the circumstance in which the
representative acts (a sales clerk in retail trade, a cashier,
etc.).
2. Persons are not representatives who act, although in the
interests of another but in their own name (commercial
intermediaries, bankruptcy claims administrators, executors of a
will in inheritance, etc.) and also persons authorized to enter
into negotiations with respect to transactions possible in the
future.
3. A representative may not make a transaction with himself
personally in the name of the person represented. He also may not
make such a transaction with respect to another person whose
representative he is simultaneously, with the exception of cases
of commercial representation.
4. It is not allowed to make through a representative of a
transaction that by its nature may be made only personally nor to
make other transactions indicated in a statute.
Article 319. Making of a Transaction by an Unauthorized
Person
1. In case of the absence of authority to act in the name of
another person or in case of exceeding such authority a
transaction is considered concluded in the name and in the
interest of the person who made it unless the other person (the
represented person) later directly ratifies this transaction.
2. The later ratification of a transaction by the represented
person shall create, change, or terminate for him the civil law
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rights and duties under the given transaction from the time of its
making.
Article 320. Commercial Representation
1. A commercial representative is a person constantly and
independently acting as representative in the name of
entrepreneurs in the conclusion by them of contracts in the sphere
of entrepreneurial activity.
2. Simultaneous commercial representation of different
parties to a transaction is allowed with the consent of these
parties and in other cases provided by a statute.
A commercial representative has the right to demand payment
of the agreed remuneration and compensation for costs borne by it
in the performance of the task from the parties to the contract in
equal shares, unless otherwise provided by an agreement among
them.
3. Commercial representation shall be conducted on the basis
of a contract concluded in a written form and containing
indications of the power of the representative and, in the absence
of such indications, alternatively on the basis of a power of
attorney.
A commercial representative is obligated to keep in secret
information that has become known to it on trade transactions even
after the performance of the task given to it.
4. The peculiarities of commercial representation in specific
areas of entrepreneurial activity shall be established by a
statute and other legal acts.
Article 321. Power of Attorney
1. A power of attorney is a written authorization issued by
one person to another person for representation before third
persons. The written authorization for making a transaction by a
representative may be given by the person represented directly to
the respective third person.
2. A power of attorney for making transactions requiring
notarial form must be notarially authenticated with the exception
of cases provided by a statute.
3. The following are equated to notarially authenticated
powers of attorney:
1) powers of attorney of military service personnel and of
other persons who are being treated in military hospitals,
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sanatoria, and other military therapeutic institutions
authenticated by the head of such an institution, by his deputy
for the medical section, or by a senior or duty physician;
2) powers of attorney of military service personnel and, in
locations of stationing of military units, groups, institutions,
and military training schools, where there are no notarial offices
nor other agencies conducting notarial operations, also powers of
attorney of workers and employees, members of their family, and
members of the families of military service personnel
authenticated by the commander (or head) of this unit, group,
institution, or school;
3) powers of attorney of persons who are in places of
deprivation of freedom authenticated by the head of the respective
place of deprivation of freedom;
4) powers of attorney of adult citizens with dispositive
capacity who are in institutions for social protection of the
public, authenticated by the administration of this institution or
the head (or his deputy) of the respective agency for social
protection of the public.
4. A power of attorney for the receipt of wages and other
payments connected with labor relations, for the receipt of
payments to authors and inventors, pensions, allowances, and
scholarships, deposits of citizens in banks, and for the receipt
of correspondence, including monetary and parcel correspondence
may also be authenticated by the organization in which the
authorizing party works or studies, an agency of local self-
government at the place of his residence, or the administration of
the inpatient treatment institution in which he is located for
treatment.
5. A power of attorney in the name of a legal person shall be
issued under the signature of its manager or other person
authorized for this by the charter, with an attachment of the seal
of this organization.
6. A power of attorney sent by telegraph and also by other
forms of communication, when the sending of the document is
conducted by the communications employee shall be confirmed by the
agencies of communications.
Article 322. Term of a Power of Attorney
1. The term of a power of attorney may not exceed three
years. If a term is not indicated in the power of attorney, it
shall remain in force for a year from the day of its making.
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A power of attorney in which the date of its making is not
indicated is void.
2. A power of attorney authenticated by a notary and meant
for the conduct of actions abroad and not containing an indication
of the term of its effectiveness remains in force until its
revocation by the person who gave the power of attorney.
Article 323. Delegation of Power of Attorney
1. The person to whom a power of attorney was given must
personally take those actions for which it was authorized. It may
delegate their making to another person if so authorized by the
power of attorney or compelled by force of circumstances, for the
protection of the interests of the one who gave the power of
attorney.
2. One who has transferred powers to another person must
notify of this the one who gave the power of attorney and report
to it the necessary information on the person to whom the powers
were transferred. Nonperformance of this duty imposes upon the one
who transferred the powers liability for the actions of the person
to whom he transferred the powers as for his own actions.
3. A power of attorney issued by way of transfer of powers
must be notarially authenticated, with the exception of the cases
provided by Paragraph 4 of Article 348 of the present Code.
4. The term of effectiveness of a power of attorney issued by
way of transfer of powers may not exceed the term of the power of
attorney on the basis of which it was given.
Article 324. Termination of a Power of Attorney
1. The effect of a power of attorney shall be terminated as
the result of:
1) expiration of the term of the power of attorney;
2) taking the actions provided by the power of attorney;
3) revocation of the power of attorney by the person who gave
it;
4) renunciation by the persons to whom the power of attorney
was given;
5) termination of the legal person in whose name the power of
attorney was given;
6) termination of the legal person to whom the power of
attorney was given;
7) death of the citizen who gave the power of attorney,
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declaration of him as lacking dispositive capacity, of limited
dispositive capacity, or missing;
8) death of the citizen to whom the power of attorney was
given, declaration of him as lacking dispositive capacity, of
limited dispositive capacity, or missing.
2. The person who has given a power of attorney may at any
time revoke the power of attorney or delegation of the power and
the person to whom the power of attorney was given may at any time
renounce it. An agreement relinquishing these rights is void.
Article 325. Consequences of Termination of a Power of
Attorney
1. A person who has issued a power of attorney and thereafter
revokes it is obligated to notify the person to whom the power of
attorney was given about the revocation and also to notify third
persons known to him for representation before whom the power of
attorney was given. The same obligation is imposed upon the legal
successors of the person who gave the power of attorney, in cases
of its termination on the bases provided in subparagraphs 5 and 7
of Paragraph 1 of Article 351 of the present Code.
2. The rights and duties that have arisen as the result of
actions of the person to whom a power of attorney was given,
before this person knew or should have
known of its termination remain in force for the one who issued
the power of attorney and his legal successors with respect to
third persons. This rule is not applied if the third person knew
or should have known that the effect of the power of attorney was
terminated.
3. Upon the termination of the power of attorney, the person
to whom it was given or his legal successor is obligated to return
the power of attorney immediately.
4. With the termination of a power of attorney a delegation
of the power of attorney loses its force.
Chapter 20. Periods of Time
Article 326. Determination of a Period of Time
A period of time established by a statute, other legal acts,
or a transaction or designated by a court shall be determined by a
calendar date or the expiration of a time interval that is
calculated in years, months, weeks, days, or hours.
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A period of time may also be determined by an indication of
an event that must inevitably occur.
Article 327. Start of a Period Defined by a Time Interval
The running of a period defined by a time interval starts on
the day after the calendar day or the occurrence of the event that
defines its beginning.
Article 328. End of a Period Defined by a Time Interval
1. A period calculated in years shall expire on the
corresponding month and day of the last year of the period.
The rules for periods calculated in months shall be applied
to a period defined as a half-year.
2. The rules for periods calculated in months shall be
applied to a period calculated by quarters of a year. In such a
case a quarter shall be considered as equal to three months and
counting of quarters shall be made from the start of the year.
3. A period calculated in months shall expire on the
corresponding date of the last month of the period.
If the end of a period calculated in months falls in a month
in which there is no corresponding date, then the period expires
on the last day of this month.
4. A period defined as a half-month is considered as a period
calculated by days and is considered equal to fifteen days.
5. A period calculated in weeks expires on the corresponding
day of the last week of the period.
Article 329. End of a Period on a Non-Work Day
If the last day of a period falls on a non-work day, the day
of ending of the period is considered to be the next work day
following it.
Article 330. Procedure for Taking Actions on the Last Day of
the Period
1. If a period is established for taking some action it may
be performed until 24:00 on the last day of the period.
However if this action must be made at an organization, then
the period shall expire at the hour when, in this organization, by
the established rules, the respective operations are terminated.
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2. Written statements and notifications submitted to a
courier organization before 24:00 of the last day of the period
shall be considered made within the period.
Chapter 21. Limitation of Actions
Article 331. Definition of Limitation of Actions
Limitation of actions is the period for protection of a right
on suit of the person whose right has been violated.
Article 332. General Term of Limitation of Actions
The general period of limitation of actions is established at
three years.
Article 333. Special Terms of Limitation of Actions
1. For individual types of claims a statute may establish
special periods of limitation of actions reduced or longer in
comparison with the general period.
2. The rules of Articles 331 and 334-343 of the present Code
extend also to special periods of limitation unless a statute
establishes otherwise.
Article 334. Invalidity of an Agreement on Changing the
Periods of Limitation of Actions
The periods of limitation of actions and the procedure for
calculating them is provided by statute and may not be changed by
agreement of the parties.
The bases for suspending and interrupting the running of the
periods of limitation of actions are established by the present
Code and other statutes.
Article 335. Application of the Limitation of Actions
1. A demand for the protection of a right shall be taken for
consideration by a court regardless of the expiration of the
period of limitation of actions.
2. The limitation of actions shall be applied by a court only
on request of a party to the dispute, made before the rendering of
a decision by the court.
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The expiration of a period of limitation of actions, that a
party has requested be applied, is a basis for the rendering of a
decision by the court to dismiss an action.
Article 336. Application of Limitation of Actions to
Supplementary Claims
1. With the expiration of the period of limitation of actions
on a basic claim, the period of limitation of actions also expires
on supplementary claims (pledge, penalty, withholding, guaranty,
earnest money).
Article 337. Calculation of the Term of Limitation of
Actions
1. The running of the term of limitation of actions starts
from the day when the person knew or should have know of the
violation of his write. Exceptions from this rule are made by the
Code and other statutes.
2. On obligations with a defined period for performance, the
running of limitation of actions starts at the end of the period
for performance.
For obligations for which the period of performance is not
defined or is defined as the time of demand, the running of the
limitation of actions starts from the time when the right arises
for the creditor to make a demand for performance of the
obligation, and, if the debtor is granted a grace period for the
performance of such an action, then the calculation of the
limitation of actions starts at the end of this period.
3. On subrogation actions, the running of limitation of
actions starts from the time of performance of the principal
obligation.
Article 338. Period of Limitation of Actions on Change of
Persons in an Obligation
The change of persons in an obligation does not entail a
change in the period of limitation of actions nor the procedure
for calculating it.
Article 339. Suspension of the Running of the Period of
Limitation of Actions
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1. The running of the period of limitation of actions shall
be suspended:
1) if the filing of the action was prevented by an
extraordinary circumstance unavoidable under the given conditions
(force majeure);
2) if the plaintiff or defendant were in the Armed Forces put
in a war status;
3) by virtue of an extension of performance of obligations (a
moratorium) established on the basis of a statute by the
Government of the Republic of Armenia;
4) by virtue of the suspension of the effect of a statute or
other legal act regulating the respective relation.
2. On suits for compensation for harm caused to the life or
health of a citizen, the running of the period of limitation of
actions is also suspended in connection with the application by
the citizen to the appropriate agency for the award of a pension
or support payment–until the award of the pension or support
payment or of a refusal to award them.
3. The running of the period of limitation of actions shall
be suspended on the condition that the circumstances indicated in
the present Article arose or continued to exist in the last six
months of the period of limitation and if the period is equal to
six months or less than six months, during the period of
limitation.
4. The running of the period of limitation shall continue
from the day of termination of the circumstance that served as the
basis for its suspension. The remaining part of the period shall
be extended to six months, or, if the period of the limitation of
actions is equal to six months or less than six months, to the
period of limitations.
Article 340. Interruption of the Period of Limitation of
Actions
The period of limitation of actions shall be interrupted by
the filing of an action by the established procedure and also by
the taking by the obligated person of actions evidencing the
acknowledgement of a debt.
After the interruption, the running of the period of
limitation of actions shall start anew; the time that passed
before the interruption shall not be counted in the new period.
Article 341. Running of the Period of Limitation of Actions
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in the Case of Leaving a Claim Without Consideration
If a suit is left by a court without consideration, then the
running of a period of limitation of actions that began before the
filing of the action shall continue in the regular manner.
If the suit that was left by the court without consideration
was presented in a criminal case, then the running of a period of
limitation of actions that began before filing the action shall be
suspended until the decision by which the action was left without
consideration goes into legal force; the time during which the
limitation was suspended shall not be calculated in the period of
limitation of actions. In such a case if the remaining part of the
period is less than six months, it shall be extended to six
months.
Article 342. Reinstatement of a Period of Limitation of
Actions
In exceptional cases, when a court recognizes a compelling
reason for letting a period of limitations of actions pass due to
circumstances connected with the person of the plaintiff (serious
illness, helpless condition, illiteracy, etc.), a violated right
of a citizen shall be subject to protection. The reasons for
allowing a period of limitation of actions to pass may be
recognized as compelling if they took place in the last six months
of the period of limitations or, if the period is equal to six
months or less than six months, during the period of limitations.
Article 343. Performance of an Obligation After Expiration
of the Period of Limitation of Actions
A debtor or other obligated person who has performed an
obligation after the expiration of the period of limitation of
actions shall not have the right to demand the performance back,
even if at the time of performance this person did not know of the
expiration of the limitation.
Article 344. Demands to Which the Limitation of Actions Does
Not Apply
Limitation of actions does not apply to:
1) demands for the defence of personal nonproperty rights and
other nonmaterial values with the exception of cases provided by a
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statute;
2) demands of depositors to a bank to give out deposits;
3) demands on compensation for harm caused to the life or
health of a citizen. However demands presented after the
expiration of three years from the time of arising of the right to
compensation for such harm shall be satisfied for not more than
three years previous to the time of bringing suit;
4) demands of an owner or other possessor for elimination of
any kind of violation of its rights, even if these violations were
not connected with the deprivation of possession (Article 277);
5) claims of an owner for recognition as invalid of an act of
a state agency or an agency of local government that has violated
the right of the owner for the possession, use, or disposition of
property.
6)other demands in cases provided by a statute.
DIVISION 6. GENERAL PROVISIONS ON OBLIGATIONS
Chapter 22. Definition of and Parties to an Obligation
Article 345. Definition of an Obligation and Bases for Its
Origin
1. By force of an obligation one person (the debtor) is
obligated to take for the use of another person (the creditor) a
defined action, such as: to pay money, to transfer property, to
perform work, etc., or refrain from a defined action, and the
creditor has the right to demand from the debtor the performance
of its obligation.
2. Obligations arise from contract, from the causing of harm,
and from other bases indicated in the present Code.
Article 346. Parties to an Obligation
1. One or simultaneously several persons may participate in
an obligation as either of the parties–creditor or debtor.
The invalidity of claims of a creditor against one of the
persons participating in an obligation on the side of the debtor
and likewise the expiration of the period of limitation of actions
with respect to such a person, in and of itself does not affect
its claims against the remaining persons.
2. If each of the parties to a contract bears an obligation
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for the use of the other party, it is considered a debtor of the
other party as to what it is obligated to do for its use and
simultaneously its creditor for what it has the right to demand
from it.
3. An obligation does not create duties for persons who are
not participants in it as parties (for third persons).
In cases provided by a statute, other legal acts, or by
agreement of the parties, an obligation may create rights for
third persons with respect to one or both of the parties to an
obligation.
Chapter 23. Performance of Obligations
Article 347. General Provisions
Obligations must be performed in a proper manner in
accordance with the terms of the obligation and the requirements
of a statute, other legal acts, and in the absence of such terms
and requirements—in accordance with the customs of trade or other
usually made requirements.
Article 348. Impermissibility of Unilateral Refusal to
Perform an Obligation
Unilateral refusal to perform an obligation and unilateral
change in its terms is not allowed with the exception of cases
provided by a statute. Unilateral refusal to perform an obligation
connected with the conduct by its parties of entrepreneurial
activity and unilateral change in the terms of such an obligation
is allowed also in cases provided by contract unless otherwise
follows from a statute or the nature of the obligation.
Article 349. Performance of an Obligation in Parts
A creditor has the right not to accept performance of an
obligation in parts, unless otherwise provided by a statute, other
legal acts, or terms of the obligation or follows from customs of
trade or the nature of the obligation.
Article 350. Performance of an Obligation to the Proper
Person
Unless otherwise provided by agreement of the parties or
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follows from the customs of trade or the nature of an obligation,
a debtor has the right in performance of an obligation to demand
proof that performance is being accepted by the creditor itself or
by a person authorized by it and bears the risk of the
consequences of the nonpresentation of such a demand.
Article 351. Performance of an Obligation by a Third Person
1. Performance of an obligation may be placed by the debtor
on a third person, unless a duty of the debtor to perform the
obligation personally follows from a statute, other legal acts,
the terms of the obligation, or its nature. In this case, the
creditor is obligated to accept the performance tendered for the
debtor by the third person.
2. A third person who is under the risk of losing its right
to the property of the debtor (right of lease, etc.) as the result
of the levying by a creditor of execution on this property may
with the consent of the debtor satisfy at its own expense claim of
a creditor and obtain the right of a creditor under the obligation
in accordance with Articles 397-405 of the present Code.
Article 352. Period for Performance of the Obligation
1. If an obligation provides or allows the determination of
the day for its performance or the period of time in the course of
which it must be performed, the obligation is subject to
performance at this day or at any time within the limits of such
period.
2. In cases when an obligation does not provide a period for
its performance and does not contain terms allowing the
determination of this period, it must be performed in a reasonable
time after the origin of the obligation.
A debtor must perform an obligation not performed in a
reasonable time and also an obligation the period for performance
of which is determined as the time of demand within a seven-day
period from the day of making by the creditor of a demand for its
performance unless an obligation for performance within another
period follows from a statute, other legal acts, the terms of the
obligation, the customs of trade or the nature of the obligation.
Article 353. Early Performance of an Obligation
A debtor has the right to perform an obligation early unless
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otherwise provided by a statute, other legal acts or the terms of
the obligation or follows from its nature. Early performance of
obligations connected with the conduct by its parties of
entrepreneurial activity is allowed only in cases when the
possibility of performing the obligation early is provided by a
statute, other legal acts or the terms of the obligation or
follows from the customs of trade or the nature of the obligation.
Article 354. Information on the Course of Performance of an
Obligation
A statute, other legal acts, or the terms of an obligation
may provide an obligation for the debtor to inform a creditor or a
person indicated by him of the course of performance of an
obligation.
Article 355. The Place of Performance of an Obligation
1. An obligation must be performed at the place that is
determined by statute, other legal acts, or contract or follows
from the customs of trade or the nature of the obligation.
2. If a place of performance is not designated, performance
must be made:
1) on an obligation to transfer a land parcel, building,
structure, or other immovable property—at the place of location of
the property;
2) on an obligation to transfer goods or other property
envisioning its carriage–at the place of submission of the
property to the first carrier for its physical delivery to the
creditor;
3) on other obligations of an entrepreneur to transfer goods
or other property–at the place of manufacture or storage of the
property if this place was known to the creditor at the time the
obligation arose;
4) on a monetary obligation–at the place of residence of a
creditor at the time the obligation arises and if the creditor is
a legal person–at its seat at the time the obligation arises. If
the creditor by the time of performance of the obligation changed
its place of residence or seat and notified the debtor of this–at
the new place of residence or seat of the creditor with the
creditor bearing the expenses connected with the transfer of the
place of performance;
5) on all other obligations–at the place of residence of the
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debtor and if the debtor is a legal person–at its seat.
Article 356. Currency for Monetary Obligations
1. Monetary obligations must be expressed in drams (Article
142).
2. In a monetary obligation it may be provided that it is
subject to payment in drams in an amount equivalent to a defined
sum in foreign currency or in artificial monetary units. In this
case the amount subject to payment in drams shall be determined
at the official rate of exchange of the respective currency or
artificial monetary units on the day of payment, unless another
rate of exchange or another date for determining it is established
by a statute or agreement of the parties.
3. In long term contracts indexation of payments may be
specified on terms agreed by the parties.
4. The use of foreign currency and also of payment documents
in foreign currency in the making of payments on the territory of
the Republic of Armenia for obligations is allowed in the cases
and by the procedure provided by statute.
Article 357. Increase of the Amount Paid for Support of a
Citizen
The amount paid under a monetary obligation directly for the
support of a citizen: in compensation for harm caused to life or
health, on a contract of lifetime support, and in other cases
shall be increased proportionally with the increase of the minimum
monthly wage established by a statute.
Article 358. Order of Satisfaction of Demands Under a
Monetary Obligation
An amount of a payment made insufficient for performance of a
monetary obligation in full, in absence of another agreement, pays
first of all the costs of the creditor for obtaining performance,
then interest, and in the remaining part, the principal amount of
the debt.
Article 359. Performance of an Alternative Obligation
A debtor who is obligated to transfer to a creditor one or
another property or to take one of two or several actions has the
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right of choice unless it follows otherwise from a statute, other
legal acts, or terms of the obligation.
Article 360. Performance of an Obligation in Which Several
Creditors or Several Debtors Participate
In the case when several creditors or several debtors
participate in an obligation, then each of the creditors has the
right to demand performance and each of the debtors is obligated
to perform the obligation in an equal share with the others if it
does not follow otherwise from a statute, other legal acts, or the
terms of the obligation.
Article 361. Joint and Several Obligations
1. A joint and several obligation (or liability) or a joint
and several claim arises if the joint and several nature of the
duty or claim is provided by contract or established by a statute,
in particular in case of indivisibility of the subject of the
obligation.
2. The duties of several debtors under an obligation
connected with entrepreneurial activity likewise as the claims of
several creditors under the same obligation are joint and several
unless a statute, other legal acts, or the terms of the obligation
provide otherwise.
Article 362. The Rights of a Creditor Under a Joint and
Several Obligation
1. In case of a joint and several obligation of the debtors,
the creditor has the right to demand performance both from all the
debtors jointly and from any one of them separately, and for all
or for part of the debt.
2. A creditor who has not received full satisfaction from one
of the joint and several debtors has the right to demand from the
remaining joint and several debtors what was not received.
Joint and several debtors are obligated until the time when
the obligation is performed in full.
Article 363. Defences Against Claims of a Creditor in Case
of a Joint and Several Obligation
In case of a joint and several obligation, the debtor does
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not have the right to raise against the claims of the creditor
defences based on relations of other debtors with the creditor in
which the given debtor does not participate.
Article 364. Performance of a Joint and Several Obligation
by One of the Debtors
1. Performance of a joint and several obligation in full by
one of the debtors frees the remaining debtors from performance to
the creditor.
2. Unless it follows otherwise from relations among the joint
and several debtors:
1) a debtor who has performed a joint and several obligation
has the right of a subrogation claim against the remaining debtors
in equal shares less its own share;
2) what is unpaid by one of the joint and several debtors to
the debtor who performed the joint and several obligation falls in
equal share on this debtor and on the remaining debtors.
3. The rules of the present Article shall be applied
correspondingly in case of termination of a joint and several
obligation by subtraction of a counterclaim by one of the debtors.
Article 365. Joint and Several Claims
1. If a claim is joint and several, any of the joint and
several creditors may present the claim to the debtor in full.
Before the making of a claim by one of the joint and several
creditors, the debtor has the right to perform the obligation to
any of them at its discretion.
2. A debtor does not have the right to raise against the
claim of one of the joint and several creditors defences based on
relations of the debtor with another joint and several creditor in
which the given creditor is not participating.
3. Performance of an obligation in full to one of the joint
and several creditors frees the debtor from performance to the
remaining creditors.
4. A joint and several creditor who has obtained performance
from the debtor is obligated to compensate what is due to the
other creditors in equal shares unless otherwise follows from the
relations among them.
Article 366. Performance of Obligations by the Placing of a
Debt on Deposit
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1. A debtor has the right to place money or commercial paper
or securities due from it on deposit with a notary and, in cases
provided by a statute, on deposit with a court, if an obligation
cannot be performed by the debtor as the result of:
1) absence of a creditor or person authorized by it to
receive performance at the place where the obligation was to be
performed;
2) lack of dispositive capacity of the creditor and absence
of a representative for it;
3) clear absence of clarity with respect to who is creditor
under the obligation, in particular in connection with a dispute
on this among the creditor and other persons;
4) refusal of the creditor to accept performance or other
delay on its part.
2. Placing of a monetary sum or commercial paper or
securities on deposit with a notary or a court is considered
performance of the obligation.
3. The notary or court, in deposit with whom the money or
commercial paper or securities has been placed shall notify the
creditor of this.
Article 367. Reciprocal Performance of Obligations
1. Performance of an obligation of one of the parties is
reciprocal if, in accordance with the contract, it depends upon
performance of its obligations by the other party.
2. In case of failure of the obligated party to make the
performance of the obligation provided by the contract or the
presence of other circumstances obviously indicating that such
performance will not be made at the established time, the party
upon whom the reciprocal performance lies has the right to suspend
performance of its obligation or to refuse to perform this
obligation and to demand compensation for damages.
If the performance provided by the contract for an obligation
is not made in full, the party upon whom the reciprocal
performance lies has the right to suspend performance of its
obligation or to refuse performance in the part corresponding to
the performance not made.
3. In case reciprocal performance of the obligation is made
despite the failure of the other party to make the performance of
its own obligation provided by the contract, this party is
obligated to provide such a performance.
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4. The rules provided by Paragraphs 2 and 3 of the present
Article shall be applied unless a contract or a statute provides
otherwise.
Chapter 24. Security for Performance of Obligations
§ 1. General Provisions
Article 368. Means of Security for Performance of
Obligations
1. The performance of obligations may be secured by a pledge
(Chapter 15), penalty, withholding of property of the debtor,
surety, guaranty, earnest money, and other means provided by a
statute or contract.
2. The invalidity of an agreement on security does not entail
the invalidity of the obligation (of the principal obligation).
3. The invalidity of the principal obligation shall entail
the invalidity of the obligation securing it unless otherwise
provided by a statute.
§ 2. Penalty
Article 369. Definition of a Penalty
1. A penalty (or forfeiture or fine) is a monetary sum
determined by a statute or contract that a debtor must pay to the
creditor in case of non-performance or improper performance of an
obligation, in particular in case of a delay in performance. In
demanding payment of a penalty, the creditor is not obligated to
prove that damage was caused to it.
2. A penalty secures only a valid claim.
3. The creditor does not have the right to demand payment of
a penalty if the debtor does not bear liability for the
nonperformance or improper performance of the obligation.
Article 370. Form of Agreement on a Penalty
An agreement on a penalty must be made in written form
regardless of the form of the basic obligation.
Nonobservance of the written form shall entail the invalidity
of the agreement on the penalty.
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Article 371. Statutory Penalty
1. The creditor has the right to demand payment of a penalty
defined by a statute (a statutory penalty) regardless of whether
or not the obligation to pay it is provided by an agreement of the
parties.
2. The amount of a statutory penalty may be increased by
agreement of the parties unless a statute forbids this.
Article 372. Reduction of a Penalty
If a penalty subject to payment is clearly disproportionate
to the consequences of violation of an obligation, a court has the
right to reduce the penalty.
§ 3. Withholding
Article 373. Grounds for Withholding
1. A creditor who has property subject to transfer to a
debtor or other person indicated by a debtor shall have the right
in case of nonperformance by the debtor on time of the obligation
to pay for this property or to compensate the creditor for the
costs and other damages connected with it to withhold it until the
time when the corresponding obligation is performed.
2. The withholding of property may serve as security for
claims, even those not connected with payment for the property or
compensation of costs for it and other damages, but which arose
from an obligation whose parties acted as entrepreneurs.
3. A creditor may withhold property that he has despite the
fact that after this property came into the possession of the
creditor the rights to it were obtained by a third person.
4. The rules of the present Article shall be applied unless a
contract provides otherwise.
Article 374. Satisfaction of Claims at the Expense of the
Withheld Property
Claims of a creditor who has withheld a property shall be
satisfied from its value in the amount and by the procedure
provided for satisfaction of claims secured by a pledge.
§ 4. Surety
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Article 375. The Contract of Suretyship
Under the contract of suretyship, the surety is obligated to
the creditor of another person to answer for the performance by
the latter of its obligation in full or in part.
A contract of suretyship may also be concluded to secure an
obligation that will arise in the future.
Article 376. Form of the Contract of Suretyship
The contract of suretyship must be made in written form.
Nonobservance of written form entails the invalidity of the
contract of suretyship.
Article 377. Liability of the Surety
1. In case of nonperformance or improper performance by the
debtor of obligations secured by a surety, the surety and debtor
shall be liable jointly and severally to the creditor unless a
statute or the contract of suretyship provides for the subsidiary
liability of the surety.
2. The surety shall answer to the creditor in the same amount
as the debtor including payment of interest, compensation for
judicial costs for recovery of the debt and other damages of the
creditor caused by the nonperformance or improper performance of
the obligation by the debtor, unless otherwise provided by the
contract of suretyship.
3. Persons who have jointly given a surety shall answer to
the creditor jointly and severally, unless otherwise provided by
the contract of suretyship.
Article 378. Compensation for the Services of the Surety
The surety has the right to compensation for services
rendered by it to the debtor unless otherwise provided by the
contract.
Article 379. Right of the Surety to Defend Against a Claim
of the Creditor
1. The surety shall have the right to raise the defences
against the claim of a creditor that the debtor could present
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unless otherwise follows from the contract of suretyship. The
surety does not lose the right to these defenses even in the case
when the debtor gave them up or recognized its debt.
2. The surety is obligated before satisfying the claim of a
creditor to warn the debtor of this and if a suit is brought
against the debtor, to involve the debtor in participation in the
case.
3. If a surety has not fulfilled the obligation indicated in
Paragraph 2 of the present article, the debtor has the right to
raise against a subrogation claim of the surety the defenses that
he had against the creditor.
Article 380. Rights of a Surety Who Has Performed an
Obligation
1. To a surety who has performed an obligation shall pass the
rights of the creditor under this obligation and the rights
belonging to the creditor as a pledgee in the amount in which the
surety satisfied the claim of the creditor. The surety also shall
have the right to demand from the debtor payment of interest on
the amount paid to the creditor and compensation for other losses
borne in connection with liability for the debtor.
2. Upon performance by the surety of an obligation, the
creditor shall be obligated to give the surety documents
evidencing the claim against the debtor and to transfer rights
securing this claim.
3. The rules established by the present Article shall be
applied unless otherwise provided by a statute, other legal acts,
or the contract of suretyship with the debtor or otherwise follows
from the relations between them.
Article 381. Notification of the Surety on Performance of
the Obligation by the Debtor
A debtor who has performed an obligation secured by a surety
is obligated to immediately notify the surety of this. In the
contrary case, a surety that has in its turn performed the
obligation has the right to recover from the creditor what was
obtained with no grounds or to bring a subrogation claim against
the debtor.
Article 382. Termination of a Surety
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1. A surety shall be terminated:
1) with the termination of the obligation secured by it and
also in case of a change without permission of the surety in this
obligation entailing an increase in liability or other unfavorable
consequences for it.
2) with a transfer to another person of a debt under an
obligation secured by the surety if the surety did not give the
creditor consent to answer for the new debtor;
3) if the creditor has refused to accept proper performance
offered by the debtor or the surety;
4) at the expiration of the term for which it was given
indicated in the contract. If such a term was not established, the
surety shall be terminated unless the creditor brings suit against
the surety within a year from the day of occurrence of the time
for performance of the obligation secured by the surety. When the
term for performance of the basic obligation is not indicated and
cannot be determined or is determined by the time of demand, the
surety shall be terminated unless the creditor brings a suit
against the surety within two years from the day of conclusion of
the contract of suretyship.
§ 5. Guaranty
Article 383. Definition of Guaranty
By virtue of a guaranty the guarantor (a bank, other credit
institution, or an insurance organization) gives at the request of
another person (the principal) a written obligation to pay a
monetary amount to a creditor of the principal (the beneficiary)
in accordance with the terms of an obligation given by the
guarantor, upon presentation by the beneficiary of a written
demand for its payment.
Article 384. Securing an Obligation of a Principal by a
Guaranty
1. A guaranty secures the proper performance by the principal
of its obligations to the beneficiary (the basic obligation).
2. The principal shall pay the guarantor the compensation for
the issuance of a guaranty.
Article 385. Independence of a Guaranty from the Basic
Obligation
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The obligation of the guarantor to the beneficiary provided
by a guaranty does not depend in relations between them upon the
basic obligation in security for which it was issued, even if
there is a reference to this obligation in the guaranty.
Article 386. Irrevocability of a Guaranty
A guaranty may not be revoked by the guarantor unless
otherwise provided in it.
Article 387. Nontransferability of Rights Under a Guaranty
The right of claim against the guarantor that belongs to the
beneficiary under a guaranty may not be transferred to another
person unless otherwise provided in the guaranty.
Article 388. Entry of a Guaranty into Force
A guaranty shall enter into force from the date of its
issuance unless otherwise provided in the guaranty.
Article 389. Making a Demand Under a Guaranty
1. A demand of a beneficiary for the payment of a monetary
amount under a guaranty must be provided to the guarantor in
written form with the attachment of the documents indicated in the
guaranty. In the demand or in an attachment to it, the beneficiary
must indicate what is the violation by the principal of the basic
obligation to secure which the guaranty was issued.
2. A demand of a beneficiary must be provided to the
guarantor before the end of the term defined in the guaranty, for
which the guaranty was issued.
Article 390. Obligations of the Guarantor in Considering
Demands of the Beneficiary
1. Upon receipt of a demand by a beneficiary, the guarantor
must without delay inform the principal of this and transfer to it
copies of the demand with all the documents relating to it.
2. The guarantor must consider the demand of the beneficiary
with the documents attached to it within the time indicated in the
guaranty and, in its absence, in a reasonable time and exercise
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reasonable care to establish if this demand and the documents
attached to it correspond to the terms of the guaranty.
Article 391. Refusal of the Guarantor to Satisfy the Demand
of a Beneficiary
1. A guarantor shall refuse a beneficiary in the satisfaction
of his demand if this demand or the documents attached to it do
not correspond to the terms of the guaranty or are presented to
the guarantor after the end of the term defined in the guaranty.
A guarantor must immediately inform the beneficiary of a
refusal to satisfy its demand.
2. If it became known to the guarantor before satisfying a
demand by a beneficiary that the basic obligation secured by the
guaranty has already been performed in whole or in a corresponding
part, has been terminated on other grounds or is invalid it must
immediately notify the beneficiary and the principal of this.
A repeated demand of the beneficiary received by the
guarantor after such notice shall be subject to satisfaction by
the guarantor.
Article 392. Limits of the Obligation of the Guarantor
1. The obligation provided by a guaranty of the guarantor to
the beneficiary is limited to payment of the amount for which the
guaranty was issued.
2. The liability of the guarantor to the beneficiary for
nonperformance or improper performance by the guarantor of the
obligation under the guaranty is not limited to the amount for
which the guaranty is issued, unless otherwise provided in the
guaranty.
Article 393. Termination of a Guaranty
1. The obligation of the guarantor to the beneficiary under
the guaranty shall be terminated:
1) by payment to the beneficiary of the amount for which the
guaranty is issued;
2) by the ending of the term defined in the guaranty for
which it was issued;
3) as the result of relinquishment by the beneficiary of its
rights under the guaranty and the return of it to the guarantor;
4) as the result of relinquishment by the beneficiary of its
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rights under the guaranty by written declaration on freeing the
guarantor from its obligations.
Termination of the obligation of the guarantor on the grounds
indicated in subparagraphs 1, 2, and 4 of the present Paragraph
does not depend upon whether or not the guaranty was returned to
him.
2. A guarantor who has learned of the termination of a
guaranty must without delay inform the principal of this.
Article 394. Subrogation Claims of the Guarantor Against the
Principal
1. The right of the guarantor to demand from the principal by
way of subrogation the compensation for amounts paid to the
beneficiary under a guaranty shall be determined by the agreement
of the guarantor with the principal, in fulfillment of which the
guaranty was issued.
2. The guarantor shall not have the right to demand
compensation from the principal for amounts paid to the
beneficiary not in accordance with the terms of the guaranty or
for violation of the obligation of the guarantor to the
beneficiary unless an agreement of the guarantor with the
principal provides otherwise.
§ 6. Earnest Money
Article 395. Definition of Earnest Money. Form of an
Agreement on Earnest Money
1. Earnest money is a monetary amount given by one of the
contracting parties toward payments due from it under the contract
to the other party, as evidence of conclusion of the contract and
to secure its performance.
2. An agreement on earnest money, regardless of the amount of
the earnest money, must be made in written form.
3. In case of doubt with respect to whether the amount paid
toward the payments due from the party under the contract is
earnest money, in particular as the result of nonobservance of the
rule established by Paragraph 2 of the present Article, this
amount shall be considered paid as an advance, unless proven
otherwise.
Article 396. Consequences of Termination and Nonperformance
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of an Obligation Secured by Earnest Money
1. In case of termination of an obligation before the start
of its performance by agreement of the parties or as the result of
impossibility of performance (Article 432) the earnest money must
be returned.
2. If the party who gave the earnest money is liable for
nonperformance of the contract, the earnest money remains with the
other party. If the party who received the earnest money is liable
for nonperformance of the contract, it is obligated to pay the
other party twice the amount of the earnest money.
In addition, the party liable for nonperformance of the
contract is obligated to compensate the other party for damages
less the amount of the earnest money, unless otherwise provided by
the contract.
Chapter 25. Changing Persons in an Obligation
§ 1. Transfer of the Rights of a Creditor to Another Person
Article 397. Grounds and Procedure for Transfer of the
Rights of a Creditor to Another Person
1. A right (or claim), belonging to a creditor on the basis
of an obligation, may be transferred by it to another person by a
transaction (assignment of a claim) or may pass to another person
on the basis of a statute.
The rules on transfer of rights of a creditor to another
person shall not be applied to subrogation claims.
2. The consent of the debtor is not required for transfer to
another person of the rights of the creditor, unless otherwise
provided by a statute or contract.
3. If a debtor was not notified in writing of a completed
transfer of rights of a creditor to another person, the new
creditor bears the risk of unfavorable consequences caused for it
by this. In this case the performance of an obligation to the
initial creditor shall be treated as performance to the proper
creditor.
Article 398. Rights That May Not Be Transferred to Other
Persons
The transfer to another person of rights inseparably
connected with the personality of the creditor, in particular of
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claims for support and for compensation for harm caused to life or
health, is not allowed.
Article 399. Scope of the Rights of a Creditor Passing to
Another Person
Unless otherwise provided by a statute or contract, the right
of the initial creditor shall pass to the new creditor in the same
volume and on the same conditions that existed at the time of
transfer of the right. In particular, the rights securing
performance of the obligation and also other rights connected with
the claim, including the right to unpaid interest, shall pass to
the new creditor.
Article 400. Proof of the Rights of the New Creditor
1. The debtor has the right not to perform an obligation to
the new creditor before the presentation to it of proof of the
transfer of the claim to this person.
2. A creditor who has assigned a claim to another person is
obligated to transfer to it documents evidencing the right of
claim and to report information having significance for the
realization of the claim.
Article 401. Defenses of the Debtor Against a Claim of the
New Creditor
The debtor has the right to raise against a claim of the new
creditor defenses that it had against the original creditor at the
time of receipt of notice of the transfer of rights under the
obligation to the new creditor.
Article 402. Transfer of the Rights of a Creditor to Another
Person on the Basis of a Statute
The rights of a creditor under an obligation pass to another
person on the basis of a statute and of the occurrence of the
circumstances indicated in it:
1) as the result of universal legal succession to the rights
of the creditor;
2) by decision of a court on transfer of the rights of a
creditor to another person, when the possibility of such a
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transfer is provided by a statute;
3) as the result of performance of the obligation of a debtor
by its surety or pledgor who is not the debtor under this
obligation;
4) in case of subrogation to an insurer of the rights of a
creditor against a debtor liable for the occurrence of the insured
event;
5) in other cases provided by a statute.
Article 403. Conditions of Assignment of a Claim
1. An assignment of a claim by a creditor to another person
is allowed if the assignment does not contradict a statute, other
legal acts, or a contract.
2. An assignment of a claim under an obligation in which the
personality of the creditor has a substantial significance for the
debtor is not allowed without the consent of the debtor.
Article 404. Form of Assignment of Claim
1. An assignment of a claim based upon a transaction made in
simple written or notarial form must be made in the corresponding
written form.
2. An assignment of a claim under a transaction rights under
which are subject to state registration must be registered by the
procedure established for registration of these rights, unless
otherwise provided by a statute.
3. An assignment of a claim under an order commercial paper
shall be made by indorsement on this commercial paper (Paragraph 3
of Article 149).
Article 405. Liability of a Creditor Who Has Assigned a
Claim
The initial creditor who has assigned a claim is liable to
the new creditor for the invalidity of a claim transferred to it
but is not liable for the nonperformance of this claim by the
debtor except in the case when the initial creditor undertook a
surety for the debtor to the new creditor.
§ 2. Transfer of a Debt
Article 406. Conditions and Form of Transfer of a Debt
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1. The transfer by a debtor of its debt to another person is
allowed only with the consent of the creditor.
2. The rules contained in Paragraphs 1 and 2 of Article 404
of the present Code shall be applied analogously to the form of
transfer of a debt.
Article 407 Defenses of the New Debtor Against Claims of the
Creditor
The new debtor has the right to raise against claims of the
creditor defenses based on relations between the creditor and the
initial debtor.
Chapter 26. Liability for Violation of Obligations
Article 408. Definition of Violation of an Obligation
Violation of an obligation means its nonperformance or
performance in an improper manner (untimely, with defects of
goods, work, and services or with violations of other conditions
determined by the content of the obligation).
Article 409. Compensation for Damages Caused by Violation of
an Obligation
1. A debtor is obligated to compensate the creditor for the
damages caused.
2. Damages shall be determined in accordance with the rules
provided by Article 17 of the present Code.
3. Unless otherwise provided by a statute, other legal acts,
or the contract, in determining damages, the prices shall be taken
into account that existed at the place where the obligation was to
be performed on the day of voluntary satisfaction by the debtor of
the claim of the creditor or if the claim was not satisfied, of
the making by the court a decision.
4. In determination of lost profit, the measures taken by the
creditor to receive it and the preparations made for this purpose
shall be considered.
Article 410. Damages and Penalty
1. If a penalty is provided for nonperformance or improper
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performance of an obligation, then damages shall be compensated in
the part not covered by the penalty.
A statute or contract may provide cases:
1) when recovery only of a penalty but not of damages is
allowed;
2) when damages may be recovered in full amount above a
penalty;
3) when at the choice of the creditor either damages or a
penalty may be recovered.
2. In cases when limited liability is established (Article
416) for nonperformance or improper performance of an obligation,
damages subject to compensation for the part not covered by the
penalty or in addition to it or instead of it may be recovered up
to the maxima established by such limitation.
Article 411. Liability for Nonperformance of a Monetary
Obligation
1. For the use of another’s monetary assets as the result of
their unlawful retention, refusing to return them, or delay in
their payment, or unjustified receipt or saving at the expense of
another person, interest is subject to payment on the amount of
these funds. The rate of interest shall be determined by the
accounting rate of bank interest existing on the day of
performance of the monetary obligation or the corresponding part
of it. In case of recovery of a debt by judicial proceedings a
court may satisfy a claim of a creditor, proceeding from the
accounting rate of bank interest on the day of making a decision.
2. The accounting rate of bank interest shall be established
by the Central Bank of the Republic of Armenia
3. If the damages caused to a creditor by the unlawful use of
its monetary assets exceed the amount of interest due to it on the
basis of Paragraph 1 of the present Article, he shall have the
right to demand from the debtor compensation for damages in the
part exceeding this amount.
4. Interest for the use of another’s assets shall be
recovered through the day of payment of the amount of these assets
to the creditor unless the contract has established a shorter
period for the computation of interest.
Article 412. Liability and Performance of an Obligation in
Kind
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1. Payment of a penalty and compensation for damages in case
of improper performance of an obligation shall not free the debtor
from the performance of the obligation in kind unless otherwise
provided by a statute or contract.
2. Compensation for damages in case of nonperformance of an
obligation and payment of a penalty for its nonperformance shall
free a debtor from performance of the obligation in kind, unless
otherwise provided by a statute or contract.
3. Refusal by a creditor to accept performance that as the
result of delay has become uninteresting for it (Paragraph 2 of
Article 421) and also payment of a penalty established as a
cancellation penalty (Article 425) shall free the debtor from
performance of the obligation in kind.
Article 413. Performance of an Obligation at the Expense of
the Debtor
In case of nonperformance by the debtor of an obligation to
prepare and transfer property in ownership or to transfer property
for the use of the creditor or to perform defined work for it or
to render a service to it, the creditor shall have the right, in a
reasonable time, to entrust the performance of the obligation to
third persons for a reasonable price or to perform it within its
own efforts unless otherwise follows from a statute, other legal
acts, contract, or the nature of the obligation, and to demand
form the debtor compensation for the necessary expenditures and
other damages suffered.
Article 414. Consequences of Nonperformance of an Obligation
to Transfer an Individually-Defined Property
In case of nonperformance of an obligation to transfer an
individually-defined property to ownership or to compensated use
to a creditor, the latter has the right to demand the taking of
this property from the debtor and transfer to it on the conditions
provided by the obligation. This right lapses if the property has
already been transferred to a third person having the right of
ownership, economic management, or operative administration. If
the property has not yet been transferred, priority belongs to the
one of the creditors for whose benefit an obligation arose
earlier, or if this is impossible to establish, the one who
earlier filed suit.
Instead of a demand to transfer to itself the property that
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is the subject of an obligation, the creditor has the right to
demand compensation for damages.
Article 415. Subsidiary Liability
1. Before the presentation of claims against a person who, in
accordance with a statute, other legal acts, or the terms of an
obligation bears liability supplementary to the liability of
another person who is the principal debtor (subsidiary liability),
the creditor must make a claim against the principal debtor.
If the principal debtor has refused to satisfy a claim of the
creditor or the creditor has not received from it in a reasonable
time an answer to a claim presented, this claim may be presented
to the person bearing subsidiary liability.
2. The creditor does not have the right to demand the
satisfaction of its claim against the principal debtor from the
person bearing subsidiary liability if this claim can be satisfied
by way of setoff of a counterclaim against the principal debtor.
3. The person bearing subsidiary liability must, before
satisfying a claim made against it by a creditor, warn the
principal debtor of this and if a suit is made against such a
person, involve the principal debtor in participation in the case.
In the contrary case the principal debtor has the right to raise
against the subrogation claim of the person who answers
subsidiarily, the defenses that he had against the claims
creditor.
Article 416. Limitation of the Amount of Liability Under
Obligations
1. Under individual types of obligations and for obligations
connected with a defined type of activity a statute may limit the
right to full compensation for damages (limited liability).
2. An agreement on limiting the amount of liability of a
debtor under a contract of adhesion or other contract in which the
creditor is a citizen acting as a consumer is void if the amount
of liability for such a type of obligations or for such a
violation is determined by a statute and if the agreement is
concluded before the occurrence of the circumstances entailing
liability for nonperformance or improper performance of the
obligation.
Article 417. Grounds of Liability for the Violation of an
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Obligation
1. A debtor answers for the nonperformance and/or improper
performance of an obligation in the presence of fault, unless
otherwise provided by a statute or contract.
A debtor is considered not to be at fault, if it show that it
took all measures depending upon it for the proper performance of
the obligation.
2. Absence of fault must be shown by the person who has
violated an obligation.
3. Unless otherwise provided by a statute or contract, a
person who has not performed an obligation or has performed an
obligation in an improper manner in the conduct of entrepreneurial
activity shall bear liability unless it shows that proper
performance became impossible as the result of force majeure,
i.e., extraordinary circumstances unavoidable in the given
situation. Such circumstances do not include, in particular,
violation of obligations by contract partners of the debtor,
absence of goods necessary for performance, nor the debtor’s lack
of the necessary monetary assets.
4. An agreement concluded in advance for eliminating or
limiting liability for the intentional violation of an obligation
is void.
Article 418. Liability of a Debtor for the Actions of its
Employees
Actions of employees of the debtor in performance of its
obligation shall be considered to be actions of the debtor. The
debtor shall be liable for these actions if they have entailed the
nonperformance or improper performance of the obligation.
Article 419. Liability of the Debtor for Actions of Third
Persons
A debtor shall be liable for nonperformance or improper
performance of an obligation by third persons to whom performance
was entrusted, unless a statute establishes that liability is
borne by the third person who is the direct performer.
Article 420. Consequences of Violation of an Obligation by
Fault of both Parties
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1. If nonperformance or improper performance of an obligation
occurred due to the fault of both parties, the court shall
accordingly reduce the amount of liability of the debtor. The
court also shall have the right to reduce the amount of liability
of the debtor if the creditor intentionally or by negligence
facilitated an increase in the amount of damages caused by the
nonperformance or improper performance, or did not take reasonable
measures to reduce it.
2. The rules of Paragraph 1 of the present Article shall be
applied accordingly also in cases when the debtor by force of a
statute or contract bears liability for nonperformance or improper
performance of an obligation regardless of its fault.
Article 421. Delay by the Debtor
1. A debtor who has delayed performance shall be liable to
the creditor for the damages caused by the delay and for the
consequences of an impossibility of performance accidentally
occurring during the delay.
2. If, as the result of delay by the debtor, performance is
no longer of interest for the creditor, the creditor may refuse to
accept performance and demand compensation for damages.
3. A debtor is not considered to have delayed so long as an
obligation cannot be performed as the result of delay by the
creditor.
Article 422. Delay by the Creditor
1. A creditor shall be considered to have delayed if it has
refused to accept proper performance offered by the debtor or has
not taken actions provided by a statute, other legal acts, or
contract or deriving from the customs of trade or from the nature
of the obligation until the taking of which the debtor cannot
perform its obligation.
A creditor also shall be considered to have delayed in the
cases indicated in Paragraph 2 of Article 424 of the present Code.
2. Delay by a creditor shall give the debtor the right to
compensation for the damages caused by the delay, unless the
creditor shows that the delay occurred due to circumstances for
which neither it itself nor the persons upon whom by force of a
statute, other legal acts, or authorization of the creditor the
acceptance of performance was placed, answer.
3. Under a monetary obligation, the debtor is not obligated
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to pay interest for the time of delay by the creditor.
Chapter 27. Termination of Obligations
Article 423. Grounds for Termination of Obligations
1. An obligation shall be terminated in full or in part on
the grounds provided by a statute, other legal acts, or contract.
2. Termination of an obligation on demand of one of the
parties is allowed only in cases provided by a statute or
contract.
Article 424. Termination of an Obligation by Performance
1. Proper performance terminates an obligation.
2. A creditor accepting performance is obligated upon demand
of the debtor to issue it a written receipt for having obtained
performance in full or in the respective part.
If the debtor has issued a creditor a document of
indebtedness in confirmation of an obligation, then a creditor
accepting performance must return this document and, if it is
impossible to return it, must so indicate in a written receipt
issued by it. The receipt may be replaced by a notation on the
returned document of indebtedness. The fact that the debtor has
the document of indebtedness confirms, until proven otherwise, the
termination of the obligation.
In case of refusal of the creditor to give a written receipt,
to return the document of indebtedness or to note in the written
receipt the impossibility of its return, the debtor has the right
to withhold performance. In such cases the creditor is considered
to have delayed.
Article 425. Cancellation Compensation
By agreement of the parties an obligation may be terminated
by the presentation, instead of performance, of cancellation
compensation (payment of money, transfer of property, etc.). The
amount of the cancellation compensation, and also the times and
procedure for presentation of it shall be established by the
parties.
Article 426. Termination of an Obligation by Setoff
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An obligation is terminated in full or in part by setoff of
an identical counterclaim whose time has matured or whose time is
not indicated or is defined as the time of demand. For setoff, the
declaration of one party is sufficient.
Article 427. Cases of Impermissibility of Setoff
Setoff of claims is not allowed:
1) if, on declaration of one party, the period of limitation
of actions is applicable to a claim and this period has expired;
2) for compensation for harm caused to life or health;
3) for recovery of support;
Setoff of claims is not allowed also other cases provided by
a statute or contract.
Article 428. Setoff in Case of Assignment of a Claim
1. In case of assignment of a claim, the debtor has the
right to setoff against the claim of the new creditor its
counterclaim against the original creditor.
2. The setoff is made if the claim arose on grounds existing
at the time of receipt by the debtor of notice of assignment of
the claim and the time for making a claim occurred before
receiving it or this time was not indicated or was defined as the
time of demand.
Article 429. Termination of an Obligation by the Coinciding
of the Debtor and the Creditor in One Person
An obligation is terminated by the coinciding of the debtor
and the creditor in one person.
Article 430. Termination of an Obligation by a Substitution
1. An obligation is terminated by an agreement of the parties
on the replacement of the initial obligation existing between them
by another obligation between the same persons providing for
another subject or another means of performance (a substitution).
2. A substitution is not allowed with respect to obligations
for compensation for harm caused to life or health or for payment
of support.
3. A substitution terminates supplementary obligations
connected with the initial obligation, unless otherwise provided
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by agreement of the parties.
Article 431. Forgiving of a Debt
An obligation is terminated by freeing by the creditor of the
debtor of the obligation resting upon it, unless this violates the
rights of other persons with respect to the property of the
creditor.
Article 432. Termination of an Obligation by Impossibility
of Performance
1. An obligation is terminated by impossibility of
performance if the impossibility was caused by a circumstance for
which none of the parties answers. In this case the creditor does
not have the right to demand performance of the obligation from
the debtor.
2. In case of impossibility of performance by a debtor of an
obligation caused by actions for which the creditor was at fault,
the latter does not have the right to demand return of what was
performed under the obligation.
Article 433. Termination of an Obligation on the Basis of an
Act of a State Agency
1. If as the result of the issuance of an act of a state
agency or agency of local self government the performance of an
obligation becomes impossible in whole or in part, the obligation
is terminated as a whole or for the respective part. Parties who
have suffered damages as the result of this have the right to
claim compensation for them in accordance with Articles 15 and 18
of the present Code.
2. In case the act of the state agency or of the agency of
local self-government on the basis of which the obligation was
terminated is declared invalid by the established procedure, the
obligation shall be reinstated unless otherwise follows from the
agreement of the parties or the nature of the obligation and the
creditor has not lost interest in the obligation.
Article 434. Termination of an Obligation by the Death of a
Citizen
1. An obligation shall be terminated by the death of the
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debtor, if performance may not be made without the personal
participation of the debtor or the obligation in another manner is
inseparably connected with the personality of the debtor.
2. An obligation shall be terminated by the death of the
creditor, if performance is meant personally for the creditor or
the obligation in another manner is inseparably connected with the
personality of the creditor.
Article 435. Termination of an Obligation by the Liquidation
of a Legal Person
An obligation shall be terminated by liquidation of a legal
person (debtor or creditor).
DIVISION 7. OBLIGATIONS ARISING FROM CONTRACTS
SUBDIVISION 1. GENERAL PROVISIONS ON CONTRACT
Chapter 28. Definition and Terms of a Contract
Article 436. Definition of a Contract
1. A contract is an agreement of two or several persons on
establishing, changing, or terminating civil law rights and
duties.
2. The rules on bilateral and multilateral transactions
provided by Chapter 18 of the present Code shall be applied to
contracts.
3. The general provisions on obligations shall be applied to
obligations arising from contract, unless otherwise provided by
the rules of the present chapter or the rules on individual types
of contracts contained in the present Code.
4. The general provisions on contract shall be applied to
contracts concluded by more than two parties unless this
contradicts the multilateral nature of these contracts.
Article 437. Freedom of Contract
1. Citizens and legal persons are free in the conclusion of a
contract.
Compulsion to conclusion of a contract is not allowed with
the exception of cases when the obligation to conclude a contract
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is provided by the present Code, a statute, or a voluntarily
accepted obligation.
2. The parties may conclude a contract provided for or not
provided for by a statute or other legal acts.
3. The parties may conclude a contract that contains elements
of various contracts provided for by a statute or other legal acts
(a mixed contract). The rules on contracts whose elements are
contained in the mixed contract shall be applied to the relations
of parties under the mixed contract unless otherwise follows from
an agreement of the parties or the nature of the mixed contract.
4. The terms of the contract shall be determined by agreement
of the parties except for cases when the content of the respective
term is prescribed by a statute or other legal acts (Article 438).
In cases when a term of a contract is provided by a norm that
is applied unless an agreement of the parties has established
otherwise (a dispositive norm), the parties may by their agreement
exclude its application or establish a term different from that
provided in it. In the absence of such an agreement the term of
the contract shall be determined by the dispositive norm.
5. If a term of a contract is not determined by the parties
or a dispositive norm, the respective terms shall be determined by
the customs of trade applicable to the relations of the parties.
Article 438. Contract and Statute
1. A contract must comply with rules obligatory for the
parties established by a statute and other legal acts (imperative
norms) in effect at the time of its conclusion.
2. If after the conclusion of a contract a statute is adopted
establishing rules obligatory for the parties other than those
that were in effect upon conclusion of the contract, the terms of
the concluded contract shall remain in force except in cases when
it was established in the statute that its effect extends to
relations arising from previously concluded contracts.
Article 439. Compensated and Uncompensated Contracts
1. A contract under which a party must receive payment or
other counterperformance in return for the performance of its
obligations is a compensated contract.
2. A contract is uncompensated under which one party is
obligated to provide something to the other party without
receiving payment or anything else in return.
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3. A contract is presumed to be compensated unless it follows
otherwise from a statute, other legal acts, the content or the
nature of the contract.
Article 440. Price
1. Performance of a contract is paid for at a price
established by agreement of the parties.
In cases provided by a statute, prices (tariffs, valuations,
rates, etc.) are applied that are established or regulated by
state agencies authorized for this.
2. Change of price after conclusion of a contract is allowed
in cases and on conditions provided by contract or statute.
3. In cases when in a compensated contract a price is not
provided and may not be determined proceeding from the terms of
the contract, performance of the contract must be paid for at the
price that, under comparable conditions, usually is taken for
analogous goods, work, or services.
Article 441. Effect of the Contract
1. A contract shall enter into force and become obligatory
for the parties from the time of its conclusion.
2. The parties have the right to establish that the terms of
a contract concluded by them shall be applied to their relations
that arose before the conclusion of the contract.
3. A statute or contract may provide that the ending of the
term of effectiveness of the contract shall entail the termination
of the obligations of the parties under the contract.
A contract in which such a term is absent is recognized as in
effect until the time defined in it of the termination of
performance of the obligation by the parties.
4. Ending of the term of effectiveness of a contract shall
not free the parties from liability for a violation of it that
occurred before the expiration of this term.
Article 442. Public Contract
1. A public contract is a contract concluded by a commercial
organization and establishing its obligations for the sale of
goods, performance of work, or rendering of services that this
organization by the nature of its activity must exercise with
respect to everyone who applies to it (retail trade, carriage by
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transport for common use, communications services, energy supply,
medicine, hotel service, etc.).
A commercial organization does not have the right to provide
a preference to one person before another with respect to
conclusion of a public contract.
2. The price of goods, work, and services, and also other
terms of a public contract shall be established equally for all
consumers.
3. A refusal of a commercial organization to conclude a
public contract if there is the possibility of providing the
consumer with the respective goods or services, or to perform for
it respective work, is not allowed.
In case of an unjustified refusal by a commercial
organization to conclude a public contract, the provisions
provided by Paragraph 4 of Article 461 of the present Code shall
be applied.
4. In cases provided by a statute, the Government of the
Republic of Armenia may issue rules obligatory for parties in the
conclusion and performance of public contracts (model contracts,
provisions, etc.).
5. Terms of a public contract not meeting the requirements
established by Paragraphs 2 and 4 of the present Article are void.
Article 443. Model Terms of a Contract
1. It may be provided in a contract that its individual terms
are determined by model terms developed for contracts of the
respective type and published in the press.
2. In cases when there is no reference to model terms in a
contract, such model terms shall be applied to the relations of
the parties as customs of trade if they meet the demands
established by Article 7 and Paragraph 5 of Article 437 of the
present Code.
3. Model terms may be stated in the form of a model contract
or of another document containing these terms.
Article 444. Contract of Adhesion
1. A contract of adhesion is a contract whose terms are
determined by one of the parties in printed forms or other
standard forms and that may be adopted by the other party not
otherwise than by adhering to the proposed contract as a whole.
2. The party adhering to the contract has the right to demand
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the rescission or change of the contract if the contract of
adhesion, although does not contradict a statute or other legal
acts, deprives this party of rights usually granted under
contracts of such type, excludes or limits the liability of the
other party for the violation of obligations or contains other
terms clearly burdensome for the adhering party, that it, on the
basis of its reasonably understood interests, would not have
accepted if it had the possibility of participating in the
determination of the terms of the contract.
3. In the presence of the circumstances provided by Paragraph
2 of the present Article a demand for the rescission or change of
the contract made by the party that adhered to the contract in
connection with the exercise of its entrepreneurial activity is
not subject to satisfaction if the adhering party knew or should
have known on what terms it was concluding the contract.
Article 445. Preliminary Contract
1. Under a preliminary contract, the parties are obligated to
conclude in the future a contract on the transfer of property, the
performance of work, or the rendering of services (the basic
contract) on the terms provided by the preliminary contract.
2. A preliminary contract shall be concluded in the form
established for the basic contract and if the form of the basic
contract is not established, then in written form. Nonobservance
of the rules on the form of a preliminary contract shall entail
its invalidity.
3. A preliminary contract must contain terms allowing the
establishment of a subject and also other substantial terms of the
basic contract.
4. In the preliminary contract the period shall be indicated
in which the parties are obligated to conclude the basic contract.
If such a period is not defined in the preliminary contract,
the basic contract is subject to conclusion in the course of a
year from the time of conclusion of the preliminary contract.
5. In cases when a party that has concluded a preliminary
contract refuses to conclude the basic contract, the provisions
provided by Article 461 of the present Code shall be applied.
6. The obligations provided by the preliminary contract shall
be terminated if by the end of the period in which the parties
must conclude the basic contract it is not concluded or one of the
parties does not send the other party a proposal to conclude this
contract.
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Article 446. Contract for the Use of a Third Person
1. A contract for the use of a third person is a contract in
which the parties have established that the debtor is obligated to
make performance not to the creditor but to a third person
indicated or not indicated in the contract, having the right to
demand performance of the obligation in its favor from the debtor.
2. Unless otherwise provided by a statute, other legal acts,
or contract, from the time of expression by the third person to
the debtor of an intent to use its right under the contract, the
parties may not rescind or change the contract concluded by them
without the consent of the third person.
3. The debtor in the contract has the right to raise against
claims of the third person the defenses that he could raise
against the creditor.
4. In the case when the third person has refused the right
provided to it by the contract, the creditor may enjoy this right
if this does not contradict a statute, other legal acts, or the
contract.
Article 447. Interpretation of a Contract
In the interpretation of the terms of a contract a court
shall take into account the literal meaning of the words and
expressions contained in it. The literal meaning of a term of a
contract, in case the term is not clear, shall be established by
comparison with the other terms and the sense of the contract as a
whole.
If the rules contained in the first part of the present
Article do not allow the determination of the content of the
contract, the real common will of the parties must be ascertained,
taking into account the purpose of the contract. In such a case
all surrounding circumstances shall be taken into account
including negotiations and correspondence preceding the contract,
the practice established in the mutual relations of the parties,
the customs of trade, and the subsequent conduct of the parties.
Chapter 29. Conclusion of a Contract
Article 448. Basic Provisions on the Conclusion of a
Contract
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1. A contract shall be considered concluded if an agreement
has been reached on all the essential terms of the contract among
the parties in the required form.
The essential terms are those on the subject of the contract,
terms that are named in a statute or other legal acts as essential
or necessary for contracts of the given type, and also all those
terms with respect to which by declaration of one of the parties
an agreement must be reached.
2. A contract may be concluded by the sending of an offer (a
proposal to conclude a contract) by one of the parties and its
acceptance (adoption of the proposal) by the other party.
Article 449. Time of Conclusion of the Contract
1. A contract shall be considered concluded from the time of
receipt by the person who has sent an offer of its acceptance.
2. If, in accordance with a statute, the transfer of property
is also necessary for the conclusion of a contract, the contract
shall be considered concluded from the time of transfer of the
respective property (Article 177).
3. A contract rights under which are subject to state
registration shall be considered concluded from the time of the
registration of these rights.
Article 450. Form of a Contract
1. A contract may be concluded in any form provided for the
making of transactions unless a defined form for a contract of the
given type has been established by a statute.
If the parties have agreed to conclude a contract in a
defined form, it shall be considered concluded after giving it the
agreed form although this form was not required by a statute for a
contract of the given type.
2. A contract in written form may be concluded by the
compilation of a single document signed by the parties and also by
the exchange of documents by mail, telegraph, teletype, telephone,
electronic or other communications that allow the reliable
establishment that the document proceeds from a party to the
contract.
3. The written form of a contract shall be considered
observed if a written proposal to conclude a contract has been
accepted in the manner provided by Paragraph 3 of Article 454 of
the present Code.
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Article 451. Offer
1. An offer is a proposal addressed to one or several
concrete persons that is definite and expresses the intent of the
person who has made the proposal to consider itself having
concluded a contract with the addressee by whom the proposal will
be accepted.
The offer must contain the essential terms of the contract.
2. The offer shall bind the person who sent it from the time
of its receipt by the addressee.
If a notice on the revocation of the offer has arrived
earlier than or simultaneously with the offer, the offer shall be
considered not to have been received.
Article 452. Irrevocability of an Offer
An offer received by an addressee cannot be revoked during
the period established for its acceptance unless otherwise
provided in the offer itself or follows from the nature of the
proposal or the situation in which it was made.
Article 453. Invitation to Make Offers. Public Offer
1. Advertising and other proposals addressed to an
indeterminate group of persons are considered as an invitation to
make offers unless otherwise directly indicated in the proposal.
2. A proposal containing all essential terms of the contract
from which the will of the person who made the proposal appears to
conclude a contract on the terms indicated in the proposal with
anyone who responds shall be considered a public offer.
Article 454. Acceptance
1. An acceptance is the response of a person to whom an offer
is addressed on its acceptance.
An acceptance must be full and unconditional.
2. Silence is not acceptance, unless otherwise follows from a
statute, custom of trade, or from prior business relations of the
parties.
3. The taking by a person who has received an offer, within
the period established for its acceptance, of actions in the
performance of the terms of a contract indicated in it (shipment
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of goods, provision of services, performance of work, payment of
the appropriate amount, etc.) shall be considered an acceptance
unless otherwise provided by a statute, other legal acts, or
indicated in the offer.
Article 455. Revocation of an Acceptance
If a notice on the revocation of an acceptance has reached
the person who has made the offer earlier than the acceptance or
simultaneous with it, the acceptance shall be considered not to
have been received.
Article 456. Conclusion of a Contract on the Basis of an
Offer Defining a Period for Acceptance
When a period for acceptance is defined in an offer, the
contract is considered concluded if the acceptance is received by
the person who has sent the offer within the limits of the period
indicated in it.
Article 457. Conclusion of a Contract on the Basis of an
Offer Not Defining a Period for Acceptance
1. When a period for acceptance is not defined in a written
offer, the contract is considered concluded if the acceptance is
received by the person who has sent the offer before the end of
the period established by a statute or other legal acts, or if
such a period has not been established—in the course of time
necessary for this.
2. When an offer has been made orally without an indication
of the period for acceptance, the contract is considered concluded
if the other party has promptly declared its acceptance.
Article 458. An Acceptance Received Late
In cases when a timely dispatched notification of acceptance
has been received late, the acceptance shall not be considered
late unless the party who has sent the offer has promptly informed
the other party of the late receipt of the acceptance.
If the party who has sent the offer promptly notifies the
other party of the receipt of its acceptance received late, the
contract is considered concluded.
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Article 459. Acceptance on Other Terms
An answer on consent to conclude a contract on terms other
than proposed in the offer is not considered an acceptance.
Such an answer is considered a refusal to accept and at the
same time a new offer.
Article 460. Place of Conclusion of the Contract
If the place of conclusion of a contract is not indicated in
it the contract shall be considered concluded in the place of
residence of the citizen or the seat of the legal person who sent
the offer.
Article 461. Refusal of a Party to Conclude a Contract
If a party for whom in accordance with the a statute the
conclusion of a contract is obligatory has refused to conclude it,
the other party shall have the right to go to a court with a
demand for compulsion to conclude a contract.
A party who has unjustifiably refused to conclude a contract
must compensate the other party for the damages caused by this.
Article 462. Precontract Disputes
In cases of bringing of disagreements that have arisen in the
conclusion of a contract for consideration by a court on the basis
of Article 461 of the present Code or by agreement of the parties,
the terms of the contract on which there were disagreements among
the parties shall be defined in accordance with a decision of the
court.
Article 463. Conclusion of a Contract at an Auction
1. A contract, unless otherwise follows from its nature, may
be concluded by the conduct of an auction. The contract is
concluded with the person who has won the auction.
2. The organizer of the auction may be the owner of property
or the possessor of a property right or a specialized
organization. A specialized organization shall act on the basis of
a contract with the owner of the property or the possessor of a
property right and shall act in their name or in its own name.
3. In the cases indicated in the present Code or other
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statute contracts on the sale of property or of a property right
may be concluded only by the conduct of an auction.
4. An auction shall be made in the form of an auction by
bidding or a competition.
The winner of an auction conducted as an auction by bidding
is the person who has proposed the highest price and in a
competition, the person who, in the conclusion of a competition
commission previously appointed by the organizer of the auction,
has proposed the best condition.
The form of an auction shall be determined by the owner of
the item sold or the holder of the property right being sold,
unless otherwise provided by a statute.
Article 464. Organization of and Procedure for Conduct of
Auctions
1. Auctions by bidding and competitions may be open or
closed.
Any person may participate in an open auction by bidding or
in an open competition. Only persons invited for this purpose may
participate in a closed auction by bidding or a closed
competition.
2. Unless otherwise provided by a statute, a notice on the
conduct of an auction shall be made by the organizers not less
than thirty days before conducting it. The notice must contain
information on the time, place and form of the auction, its
subject, and procedure for conducting it, including for
formalization of participation in the auction, determination of
the person who has won the auction and also information on the
starting price.
In the case the subject of the auction is the right to
conclude a contract, in the notification on the planned auction
the period provided for this must be indicated.
3. Unless otherwise provided in a statute or in the notice on
the conduct of the auction the organizer of an open auction who
has made a notification has the right to cancel the conduct of the
auction by bidding at any time but not later than three days
before the start of the day on which it is to be held, and for a
competition not later than thirty days before the holding of the
competition.
In cases when the organizer of an open auction cancels the
holding of the auction in violation of the above periods, it shall
be obligated to compensate the participants for the actual damages
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suffered by them.
The organizer of a closed auction by bidding or of a closed
competition is obligated to compensate the participants invited by
it for their actual damages regardless of how long after the
sending of the notice the cancellation of the auction occurred.
4. The participants in an auction shall pay earnest money in
the amount, within the periods, and by the procedure that are
indicated in the notice on the conduct of the auction. If the
auction does not take place, the earnest money shall be subject to
return. Earnest money shall also be returned to persons who
participated in the auction but did not win it.
Upon conclusion of a contract with a person who has won an
auction, the amount of earnest money contributed by it shall be
counted toward performance of obligations for the contract
concluded.
5. A person who has won an auction and the organizer of the
auction shall sign, on the day of the conduct of the auction by
bidding or of the competition, a memorandum of the results of the
auction, which shall have the force of a contract. The person who
has won an auction, in case of refusal to sign the memorandum,
shall lose the earnest money contributed by it. An organizer of an
auction who refused to sign the memorandum shall be obligated to
return the earnest money in double amount and also to compensate
the person who has won the auction for the damages caused by
participation in the auction.
If the subject of an auction was only the right to conclusion
of a contract, such a contract must be signed by the parties not
later than twenty days, or other period indicated in the notice,
after the completion of the auction and the formalization of the
memorandum. In case of refusal of one of them to conclude the
contract, the other party has the right to go to a court with a
demand for compulsion to conclude the contract and also for
compensation for the damages caused by refusal to conclude it.
Article 465. Consequences of Violation of the Rules for the
Conduct of Auctions
1. An auction conducted in violation of the rules established
by a statute may be declared invalid by a court upon suit by an
interested person.
2. Declaration of an auction as invalid shall entail the
invalidity of the contract concluded with the person who has won
the auction.
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Chapter 30. Change and Rescission of a Contract
Article 466. Bases for Change and Rescission of a Contract
1. Change and rescission of a contract are possible by
agreement of the parties, unless otherwise a statute or contract.
2. Upon demand of one of the parties a contract may be
changed or rescinded by decision of a court only in case of a
substantial breach of the contract by the other party or in other
cases a statute or contract.
A violation of a contract by one party shall be considered
substantial if it entails for another party such damage that it to
a significant degree is deprived of that which it had the right to
expect at the conclusion of the contract.
3. In case of unilateral refusal to perform a contract in
whole or in part, when such a refusal is allowed by a statute or
agreement of the parties, the contract shall be considered
respectively canceled or changed.
Article 467. Change and Rescission of a Contract in
Connection With a Substantial Change of Circumstances
1. A substantial change of circumstances from which the
parties proceeded in the conclusion of the contract is a basis for
its change or rescission unless otherwise provided by the contract
or follows from its nature.
A change of circumstances shall be considered substantial
when they have changed to the extent that, if the parties could
have reasonably foreseen this, the contract would have been
concluded on significantly different terms or would not have been
concluded by them at all.
2. If the parties have not attained agreement on bringing a
contract in accordance with substantially changed circumstances or
on its rescission, the contract may be rescinded or, upon the
bases provided by Paragraph 4 of the present Article, changed by a
court on demand of an interested party if the following conditions
are present simultaneously:
1) at the time of the conclusion of the contract the parties
proceeded on the basis that such a change of circumstances would
not occur;
2) the change of circumstances was brought about by causes
that the interested party could not overcome after they arose with
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the degree of care and caution that was demanded of it by the
nature of the contract and the conditions of trade;
3) performance of a contract without change of its terms
would so violate the contract-related property interests of the
parties and would entail such harm for the interested party that
it to a significant degree would be deprived of that which it had
the right to expect upon conclusion of the contract;
4) it does not follow from the customs of trade or the nature
of the contract that the risk of change of circumstances is borne
by the interested party.
3. In case of rescission of a contract as the result of
substantially changed circumstances, a court, on demand of one of
the parties, shall determine the consequences of rescission of the
contract proceeding from the necessity of just distribution among
the parties of the expenditures borne by them in connection with
the performance of this contract.
4. A change in the contract in connection with a substantial
change in circumstances shall be allowed by decision of a court in
exceptional cases when the rescission of the contract would
contradict societal interests or cause harm to the parties
significantly exceeding the expenditures necessary for performance
of the contract on the terms changed by the court.
Article 468. Procedure for Changing and Rescinding a
Contract
1. An agreement to change or rescind a contract shall be made
in the same form as the contract unless it follows otherwise from
a statute, other legal acts, contract, or customs of trade.
2. A demand for change or rescission of a contract may be
made by a party to the court only after receipt of a refusal of
the other party to a proposal to change or rescind the contract or
the failure to receive an answer within the period indicated in
the proposal or, in its absence, in a thirty-day period.
Article 469. Consequences of Change and Rescission of a
Contract
1. In case of change of a contract, the obligations of the
parties shall be maintained in the changed form.
2. In case of rescission of a contract, the obligations of
the parties shall be terminated.
3. In case of change or rescission of a contract, the
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obligations shall be considered changed or terminated from the
time of conclusion of an agreement of the parties to change or
rescind the contract, unless otherwise follows from the agreement
or the nature of the change of the contract, and in case of change
or rescission of the contract by judicial procedure—from the time
of entry into legal force of a decision of the court on changing
or rescinding the contract.
4. The parties do not have the right to demand the return of
what was performed by them under an obligation before the time of
change or rescission of a contract, unless otherwise provided by a
statute or agreement of the parties.
5. If a substantial breach of the contract by one of the
parties was the basis for change or rescission of the contract,
the other party has the right to demand compensation for the
damages caused by the change or rescission of the contract.
SUBDIVISON 2. CONTRACTS OF ALIENATION OF PROPERTY
CHAPTER 31. PURCHASE AND SALE
§ 1. General Provisions on Purchase and Sale
Article 470. The Contract of Purchase and Sale
1. Under the contract of purchase and sale, one party (the
seller) is obligated to transfer property (the goods) to the
ownership of the other party (the buyer), and the buyer is
obligated to accept the goods and pay a defined monetary amount
(the price) for them.
2. The provisions provided by the present Section shall be
applied to the sale of securities, commercial paper, and currency
valuables unless special rules for their purchase and sale have
been established by a statute.
3. In cases provided by the present Code or another statute,
the peculiarities of the purchase and sale of goods of individual
types shall be determined by statutes and other legal acts.
4. The provisions provided by the present Section shall be
applied to the sale of property rights unless it follows otherwise
from the content or nature of these rights.
5. The provisions provided by the present Section shall be
applied to individual types of the contract of purchase and sale
(retail purchase and sale, supply of goods, supply of goods for
state needs, energy supply, sale of immovables) unless otherwise
provided by the rules of the present Code for these types of
contracts.
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Article 471. Terms of the Contract on the Goods
1. The goods under the contract of purchase and sale may be
any property, with the observance of the rules provided by Article
133 of the present Code.
2. A contract may be made for the purchase and sale of goods
that the seller has on hand at the time of concluding the contract
and also of goods which will be made or obtained by the seller in
the future, unless otherwise provided by a statute or otherwise
follows from the nature of the goods.
3. The terms of a contract of purchase and sale on the goods
shall be considered agreed if the contract allows the
determination of the name and quantity of the goods.
Article 472. Obligations of the Seller to Transfer the Goods
1. The seller is obligated to transfer to the buyer the goods
provided by the contract of purchase and sale.
2. Unless otherwise provided by the contract of purchase and
sale, the seller shall be obligated simultaneously with the
transfer of the property to give the buyer its accessories and
also the documents relating to it (plan documentation, certificate
of quality, instruction for use, etc.), provided by a statute,
other legal acts, or contract.
Article 473. Time for Performance of the Obligation to
Transfer the Goods
1. The time for performance by the seller of the obligation
to transfer the goods to the buyer shall be determined by the
contract of purchase and sale and, if the contract does not make
possible the determination of this time, in accordance with the
rules provided by Article 352 of the present Code.
2. A contract of purchase and sale shall be recognized as
made with the condition of its performance at a strictly defined
time if from the contract it clearly follows that in case of
breach of the time for performance the buyer will lose interest in
the contract.
The seller shall have the right to perform such a contract
before the occurrence or after the expiration of the time defined
in it only with the consent of the buyer.
Article 474. The Time of Performance of the Obligation of the
Seller to Transfer the
Goods
1. Unless otherwise provided by the contract of purchase and
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sale, the obligation of the seller to transfer the goods to the
buyer shall be considered performed at the time:
1) of handing over the goods to the buyer or to a person
designated by it if the contract provides for an obligation of the
seller to deliver the goods;
2) of the placing of the goods at the disposition of the
buyer if the goods are to be transferred to the buyer or to a
person designated by it at the place where the goods are located.
Goods shall be considered placed at the disposition of the buyer
if at the time provided by the contract the goods are ready for
transfer at an appropriate place and the buyer in accordance with
the terms of the contract has been notified of the readiness of
the goods for transfer. Goods are not considered ready for
transfer if they are not identified for the purposes of the given
contract by marking or in another manner.
2. In cases when the obligation of the seller for the
delivery of the goods or the transfer of the goods to the buyer at
the place of their location does not follow from the contract of
purchase and sale, the obligation of the seller to transfer the
goods to the buyer shall be considered performed from the time of
giving the goods to a carrier or courier organization for transfer
to the buyer, if the contract does not provide otherwise.
Article 475. Passage of Risk of Accidental Loss of and of
Accidental Harm to the Goods to the Buyer
1. Unless otherwise provided by the contract of purchase and
sale, the risk of accidental loss of or accidental harm to the
goods shall pass to the buyer from the time when in accordance
with a statute or the contract the seller is considered to have
fulfilled its obligation for the transfer of the goods to the
buyer.
2. The risk of accidental loss of or accidental harm to goods
sold while they are in transit passes to the buyer at the time of
making of the contract of purchase and sale unless otherwise
provided by such contract or customs of trade.
3. A term of the contract that the risk of accidental loss
of or accidental harm to the goods shall pass to the buyer from
the time of giving the goods to the first carrier may be
recognized by a court as invalid, on request of the buyer, if at
the time of making of the contract the seller knew or should have
known that the goods were lost or damaged and did not inform the
buyer of this.
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Article 476. Obligation of the Seller to Transfer the Goods
Free from the Rights of Third Persons
1. The seller is obligated to transfer the goods to the buyer
free from rights of third persons, with the exception of the case
when the buyer agreed to accept the goods burdened by the rights
of third persons.
Nonfulfillment by the seller of this obligation shall give
the buyer the right to demand reduction of the price of the goods
or rescission of the contract of purchase and sale, unless it is
shown that the buyer knew or should have known of the rights of
third persons to these goods.
2. The rules provided by Paragraph 1 of the present Article
shall be applied likewise in the case when there were claims of
third persons with respect to the goods at the time of their
transfer to the buyer about which the seller knew, if these claims
subsequently have been found by the established procedure to be
lawful.
Article 477. Liability of the Seller in Case of Taking of the
Goods from the Buyer
1. In case of taking of the goods from the buyer by third
persons on grounds that arose before the performance of the
contract of purchase and sale, the seller shall be obligated to
compensate the buyer for the losses suffered by it, unless it
shows that the buyer knew or should have known of the presence of
these grounds.
2. An agreement of the parties to free the seller from
liability or on limitation of liability in case of taking of the
goods obtained from the buyer by third persons is void.
Article 479. Obligations of the Buyer and Seller in the Case
of Bringing of a Suit for Taking of the Goods
1. If a third person, on a ground that arose before the
performance of the contract of purchase and sale, brings suit
against the buyer for the taking of the goods, the buyer must
bring the seller into participation in the case and the seller is
obligated to enter the case on the side of the buyer.
2. Failure by the buyer to bring the seller into
participation in the case shall free the seller from liability to
the buyer if the seller shows that if it had taken part in the
case it could have prevented the taking of the goods sold from the
buyer.
3. A seller brought by the buyer into participation in the
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case but who did not take part in the case shall be deprived of
the right to show that the buyer conducted the case improperly.
Article 479. Consequences of Nonperformance of the Obligation
to Transfer the Goods
1. If the seller refuses to transfer to the buyer goods that
have been sold, the buyer shall have the right to refuse to
perform the contract of purchase and sale.
2. In case of refusal of the seller to transfer an
individually defined property, the buyer shall have the right to
make to the seller the demands provided by Article 414 of the
present Code.
Article 480. Consequences of Non-Performance of the
Obligation to Transfer Accessories and Documents Relating to the
Goods
If the seller does not transfer or refuses to transfer to the
buyer accessories and documents relating to the goods that it must
transfer in accordance with a statute, other legal acts, or the
contract of purchase and sale, the buyer shall have the right to
designate to it a reasonable time for their transfer.
In the case when the accessories or documents relating to the
goods are not transferred by the seller in the designated time,
the buyer shall have the right to refuse the goods unless
otherwise provided by the contract.
Article 481. The Quantity of the Goods
1. The quantity of the goods subject to transfer to the buyer
shall be provided by the contract of purchase and sale in
accordance with units of measurement or as a monetary expression.
The term on the quantity of the goods can be agreed by means of
establishing in the contract a procedure for determining it.
2. If the contract of purchase and sale does not make
possible the determination of the quantity of the goods subject to
transfer, the contract shall not be considered to have been made.
Article 482. Consequences of Breach of the Term of the
Contract on the Quantity of the Goods
1. If the seller has transferred to the buyer, in breach of
the contract of purchase and sale, a smaller amount of the goods
than defined by the contract, the buyer shall have the right,
unless otherwise provided by the contract, either to demand the
transfer of the lacking quantity of the goods or to refuse the
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goods transferred and to refuse to pay for them, or—if the goods
have been paid for—to demand the return of the monetary amount
paid.
2. If the seller has transferred the goods to the buyer in a
quantity exceeding that indicated in the contract of purchase and
sale, the buyer is obligated to inform the seller about this by
the procedure provided by Paragraph 1 of Article 499 of the
present Code. In the case when, within a reasonable time after the
receipt of notice from the buyer, the seller does not dispose of
the respective part of the goods, the buyer shall have the right,
unless otherwise provided by the contract, to accept all the
goods.
3. In case of acceptance by a buyer of the goods in a
quantity exceeding that indicated in the contract of purchase and
sale (Paragraph 2 of the present Article), the additionally
accepted goods must be paid for in accordance with the price
established for the goods accepted under the contract, unless
another price is defined by agreement of the parties.
Article 483. Assortment of Goods
1. If under a contract of purchase and sale, goods are to be
transferred in a defined relationship by types, models, measures,
colors, or other features (assortment), the seller is obligated to
transfer to the buyer goods in the assortment agreed upon by the
parties.
2. If the assortment is not determined in the contract of
purchase and sale and no procedure is established in the contract
for determining it, but from the nature of the obligation it
follows that the goods must be transferred to the buyer in an
assortment, the seller shall have the right to transfer to the
buyer goods in an assortment based on the needs of the buyer that
were known to the seller at the time of making of the contract or
to refuse to perform the contract.
Article 484. Consequences of Breach of the Term of the
Contract on Assortment
1. In case of transfer by the seller of the goods provided by
the contract of purchase and sale in an assortment not
corresponding to the contract, the buyer shall have the right to
refuse to accept and pay for them or, if they have been paid for,
to demand the return of the monetary amount that has been paid.
2. If the seller has transferred to the buyer, along with
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goods whose assortment corresponds to the contract of purchase and
sale, goods in breach of the term on assortment, the buyer shall
have the right at its choice:
1) to accept the goods corresponding to the term on
assortment and to refuse the remaining goods;
2) to refuse all the goods transferred;
3) to demand the replacement of the goods not corresponding
to the term on assortment with the goods in the assortment
provided by the contract;
4) to accept all the goods transferred.
3. In case of refusal of the goods whose assortment does not
correspond to the term of the contract of purchase and sale or of
making a demand for replacement of the goods not corresponding to
the term of the contract on assortment, the buyer shall have the
right also to refuse payment for these goods and, if they have
been paid for, to demand the return of the monetary amount that
has been paid.
4. Goods not corresponding to the term of the contract of
purchase and sale on assortment shall be considered accepted
unless the buyer, within a reasonable time after receiving them,
informs the seller of its rejection of the goods.
5. If the buyer does not reject the goods whose assortment
does not correspond to the contract of purchase and sale, it is
obligated to pay for them at the price agreed with the seller. In
the case when the seller has not taken the necessary measures for
agreeing on a price within a reasonable time, the buyer shall pay
for the goods at the price that at the time of making of the
contract usually was taken for analogous goods in comparable
circumstances.
6. The rules of the present Article shall be applied unless
otherwise provided by the contract of purchase and sale.
Article 485. The Quality of the Goods
1. The seller is obligated to transfer to the buyer the goods
whose quality corresponds to the contract of purchase and sale.
2. In case of the absence in the contract of purchase and
sale of terms on the quality of the goods, the seller is obligated
to transfer to the buyer goods suitable for the purposes for which
goods of such type are usually used.
If the seller at the making of the contract was made aware by
the buyer of the concrete purposes for obtaining the goods, the
seller has the obligation to transfer to the buyer goods suitable
for use in accordance with these purposes.
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