Seller Must Deliver Paid Goods Despite Force Majeure Where It Continued Operating and the Goods Were in Stock
⚖️ Ukraine | Commercial Disputes | Sale of Goods | Force Majeure
Case Details
Case No.: 170/332/22
Proceedings No.: 61-9556св23
Court: Supreme Court, Civil Cassation Court
Decision Date: 19 June 2024
Case Category: Contract Law
Subject Matter: Performance of a Sale and Purchase Agreement
Sub-Subject: Force Majeure / Delivery of Goods / Self-Collection / Consumer Rights
Goods: Tractor “Belarus 82.1”
Contract Date: 17 February 2022
Contract Price: UAH 565,000, including VAT
Delivery Terms: Self-collection from the seller’s warehouse within 10 working days after payment
Key Issue: Whether a seller may rely on force majeure to avoid delivering fully paid goods where it continued its business operations, the goods remained available in its warehouse, and the seller failed to notify the buyer of force majeure in accordance with the contract
Outcome: The Supreme Court held that the seller remained obliged to transfer the paid goods to the buyer in accordance with the sale and purchase agreement.
Background of the Dispute
An individual entered into a sale and purchase agreement with a Ukrainian company for the purchase of a Belarus 82.1 tractor.
The contractual price was UAH 565,000, including VAT.
Under the agreement, the seller was required to make the tractor available to the buyer by way of self-collection from the seller’s warehouse within 10 working days after payment.
The buyer paid the full purchase price on 15 April 2022.
However, the tractor was not transferred to him.
The buyer consequently brought proceedings seeking protection of his consumer rights, including delivery of the tractor and recovery of monetary amounts associated with the seller’s failure to perform the contract.
The Seller Relied on Force Majeure
The seller argued that its failure to deliver the tractor resulted from force majeure connected with Russia’s full-scale invasion of Ukraine and the occupation of part of the Kharkiv region.
The seller’s warehouse was located in Mala Danylivka in the Kharkiv region.
According to the seller, the circumstances arising from the war prevented performance of its contractual obligations.
The seller also relied on the force majeure provisions contained in the contract.
Those provisions exempted the parties from liability where contractual obligations could not be performed because of force majeure and provided for suspension of the period for performance while such circumstances continued.
The seller maintained that the inability to perform had lasted for more than 30 calendar days and sought termination of the agreement.
Force Majeure Did Not Automatically Terminate the Seller’s Obligations
The dispute required the courts to distinguish between the existence of force majeure circumstances and their actual effect on the seller’s ability to perform the particular contract.
The existence of war or other extraordinary circumstances does not, by itself, mean that every contractual obligation becomes impossible to perform.
The relevant question was whether those circumstances actually prevented this seller from transferring this particular tractor to the buyer.
That factual connection was especially important because the seller had continued carrying out its business activities during the relevant period.
The Goods Were Available in the Seller’s Warehouse
A significant factor in the courts’ assessment was that the tractor purchased and paid for by the buyer remained available in the seller’s warehouse.
The case therefore did not concern goods that had been destroyed, lost or otherwise become unavailable as a result of hostilities.
Nor was it established that the seller had completely ceased operations and was objectively incapable of performing the transaction.
The seller continued its activities while the goods remained in stock.
In those circumstances, reliance on the general existence of force majeure was insufficient to establish that performance of the particular delivery obligation had become impossible.
The Contract Required the Seller to Notify the Buyer of Force Majeure
The Supreme Court also considered the contractual mechanism governing force majeure.
The seller had agreed to contractual provisions addressing how force majeure circumstances were to affect the parties’ obligations.
However, the seller did not notify the buyer of the existence of force majeure circumstances in the manner required by the agreement.
This was material because contractual force majeure provisions do not operate independently of the notification requirements agreed by the parties.
Where a party seeks to rely upon force majeure, compliance with the contractual procedure for invoking it may therefore become an important part of the court’s assessment.
Self-Collection Did Not Eliminate the Seller’s Obligation
The contract provided for delivery by self-collection from the seller’s warehouse.
That did not mean that the seller had no obligation concerning transfer of the goods.
The seller remained responsible for making the purchased and paid tractor available to the buyer in accordance with the contractual terms.
The buyer had fully performed his principal payment obligation.
The seller, meanwhile, retained possession of the tractor and failed to complete the corresponding transfer of the goods.
The contractual arrangement for self-collection therefore did not permit the seller simply to retain both the purchase price and the goods.
Continued Business Activity Was Relevant
The fact that the seller continued operating during the period relied upon as force majeure was another significant circumstance.
A party relying on force majeure must establish more than the general existence of extraordinary events.
The circumstances relied upon must have had an actual effect on the performance of the particular contractual obligation.
Where a business continues its commercial operations and the goods required for performance remain available, it becomes necessary to establish why those circumstances nevertheless made the specific contractual performance impossible.
The courts found that the circumstances of this case did not relieve the seller of its obligation to transfer the tractor.
Decisions of the Lower Courts
The first-instance court partially upheld the buyer’s claims.
It ordered the seller to transfer the tractor to the buyer in accordance with the contract and awarded certain monetary amounts arising from the dispute.
The seller’s counterclaim seeking termination of the sale and purchase agreement was dismissed.
The appellate court upheld the first-instance judgment.
Both sides subsequently pursued cassation proceedings before the Supreme Court.
The Supreme Court’s Decision
The Supreme Court dismissed the cassation appeals and left the decisions of the lower courts unchanged.
The Court confirmed that where:
the seller continued its activities during the force majeure circumstances;
the goods purchased and paid for by the buyer were available in the seller’s warehouse;
the seller did not notify the buyer of force majeure in accordance with the contractual procedure; and
the seller failed to perform its obligation to transfer the goods under the agreed self-collection arrangement,
the seller remained obliged to transfer the paid goods to the buyer in accordance with the contract.
The existence of force majeure circumstances therefore did not, in the circumstances of this case, eliminate the seller’s primary contractual obligation to deliver the goods.
Why This Decision Matters
The judgment illustrates an important distinction between force majeure as an extraordinary circumstance and force majeure as a legally relevant impediment to contractual performance.
The existence of war does not automatically release a contracting party from every obligation.
The effect of force majeure must be considered in relation to the specific obligation and the particular factual circumstances in which performance was required.
The decision is particularly relevant where:
a party invokes Russia’s full-scale invasion as force majeure;
the business continued operating during the relevant period;
goods required for contractual performance remained available;
the contract contains a specific force majeure notification procedure;
the seller received full payment but did not transfer the goods;
delivery was agreed on a self-collection basis; or
one party seeks termination of a contract because force majeure allegedly continued for a specified period.
Lions Lawyers’ Analysis
The practical significance of this decision lies in the Supreme Court’s fact-specific approach to force majeure.
A party cannot rely solely on the existence of war or other extraordinary circumstances. The relevant issue is whether those circumstances actually prevented performance of the particular obligation under the particular contract.
Three aspects of the case are especially important.
First, the goods remained available. Where the contractual subject matter continues to exist and remains under the seller’s control, it may be substantially more difficult to establish that force majeure made performance objectively impossible.
Second, the seller continued its business operations. Continued commercial activity does not necessarily exclude force majeure, but it is relevant when assessing whether the alleged circumstances actually prevented performance.
Third, contractual notification requirements matter. A force majeure clause commonly establishes not only substantive grounds for relief but also a procedure through which the affected party must notify its counterparty. Failure to comply with that procedure may materially weaken reliance on the clause.
For businesses operating in Ukraine during wartime, the judgment therefore reinforces the importance of documenting the specific causal connection between the extraordinary event and the inability to perform, complying with contractual notice requirements and distinguishing genuine impossibility of performance from increased difficulty, inconvenience or commercial risk.
Lions Lawyers advises Ukrainian and international clients on commercial contracts and disputes in Ukraine, including sale and supply agreements, force majeure, non-delivery of goods, contractual termination, recovery of payments and wartime contractual disputes. We provide full-service legal representation as well as standalone legal opinions, enabling clients to assess their existing strategy and, where appropriate, identify alternative legal approaches.
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