A delivery contract may stipulate the customer’s right to withhold penalties when making settlements

The parties may agree that the customer has the right to withhold penalties and interest fines from final payments due to the supplier. In the case under review the penalty was withheld for a delayed delivery of goods. In judicial practice, such withholding has been repeatedly found legally acceptable and the situation in point is not an exception. Substantiating its opinion, the court referred to SACRF’s position.

Document: Decision of the Northwest District Court of Arbitration on case No. А56-43048/2015 dated 16 August 2016

Conclusion from judicial practice: Except as otherwise expressly provided in a contract, the penalty is charged for a delay in delivery of a consignment of goods as a whole, rather than a part of the consignment delayed in transferring to the customer.

A penalty agreement shall be signed in writing (Part 1, Art. 331 of CCRF). The written form of such an agreement shall be deemed observed if the parties include the penalty clause directly in a delivery contract. To this end, the contract shall provide for the following:

– cases and amount of penalty payment;
– cases and amount of interest fine payment;
– time until which the interest fine is accrued;
– payment of penalty for failure to perform part of an obligation.

The parties can also provide for a term whereby the customer may withhold a penalty from the amount payable for goods in case the supplier is in breach of the contract, or a term whereby the penalty payment obligation is cancelled by offsetting a counter claim.

If agreement on penalty for delayed performance of a money obligation is missing from the contract, the affected party may require payment of interest under Art. 395 of CCRF and recovery of incurred losses, having proved them.

If agreement on penalty for delayed performance of a nonmoney obligation (delayed delivery of goods, delayed handover of documents for goods etc.) is missing from the contract, the affected party may require payment of interest under Art. 395 of CCRF or may only demand compensation for incurred losses, having proved them.