The Absence of Contractual Terms on Its Termination Does Not Prevent the Exercise of the Right to Legal Protection

The plaintiff, S.Zh., filed a claim with the Satpayev City Court of Ulytau Region against the defendant, B.S., seeking termination of the earnest money agreement and eviction of the defendant and his family members from the occupied dwelling. The plaintiff's claims were based on the fact that, on 22 October 2022, the parties entered into an earnest money agreement to secure the performance of an apartment sale and purchase agreement, with the apartment valued at KZT 10,500,000. Under the terms of the earnest money agreement, the defendant paid the plaintiff KZT 5,300,000 and undertook to pay the full purchase price of the apartment in monthly instalments of KZT 150,000 by 22 August 2025.

The claim for termination of the agreement was based on the defendant's alleged improper performance of the obligation to make monthly payments towards the debt. By the judgment of the court of first instance dated 14 February 2024, S.Zh.'s claims were dismissed. The court established that the payment schedule for October and November 2023 had been breached. The court of first instance concluded that a breach of the payment schedule for the purchase price of the apartment could not serve as grounds for termination of the agreement and that the obligation to pay the remaining balance of the purchase price of the dwelling constituted a separate and independent obligation. In addition, the court based its decision on the absence of a provision in the earnest money agreement concerning termination of the agreement.

By a ruling of the Judicial Panel for Civil Cases of the Ulytau Regional Court dated 22 May 2024, the court judgment was set aside, and the case was accepted for consideration under the rules applicable to proceedings before a court of first instance. The appellate court proceeded on the basis that the city court had violated procedural law by considering claims for the eviction of minors who had not been joined as parties to the proceedings. Subsequently, having established that the defendant had breached his payment obligations for seven months during 2023–2024, the appellate court, by its judgment dated 3 July 2024, granted the claims.

The conclusions set out in the appellate judgment in this civil case may be considered well-founded. In such circumstances, the general provisions of civil legislation are applicable.

Article 272 of the Civil Code establishes the fundamental requirement that an obligation must be performed properly in accordance with its terms and the requirements of the legislation and, in the absence of such terms and requirements, in accordance with the customs of business practice or other generally applicable requirements. Unilateral refusal to perform an obligation and unilateral amendment of its terms are not permitted, except in cases provided for by law or contract (Article 273 of the Civil Code). Pursuant to the general provision set out in subparagraph 1) of paragraph 2 of Article 401 of the Civil Code, a material breach of contract may serve as grounds for its termination or amendment. The judgment of the court of first instance in the above case does not comply with these requirements of the law.

Jurisdiction

Jurisdiction over disputes concerning the amendment and termination of contracts is determined by the provisions of Chapter 3 of the Civil Procedure Code. As a general rule, such disputes fall within the jurisdiction of the court at the defendant's place of residence or location (Article 29 of the Civil Procedure Code). In addition, the law provides for jurisdiction over investment disputes (parts 1–2 of Article 27 of the Civil Procedure Code), jurisdiction at the plaintiff's choice in disputes arising from contracts specifying the place of performance (part 6 of Article 30 of the Civil Procedure Code), exclusive jurisdiction over disputes concerning rights to immovable property (part 1 of Article 31 of the Civil Procedure Code), as well as contractual jurisdiction (Article 32 of the Civil Procedure Code).

An analysis of the civil cases reviewed showed that, in general, the courts of the Republic comply with the requirements of the legislation concerning territorial jurisdiction. At the same time, certain violations concerning the jurisdiction of cases have been identified.

By a ruling of the judge of the Balkhash District Court of Almaty Region dated 20 December 2022, the claim filed by A.K. against LLP “B” for termination of the contract and recovery of a monetary amount was returned. According to the materials of the civil case, the parties had entered into a contract for the manufacture and installation of windows and doors on the basis of advance payment. Referring to the prolonged breach of contractual obligations, the plaintiff, A.K., applied to the court at the defendant's location. In the said ruling, the judge of the Balkhash District Court of Almaty Region concluded that the dispute did not fall within the jurisdiction of that court, stating that the claim could be filed at the place where the contract was concluded or performed, in the city of Almaty.

By a ruling of the Judicial Panel for Civil Cases of the Almaty Regional Court dated 14 February 2023, the judicial act of the court of first instance was set aside, and the civil case was remitted to the same court for consideration on the merits. The appellate instance proceeded on the basis that, previously, by a ruling of the Auezov District Court No. 2 of Almaty dated 29 December 2021, the civil case based on A.K.'s claim against LLP “B” for termination of the contract had been transferred, according to jurisdiction, to the Balkhash District Court of Almaty Region after the defendant's actual location had been established within the territory of that district.

Thus, the conclusions of the court of first instance that the dispute did not fall within the jurisdiction of the Balkhash District Court of Almaty Region cannot be regarded as consistent with the requirements of the law. Pursuant to the general rule provided for in part 1 of Article 29 of the Civil Procedure Code, a claim shall be filed with the court at the defendant's place of residence or location. In the above-mentioned statement of claim, which was refiled with the Balkhash District Court, the plaintiff indicated information confirming the defendant's registration within that district. The judge's reference to the lack of jurisdiction of the dispute by that district court due to the application of part 9 of Article 30 of the Civil Procedure Code contradicts the law governing jurisdiction at the plaintiff's choice. In cases of alternative jurisdiction, the law grants the claimant the right to choose the venue for the consideration of the civil case.

State Duty

Article 35 of the Constitution of the Republic of Kazakhstan establishes the general requirement that the payment of legally established taxes, fees and other mandatory payments is the duty and obligation of everyone.

The rates of the state duty payable in courts are determined by Article 610 of the Tax Code. Pursuant to subparagraph 1) of paragraph 1 of Article 610 of the Tax Code, as a general rule, state duty on statements of claim of a proprietary nature is charged as a percentage depending on the amount in dispute.

Part 1 of Article 104 of the Civil Procedure Code establishes the procedure for determining the value of a claim. In claims for the early termination of a property lease agreement, with the exception of residential tenancy, the value of the claim is determined by the aggregate amount of payments for the use of the property for the remaining term of the agreement (contract), but for no more than three years (subparagraph 10) of Part 1 of the said Article).

At the same time, subparagraph 7) of Article 610 of the Tax Code provides that, in claims for the amendment or termination of a residential tenancy agreement, as well as in other statements of claim of a non-proprietary nature or claims not subject to valuation, the state duty shall be payable in the amount of 0.5 of the monthly calculation index (hereinafter referred to as the “MCI”).

In general, judicial practice has developed an approach under which claims for the termination or amendment of a contract are regarded as non-proprietary claims or claims not subject to valuation. At the same time, from the perspective of improving legal regulation, the issue arises of bringing the Civil Procedure Code and the Tax Code into a uniform approach with regard to claims for the termination of lease agreements.

Claims for the amendment or termination of a contract are often filed together with claims for the return of property or recovery of monetary amounts. For such cases, paragraph 5 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 9 dated 25 December 2006, “On the Application by the Courts of the Republic of Kazakhstan of Legislation on Legal Costs in Civil Cases,” establishes the rule that, where a claim contains both proprietary and non-proprietary claims, the state duty shall be paid simultaneously in the amount established for each type of claim.

Part 2 of Article 104 of the Civil Procedure Code requires the plaintiff to state the value of the claim. Where the stated value clearly does not correspond to the actual value of the property sought, the value of the claim shall be determined by the judge.

When resolving disputes concerning the amendment or termination of a contract together with simultaneous claims for the recovery of property or monetary amounts, courts should properly verify the plaintiff's compliance with the requirement to state the value of the claim, as well as the full payment of the state duty in respect of each claim.

Legislation

The principal regulatory legal acts applicable to the category of civil cases under review are:

• The Constitution of the Republic of Kazakhstan dated 30 August 1995 (hereinafter referred to as the “Constitution”);
• The Civil Code of the Republic of Kazakhstan (General Part), adopted by the Supreme Council of the Republic of Kazakhstan on 27 December 1994, and the Civil Code of the Republic of Kazakhstan (Special Part), adopted by the Parliament of the Republic of Kazakhstan on 1 July 1999 (hereinafter referred to as the “Civil Code”);
• The Civil Procedure Code of the Republic of Kazakhstan dated 3 November 2015 (hereinafter referred to as the “CPC”);
• The Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use” dated 27 December 2017;
• The Land Code of the Republic of Kazakhstan dated 20 June 2003;
• The Code of the Republic of Kazakhstan “On Taxes and Other Mandatory Payments to the Budget” dated 25 December 2017 (hereinafter referred to as the “Tax Code”);
• The Law of the Republic of Kazakhstan dated 16 April 1997 “On Housing Relations”;
• The Law of the Republic of Kazakhstan dated 5 July 2000 “On Financial Leasing”;
• The Law of the Republic of Kazakhstan dated 4 May 2010 “On Consumer Protection”;
• Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 9 dated 25 December 2006, “On the Application by the Courts of the Republic of Kazakhstan of Legislation on Legal Costs in Civil Cases”;
• Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 9 dated 18 July 1997, “On Judicial Practice in Applying Legislation on the Privatization by Citizens of Residential Premises from the State Housing Fund”;
• Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 7 dated 25 November 2016, “On Judicial Practice in Considering Civil Cases Arising from Bank Loan Agreements.” 

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