CIVIL CODE OF MONGOLIA

( Revised Edition)

Part I

General Principles

CHAPTER ONE

General Provisions

Article 1. Purpose of the Code

1. The present Civil Code shall determine the legal status of participants in the civil turnover and regulate the property relations and personal non-property relations connected thereto on the basis of equality as well as of the autonomy of will and property of the participants therein.

2. The present Civil Code shall not apply to the property relations and personal non-property relations pertaining to the administrative subordination of one person to another.

Article 2. Civil Legislation

1. The Civil legislation shall consist of the Constitution of Mongolia, this Code, and other enactments which are consistent with the preceding.

2. A court shall not apply any other laws which violate the Constitution and general principles of this Code.

3. A court shall not apply any decisions of State administrative organs establishing the rules of law, the State administrative organs in the settlement of disputes pertaining to the rights and duties provided by this Code.

4. Civil legislation shall not be retrospective except the cases those provided by the Law.

5. Relations arising out of contracts concluded prior to the coming into effect of the present Civil Code shall be regulated by Article 165 of this Code.

Article 3. Grounds for arising of civil law relations

Civil law relations shall arise on the following grounds:

1) transactions provided by Law as well as those which are not provided by Law and which contents are not contrary to the Law;

2) court decisions aimed at creating civil law relations;

3) administrative decisions aimed at creating civil law relations subject to law;

4) creation of intellectual values;

5) torts and groundless acquisition and possession of property;

6) any other grounds creating civil law relations subject to law.

Article 4. Exercise of rights and duties in the civil law relations

1. Citizens or legal person shall at their own will exercise their rights are set forth in this Code at their own will only in conformity with the requirements of laws and regulations.

2. Citizens or legal person may not use illegally their rights in the way of cause of damages to others or otherwise.

3. A legal person may not conduct any activities restricting the competition or utilize its dominant position contrary to the law.

4. In case of violation of the requirements set forth in Sections 1, 2, and 3 of this Article, the court or arbitration body may refuse to protect the rights and legitimate interests of the person who did so.

Article 5. Civil Law Protection

1. The purpose of civil law protection shall be to restore the violated rights.

2. Parties are entitled to choose and determine the person who will protect the formers’ rights.

3. A court shall exercise the civil law protection only subject to procedures and means established by the Law.

4. The procedures for and means of protection by arbitration bodies of rights which have arisen out of contracts and relations of property nature with participation of foreign nationals and legal persons shall be determined by the Law.

5. A court or arbitration body shall protect civil law rights by the following means:

1) recognition of the rights;

2) suspension of actions which have violated the rights and restoration of the state which existed before such a violation;

3) specific performance;

4) recovery of caused damages;

5) recovery of non-material damage;

6) payment of fines provided for by contract and Law;

7) annulment of decisions by State administrative organs as well as of any administrative decisions bodies which have violated the rights;

8) change and termination of civil law relations;

9) any other means established by the Law.

Article 6. Analogous application of civil legislation

If there is no law regulating the disputable civil relations in question, then a court or arbitration body shall apply the law regulating the similar relations thereto.

In case of absence of such law, the dispute may be settled in conformity with the contents and principles of the civil law.

Article 7. Protection of name, dignity and business reputation

1. If citizens or legal entity consider that their name, dignity or business reputation are defamed, then they shall be entitled to deny such information and claim recovery of damages caused by such defamation.

2. If the person who has disseminated the information mentioned in Section 1 of this Article cannot prove its accuracy, then such a person shall be liable for recovery of the caused damages.

3. A court shall determine the amount of damages caused by the defamation of name, dignity and business reputation as well as the means of their recovery according to the grounds and procedures set forth in this Code.


Chapter Two

Citizens and Legal Persons

Article 8. Civil Law Status of Citizens

1. Subject to law, citizens of Mongolia are entitled to own things and intellectual values or, to conclude transactions or to enjoy copyrights and inherit the property and rights or to make testament of their own property, or to engage in business without creating a legal entity or to choose their place of residence, occupation, and profession, or to carry out the other activities which are not prohibited by Law and to enjoy the other property and personal non-property rights.

2. Citizens of Mongolia shall equally enjoy a civil law capacity equally, i.e. capacity to have the rights and duties of citizens.

3. The civil law capacity of citizens shall arises at the moment of his/her birth and terminates upon his/her death.

4. The conditions and rules on engagement by citizens in business without creating a business entity shall be determined by the Law.

* civil law capacity means general legal capacity

**Article 9. Full legal capacity of citizen

The legal capacity, i.e. capacity of citizen to acquire rights and create civil liabilities for himself or herself by his/her actions shall fully arise upon attainment of eighteen years of age thereby.

Article 10. Limited legal capacity of minors

1. Transactions by minors or persons less than fourteen years of age shall be concluded by their legal representatives- parents or guardians in their name.

2. Minors may conclude petty domestic transactions which are harmless for them, and which are executed at the moment of conclusion thereof.

3. Damages caused by minors to the other persons shall be recovered subject to procedures set forth in Article 381 of this Code.

Article 11. Partial legal capacity of citizens

1. Minors or persons between fourteen and eighteen years of age shall conclude transactions with the consent of their legal representatives – parents or guardians.

2. Minors may exercise the following rights without the consent of their legal representatives:

a) to dispose their wage, stipends, and other income similar thereto as well as the property transferred to their disposal at their own discretion.

b) to conclude petty domestic transactions which are harmless to them and which are executed at the moment of conclusion thereof;

c) to transfer the income mentioned in Section 2 (1) of this Article to the banking and credit institutions and to dispose it;

3. Persons between sixteen and eighteen years of age may be members of a cooperative.

4. Damages caused by minors to the others shall be recovered subject to procedures set forth in Article 383 of this Code.

Article 12. Declaration of acquisition by minors of full legal capacity

1. If there are sufficient grounds, then a court may declare a person between sixteen and eighteen years of age to have full legal capacity upon its request.

2. Parents and guardians shall not be liable for discharge of obligations of person who has been declared to have full legal capacity.

3. Upon request by parents or guardians, a court may withdraw a declaration concerning full legal capacity.

** full legal capacity means legal capacity to perform acts

Article 13. Limitation of Legal Capacity of Citizens

1. A court may restrict the legal capacity of person who permanently uses drugs or alcohol, and appoint a guardian for him/her.

2. A person with limited legal capacity shall conclude any transactions within such restricted capacity with the consent of his/her guardian.

3. In case the grounds for limitation of legal capacity cease to exist, then the limitation established over such person shall be abolished by a court decision, and the guardian shall be released from his/her duties.

4. When a person with limited legal capacity causes damages to the others, then such damages shall be recovered like as those by the citizen of full legal capacity.

Article 14. Custody of Citizen of Full Legal Capacity

1. A custodian may be appointed for citizens who are not able personally to exercise their rights and duties due to insanity upon their own request.

2. A guardianship authority shall appoint the custodian upon the consent of citizen under care.

3. A custodian shall conclude transactions concerning the use and disposal of property of citizen under care only with his/her consent.

Article 15. Complete Deprivation of Legal Capacity

1. A court shall consider a citizen who is incapable of understanding the consequences of his/her own actions or of administering his/her own affairs due to mental disorder to have been completely deprived of legal capacity, and shall appoint guardianship for him/her.

2. A guardian shall conclude transactions on behalf of a person who has been considered to completely deprive of legal capacity.

3. Damages caused by person, who has been considered to completely deprive of legal capacity to others shall be recovered subject to procedures set forth in Article 382 of this Code.

4. If the grounds for complete deprivation of legal capacity cease to exist, then a court shall revoke its previous decision and release the guardian from his/her duties.

Article 16. Transactions Aimed at Limitation of Civil Law Capacity or Legal Capacity

1. It is not allowed to limit or deprive someone of his/her civil law capacity or legal capacity contrary to the procedures prescribed by the Law.

2. Transactions which at limiting and depriving of civil law capacity or legal capacity shall be void.

Article 17. Place of Residence

1. The place of residence of a citizen shall be determined by the administrative and territorial unit where she/he is registered under the Law.

2. The place of residence of minors or citizen under guardianship of the others shall be determined by the place of residence of their parents or guardians.

Article 18. Declaration of Citizen to be Missing

1. Upon request by an interested person, a court may declare a citizen to be missing if his/her place of abode is unknown for the two years of period from the date of missing from his/her place of residence.

2. Where the date of last information concerning a missing citizen is determinable, then the first day of next month shall considered as the date for missing thereof. If the date of receipt of information is indeterminable, the first day of January of next year.

3. An administration shall be appointed over the property of a missing citizen and his/her statutory duties such as the maintenance of others and taxation etc. shall be discharged with such property.

4. In case of return of as well as of determination of the place of abode of a missing citizen, then a court shall revoke its previous decision.

5. Upon return, a missing citizen is entitled to claim restitution of his/her available property which has been transferred to others without compensation after declaration of such a citizen to be missing except on the grounds set forth in Section 3 of this article.

6. If an administrator has lost property of a missing citizen, then a court may pass a decision on full or partial payment of the price of such property.

Article 19. Declaration of citizen to be deceased.

1. Upon request by an interested person, a court may declare a citizen to be deceased if his/her existence is unknown for one year from the date of his/her missing as well as of missing under the circumstances threatening to life.

2. Upon a court decision, the declaration of a citizen to be deceased shall be entered into registry of civil status of the citizens.

3. The effective date of a court decision on the declaration of a citizen to be deceased shall be considered as the date for his/her death.

4. If a citizen who has been missing under circumstances threatening to life or is considered to have deceased due to certain danger or accidents, is declared to have deceased, then the court may consider the day of possible death as the day of the death of such a citizen.

5. The property of a citizen who is declared to have deceased shall be transferred to the others subject to inheritance.

6. A spouse of a citizen who is declared to have deceased may request an annulment of his/her marriage under the procedures prescribed by the Law.

Article 20. Consequences arising out of revocation of court decision on declaration of citizen to be deceased.

1. In case of return and determination of the place of abode of a citizen who is declared to have deceased, then a court shall revoke its previous decision and the record in the registry of civil status of citizens shall be changed.

2. A citizen who is declared to have deceased is entitled to claim restitution of his/her property which has been transferred to the others subject to inheritance.

3. In case of the transfer of the property of citizen who is declared to have deceased, then such property shall be returned to its owner or, if this is impossible, the price shall be reimbursed upon revocation of a court decision thereon.

4. A revocation of court decision on the declaration of citizen to be deceased shall not serve as grounds for revocation of court decision on annulment of marriage.

Article 21. Legal Persons

1. Legal persons shall be an organization which has a separated property falling within its powers to own, to possess, use and dispose and is able to acquire the rights and create liabilities by its own actions and, is liable for its obligations arising out of own activities with its own assets as well as sues and is sued in its own name at the court and arbitration bodies.

2. Legal persons may be organizations which main goal is to make a profit or non-profit organization which has the other goals provided by the Law or its charter.

3. The Law may provide that the founder or participants of a legal person might or might not retain their rights in respect with its separate property.

4. Companies, partnerships, cooperatives as well as institutions financed by owners thereof shall be legal person in which the founders or participants retain their rights in respect with the separate property thereof.

5. Public organizations or religious organizations and foundations established for charitable and other purposes shall be a legal person in which the founders or participants do not retain their rights in respect with the separated property thereof.

Article 22. Civil Law Capacity Of Legal Person

1. Legal person shall have the rights and duties which follow the goals of activities set forth in their foundation documents.

2. Legal persons may carry out any activities which do not contradict the goals of their activities and which are not prohibited by the Law.

3. Legal persons shall carry out certain activities which are provided by the law only on the basis of special authorization by the competent authorities.

4. The rights of a legal person may be restricted subject to the grounds and procedures prescribed by the law.

Article 23. Establishment Of Legal Person And Foundation Documents

1. Citizens, the state and its competent authorities, as well as other legal persons, and if it is stipulated by the law, foreign citizens and organizations including stateless persons, may found a legal person under the procedures prescribed by the law.

2. Foundation documents shall be formalized for the establishment of legal persons and their types, forms and procedure for formalization shall be determined by law.

3. Decisions by the competent authorities or charter or contract for foundation may be foundation documents of legal person.

4. The charter of a legal person shall be adopted by its founders( participants) or authorized organs thereby.

5. A charter shall contain the name, place of business, goals of activities of the legal person and organs of legal person and their powers as well as the other items needed for the type of legal person in question under the law.

6. A contract on the foundation of a legal person shall be concluded if it is provided for by the law.

7.* Members or participants of a legal person shall determine the procedure for joint actions aimed at foundation thereof and conditions on the transfer of their properties to the ownership of the legal person which is non-owner thereof or at its powers to possess, use and dispose under Article 88 of this Article and on participation in its activities by the contract on foundation of legal person. This contract also shall contain the procedure and conditions on management of the activities of legal person and withdrawal therefrom, joint actions of founders, principles of distribution of profits and losses and the other provisions.

8. A legal person is subject to state registration if it is provided by the law.

9. Where the legislative requirements are not met, then the registration agency shall refuse the registration of legal person with the state registry. If there is objection to such decision on refusal, then a complaint may be filed to the court.

10. Legal persons which are subject to registration under the law shall be considered to be founded upon registration with the state registry, and the other legal persons shall be considered to be founded upon decision by the competent authorities and the adoption of their charter thereby.

11. Founders shall be liable for the obligations arising from the activities prior to the establishment of a legal person under the law.

Article 24. Name And Place Of Business Of Legal Person

1. Legal persons shall have a business name. The name of a legal person may not be similar to that of another legal person which has been previously entered in the state registry.

2. The Registration Agency shall keep a State registry of names of legal persons.

3. Legal persons may have their own symbol and trademarks.

4. A court shall decide on disputes arising in connection with the name, symbol, and trademark of a legal person.

5. The place of business of a legal person shall be determined by the place where its head office is located.

Article 25. Organs Of Legal Person

1. Legal persons shall participate in the civil law relations through their organs.

2. The legal status of organs of a legal person shall be determined by the law or the foundation documents thereof.

Article 26. Subsidiary And Representative Office Of Legal Persons

1. A legal person may set up its subsidiary or representative office if it is provided by the law and its foundation documents.

2. Subsidiaries shall be a special unit which is located at the other place than the place of business of a legal person and exercise all or part of its functions.

3.* Representative offices shall be an unit which is located at the other place than the place of business of a legal person, and protects its legitimate interests and commits the legal actions such as conclusion of transactions on behalf of the former.

4. The rights and duties of subsidiary and representative offices shall be determined by their charter.

5. Executives of subsidiary and representative offices shall carry out their activities on the basis of authorization issued by a legal person thereto.

6. Subsidiaries may have the legal personality.

Article 27. Liabilities Of Legal Person

1. A legal person may be liable for its obligations with all of its assets.

2. Unless otherwise stipulated by the law or foundation documents, the founders of a legal person or owners of its assets shall not be liable for obligations undertaken by the legal person, and a legal person shall not be liable for obligations undertaken by its founders and owners.

3. Legal persons which are financed by an owner and have the right to possession, use and disposal of such property shall be liable for obligations with their cash. In case such cash is insufficient to satisfy the claims, then the owner shall be liable thereby.

4. If legal persons become bankrupt due to illegal activities of the owner or the assets of the legal person are not enough to satisfy the claims by plaintiffs, then the owner shall be liable thereby.

Article 28. Winding Up Of Legal Persons

1. Winding up of legal persons is subject to reorganization or liquidation as provided by this Code.

2. Transactions concerning the reorganization and liquidation of legal persons on the grounds and procedure other than those provided by the law, which have been concluded with the other persons, shall be void.

Article 29. Reorganization Of Legal Persons

1. Upon decisions by owners of the property of legal person or designated organs thereby as well as of competent organs indicated in its foundation documents, legal persons may be reorganized. (merger, joining, dividing, separation and transformation)

2. The relevant provisions of Article 31 of this Code shall be applicable to the reorganization of legal persons.

Article 30. Consequences Arising Out Of Reorganization Of Legal Persons

1. In case of joining or separation or transformation of legal person, its rights and liabilities shall be assigned by the legal person which has been created as a result of such joining or separation or transformation.

2. Where a legal person merges with another legal person, then the forger’s rights and liabilities shall be assigned by the legal person which has been created by such merger.

3. Where a legal person is divided, then its rights and liabilities shall be assigned by the new legal persons proportionally unless otherwise provided by the law.

Article 31. Liquidation Of Legal Persons

1. Legal persons shall be liquidated on the following grounds:

  1. decision by owners or designated organs thereby, and by competent organs indicated in its foundation documents;
  2. declaration of bankruptcy or court decision on liquidation due to several or gross violation of laws;
  3. decision by legal person on the termination of its activities for such reasons as the expiration of operation period or achievement of the goals of its establishment thereby;
  4. any other grounds subject to law.

2. The Liquidation Commission, appointed by organs which have passed decision on liquidation shall be in charge of liquidation matters.

3. The liquidation Commission shall make public liquidation of the legal person.

4.* The time limit for acceptance by the Liquidation Commission of applications by creditors shall not be less than two months or not exceed six months from the date of public notification of the liquidation of legal person in question.

5. Actions against a legal person under liquidation shall be satisfied in the following order.

  1. completion of payments due by the legal person to the others for cause of damages to their life and health,
  2. payment of wages of the workers under a labor contract,
  3. payment of taxes and social insurance premiums,
  4. completion of payments with the other plaintiffs subject to law.

6. In case the assets of legal person under liquidation are insufficient to service its debts, its available assets shall be distributed among the plaintiffs in proportion to the amount of due payments according to the proper sequence order.

7. When the available cash of legal person is insufficient, to satisfy the claims of plaintiffs then the Liquidation Commission may sell its other assets and complete its due payments under the law.

8. Upon satisfaction of claims by the plaintiffs, the remaining property shall be transferred to the statutory owners ( founders ) or legitimate persons if it is specially provided by the law.

9. Where there is no person to accept the property of legal person under liquidation, then it shall be transferred to the State ownership.

10. Legal persons which are subject to statutory registration with the state registry shall be considered to have winded up upon registration of their liquidation with the state registry, and other legal persons shall be considered to have winded up upon decision on their liquidation.

Article 32. Companies

1. Companies shall be a legal person which has the registered capital consisting of contributions by its members (shareholders) and is liable for its own obligations and is liable for its own obligations within amount of its registered capital, and its member is liable therefore only within the amount of its contribution made to the registered capital.

2. Companies may have one member.

3. The limited liability company shall be a company in which its registered capital is divided into a number of stocks which are indicated in its foundation documents and which members have the prerogative to buy the interests of the other members. Each member shall be issued a certificate of stock.

4. Joint stock companies shall be a company in which its registered capital is divided into certain number of shares of equal value, and its shareholders freely trade in their shares to the public and its shareholder has the prerogative to buy the shares of other shareholder.

5. A legal status of companies shall be determined by the law.

Article 33. Partnership

1. Partnerships shall be a legal person which has the assets consisting of contributions by its members and is liable for its obligations with these assets and the private properties of its members under the law.

2. A general partnership shall a partnership in which all of its members are jointly liable for obligations undertaken by such a partnership with their private property if the assets of partnership are insufficient therefore.

3. A limited partnership shall be a partnership in which at least one member ( general partner) is fully liable for the obligations undertaken by such a partnership with its private property. The other members of partnership may have the limited liability.

4. The other forms of partnership may be determined by the law.

5. A legal status of partnerships shall be determined by the law.

Article 34. Cooperatives

1. Cooperatives shall be a legal person which carries out activities aimed at meeting the needs of its members by contributions of their labor and property and which members are liable for due parts of its obligations if the property of cooperatives is insufficient.

2. Foundation documents shall state the size of liability and procedures for distribution of earned profits to the members.

3. The legal status of cooperatives shall be determined by the law.

Article 35.* Merger of Legal Persons

1. Companies, partnerships and cooperatives may merger with each other with a view of coordinating their activities, unless otherwise stipulated by the law.

2. A conglomerate may be set up in the form of a for-profit organization or non-profit organization.

3. Public organizations, religious organizations and foundations may set up a consortium only in the form of non profit organization.

4. Participants of the conglomerate shall retain their legal capacity personality.

Article 36. Public Organizations, Religious organizations and foundations

1. Public organizations shall be a body of citizens and legal persons who are united on a voluntary basis with the view of protecting their intellectual, material, non- material and other interests.

2. Religious organizations shall be an organization which goals are to meet the rituals, and behavioral and education needs of the religious community.

3. Foundations shall be an voluntary organization without membership which centralizes the grants and donations for social, cultural, charitable or other public benefit, and has the right to dispose them according to the procedures for their utilization set forth in its charter.

4. Public organizations, religious organizations, and foundations shall be non-profit organizations.

5. The legal status of public organizations, religious organizations and foundations shall be determined by the law.

Article 37. Participation By The State, Aimaks, The Capital City, Soums and Duuregs in the Civil Law Relations

The civil rights and duties set forth in this Code shall be exercised by the State through its high governing organs or by the aimaks, the capital city, soums and duuregs through their Hurals of representatives of citizens. They may delegate to the others their power to exercise the civil rights and duties subject law or agreements.


Chapter Three

Transactions

Article 38. Transaction and its types

1. A transaction shall mean actions by citizen or legal person which are aimed at creating, changing, transferring or terminating the civil rights and duties.

2. Transactions may be unilateral, bilateral or multilateral.

3. A unilateral transaction shall mean a transaction which is be concluded by an indication of intention of one party subject to the law or the agreement between the parties.

4. If it is not contrary to the law or nature of the transaction, then the general principles of contracts and obligations shall apply to unilateral transactions.

5. A bilateral transaction shall mean a transaction which is to be concluded by indication by two or more parties of their intention.

Article 39. Form of transactions.

1. Transactions, except those for which a writing form is mandatory under law, may be concluded orally.

2. Parties may conclude transactions by conduct in the way of indicating their assent to essential terms thereof.

3. In the cases provided by the law or contract silence may be considered as an acceptance of proposal for concluding transaction.

4. In case of conclusion of a transaction in writing, the parties shall sign the documents. If a party is unable to sign the documents due to the insanity or other good reasons, then another person may sign the documents on behalf of the former and the facts thereof shall be specially stated in such documents.

5. Transactions, except those between citizens which are executed at the moment of conclusion, shall be concluded in writing unless otherwise stipulated by law.

6. Unless otherwise stipulated by law, transactions by legal persons shall be concluded in writing.

7. If the law provides that a transaction which does not comply with the mandatory writing requirements would be void, then such a transaction shall be void . In such case, the parties shall make restitution of the subject of the transaction to each other concurrently.

8. If the parties have disputes concerning a transaction which violated the mandatory writing requirements, then they may prove it by any other means of evidence regardless of the deprivation of their right to do so by witness unless otherwise provided by this Code.

Article 40. Consideration of Transaction as Concluded

1. An oral transaction shall be considered to have been concluded as follows:

1) When the parties agree upon the essential terms of transaction;

2) at the moment of handing over the customary things such as the receipt or documents certifying the conclusion of the transaction;

3) non-reply to proposal for concluding a transaction subject to law or contract, and the expiration of fixed time or of a reasonable time for such reply.

2. An written transaction shall be considered to have been concluded as follows:

1) When the parties draw up and sign a document indicating their intention;

2) at the moment of receipt by one party of letter, telegram (telex, facsimile etc.) or other similar documents which indicate the assent by the other party to the proposal for concluding a transaction ( draft contract );

3) at the moment of registration and notarial certification of transactions which are subject to mandatory requirements as to registration or notarial certification.

3. If one of the parties indicates its unconditional acceptance of the terms of the other party by its own conduct, then such a transaction shall considered to have been concluded by conduct.

Article 41. Transactions Subject To Special Authorization And Registration

1. Subject to special regulation by the law, the parties are obliged to seek authorization by the competent authorities for the conclusion of a transaction and to register them.

2. A transaction which does not comply with the requirements set forth in Section 1 of this Article shall be void. In such case, the consequences mentioned in Section 7 of Article 39 of this Code shall occur.

Article 42. Notarial Certification Of Transaction

1. Upon request by one of the parties, a transaction is subject to mandatory certification by a notary office.

2. Where the law provides for mandatory notaries certification of transactions, the parties shall be obliged to comply this requirement. In case of non – performance of this obligation, a transaction shall be void. In such case, the consequences mentioned in Section 7 of Article 39 of this Code shall occur.

3. When a transaction which is subject to notarial certification is not certified, if any of the parties accepts the execution upon full or substantial performance of the obligations by the other party and objects to notarial certification of such a transaction, then a court may consider this transaction to have been concluded upon the action of the party which has performed its own obligations. In such a transaction is not subject to notarial certification.

Article 43. Void Transactions

1. The following transactions shall be void:

  1. transactions which contents violate the law or transactions which obviously contradict the interests of the state or public;
  1. transactions by legal persons which are contrary to the goals of activities set forth in their charter;
  1. transactions by minors;
  1. transactions by citizens who are deprived of full legal capacity;
  1. false transactions which have been concluded formally without any intention of creating legal effects;
  1. transactions which have been concluded in order to conceal another void transaction.

2. The provisions of Section 1(3) of this Article shall not apply to petty domestic transactions which are harmless for minors and which are executed at the conclusion thereof.

3. Any interested person may claim the elimination of the consequences arising out of a void transaction. However, a court is entitled to pass decision on the elimination of such consequences at its own initiative.

Article 44. Voidable Transactions Due To Actions By An Interested Party

1. Upon action by an interested person, a court may consider the following transactions to be voidable:

  1. transactions which are concluded due to substantial mistake;
  2. transactions which are concluded by fraud, violence or threat as well as transactions which are concluded by gross disparity due to coercion or misrepresentation;
  3. transactions which are concluded by representatives of citizens and legal persons on intentionally unjust terms for the principal as well as transactions concluded by persons without the full authorization or with excess of their authority unless the principal approves such transactions;
  4. transactions which are concluded by minors without the consent of their parents or guardians, except those which are not subject to authorization thereto;
  5. transactions concluded by citizens with full legal capacity who have been unable to understand the consequences of their own actions and administer their own affairs at the moment of conclusion of transaction.

2. An action for violable transaction on the grounds set forth in this Article may be filed only by the person who has suffered losses or its legal representative.

Article 45. Consequences arising out of void transactions which are concluded by a legal person which are contrary to the law or goals set forth in its charter or transactions which obviously contradict the interests of the state or of the public.

1. If transaction which violates the law by its contents and transaction which is concluded by a legal person which is contrary to the goals set forth in its charter (Section 1(1 and 2) of Article 43), are not of the character as mentioned in Section 2 of this Article, then the parties shall make restitution to each other concurrently. The price shall be paid if it is impossible to do so.

2. Where the transaction which obviously contradicts to the interests of the state or of the public was concluded intentionally, then all things gained thereunder or their prices shall be confiscated by the state. If any of the parties has performed the obligations under this transaction, then the things gained by the other party and mutual consideration shall be confiscated by the State. Where any of the parties has concluded such a transaction intentionally, then the things gained by the former or their price shall be returned to the other party, and all things gained by the guilty party shall be confiscated by the State.

Article 46. Consequences arising out of void transactions which are concluded with minors

1. If any transactions, except for petty domestic transactions which are harmless and which are executed at the moment of conclusion thereof under (Section 1 (3) of Article 43), were concluded with minors, then the parties shall be obliged to make restitution to each other concurrently or to pay the price if it is impossible.

2. If a citizen with full legal capacity has known or ought to have known the other person to be a minor, then such a citizen shall be obliged to compensate for damages caused thereto.

Article 47. Consequences Arising Out Of Void Transactions Concluded With A Citizen who is Completely Deprived Of Legal Capacity

1. Where a transaction was concluded with a citizen who is completely deprived of legal capacity (Section 1(4) Article 43), then the parties shall be obliged to make restitution to each other concurrently or to pay the price if it is impossible.

2. In case a citizen with full legal capacity has know or ought to have known the other person to be completely deprived of legal capacity, then such a citizen shall be obliged to compensate for damages caused thereto.

Article 48. Consequences Arising Out Of Voidable Transaction Concluded With A View to Conceal Another Void Transaction

1. Where the parties have concluded a transaction intentionally with a view to conceal a void transaction, then all things gained under such a transaction shall be confiscated by the State.

2. Where any of the parties concluded such a transaction intentionally, then all things gained by the former, or their price if it is impossible, shall be returned to the other party, and all things gained by the guilty party shall be confiscated by the State.

Article 49. Consequences Arising Out Of Void Transaction Concluded Due To Substantial Mistake

If a transaction concluded due to substantial mistake (Section 1(1) of Article 44) is considered to be void, then the parties shall be obliged to make restitution to each other concurrently or pay the price if it is impossible.

Article 50. Consequences arising out of a void transaction which is concluded due to fraud, violence or threat, or a transaction which is concluded by gross disparity due to coercion or misrepresentation, or a transaction which is concluded on intentionally unjust conditions for a principal, or a transaction which is not approved by a principal due to the collusion by persons without full authorization or with excess authority.

1. If a transaction which is concluded due to fraud, violence or threat, or a transaction which is concluded by gross disparity due to coercion or misrepresentation, or a transaction which is concluded by a representative on intentionally unjust conditions for a principal due to the collusion by persons without full authorization or with excess of authority (Section 1 (2 and 3) of Article 44) is considered to be void, then the aggrieved party shall be entitled to claim the following from the other party:

  1. to make all restitution under such transactions or to pay the price if it is impossible;
  1. to compensate for damages.

2. If a transaction is considered to be void under Section 1 of this Article, then all things gained by the aggrieved party from the guilty party shall be confiscated by the State.

Article 51. Consequences Arising Out of Voidable Transaction Concluded by Minors

1. If a transaction which is concluded by minors without the consent of their parents or guardians (Section 1 (4) of Article 44) is considered to be void, then the parties shall be obliged to make restitution to each other concurrently or to pay the price if it is impossible.

2. Where the person who has concluded a transaction with the minors has know or ought to have known the impossibility for concluding such a transaction without the consent of the parents or guardians, then this person shall be obliged to compensate for the damages caused thereto.

3. This provision shall not apply to persons who is declared to have full legal capacity.

Article 52. Consequences Arising Out of a Voidable Transaction Which is Concluded by a Citizen With Full Legal Capacity but Who Was Unable to Understand the Significance of His/Her Own Actions or To Administer His/Her Own Affairs at the Moment of the Conclusion of Such Transaction.

1. Where a transaction is concluded by a citizen with full legal capacity, but who was unable to understand the significance of his/her own actions or to administer his/her own affairs at the moment of the conclusion of the transaction (Section 1(5) of Article 44) is considered to be void, then the parties shall be obliged to make restitution to each other concurrently or to pay the price if it is impossible.

2. In case a person knew or ought to have known the other party to be unable to understand the significance of his/her own actions or to administer his/her own affairs, then the former shall be obliged to compensate for the damages caused thereto.

Article 53. Time For Void Transaction

A voidable transaction shall be considered void from the date of its conclusion.

Article 54. Void Part Of transaction

If a certain part of transaction is considered void, but its remaining parts are fit for the purposes of such a transaction, then this transaction shall remain valid.

Article 55. Conditional transaction

1. Where the transaction provides for the creation of rights and duties due to events for which the occurrence is uncertain, then this transaction shall be considered to be a suspended conditional transaction.

2. Where the transaction provides for the termination of rights and duties due to any events for which the occurrence is uncertain, then this transaction shall be considered to be a changeable conditional transaction.

3. If the occurrence of an established condition is delayed intentionally, then such a condition shall be considered to have occurred. If the occurrence of an established condition is speeded up, then such a condition shall not be considered to have occurred.

Article 56. Stock Exchange Transaction

1. A transaction for investment or for transfer of property rights (property, securities etc.) into the stock exchange turnover is subject to the mandatory requirements as to its conclusion and registration.

2. If the law does not contradict the nature of the transaction in question, then the stock exchange transaction shall be regulated by the rules concerning contracts (contract for sale, contract for commission etc.) which are fit for its contents.

3. Terms containing the commercial secrets of parties which are not subject to disclosure without their consent may be determined by the laws and regulations on the stock exchange.

4. Disputes relating the conclusion of stock exchange transaction may be considered by the competent organs of the stock exchange, and the parties may file claims on the decision by such organs.


Chapter Four

Representation and Authorization

Article 57. Representation

Citizens or legal persons may exercise their rights and duties through representation by the other person. The law or contract shall determine the procedure for such exercise.

Article 58. Representative

1. Citizens or legal persons may conclude through their representative any other transactions except those which must be concluded thereby subject to law.

2. Parents, guardians and custodians shall conclude transactions on behalf of citizens who are completely deprived of legal capacity or have a limited legal capacity or are partially deprived of legal capacity.

3. A person who acts for the interests of others in its own name (auctioneer, trustee in bankruptcy, mediator, executor of testament, etc.) as well as a person authorized to conduct negotiations on transactions to be concluded in the future shall not be considered as a representative.

Article 59. Authority of Representative.

1. The authority of representative shall be based on law or administrative decision and authorization.

2. A representative may not act outside the scope of its authority.

3. Transactions concluded by a representative on behalf of the principal within its authority shall create or change and terminate the rights and duties of the principal.

Article 60. Authorization

Authorization shall be a written confirmation of authority for commission of certain of certain legal actions, given by one person ( the principal ), to another person ( the proxy).

Article 61. Forms of Authorization.

1. An authorization pertaining to transactions which are subject to notarial certification under the law shall be certified by a notary office.

2. Authorizations for getting the wage or price of intellectual values, or pensions, or allowances, or money transfers or parcels or valuable letters and money from a bank account, may be subject to certification by the local administration of the place of residence of the principal or by management of institutions where the principal works, studies or is under medical treatment.

3. Authorization of soldier may be subject to certification by the commander of his military unit and organization, and authorization of citizens who are at the state maintenance house or serve punishment, may be subject to certification by the administration of such institutions.

4. An authorization which does not comply with the requirements set forth in this Article shall be invalid.

Article 62. Authorization of legal persons.

1. An authorization by legal persons shall have the signature of executives and the seal of such an organization.

2. An authorization for acceptance or transfer and disposal of the property of the legal person shall be signed by the superintendent of such an organization as well as by its accountant or acting accountant thereof.

3. Forms of authorization for the conclusion of banking transactions and foreign trade deals, as well as the procedure for its issue shall be determined by the law.

Article 63. Duration of Authorization.

1. An authorization shall be issued for a period of time not more than three years.

2. If the duration of authorization is not indicated, then it shall be valid for a one year period from its issue.

3. An authorization which does not indicate its date of issue shall be invalid.

Article 64. Transfer of authorization.

1. A proxy is obliged personally to carry out the acts falling within the scope of its authority. If an authorization indicates the possibilities for carrying out such acts through the other person or it is necessary to do so for the interests of the principal, then such an authorization may be transferred.

2. When a proxy of transactions which are subject to notarial certification under the law, transfers its rights to the other person, then such an authorization thereon shall be subject to notarial certification.

3. The duration of transferred authorization shall not exceed that of the original authorization. Upon termination of the original authorization, the transferred authorization shall also terminate.

4. A proxy is obliged to notify the principal about the transfer of its rights to the other as well as about the transferee of authorization. A proxy which has not performed its obligation shall be liable for consequences arising out of the acts of transferee like its own acts.

Article 65. Termination of Authority

1. An authority shall be terminated in the following cases:

1) expiration of validity of authorization;

2) revocation by the principal of its authorization;

3) winding up of legal entity which has given authorization;

4) death of the principal and proxy or the declaration thereof to be missing or to have deceased;

5) complete deprivation by the principal or proxy of legal capacity or limitation of legal capacity thereof.

6) renunciation by the proxy from authorization.

2. The principal is entitled to revoke its authorization at any time, and the proxy is entitled to renunciate from the authorization at any time. Any transactions for non-enjoyment of this right shall be void.

3. A principal is obliged to notify about revocation of its authorization to the proxy and person which must conclude transactions with the proxy.

4. Where an authorization is terminated due to winding up of legal entity which has given authorization or death or declaration of principal to have deceased, then its successor or inheritor shall be obliged to give notification on such termination of authorization to the proxy or person which must conclude transactions therewith.

5. Upon termination of authorization, the proxy or transferee of authorization therefrom is obliged to return such an authorization to the principal without delay.

6. Transactions concluded by the proxy with the other persons shall remain effective unless the proxy knew or ought to have known of the termination of authorization.


Chapter Five

Period of Time in the Civil Law

Article 66: Definition Of Period Of Time.

1. A period of time determined by the law or contract or court shall be defined by a calendar date, i.e. by year or semi year or quarter or month, ten days or week or day and hour.

2. A period of time may be defined by an event which occurrence is unevitable.

Article 67: Calculation Of Period Of Time Determined By Year Or Semiyear Or Quarter Or Month Or Tendays Or Week Or Day And Hour.

1. A period of time determined by year shall expire on the same month and day on which such a period expires.

2. A period of time determined by semiyear, shall expire on the same day of the month which corresponds to the date on which such a period expires.

3. A period of time determined by quarter shall expire on the same day of the month which corresponds to the date on which such a period expires.

4. A period of time determined by month shall expire on the same day and of the month on which such a period expires. Where there is no last day which corresponds to the date on which a period of time determined by year or quarter or month expires then such a period shall expire on the last day of the month in question.

5. In the calculation of determined period of time, the semiyear shall be regarded as six months, and the quarter shall be regarded as three months.

6. A period of time determined by ten days shall expire on the same day of the ten days on which such a period expires.

7. A period of time determined by week shall expire on the same day of the week on which such a period expires.

8. A period of time determined by day shall expire on the same hour of the day on which such a period expires.

9. A period of time determined by hour shall expire on the same number of the hour on which such a period expires.

Article 68: General Principals Of Calculation Of Period Of Time.

1. If a period of time is to be calculated by a calendar date or from the occurrence of any event, then it shall calculate by such a determined date, i.e. by year or quarter or month or ten days or week or day and hour or from the day following the occurrence of such an event.

2. Where the last day of calculated period of time falls on a non-working day, then such a period shall expire on the working day following this day.

3. Where a period of time is determined for performance of any obligation and transaction does not provide for otherwise, such an obligation shall be performed within twenty-four hours of the last day of that period.

4. Where any organization must perform an obligation, it shall be performed within the last hour on which the working day or production operations of such an organization, determined by the relevant procedure end.

5. Where any document is transmitted to the post and communication authorities within twenty-four hours of the last day of the determined period of time, it shall be deemed to have been given in due time.

Article 69: Limitation Period.

1. A general limitation period in respect of claims for the protection of violated rights shall be three years.

2. The law may determine a shorter period of limitation other than that set forth in Section 1 of this Article in respect to special types of obligations.

3. A limitation period shall be calculated from the date on which the right to file action has accrued.

4. Unless otherwise provided by the law, right to fill action shall accrue on the date of violation of rights or on which the plaintiff knew or ought to have known of the violation of its rights, and if the guarantee period or time limit for claims are determined, on the date on which the response to such claim had been received or on which these periods have expired.

5. A limitation period with respect to counter obligation shall commence upon performance of the principal obligation.

6. The expiration of the limitation period with respect to the principal obligation shall have the same effect to the ancillary performance, (fine, pledge, earnest, surelyship, guarantee, etc.).

Article 70: Procedure For Application Of Limitation Period.

1. A court or arbitration body shall apply a limitation period irrespective of request by the parties.

2. Where a court or arbitration body consider that the limitation period had expired for good reasons then it may extend such a period and protect the violated rights.

Article 71: Scope Of Application Of Limitation Period.

A limitation period shall not apply to the following claims:

1) restitution of banking deposits;

2) recovery of damages caused by the violation of the non-property and personal rights;

3) recovery of damages caused to the life and health of citizens;

4) any other claims subject to law.

Article 72: Suspension Of Limitation Period

1. The limitation period is subject to suspension in the following cases:

1) extraordinary events or circumstances of force major nature, ( occurrences of natural disasters such as earthquakes, volcanes, floods, forest and steppe fires, and establishment of quarantines due to epidemics, etc.), have impeded the filing of a action;

2) any of the plaintiff and defendant serves in the army, under the martial law or at the time of declaration of the state of emergency and war;

3) the government decision has resulted in delay of the performance of obligations.

2. Where the circumstances mentioned in Section 1 of this Article have occurred within the last six months of the limitation period, then the limitation period shall be suspended.

3. The limitation period shall commence to run upon removal of reasons for suspension thereof. If the remaining period is less than six months, then such a period shall be extended up to six months. If the limitation period is less that six months, then the remaining period shall have the same length like the limitation period itself.

Article 73: Cessation of limitation period.

1. Where an action is filed under the prescribed procedure, then the limitation period shall cease to run.

2. Where a debtor accepts his obligations, then the limitation period also shall cease to run.

3. Upon cessation of the limitation period, then a new limitation period shall commence.


PART TWO

Property Law

Chapter Six

General Provisions

Article 74. Types And Forms Of Property

1. There shall be private and public property in Mongolia.

2. The State shall create the conditions for free development of all types and forms of property and protect their inviolability by the Law.

Article 75. Owner

1. The State, citizens, and legal persons may be owners in Mongolia.

2. Foreign states, its citizens and legal persons as well as international organizations and stateless persons may be owners unless otherwise provided by the Mongolian law and international treaties of Mongolia.

3. An owner may transfer their rights to the other and the latter is entitled to possess or use and dispose of the things according to the utilization determined by the owner or the goals of its activities and charter.

Article 76. Objects Of Ownership

Things, intellectual values as well as some property rights which are subject to legalization may be objects of ownership.

Article 77. Immovable And Movable Property

1. Things shall be classified into immovable and movable properties since the former are objects of ownership.

2. An immovable property shall be the land and things which can not be utilized separately from it.

3. The competent State authorities which are located at the place where the immovable property is situated shall register it in conformity with the procedures prescribed by the Law.

4. Any other property except immovable property shall be movable property.

Article 78. Securities

1. Securities shall be documents certifying the right to claim repayment of a certain amount of money or to make investment to the joint stock company and to take profits thereupon as well as the right to accept and dispose the property, and other property rights provided by the Law.

2. The procedures for authorizing the issue of securities and their trading and the rights and duties of participants in the securities market as well as the rights and duties of the institution in charge of supervision over the issuance of securities and trading shall be determined by the Law.

Article 79. Requirements for Securities

1. Securities shall have requirements and forms which are determined by the Law and competent authorities.

2. Upon approval by the competent authorities, the securities shall be produced in conformity with the procedures prescribed by the Law.

Article 80. Forms of Securities

1. Securities shall have visible and non-visible forms.

2. A visible security shall be a security which has been printed under the prescribed procedure, and a non-visible security shall be security which has not been specially printed and which requisites are entered into a special registry (ordinary or in the memory of an electronic machine).

Article 81. Types Of Securities

1. Securities shall be the following types: non-bearer security, inscribed security, and bearer security.

2. Issuance of some types of securities by certain persons may be restricted by the Law.

Article 82. Person Entitled To Enjoy A Right Certified By The Securities ( Owner )

1. The following persons shall enjoy a right certified by the securities:

  1. for a right certified by a non-bearer security – by the person which has acquired legally such a security;
  1. for a right certified by a bearer security – only by the person whose name is stated therein,
  1. for a right certified by an inscribed security – by the owner of such a security or the person in whose name the relevant registry has been made with a view of assignment of this right from the owner.

2. A holder of a right certified by the securities shall be the owner of securities.

Article 83. Assignment Of Right Certified By The Securities

1. Upon transfer of securities, a right certified thereby shall be assigned in full.

2. A right certified by a non-bearer security shall be assigned to the others by handing over of such a security.

3. The rules on the assignment of a claim shall be applicable to the assignment of right certified by bearer security.

4. A security containing a name shall become invalid at the moment of assignment of the right certified by the bearer security to the others, and another security shall be given to a new owner.

Article 84. Transfer Of Securities

1. A transferor of a bearer security shall be responsible for its validity. However, it shall not be responsible for the exercise of a right.

2. A transferor of an inscribed security shall be responsible for its validity as well as the exercise of a right.

Article 85. Restoration of Rights Certified by the Securities

A court shall restore the rights certified by nonbearer security or imcribed security.

Article 86. Intellectual property

1. Intellectual property shall consist of the discovery or invention or a rational proposal or the works relating to copyright or sample of product and trademark.

2. A discovery shall be an intellectual value proved by experiments on the basis of investigation of the nature, phenomenon, and characteristics of the material world which were previously unknown to science. The geographical, paleontological, archeological fossils, and discovered minerals as well as works of social science shall be considered as a discovery.

3. An invention shall be a new solution relating to a production method or process and products which involve a new inventive step on the basis of natural laws.

4. A rational proposal shall be a rational solution relating to a new production method or a process and organization of production process within the entity in question.

5. Works relating to copyright shall include:

  1. all kinds of oral or written literary works such as scientific and literary works;
  1. all kinds of musical works;
  1. all kinds of works of fine art or applied art;
  1. works of architecture, drawing, plans, and sketches,
  1. all kinds of choreographic works, works of contortionists, and pantomimes;
  1. all kinds of dramatic works;
  1. cinematographic works as well as all kinds and works expressed by an analogous process;
  1. photographic works as well as all kinds of works expressed by an analogous process;
  1. projections, drawings, sketches, and models pertaining to science and technology;
  1. computer programs;
  1. sound and visual recordings;
  1. derived works created by the use of previously expressed works;
  1. other works which are capable of expressing the intellectual and creative activities of author.

6. Samples of product shall be a new and specific solution relating to forms and designs of a product which may be made by a manufacturing method.

7. Trademarks shall be a distinctive mark used by legal persons or citizens who are engaged in a sole proprietorship for the purpose of distinguishing their own goods and services from those of others. A single mark shall be a trademark used by members of merging legal entities for goods and services of nature of their merger under supervision of such conglomerate.

Article 87. Right Of Ownership

1. An owner is entitled to possess, use, and dispose of their property at their discretion within the legal framework.

2. Unless otherwise provided by the Law or contract, an owner shall preserve the property under its possession.

3. An owner may not violate the legislation, rights, and legitimate interests of other owners and holders by exercising its right of ownership.

4. The land, except that under the private ownership of Mongolian citizens as well as the subsoil with its wealth, forests, water resources and fauna, shall be the property of the State.

5. The other land, except pastures and areas under public and special use may be owned only by citizens of Mongolia. This provision shall not apply to the ownership of the subsoil of land.

6. An exercise of the right of ownership intellectual values shall be inalienable from the copyright of the work in question. The protection of the rights of the author of intellectual property shall be regulated by the Law. The relevant provisions of this Code shall be applied to the relations pertaining to the exercise of rights of ownership intellectual values if they do not contradict the contents of such relations.

Article 88. Rights Of Non-owner **

1. A non-owner is entitled to possess, use, and dispose property within the definite authority issued by the owner under the Law and contract in conformity with the directions of its activities.

2. Unless otherwise stipulated by the Law, the other persons shall use intellectual property only with the consent of the owner and holder of those rights.

Article 89: Common Ownership Of Property.

1. Two or more persons may own property partly or jointly, and each of them has independent defense of their right of ownership.

2. Payment to be made for due obligations by the common owner shall be imposed on the property due to the common owner in question.

3. A court shall decide on disputes relating to the common ownership of property.

4. Provisions of this Code concerning the common ownership may be applied to the relations pertaining to the common ownership of intellectual values.

Article 90: Joint Ownership Of Property.

1. Owners shall possess, use and dispose the joint property subject to agreement thereupon. A court shall decide on disputes relating thereto.

2. Each joint owner is entitled to transfer the part due thereto into the ownership of the other person or to dispose of it otherwise.

Article 91: Sale And Lease Of Due Part Of Property Under Joint Ownership.

1. In case any of the joint owners sells or leases the property under joint ownership due thereto, then it shall be obliged to give notification thereof to the others, and the latter shall have the prerogative to buy or take such part on lease. If they do not give a response thereto within one month from such notification concerning the sale or lease, the common owner in question shall be entitled to sell and lease its part to the other person.

2. If any of the joint owners sold or leased the part of the property under joint ownership due thereto, contrary to Section 1 of this Article, the other common owner may demand to transfer the rights and duties of seller and leasee thereto and file an action thereon to the court within six months.

Article 92: Partition of due property under joint ownership.

1. Each joint owner is entitled to claim partition of the part of such property due thereto.

2. If the joint owner does not have any agreement with the others on due partition of property under the joint property or the utilisation and nature of such a property are not lost due to this partition, then the court shall order due part of the property upon the request of the common owner in question. In this case, the partition is impossible, the price of due part may be paid to the common owner in question.

3. Income, fruits and earnings from the property under joint ownership shall be a joint ownership. The joint owners shall distribute the income, fruits, and earnings in proportion to the amount of parts due thereto in the future unless otherwise agreed between themselves.

Article 93: Distribution Of Expenses Concerning The Property Under Joint Ownership.

Joint owners shall be responsible for the taxes on the property under joint ownership and cost of maintenance and preservation of such a property and other expenses relating to obligations arising from these relations in proportion to the amount of the part due thereto.

Article 94: Ownership Of Community Property.

1. Family property shall be one form of community property.

2. The other forms of community property shall be determined by the law.

Article 95: Community of family property.

1. Any other property except the separated property of spouses shall be a community property of the family members.

2. Spouses and other family members are entitled to ownership of community property of the family.

3. Spouses and other family members shall have an equal right to possess, use and dispose of the community property. Spouses and other family members shall agree upon exercising such rights with all of the adult family members and seek their written permission for disposal of the immovable property. Any transaction which has not complied to this requirement shall be void.

4. A family member shall be liable for his/her own obligations within the amount of part of the family property due thereto.

Article 96: Separated Property Of Spouses.

1. If spouses did not agree upon transfer into common ownership, the following property shall be their own property:

1) property, sums of money and property rights which were acquired by the spouses before their marriage;

2) sums of money, property and property rights which were transferred to the spouses by inheritance and gift as well as the property and money which was acquired as a result of the sale and trading therein.

3) property which is designated for the meeting of individual consumption of spouses;

4) price of objects of intellectual property or authors fees;

5) income derived from the reward of individual talents, capacity and achievements;

6) property which the spouses have acquired as their own property and which is thereby needed for conduction of their professional activities.

2. Spouses are entitled to possess, use and dispose of their separated property at their discretion.

3. Unless otherwise agreed between by the spouses, they shall be liable for obligations arising from their private activities with their separated property.

Article 97: Community property of family members.

1. The following property shall be community property of the family members:

1) property and sums of money except those listed in section 1 of Article 96 of this Code;

2) property and sums of money which have accrued in the course of labor and economic activities of the spouses and other family members after the marriage;

3) property and sums of money which were transferred by a family member out of his/her own property for the purpose of community property;

4) profit, revenue and fruits earned in the course of joint labor of family members as well as property which has accrued a newly;

5) any other property which is needed for the household consumption of family members.

2. Where the price of the separated property of spouses increases substantially due to improvement by a family member, of its quality, then it may become a community property by agreement.

Article 98: Determination of part of family community property due to its members.

1. Part of the family community property due to its members shall be determined in the following cases.

1) when the leaving of a family member leads to disputes on part due thereto;

2) the separated property of spouses is insufficient for completion of their payment;

3) in position of payment on the other family members;

4) opening of inheritance due to the death of a family member.

2. The amount of part of the property due to each family member shall be equal in respect to all of the members including minors and members who are unable to work.

3. Subject to dissolution of marriage or annulment of marriage, a court may determine the part of the property due to one family member differently, taking into consideration the health of spouses and interests of children.

4. In the determination of the part of the property due to a family member who is able to work except those listed in Section 3 of this Article, a court may reduce the amount of such a part or decide not to give it thereto taking into consideration his/her labor participation in, and size of property contribution to the formation of family community property.

5. Where a family member who is able to work could not participate in the formation of family community property by his/her labor or property for such good reasons as the military service, academic study and long term illness, etc., then Section 4 of this Article shall not be applied.

6. A court shall decide on disputes arising from the determination of part of the family community property due to its members.

Article 99: Member Leaving The Family.

1. When one or several family members leave the family, they shall take the part of common property due thereto and not be entitled to property which is essential for the further conduction of family business.

2. If it is impossible to give due part in kind, then its price shall be paid.


Chapter Seven

Ownership of land and other property rights relating to land.

Article 100: Ownership Of Land.

1. The land except that in the private ownership of citizens of Mongolia, shall be the property of the State.

2. In the exercise of its rights a landowner may not cause damages to the environment and violate the right and legitimate interests of the other person in the exercise of its rights.

3. When a landowner transfers its land to the other’s use, the former shall indicate its utilization. It is not allowed to use such land given for the concrete purpose contrary thereto.

4. The term “landowner” mentioned in this Chapter shall be understood as the State until the establishment of the procedure for private ownership of land by the citizens of Mongolia.

Article 101: Public Use Of Land.

Citizens are entitled to enter into the land under state ownership which may be subject to public use without any permission, and to use the natural things in such land within the legal framework.

Article 102: Rights Of Non-landowner.

A non-landowner shall possess and use land in conformity with the terms and conditions established by the law or contract concluded with the owner.

Article 103: Right To Lifetime Possession Of Land And Inheritance Of Such A Right.

1. A citizen may acquire the right to lifetime possession of land under state ownership on the grounds and procedure subject to law as well as the right to inheritance of his/her right to such possession.

2. A citizen who has the right to lifetime possession of land and inheritance of his/her right to such possession shall possess and use such land subject to its utilization and terms at that time.

3. Unless otherwise provided by the law or contract, a citizen who has the right to lifetime possession of land and inheritance of his/her right to such possession may transfer such land to the others’ use subject to its utilization and terms.

Article 104: Right to use of land for indefinite period.

1. Unless otherwise stipulated by the law, a legal person may be granted the right to use the land under state ownership for an indefinite period.

2. The owner of buildings and facility and other immovable property listed in Article 105 of this code may acquire the right to use land for an indefinite period.

3. Upon reorganization of legal person, its right to use land for an indefinite period is subject to assignment.

4. A person who has the right to use the land for indefinite period shall be entitled to use such land according to its utilization or to construct the buildings, facility, and other immovable property thereon unless otherwise stipulated by the law or decision on grant of land. Such a person shall be the owner of the buildings, facility and other immovable property constructed for its own utilization.

5. A person who has the right to use the land for an indefinite period shall be entitled to transfer such land to the others’ use on the payment or non-payment conditions for definite period of time upon consent of only the owners thereof.

Article 105: Right to use of surface by owner of immovable property on others land.

1. An owner of the immovable property on the others land is entitled to use such land.

2. An owner of the immovable property shall be entitled to use the surface for an indefinite period unless otherwise stipulated by the law or decision on grant of land and contract.

3. Upon transfer of the right of ownership of immovable property, the right to use of surface land thereunder shall be transferred to such extend as the right of use of the previous owner.

4. The transfer of the right to ownership of land shall not serve the grounds for termination of the right by owner of the immovable property to the use of the surface land unless otherwise provided by the law or contract.

5. Where it does not contradict to the terms on use of the land in question provided by the law or contract, then an owner of the immovable property shall have the right to possess, use and dispose of such property at its own discretion.

Article 106: Consequences of deprivation by owner of immovable property on others land of its right to use of surface thereof.

1. Upon termination of the right of the owner of the immovable property to use of surface land, the property right in question shall be determined by the contract between the landowner and owner of such property. If the parties can not determine in this way, a court shall decide thereon upon request by any of the parties. After termination of the right of the owner of the immovable property to use the surface land, the landowner shall be entitled to claim release or restoration of such land to its original state.

2. In case, it is prohibited to remove the buildings and facility on the surface of the land (housing flats, historical and cultural values etc.,) under the law, then upon request by the parties a court may decide thereon as follows:

1) to give the landowner the right of ownership of the immovable property thereon;

2) to give the owner of the immovable property the right to use the surface land in the future, and to determine its duration and terms.

Article 107: Transfer of the right to possession and use of land due to transfer of the right of ownership of immovable property such as buildings and facility and housing flat.

1. Where the right of ownership of the immovable property such as the buildings and facility, which have been the property of landowner is transferred to the other person, then the transfer of the right to possession and use of its surface shall be decided by agreement between the parties.

2. Section 1 of this Article shall not be applied to the removal of the immovable property such as the buildings and facility.

Article 108: Right to limited use of land ( servitate).

1. An owner of immovable property is entitled to demand the landowner or land holder to grant the land under the procedure by the law in order to create the conditions for exercising its rights as well as for and protection of its own property.

2. If an owner of immovable property does not have the opportunities for exercising its right of ownership without the right to limited use of others’ land, then it may be granted the right to limited use of others’ rights such as the right to passage through the others land or to construction of electricity, communication and engineering networks and channels as well as to use thereof otherwise.

3. Granting the right to limited use of others’ land under Section 2 of this Article shall not impede the landowner and landholder to exercise their rights.

4. Where an agreement on terms and procedure on limited use of land is not reached, then a court shall decide on such disputes.

5. Persons who have the right to lifetime possession of land and inheritance of his/her right to such possession or the right to use the land for an indefinite period may be granted the right to limited use of others land.

6. Unless otherwise provided by the law, the owner which land is under the limited use shall be entitled to claim the rent from the user.

Article 109: Detainment of the right to limited use of the land due to transfer of the right of the land.

1. When the right to land is transferred to the others, the right to limited use of such land shall be retained.

2. The right to limited use of land may be transferred only to the owner of immovable property which has served the ground for acquisition of such right.

Article 110: Termination of the right to limited use of land.

1. Upon removal of grounds for granting the right to limited use of land, this right shall be terminated unless otherwise provided by the law or contract.

2. If the use by others of land which is under possession of citizens and legal persons destroys the utilization characteristics of such land, then the owner shall be entitled to file to the court an action for the termination of the contract for limited use of the land.

Article 111: Right to limited use of buildings, facility and other immovable property.

Buildings, facility and other immovable property may be used limitedly without any connection to the use of the land. In such case, the procedure set forth in Articles 108,109, and 110 of this Code shall be applied.

Article 112: Overtaking land due to special public need.

1. The land may be taken over with compensation on the grounds of special public need.

2. The Government shall pass decision on over taking of land.

3. The Government shall give on year notice on such overtaking to the landowner or land holder. The overtaking of land shall be exercised upon consent of only the landowner and land holder prior to expiration of this period of time.

Article 113: Compensation at the moment of overtaking land.

1. A contract shall determine the amount of compensation for the overtaking of land, terms and the other conditions.

2. Unless otherwise provided by the law or contract, compensation for overtaking land shall include the price of the land and immovable property thereon and other expenses incurred due to such an overtaking of land.

3. In the case of agreement by the parties, the land which is to be taken over may be substituted by another land and the price of the new land may be included in the compensation rate.

4. If the dispute on compensation for overtaking land arises, then a court shall decide thereon.

Article 114: Overtaking of land due to the use contrary to its utilization.

1. Where the land which has been granted for construction of agricultural dwellings, houses and other buildings and facility was not used according to its utilization and if another period of time is not determined by the law, it may be taken over from the landowner or land holder thereof.

2. Where the land could not have been used according to its utilization for such good reasons as the preparation of the use of the land and occurrence of natural disaster, etc., then such a useless period shall not be included into the period of time mentioned in Section 1 of this Article.

Article 115: Confiscation of land due to violation of legislation.

The land of the landowner and land holder which have violated the legislation by its use contrary to the health of the population and interests of ecology and natural security may be subject to confiscation.

Article 116: Procedure for confiscation of land.

In the case the landowner and land holder have broken Article 115 of this Code, the Government shall determine the time limit for removal of such a breach and warn them about the confiscation of land, if a breach is not removed within such a time limit. If a breach has not been removed within the determined time limit, then the decision on confiscation of land shall be passed. The owner or land holder may file to the court a claim on such a decision.

Article 117: Termination of the right of a non-owner to possession and use of land.

The right of a nonowner ( Article 88 of this Code), to possess and use the land shall be terminated on the grounds and procedure subject to law.


Chapter Eight

Ownership of apartments and other property rights relating to apartments.Article 118: Ownership of flats with several apartments of public utilities and its part as well as of buildings of public houses.

1. An owner of a flat with several apartments of public utilities and its part as well as of buildings of public houses is entitled to possess, use and dispose such house and buildings only according to their utilization.

2. An owner of a house or building indicated in Section 1 of this Article may not use them for the non-housing purpose without changing their utilization. The rules on change in utilization shall be established by the law.

3. If it does not contradict the legitimate interests of hirer, an owner of the area of the basement below the houses and buildings shall dispose of it at their own discretion.

Article 119: Ownership of apartments in flat with several apartments of public utilities.

1. An owner of an apartment in a flat with several apartments of public utilities shall also own the property inside thereof which can not be utilized separately.

2. Unless otherwise provided by the law, an owner of an apartment in a flat with several apartments of public utilities, shall possess and use or jointly own the common utilization area mentioned in Article 249 of this code subject to contract.

Article 120: Ownership of private residential houses.

1. An owner of private residential houses is entitled to possess, use and dispose of it at its own discretion.

2. In the disposal of the residential house indicated in Section 1 of this Article, an owner thereof shall get a written consent of all of the adult family members thereto.

Article 121: Rights of family members of owner of apartment or of private residential house.

1. A family member of the owner of an apartment or private residential house is entitled to possess and use such an apartment or house like the owner himself/herself.

2. If a family member of an apartment or private residential house, considers his/her right thereto to have been violated, then it shall be entitled to claim the removal of such violations.


Chapter Nine

Arising and termination of the right of ownership.Article 122: Arising of the right of ownership on property acquired under contract.

1. Unless otherwise provided by the law or contract, the right of ownership on property which was acquired under the contract or powers to possess, use or dispose as provided by Article 88 of this Code in respect of a non-owner thereof, shall arise at the moment of transfer of such property.

2. Where the law provides for certification or registration by the proper organizations, of the contract for the transfer of property, then the right of ownership on this property shall arise upon such certification or registration.

Article 123: Moment of transfer of property.

A property shall be deemed to have been transferred in the following cases:

1) at the moment of the passage of the property to its recipient;

2) at the moment of handing over the property to the person in charge of its delivery;

3) at the moment of handing over transport documents of acceptance and transmission thereof.

Article 124: Right of ownership on income, fruits and young livestock.

Unless otherwise provided by the law or contract, income earned out of the property, fruits and young livestock and animals, shall be under ownership of the owner of such property or livestock and animals.

Article 125: Mislaid property.

1. A person who has found mislaid property or property which the owner is unknown, shall hand over the property to the proper local administrative organ.

2. A local administrative organ shall register and take custody over mislaid property or over property which the owner is unknown.

3. If the owner has not been identified within six months from the registration and public notification thereof or the owner has refused acceptance thereof, then such property shall be transferred to the state ownership.

Article 126: Lost property.

1. A person who has found lost property shall notify immediately its owner and restore it thereto or shall hand over the property to the proper local administrative organ or police organization if its owner is unknown.

2. Property found at the organization or public transport shall be handed over to the administration of the entity in question. If the owner thereof has not been identified within one month from such handing over, then the administration of the entity shall transmit such a property to the proper local administrative organ or police organization.

3. Organizations mentioned in Sections 1 and 2 of this Article are obliged to make lost property public and take measures for the identification of its owner.

4. Where the owner of lost property has not been identified within one year, then such property shall be transferred to the state ownership.

5. A person who has found lost property is entitled to reward by the owner of such property or that by the proper state organs thereto, in case of its transfer to the state ownership.

6. The reward shall be bestowed at the amount agreed between the owner of the property and the person who found it or at ten percent of the value of such property in the case of disagreement thereby.

Article 127: Lost livestock and domestic animals. ( hereinafter referred as lost livestock )

1. A person who has found lost livestock is obliged to notify its owner immediately or restore it thereto or to notify the proper local administrative organ or police organization within one month if its owner is unknown.

2. Local administrative organs or police organizations shall take measures for identification of the owner of the livestock or for its transmission to organizations or citizens capable of maintaining it until the identification of such owner.

3. When an owner is identified within one year form the public notification of the lost livestock, then the livestock as well as its offspring, shall be restored. If an owner has not been identified within the above period, such livestock shall be transferred to the state ownership.

4. A person who has found lost livestock is entitled to compensation of incurred expenses thereof by the owner of such livestock or by the proper state organ in case of its transfer to the state ownership, as well as the reward therefor. The amount of the reward shall be determined as provided for by section 6 of Article 126 of this Code.

Article 128: Hidden property.

1. Hidden money and valuables which were buried in the earth or concealed in another way thereon, and which the owner is unknown, shall be the property of the state.

2. A person who has discovered hidden money or valuables is obliged to notify and transmit it immediately to the proper local administrative organ or police organization.

3. A person who has discovered and transmitted hidden money and valuables to the proper organs is entitled to a reward by the proper state organs. The amount of the reward shall be determined as provided for by section 6 of Article 126 of this Code.

4. In the case a person in charge of research and digging has discovered hidden money and valuables in the line of such official duties, the reward mentioned in this Article shall not be bestowed thereto.

Article 129: Negligent treatment of historical and cultural values.

1. If an owner holds with negligence the historical and cultural values which belong thereto and are entered into the state registry because of destruction and damage thereto and otherwise, then a local administrative organ shall warn such person in advance and require them to take care of this treatment by fixing a time for it or shall propose to sell them to the state.

2. Where an owner does not accept the proposal for sale or does not fulfill the requirement within the fixed time; such property may be expropriated and transferred into the state ownership by a court decision upon action of the proper local administrative organ.

3. An owner shall be given compensation for expropriation of property as provided for by Section 2 of this Article and the court shall determine its amount, taking into consideration the owner’s proposal thereon.

4. Historical and cultural values may be subject to confiscation and transfer into the state ownership by a court decision upon action of the proper local administrative organ, taking into consideration their significance and characteristics of negligent treatment thereof.

Article 130: Conversion and specification of property of another.

A person who has created new things from the property of another or has altered its utilization by conversion and speculation thereof under the law or contract shall be entitled to take such property himself/herself for payment of its price with the consent of owner or shall make restitution of such property to its owner for compensation of expenses incurred thereby on conversion and specification thereof.

Article 131: Confusion or mix up of property.

1. If property belonging to several owners can not be separated from each other due to confusion or a mix up thereof or damage may be caused to the owner due to such a separation, it shall by owned jointly thereby.

2. Where any owner refuses common ownership, then the person who has owned the greatest part of property prior to confusion or mix up thereof shall be entitled to take such property himself/herself for payment of its price to the others or shall transfer such property to the others for compensation of the price of part sue thereto.

Article 132: Loss and damage to property due to extraordinary circumstances of emergent or force majeure nature at the moment of passing of right of ownership under the contract.

1. In the case of passing of right of ownership under the contract prior to transfer of property itself, such property was lost or damaged due to extraordinary circumstances of emergent or force majeure nature, then an owner shall be liable for consequences thereof unless otherwise stipulated by the contract.

2. If there is delay in the transfer or in acceptance of property, then the delayed party shall be liable for damages caused due to extraordinary circumstances of emergent or force majeure nature.

3. The rules set forth in this provision shall be applied to loss and damages caused to the property due to extraordinary circumstances of emergent or force majeure nature at the moment of transfer of such property to the person who has the powers to possess, use and dispose thereof under Article 88 of this Code.

Article 133: Things to be acquired that are subject to special authorization.

1. Things such as weapons, explosive substances, drugs and poisons shall be acquired only subject to special authorization.

2. The Government shall approve the list of things which are subject to special authorization and regulations on grant of such authorization.

Article 134: Expropriation and confiscation of property.

Property of another person may be expropriated into the state ownership for public needs against compensation only on the grounds and procedures under the law or property of the person who has transgressed may be confiscated.

Article 135: Transformation of property from one type and form, to another.

1. The arising of right of ownership may be subject to change in any type and form under the law or contract.

2. The conditions and procedure on transformation of property under state ownership into another type shall be determined by the law.

Article 136: Arising of right of ownership of intellectual values.

1. Unless otherwise stipulated by the law, the right of ownership of a person who has created intellectual values shall arise at the moment of the creation of such values.

2. An owner is obliged to have the creation of intellectual values certified in due time. Such certification shall not excuse an owner from his/her liability for proof of the creation thereby of such values if necessary.

3. Ownership of intellectual values shall be determined by registration due to formalities provided by the law.

Article 137: Right of discoverer.

1. Right of discoverer shall be certified by diploma of discovery issued thereto.

2. A court shall decide on disputes concerning discoverer.

3. Upon issue of diploma of discovery, a discoverer shall enjoy his/her right of ownership of works as well as property rights and non-personal property rights relating to the discovery.

4. The Government shall approve the regulation on registration of discovery, issue of diploma, discoverer’s fees and enjoyment of privileges thereby, and shall designate an agency in charge of these issues.

Article 138: Joint discovery.

1. If two or more citizens jointly have made a discovery, then each discoverer shall be entitled to have a diploma indicating his/her own name.

2. A citizen who has rendered only the technical assistance shall not be considered as a joint discoverer.

Article 139: Termination of right of ownership.

The right of ownership of the owner shall be terminated on the following grounds:

1) transfer of property and property rights to the others, which are objects of its ownership subject to the law or contract;

2) refusal of its right of ownership;

3) loss of property which is the object of its ownership;

4) deprivation of its right of ownership on the grounds subject to law;

5) death or declaration of a citizen, who is an owner, to have deceased;

6) liquidation of legal person which is an owner;

7) any other grounds subject to law.


CHAPTER TEN

PRIVATE PROPERTY OF CITIZENS OF MONGOLIAArticle 140: Private property of citizens of Mongolia.

Citizens of Mongolia shall enjoy the right to have the private property.

Article 141: Objects of private ownership of citizens of Mongolia.

1. Citizens of Mongolia may privately own immovable property, movable property, intellectual values and rights except those which are prohibited to be under their ownership by the law.

2. Procedure on private ownership of land shall be determined by the law.

Article 142: Other forms of exercise by citizens of right of ownership.

Unless otherwise stipulated by the law, citizens shall exercise their right of ownership of the property of the legal person, created by the property of private ownership thereof or joining thereof, themselves or through their proxies.


CHAPTER ELEVEN

PUBLIC PROPERTYArticle 143: State property.

1. The land except that in private ownership of citizens of Mongolia as well as its subsoil, forests, water, flora, fauna and other natural resources shall be under state ownership. Other immovable and movable properties, intellectual values and rights may also be under state ownership.

2. The highest governing organs of Mongolia or designed organizations thereby shall possess, use and dispose objects of state ownership within their competence provided by the law.

3. Legal persons based on the state property are entitled to possess, use and dispose their separated property in conformity with the goals of their activities within the limits and conditions provided by the law.

4. Any other property and appropriate budget assets except those which were transferred to legal persons of state ownership shall constitute the state treasury.

5. Procedure on possession, use and disposal of state treasury shall be established by the law.

Article 144: Local property.

The following property may be under ownership of aimags, the Capital City, soums and duuregs:

1) objects of ownership allocated out of the state property subject to law;

2) property of legal persons created by their own contributions thereto as well as dividends due thereto;

3) property which has accrued due to the local budget, and financial assistance as well as the other sources provided by the law.

Article 145: Property of public organizations and foundations.

1. Public organizations may have the property of their ownership consisting of the dues, contribution of their members and supporters as well as the other income earned as a result of their activities consistent with the charters thereof and shall be entitled to possess, use and dispose it only for the attainment thereby of their goals and activities determined by charters thereof.

2. The right of ownership of public organizations shall be exercised by their governing bodies within their competence provided for by the law and charters thereof.

3. Property transferred to the foundation shall be under its ownership. Founders shall not be liable for obligations of the foundation, and the foundation shall not be liable for obligations of its founders. Property of foundation shall be utilized only for attainment of the goals set forth on its charter.

4. State competent authorities and founders shall supervise over the utilization of property of the foundation.

5. In case of liquidation of public organization and foundations, the remaining property thereof shall be regulated by their charters, and if there is no such provisions therein, it shall be transferred into the state ownership. Charters of these organizations shall provide that the property of public organization under liquidation would be transferred to the organizations with the similar goals or the property of foundation under liquidation would be transferred only to legal persons engaged in social, cultural, charitable and other public beneficial activities.

Article 146: Property of religious organizations.

1. Religious organizations are entitled to own buildings, objects of religious rites of worship, items of religious ceremonies, property accrued by there own capital or that donated by organizations and citizens and intellectual values.

2. The right of ownership of religious organisations shall be exercised by their governing bodies within their competence provided for by the law and charters thereof.

3. In case of liquidation of religious organisations, the remaining property thereof shall be regulated by their charters, and if there is no such provisions therein, it shall be transferred into the state ownership. The charter shall provide that the property of public organisation under liquidation would be transferred to the organisations with the similar goals thereto.

Article 147: Possession, use and disposal of donated property.

Unless otherwise stipulated by the law, the Government shall establish the rules on donating to organisations of state ownership, and possession, use and disposal of the donated property.

Article 148: Imposition of payment on property of the state, public organisations, religious organisations and foundations.

Payments may be imposed on any other property of the state, public organisations, religious organisations and foundations except those prohibited by the law.


Chapter Twelve

Property of foreign citizens, legal persons, foreign state and international organisations.Article 149: Property of foreign citizens.

1. Foreign citizens are entitled to own the objects of ownership within the territory of Mongolia as the Mongolian citizens, unless otherwise provided for by the law of Mongolia and international treaties of Mongolia.

2. Provisions of Section 1 of this Article shall also be applied to stateless persons.

Article 150: Property of foreign legal persons.

Foreign legal persons are entitled to own the objects of ownership within the territory of Mongolia for the purposes of conduction of their activities, permitted under the conditions and procedures set forth in the law of Mongolia and international treaties of Mongolia.

Article 151: Property of international organisations.

International organisations shall enjoy the right to own the objects of ownership needed for carrying out their activities within the territory of Mongolia, under the law of Mongolia and international treaties of Mongolia.

Article 152: Imposition of payment on property of foreign citizens, legal persons and international organisations.

1. Procedure for imposition of payment on property of foreign citizens, legal persons and international organisations shall be determined by the law of Mongolia and international treaties of Mongolia.

2. Provisions of Section 1 of this Article shall also be applied to stateless persons.


Chapter Thirteen

Guarantees of the right of ownership, civil law protection.Article 153: Grounds for guarantees of right of ownership and civil law protections.

1. The state shall create the legal, economic and other similar conditions for the protection of right of ownership regardless of types and forms of property, and shall guarantee such rights.

2. All other persons are obliged not to violate the right of ownership of owner.

Article 154: Dispossession proceedings.

1. An owner is entitled to claim its own property under dispossession of the others.

2. If a person who dispossesses property did not know or ought not to have known of his/her dispossession and did not know or ought not to have known that the other person had not had the right to alienation of such property thereto,then it shall be considered as a bona fide possessor.

3. If the owner or person in actual possession have lost their property unwillingly, then they shall be entitled to claim such property form the possessor bona fide who has acquired it for consideration. In such a case, a possessor bona fide who has acquired it for consideration is entitled to demand recovery of damages caused thereto by the person who has transferred such property thereto.

4. If a possessor bona fide has acquired the property without consideration, then the owner shall be entitled to claim it at any time.

5. It is not allowed to claim money and securities from their possessor bona fide.

Article 155: Compensation by persons in dispossession of income and damages.

1. Where an owner institutes the dispossession proceedings, then it shall be entitled to claim the possessor mala fide to make restitution of income which the latter has earned or ought to have earned during its possession of the former’s property.

2. An owner is entitled to claim the possessor bona fide to make restitution of the income which the latter has earned or ought to have earned form the moment at which it knew or ought to have known of its dispossession or of the income which it has earned or ought to have earned within the time limit from the receipt thereby of notice of dispossession proceedings of the owner in question.

3. Upon transfer of the income derived from property to the owner, a possessor bona fide is entitled to claim the owner to compensate for its own reasonable expenses on such property.

4. A person in dispossession is entitled to separate and keep its items for the repair if property of such separation does not cause damage thereto.

5. Where a possessor bona fide is unable to separate its items for repair from the property without damage thereto, it may claim the price of repair, not exceeding the increased value of the property due to such repair.

Article 156: Elimination of violations of the right of ownership.

If an owner considers that its right of ownership is violated in any form irrespective of the possession of property, then it shall be entitled to claim to eliminate such violations.

Article 157: Demand for stopping actions impeding the exercise of the right of ownership.

An owner is entitled to demand to stop any actions impeding the exercise of its right of ownership.

Article 158: Protection of the right of a person in actual possession.

Provisions of Articles 154-157 shall also be applied to a non-owner who possesses property under the law and contract.

Article 159: Guarantee and protection of the right of ownership of intellectual values.

1. Guarantees and protection of the right of ownership of intellectual values shall be established by the law.

2. Unless otherwise stipulated by the law, guarantees and protection of right of ownership shall be regulated by this Code.


PART THREE

General principles of obligations.

CHAPTER FOURTEEN

Arising of obligation and its performance.Article 160: Obligation and its performance.

1. One person-debtor participating in the civil turnover shall undertake obligations to commit certain actions such as the transfer of property, performance of work, rendering of services, and payment of money, etc., or to refuse commission of certain actions before the other person/creditor, and the creditor shall be entitled to require performance of such obligations thereby.

2. Obligations shall arise on the grounds set forth in Article 3 of this Code.

3. A debtor shall perform its obligation under the law or provisions of contract which have served as grounds for the arising of obligation. In case of absence of such provisions in the law or contract, it shall be performed in conformity with the ordinary requirements.

4. It is not allowed to refuse performance of obligations unilaterally or alter the terms of contract unilaterally except cases other than those provided by the law or contract.

5. A creditor is not entitled to accept partial performance of obligations unless otherwise provided for the law or contract or it is not required to do so due to specific features of obligations.

Article 161: Formation of contract.

1. Where the parties have reached mutual agreement on essential terms of contract and concluded the contract in the form provided by the law or in the agreed form, then such a contract shall be considered to have been concluded.

2. Essential terms of contract shall be terms which are mandatory to subject to law or those which are to be contained essentially therein or those which are accepted by one party at the request by the other party.

3. Subject to law, the conclusion of contract is due to transfer of property, a contract shall be considered to have been concluded at the moment of transfer of such property upon agreement by the parties on essential terms of the contract.

4. Where the parties have agreed to conclude a contract in the specific form or in case of absence of the provisions concerning the form of contract in question, then it shall be considered to have been concluded at the moment of its conclusion in such form.

5. Subject to law or agreement by the parties, the contract is to be concluded in writing, then it shall be considered to have been concluded upon making by the parties of documents and signature thereon or upon acceptance by one party of the letter, telegram and other documents ( telex, facsimile etc.) signed by the other party, indicating its assent to the draft of contract.

6. The draft of contract shall be a sufficiently definite proposal for concluding a contract explicitly indicating the intention of the party, which is addressed and made to one or more specific persons to be bound with the person in case of acceptance thereby. A proposal shall be sufficiently definite if it contains the essential terms of contract or makes provision for their determination.

7. A proposal other than one addressed to one or more specific persons shall be considered as request for sending the draft contract of it does not clearly contain any other provisions itself.

Article 162: Auction

10. Participants of auctioneer shall provide the amount of earnest mentioned in the announcement in due time under the procedure prescribed thereby. If the auction has not been conducted or the persons who participated therein but did not win shall take back their earnest. In case of the conclusion of contract with the winner, an earnest shall be calculated as a part of performance of obligations under the contract.

11. The highest bidder of auction and auctioneer (organizer of competition) shall sign the records of auction and competition on the day of conduction thereof, and these records shall have the same legal effects like a contract. In case, a winner avoids signature of records, then it shall forfeit its earnest. In case an auctioneer (organizer of competition) avoids signature of records, it shall be obliged to pay the two-fold amount of earnest provided by the other party and to compensate for damages due to participation therein within the amount exceeding that of earnest.

12. Where the auction was conducted for acquirement of right to conclusion of contract, the parties shall sign a contract within 20 days from the making of records upon or within the time limit provided for in the announcement. In case any of the parties avoids conclusion of contract, the other party shall consider a contract to have been concluded and be entitled to remedy and compensation of damages caused thereto.

13. A competitive bidding which has been conducted contrary to the procedure prescribed by the law shall be invalid.

14. A contract concluded with the winner of invalid competitive bidding shall be void.

Article 163: Public Contract.

1. A public contract shall be a contract concluded by citizens and legal persons on the terms provided by the law or on their own announced terms, addressed to the public, depending on the nature of their activities under which performance of certain obligations (sale of property, execution of work rendering assistance etc.) thereby is due before any person in case of its acceptance of such terms.

2. Price of property, works and assistance and other terms of public contract for consideration shall be determined the same in respect to all persons which have consented to conclusion of such contract in cases except those provided by the law.

3. Where the offer or is able to transfer the proper property, perform work and render assistance, it shall not be entitled to refuse conclusion of the public contract with an offeree. In case an offeror refuses conclusion of the contract groundlessly, the provisions of Article 164 shall be applied.

Article 164: Mandatory conclusion of contract.

1. Where a mandatory conclusion of contract by any of the parties is provided by the law, then this party shall be obliged to dispatch to the other party its consent or refusal of the draft contract or new draft of contract ( reply containing the different terms of contract ) within 30 days from its receipt of the draft contract unless a different time is fixed by the law or contract.

2. Where a different time is not fixed by the law or contract, the party which has received a new draft contract from the party in charge of mandatory conclusion of contract shall be entitled to refer disputes arising in the course of conclusion of contract to the court for its decision thereof within 30 days from the receipt of reply or from expiration of fixed time for acceptance.

3. If a new draft contract sent by the party in charge of mandatory conclusion of contract is received within 30 days, the other party shall be obliged to notify about its consent and refusal of such draft within 30 days from its receipt thereof. In case of non-consent of a new draft contract or failure to dispatch reply within a fixed time, the party which has dispatched a new draft contract shall be entitled to refer disputes to the court for its decision.

4. In case the party in charge of mandatory conclusion of contract subject to law avoids conclusion of contract, the party shall consider a contract to have been concluded and be entitled to resort to the court for remedy and compensation of damages caused thereto.

Article 165: Contract and law.

1. A contract must conform with the rules established by the law, which were in force at the time of conclusion of such a contract.

2. Where the law establishing the other rules than those which were in force at the time of conclusion of contract has been adopted after conclusion of contract, and the new rules may cause damages to the rights and legitimate interests of any or of the both parties to contract, then the terms of such a contract shall remain valid.

Article 166: Interpretation of contract.

1. In the interpretation of contract, a court shall refer to the direct meanings of its words. If the meaning of any of the terms of contract is not understood, its contents shall be defined in comparison with the other terms and general contents of contract.

2. Where it is impossible to define the contents of contract under the procedure set forth in Section 1 of this Article the real and common intention of the parties shall be established, taking into consideration the goals of contract. The relevant circumstances such as negotiations conducted prior to conclusion of contract, correspondence, practice and usages which the parties have established between themselves etc., may be taken into consideration to that effect.

Article 167: Preliminary contract.

1. Subject to terms of preliminary contract, the parties are obliged to conclude contracts for transfer of property, performance of work and rendering assistance etc., in the future. The procedure on agreement of the essential terms of contract which have not been established by the law or which have not been provided for by a preliminary contract shall be determined by the parties subject to preliminary contract itself.

2. A preliminary contract shall be concluded in writing.

3. In case any of the parties to preliminary contract refuses conclusion of contract subject thereto, then the other party shall be entitled to resort to the court under the procedure set forth in Article 164 of this Code. Unless otherwise stipulated by the law, the party which has avoided groundlessly conclusion of contract subject to preliminary contract shall compensate for damages caused to the other party due to delay in conclusion of such contract.

Article 168: Amicable contract.

1. Parties may conclude an amicable contract for resolution of their disputes by mutual concessions.

2. Parties may not conclude an amicable contract concerning the property and rights which do not fall within their power to dispose

3. If the parties concluded an amicable contract having known that the outcome of contract might be different from the reality, then the establishment of correctness of the previous state prior to the arising of disputes may not serve as grounds for considering such a contract to be void. However, an amicable contract provides that contract should be void due to later finding of evidence certifying the correctness of the previous state prior to the arising of disputes, then this contract shall be void upon finding of such evidence.

Article 169: Unnamed contract.

1. Unnamed contracts shall be a contract with specific contents expressing the principal nature and form of contract and which is not regulated specifically and is directly unnamed by this code.

2. General principles of obligation shall be applied to unnamed contract.

Article 170: Contract for the benefit of a third party.

1. Subject to contract for the benefit of a third party, the parties shall agree upon performance of obligations to the benefits of the third party which is not a party to such a contract.

2. Unless otherwise provided by the law and contract and it does not contradict the nature of obligation, creditor and the third party which benefits from the performance of such contract shall be entitled to claim performance under this contract.

3. Where the third party has refused its rights under the contract and it does not contradict the law or the contract and nature of obligations, a person who has concluded such a contract may acquire the rights which the third party has been entitled to enjoy.

Article 171: Performance by the third party of obligation.

1. If it was provided by the law or contract, and the third party has concluded the proper contract with any of the parties all or some part of obligation may be performed by the third party.

2. Subject to law, or contract and nature of obligation a debtor does not need to perform such obligation personally, then a creditor shall be obliged to accept performance by the third party of obligation.

3. Where the law does not provide for responsibilities of the third party, then a principal debtor shall be liable for the former’s non-performance or improper performance of obligation.

Article 172: Time for performance.

1. Performance of obligation is due at the time provided by the law and contract.

2. A debtor is not entitled to earlier performance without consent by creditor thereto.

3. Where time of and conditions of performance are not determined, creditor shall be entitled to require performance at any time, and debtor shall be obliged to perform its obligation. Unless otherwise provided by the law or contract or if it is not required for to the nature of the obligation, a debtor shall be obliged to perform its obligation within 10 days from the requirement of a creditor.

4. Subject to law or contract, a time of performance may be extended by agreement between the parties. The parties must decide on the extension of time of performance prior to the expiration of principle time of performance.

Article 173: Place of Performance

1. Unless otherwise provided by the law or contract, the place of performance shall be determined as follows:

1) obligation for transfer of immovable property at the place where such property is situated;

2) in respect to obligation for carriage of property at the place where it is handed over to the first carrier for transmission to the creditor or authorized person;

3) a monetary obligation at the creditor’s place of residence or of business, in case a creditor changed its place of residence or of business and notified the debtor about this, performance shall be due at its new place of residence or of business and the creditor shall bear the expenses incidental thereto.

4) any other obligations at the debtor’s place of residence or of business.

2. Subject to contract, an obligation may be performed at the place where the property in question was manufactured or produced.

Article 174: Contract price.

1. Parties shall fix a contract price by agreement.

2. Where it is provided by the law or contract, a contract price may be changed after the conclusion of contract.

3. Where it is provided by the law or contract the parties may calculate the price of contract at the market rate applicable at the time of performance or determine it in the future.

Article 175: Monetary obligation.

1. A monetary obligation is due in tugrigs the currency of Mongolia.

2. The relevant rules shall be applies to performance of monetary obligations in foreign currency or in documentary credits expressed in foreign currency.

3. If there is no creditor and the credit or has refused to receive or has delayed performance, then a debtor shall file the money due and securities to be transferred with a notary office and a notary office shall give notification thereon to the creditor.

4. A file of money and securities with notary office shall be considered as a performance.

5. Where there is delay in the performance of monetary obligation and if it is provided for by the parties in the contract, then a creditor shall be entitled to claim payment of fine.

Article 176: Conditions for performance of obligations certified by securities.

1. All persons who have issued securities and who have transferred the securities and rights certified thereby shall be jointly liable before an owner under the law.

2. Owner of securities who have found them illegal or to have been repaired shall be entitled to require any persons of the listed in Section 1 of this Article to perform its obligations properly and compensate for damages caused thereto.

Article 177. Performance of Obligation by Several Creditors or Debtors

1. An obligation in which several creditors or debtors participate shall be discharged partially or jointly, and performance thereof shall be required partially or jointly under the law or contract.

2. Where several debtors discharge obligation partially, then each debtor shall be liable for part of obligation due thereby to a creditor, it is obligation shall be terminated upon performance of obligation due thereby.

3. If there are several creditors, then they shall be entitled to require performance by a debtor of obligation due thereto.

4. Unless otherwise provided by the contract, the right to require the performance of obligation in which several creditors participate by each of them as well as the part of obligation in which several debtors participate, due by each thereof shall be considered to be equal.

5. Where an object of obligation is of indivisible nature, the obligation shall be discharged jointly and performance thereof shall be required jointly.

6. If an obligation is to be discharged jointly, then the creditor shall be entitled to require a full performance of obligation by all or any of debtors.

When any of debtors has failed to perform its obligation in full, then the creditor shall be entitled to require the performance of due part of obligation by the other debtors.

7. When any of the co-debtors has performed its obligation in full, then the other debtors shall be exonerated from liability before the creditor.

8. All or any of the creditors are entitled to require a full performance of obligation by the debtor.

9. When a debtor has performed obligation in full before any of the creditors, then he shall exonerate himself from liability before the other creditors.

Article 178. Modification and Avoidance of Contract

1. Unless otherwise provided by the law or contract, then a contract may be modified or be avoided by agreement between the parties.

2. A contract may be modified or be avoided by a court order at the initiative of one of the parties only in the following cases.

1) If the other party has committed a fundamental breach of contract;

2) If any other cases provided by the law or contract;

3. If it is allowed to reject full or partial performance of the contract at the initiative of one of the parties under the law or contract, then the contract shall be considered to have been modified or to have been avoided upon such rejection.

4. Unless otherwise provided by the law or contract an agreement on modification or on avoidance of contract shall be made in the same form as an original contract.

5. Where one of the parties as has disagreed with a proposal by the other party for modification or for avoidance of a contract or which has not given its consent to such proposal within the period of time indicated in a proposal and or that fixed by the law or contract or within 20 days in the absence of such a fixed time, then the former shall be entitled to resort to the court for the avoidance of contract.

6. Upon avoidance of contract, the obligations of parties thereunder shall be terminated.

7. When a contract is modified , then the obligations of parties thereunder shall continue to exist in such a modified form.

8. If it does not contradict to the agreement between the parties or to the nature of contract, then their rights and liabilities shall be modified or be terminated upon reaching such agreement on modification or on avoidance of contract, as well as upon the effective date of a court order thereon.

9. Unless otherwise provided by the law or by agreement between the parties, it shall not be allowed to claim the restitution of the performance of obligation prior to the modification or avoidance of contract.

10. If a fundamental breach of contract by any of the parties has caused its modification or avoidance, then the other party shall be entitled to claim damages caused thereto due to such modification or avoidance.


CHAPTER FIFTEEN

REMEDIESArticle 179. Form of Remedies

1. If it’s provided by the law or contract, performance of obligation shall be secured by the fine or pledge or earnest or suretyship and the warranty.

2. A void contract for remedies shall not serve as the grounds for making a principal obligation void.

3. Where a principal obligation is void, then the contract shall have no legal force.

Article 180. Fine

1. A fine shall be a sum of money which one party undertakes to pay to the other party for non-performance or improper performance of its obligations under the law or contract.

2. A contract on fine shall be concluded in writing irrespective of the form of contract of a principal obligation.

A contract which has not complied with this requirement shall be void.

3. A fine shall have form of penalty or of compensation for losses.

4. A penalty shall be a fine due by a debtor which has not performed its obligation or has performed improperly its obligation to a creditor , and which amount is stipulated in advance under the law or contract or is calculated on the basis of the certain percentage of the sum of the non-performed or improperly performed obligation.

5. A compensation of losses shall be a fine due by a debtor to a creditor , and which is charged for each day of delay, provided by the law or contract and is calculated on the basis of the percentage of the sum of the non-performed obligation.

6. The total amount of fine may not exceed 50 percent of the sum of the non-performed obligation.

7. Where the contract provides for the payment of fine, the damage caused due to non-performed or improper performance may be recovered in the amount exceeding that of fine or the fine or compensation for losses may be paid at the choice of a creditor. However, subject to law or contract, the compensation for losses as well as fine may be paid in full.

8. When a debtor is not liable for non-performance or improper performance ( Article 191 of this Code ), then the creditor shall not be entitled to require the payment of fine.

9. Where the amount of fine, stipulated in the contract, the court or arbitration tribunal shall be entitled to reduce the amount of fine.

Article 181. Pledge

1. Unless otherwise provided by the law, the property or property right may be an object of pledge.

2. The procedure for the creation of security interest in the apartment, buildings and other immovable property shall be determined by the law.

3. Where a debtor has not performed his obligation secured by pledge under the law or contract, then a creditor-pledge shall be entitled to have recovered its damage out of the price of the pledged property in the first order than the other creditors.

4. A pledgor may be debtor or other person.

5. A pledgor shall be an owner of the pledged property.

6. Unless otherwise provided by the law, an obligation may be performed and the damage and fine due to pledge may be compensated for by the pledged property.

7. A contract for pledge shall contain the name, place of residence ( business ) of parties thereto, obligation secured by pledge and its size, period for performance and the lost and price as well as the location of the pledged property.

8. A contract for pledge shall be concluded in writing. A contract for pledge of an immovable property is subject to registration with the Registrar of Immovable Property. A contract for pledge which has violated the provisions of this Article shall be void.

9. When an immovable property is pledged, the right of pledge shall arise from the date of registration of contract, or in case of other property, upon its transfer to the pledgee.

If the contract provides for non-transfer of property to the pledgee, then the right of pledge shall arise upon the conclusion of contract.

10. Unless otherwise provided by the law or contract, the pledged property shall be transferred to a pledgee. A pledgee – transferee shall be obliged to ensure the security and protection of such a property.

11. A pledgee is entitled to claim the pledged property which is out of the preservation by pledgee or by debtor in charge of its preservation.

12. Where the right of ownership by a pledgor of the pledged property has been assigned to another person, then the right of pledge shall not be terminated.

13. Unless otherwise provided by the law or contract, a pledgee shall not be entitled to use the pledged property.

14. If a pledgee can not prove that loss of or damage to the property, transferred thereto have not been due to his fault, than he shall be liable therefore.

15. Unless otherwise provided by the law, the claims by a creditor shall be satisfied out of the price of the pledged property upon a court order.

16. Where the pledged or insured property have been lost, then a pledgee shall be entitled to have recovered the damage thereto out of the amount of insurance compensation in the first order.

17. Where the proceeds of sale of the pledged property have not satisfied fully the claims by a pledgee, then the pledgee shall be entitled to compensate for due part of damages by the other property of the debtor unless otherwise provided by the law or contract.

In such case, the right of pledge shall not serve as the ground for claim by the other creditors for recovery of damages thereto in the first order .

18. The right of pledge shall be terminated in the following cases:

1) termination of obligation secured by pledge;

2) loss of pledged property;

3) acquisition by pledgee of the right of ownership of the pledged property;

4) sale of pledged property by execution.

Article 182. Secured Loan by Banks and Pawnshops

The extension by the banks and pawnshops of secured loan shall be regulated by the law or contract made between the parties in consistent with the law.

Article 183. Earnest

1. Unless otherwise provided by the law, an earnest shall be a sum of money or property given by one of the parties to contract as a part of payment due to the other party for the purpose of proving the conclusion of contract and assurance of its performance.

2. Where the person which has provided the earnest default, then such earnest shall be forfeited thereby.

If the person which has taken the earnest defaults, then it shall be obliged to pay to the other party the twofold sum of the earnest.

3. Unless otherwise provided by the law, the party in default shall calculate the earnest as a part of payment in the compensation for damages caused thereby to the other party.

Article 184. Suretyship

1. A surety shall guarantee the performance by a debtor of all or part of its own obligation due to a creditor or shall conclude a contract of suretyship whereby the surety engages to be answerable for the non-performance of a debtor.

2. A contract of suretyship shall be concluded in writing. A contract which has not complied with this requirement shall be void.

3. Unless otherwise provided by the contract, a surety shall not be entitled to renounce its suretyship at the request of one party.

4. Unless otherwise provided by the contract, the creditor may not assign to the other its right of claim pertaining suretyship.

5. Unless otherwise provided by the contract, the debtor and surety shall be jointly liable for the non-performance of obligation. Co-sureties shall be jointly responsible, unless otherwise provided by the contract.

6. A surety which has performed an obligation shall assign all rights of a creditor pertaining to this obligation. A creditor is obliged to hand-over the documents certifying claims owed by a debtor, and to transfer the rights securing these claims to the surety which has performed an obligation.

7. Where a creditor files an action against a surety, then the surety shall l entitled to raise all objections which a debtor may raise against a creditor.

8. Where a creditor files an action against a surety, then the debtor shall be engaged in the settlement of this dispute. In case of such non-engagement, the debtor shall be entitled to raise all objections which may be raised against a creditor to an action by the surety which has performed obligation.

9. The debtor which has not been present at these proceedings irrespective of the requirement by a surety shall lose its right mentioned in Section 8 of this Article.

10. In case of full or partial non-performance by a debtor of its obligation, or the creditor has not filed an action against a surety within one year period from the date of commencement of the surety’s performance, then the suretyship shall be terminated.

11. If a contract of suretyship is concluded for a indefinite period of time or without any condition, then the suretyship shall be terminated upon expiration of 3 years period from the conclusion of a contract of suretyship.

Article 185. Warranty

1. A debtor may make a warranty concerning the quality of executed work or of transferred property thereby for a certain period. A creditor shall be given written notification thereon.

2. A creditor is entitled to file claims concerning any defect in quality which impairs the normal use of the property in question within the period mentioned in the warranty. In such case, a creditor is entitled to require to repair the defect in the quality of the property free of charge or to substitute it by the property of the appropriate quality or to refund the price by restitution of such property and to claim damages caused thereto.

Article 186. Assignment of Right of Claim

1. In cases except those if it contradicts to the law or contract or it is connected to the personality of a creditor, the creditor may assign its right of claim to the other person.

2. An original creditor shall be liable for the lawfulness of right of claim before a new creditor. However, an original creditor shall not be liable for the performance of any obligations except those guaranteed thereby to a new creditor.

3. The creditor which has assigned its right of claim shall give to a debtor a written notification therein. If it has not been done so, the performance by a debtor of its obligation due to an original creditor shall terminate this obligation.

4. A debtor is entitled to raise all obligations against a new creditor, which the former should have raised against an original creditor at the moment of the receipt of the notification on assignment of the right of claim. Rights to remedies shall also be transferred to the assignee.

Article 187. Transfer of Obligation

1. A debtor may transfer its obligations only upon consent of a creditor.

2. A new debtor may file to a creditor all claims based on the relationship between the creditor and the original debtor.

3. If the surety or pledgee have not consented to be liable for obligations of a new creditor, then the suretyship or pledge transferred by the third party shall be terminated upon transfer of the obligation.

Article 188. Form of Transfer of Right of Claim, and of Obligation

Transfer of rights and obligations based on transactions which are subject to requirements as to written form or special authorization or registration and notarial certification shall be made in the same form as such concerned transaction.


CHAPTER SEVENTEEN

RESPONSIBILITY FOR NON-PERFORMANCE OF OBLIGATIONArticle 189. Right of Claim of Performance

1. Where any of the parties has not performed its obligation, them the other party shall be entitled to require the performance of such obligation thereby.

2. Where any of the parties has not performed its obligation to transfer the property to the other’s ownership or right of possession and use as well as of disposal ( mentioned in Article 88 of this Code ), then the other party shall be entitled to require the transfer of such property thereto.

If the property has been transferred to the other person having the same rights, then the above right shall be lost. Where the property is not transferred, then such property shall be transferred to the person to which the transfer is due first.

In respect of other person except those to which the transfer is made first under the law or contract, the transfer shall be due to the person which has required it first among them.

3. Where an obligation to execute certain work or to render assistance has not been performed, then the aggrieved party shall be entitled to performance by the costs of the party which should perform such obligation.

Article 190. Liability by Debtor for Non-performance or Improper Performance of Its Obligation

1. A debtor is obliged to compensate for harm sustained by creditor due to the non-performance or improper performance of the former’s obligations.

2. Harm shall include costs of a creditor, and loss of or damage to property as well as any lost profit suffered by a creditor due to the non-performance by a creditor of its obligation.

3. If the law or contract provide for payment by a debtor of fine for non-performance or improper performance of its obligation, then fine and harm shall be paid as provided in Section 7 of Article 180 of this Code.

4. Where a debtor has not performed its obligation to transfer the property into the ownership or right of possession, use as well as of disposal of the creditor ( mentioned in Article 88 of this Code ), then the creditor shall be entitled to require the transfer of such property thereto or to claim recovered damages thereto.

5. Where a debtor has not performed its obligation to execute certain work or render assistance, than the creditor shall be entitled to perform such obligation itself or to have it performed by engagement of a third party therein and to claim recovery of damages thereto unless otherwise provided by the law or contract.

Article 191. Grounds for Liability

1. Unless otherwise provided by the law or contract, a debtor shall be liable for the non-performance or improper performance of its obligation, only subject to its own fault.

2. Unless otherwise provided by the law, a debtor which has not performed its obligation or has performed its obligation improperly shall prove itself that he is not at fault.

If a debtor can prove that he has taken all reasonable measures in order to perform its obligations properly, then he shall be considered not to have been at fault.

3. If a debtor has not proved that the non-performance or improper performance of its obligation was due to the extraordinary events or circumstances of insuperable force, then he shall not be relieves of liability.

4. Circumstances such as non-performance by any of the partners of a debtor of its obligation and shortage in resources needed for the performance of obligation etc., shall not be deemed as an extraordinary event mentioned in Section 3 of this Article.

Article 192. Liability for Delay in Performance , and for Earlier performance

1. A debtor which has delayed the performance of obligation shall be liable before a creditor for the impossibilities of performance of obligation due to his delay therein.

2. Where a creditor does not need the performance of obligation due to delay therein, then the creditor shall be entitled to reject the performance of such an obligation, and to claim damages.

3. Where a creditor has rejected the properly performed obligation or if the performance of obligation is not possible due to the non-performance by a creditor of its binding obligation or if it is agreed not to perform an obligation prior to the performance by a creditor of its obligation, then the debtor shall be considered to have delayed.

4. A creditor shall compensate for to a debtor the damage caused due to the delay in performance.

The amount of fine due to the delay by a creditor in its performance may be determined by the law or contract.

5. A debtor shall not pay a fine during the period of delay by a creditor.

6. If the creditor can prove that the delay in such performance was not due to its own fault or that of the person which is bound to accept the performance of obligation, then he shall exonerate himself from liability.

7. A creditor is entitled to claim damages caused thereto due to the earlier performance by a debtor without the former’s consent thereto.

Article 193. Fault by a creditor due to liability of debtor

1. Where the non-performance or increase in the amount of damage caused by a debtor is due to a negligence or omission and inaction of the creditor or the creditor has not taken the measures aimed at reducing the damage arising from the non-performance, then the court shall be entitled to reduce the amount of compensation taking into consideration these factors.

2. Unless otherwise provided by the law or contract, if the performance of obligation is impossible due to a creditor’s fault, then a debtor shall be exonerated from liability.

Article 194. Liability by state administrative organ

1. A state administrative organ is obliged to take measures not to cause the damage to the parties to a contract in its decision-making , and its officer shall have the duty to do so in carrying out his/her functions.

2. Where the damage has been caused to the party to a contract due to the non-performance by a state administrative organ or its officer of their duties mentioned in Section 1 of this Article, the concerned organ shall compensate for the damages upon requirement by the parties.


CHAPTER EIGHTEEN

Termination of Obligation

Article 195. Termination of Obligation by Performance

1. An obligation shall be terminated upon its proper performance.

2. A creditor to accept the performance and also give its signature thereof upon requirement by a debtor therefore.

3. Where a debtor has given a deed of obligation certifying its obligation, then a creditor shall return this deed upon acceptance of an obligation. If the return of deed is not possible for such reason as loss thereof etc., then this fact shall be recorded in the relevant documents.

4. Where a creditor has refused to give his signature concerning his acceptance of obligation or to return the deed of obligation, then a debtor shall be entitled to suspension of an obligation.

Article 196. Termination Of Obligation Due To Set- Off

1. Where the time of performance of obligation is already due or that is not stipulated, or there is no conditions for its demand, then such obligation may be terminated by set-off of the parties’ cross obligations upon request by any of the parties. However, such set-off shall be applied only to claims which limitation period has not expired.

2. If it has been possible to offset obligations at the time of receipt of notice of the assignment of right, then a debtor shall be entitled to refuse to render to a new creditor the performance of obligation, and to offset such obligation with an original creditor.

Article 197. Termination Of Obligation To Novation

Obligation may be terminated upon novation by substitution of old obligation by new one etc.,

Article 198. Modification And Termination Of Obligation By Administrative Decision

1. An obligation from administrative decisions binding on the parties may be modified or be terminated by decisions of such organs.

2. Where an obligation has been modified or has been terminated, then the other obligation, arisen on the basis thereof shall also be modified and be terminated.

Article 199. Termination Of Obligation Due To Impossibility Of Performance

Where the performance of obligation is not possible due to an impediment to an impediment beyond control of a debtor, this obligation shall be terminated.

Article 200. Termination Of Obligation Due To Death Of Parties

1. An obligation which is closely connected to the personality of a debtor shall be terminated upon his/her death.

2. Where a creditor has deceased, then the obligations, arising from the cause of damages to his/her health as well as other obligations which performance is closely connected thereto shall also be terminated.

Article 201. Other Grounds For Termination Of Obligation

The other grounds for termination f obligation may be terminated by the law or contract.


PART FOUR

Contractual Liability

Subpart I

Contractual liability connected to transfer of property, intellectual values and property rights to the others’ ownership.

CHAPTER NINETEEN

Contract For SaleArticle 202. Contract For Sale

The seller shall undertake to transfer the subject matter of contract ( property, intellectual values and property and property rights ) into the ownership or into the right of possession, use as well as of disposal ( Article 88 of this Code ) of the buyer, and the buyer shall undertake to accept them and pay the fixed price under the contract for sale.

2. Unless otherwise provided by the law or contract, the common rules of contract of sale shall be applied to stock exchange sale and that by auction.

Article 203. Form Of Contract For Sale

1. Form of contract for sale shall be defined by the rules mentioned in Article 39, 40, 41 and 42 of this Code.

2. Any other form of contract for sale may be determined by the law or contract.

3. Contract for sale of immovable property is subject to registration with the Registrar of Immovable property.

Article 204. Price Of Contract For Sale

1. Price shall be fixed by agreement between the parties.

2. Price may be expressed in a national currency – tugrig – or that of the other countries, and the parties may agree upon another method for its determination.

3. Price shall be directly paid in the cases other than if it is due upon expiry of a certain period or is due in advance subject to the law or specific nature of a contract.

4. The procedure other than those mentioned in this Code may be established by the law.

Article 205. Liability Of Seller For Non-performance Of Its Obligation To Transfer The Property

Where the seller has not transferred the property or the transferred property does not confirm, then the buyer shall be entitled to require to transfer the property stipulated in a contract or that confirming with the forms of contract or to claim damages caused thereto due to a delay in the execution of contract or to avoid a contract, and to claim damages caused thereto due to such an avoidance.

Article 206. Rejection By Buyer Of Property Or Of Payment Of The Price

Where the buyer rejects the property or payment of its price, then he seller shall be entitled to require the execution of contract or to claim damages caused thereto due to a delay in the execution of contract or to avoid a contract, and to claim damages caused thereto due to such a avoidance.

Article 207. Preservation Of Sold Property

When the right of ownership has passed prior to the transfer of property, the seller shall be obliged to preserve properly such property until if is transferred to the buyer.

The buyer is obliged to reimburse the reasonable expenses by the seller on such preservation.

Article 208. Obligation Of Seller For Provision of Information on property Under Sale

1. The seller is obliged to provide the buyer accurate and full information concerning use, and nature of consumption, conditions of preservation and carriage, instructions for consumption, warranty and utilization period, and manufacturer of the property under sale.

2. The buyer is entitled to claim damages caused thereto due to the non-performance by the seller of obligation mentioned in Section of this Article.

Article 209. Quality Of Property Under Sale

1. The quality of property under sale shall conform with the terms of contract.

If a contract does not contain any such provision, then the seller shall be obliged to transfer to the buyer property of the quality which is fit fir the purposes, known to the buyer or for any particular purposes, stipulated in the contract, and does not conform with the ordinary requirements where the buyer was not bound to know of the particular purpose of property under sale, such a property shall be fit for the common use of property of the same description.

2. Where the standards and technical data of property under sale are determined by contract, than its quality shall be fit for those terms.

Article 210. Rights of Buyer And Responsibilities Of seller, Arising From sale Of Property Of Inappropriate Quality

1. Where the seller has not given notice of damage to or deficiency or defect in the quality of property ( hereinafter referred as to “defective quality’ ), then the buyer shall be entitled to file a claim against him by making any of the following requirements:

1) to substitute the property in question by property of the same description, possessing appropriate quality;

2) to cure defects in the quality of property free of charge;

3) to compensate for expenses, incurred on cure of defects in the quality of property;

4) to reduce the price to the reasonable extent or to refuse to effect payment fully or partially for a definite period.

2. The buyer is entitled to avoid a contract without making the requirements, mentioned in Section 1 of this Article, or to claim refund of paid money by restitution of the property of inappropriate quality.

3. Where the requirements by the seller, mentioned in Section 1 and 2 of this Article , are insufficient for recovery of the damage caused thereto, then he shall be entitled to claim full recovery of the damage caused thereto.

4. If the more longer period was not stipulated by the law or contract, then the buyer which has found any defective quality of property within 6 months’ from the assignment thereby of the right of ownership on the property in question, may exercise its rights mentioned in this Article.

5. In respect of property which consumption period is fixed , the right mentioned in this Article may be exercised within such consumption period.

6. Where the seller proves that a defective quality of the property in question was due to breach by the seller of regulations on its carriage, preservation and use or to events of extraordinary character and circumstances of insuperable force sent the satisfaction of requirements by the buyer mentioned in this Article may be refused.

7. Unless otherwise provided by the law if the buyer which has found a defective quality of purchased property after the expiry of time limit mentioned in Section 4 of this Article, but within its consumption period, proves that such defective quality had arisen prior to the purchase of the property, then he may exercise his rights mentioned in this Article.

Article 211. Responsibility for Defective Quality of Property Sold Subject to Warranty Period

1. Where a warranty period is determined over the quality of property under sale under the law or contract, then such a period shall be calculated from the sale date of property.

2. The buyer may file to the seller a claim relating to defective quality which has impeded the normal use of property within the warranty period.

3. In case of the filing of claim under Section 1 and 2 of this Article, the seller can not prove that the above defect was due to the breach by the buyer of the regulations on carriage, preservation , use and consumption of property, then the former shall be obliged to cure the defect in property at his own cost or to substitute it by the property of appropriate quality, or to pay the price.

Article 212. Containment, Package and Markings of Property

1. If the law or contract provide for transfer of the property with containment, package and marking, then their preparation shall confirm with the requirements of the law or contract. Containment, package and markings shall be fit for keeping its quantity and quality in the course of its carriage and preservation.

The appropriate markings shall be made in respect of each property with containment and package.

2. Unless otherwise provided by the law or contract, the buyer shall pay the price of containment and package in addition to that of the property in question.

3. A contract may provide for the return of containment and package.

Article 213. Complete Property

1. Subject to law or contract, the seller is obliged to delivery the complete property having all relevant accessories, spare parts and components subject to standards, technical data and price list.

A completion of property may be determined by the standards, technical data, price list or the contract.

2. Where an non-complete property is transferred, then the buyer shall be entitled to require full completion thereof or substitution thereof by another complete property. The buyer shall not bear expenses relating to completion or substitution of the property, and in case of payment thereof be entitled to refund thereof.

3. Where the seller fails to ensure completion of non-complete property within the agreed time-limit, then the buyer shall be entitled to refuse acceptance of property, and to claim damages caused thereby.

Article 214. Limitation Period of Action Filed Regarding Defective Quality

Where the seller has not satisfied the buyer’s claim, then the buyer shall be entitled to file to the court the action regarding a defective quality of property within six month from the day of receipt of reply to claim. If it is impossible to determine the date of the filing of claim or that of receipt of the reply thereto, the limitation period shall be calculated from the date on which the period for filing of claim has expired.

Article 215. Right of Third Party Regarding Property Undersale

The seller is obliged to inform the buyer in advance all rights of the third party ( hiree, pledgee etc.,) regarding the property under sale at the conclusion of contract. Where the seller has not performed this obligation, the buyer shall be entitled to avoid contract or to claim damages caused due to such avoidance or to require reduction of purchase price to the appropriate proportion.

Article 216. Responsibility of seller for Conversion of Sold Property from Buyer by Execution

1. Where the third party files to the court an action against the buyer for conversion of property from the buyer, based on the seller’s obligation which has arisen prior to the sale of such property, then the buyer shall be obliged to engage the seller in the procedure of this case. The seller is bound to be a co-litigant of the buyer in this proceedings.

2. Where the demands of action for conversion of property filed by the third party against the buyer are satisfied, then the seller shall be obliged to compensate for damages caused to the buyer.

However, if the buyer has not engaged the seller in the settlement of this proceedings, and in case of engagement thereby, the seller proves that he could have left to the buyer the property in question, then he shall exonerate himself from this liability.

Article 217. Sale of Property on Credit

1. Unless otherwise provided by the law or contract, the property may be sold on credit by determination of the date of payment.

2. Unless otherwise provided by the law or contract, the price of property to be sold on credit shall be determined by the price, agreed between the parties on the date of bargaining, and the seller shall not be entitled to alter the price thereafter.

3. Upon transfer of the property sold on credit, the right of ownership thereon shall be assigned.

Article 218. Sale of Property by Manufacture ( Contract for Manufacture )

1. A manufacture shall undertake to transfer property designed for engagement in business into the ownership or right of possession, use as well as of disposal ( Article 88 of this Code ) of the buyer at the agreed period, and the seller shall undertake to accept such property and pay its price under the contract for manufacture.

2. Unless otherwise provided by the law or contract, the rules, regulating a contract for sale shall be applied to contract for manufacture.

3. Other terms on the manufacture of property of certain types may be established by the law or contract.

Article 219. Time of Manufacture

1. Where the contract provides for a partial manufacture of property of one type, or the parties have not agreed otherwise, manufacture shall be made in equal parts within the stipulated period of time.

2. If the contract for manufacture of machinery, equipment and the components of property has not stipulated the time of delivery of parts thereof, then the performance shall be calculated by the date of delivery of the remaining parts of components.

3. Where there is a delay in manufacture or in case of earlier delivery without consent by the seller, the buyer shall be entitled to claim damages due thereto or to refuse to accept property by notification thereon to the manufacturer without undue delay.

The buyer is obliged to accept and pay the price for property dispatched by the manufacturer prior to receipt of notification of the buyer.

Article 220. Rejection by One Party of Performance of Obligation Under Contract for manufacture

1. In case of a fundamental breach by any of the parties of contract, the other party may reject performance of all or some of obligations under the contract for manufacture unless otherwise provided by the contract.

2. Where the manufacturer has delivered the property of inappropriate quality several times or has delayed the date of delivery stipulated in the contract several times, the buyer has delayed date of payment for the delivered property, stipulated in the contract constantly or for long period of time, as well as has been declared insolvent, then it shall be considered to be a fundamental breach of contract.

Article 221. Sale, Realization and Gift of Intellectual Values and Property Rights

Unless otherwise provided by the law or contract, the relevant provisions of this Chapter and Chapters XX and XXI shall be applied to the sale, realization and gift of intellectual values and property rights.


CHAPTER TWENTY

COMMERCEArticle 222. Commercial Contract

1. Parties shall undertake to transfer mutually the property of certain type into ownership or into right of possession, use , and of disposal ( Article 88 of this Code ) by exchange thereof under a commercial contract.

2. The procedure for trading in money or securities of State ownership shall be established by the law .

3. In case of exchange of securities under a commercial contract the right may be evaluated.

Article 223. Application of Rules of Contract for Sale to Commercial Contract

Unless otherwise provided by the law , the parties shall apply the rules regulating the relations of sale to commercial contract.

The party who has dispatched the draft contract with a view of concluding a commercial contract shall be considered as the seller, and the party which has consented thereto shall be considered as the buyer.


CHAPTER TWENTYONE

GIFTArticle 224. Gift

1. A donor shall transfer the property into the ownership or into the right of possession, use as well as of disposal of recipient without consideration, and a recipient shall accept such property.

2. Unless otherwise provided by the law or contract, a gift shall be considered to have been made upon transfer of property or upon registration thereof with the Registrar or Immovable Property in case of gift of an immovable property.

Article 225. Grant Contract

1. Certain property may be gifted as a grant for special purposes.

2. Grantee shall possess, use and dispose a granted property for the purposes thereof.

In case, a grantee has not performed or has performed improperly this obligation, then a donor shall be entitled to possess, use and dispose the granted property for its purpose by conversion thereof from the guilty party.


CHAPTER TWENTYTWO

SUPPLY OF ENERGY AND OTHER RESOURCESArticle 226. Contract for Supply of Energy and Other Resources

1. A supplier shall undertake to supply energy and other resources of the quantity and quality which confirm with the determined technical requirements and terms of contract, in due time, and a consumer shall undertake to pay the price of energy and other resources under the contract for supply of energy and other resources through connected networks.

2. A contract shall provide for disconnecting points of possession of the networks for transmission of the energy and other resources as well as responsibilities by parties for endurance thereby of the security of networks, equipment and buildings.

3. Particulars of contract for supply of energy of certain type and other resources may be determined by the law

Article 227. Obligations of Consumers of Energy and Other Resources

1. A consumer of energy and other resources shall have the following obligations:

1) to pay the price of used energy and other resources within the period stipulated by a contract;

2) to ensure the security and free trouble operation of equipment designated for use and reprocessing of energy and other resources, and to enforce the rules pertaining thereto;

3) A consumer is obliged to enforce provisions of contract concerning the consumption of energy and other resources;

4) to make repair possible within its capacity, urgently need for equipment designed for use and reprocessing of energy and other resources in due time or to pay the price or expenses if a supplier have made a necessary repair due to the latter’s professional workmanship, unless otherwise provided by the law or contract;

5) to fulfill requirements concerning the normal operation of system of calculation of energy and other resources and their consumption as well as of equipment designated for use and reprocessing of resources in conformity with instructions, stipulated in the contract;

6) any other obligations subject to law or contract.

2. Where a consumer has broken or has caused damage to equipment designated for use and reprocessing a necessary repair himself, or shall be entitled to have repaired if by a supplier. If a consumer does not take necessary measures for cure of such breach and damage, then the supplier shall make a repair himself and require compensation by a consumer of due expenses. In case, a consumer of energy and other resources has not performed his obligations, stipulated in this Article, a supplier shall be entitled to claim damages caused thereto or to refuse to supply the energy and other resources. If the price for the consumption of energy and other resources has not been made in due time, then a consumer shall compensate for losses as provided by the law or contract.

4. If a consumer proves that non-performance of obligation, mentioned in Section 1 (2) of this Article was not due to his fault, then he shall be exonerated from liability.

Article 228. Obligations of Supplier of Energy and Other Resources

1. A supplier of energy and other resources shall have the following obligations:

1) to supply energy and other resources of the quantity and quality, conforming with the terms of contract in due time;

2) to install appropriate equipment designated for use and reprocessing of energy and other resources, and to transfer of into possession of a consumer , unless otherwise provided by the law or contract;

3) to maintain equipment, designated for use and reprocessing of energy and other resources in conformity with its technological requirements of his cost, unless otherwise provided by the law or contract;

4) to repair equipment designated for use and reprocessing of energy and other resources if necessary. In case, the procedure on the payment of repair shall be governed by Section 1 ( 3) of Article 227 of this Code.

5) any other obligations subject to law.

3. A supplier is entitled to inspect the technical conditions of system of calculation of resources’ consumption. and of equipment designated for use and reprocessing of resources without interference thereby into the activities of a consumer.

4. Where a supplier has not performed improperly or has performed his obligations, stipulated in this Article, then the consumer shall be entitled to claim damages, caused thereto or to refuse to pay all or part of the price of energy and other resources.


CHAPTER TWENTYTHREE

LOANArticle 229. Contract for Loan

1. A lender shall undertake to transfer sum of money and other property into the ownership or into the right of possession and use, as well as of disposal ( Article 88 of this Code ) of borrower, and a borrower shall undertake to return to a lender the borrowed sum of money or property of the same type, quantity and quality under the contract for loan.

2. A borrower shall repay to a lender the principal irrespective of the change in an exchange rate, under the contract for commercial lending.

3. The parties shall determine the forms of remedies and procedure on establishment of contract for loan.

4. Where a contract t for loan is concluded for an indefinite period, a borrower shall be obliged to return an object of contract for loan upon demand by a lender thereof.

5. Where a contract for loan is concluded for a definite period, and a borrower has not performed its obligation, then a lender shall be entitled to restitute an object of contract for loan or to require the compensation of loss due the expiration of original term of contract if it is provided by the law or contract.

SUBPART II

CONTRACTUAL LIABILITY CONNEXTED TO TRANSFER OF PROPERTY AND INTELLECTUAL VALUES INTO THE OTHER’ POSSESSION AND USE


CHAPTER TWENTYFOUR

HIRE OF PROPERTYArticle 230. Contract for Hire of Property

A hiree shall undertake to deliver a property for the temporary use by a hirer, and a hirer shall undertake to pay fees for use of such property under the contract for hire of property.

Article 231. Form of Contract for Hire of Property

1. Unless otherwise provided by the law , a contract between the citizens on hiring of property more than one year period shall be concluded in writing.

2. Where one of the parties is a legal person, then a contract for hire of property shall be concluded in writing irrespective of the term.

3. Contract for hire of immovable properties except that of apartments is subject to registration with the Registrar of Immovable Property.

4. Unless otherwise provided by the law, other procedure for hiring of property of certain type may be determined.

Article 232. Fees for Use of Property

1. Parties shall determined the amount , and form of payment of the fees for use of property by a mutual agreement.

2. Unless otherwise provided by the law or contract, a hirer shall be obliged to pay to hiree the fees for use of property at the constant time.

Article 233. Term of Contract for Hire of Property

1. A contract for hire of property shall be concluded for definite or indefinite period. A contract of definite period shall be concluded not more than ten years.

2. However, in case of termination of contract for hire of property, a hiree does not refuse and hirer continues to use such property, then a contract shall be considered to have been extended on the same terms and conditions for an indefinite period.

3. Where the time limit is not stipulated in the contract for hire of property, then such a contract shall be considered to have been concluded for an indefinite period.

4. Parties to contract, concluded for an indefinite period are entitled to terminate such a contract at any time, but, are also obliged to give to the party notice of the termination of contract lease of immovable property prior to not less than three months.

Article 234. Preemptive Rights of Hirer

A hirer, which does perform its obligations properly under the contract for hire of property shall have the preemptive right to conclude a new contract for hire of this property in the first order, upon termination of an previous contract.

Where a contract for hire of property is concluded with the other party contrary to this provision, then an old hirer shall be entitled to require the transfer of rights and obligations by a new hirer thereto.

Article 235. Obligation of Hiree

1. A hiree is obliged to transfer to a hirer property, conforming with the terms of contract, and to repair property under hire if it is provided by the law or if it has been agreed by contract.

2. A hiree shall not be liable for defective in the quality which a hirer knew or ought to have known at the moment of conclusion of contract.

Article 236. Consequences Arising due to Non-performance by Hiree of its Obligation

1. Where a hiree does not transfer property, a hirer shall be entitled to demand it and claim damages, caused thereto, or to avoid a contract and claim damages, caused thereto.

2. Where a hiree does not perform its obligation to repair the property, stipulated by the law, and contract, then a hirer shall be entitled to make a necessary repair and require the reimbursement of price of such repair, or include if into due fees thereby or to avoid a contract and claim damages, caused thereto.

Article 237. Obligation of Hirer

A hirer shall have the following obligations:

1) to use property in conformity with the terms of contract;

2) to prevent property from any damage and deterioration except normal depreciation;

3) to pay the fees use of property in due time, where the possibility for use of the property under hire is reduced for reasons beyond his control, he may require a hiree to reduce the fees according thereto;

4) to repair property if it is provided by the law or contract;

5) to return to a hiree the property upon termination of contract, subject to calculation of normal depreciation or that agreed by the contract.

Article 238. Consequences Arising due to Non-performance by Hirer of its Obligation

1. Where a hirer does not cure such breach as non-use of property according to the terms of contract, or intentional and negligent deterioration of the quality of property in the course of its use, or constant non-payment of fees in due time etc., irrespective of the warning of hiree, then a hiree shall be entitled to avoid a contract, and claim damages caused thereto.

2. Where a hirer has not performed his obligation to make repair under the law or contract, upon demand by a hiree, then a hirer shall be entitled to make such repair at the cost of hirer or to avoid a contract and claim damages, caused thereto.

3. If a hirer has deteriorated the property due to grounds, not stipulated by the law or contract at the time of its reform upon termination of contract or can not prove that it was not due to his own fault, then a hiree shall be entitled to claim damages caused thereto.

4. Where a hirer has not returned the property upon termination of the contract for hire of property, then hiree shall be entitled to restitute the property or to claim fees due to such delay and damages caused thereto.

Article 239. Transfer of Property Under Hire to Another Owner

When the right of ownership or right of possession, and use as well as of disposal of the property under hire ( Article 88 of this Code ) is transferred by a hiree to another person, then a contract for hire of property shall stay on force.

Article 240. Subhire

A property under hire may be subhired to the others only upon consent of hiree thereto.

Article 241. Avoidance of Contract due to the Impossibilities for Use of Property Under Hire

A hiree shall be entitled to avoid a contract if the impossibility for use of the property under hire is not due to his own fault.

Article 242. Right by A Hiree for Cure and Improvement of Property

1. Where a hirer has cured and improved the property under hire, at his own cost with the consent of a hiree, then he shall be entitled to require to compensate for due expenses incurred thereon upon termination of contract unless otherwise agreed between the parties.

2. Where a hiree refuses to pay the price of the improvement of property, made without his consent, then a hirer may separate such an improvement therefrom.

If it is not possible to separate this improvement, then a hiree shall not pay the price of the improvement, made without his consent , unless otherwise provided by the law.


CHAPTER TWENTYFIVE

HIRE FOR APARTMENTSArticle 243. Contract for Hire of Apartments

1. A hiree shall undertake to transfer residential houses, housing flats, apartment and ger ( herein after called as to ” apartments” ) ensuring the living conditions under his ownership or his possession, use and disposition ( Article 88 of this Code ) , into possession and use by a hirer or his/her family members, and a hirer shall undertake to use such apartments for their purposes, to preserve its original state and pay the rent for use of apartment ( hereinafter called as to ” rent ” ) in due time, under the contract for use of apartment.

2. Unless otherwise provided by the law, the rules on possession and use of apartment shall be defined by a contract between the parties.

Article 244. Form of Contract for Use of Apartments

A contract for use of apartment shall be concluded in writing. The contract which has not complied with this requirement shall be void.

Article 245. Obligation of Hiree of Apartments

1. A hiree is obliged to transfer apartments, conforming with the terms of contract, into possession and use by a hirer in due time, and to make a necessary repair if it is provided by the law or contract.

2. Where a hiree has broken a contract, then a hirer shall be entitled to require to reduce the amount of rent or to claim damages, caused thereto.

Article 246. Obligations of Hirer of Apartments

1. A hirer of apartments shall have the following obligations:

1) to pay rent at the time-limit, stipulated by in the contract;

2) to use apartments and common space of utilization for their purposes and reserve their original state, and to fulfill the requirements of utilization;

3) to make a necessary repair of apartments as required, if it is provided by the law or contract;

4) to obey the other rules on utilization of apartments.

2. Where a hirer or his/her family members have broken or have caused the damage to apartments, then he/she shall be obliged to make a necessary repair without undue delay. If a hirer does not make such a repair upon demand by a hiree, then the latter shall be entitled to do so, and to require a hirer to compensate for expenses, incurred due thereto.

Article 247. Term of Contract for Use of Apartments and Right to Renew Such Contract

1. A contract for hire of apartments may be concluded for a definite period or indefinite period.

2. A citizen may possess and use apartments during his/her lifetime or inherit this right.

3. If the time-limit is not stipulated in the contract for use of apartments, then such a contract shall be considered to have been concluded for an indefinite period.

4. Where a contract for hire apartments is terminated and a hiree does not reject the further use by a hirer of apartments, then the contract shall be considered to have been renewed on the same terms and conditions for an indefinite period.

5. The hirer who properly performs his/her obligation under the contract for use of apartments shall have the preemptive right to conclude a new contract for use of these apartments in the first order upon termination of such contract. If a hiree has broken this provision and has concluded the contract with the other person, an old hirer shall be entitled to require the transfer of rights and obligations by a new hirer thereto.

Article 248. Rent

1. Parties shall determine the amount of and the term and form of payment of rent by a mutual agreement.

2. Unless otherwise provided by the law or contract, a hirer shall be obliged to pay to a hiree the rent at a fixed time thereby.

Article 249. Use of commonly used Areas of Apartments

Unless otherwise provided by the law or contract, hirers who inhabit in the apartments shall have an equal right to use common areas of apartments ( kitchen, bathrooms, entrances, ladder etc., ) and these areas shall not be a separate object of contract for use of apartments

Article 250. Family Member of Hirer

1. Spouse, children and parents who are living in a permanent community with a hirer shall be considered as the latter’s family member.

2. Any other relatives of family members listed in Section 1 of this Article and persons maintained who are under his/her care, and are unable to work, and have been living in a permanent community with him/her not less than one year period and have a common business may be considered as a family member.

3. A court shall decide on disputes concerning a family member.

Article 251. Right of Family Members of Hirer

1. Family members who are living in a permanent community with a hirer of apartments shall have all rights and obligations of hirer, provided by the law or contract for hire of apartments.

2. Upon request by a hirer of apartments or by any of his/her family members, a contract for hire of apartments may be concluded with any of his/her members.

3. Where a hirer of apartments has deceased or has moved from such apartments, a contract for hire of apartments may be concluded with any of his/her family members.

4. When an adults family member leaves the family,

the disputes, arising from the possession and use of apartments shall be decided by a court without consideration of fact that whom a contract for hire of apartments has been concluded with.

Article 252. Right to Possession and Use of Apartments due to Impermanent Absence of Hirer

When a hirer is away temporarily the right to possession and use of apartments shall be regulated in conformity with the below procedure in the following uses.

1) right by a citizen employed in the actual a military service, to possession and use of apartments shall remain during his military service period including six months from its termination.

Where a family member of citizen employed in the actual military service has not left in his apartments, then a hiree may rent such apartments to another person from the date of his employment by the military service of the government. When a previous hirer comes back, a new hirer shall be obliged to release such apartments upon his first demand. In case of refusal to release them, the latter shall be removed therefrom by a court order irrespectively of his/her having another apartments.

2) right by a citizen moving to the custodian organization, to possession and use of apartments shall remain for a custodian period.

Where a family member of such person has not left in his/her apartments, then a hiree may rent such apartments to another person from the date of his movement to the custodian organization.

A new hirer is obliged to release such apartments upon the first demand by the hirer who has come back from the custodian organization or his/her custodian and guardian. In case of refusal to release them, the former shall be removed therefrom by a court order irrespective of his/her having another apartments;

3) Unless otherwise provided by the law, where a hirer is away temporarily abroad or in another local place with his/her family, then the parties shall decide the remaining of his/her right to possession and use of apartments by agreement.

4) Where a family member of hirer who is imprisoned or has served an imprisonment sentence, has not left in his/her apartments, the right to possession and use of apartments shall be regulated as provided for by Section 3 of this Article.

Article 253. Alteration of Terms of Contract due to Change in the Design of Apartments

In case, a design of apartments under hire is changed then the parties shall decide the distribution of another apartments to a hirer by agreement.

Article 254. Subhire of Apartments

1. A hirer is entitled to subhire all or part of apartments under his/her possession to the other party with the consent of a hiree, and is full liable for him/her obligations under an original contract before a hiree.

2. However, the parties shall fix the term of contract for subhire by agreement, and it may not exceed the remaining term of original contract for hire of apartments. A subhirer is not entitled to demand to extent the term of contract.

3. Upon termination of the contract, a subhirer is obliged to release apartments, and in case non-performance thereby of this obligation, the former shall be removed therefrom by a court order upon demand by an actual hirer irrespective of his/her having another apartments.

4. A contract for subhire may be concluded for a indefinite period of time. In this case, the parties are entitled to avoid a contract at any time, but any of them is obliged to give not less than one month notice to the other party thereon.

5. However, the parties shall fix the amount of rent for subhire of apartments, and but it may not exceed that of rent due by a hirer, fixed by an original contract.

Article 255. Resident

A hirer may permit a resident to live in the apartments under the former’s possession without contract and free of charge. A resident is obliged to release such apartments upon the first demand of a hirer, and in case of refusal thereof to release them, the former shall be removed therefrom under the procedure, prescribed by the law.

Article 256. Removal of Subhirer and Resident due to Termination of Contract for Hire of Apartments

Subject to termination of contract for hire of apartments, subhirer or resident shall be removed under the procedure prescribed by the law, irrespectective of their having another apartments.

Article 257. Exchange of Apartments

1. Hirers are entitled to exchange apartments under their possession, upon consent by a hiree thereon.

2. Hirers are obliged to get a written permission by all of their adult family members on such exchange.

A contract which has not complied with this requirement shall be void.

Article 258. Transfer of Right of Ownership of Apartments to Another Owner

Upon transfer of the right of ownership of apartments under the other’s hire, to another owner or person, having the right to possession, use, and of disposal ( Article 88 of this Code ), a contract for hire of apartments shall stay in force.

Article 259. Avoidance of Contract for Hire of Apartments, Concluded for a Definite Period

1. A hiree is entitled to avoid a contract for hire of apartments, concluded for a definite period, at any time at its own initiative.

A hiree is obliged to give to hirer not less than one month notice.

2. Where the parties can not mutually agree upon avoidance of contract for hire of apartments at the hirer’s initiative, then it may be avoided only a court order prior to due expiration of such period.

Article 260. Avoidance of Contract for Hire of Apartments, Concluded for an Indefinite Period

1. Where an apartment house is hired for an indefinite period, and hirer performs its obligations under the contract properly, then the parties shall avoid a contract upon mutual agreement thereon.

If the parties do not agree so, a contract may be avoided by court proceedings.

2. Where a contract for hire of residential houses is concluded for an indefinite period, any of the parties shall be entitled to avoid a contract at any time, but and shall be obliged to give a notice to the other party prior to three month period thereof.

Article 261. Termination of Contract for Hire of Apartments due to Demolition of Apartments House

1. Upon demolition of apartment house by decision of competent authorities, a contract for hire of apartments shall be terminated.

2. In case of termination of contract under Section 1 of this Article, another apartments shall be given to a hirer or incurred expenses thereby shall be reimbursed by the said authorities if impossible.

3. The provisions of this Article shall not be applied to the demolition of apartment house due to non-satisfaction of utilization requirements thereof.

Article 262. Removal of Hirer from Apartments by a Court Order

A hirer of apartments shall be removed without distribution of another apartments by a court order in the following cases:

1) Where a hirer or his/her family member always commit breach of their obligations under the contract for hire of apartments, or do not stop such breach irrespective of previous warning by a hiree several times; or

2) illegal settlement by citizens in apartments;

3) voluntary non-release of residencies, provided for performance of the work of provisional and seasonal character or study at training institutions after the completion of work and training;

4) non-release of apartments occupied due to work under the labor contract upon expiration of time limit stipulated in such contract unless otherwise provided by the law or contract;

5) voluntary non-release of apartments provided due to a definite ranking title and privileges for a definite period under the law upon termination of such period in the other cases, stipulated by the law except provision of another apartments.

Article 263. Removal of Hirer from Hotel by a Court Order

The hirer who stays at hotel in excess of due days or breaks severally the inside rules of hotel shall be removed therefrom by a court order.

Article 264. Removal Procedure

The enforcement service for Court Decisions solely or in collaboration with Police Organization shall remove a hirer on the basis of a valid court decision.


CHAPTER TWENTYSIX

LEASE OF PROPERTYArticle 265. Contract for Lease of Property

1. A lessor shall undertake to transfer immovable or movable property under its ownership or under its possession, use and disposal ( Article 88 of this Code ) into possession and use by a lessee for certain period of time on the appropriate conditions and terms of payment for the purpose of conduction by the latter of its economic activities, and of attainment of goals provided for in its statutes, and a lessee shall undertake to possess and use the property under the law or contract and make the payment therefore under the contract for lease of property.

2. A lease of property may be made subject to assignment.

3. The provisions of Article 242 of this Code shall also be applied to contract for lease.

Article 266. Ownership of Income, Fruit and Younger Earned out of Leased Property

Unless otherwise provided by the law, the right of ownership of income, fruit and younger occurred as a result of possession and use of leased property shall be determined by contract between the parties.

Article 267. Form of Contract for Lease

1. A contract for lease of immovable property is subject to registration with the Registrar of Immovable Property.

2. A contract which has not complied with the requirements mentioned in Section 1 of this Article shall be void.

Article 268. Term of Contract for Lease

1. Unless otherwise provided by the law, the parties shall fix the term of contract for lease by agreement, taking into consideration the nature and design of property under lease.

2. Provisions of Sections 2, 3 and 4 of Article 233 of this Code shall also be applied to contract for lease.

Article 269. Modification and Avoidance of Contract for Lease

Where the performance of contractual obligation is not possible for good reasons, then any of the parties shall be entitled to require the modification or avoidance of contract.

Article 270. Impossibility for Modification and Avoidance of Contract for Lease

1. The substitution of leasor and lessee for reasons, not depending on the activities of parties shall not serve as the ground for avoidance and alteration of the terms of contract for lease.

2. The provision of Section 1 of this Article shall not prevent a successor from making a proposal for the alteration of terms and avoidance of contract.

Article 271. Rentage

1. Unless otherwise provided by the law, the parties shall determine the rental by agreement.

2. Where the quality and state of rental property are deteriorated due too circumstances of extraordinary character or of insuperable force, then the parties may change the rent by a mutual agreement.

3. Unless otherwise provided by the contract, the rent shall be payable at a fixed time.

Article 272. Obligation of Lessor

1. A lessor is obliged to transfer to a lessee the property, conforming with the terms of contract, and to repair the property unless otherwise provide by the contract or if it is stipulated by the contract. Any other obligations may be defined by the parties in the contract.

2. A lessor is liable for the defect in the quality of property which was unknown at the conclusion of contract and is impeding its use.

Article 273. Obligation of Lessee

A lessee shall undertake to possess and use the rental property and not deteriorate and restore the original state of track of land or quality of property, to pay the rent in due time, to mend the property unless otherwise provided by the law or if it is stipulated by the contract or to return to a lessor the property upon termination of contract subject to calculation of natural wear or of that stipulated by the contract unless otherwise provided by the law or contract.

Any other obligations shall be defined by the parties in the contract.

Article 274. Preemptive Right of Lessor and Lessee

1. A lessor is entitled to select a Lessee among several persons which are making the proposal for concluding a contract and to avoid a contract and to claim damages caused thereto if a lessee has committed a fundamental breach of contract or has become bankrupt or has deprived of its capacity to possess the property.

2. In case of sublease or sale of property, the Lessee which performs its obligation property shall have the preemptive right to rent or purchase if in the first order unless otherwise provided by the law or contract. Where a Lessor has concluded with the other person a contract for lease or sale of such property contrary to this provision, then an old Lessee shall be entitles to require the transfer of rights and obligations of a new Lessee thereto.

3. The parties shall establish any other preemptive rights in the contract.

Article 275. Sublease of Property

A rental property is subject to sublease only upon consent of a Lessor.

Article 276. Evaluation of Rental Property

Unless otherwise provided by the law , a rental property shall be evaluated by agreement between the parties.

Article 277. Sale and Transfer of Rental Property without Consideration

Parties are entitled to agree upon sale of the rental property by its re-evaluation or its transfer without consideration.

Article 278. Insurance of Rental Property

Parties shall agree upon insurance of the rental property and procedure for distribution of insured property by the contract.

Article 279. Joint Lease

In case of joint lease by several persons of property, the relationship between lessees shall be regulated by their contract. Subject to joint lease, each lessor shall be entitled to require the defense of its right.

Article 280. Consequences Arising out of Non-performance and Improper Performance of Obligation Under Contract for Lease

1. In case of non-performance or improper performance of obligation under the contract for lease, the parties shall be liable under the law or contract.

2. The provisions of Articles 236 and 238 of this Code shall be applied to the definition of liability of the party which has not performed or has performed its obligation improperly under the contract for lease.

Article 281. Rent of Land

1. A right to rent of land shall not affect the possession and use of its subsoil.

2. The procedure for rent of land shall be established by the law.


CHAPTER TWENTYSEVEN

USE OF PROPERTY WITHOUT CONSIDERATIONArticle 282 Contract for Use of Property without Consideration

1. One party shall transfer, the property into use by the other party without consideration for a limited time under the contract for use of property without consideration.

2. The provisions of Articles 231, 233 and 242 of this Code shall also applied to the contract for use of property without consideration.

Article 283. Obligation of User without Consideration

1. Unless otherwise provided by the law or contract, user of the other’s property shall be obliged to use it in conformity with the contract, or not to cause damage thereto or deteriorate except the natural wear or to mend or to incur the reasonable expenses ensuring the original state of such a property.

The user is obliged to return such property subject to canculation of natural wear and that stipulated in the contract, upon termination of the contract.

2. Where the user has broken the provisions of Section 1 of this Article and continues to do so irrespective of the warning by the user , then the usee shall be entitled to avoid a contract and claim the incurred expenses and damages caused thereto due to deterioration of the property.

3. The user is not entitled to transfer it to another person without the consent of the usee. The person which has transferred the property to another person subject to permission shall not be exempted from its liability due to the usee.

Article 284. Transfer of Right of Ownership of Property under Use without Consideration

Upon transfer of the right of ownership of the property under use without consideration, then a contract for use of property without consideration shall be still effective. Where the contract is concluded for an indefinite period, then a new owner shall be entitled to avoid the contract.


CHAPTER TWENTYEIGHTUSE OF INTELLECTUAL VALUE

Article 285. Contract for Use of Intellectual Value

1. An owner of intellectual value or patentee shall undertake to transfer an intellectual value into the use by an interested person ( individuals, legal persons and the state ) for the particular purpose and fees under the contract for use of intellectual value.

2. An interested person shall not enjoy any right in respect of the personal right of the owner pertaining to the work being an object of the contract for use of intellectual value.

3. Unless otherwise provided by the law or contract, the relevant provisions of this Code shall be applied to the contract for use of intellectual value.

Article 286. Form of Contract for Use of Intellectual Value

A contract for use of intellectual value shall be made in writing and be subject to registration with the competent authorities if the law specially provides so.

Article 287. Object, Price and Content of Contract for Use of Intellectual Value

1. Object of contract for use of intellectual value shall be discovery, invention, rationalization proposal, industrial design, trade mark and work, relating to a copyright, which are registered and recognized under the procedure prescribed by the law.

2. Unless otherwise provided by the law, the parties to contract shall determine the fees or reward for use of intellectual value by agreement.

3. A contract for use of intellectual value shall contain the method and form of use of intellectual value, scope of application, duration period of contract rights , obligations and liabilities of parties, and any other terms subject to law.

Article 288. Liability for Breach of Contract for Use of Intellectual Value

The party which has not performed or has performed its obligations improperly under the contract shall be liable for under the law or provisions and terms of the contract.


SUBPART IIIOBLIGATION UNDER CONTRACT FOR WORKS

CHAPTER TWENTYNINE

EXECUTION OF WORKS

Article 289. Contract for Works

1. A contractor shall undertake to execute a certain work under the instructions of an Employer by the latter’s or its own property, and an employer shall undertake to accept such work and pay for it under the contract for works.

2. A budget may be allocated for the execution of work, stipulated in the contract. The parties shall determine the method and procedure for alteration of budget and liabilities for breach, thereof in the contract.

3. An Employer is entitled to inspect the process and quality of works of any time without interference into the activities of a Contractor.

4. An owner or possessor of the property in question shall be liable for the loss or damage to this property due to the circumstances of extraordinary and superforce character prior to the time-limit for acceptance of the executed work, stipulated in the contract, and the party in delay shall be answerable for any responsibility, arising due to the expiration of such time-limit unless otherwise provided by the law or contract.

5. Where the object of contract for works is lost or damaged due to the circumstances of extraordinary or superforce character, and the completion of work is nor possible due to the fault of an Employer, then a Contractor shall be entitled to require the payment of work. Where the impossibility for completion of the work, stipulated in the contract was due to the insufficient property and defects in the instructions of an Employer, and a Contractor has given to an Employer a notice of substitution of the property or of need of the alteration in the instructions in due time, then a Contractor shall not loss its right to payment of the work.

If the loss of articles, used for the execution of work was not due to the fault of a Contractor, and has occurred after the delay by an Employer in the acceptance of work, then a Contractor also shall not loss its right to payment.

6. Unless otherwise provided by the law, a contract for works shall be concluded in writing.

Article 290. General and Contractor and Subcontractor

1. A Contractor may engage the other person ( subcontractor ) in the execution of the work, stipulated in the contract.

2. Unless otherwise provided by the law or contract, a Contractor shall be liable to an Employer for the outcome of the work of a Subcontractor.

In this case, a Contractor shall act as General Contractor in respect of an Employer, and as an Employer in respect of a Subcontractor.

Article 291. Term of Contract for Works

1. Unless otherwise provided by the Law, the parties shall determine the term of contract for works by agreement. A temporary or special time may be fixed, depending on the specific nature of work.

2. Unless otherwise provided by the law, the parties may agree upon the liability for breach of temporary or special time, but it may not exceed the size of liability for breach of the principal time.

Article 292. Price of Work

Unless otherwise provided by the law, the parties shall determine the amount of price for execution of work, method, procedure and time for payment by agreement.

Article 293. Quality of Work

Parties shall determine the quality of work by agreement.

Article 294. Obligation of Contractor

1. A contractor is obliged to execute properly their work, listed in the contract at the stipulated time-limit.

2. Unless otherwise provided by the contract, a Contractor shall execute such a work by its own property, instruments and machinery.

3. Where the property, provided by an Employer is not fit for the requirements of the work to be executed under the contract or is of a bad quality, then a Contractor shall be obliged to give notice thereof to an Employer in due time.

4. Where the instructions, given on methods of the execution of work by a Client might have a bad impact on the quality and outcome of such a work or there are any other reasons, not beyond a Contractors control, then a Contractor shall be obliged to give a notice thereof to Employer in due time.

5. A contractor shall be obliged to take measures for ensuring the security of property, provided by an Employer and be liable for its loss of or damage thereto.

Article 295. Right of an Employer due to Breach by a Contractor of Contract

1. Where a Contractor has breached the contract or there is any defect in the executed work, then a Client shall be entitled to make any of the following requirements:

1) to remedy or complete any work, which has been executed improperly or partially at a fixed time;

2) to reduce the amount of price of the work to the appropriate extent;

3) to compensate for the actual expenses of an Employer, incurred on the remedy of the defects in the work at its own costs.

2. Where a Contractor has committed a fundamental breach or has committee the other fundamental breach, then an Employer shall be entitled to demand to avoid a contract or to claim damages caused thereto.

Article 296. Time limit for Presentation of Claim on Responsibility of a Contractor

1. Where a Contractor has committed a breach of contract or there is any defect in the executed work, then an Employer shall present claims thereon within six months from the acceptance of work or those on the defect of which finding was not possible one year from the acceptance of work unless otherwise provided by the law or contract. The claims on such a defects in the construction and buildings may be presented within three years of the acceptance of work.

2. Where the law or contract provide for a warranty period, and the defect in the work has become apparent within such a period, then the time limit for presentation of claims shall commence to run from the date of the finding of a defect.

3. A limitation period shall commence to run from the date on which the time limit for presentation of claims, mentioned in this Article has expired.

Article 297. Obligation of Employer

1. An Employer is obliged to accept the work executed in conformity with the contract, and pay the appropriate price. Unless otherwise provided by the contract, the price for work shall be paid after the execution of all works.

2. If it is stipulated by the contract, an Employer shall be obliged to provide with a Contractor all or some part of property needed for the execution of work.

3. An Employer is obliged to substitute the property of a bad quality or unnecessary material provided thereby to a Contractor upon demand made by a Contractor in due time or to alter his instructions on the method of execution of work, and to remove the other obstacles in its control having a negative impact on the quality of work.

Article 298. Consequences, arising out of non-acceptance by an Employer of its executed work

1. Where an Employer has not accepted the executed work or the law or contract have not established the other procedure, a Contractor shall be entitled to sell such objects by auction or commission after the written notice not less than two within three months.

2. All payments due to a Contractor shall be deducted out of the proceeds of sale, and extra proceeds shall be transferred to an Employer. If it is impossible to transfer to an Employer, such proceeds shall be transferred into the state ownership.

3. Where the sale proceeds do not cover the payment due to a Contractor, then a Contractor shall be entitled to require an Employer to pay the difference.

4. Consequences, arising out of non-acceptance by an Employer of the work, executed by a Contractor shall be regulated by Sections 1, 2 and 3 of this Article hereof.

Article 299. Avoidance of Contract for Works Subject to Demand of an Employer

1. Where the completion of work is not possible due to commencement thereof by a Contractor in due time or delay therein, then an Employer shall be entitled to avoid a contract and claim damaged, caused thereto.

2. Where it has become apparent that a Contractor would be unable to execute the work, stipulated in the contract and could not have remedy the defect in the work within a fixed time or if it is provided by the contract, then an Employer may remedy any defect in such work at the cost of a Contractor without avoidance of the contract and engage another person in its continuance.

3. Subject to good reasons, an Employer is entitled to compensate for damages, caused to a Contractor due to avoidance of the contract, taking into consideration the quality of executed work as well as the price of the already executed work, and to avoid the contract at any stage prior to the completion of the work.

Article 300. Avoidance of Contract Subject to Demand of a Contractor

Where an Employer has not fulfilled the demand for the execution of work or that of a bad quality as well as for unreasonable instructions on the execution of work given in due time, then a Contractor shall be entitled to avoid a contract and claim damages, caused thereto.

Article 301. Regulation of Some Types of Contract for Works

1. Common rules, set forth in Article 289 – 300 of this Code shall be applied to certain types of contract for works.

2. A special regulation of some types of contract for work may be set forth by the law.


CHAPTER THIRTYEXECUTION OF CONSTRUCTION WORK

Article 302. Contract for Construction Works

1. A contractor shall undertake to construct buildings and execute a construction work in conformity with the appropriate drawings by its own property or by that of an Employer, and to deliver them to an Employer at the time, stipulated in the contract, and an Employer shall undertake to make available the site and employment for a Contractor or to provide the drawings or to allocate the budget or to accept the executed work and to pay the price thereof under the contract for construction works.

2. Unless otherwise provided by the law, the contract shall provide for whether which party would be liable for the supply of material, machinery and drawings.

3. Unless otherwise provided by the law, parties shall define the price for execution of work, method and term of and procedure for payment by agreement.

4. Where the building under construction has been destructed or has been damaged due to circumstances of extraordinary or superforce character prior to the time for its acceptance or in the absence of another provision in the contract, then an Employer shall be obliged to pay the price for executed and reconstructed work.

5. If there’s need for suspension of work subject to its further continuance due to circumstances not beyond the parties control, an Employer shall pay to a Contractor the price for the work, execute prior to its suspension and expenses, arising in connection with the suspension.

Article 303. Inspection of Execution of Construction Work

1. Unless otherwise provided by the law or contract an Employer shall conduct the inspection and supervise over the conformity of the currently execute work with the contract and drawings in respect of time, volume, budget and quality.

2. Upon completion of certain part of construction or that of certain type of construction work, a Contractor is obliged to make deeds, defining the works by an Employer, need for the following work, and deliver them to an Employer.


CHAPTER THIRTYONEEXECUTION OF WORK OF PROJECT

Article 304. Contract for works of project

1. A Contractor shall undertake to prepare project documents upon order of an Employer, and an Employer shall undertake to accept them and pay the price under the contract for works of project.

2. Where any defect becomes apparent in the course of the acceptance and implementation of project, then a contractor shall be obliged to reprepare it at its own cost, and compensate for damages caused to an employer due to the defect in the project in case of absence of any other responsibility under the law or contract.

3. An employer is obliged to provide a contractor with information on project objective and other particulars, and in case of non-performaance thereof a contractor is entitled to avoid a contractor and claim damages caused thereto.


CHAPTER THIRTYTWOEXECUTION OF RESEARCH, TESTING AND CONSTRUCTIVE WORK

Article 305. Contractor for research, testing and constructive works

1. A contractor shall undertake to conduct a research work, stipulated in the order, or to draw documents of new production design or to create a new production technology or other new articles and to conduct testing, and an employer shall undertake to accept the work outcome and pay the price under the contract for research, testing and constructive works.

2. A contractor to be concluded with the contractor may cover all or certain stages of research, testing and constructive works.

3. Where the impossibility of the outcome, stipulated in the contract becomes of research, testing and constructive works, then an employer shall be obliged to pay to a contractor the reasonable price of work, executed up to this period and expenses incurred by the latter.

4. Where a contractor has created an intellectual value relating to the copyright in the course of the execution of research, testing and constructive works, then a contractor shall not enjoy any right in respect of personnel right of author relating to such a work.


CHAPTER THIRTYTHREEEXECUTION OF CREATIVE WORK

Article 306. Contractor for creative works

1. A contractor shall undertake to create and transfer type and form of scientific, technical, artistic and literary works at the time, fixed by an order, and an employer shall undertake to accept such works and pay the reasonable price or fees under the contract for creative works.

2. Unless otherwise provided by the law or contract, the provisions of Sections 2, 3 of Article 304 and Sections 2, 3 and 4 of Article 305 of this Code shall also be applied to the contract for creative works.

CHAPTER FOURTYLABOR

Article 307. Labor Contract

1. A citizen may conclude a labor contract with legal persons and other citizens.

2. The procedure on conclusion of and terms of labor contract shall be determined by the law.

3. Unless otherwise provided by the law, the common principles of this Code shall be applied to a labor contract.


CHAPTER THIRTYFIVEEMPLOYMENT

Article 308. Employment Contract

An employment undertake to work with the use of his /her own high knowledge and specific capacity for a certain period, and an employer shall undertake to pay thereby under an employment contract.

Article 309. Term of Employment Contract

1. Unless otherwise provided by the law, the parties shall determine the term of an employment contract by agreement.

2. An interim time may be fixed depending on the specific nature of work.

3. Unless otherwise provided by the law, the parties shall define the scope of liability, arising from the default in interim time, and however, it may not exceed the scope of liability arising from the default in that of employment contract in question.

Article 310. Remuneration of Employment Contract

1. Unless otherwise provided by the law, the parties shall determine the amount of remuneration, method, procedure and term of payment by agreement.

2. Unless otherwise provided by the law, the parties may define other rights and obligations, relating to the performance of duties in their contract.

Article 311. Obligation of Employee

1. An employee shall have the following obligations:

1) to perform personally the work, stipulated in the contract, and not to engage the third party in the performance of his/her work;

2) not to perform to the other person the related or similar obligations to his/her principal obligation due thereby without the consent of an employer during the duration of contract;

3) to perform to the other person the relating to those, stipulated in the contract.

2. In case of breach by an Employee of his/her obligation, set forth in Section 1(1) of this Article, an employer shall be entitled to avoid a contract and claim damages caused thereto or to avoid a contract, and claim damages and fine, stipulated in the contract in case thereby of his/her obligation set forth in Section 2 and 3 (1) hereof.

Article 312. Obligation of Employer

1. An employer shall have the following obligations:

1) to pay the remuneration, stipulated on the contract;

2) render a financial assistance if the contract provides for so;

3) to recover damages, caused to an employee due to his/her death in the course thereby of dischargement of duties under the contract or illness due to professional accident unless otherwise provided by the law or contract.

2. Unless otherwise provided by the law or contract an employer shall not be entitled its right of claim of the performance to the third party without the consent of an employee.

3. Where an employee has not discharged his/her duties under the law or contract, then an employer shall be entitled to claim the damages and expensed incurred thereby or to avoid the contract and claim the damage and expenses incurred thereby.

SUBPART IV

CONTRACTUAL LIABILITY CONNEXTED TO RENDERING OF ASSISTANCE


CHAPTER THIRTYSIXCARRIAGE

Article 313. Contract for Carriage

1. The carrier shall undertake to transport the cargo entrusted by the shipper thereto to an agreed place of destination and hand over it to an authorized person, and the shipper shall undertake to pay a fixed price under the contract for carriage.

2. The carrier shall undertake to transport the or in case of entrustment by the passenger of his/her luggage thereto, to transport it to an agreed place and hand over it to an authorized person , and the passenger shall undertake to pay the price for transportation under the contract for carriage of passengers.

3. The conditions of carriage of cargo, passengers and luggage , and responsibilities of parties for carriage shall be determined by the law or rules of special kind of carriage inconsistent therewith and other rules, enacted under the prescribed procedure.

4. Unless otherwise provided by the law, the carrier shall provide information on the carriage, and the shipper shall provide that on the cargo and luggage concurrently.

Article 314. Form of Contract for Carriage

A contract for carriage shall have the form, specified in Article 39 of this Code.

Article 315. Price for Transportation

1. Parties shall determine the price for transportation by agreement.

2. The carrier may have the right to lien of cargo entrusted by the shipper for its carriage by the former as a security of price for transportation and other charges.

Article 316. Time for Carriage and Responsibility for its Breach

1. Unless otherwise provided by the law, the shipper shall be obliged to perform its obligation with the time, stipulated in the contract.

2. In case of breach of time, the shipper shall bear the responsibilities, provided for by the law or contract.

3. The shipper shall be exempted from its responsibility if the delay therein was not due to its fault.

4. Subject to breach of route or contract, the shipper shall bear the responsibility therefor.

Article 317. Liability for Damage to Life, Health and Property of Passengers

The liability of carrier for damage to the life, health and property of passengers shall be determined by the rules governing the obligation for damage to the life, health and property of the others.

Article 318. Liability for Damage and Loss of Cargo and Luggage

Unless otherwise provided by the law, the shipper shall be entitled to claim the twofold price of cargo and luggage received by the carrier for its carriage in case of their loss and missing part, or to compensate for the price of damaged cargo and luggage in case of cause of damage thereto.

Article 319. Filing of Claim and Action on Carriage

1. The shipper shall file a claim to the carrier prior to the institution thereby of action ion carriage to the court.

2. A claim shall be filed within the six months from the date of accrue of right thereto.

Where the time is payable subject to the law or contract, the claim thereon shall be filed within forty five days.

3. Upon receipt of claim, the shipper shall send to the carrier its explanation to satisfaction or refusal thereof within three months. But, it is mandatory to send the explanation to the claim in respect of carriage being performed by several operations under one single document within six months or to the claim in respect payment of fine within forty five days.

4. Where the claim has been refused or the explanation has not been given with the time, mentioned in this Article , then the shipper shall bring an action to the court within one year from the date of receipt by the shipper of explanation or what expiry of the time-limit for claim.

5. The provisions of this Article shall be applied to claims and actions in respect of carriage to be filled by the carrier to the shipper, consignee and passengers.

Article 320. Contract of Carriage Arrangement

1. When a constant carriage is necessary, the contract or carriage arrangement may be concluded between the carrier and shipper for an indefinite or definite period.

2. A contract of carriage arrangement shall contain the time for availability of transport vehicles and handing over of cargo, volume of cargo and other terms as well as the other terms and condition of carriage arrangement, not provided for in the ruled and regulations of certain kind of carriage.

3. The provisions of Articles of 314-319 of this Code shall be also applied to a contract of carriage arrangement.


CHAPTER THIRTYSEVENAGENCY RELATIONS

Article 321. Contract of Agency

1. The agent shall undertake to do certain acts in the name of and at the cost of the Principal, and the Principal shall undertake to pay the price unless otherwise provided by the law or contract under a contract of agency.

2. Unless otherwise provided by the law or contract, the agent shall be obliged personally to perform the command.

The principal is entitled to revoke the command and the agent is entitled o refuse the command at any time. A contract which has restricted this right shall be void.

3. When the principal has deprived at the opportunity for ensurance of his own interests otherwise, then the agent which has refused the command shall be obliged to compensate for the damages caused to the principal due to such a refusal.

Article 322. Obligation of Agent

1. An agent is obliged to perform the command under the instruction of the Principal.

If there has been an urgent need to alter the instruction, given by the principal to the benefit of the latter’s interests, and it has not been possible to give notice thereon in advance or the approvals thereof has not been come in due time irrespective of the notice thereon, then the agent shall be entitled to alter such instruction.

2. The agent is obliged to record the process of work, being executed upon the demand by the principal and to restitute to the principal all of the things received in connextion with the performance of command without undue delay.

Article 323. Obligation of principal

The principal is obliged to accept the performance of command given thereby. Unless otherwise provided by the contract, it also shall be mandatory to provide the agent with all of things needed for the performance of command, and compensate to the agent for reasonable expenses incurred due to the performance.

Article 324. Alteration of Command

If the agent has altered his command in the course of its non-full performance, then it shall compensate for the damages caused to the agent and be obliged to recover the cost of performance property to its extent in case of agreement thereon.

Article 325. Refusal by Agent of Performance of Command

Where the agent has refused to perform a due command, then he shall be obliged to restitute to the principal all of things which he has received in connextion with performance thereof in proportion to the non-performance.

Article 326. Death of Agent and Liquidation of Legal Person

1. Where the citizen who is an agent has deceased, then his/her heir shall be obliged to notify to the principal about the termination of contract, and take measures for the protection of the latter’s property.

2. Where the legal person which is an agent has been liquidated, then the liquidation commission or person in charge of liquidation matters shall be obliged to give notice thereon to the principal and take measures for the protection of the latter’s property.

Article 327. Transfer of Command to Another Person

1. Where an engagement of the other party in the performance of command secures the interests of the principal subject to contract and authority thereon, given by the principal or due to occurrence of the impossibility for personnel performance of the command, then the agent may transfer the command to the other party ( subagent) for its performance.

2. The agent which has transferred all or part of command to subagent is obliged to give notice thereon to the principal with undue delay, and to provide the principal with information on a subagent.

3. The agent shall be liable for the non-performance or improper performance of command due to its selection of a subagent which is unable to act in this capacity.

4. Where the agent has violated the provisions 1 and 2 of this Article, then it shall be also liable for the performance of obligation due by a subagent like its own obligation.

5. the principal is entitled to substitute an subagent selected by the agent at any time.

Article 328. Termination of Contract of Agency

A contract of agency shall be terminated on the following grounds except those specified in Articles 195, and 197-201 of this Code;

1) alteration by the principal in its command;

2) refusal by the agent of performance of command;

3) deprivation by any of the parties of its full legal capacity or;

4) liquidation of legal person which is one of the parties.

Article 329. Performance of Other’s Obligation Without Command

1. If the actions of any person which has concluded a transaction to the benefit of the other person are ratified by such a person in future, then the latter shall be obliged to reimburse all the expenses, incurred on the conclusion of this transaction. In case of absence of such a ratification, the beneficiary shall bear the reasonable expense within the amount of profit earned by conclusion of such a transaction.

2. When it is not possible to notify in advance the owner or possessor about a real danger which might cause the damages to the others’ property, then the person who has prevented such a danger under such circumstance shall be entitled to claim his expenses and damages. The amount of this harm may not exceed that of damage which might have been caused.


CHAPTER THIRTYEIGHTBROKERAGE

Article 330. Brokerage Contract

The broker shall undertake to communicate the principal with a person who will conclude transactions to the former’s benefit under the authority given thereby, and the Principal shall undertake to pay the fees unless otherwise provided by the contract under a brokerage contract.

Article 331. Form of Brokerage contract

Unless otherwise provided by the law, Article 39 of this code shall be applied to the conclusion of a brokerage contract.

Article 332. Obligation of Broker

1. The Broker is obliged to agree upon the conclusion by the Principal of a contract with the third party and certify this action by a definite form.

Unless otherwise provided by the law , a form of such certification shall be determined by the contract. If the broker could not prove so, then it shall not be considered to have performed its obligation.

2. The broker is obliged not to disclose the confidentiality of information entrusted thereto by the principal or not to use a wrong information contrary to the latter’s interests, and in case of breach thereby of this obligation the principal shall be entitled to avoid a contract and claim damages caused thereto.

3. The broker shall act under the instruction given by the principal in respect of brokerage.

If this instruction violated the law or impedes the conduction of a brokerage, then the broker shall;; be entitled to avoid a contract and claim damages caused thereto. The broker shall not be responsible to the third party for such a wrong instruction.

4. Where the broker refuses to perform its obligation groundlessly, the principal shall be entitled to avoid a contract and refuse the payment of price.

5. The broker is not entitle to buy itself the property handed over thereto by the principal for its transfer to the third party under the contract.

In case of violation by the broker of this provision, such a property shall be restituted ( or its price if impossible ) to the principal or if the broker has earned a profit, then it shall be confiscated by the state.

6. The broker shall work only in the interests of the principal and may not act as a broker of the third party- counter partner at the same time.

In case of violation of this provision , the principal shall be entitled to avoid a contract and have compensate the damages caused thereto and the fees received by the broker from the third party shall be confiscated by the state.

7. Any other obligation except those mentioned in this Article may be stipulated in the contract.

Article 333. Obligation of Principal

1. The principal shall be obliged to provide the broker with information and other facilities urgently need for the performance of obligation by the latter, and in case of non-performance thereby of this obligation the principal shall be entitled to avoid a contract.

2. The principal shall pay the fees at a fixed time under the law or contract and in case of non-performance thereby of this obligation, the broker shall be entitled to claim damages caused thereto.

Article 334. Transfer of Brokerage to Another Person

The procedure set fourth in Article 187 of this Code shall be applied to transfer of brokerage to another person.


CHAPTER THIRTYNINECOMMISSION

Article 335. Contract of commission

1. The commission agent shall undertake to conclude one or several transactions in its own name and at the cost of and under the instruction of the principal, and the principal shall undertake to pay the commission fee under a contract of commission.

2. Where the contract of commission has not been implemented due to the principal, then the commission agent shall be entitled to get reasonable fees and claim a compensation of incurres expenses.

3. A contract of commission shall be concluded in writing.

Article 336. Performance by a Commission Agent of Command

1. The commission agent is obliged to perform the command under the restriction of the principal to the almost benefit for the latter.

2. Where the benefit for the principal is apparent or it is not possible to give thereto a notice in advance or a reply has not been received in due time, then the commission agent shall be entitled to alter the instruction of principal.

3. Where the transaction has been concluded on the better conditions than those of command or the contract does not provides otherwise, the parties shall share equally an earned profit.

Article 337. Obligation of Commission Agent, Pertaining to Property of the Principal

1. Where any defect in the quality of property is founded by an ordinary inspection at the moment of receipt by the Commission agent of the property, provided by the principal or provided to the principal to that effect, then the commission agent shall give to the principal notice thereon without undue delay.

2. Where any other person has caused damages to the property of the principal, the commission agent shall take measures for protecting the right of the principal or collect relevant documents thereon and give to the principal notice thereon without undue delay.

3. Where the commission agent has not performed its obligations, specified in Section 1 and 2 of this Article, the former shall compensate to the principal for the damages caused due thereto.

4. The commission agent shall be responsible to the principal if the former is unable to prove that the loss of or damage to the property of the principal was not due to its fault.

5. The commission agent which has not implemented the rules governing a mandatory insurance of the property in question or the instruction thereon given by the principal shall be responsible thereto to the principal.

Article 338. Obligation Due to Commission Agent when a Citizen- principal has Deceased or is Declared to have been deceased or is considered to be missing and to have fully deprived of his/her Legal Capacity, and a Legal Person is Winded up

When a citizen-principal has deceased or is declared to have been decease or is considered to be missing and to have fully deprived of his/her legal capacity, and a legal person to continue the performance of command until an appropriate instruction of the principal’s successor or its representative.

Article 339. Liability for Non-performance by a Third Party of its Obligation

1. Where the third party has not performed its obligation under the transaction concluded by the commission agent therewith with a view of performing its command, the commission agent shall be obliged to give to the principal notice thereon without undue delay or collect necessary documents and information and hand them over to it.

The principal which has received information shall be entitled to demand the commission agent to transfer thereto claims due to the third party under the above transactions.

2. When the commission agent gives its guaranty for the non-performance by a third party of obligation thereof, than the former shall be liable for such a liability.

Article 340. Ownership by a Principal of Things, Gained by A Commission Agent

1. The principal is entitled to own its property transferred thereby to the commission agent as well as any things gained by the commission agent by the principal’s expenditure.

2. The commission agent is entitled to pledge the object of a contract of commission as a remedy for payment due thereto.

Article 341. Acceptance by a Principal of Performance of Command

1. Upon performance of command the commission agent is obliged to report to the principal about its performance of command, and to transfer to the latter all the things gained thereby.

2. Where the principal demands to assign any rights arising from transactions concluded by the commission agent with a third party, then the commission agent shall be obliged to fulfill it.

In case of such assignment by the principal of rights, it shall be obliged also to accept any obligations due by the commission agent under the transaction.

3. The principal is obliged to notify the commission agent about a defect which has become apparent at the moment of acceptance of property transferred by the commission agent, without undue delay.

4. In case the principal does not ratify all or part of actions described in a report of the commission agent, then the former shall be obliged to give to the commission agent notice thereon within three months of from the date of its receipt. If the principal has not sent its proposal on a report or contract does not provide otherwise, then the former is considered to have accepted it.

Article 342. Fees and Expenses of Commission Agent

1. Upon performance of command the commission agent is entitled to demand the principal to pay the commission fees and expenses incurred thereby due to the performance of command.

The cost of preservation of the property of the principal shall be reimbursed to the commission agent if a contact provides so.

2. If the commission agent has given a guaranty of its enforcement of transaction concluded with a third party, then it shall be entitled to claim theses guaranty fees.

3. Parties shall determine the amount of commission fees and that of guaranty by the commission agent of a contract by agreement and in case of absence of such agreement, a court or arbitration body may do so upon request by any of them.

Article 343. Rejection by a Commission Agent of Performance of Command or Termination of Contract of Commission due to Impossibility for its Performance

1. Where the principal has breached a contract, the commission agent shall be entitled to reject the performance of command.

2. The commission agent shall give to the principal a written notice on its rejection of performance of command, and such a contract shall be terminated upon expiry of two weeks from the date of its receipt.

3. In case, the commission agent has rejected the performance of command, it shall be entitled to demand the principal to pay the commission fees and expenditure at the cost of performed demand.

4. Where the impossibility for performance of command is not due to the fault of commission agent, and the contract does not provide otherwise, the commission agent shall be obliged to compensate for the damages caused to the principal subject to deduction of commission fees and expenditure due to the performed part of command.


CHAPTER FOURTYDEPOSIT

Article 344. Contract for deposit

The depository shall undertake to preserve the property handed over by the depository or to return it to the depositor and to transfer it to an authorized person under contract for deposit.

Article 345. Form of Contract for Deposit

1. A contract for deposit shall be concluded in the from specified in Article 39 of this Code.

2. If the parties have dispute on the contract for deposit concluded contrary to the form specified by the law, they shall not lose their right to certification thereof by witnesses in the following cases:

1) property is handed over for its preservation under the circumstances of extraordinary or superforce character;

2) identification of property handed over for its deposit;

3) property is handed over to an automatic depository.

Article 346. Costs of Deposit

Unless otherwise provided by the law, the parties may agree upon on the payment of deposit of the property.

In this case, the amount of fees, payment procedure, form and term thereof shall be determined by the contract.

Article 347. Term of Contract for Deposit

1. A contract for deposit may be concluded for an indefinite or definite period.

2. Parties are entitled to terminate a contract concluded for an indefinite period at any time, but any of them shall give to the other party a reasonable time e for the performance of its obligation.

Article 348. Depository: Obligation thereof

1. The following persons may be a depository:

1) citizen and legal person solely engaged in the deposit activities;

2) citizen and legal person carrying out the deposit functions in addition to their main activities;

3) citizen who is liable for the deposit of other’s property under the contract.

2. Unless otherwise provided by the law, the depository shall have the following obligation.

1) to ensure the security of property under the deposit;

2) to return or transmit the property to an authorized person upon demand of the depositor.

3. The person mentioned in Section 1 of this Article is obliged to take all the measures needed for the ensurance of security of property received for its deposit.

4. The person mentioned in Section 2 and 3 of this Article shall be obliged to preserve the property received for its deposit free of charge on the same conditions as its own property or shall take all measures beyond its control for ensuring the security of property if deposit is due to consideration.

Article 349. Right of Depository

1. Unless otherwise provided by the law or contract, the depository shall enjoy the following rights:

1) to use the property under deposit as well as its fruit and younger;

2) to demand the payment of costs of deposit.

2. Unless otherwise provided by the law or contract, the depository shall be entitled to demand the depository to pay the cost of deposit.

Article 350. Obligation of Deposit

The deposit shall have the following obligations:

1) to take back the property under deposit at a fixed time;

2) to pay the fees to the depository if it is provided by the law or contract;

3) to reimburse to the depository the reasonable expenses incurred due to deposit;

4) to notify to the depository about the specific nature of property under deposit, and terms and conditions on its deposit;

5) to transfer its property as the stipulated time-limit if it is agreed to do so after certain time from the conclusion of contract.

Article 351. Right of Depositor

The depositor is entitled to claim restitution of its property under deposit at any time not depending on the term of contract for deposit. In this case, the depository shall be given a reasonable time for the performance of its obligation.

Article 352. Responsibilities of Parties to Contract for Deposit

1. Where the e depository has lost or damaged the property under deposit or the contract does not provide otherwise, it shall compensate for the damages caused to the depositor.

2. The depositor shall be obliged to compensate for the damages caused to the depository due to the non-notification by the depositor any defect in the quality to the depository which the former knew or ought to have know at the moment of transfer of property for the deposit or to the fact that any of has not know or could not have known this defect.

3. If it is agreed to pay a fine in case of delay in deposit or in transfer of the property for the deposit, then the defaulting party shall pay the fine stipulated in the contract.

4. Persons engaged in hotel, public housing, rest home and sanitarium business or in activities similar thereto shall be obliged to secure the safety of property in rooms thereof given to their visitors except for the damages caused to a visitor due to the non-performance of this obligation thereby.

Article 353. Grounds for Exemption of Parties to a Contract for Deposit from Responsibilities

The depository shall be exempted from responsibilities in the following cases.

1) person mentioned in Section 1 of Article 348 of this Code has proved that its loss of and damage to the property transferred by the depositor thereto was due to the circumstances of extraordinary and superforce character;

2) persons mentioned in Paragraphs 2 and 3 of Section 1 of Article 348 and Section 4 of Article 352 of this Code prove that the loss of and damage to the property transferred by the depository thereto were not due at their fault;

3) it has been proved that the loss of and damage to the property prior to the taking back by the depositor of its property transferred thereby for the deposit at the stipulated time limit were not due to intentional or negligent action of the depository.

Article 354. Consequences Arising From Non taking back of Property Under Deposit

1. Where the depositor has not taken back its property upon expiration of deposit period or the law and a contract do not provide otherwise, then the depository shall be entitled to sell such a property by auction or commission subject to not less than two written notices thereon within three months.

2. The depository shall deduct the fees, fine and expenses due thereto under the law or contract from the price of sold property or shall give to the depositor the excess part thereof and transfer it to the state ownership if impossible.

3. If a sale price is not sufficient to serve payments due to the depository, then it shall be entitled to demand the depositor to pay the difference.

Article 355. Other Grounds for Arising of deposit Liability

A deposit liability may arise in the following cases:

1) conclusion of contract of another type indicated in this chapter;

2) subject to other grounds stipulated by the law.

2. The provisions of this Chapter shall also be applied to the relations arising under Section 1 of this Article.


CHAPTER FOURTYONEMAINTENANCE

Article 356. Contract for Maintenance

1. The maintainer shall undertake to supply the maintanee with food, clothing and apartment or support or render a medical aid at his/her own cost or that of the maintaince, and shall bear the funeral expenses of the latter in case of his/her death, and the maintainee shall undertake to regularly pay an agreed sum of money during a maintenance period, and give the property to the maintainee under the contract for maintenance.

2. The mainteinee shall be a citizen who is unable to live independently due to his/her old age and health.

3. A contract for maintenance shall be concluded in writing and be subject to notarial certification. A contract which has not complied this requirement shall be void.

4. A local administrative organ shall supervise over the implementation of a contract for maintenance.

Article 357. Transfer of Obligation of Maintenance of Relatives

A citizen is entitled to conclude a contract with the third party in the name of his/her relative, and transfer his/her obligation of maintenance in the day of replacing an obligation of the maintenance by a material support of property under his/her ownership.

Article 358 Responsibility of Maintainer

1. In case the health of a maintainee is to worsened due to the improper performance by the maintainer of his/her obligation, then a local administrative organ shall be entitled to bring to the court an action for avoidance of contract in the name of a maintainee.

2. When a contract is avoided on this ground, the property and money or part thereof shall be restituted to the mainainee.

Article 359. Termination of Contract for Maintenance

1. Where the maintainee becomes to be able to live independently or dies, then a contract for maintenance shall be terminated.

2. Where the maintainer does not perform his/her obligation under the contract or becomes to be unable to perform his/her obligation in the future, then a contract for maintenance may be avoided at the initiative of any of the parties thereto.


CHAPTER FOURTYTWOINSURANCE

Article 360. Object of Insurance

1. An object of insurance shall be a property or an non-property interest which is not contrary to the law.

2. An insurance shall be made on the voluntary basis and may be subject to mandatory requirements as to its form.

3. The insurer shall be a legal person which has met the requirements, set forth in the law and has obtained a permission for its engagement in the insurance business from the competent authorities.

Article 361. Insurance Policy

1. The insurer shall undertake to compensate for all or part of damage caused to the insured or person which interests a contract is concluded in subject to occurrence of insurance events listed in the contract, and the insured shall undertake an insurance premium stipulated in the contract under an insurance policy.

2. In case, an insurance does not cover the total value of property, the damage shall be compensated for in proportion to its insured part unless otherwise provided by the law or contract.

3. When the price specified in an insurance policy is higher than an reasonable price of property covered by the insurance, then an insurance policy shall be void in respect of an excess part of the price of property in question.

4. Upon occurrence of risks, stipulated in an insurance policy, the insurer is obliged to compensate for the damage specified in the policy not depending on the monetary values given by the social insurance fund to an additional insured.

5. Unless otherwise provided by the la or contract, an insurance policy shall not come in effect until the payment of premium.

6. Rights and liabilities pertaining to the particularities of insurable interests may be specially determined by the law or contract.

7. An insurance policy shall be concluded in writing. A policy which has not complied with this requirement shall be void.

Article 362. Consequences Arising from the Occurrence of Risks

1. Upon occurrence of risks the insurer is obliged to compensate to the insured or additional insured for reasonable expenses incurred thereby with a view of reduction of the premium and amount of damage within the total amount of premium.

2. If it is provided by the law or contract, the insured may waive its insurable property rights and get the premium in full after the occurrence of risks.

3. A right of claim of beneficiary to a tort-feasor shall be assigned to the insurer in proportion to the amount of premium.


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B>SUBPART FIVECREDIT AND PAYMENT LIABILITY

CHAPTER FOURTYTHREE

PAYMENT

Article 363. Payment

1. A monetary payment to be made in cash between the legal person and citizen may be effected through a bank.

2. A non-cash payment with the participation of legal person shall be effected through a bank.

3. The payer shall effect payment out of saving account of bank account, and credit account.

4. Unless otherwise provided by the contract, it shall not be allowed to transfer a fund out of the payer’s account without its consent thereto.

This provision shall not apply to the banking operations by a court order.

5. A monetary payment shall be effected against presentation of the legal documents drawn within the sum of funds in the savings account, bank account and credit account of payer.

6. Banking operations shall be regulated by the law.


CHAPTER FOURTYFOURBANK SAVING

Article 364. Contract for Bank Savings

1. The bank shall undertake to deposit the money of client or redeliver it to depositor or authorized person an pay interest under the contract for bank savings.

2. A contract for savings shall state the term of deposit, interest rate and method of its calculation and responsibility of parties for non-performance of their obligation thereunder.

3. A contract for savings shall be made in writing.

Article 365. Term of Contract for Savings

1. A contract for savings shall be concluded for an indefinite or definite period.

2. If a contract for savings is concluded for an indefinite period, then the depository shall be obliged to redeliver to the depositor its money under deposit upon its request and pay an interest.

3. If a contract for savings is concluded for a definite period, the depository shall be obliged to redeliver the money and pay an interest at the first demand of depositor.

4. Where the depositor has not demanded a redelivery of its money under deposit upon expiration of time stipulated in the contract, then such a contract shall be considered to have been concluded for an indefinite period in future.

5. The depository shall modify a contract concluded foe a definite period, at its own initiative and shall not be entitled to avoid it prior to its termination.

6. Where the depository has not performed or has performed improperly its obligation mentioned in Section 2 and 3 of this Article, the Depositor shall be entitled to claim damages caused thereto or fine, stipulated in the contract

Article 366. Disposal of bank deposits

1. The depositor which places its money in a bank shall dispose such a money in accordance with the Law.

2. Unless otherwise provided by the Law or contract, the bank shall be entitled to use the money by putting it into circulation in its own name, but shall be obliged to ensure a guaranty by the Depositor of disposal of its money.

Article 367. Obligation Of Depository ( Bank)

1. The Bank is obliged to open an account in the name of Depositor and deposit the money, and to transfer funds out of this account by an order of the depositor.

2. Unless otherwise provided by the Law, the Bank shall be obliged to keep the secret of account of the depositor and not to disclose information relating to the transfer of funds thereby. The depositor is not entitled to control or interfere in and impete the disposal by the depository of its money.

3. Where the depository has not performed its obligation mentioned in Sections 1 and 2 of this Article, the depositor shall be entitled to avoid a contract and claim damages caused thereto.


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a name=”ch45″> CHAPTER FOURTYFIVELOAN

Article 368. Contract For Loan

1. The Bank shall undertake to transfer the sum of money under its ownership and possession, into ownership or into possession, use and disposal ( Article 88 of this Code ) of the borrower ( citizens, legal persons and the State ) for a definite period on the grounds and procedure set fourth in the Law, and the borrower shall undertake to return such a sum within the fixed time under the contract for loan.

2. A bank loan may have an interest or have no interest.

3. A contract for loan shall be made in writing. A contract which has not complied with this requirement shall be void.

4. An interest rate of loan shall be determined by the term of contract.

5. Where the borrower has not repaid the principal stipulated in Section 1 of this Article or the contract provides for the increase in an interest rate in this case, the rate of increased interest shall not exceed 20 percent of original interest.

6. If it is to remit the money to the borrower upon the expiry of certain time after conclusion of contract and the bank has not performed this obligation in due time, the borrower shall be entitled to claim remittance of such a sum.

7. Articles 180 and 190 of this Code shall not be applied to a contract for loan.

8. Commercial lending operations shall be governed by the Law.


SUBPART VIOTHER CONTRACTUAL LIABILITY

CHAPTER FOURTYSIX

COOPERATION

Article 368. Contract For Joint Actions

1. Parties shall undertake to act jointly with a view of profit-making and implementation of other objectives under the contract for joint actions.

2. A contract for joint actions shall be concluded in writing.

3. Particulars of certain type of contract for joint actions may be defined by the Law.

Article 370. Joint Actions

Unless otherwise provided by the Law, the parties shall carry out joint actions by a mutual agreement.

In case the contract provides that any of the participants will direct the joint actions, then such a person shall exercise the management of these actions. Such a management shall be based on the power of attorney issued by the parties to contract thereto.

Article 371. Common Property Of Parties To Contract For Joint Actions

1. The money and other property contributed by the parties for joint actions as well as the property which has accrued or has been acquired by joint actions shall constitute their common or joint property.

2. The property allocated by legal persons for joint actions may be transferred to the agency authorized to dispose it under the contract.

3. If there is no fund to serve the debts not relating to the joint actions of the party to contract, the payment may be imposed on the party of common property due to such a party under the prescribed procedure.

4. The procedure for the disposition of common property shall be determined by the contract.


CHAPTER FOURTYSEVENCOMPETITION

Article 373. Announcement Of Competition

1. A citizen or legal person which has made a public announcement to grant reward or right for securing the performance of certain work shall undertake to grant such reward or right to a person which has won the competition in question.

2. The terms of competition shall indicate the type of work time for its performance, conditions for grant of certain right, number of reward, procedure and time for awarding work and project. The terms of competition may contain any other items except the above.

Article 374. Alteration In Terms Of Competition

1. If it is urgently required to alter the terms of competition which already been announced not due to reasons beyond somebody’s control, then the work in question may be altered prior to completion of its performance.

2. If the requirements of work which is an object of competition need to be altered substantially, then the time for its complete performance shall be extended due thereto.

3. The alteration in terms of competition shall be made public under the same procedure as the competition itself. If they were not made public, then the terms of competition shall not be considered to have been altered.

4. The person which has announced the competition is not entitled to revoke its proposal after receipt thereby of assent of a competitor to its participation therein or relevant materials. In case of such revocation, the winner shall be entitled to demand a reward.

5. Where the person which has announced the competition has violated the procedure set forth in this Article, then it shall be obliged to compensate for damages caused to the competitors due thereto.

Article 375. Use of work awarded by competition

Where the work relating to copyright is created due to the announcement of competition and this work is awarded, then the person which announced the competition shall be entitled to use it according to the terms of competition. Unless otherwise provided by the terms of competition, the author of this work shall be entitled to get the fees and payment for utilization of its work.

Article 376. Return Of Work Submitted For Competition

Works which have not been awarded or have not been granted a right or which have been awarded or granted a right and is not eligible for its further use according to the terms shall be returned without undue delay upon of the competition.


Part V

Non-contractual liability <

H3>CHAPTER FOURTYEIGHT

Obligations for torts

Article 377 . Grounds for liability for damage

1. A person who caused the damage to the life, health, dignity, reputation, good will and property of the others, is obliged to fully recover such damage.

2. If a tort feasor proves that such a damage did not occur due to its own fault, it shall not be liable for such damage in other cases except those provided by the Law.

3. A person who caused damage to the other persons due to its statutory powers shall be excused from such liability in other cases those specially provided by the law.

4. If there is not a greater protection, a damage caused by self-defense to the others shall not be subject to compensation.

5. Where the needs for protection have caused damage to the others, a court may exonerate him/her fully or partially from liability, taking into consideration the circumstances as well as the amount of damage which may have been caused.

6. Subject to special provisions of the law, a damage caused by lawful actions to the other shall be compensated for.

7. Only a court shall determine the amount of damage.

Article 378. Liability for damage by legal entities

1. If an employee causes damage to the others in the course of discharge of his/her duty under a labor contract, then his/her employer – legal entity shall be liable for such damage.

2. Damage caused to the others due to the wrong decision or other form of the misconduct of management operation by the state and the administrative organs as well as its officers shall be subject to compensation under Article hereof unless otherwise provided by the law.

3. Damage caused to the others due to wrong performance of duties by the officers of the identification and investigation institutions, and the courts as well as the prosecution agencies shall be subject to compensation in conformity with the procedures prescribed by the law.

Article 379. Liability for Dangerous Things to the Surroundings

1. A holder of dangerous things to the surroundings is obliged to compensate for the damage caused thereby.

2. If a damage occurs due to the circumstances of extraordinary of superforce character and intentional action, inaction and negligence of the injured person, a holder of dangerous things to the surroundings shall be excused from liability.

Article 380. Liability for Damage Caused by Defective goods, works and services

1. If the goods or results of performed works cause the damage to life, health and property of the others due to their production, design , compounds and other defects, then the seller or manufacturer thereof are obliged to recover such a damage.

2. If the seller or manufacturer prove that damage was due to the violation of regulations on utilization and custody of goods ( works, services ) in question, then they shall be excused from liability.

Article 381. Liability for damage by minors

1. If the minors under fourteen years of age cause the damage, then their legal representative – parents and guardian shall be liable for such a damage.

2. If the minors cause the damage while they are under direct supervision of school’ kindergartens and health organizations, then these organizations shall be liable for such a damage.

Article 382. Liability for Damage by Persons Fully Deprived of Legal Capacity

If a person fully deprived of legal capacity due to insanity causes the damage to the other, then, his/her guardian or organization in charge of continuous supervision over him/her shall be liable for such a damage.

Article 383. Liability for Damage by Minors

1. Minors shall be liable themselves for the damage caused thereby to the others.

2. Where the income and wage earned by minors in the course of their employment under laws as well as certain property transferred by their legal representative at their disposal on discretion are not sufficient to cover the damage thereby to the others, then their parents and guardians shall be obliged to compensate for unpaid parts thereof.

Article 384. Liability for Damage by Persons Incapable of Understanding the Results of their Actions or of Administering Their own Affairs

If a citizen fully deprived of legal capacity causes the damage while he/she is incapable of understanding the results of his/her actions or of administering his/her own affairs, then he/she shall be liable for such a damage.

However, a person who has done so due to use of drugs and alcohol shall not be excused from liability.

Article 385. Joint Liability for Damage

If a damage is caused jointly, then there shall be a joint liability before the creditor.

Article 386. Recovery of Damages Caused to the Property

A person who caused the damage to the property of the others may recover such a damage by restoring it to its original state ( substitution of property of similar description, species and quality or remedy of defective property ) or compensate for due harm.

Article 387. Recovery of Damages to the Others Health

1. A person who caused the damage to the others’ health shall pay the wage and income of which the injured person has not got fully due to the deprivation of his/her ability to work as well as the all reasonable expense similar thereto needed for the restoration of his/her health.

2. Where the injured person has not any definite salary or wage and income at the time of cause of damage then he/she shall be entitled to claim the damages caused thereto due to the deprivation of his/her to work abilities calculated at the role not less than a low role of wages determined by the law.

Article 388. Recovery of Damages caused to Minors less than sixteen Years of Age

1. Where damage is caused to the health of the minors less than sixteen years of age who don’t have any salary and income, then a wrongdoer is obliged to compensate to such minors for all reasonable expense resulting out of that damage to the health under p.1 of Article 387 of this Code.

2. If a minor who has reached sixteen years of age and his/her health is not improved, then his/her parents and guardian may present to the court claims for payment of harm due to deprivation of his/her ability to work, calculated at the rate not less than a low rate of wages determined by Law.

3. If a minor not less than sixteen years of age was employed in a continuous job at the time of cause of damage thereto, than the damage due to deprivation of his/her work abilities shall be paid within the amount of wage which he/she has not got.

Article 389. Recovery of Damages Due to the Death of the Injured Person

1. If the injured person is deceased, then the reasonable expenses relating to his/her funeral as well as compensation for damage shall be payable.

2. The persons who are not able to work, or were descendants of the injured person and are entitled to his/her maintenance, or the children born after the death of such a person, and the parents as well as any of spouses of the his/her children, brothers, sisters, granddaughters and grandsons not less than eight years of age are entitled to payment of damages.

3. The amount of recovery shall be determined on the basis of average monthly wage and income of the descendent except portions due to persons who are able to work and not entitled to compensation of damages.

However, a compensation for death shall be deleted from the amount of recovery due to each survivors.

4. A compensation for death shall be payable within the following period:

1) in respect of infants or minors – till sixteen years of age thereby, in case of their study – till eighteen years of age thereby;

2) in respect of women more than fifty years of age and men more than sixty years of age – during their lifetime;

3) in respect of disabled citizens – during the deprivation period of their work abilities;

4) in respect of parents and any of spouses of the descendent who are not employed and bring up his/her children, brothers, sisters, granddaughters and grandsons not less than eight years of age – till attainment by such child of his/her eight years of age.

Article 390. Alteration to the Amount of Compensation for Damage

1. In case, the work abilities of citizen deprived partially due to cause of damage to his/her health are diminished in future or the amount of his/her allowance is reduced, then such citizen may require the debtor to increase the amount of compensation to the appropriate extent.

2. In case, the work abilities of the injured person are improved or the amount of his/her wage and allowance is increased then the debtor shall be entitled to require to reduce the amount of compensation for damages.

Article 391. Payment for Death or Deprivation of Work Abilities of the Injured Person

1. A payment for death or deprivation of work abilities of the injured person shall be effected each month.

2. Where the operations of legal entity which is obliged to pay damages are terminated in the absence of its successor, then the required sum needed for the payment by such legal entity of compensation due to the death or deprivation of work abilities by the injured person to the authorized persons in due time shall be collected in the order and be transferred to the social insurance institutions under p.4 of Article 31 of this Code.

3. Upon request by the payees, a court may alter the sum of payment, taking into consideration the changes in the currency rate.

Article 392. Recovery of Non-Material Damage

1. Where a person who has disseminated information causing the damage to the others’ dignity, reputation and goodwill is unable to prove that his/her behavior does conform the reality, then this person shall be obliged to recover such damage by money or otherwise irrespective of recovery of a material harm.

2. A court shall determine the amount of recovery of non-material damage calculated in money within the amount of claims by the plaintiff taking into consideration the means of information dissemination, scope of its dissemination and the moral consequences of injured person and other things, and shall instruct the wrongdoer to justify itself in the manner similar to the means of information dissemination and otherwise.

Article 393. Claim for Repayment of Damages

1. Social insurance institutions and public and other organizations which effected payments relating to the damage to life and health of the others are entitled to claim for repayment of their compensations and aids from the guilty legal entities and citizens.

2. Legal entities and citizen which are liable for damages shall be obliged to recovery damages due to the appropriate organizations in conformity with the requirements of their claim for repayment.

3. In case, the amount of damage is reduced on the grounds specified in Article 390 of this Code, then the amount of liability to be imposed subject to requirements of claim for repayment shall also be reduced.

Article 394. Consideration of Fault of the Injured Person and Proprieties of Wrongdoer

1. If any omissions and inaction of the injured person adversely has affected cause of damage or increase in the amount of such damages, then the amount of due compensation may be reduced taking into consideration the fault of parties.

2. If the determination of the amount of compensation for damages except those caused by an intentional crime may reduce it taking into consideration the proprieties of wrongdoer.


CHAPTER FOURTYNINE

Recovery of Damages Caused Due to Rescuing the Others’ Property

Article 395. Recovery of Damages Caused Due to Rescuing the Others’ Property

If a damage is caused to the citizen who rescued the others’ property from any dangers which may happen, then he/she shall be entitled to demand the owner of such property or persons entitled to possession, use and disposal thereof. ( Article 88 of this Code ) to compensate thereto for such damages.


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H3>CHAPTER FIFTY

Obligations for Groundless Acquirement and Possession of Property

Article 396. Obligation to Make Restitutional Groundlessly Acquired and Possessed Property

1. A person who acquired the other’s property without any grounds determined by law or transactions is obliged to make its restitution to its owner or persons entitled to its possession, use and disposal ( Article 88 of this Code ) thereof or to pay its price at the rate prevailing at the moment of claim for restitution of property if impossible.

2. In case, any ground for acquirement of property becomes invalid in future, then the obligation specified in p.1 of this Article shall also arise.

3. A person who has acquired unjustly the others’ property is obliged to make restitution to the owner or persons entitled to its possession, use, disposal of any income, benefits and fruit which it derived or ought to have derived from such a property from the moment of such acquirement of the property, and person who has acquired the others’ property groundly is obliged to do so from the moment it knew or ought to have known of such groundless acquirement or to pay its price if impossible.

4. The provisions of this Article shall also apply to use of the others’ property without grounds determined by the law or transaction.

5. In case, the owner or persons entitled to possession, use and disposal of groundlessly acquired property are unknown or they have lost or refused from their right to possession, use and disposal of groundlessly acquired property, then such property shall become a state income.

Article 397. Exception for Groundless Acquirement of Property

1. When one party transferred the property to another party for performance of its own obligations after the expiry of limitation period while he/she could not know or could not have known of such expiry, then this citizen shall not be entitled to claim for its restitution on the basis of its groundless acquirement.

2. If there are not errors in accounts and unjust manipulation of payees, then the excess payment and fees for intellectual creations shall not be subject to claim for groundless acquirement.

3. Conditions and terms on repayment of excess wage, pension, and allowance shall be determined by the respective laws regulating these matters.

If these matters are not specified in the respective laws, then the provisions of p.2 of this Article shall also be applicable.


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a name=”P6″>

PART SIX

Right of Inheritance

CHAPTER FIFTYONE

General Provisions

Article 398. Grounds for Inheritance

1. Property and rights of the person to be inherited are subject to succession.

2. Inheritance is subject to statute and testament.

3. A statutory inheritance order may be changed only by testament of the person to be inherited.

4. Only citizens who are alive at the death of the person to be inherited as well as child born after the death thereof may be heirs.

5. Where there’s no heirs or they refused inheritance or all of heirs renounced their right of inheritance, then the inheritable property of the deceased person shall be transferred to the State ownership. ( like a property without ownership )

6. If some part of the property of the person to be inherited is subject to testament or there’s no heirs to inherit the remaining part, then it also shall be transferred to the State ownership like mislaid property.

Article 399. Inheritance of Intellectual Values

1. A right of inheritance of intellectual values shall be recognized only as a property right. This right may be acquired by law or testament.

2. A right inheritance of intellectual values shall be valid for a period of 50 years.

3. Any other right except those specified in p.1 of this Article shall be transferred to the State on the grounds subject to the law.

Article 400. Renunciation Of Right of Inheritance

1. A person who killed intentionally the person to be inherited or heirs , and an enforceable court order proved that the former intentionally committed other grave crime leading to the death of any of them, then such person shall renounce his/her right to succession.

2. A person who is under preliminary investigation due to crimes stipulated in Section 1 of this Article may not be entitled to inheritance until enforcement of court order or dissatisfaction of the case, and but the measures for protection of the protection of the part of inheritable due thereto shall be taken under Article 422of this Code.

Article 401. Date For Opening Inheritance

The date for opening inheritance shall be a date of the death of the person to be inherited as well as that stipulated in Article 19 hereof if a citizens is declared to have been deceased.

Article 402. Place of Opening Inheritance

The place of inheritance shall be the last place of residence of the person to be inherited or that where all or main part of the inheritable property is situated if the former is unknown.


CHAPTER FIFTYTWO

Statutory Inheritance

Article 403. Statutory Heirs

The following persons shall be statutory heirs and be entitled to equal part of inheritable property:

1) spouse, sons, daughters, adopted children, heirs of the body, parents and foster parents who were under the maintenance of the descendent and are not able to work;

2) Parents and foster parents, grandfathers, grandmothers, foster grandfathers, foster grandmothers who are able to work, as well as brothers and sisters of descendent if there are no heirs listed in paragraph 1 of this Section or such heirs refused their inheritance or renounced their right to succession;

3) Grandsons, granddaughters and their descendants of the person to be inherited whom statutory parents are deceased at the date for opening inheritance are entitled to equal part in inheritable property due to their parents to be included in statutory inheritance order.

4) The citizen who was under maintenance of the person to be inherited not less than one year prior to the latters’ death, and is unable to work except persons listed in Section 1, 2 of this Article shall considered as a statutory heir. If there’s no another heir, then such person shall be entitled to equal part in inheritance therewith.

4. Household effects shall be transferred to a statutory heir who has been living with the person to be inherited at the time of the latter’s death irrespective of inheritance order and nature of the part of inheritable property.

5. The spouses’ own property is subject to succession under Sections 1, 2 and 3 of this Article.

6. Only persons listed in Paragraph 1, Section 1 of this Article are entitled to inherit the part of common property due to family members in kind or in the form of monies.

Article 404. Inheritance Of Remaining Property Not Covered By Testament

Should some part of the property be transferred by testament to heirs, then the remainder shall be transferred to statutory heirs.


CHAPTER FIFTYTHREE

Inheritance by Testament

Article 405. Contents of Testament

1. Each citizen may at his/her own discretion bequeath all or part of his/her property and rights to one or several citizens who are or are not statutory heirs, or to the State and legal entities.

2. A testator who bequeaths his/her property to the State or legal entities may indicate the utilization thereof.

3. A testator may deprive one or several or all of statutory heirs of their inheritance right by his/her testament on the way of indicating the formers’ name therein .

The provisions of Section 4 of this Article and Section 2 of Article 406 shall not be applied to the person who has lost his/her right of inheritance in this way.

4. In case, the testator has bequeathed all of his/her property to another person children of the person to be inherited who are minors or are not able to work, heirs of the body, spouse who was under his/her maintenance and is not able to work, parents and foster parents and other statutory heirs shall be entitled to not less than two third of the property inheritable thereto subject to law. In the determination of size of this inheritable part the price of ordinary household effects and bank accounts of the person to be included shall be included.

Article 406. Change in Appointment of Heirs

Should a heir indicated in testament is deceased or refused inheritance prior to opening of inheritance, then the testator may appoint another heir.

Article 407 . Form of Testament

1. A testament should be made in writing and indicate a date and place thereof, and be attested by a notary office.

If there is no notary office at the place of testament, then such testament shall be subject to certification by the Governor of bag and soum.

2. The following forms of testament are considered as an attested copy of notary office.

1) military testament of soldier by a commander of his army units and detachments;

2) testament of citizen who is serving a term of imprisonment or working for the prison, certified by a prison governor.

3. A testament which does not meet the requirements, stipulated in Section 1, 2 of this Article shall be invalid.

Article 408. Obligations of Heirs by Testament

1. A testator is entitled to impose on heirs any obligations in favor of a statutory heirs or any other person or of any public benefits.

2. A testamentary heir shall fulfill due obligations only within the amount of the property inherited thereto.

3. If a testamentary heirs is deceased or refused inheritance, then the obligation imposed thereon shall be transferred to the other heirs who have accepted the inheritance in question.

Article 409. Changes and Cancellation of Testament

1. A testator is entitled to change and cancel its own testament at any time.

2. A testament shall be changed or canceled by the new testament or document of cancellation thereof. The new testament or document of cancellation of testament are subject to notary certification under Article 407 of this Code

Article 410. Execution of Testament

1. A heir who has been appointed by testament shall undertake to execute the testament itself.

2. A testator may appoint another citizen as an executor of testament.

3. An executor of testament shall prove his/her promise to execute obligations imposed thereon by signing it or drawing up document thereof and attaching these documents to testament, and shall undertake to perform such a promise thereby.

4. An executor of testament is obliged to take all measures needed for execution of testament and is entitled to deduct his/her reasonable expenses on the execution of testament as well as on administration and protection of inherited property out of the inheritable property.

5. Upon execution an executor is obliged to report heirs thereon.


CHAPTER FIFTYFOUR

Acceptance and Refusal of Inheritance

Article 411. Acceptance of inheritance

1. An inheritance is subject to acceptance of the inheritable property.

2. A heir may not accept an inheritable property temporarily on any terms and conditions.

3. A property accepted by heirs is considered to be transferred to heirs at the date for the opening of inheritance.

Article 412. Procedures for Acceptance and Refusal of Inheritance

1. If a heir who has been living with the person to be inherited does not give a declaration on refusal of inheritance to a notary office or the Governor of bag or soum in the absence of a notary office within three months from the date for the opening of inheritance, then such inheritance shall be considered accepted thereby.

2. If any other heirs except those listed in Section 1 of this Article have possessed and administered an inherited property or submitted to a notary office or the Governor of bag or soum, applications for acceptance of inheritance and issue of certificate of inheritance right within one year from the date for the opening of inheritance, then such heirs shall be considered to have accepted this inheritance.

3. If an heir did not accept inheritance or did not give a declaration on acceptance within the period stipulated in Sections 1, 2 of this Article, then such heir shall be considered to have refused the inheritance.

4. A court may extend the date for acceptance of inheritance for good reasons. In case of such extension, a delayed heir is entitled to claim the part due to him/her or appropriate part of sale price of the property transferred to the other heirs or to the ownership of the State.

5. An heir is entitled to refuse inheritance by indicating any other citizen to be included into an inheritance rider or the State or any legal entities in favor of which he/she does so.

Article 413. Transfer of Right to Acceptance of an Inheritable Property

1. Should a heir be deceased without acceptance of inheritance after the opening of inheritance, then the part of inheritable property due thereto shall transfer to the former’s successor.

2. A right so transferred shall be exercised within the time limit for acceptance of inheritance under the common procedures or three months if the remaining time limit is less than three months at the moment of transfer of such a right.

Article 414. Acceptance by Heirs of Inheritance Property Prior to Arrival of Other Heirs

A heir may accept an inheritable property without awaiting for arrival of other heirs and is not entitled to sell or gift or pledge such property till expiry of one year period from the date for the opening of inheritance or issue of certificate of inheritance right. However, a heir is entitled to deduct the following expenses out of the inherited property:

1) expenses for maintenance of sick person to be inherited or funeral thereof;

2) expenses for maintenance of persons who was under custody of the person to be inherited or entitled to allowance from the person to be inherited;

3) expenses for wages and for satisfaction of other similar payment requirements;

4) expenses for the protection of the inherited property.

Article 415. Issue of Certificate of Inheritance Right

1. Heirs may submit an application for issue of certificate of inheritance right to a notary office at the place of inheritance or to the Governor of bag or soum in the absence of such office. The appropriate State organizations shall be issued a certificate of transfer of a mislaid property into the state ownership.

2. A certificate of inheritance right shall be issued to statutory heirs upon expiry of one year from the opening of inheritance. Where an application for issue of certificate is submitted or it is proved that there no other heirs except those who accepted the inherited property, then a certificate may be issued prior to expiry of one year from the opening of inheritance.

3. In case, there’s no person entitled to inherit listed in Section 4, Article 405 of this Code, then upon presentation of testament by a heir a certificate of inheritance right by testament shall be issued thereto within one year from the date for the opening of inheritance.

4. A certificate of transfer of a mislaid property into the State ownership shall be issued to the appropriate state organizations upon expiry of one year from the opening of inheritance.

Article 416. Distribution of Inherited Property

1. Upon agreement among all of heirs participated in the inheritance, the inherited property shall be distributed in parts due to each heir. A court shall decide disputes on such a distribution.

2. A part due to heir of the body is subject to special distribution. A representative of guardianship institution shall participate in the distribution of inheritable property in order to protect the interests of heir of the body.


CHAPTER FIFTYFIVE

Increase in the Amount of Inheritable Property

Article 417. Increase in Inheritable Property Due to Statutory Heir

1. If any of statutory heirs refused inheritance without appointment of another person or renounced its right of inheritance, then the part due thereto shall be subject to equal distribution by other statutory heirs.

2. In case of distribution of all the property of a testator by testament, if any of testamentary heirs refused inheritance without appointment of another person or renounced its inheritance right, then the part due thereto shall be subject to equal distribution by statutory heirs listed in Section 4 of Article 405 of this Code.

3. In case of distribution of some property of testator by testament, if any of testamentary heirs is excluded from an inheritable order on the grounds, mentioned in Section 2 of this Article, then a part thereto shall be subject to equal distribution by statutory heirs.

4. If there is no heirs entitled to acceptance of the due part of an inheritable property, it shall be transferred into the State ownership like a mislaid property.

Article 418. Consequences of change in Appointment of Testamentary Heir

In case of appointment by the person to be inherited of the other heir due to exclusion of testamentary heir on the grounds mentioned in Article 400 of this Code, then the provisions of Sections 2 and 3 of Article 417 of this Code shall not be applied.


CHAPTER FIFTYSIX

Liability of Heirs for Obligations of the Person to be Inherited

Article 419. Liability of Heir

A heir who accepted inheritance and state organizations which assigned the property under the procedure prescribed by this Charter, are liable for obligations undertaken by the person to be inherited only within the amount of the inherited property. If there are several heirs then each heirs shall be liable for such obligation only within the amount of its part of an inherited property.

Article 420. Presentation of Claims by Creditors of the Person to be Inherited

1. A creditor of the person to be inherited shall present its claims on binding obligations by the latter to heirs thereof or executor of testament or notary office or state organization which assigned the property within one year from the date for the opening of inheritance.

In case of such presentation of claim, an action may be brought to the court within one year from the date of acceptance of the explanation of the claim or date of expiry of the time limit for claims.


CHAPTER FIFTYSEVEN

Protection of Inheritable Property

Article 421. Procedure for Protection of Inheritable Property and Its Term

1. A notary office or Governor of bag or soum of the place of opening of inheritance in the absence of such office shall take measures for protecting the inheritable property for the interests of heirs, creditor of the person to be inherited and the state if necessary.

2. An inheritable property shall remain under protection till acceptance thereof by all of heirs or transfer thereof to the state ownership.

Article 422. Administration of inheritable Property

A local administrative organ shall appoint an administrator of inheritable property due to actions by creditors of the person to be inherited or to the other circumstances. Expenses relating to such an administration shall be deducted out of an inheritable property.


PART SEVEN

International Private Law

CHAPTER FIFTYEIGHT

Civil Law Capacities of Foreign Citizens, Stateless persons and Foreign Legal Entities, Application of Foreign Law and International treaty

Article 423. International Treaty and Agreement

Mongolia shall conclude international treaties on the basis of the general principles of the Civil Code of Mongolia. However, if a international treaty of Mongolia provides for other provision than those of the Civil Code, then such provisions of international treaty shall prevail.

Article 424. Grounds for Application of Foreign Law

A foreign law or internationally recognized usage which are not contrary to the Mongolian Law and International treaty of Mongolia may be applied in the civil law relations.

Article 425. Ascertaining Foreign Law

1. In the application of foreign law, the courts and arbitration bodies shall ascertain the content of rules in conformity with its official interpretation and practice thereof.

2. The court and arbitration bodies may approach the Ministry of Justice of Mongolia or other competent authorities in Mongolia or abroad for legal assistance and interpretations, and invite experts with a view of ascertaining the contents of rules of foreign law.

3. Parties are entitled to provide documents certifying the contents of appropriate rules of foreign law.

4. If the rules of foreign law are not ascertained due to appropriate measures taken under this Article, then the Mongolian Law shall be applied.

Article 426. Restriction on Application of Foreign Law

Should an application of foreign law contradict to the Mongolian Law and international treaty of Mongolia, then it shall not be applied. In this case, the Mongolian law shall be applied.

Article 427. Statute of Limitation

1. The statute of limitation shall be determined in conformity with the Mongolian Law and international treaty of Mongolia being applied in the regulation of relations in question.

2. The Mongolian law may define the exceptions for statute of limitation.

Article 428. Civil Law Capacity and Legal Capacity of Foreign Citizen and Stateless Persons

1. The foreign citizens and stateless persons shall have the similar civil law capacity to that of citizens of Mongolia. Their civil status may be restricted by the Mongolian law.

2. A legal capacity of foreign citizen shall be determined by the law of the State which such citizens are nationals.

3. A legal capacity of stateless persons shall be determined the law of the State where they have a permanent residence.

4. A legal capacity of foreign citizens regarding their contractual obligations and torts occurred on the territory of Mongolia shall be determined by the Mongolian law.

5. Deprivation of legal capacity or limitation of legal capacity of any persons on the territory of Mongolia shall be determined by the Mongolian law.

6. Declaration of any person to have been missing or to have deceased on the territory of Mongolia shall be determined by the Mongolian law.

Article 429. Legal Capacity of Foreign Legal Entities

1. The determination of a legal capacity of foreign legal entities under the law of the State which such entities are nationals shall be recognized by Mongolia.

2. A foreign legal entity entering into transactions may not refer to the restrictions which are not provided by the Mongolian law

Article 430. Reciprocal Restriction of Law Capacity of Citizen

In case of special restriction by a foreign state of the civil law capacity of citizens and legal entities of Mongolia, then the Government of Mongolia may establish an reciprocal restriction in respect of the civil law capacities of citizens and legal entities of such a State.

Article 431. Protection of Non Property and Personal Rights

In the protection of non-property and personal rights, the law of the State where the event and other circumstances justifying a claim have occurred or that where the plaintiff has its place of residence business shall be applied subject to choice thereby.

Article 431. Right of Ownership

A right of ownership of property shall be determined as follows:

1) right of ownership of property – by the law of the State where such a property is situated;

2) right of ownership of property subject to registration – by the law of the State where such a property was registered;

3) arising and termination of right of ownership of property – by the law of the State where the property in question is situated at the moment of the occurrence of events and other circumstances justifying such arising and termination of right of ownership unless otherwise provided by the Mongolian law.

4) acquisition and termination of right of ownership of the property which is a subject of the transactions – by the governing law of such a transaction unless otherwise agreed by the parties,

5) right of ownership of the property in route under the foreign trade transactions – by the law of the State from which such a property is dispatched unless otherwise agreed by the parties;

6) right of the owner who have filed a claim for the protection of its right of ownership – by the law of the State where such a property is situated or the law of the State where it is registered or the law of the State which court an action is brought to, subject to choice by an owner of any of them.

Article 433. Transactions and Authorization

1. A form of transaction shall be determined by the law of the State where such transaction was made.

2. Transactions which were made abroad and meet the requirements of the Mongolian Law may not be considered void due to contravention to the requirements as to form.

3. A form of transactions relating to the immovable property which is situated on the territory of Mongolia shall be determined by the Mongolian Law.

4. Determination of the place of making transactions shall be regulated by the Mongolian law.

5. Form and validity term of authorization shall be determined by the law of the State where such an authorization was issued.

If an authorization meets the requirements of the Mongolian law, then it may not be considered due to contravention to the requirements as to form.

Article 434. Rights and Responsibilities of Parties to Foreign Trade Transactions

1. Rights and obligations of parties to foreign trade transactions shall be determined by the law of the State, designated under such transactions or any future agreements made by parties thereafter.

2. If parties did not designate a governing law as provided for in Section 1 of this Article, then such a law shall be determined by the law of the State where the following parties have place of residence ( place of business) or carry out the main business activities:

1) in respect of contract for sale – by the law of seller;

2) in respect of contract for lease – by the law of lessor;

3) in respect of contract for deposit – by the law of depository;

4) in respect of contract for commission – by the law of commission agent;

5) in respect of contract of agency – by the law of commission agent;

6) in respect of contract for carriage – by the law of carrier;

7) in respect of insurance contract – by the law of insured;

8) in respect of contract for loan – by the law of lender;

9) in respect of contract for gift – by the law of donor;

10) in respect of contract of suretyship – by the law of surety;

11) in respect of contract for pledge – by the law of pledger.

3. Contracts for production cooperation or specialization or cooperation or for civil engineering and installment work, and other works shall be governed the law of the State where such activities are carried out or outcome of such contracts is occurring unless otherwise agreed by the parties thereto.

4. A joint venture agreement involving foreign legal entities and citizens shall be governed the law of the State where such a joint venture enterprise has its place of business.

5. A contract concluded as result of security transactions and auction sales shall be governed by the law of the state where such security transactions were made or auctions sales were conducted.

6. Rights and obligations of parties to contracts not provided for in Sections 1, 2, 3 and 4 of this Article shall be determined by the law of the State where the party performing the main obligations under such contracts has its place of residence ( place of business ) or carries out its main business activities.

7. Unless otherwise agreed by the parties, in respect of acceptance of performance, reference shall be made to the law of the State where such an acceptance is made.

Article 435. Obligations for Torts

1. Rights and obligations of parties arising out of torts thereby shall be determined by the law of the State where the events and other circumstances justifying claims for recovery of such damages have occurred.

2. If the parties to obligations for torts which events have occurred abroad are citizens or legal entities of Mongolia, then their rights and obligations shall be determined by the Mongolian Law.

Article 436. Governing law for Inheritance

1. The inheritance relations shall be regulated by the law of the State where the person to be inherited had his/her last permanent place of residence.

2. The legal capacity of the person to be inherited, form of testament, making of testament and its change shall be determined by the law of the State where the person to be inherited had his/her place permanent residence at the moment of making such testament or its change. However, if the making of testament or its change are fit for the requirements of the law of the place of its making and those of the Mongolian law, then such testament and its change shall not be considered invalid only on the grounds of contravention to the requirements as to form.

3. Inheritance of an immovable property situated in Mongolia is subject only to Mongolian law. In the testament of an immovable property situated in Mongolia, the making of testament and its form as well as its change shall be governed by the Mongolian law.

Chairman of State Great Hural N. Bagabandi


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