The Grand Chamber of the Supreme Court Ruled Against Double Bringing to Legal Responsibility for Breach of the Terms of the Contract

The parties may not regulate their relations (determine mutual rights and obligations) in the contract in a manner which is contrary to public order, violates the provisions of the Constitution of Ukraine, does not comply with the general principles of civil law which restrict the freedom of contract under Art. 3 of the Civil Code of Ukraine.

The court is empowered to check the method chosen by the parties to the agreement to regulate their relations for compliance with the Constitution of Ukraine.

This is stated in the resolution of the Grand Chamber of the Supreme Court adopted following the results of the consideration of case No. 910/12876/19 on the claim of PJSC Extractive Company "Ukrnaftoburinnia" to Innover Ukraine LLC for recovery of UAH 4,346,226.28 (advance payment, penalty, 10% and 20% of the fine for breach of the terms of services for a period of more than 10 days and 30 days, respectively) for breach of the terms of services for setting up and making modifications to the software product.

By the decision of the court of first instance upheld by the resolution of the appellate instance, the claim was partially satisfied. Innover Ukraine LLC appealed these decisions to the Commercial Cassation Court within the Supreme Court, arguing that the courts of previous instances had erred in finding that it had violated several different obligations to the plaintiff and had twice applied liability of the same type for the same violation. The Commercial Cassation Court within the Supreme Court noted that the defendant did not agree with the terms of liability under the contract and referred the case to the Grand Chamber of the Supreme Court to resolve an exceptional legal issue.

The Grand Chamber of the Supreme Court noted that prohibition of double bringing to legal responsibility of the same type for the same offence (lat. non bis in idem - “not punished twice for the same”) is guaranteed by Art. 61 of the Constitution of Ukraine and intended to avoid unjust punishment.

The simultaneous collection of a penalty for a delay in fulfilling an obligation for a period exceeding 10 calendar days and a penalty for a delay in fulfilling an obligation for a period exceeding 30 calendar days is a double penalty for late performance, that is double liability for breach of obligation.

The Grand Chamber of the Supreme Court ruled that claims for the collection of a fine and penalty from Innover Ukraine LLC for the delay in the implementation of a complete software product, delay in the delivery of goods for a period of more than 30 calendar days were substantiated and were to be satisfied; the SC Grand Chamber rejected the rest of the penalty and fine.

The resolution of the Grand Chamber of the Supreme Court in case No. 910/12876/19 (proceedings No. 12-94гс20) - https://reyestr.court.gov.ua/Review/98524309.