Returning an Advance Payment Does Not Automatically Terminate the Obligation to Supply Goods
⚖️ Ukraine | Commercial Disputes | Supply Contracts | Advance Payments
Case Details
Case No.: 911/969/24
Proceedings No.: 12-38гс25
Court: Grand Chamber of the Supreme Court
Decision Date: 18 February 2026
Case Category: Commercial Law / Contract Law
Subject Matter: Consequences of Seller-Initiated Return of Advance Payment
Sub-Subject: Supply Agreement / Advance Payment / Specific Performance / Termination of Obligations / Buyer’s Objection
Claimant: Resilient Agro LLC
Defendant: Agristar LLC
Supply Agreement: No. 13226 dated 21 July 2021
Goods: VL40 (Volland) header transport trolley, one unit
Key Issue: Whether a seller’s unilateral return of an advance payment terminates its obligation to supply the goods where the buyer did not request repayment and continues to demand delivery
Outcome: The Grand Chamber held that where the buyer accepts an advance payment returned on the seller’s initiative without objection, the parties’ mutual obligations may be terminated by agreement under Article 604(1) of the Civil Code of Ukraine. However, where the seller returns the advance without a statutory or contractual basis and the buyer, without unjustified delay, unequivocally objects and demands delivery, the seller’s obligation to supply the goods is not terminated.
Background of the Dispute
Resilient Agro LLC and Agristar LLC entered into Supply Agreement No. 13226 dated 21 July 2021.
Under the agreement and Specification No. 1, Agristar was required to supply the buyer with a VL40 (Volland) header transport trolley.
The buyer made the agreed advance payment, but the supplier did not deliver the goods within the contractual period.
After the contractual term had expired, the supplier returned the advance payment to the buyer on its own initiative.
The buyer subsequently brought proceedings seeking, among other remedies, an order requiring the supplier to deliver the agreed goods.
The dispute therefore raised a fundamental question concerning the relationship between the seller’s unilateral return of an advance payment and the buyer’s statutory right to continue demanding delivery.
Who Chooses Between Delivery and Repayment?
The Grand Chamber examined Article 693(2) of the Civil Code of Ukraine.
Where a seller has received an advance payment but has failed to transfer the goods within the agreed period, the buyer may demand either:
delivery of the paid goods; or
return of the advance payment.
Although Article 693 uses the language of the buyer having the right to “demand” one of these remedies, the Grand Chamber emphasised the substantive meaning of the provision.
The choice between the two alternatives depends on the buyer’s will rather than the seller’s.
The buyer may elect to continue the parties’ contractual relationship and insist upon delivery, or it may elect to terminate the outstanding reciprocal obligations by recovering the advance payment.
The seller cannot ordinarily make that choice for the buyer merely by transferring the money back.
Acceptance of the Returned Advance May Terminate the Obligations
The Grand Chamber nevertheless rejected an absolute approach under which a seller-initiated refund could never terminate the outstanding supply obligation.
Article 604(1) of the Civil Code provides that an obligation may be terminated by agreement between the parties.
The parties’ agreement concerning termination does not necessarily have to take the form of a separate express agreement.
Their conduct may demonstrate their common intention regarding the future of their contractual relationship.
Accordingly, where the seller returns the advance payment on its own initiative and the buyer accepts the returned amount without objection, such conduct may be equivalent in its legal effect to repayment made following an express demand by the buyer.
In that situation, the parties’ conduct reflects the buyer’s acceptance of the termination of their remaining reciprocal contractual obligations.
The obligation may therefore be regarded as terminated by agreement under Article 604(1) of the Civil Code of Ukraine.
A Seller Cannot Unilaterally Impose Repayment on an Objecting Buyer
The legal position is different where the buyer does not accept the seller’s attempt to replace delivery with repayment.
The Grand Chamber held that a seller’s return of the advance payment, including a return made after expiry of the term of the sale or supply agreement, does not itself terminate the obligation to deliver the goods where:
the repayment was initiated by the seller;
there was no statutory or contractual basis permitting the seller to terminate the obligation in that manner;
the buyer unequivocally objected to the repayment without unjustified delay; and
the buyer demanded delivery of the goods.
The buyer may express that objection in different ways.
For example, it may send the seller a formal claim or letter rejecting the repayment and demanding delivery, or it may commence court proceedings seeking specific performance.
The decisive consideration is that the buyer makes clear, without unjustified delay, that it does not accept the repayment as terminating the contractual relationship.
Expiry of the Contract Does Not Automatically Terminate Outstanding Obligations
The case also concerned the consequences of expiry of the contractual term.
The Grand Chamber confirmed that expiry of a contract does not in itself terminate an obligation that arose while the contract was in force and remained unperformed.
Accordingly, the mere fact that the contractual period had ended did not automatically give the supplier the right to return the advance payment and treat the outstanding delivery obligation as extinguished.
The legal consequences depended instead on the applicable contractual and statutory grounds for termination and, importantly, on the parties’ subsequent conduct.
This distinction is commercially significant.
A contract may cease to operate as a source of new obligations while obligations already created during its term remain capable of enforcement.
The Buyer Must Object Without Unjustified Delay
The Grand Chamber placed particular emphasis on the timing of the buyer’s reaction.
Where a buyer intends to preserve the right to demand the goods after receiving an unsolicited refund, it must communicate that position without unjustified delay.
Silence can therefore have legal consequences.
If the buyer receives and retains the returned payment without objection and behaves for a substantial period as though the contractual relationship has ended, its conduct may objectively indicate acceptance of the termination of the parties’ remaining obligations.
By contrast, a prompt and unequivocal objection prevents the seller from relying simply on the fact of repayment as evidence that both parties agreed to terminate the outstanding supply obligation.
Good Faith and Consistency of Conduct Matter
The Grand Chamber connected this issue with the general private-law principles of good faith and consistency of conduct.
A party that has accepted a particular legal state of affairs for a substantial period may not subsequently be entitled to adopt an inconsistent position where its previous conduct objectively gave the counterparty reason to believe that the existing position had been accepted.
This reflects the principle commonly associated with venire contra factum proprium — the prohibition against inconsistent conduct.
The issue is therefore not limited to the mechanical question of whether money was transferred back to the buyer.
The court must assess the conduct of both parties after repayment and determine what that conduct objectively demonstrated about the continued existence of their contractual obligations.
The Buyer’s Conduct in This Case Was Decisive
In the dispute before the Grand Chamber, the supplier returned the advance payment to the buyer.
The buyer did not immediately object to the repayment and did not promptly demand that the supplier nevertheless deliver the equipment.
Instead, the buyer subsequently sought delivery through court proceedings.
The courts considered the buyer’s conduct following repayment when determining whether the parties’ remaining contractual obligations continued to exist.
The Grand Chamber concluded that the buyer’s acceptance of the returned payment without a timely objection could demonstrate agreement to terminate the parties’ reciprocal obligations.
This meant that the seller could not be compelled to deliver the equipment merely because the buyer later changed its position and sought specific performance.
The Supreme Court Clarified Its Previous Case Law
The case was referred to the Grand Chamber because the Commercial Cassation Court considered it necessary to clarify the approach previously expressed by the Supreme Court of Ukraine in its judgment of 24 June 2015 in Case No. 904/5381/14.
The earlier approach could be understood as meaning that the seller’s unilateral return of an advance payment could not terminate an outstanding obligation because Ukrainian law does not recognise expiry of the contractual term itself as a ground for termination of an unperformed obligation.
The Grand Chamber refined that approach.
The decisive question is not simply whether the seller initiated the repayment.
The buyer’s reaction must also be considered.
Where the buyer accepts the repayment without objection, the parties’ conduct may establish an agreement to terminate their reciprocal obligations under Article 604(1) of the Civil Code.
Where the buyer promptly objects and continues to demand delivery, the seller cannot ordinarily achieve the same result unilaterally merely by returning the money.
The Supreme Court’s Decision
The Grand Chamber dismissed the cassation appeal of Resilient Agro LLC.
It left unchanged the judgment of the Commercial Court of Kyiv Region of 8 August 2024, the additional judgment of that court of 12 September 2024, and the judgment of the Northern Commercial Court of Appeal of 8 January 2025.
The Grand Chamber thereby confirmed the distinction between:
a seller-initiated repayment accepted by the buyer without objection, which may terminate the reciprocal obligations by agreement under Article 604(1) of the Civil Code; and
a seller-initiated repayment promptly and unequivocally rejected by the buyer, which does not by itself terminate the seller’s obligation to deliver the goods where there is no other statutory or contractual basis for termination.
Why This Decision Matters
The judgment provides important guidance on the consequences of advance-payment refunds under Ukrainian sale and supply contracts.
The transfer of money back to the buyer is not merely an accounting event. Depending on the buyer’s response, it may materially affect whether the underlying supply obligation continues to exist.
The decision is particularly relevant where:
a supplier has failed to deliver prepaid goods;
the supplier returns an advance without receiving a repayment demand from the buyer;
the buyer still wants the goods rather than repayment;
the contractual term has already expired;
the seller argues that repayment extinguished its delivery obligation;
the buyer received the refund but did not immediately object;
specific performance is subsequently sought before a Ukrainian court; or
the parties dispute whether their conduct amounted to an agreement terminating outstanding contractual obligations.
Lions Lawyers’ Analysis
The practical significance of this decision lies in the buyer’s response to an unsolicited refund.
Article 693 of the Civil Code gives the buyer, rather than the defaulting seller, the initial choice between demanding the goods and demanding repayment of the advance. However, the Grand Chamber makes clear that this right cannot be considered separately from the parties’ subsequent conduct.
For a buyer that still wants delivery, passive receipt of the money creates unnecessary legal risk.
The safer contractual position is to respond without delay and state unequivocally that the repayment was not requested, is not accepted as terminating the delivery obligation, and that performance of the supply obligation continues to be demanded.
Conversely, sellers should not assume that transferring an advance payment back to the buyer automatically extinguishes the obligation to supply. Where the buyer promptly objects, the underlying delivery obligation may remain enforceable.
The decision is also significant for contractual drafting. Supply and sale agreements should clearly regulate the consequences of non-delivery, expiry of the contractual term, repayment of advances, termination rights and the procedure for communicating an election between repayment and continued performance.
For foreign companies purchasing goods from Ukrainian suppliers, the judgment is particularly relevant where substantial advance payments are common. The legal effect of a refund may depend not only on who initiated it, but also on what the buyer does immediately after receiving it.
Lions Lawyers advises Ukrainian and international clients on commercial contracts and disputes in Ukraine, including supply and sale agreements, advance payments, non-delivery of goods, specific performance, contractual termination, recovery of payments and cross-border commercial transactions. 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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