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UNCONCLUDED TRANSACTION: LEGAL NATURE.

: Michael Semenov,
: NGO Pericles
: 04.07.2002

The following article is a discusion of the arbitrage court practice, which establishes a new type of transaction an unconcluded transaction categorized with valid and invalid transactions.

Besides the great theoretical significance of the proposed new type of transaction, certain practical problems arise. Unconcluded transaction as a separate type of transaction entails a three year period for suits arising from such transaction, whereas if we stipulate that there is no unconcluded transaction as a separate type of transaction, then such transaction is void (Article 168 of the Civil Code of the Russian Federation) and the period of ten years for suits arising from void transactions should be applied to it (Article 181 of the Civil Code of the Russian Federation).

If the agreement hasnt been reached on all the essential terms of the contract, the courts proclaim the contract unconcluded. According to Article 432 of the Civil Code of the Russian Federation: A contract shall be considered concluded if an agreement has been reached on all the essential terms of the contract between the parties in the form required in appropriate cases.

From the following situation arises the problem of what is an unconcluded transaction: 1. A special type of invalid transaction categorized with avoidable and void transactions; 2. A type of void transaction: 3. A special type of the transaction categorized with the valid and invalid transaction.

The Presidium of the High Arbitrage Court believes that the unconcluded transaction is a special type of the transaction similar to valid and invalid transaction. In a Decision of the Presidium of the High Arbitrage Court (Vestnik V. Arb. Suda RF 11 1998; Delo 1173/98 14.08.98) it is stipulated: if the agreement hasnt been reached on all the essential terms of the contract such contract is unconcluded, but it is not invalid. So the unconcluded transaction can not be valid (its terms are not clarified by the parties and, thus, it can not be performed) and can not be invalid (position of the High Arbitrage Court), thus, it is a special type of the transaction categorized with valid and invalid transaction.

This position of the Presidium of the High Arbitrage Court would cause the application of unjust enrichment rules to the unconcluded transaction and, thus, general period of limitation of actions of three years for such suits (Article 196 of the Civil Code), whereas Article 181 of the Russian Civil Code provides a period of ten years for suits regarding void transactions.

In my opinion, the unconcluded transaction is a type of void transaction. I believe that the wording of the above-cited Article 432 of the Russian Civil Code is a legal technique used by the legislator only for the purpose of stipulating the moment of the conclusion of the contract.

Using a systematic interpretation of the Civil Code it becomes obvious that an unconcluded contract is a type of void contract. In particular according to the interpretation of Article 432 the contract is unconcluded if the required form of the transaction is not observed, but we have Article 165 of the Civil Code which stipulates the nonobservance of the notarial form of the transaction makes this transaction void. Article 433 of the Civil Code stipulates the transaction is concluded after its state registration. But Article 165 of the Civil Code stipulates the nonobservance of the state registration of the transaction makes this transaction void.

The Civil Code does not provide any particular consequences for unconcluded transactions, thus, such transactions are presumed void. A transaction not corresponding to the requirements of a statute or other legal acts is void, unless the statute establishes that such a transaction is avoidable or provides other consequences for the violation (Article 168 of the Russian Civil Code).

Further I believe that there is no difference in the legal nature of the void transaction and the unconcluded transaction. According to Articles 166 and 167 of the Civil Code of the Russian Federation, a void transaction does not entail legal consequences other than those that are connected with its invalidity and is void from the time of its making. The unconcluded transaction has the same nature: it does not entail any legal consequences other than those that are connected with the nonobservance of the rules of its conclusion.

Thus, the unconcluded transaction is a type of void transaction, and all the rules of void transactions should be applied to it, including the ten year period for suits arising from such transactions.



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