January 18, 2021

Methods for ensuring the fulfillment of an obligation according to the legislation of the Republic of Kazakhstan

  1. Pledge
  2. Guarantee and surety
  3. Deposit
  4. Hold
  5. Guarantee fee
  6. Penalty
  7. Insurance of liability under the contract as a way to ensure the fulfillment of obligations

According to the legislation of the Republic of Kazakhstan, the fulfillment of an obligation can be secured by a forfeit, a pledge, retention of the debtor’s property, a surety, a guarantee, a deposit, a guarantee contribution, and in other ways provided for by legislation or an agreement.

1. Pledge

A pledge is a method of securing the fulfillment of an obligation, by virtue of which the creditor (pledgee) has the right, in the event of the debtor’s failure to fulfill the obligation secured by the pledge, to receive satisfaction from the value of the pledged property primarily to other creditors of the person.

Types of pledge

  1. Mortgage is a type of pledge in which the pledged property remains in the possession and use of the pledger or a third party. The subject of a mortgage can be enterprises, structures, buildings, structures, apartments in an apartment building, vehicles, space objects, goods in circulation, etc. The Law of the Republic of Kazakhstan dated December 23, 1995 No. 2723 “On mortgage of real estate” regulates relations arising from the use of property mortgages as a way of securing obligations.
  2. Mortgage – a type of pledge in which the pledged property is transferred by the mortgagor into the possession of the mortgagee;
  3. Pledge of rights, when the subject of pledge is property rights that can be alienated, in particular lease rights to enterprises, structures, buildings, structures, the right to a share in the property of a business partnership, debt claims, copyright, inventive and other property rights. At the same time, an urgent right can be pledged only until the expiration of its validity period.
  4. Pledge of a bank deposit, when the subject of pledge is a bank deposit.
  5. Pledge of securities when securities are the subject of pledge.
  6. Pledge of things in a pawnshop.

The subject of a pledge can be any property, including things and property rights (claims), with the exception of things withdrawn from circulation, claims inextricably linked with the personality of the creditor, in particular, claims for alimony, compensation for harm caused to life or health, and other rights whose assignment to another person is prohibited by legislative acts.

The right of pledge can be extended by an agreement to property that will become the property or business of the pledger in the future. Since the pledger can only be the owner of the property or, with his consent, a person who has the right of economic management to the property (see Article 305 of the Civil Code), therefore, the pledge agreement, the parties to which extend the right of pledge to the property that will become the property of the pledger in the future, must contain the terms of the preliminary contract. Despite the fact that if a party that has entered into a preliminary agreement evades the conclusion of the agreement provided for by it, it is obliged to compensate the other party for the losses caused by this, it is necessary to have an additional way to secure the obligation before the property becomes the property of the pledgee.

The subject of a pledge may be a land plot belonging to the pledger on the basis of the right of private ownership or the right of land use. Pledgers can be individuals and non-state legal entities that have land plots on the basis of the right of private ownership or on the right of temporary compensated long-term land use. A pledge of a building (structure, structure) located on a divisible land plot means that at the same time a part of the divisible land plot or the right to land use is pledged to a part of the divisible land plot that is occupied by a building (structure, structure) and is necessary for its maintenance. A pledge of a building (structure) located on an indivisible land plot means that the entire land plot or the land use right for the entire land plot is simultaneously pledged. The pledge of a land plot or land use rights is subject to state registration in the manner established for registration of rights to real estate.

Property constituting common property can be pledged only with the consent of all owners. The right to a share in common property can be an independent subject of pledge.

The contract may impose on the pledgee the obligation to insure the pledged property transferred into his possession.

Insurance of the pledged property, which remains in the use of the pledger, shall be borne by the latter.

Pledge registration

Real estate pledge is subject to state registration by the body that registers rights to real estate.

Registration is subject to a change in the subject of pledge, as well as other changes in the cases established by the legislative acts of the Republic of Kazakhstan.

Changes to the collateral that are not subject to mandatory registration can be registered at the request of the participants.

The procedure for levying execution on the subject of pledge

The satisfaction of the claim of the pledgee from the value of the pledged property is made, unless otherwise established by this Code and other legislative acts or an agreement, in a judicial proceeding.

In the cases stipulated by the pledge agreement, legislative acts, the pledgee has the right to independently sell the pledged property out of court through an auction (auction).

2. Guarantee and surety

By virtue of the guarantee, the guarantor is obliged to the creditor of another person (the debtor) to be responsible for the fulfillment of the obligation of this person, in whole or in part, in solidarity with the debtor, with the exception of cases provided for by legislative acts.

By virtue of the surety, the surety undertakes to the creditor of another person (the debtor) to be responsible for the fulfillment of the obligation of this person in whole or in part subsidiary.

Guarantee or surety agreements must be made in writing. Failure to comply with the written form entails the nullity of the guarantee or surety agreement.

Liability of the guarantor and surety

The guarantor is liable to the creditor to the same extent as the debtor, including the payment of forfeit, remuneration (interest), legal costs for collecting the debt and other losses of the creditor caused by non-performance or improper performance of the obligation by the debtor, unless otherwise provided by the guarantee agreement.

The surety is liable to the creditor within the amount specified in the surety, unless otherwise provided by the terms of the surety. Prior to filing claims against the surety bearing subsidiary liability, the creditor must take reasonable measures to satisfy this claim by the debtor, in particular, by offsetting the counterclaim and enforcing the debtor’s property in accordance with the established procedure.

3. Deposit

A deposit is an amount of money issued by one of the contracting parties against payments due from it under the contract to the other party and to secure the conclusion and execution of the contract or the performance of another obligation.

An agreement on a deposit, regardless of the amount of the deposit, must be concluded in writing. Failure to comply with the written form entails the nullity of the deposit agreement.

If the obligation is terminated before the start of its performance by agreement of the parties or due to the impossibility of performance, which occurred without their fault, the deposit must be returned.

If the party who gave the deposit is responsible for the failure to fulfill the obligation, it remains with the other party, and if the party that received the deposit is responsible, it is obliged to pay the other party double the amount of the deposit. In addition, the party responsible for the failure to fulfill the obligation is obliged to compensate the other party for losses, taking into account the amount of the deposit, since the contract does not provide otherwise.

4. Hold

The creditor who holds the thing that is subject to transfer to the debtor or to a person specified by the debtor has the right, if the debtor fails to fulfill the obligation to pay for this thing or to reimburse the creditor for related costs and other losses, until the corresponding obligation is fulfilled. …

Withholding of the thing may also secure claims, although not related to payment for the thing or reimbursement of costs for it and other losses, but arising from an obligation, the parties to which act as entrepreneurs.

5. Guarantee fee

The security deposit is the amount of money transferred by the payer of the security deposit to the recipient of the security deposit in order to secure the fulfillment of the obligation to conclude an agreement during the auction or fulfillment of another obligation.

The obligation to pay the guarantee fee arises in cases provided for by legislative acts. The obligation to pay the guarantee fee also arises by agreement of the parties.

If the obligation secured by the security deposit is not fulfilled, through the fault of the payer, the security deposit remains with the other party.

In case of failure to fulfill the obligation secured by the guarantee deposit, through the fault of the recipient of the guarantee deposit, or the termination of this obligation by agreement of the parties or due to the impossibility of performance, which occurred without their fault, the guarantee deposit is refundable.

6. Penalty

A forfeit (fine, penalty interest) is a sum of money determined by legislation or an agreement, which the debtor is obliged to pay to the creditor in case of non-fulfillment or improper fulfillment of an obligation, in particular, in case of delay in fulfillment. In civil contractual obligations, forfeit is the most commonly used method of enforcing obligations. At the same time, a claim for payment of a forfeit is issued more often than for compensation for losses. Upon the claim for payment of the penalty, the creditor is not obliged to prove the damage caused to him.

An agreement on a forfeit must be made in writing, regardless of the form of the underlying obligation. Failure to comply with the written form entails the nullity of the agreement on the penalty.

The creditor has the right to demand payment of a forfeit determined by legislation (legal penalty), regardless of whether the obligation to pay it is stipulated by the agreement of the parties.

If the forfeit (fine, penalty) payable is excessively large in comparison with the creditor’s losses, the court, at the request of the debtor, has the right to reduce the forfeit (fine, penalty), taking into account the degree of fulfillment of the obligation by the debtor and the interests of the debtor and creditor deserving attention. Since the Law has not specified to what extent this can be done, the court, when assessing what the penalty is “excessively large,” has no right to violate the interests of creditors, taking into account that the state duty has been paid, taking into account the penalty.

At the same time, according to the draft Law of the Republic of Kazakhstan “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the Improvement of Civil Legislation and Improvement of the Conditions for Entrepreneurial Activity Based on the Implementation of the Principles and Provisions of English and European Law”, the issue of judicial authority for reducing the amount of the contractual forfeit in commercial contracts, limiting these cases to only an explicit abuse of law. If the aforementioned law is adopted, such abuse will take place, for example, if a disproportionate penalty is “imposed” under conditions of unequal negotiating opportunities on the weaker party, and in all other cases – only in a situation where the amount of the penalty is so abnormally high that there are signs of a sham deal … It also provides that if the violation of the contract was intentional, the court is not entitled to reduce the penalty.

7. Insurance of liability under the contract as a way to ensure the fulfillment of obligations

In modern legal literature, the problem of the security nature of the insurance contract has not received a clear coverage and unambiguous solution; at least in the civil code, article 292, which lists the methods of securing the fulfillment of obligations, does not include an insurance contract.

At the same time, the objects of insurance, according to subparagraph 4) of paragraph 1 of Article 807, can be any property interests of citizens and legal entities, including those related to the obligation to compensate for harm caused to other persons, including as a result of violation of the contract (obligations).

Clause 5 of Article 809 of the Civil Code provides that in case of civil liability insurance, the risk of liability is insured for obligations arising from harm to life, health or property of third parties, as well as liability for obligations arising from contracts.

The introduction of cases of insurance of contractual liability is primarily due to the increased protection of the rights of the creditor as a weak side in the relevant legal relationship.

The contract of liability insurance as a result of a breach of the contract exists together with the main contract, the risk of liability for non-performance of which is insured. In the main contract, the debtor has the status of the policyholder in the insurance contract, the creditor has the status of the beneficiary, the insurer will act as the debtor under the insurance contract in relation to the creditor of the main contract. An insured event is the occurrence of civil liability for actions (inaction) that entail non-performance or improper performance of an obligation arising from the conclusion of a contract.

Thus, the guaranteeing function of the contract of liability insurance for breach of contract is fully implemented. The creditor satisfies his property interests as a person in whose favor the civil liability should be incurred. The debtor is considered to have fulfilled the obligation to compensate for losses, pay a penalty or implement other measures of responsibility related to the violation of the contract. Also, such an insurance contract guarantees the fulfillment of the obligation, first of all, to the debtor himself.