Preaload Image
HomeBlogAccounts receivable and case law

Accounts receivable and case law

In the constantly changing business environment, there are frequent cases when one business entity supplies products/provides services to another entity. The latter, depending on the contractual relationship, either avoids or unreasonably delays the fulfillment of the obligation.

Accounts receivable is a claim of the company, which arises for many different reasons in dealing with individuals or legal entities, mainly as a result of the following contractual relationships – delivery of products, performance of work, provision of services, advances paid to suppliers, loans issued and others. The company has the right to claim receivables in case of violation of the monetary obligation owed to the company by the other party.

First of all, it should be noted that the Civil Code recognizes and is based on the principle of “pacta sunt servanda” (agreement must be performed), according to which the contracting party, who has undertaken the obligation, must fulfill the rights and obligations agreed to by the contract of his own free will.

The obligation to perform, first of all, implies the occurrence of the result provided for in the contract. At the same time, in case of non-fulfillment of the primary obligation, the obligation to perform the work (compensation of damages, damages) arises.

According to the second part of Article 361 of the Civil Code, the obligation must be performed regularly, in good faith, at the appointed time and place. Failure to comply with these requirements is a breach of obligation.

Civil legislation, for the prevention of the violation of the obligation, provides for the legal means of securing the demand and obligation. It serves to fulfill the mentioned obligation and the selection depends on the will of the parties. (SUSG 25.05.2010. Case No. AS-1220-1480-09).

In order for the creditor to make demands on the debtor arising from the unfulfilled obligation, there must be a legal basis for the origination of the obligation, such as a contract. In practice, there are cases when the parties have reached a certain agreement, signed a contract, however, at the stage of the dispute, the debtor questions the creditor’s performance based on the contract and believes that he is not obligated to perform in return. For example, in one of the cases, a movable property lease agreement was signed between the parties, on the basis of which, the lessor gave the lessee temporary use of movable equipment for carrying out certain works. According to the lessor, the cost of the lease in exchange for the use of the mobile equipment by the lessee amounted to 16,000 GEL. In turn, the lessee claimed that the lessor did not provide services to him, which precludes the satisfaction of the claim for compensation.

In the mentioned case, the lessor submitted evidence, including payment invoices, to prove that he fulfilled the obligation arising from the agreement in good faith and as a creditor had a legal basis for making a claim against the debtor, while the debtor indicated that the payment invoice is important only in relation to the state budget and It cannot be used as evidence in a civil dispute. In the mentioned case, the court explained that the invoice, taking into account its form and content, meets the criteria of written evidence established by the first part of Article 134 of the Civil Code (acts, documents, business and personal letters containing information about the circumstances important to the case) and any prohibition of the law In this regard, it does not contain, therefore, the Appeals Chamber considered that the invoice, as a document issued by a business entity, can be used as written evidence in a civil dispute, if it contains information relevant to the case. (Case No. As-752-2022) Accordingly, in the mentioned case, the court accepted the payment invoices as written evidence, and on the basis of it, the debtor was ordered to pay the full amount of the rent in favor of the creditor.

Based on the purchase (delivery) contract, in one of the cases, the court had to distribute the burden of proving the delivery of the goods to the plaintiff. However, only the existence of the tax invoice and bill of lading does not confirm the conclusion of the purchase agreement and the existence of the obligation. (see case No. AS-249-2022)
In the case, the cassation chamber pointed out that the electronically verified tax invoice fully confirms the fact of receipt of the products by the buyer and, in the absence of qualified objections, gives rise to the obligation to pay the fee. In one of the cases, the cassation chamber explained that in the conditions when the defendant confirmed the invoice issued by the plaintiff, it is implied that a legal relationship arose between the parties based on the purchase agreement. The service of tax invoices includes a set of complex processes for the supply of goods and services, which are connected to each other by a logical chain. In the mentioned processes, the writer of the bill of lading, the tax invoice (seller), as well as the receiver (buyer) and the employee of the revenue service take part. Upon confirmation of the invoice by the buyer, we can safely assume that he has purchased the delivered goods, since the invoice is sent directly to the buyer and no other third party has access to its confirmation. When issuing and confirming the invoice, the parties determine the date of the beginning of the transportation of the goods, acknowledge the delivery and receipt of the goods (see, case No. As-381-381-2018, ruling of May 4, 2018).

Creditors, in addition to charging the debtors the amount based on the main obligation, additionally demand the payment of the amount based on the means of securing the claim stipulated in the contract in order to prevent damage and breach of obligation. In such a case, consideration of the breach in the contract is one of the most widespread means. When determining the amount of the penalty, attention is paid to several circumstances: a) the function of the penalty, as an instrument of the nature of sanction, to prevent actions that violate additional obligations; b) the severity and volume of the violation and the degree of threat to the creditor; c) the degree of guilt of the person violating the obligation; d) The function of a breacher should include compensation for damages. The cassation chamber explains that the breach of contract is a means of ensuring the corresponding interest of the party in the performance of the obligation, the origin of the obligation to pay is related to the violation of the obligation. The right to request a breach of contract is independent of proving the fact of damage, that is, for a claim against a breach of contract, the creditor does not have the obligation to prove the damage caused. The creditor always has the right to ask for rescission, regardless of whether he suffered damage or not. The main thing is the fact of breach of obligation. The right to request a breach of contract and the right to request compensation for damages, despite the fact that they are aimed at satisfying the same interest of the creditor, remain independent requests (see case No. AS-1747-2019).

In addition, it is important that there is a record of the pirgsamatechlo in the contract itself and/or even in the agreement on the recognition of the debt by the debtor. In one of the cases, the debtor admitted the existence of the debt due to the contract, however, he did not express in writing his willingness to pay the accrued interest due to the violation of the obligation. In the disputed case, the creditor demanded from the debtor the payment of both the principal amount and the interest accrued on it. In the mentioned case, the Supreme Court made the following clarifications: the purpose of the pirgasamtekhlo is to include this amount in the calculation of the minimum damages for breach of obligation. Functionally, the minimum damage does not represent the full compensation of the actually received damage, but it is the amount that ensures the minimum satisfaction of the creditor’s demand, that is why the contractual nature of the severance clause is justified, that is, for the imposition of the severance clause, it is mandatory for the parties to reach an agreement in the appropriate form. With the termination of the obligation, the imposition of the penalty is also terminated, and its amount is calculated according to the period that has passed from the time of performance to the actual performance. The court established the fact that he did not express his willingness to pay the rent, and the payment of rent cannot be the basis for recognition of the means of securing the claim by the obliged person.

Based on all of the above, we can conclude that at each stage of the legal relationship between the parties, the party should have appropriate qualified legal assistance in order to fully, unhindered, and insure the risks as much as possible. In addition, each business entity, any business, when carrying out its activity, should try to act as much as possible to have as many protection mechanisms as possible, in order to be able to fully protect its interests in case of violation of its rights in the future.

0 Reviews

Write a Review

Share:

Leave A Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Among the special taxation regimes, the status of small business is one of those for which relatively light tax obligations...
Effective provision of asset accounting and control is important for sustainable business development. Many challenges in business are due to...