THE CIVIL CODE
OF GEORGIA

BOOK ONE
GENERAL PROVISIONS OF THE CIVIL CODE

GENERAL PROVISIONS

Article 1. Concept. Scope of Application

This Code regulates property, family and personal relations of a private nature, based on the equality of persons.

Article 2. Civil Legislation

1. The Civil Code, other acts of private law, and interpretations thereof, shall conform to the Constitution of Georgia.
2. If legal norms of the same rank are in conflict, the special and the most recent law shall be applied. If general norms provided in this Code are in conflict with special norms, then the special norms shall be applied.
3. Sublegislative normative acts shall be applied to regulate civil relations only if they complement the norms of law. If such acts contravene the law, the law shall prevail.
4. Customary norms shall be applied only if they do not contravene universally recognized principles of justice and morality, or the public order.

Article 3. Entry of a Civil Law into Force

1. A law and sublegislative normative acts shall take effect only after their publication in an official organ for general familiarization according to the established rule.
2. Ignorance or misunderstanding of the law shall not be an excuse for not applying the law or for release from the liability stipulated by the law.
3. A law loses force if this is literally pronounced by a new law, or if a former law contravenes a new law, or if a new law encompasses the relation regulated by a former law, or if the relation regulated by a former law no longer exists.
4. A law of a general nature shall not repeal a special law unless such repeal was the direct intention of the legislator.
5. Repeal of a law that repealed a former law shall not reinstate the former law.

Article 4. Denial of Justice in Civil Proceedings Not Allowed

1. A court may not refuse to administer justice in civil cases, even if no legal norm exists or the legal norm is vague.
2. A court may not refuse to apply a law on the grounds that in its opinion a norm of the law is unjust or immoral.

Article 5. Analogy of Law and Justice

1. The legal norm regulating the most similar relation [to the one under consideration] shall apply to regulate a relation not literally prescribed by law (analogy of law).
2. In the event that it is impossible to use an analogy of law, then the relation shall be regulated on the grounds of the general principles of justice, as well as in accordance with requirements of fairness, good faith and morality (analogy of justice).
3. Norms regulating special relations (norms on exceptions) may not be applied by analogy.

Article 6. Retroactive Force of Laws

Laws and sublegislative normative acts shall not be retroactive except when literally so pronounced by law. A law may not be retroactive if it is prejudicial to or disadvantages a person.

Article 7. Objects of Private Law

An object of private legal relations may be a material or nonmaterial good, of property or nonproperty value, which has not been excluded from [commercial] circulation by law.

Article 8. Subjects of Private Law

1. Any natural or legal person may be a subject of private law relations. This rule applies to both entrepreneurial and nonentrepreneurial persons of Georgia and of other countries.
2. Private law relations between state bodies and legal persons of public law, on the one hand, and other persons on the other hand, shall likewise be regulated by civil laws unless these relations, in the interests of the state or the public, are to be regulated by public law.
3. Participants in a legal relationship shall be bound to exercise their rights and duties in good faith.

Article 9. Purpose of Civil Laws

Civil laws ensure the freedom of civil circulation [activity] on the territory of Georgia, unless the exercise of such freedom hinders the rights of third persons.

Article 10. Independence of Civil Rights from Political Rights. Imperative Norms of Civil Law

1. The exercise of civil rights shall not depend upon political rights regulated by the Constitution or by other laws of public law.
2. Participants in a civil relation may exercise any action not prohibited by law, including any action not directly foreseen by law.
3. Imperative norms of civil laws protect the freedom of others from the abuse of rights.¹ Actions that contravene these norms shall be null and void except when the law explicitly defines other effects. Individual interventions [in civil relations] through administrative acts shall be prohibited, unless these acts are applied on the grounds of a specific law.
¹ In other words, imperative norms, by constraining an actor from abusing his rights, protect the freedom of other persons.

TITLE ONE
PERSONS

CHAPTER ONE
NATURAL PERSONS

Article 11. Capacity to Have Rights [Passive Capacity]

1. The capacity for right of a natural person – the ability to have civil rights and bear duties – shall arise from the moment of the person’s birth.
2. The right to inherit shall arise upon conception; the exercise of this right shall depend upon birth.
3. The capacity for right of a natural person shall be terminated by his death. The moment of death shall be the moment at which the brain ceases functioning.
4. A natural person may not be deprived of his capacity for right.

Article 12. Legal Capacity [Capacity to Act]

1. The ability of a natural person to acquire and exercise his civil rights and duties in full by his will and action (legal capacity) shall arise upon the attainment of the age of majority.
2. A person of the age of majority – an adult – is one who has attained the age of eighteen years. 
3. A person who has entered into marriage before attainment of the age of eighteen years shall be deemed to have legal capacity.
4. A minor under the age of seven years (an infant) shall be deemed to be a person without legal capacity [a legally incapable person].
5. A person shall also be deemed to be a person without legal capacity when so declared by a court by reason of his mental retardation or mental illness. A statutory representative (guardian) shall exercise the rights of such a person.
6. In the event of recuperation or significant improvement in the health of an incapacitated person, a court shall declare him to have legal capacity.

Article 13. Limitation of Legal Capacity by Agreement Not Allowed

Limitation of legal capacity shall be allowed only in instances prescribed by law. In no case may the legal capacity of a person be limited by agreement [or by a transaction].

Article 14. Limited Legal Capacity

1. A minor from the age of seven to eighteen years is a person with limited legal capacity.
2. An adult over whom a court has established a curatorship shall also be deemed to be a person with limited legal capacity. A person of limited legal capacity and a minor are equal in their legal capacities.
3. Limitation of legal capacity ceases when the grounds for limitation of the legal capacity of the person no longer exist.

Article 15. Consent by Statutory Representative in Case of Limited Legal Capacity

A valid declaration of intent by a person with limited legal capacity is subject to the consent of his statutory representative, except when the person of limited legal capacity would acquire a benefit from the transaction.

Article 16. Limitation of Legal Capacity by Reason of Use of Alcohol or Narcotic Drugs

1. A court may establish curatorship over an adult who abuses alcohol or narcotic drugs and thereby puts his family in material hardship. He shall be entitled to conduct transactions to dispose of property, or to dispose of wages, pension or other income, only with the consent of his curator, except in the case of petty domestic transactions [which he may do without such consent].
2. Restoration of legal capacity in full shall cause removal of the curatorship.

Article 17. Right to a Name

1. Every natural person has the right to a name that includes a given name and a surname.
2. Change of name is allowed. Change of name shall require the application of the person stating the grounds for change, to be considered by the appropriate body according to the established rule.
3. A change of name shall not be an excuse for either termination or alteration of the rights and obligations acquired under the former name. The person shall be bound to undertake all necessary actions to notify his creditors and debtors of the change of his name.

Article 18. Personal NonProperty Rights

1. A person whose right to a name is contested, or whose interests are impaired through unauthorized use of his name, shall be entitled to demand that the wrongdoer cease or refrain from such action.
2. A person is entitled to demand in court the retraction of information that defames his honor, dignity, privacy, personal inviolability or business reputation unless the person who has disseminated such information can prove that it corresponds to the true state of affairs. The same rule applies to the incomplete dissemination of facts, if such dissemination defames the honor, dignity or business reputation of a person.
3. If information defaming the honor, dignity, business reputation or private life of a person has been disseminated in the mass media, then it must be retracted in the same media. If such information is contained in a document issued by an organization, then this document must be corrected and the concerned parties must be informed of the correction.
4. A person whose honor and dignity has been defamed by information disseminated in the mass media shall be entitled to disseminate information in answer to the defamation through the same media of information.
5. A person may likewise exercise the rights described in paragraphs (1) and (2) of this Article when his image (photograph, film, video etc.) has been disseminated without his consent. The consent of the person is not required when phototaking (video recording etc.) is in connection with his public notoriety, the office he holds, the requirements of justice or law enforcement, scientific, educational or cultural purposes, or when the phototaking (video recording etc.) has occurred in public circumstances, or when the person has received remuneration for posing.
6. The protection of the good [i.e. human values such as honor, dignity and privacy] referred to in this article shall be exercised regardless of the culpability of the wrongdoer. And if the violation has been caused by culpable action, a person may claim damages (compensation for harm). Damages may be claimed in the form of the profit that accrued to the wrongdoer. In the case of culpable violation, the injured person may also claim compensation for nonproperty (moran( �/span> damage. Moral damages may be recovered independently from the recovery of property damages.

Article 19. Protection of Personal Rights after Death

The rights referred to in Article 18 may also be exercised by a person who, although not the bearer of the name or the right to personal dignity himself, nevertheless has an interest [in it] deserving protection. He may exercise the right to demand such protection of the name and dignity [of the person] which determines the essence of the person and continues to exist as well after death. It shall not be allowed to claim compensation for property damage for defamation of the name, honor, dignity or business reputation of a person after his death.

Article 20. Place of Residence

1. The place where a natural person chooses his ordinary dwelling is deemed to be the place of residence of the person. The person may have several places of residence.
2. The place of residence of parents having parental rights is deemed to be the place of residence of a minor, and the place of residence of a guardian is deemed to be the place of residence of the ward.
3. The place of residence of a person is not cancelled if he leaves this place under compulsion, or for performance of a state duty for a certain period of time.

Article 21. Person Declared to be Missing

1. A court, on the petition of an interested person, may declare a natural person to be missing if his whereabouts are unknown and he has not appeared at his own place of residence for two years. Upon the entry into force of the court’s decision, the legal heirs of the missing person shall obtain the power to administer the property of the missing person as property held in trust, including the receipt of profits [benefits] from it. From this property, maintenance shall be paid to the missing person’s dependents and debts shall be paid off.
2. If the missing person reappears, or if his whereabouts become known, the court decision on the administration of his property shall be vacated. He shall not be entitled to demand compensation for the benefits received by proper management [of his property during his absence].

Article 22. Declaration of Death of a Person

1. A person may be declared dead by the ruling of a court, if for five years there has been no information at his place of residence on his whereabouts, and likewise if he disappeared under circumstances threatening his death, or if his death may be presumed because of some unfortunate accident, and no information to the contrary has been obtained for six months.
2. A member of the armed services or other person who disappeared in connection with wartime operations may be declared dead by a ruling of the court not earlier than two years after the day on which war operations ended.
3. The day of entry into legal force of the court decision declaring the person dead shall be considered to be the day of his death.
4. In the cases referred to in paragraphs (1) and (2) of this Article, a court may declare that the day of a person’s death is the day of his presumed death.

Article 23. Effect of Reappearance of a Person Declared Dead

1. If a person who has been declared dead reappears, or if his whereabouts become known, the court shall vacate its decision regarding the person’s death.
2. Regardless of the time of reappearance, the person shall be entitled to recover any remaining property that has been gratuitously transferred to another person following the declaration of his death.
3. A person who has paid to acquire the property of a person that was declared dead shall be bound to return this property to him, if it is proved that at the time of acquisition of the property the acquirer knew that the person declared dead was in fact alive.
4. If the property of the person declared dead was transferred to the [state] treasury and subsequently sold by it, then after revocation of the court decision declaring the person dead the proceeds of the sale of his property by the treasury shall be returned to him.

CHAPTER TWO
LEGAL PERSONS
I. General Provisions

Article 24. Concept. Types

1. A legal person is an organized entity, created for the accomplishment of a certain object and having its own property under its ownership, that is independently liable with its own property, acquires rights and duties in its own name, makes transactions and can sue or be sued.
2. A legal person may be organized as a corporation, based on membership, dependent or independent upon the status of its members, and engaged or not engaged in entrepreneurship.
3. Legal persons of public law participate in civil law relations in the same manner as legal persons of private law. The procedure of their creation, organization and functioning shall be regulated by law.
4. The state participates in civil law relations like a legal person of private law. In this respect the powers of the state shall be exercised by its organs (ministries, state departments, etc.), such that they do not constitute [individual] legal persons.

Article 25. Capacity for Right [Passive Capacity] of a Legal Person

1. A legal person of public law is entitled to engage in an activity corresponding to the purposes prescribed by law or provided for in its founding documents.
2. A legal person of private law (entrepreneurial or nonentrepreneurian( �/span> is entitled to engage in any activity not prohibited by law, regardless of whether or not this activity is provided for in its charter.
3. A legal person may engage in certain kinds of activities, the list of which is determined by law, only on the basis of a special permit [license]. The right of a legal person to engage in such activity shall arise from the moment the license is received.
4. The capacity for right of a legal person shall arise from the moment of its registration and shall cease to exist from the moment that the completion of its liquidation is registered.

Article 26. Name of a Nonentrepreneurial Legal Person

1. A nonentrepreneurial legal person shall have a name that includes the indication of its organizationaljuridical form. The firm name of an entrepreneurial legal person shall be regulated by the Law on Entrepreneurs.
2. A person who unlawfully uses the name of another legal person is bound to cease such use on demand of the entitled person and to compensate the damage caused by the unlawful use.
3. In the case of defamation of honor, dignity or business reputation of a legal person, the rules of Article 18 shall apply.

Article 27. Domicile of a Legal Person

1. The place where the administration of a legal person is situated shall be deemed to be the domicile of the legal person. A legal person may have only one domicile (legal address).
2. Any other residence of a legal person shall be deemed to be the domicile of its branch.

Article 28. Branch of a Legal Person

1. A branch of a legal person − a separate subdivision situated outside the domicile of the legal person − represents and exercises the functions of the legal person in whole or in part.
2. A branch is not a legal person. It functions on the basis of an act [charter, legal document] affirmed by the legal person.

Article 29. Entrepreneurial (Commercian( �/span> Legal Persons

A legal person whose object is entrepreneurial (commercian( �/span> activity must be created in accordance with the Law on Entrepreneurs.

Article 30. NonEntrepreneurial (Noncommercian( �/span> Legal Persons

1. A legal person whose objective is not entrepreneurial activity may exist as a union (association) or as a foundation. Entrepreneurial activity that is of an auxiliary nature and serves to accomplish a common goal does not alter the [fundamental] nature of a noncommercial legal person. The distribution of profits resulting from such activity among members of a union or among contributors to a foundation shall not be allowed.
2. A union is a legal person in which a number of persons set a common goal, and its existence is independent from changes in its membership. At least five founding members shall be required to constitute a union.
3. A foundation is a legal person in which one or more founders transfers a special property to the ownership of an independent subject having no membership, for the accomplishment of a useful, common and public purpose.

II. Norms Common to Unions and Foundations

Article 31. Registration of a Union and a Foundation

1. A union shall be subject to registration by a court, and a foundation shall be subject to registration by the Ministry of Justice.
2. The right to demand registration exists when the charter conforms to the provisions of law, and the objectives of the legal person, filed for the registration, do not contravene the law, recognized moral standards or constitutionaljuridical principles of Georgia. In the case of a foundation the property shall correspond to the objectives set.
3. An application and charter signed by all founders and all members of the governing board are necessary for registration. The materials necessary for registration of a union shall be filed with the court [having jurisdiction over] the location of the residence of the union.
4. The court shall decide on the registration within one month from the day of filing of the application. If within this term no decision is made, the registration shall be deemed effective. The same rule applies when the registration is to be carried out by the Ministry of Justice.
5. The court’s refusal to register [a union] must be grounded on cause and provide for the possibility of appeal and the rule thereof. The appeal against the refusal may be filed with a court.

Article 32. The Charter of a Union and a Foundation

1. The organization and structure of a union and a foundation shall be regulated by a charter.
1. The charter shall include:
1. Objectives of the activity;
2. The name [of the organization];
3. The domicile (legal address);
4. The procedure for property liquidation and distribution;
5. The name, surname, date and place of birth, occupation and place of residence of each founder, contributor and member of the governing board of the union or the foundation, procedure for calling board meetings and making decisions at such meetings;
6. Authority [powers] of union members.
1. The charter may include other information as well, namely:
1. The functions of other bodies of management and control;
2. The competence of the [General] Meeting of the union members.
1. The charter of a foundation, in addition to the information referred to in paragraph (2) of this article, shall include:
1. The minimum amount and type of contributions;
2. Instructions on use of the amount;
2. The charter shall be notarized.

Article 33. Registration Data

1. The registration document [record] of a union and a foundation shall include the following information: name and domicile of the legal person, the object of its activity, the date of confirmation of the charter, the identity of the founders, the identity of the members of the governing board, and possible limitations on their representational authority.
2. Registration data shall be published.
3. Any person may examine the records in the register and demand its written extracts.

Article 34. Registration of Changes

The governing board shall immediately file changes [to the entity’s data] requiring registration with a court (Ministry of Justice) in notarized form. These alterations shall be entered in the register and published.

Article 35. State Supervision Over Activities of Union and Foundation

A court (the Ministry of Justice) shall revoke the registration of a union or a foundation [as the case may be] if it has actually turned to entrepreneurial activity or if accomplishment of the objectives provided for in the charter has become impossible.

Article 36. Leadership and Representation

1. The right of leadership [direction] is vested in the members of the governing board and, in individual cases, in special representatives, and this simultaneously becomes their duty.
2. Limits on the leadership shall be defined by the charter in accordance with the objectives of a union or a foundation.
3. The charter may provide that one person will exercise all authority individually, or it may establish joint direction by two or more persons.
4. The charter may provide whether the engaging in some activities requires the consent of other controlling bodies [of the entity].

Article 37. Competence of the Governing Board in Relations with Third Persons

1. The governing board represents a union or a foundation in its relations with third persons. The charter shall regulate whether the persons given representational authority may act individually, jointly between some of them, or jointly between all of them.
2. Representational authority may be limited by the charter. These limitations shall have legal force visàvis third persons only if the limitations have been recorded in the register, except where the third persons knew of these limitations.
3. The charter may establish a special representative of a union or a foundation. The charter shall regulate the limits of his representational authority and the form of representation, which shall also be registered.

Article 38. Compensation for Damage

1. A union or a foundation shall be liable for damages sustained by third persons as a result of culpable action by a member of the governing board, or other agent [representative], in the course of performing his duties.
2. Persons authorized to represent the union or foundation shall conduct the entity’s affairs conscientiously [in good faith]. If they fail to perform this duty, they shall be liable before the union or the foundation for the damage caused thereby. The union or foundation may not refuse to demand damages if necessary for the satisfaction of the claims of third persons.
3. A union or a foundation shall not be liable for the obligations of its members. Likewise, the members shall not be liable for the obligations of the union or the foundation.

Article 39. Reorganization and Liquidation of Union and Foundation

1. Reorganization (merger, accession, division, spinoff, transformation) of a union or a foundation shall be carried out according to the procedure prescribed by law.
2. Liquidation of a union or a foundation occurs under the circumstances provided for in the charter; as a result of accomplishment of the object of the entity; or upon bankruptcy of the entity or revocation of its registration.
3. During liquidation of the entity the current affairs shall be concluded; claims ascertained; remaining property valued in monetary terms; the [claims of] creditors satisfied; and the remaining property distributed among entitled persons.
4. The persons entitled to the distribution of the property may be defined in the charter. [Otherwise] court or the Ministry of Justice [as the case may be] shall transfer the remaining property to one or several unions or foundations that promote the same or similar objectives as those of the union or the foundation being liquidated. If no such organizations exist, then a decision may be made on transfer of the remaining property to [another] charitable organization or to the state.
5. Information on the liquidation of the entity shall be made public. The property may be distributed one year after publication of the liquidation notice.
6. Liquidation is conducted by the governing board of the entity. In extraordinary circumstances, a court (or the Ministry of Justice) may appoint other liquidators. The liquidators are liable in the same manner as the members of the governing board.

III. Special Norms on Unions

Article 40. Governing Board

1. The Governing Board shall be elected by the [General] Meeting of the members for a term of four years, unless otherwise provided for in the charter of the entity. After expiration of this term, the powers of the Governing Board remain effective until the election of a new Board. The charter of the union shall also establish rules regarding the remuneration of the members of the Governing Board.
2. Decisions on election of members to the Governing Board may be revoked at any time. The charter may provide for significant grounds related to the revocation [of the authority of Board members].
3. If the Governing Board has fewer than the minimum number of members required by the charter, then the court may designate members from the same union [to occupy the vacant slots] during a transitional period. In this case, the members of the Board shall call a General Meeting of the members of the union to make the final decision on Board membership.

Article 41. General Meeting of the Members of a Union

1. The General Meeting of the members is convened by the Governing Board at least once per year, or when the union’s interests so require. A General Meeting may be convened by the written request of onetenth of the members, which shall indicate the agenda of the meeting.
2. Each member shall be notified of the convening of the Meeting either in writing or by the publication of a notice in the printed periodical of the union no later than two weeks before the Meeting.
3. The Meeting of the members makes decisions on all matters outside the competence of the Governing Board. A decision of the Meeting is valid only when an entry with respect to that matter appeared on the agenda included in the notice at the time of calling the Meeting.
4. A decision of the Meeting is made by a majority of the votes of members present and a decision on alteration of the charter by a majority twothirds of such votes. A majority of fourfifths of the votes of all members of the union shall be required to alter the purpose of the union. Members who cannot be present at the meeting may submit their votes in writing. Such members shall have equal status to the members present at the meeting [i.e. for purposes of quorum and voting].

Article 42. Commissions

The General Meeting of members may establish commissions in accordance with the charter, and delegate to them the powers of the Meeting during periods between the Meetings, especially for supervising the activities of the union. Only members of the union may be members of such commissions.

Article 43. Advisory Bodies

In the process of carrying out the objectives of the union, the General Meeting of the members may establish special advisory boards, if so provided in the charter. A person who is not a member of the union may be a member of such an advisory group.

Article 44. Union Membership

1. The Governing Board admits members to the union on the basis of written applications by interested persons, or in other cases provided for in the charter.
2. Each member is entitled to withdraw from the union. The charter may provide for a certain period of time for withdrawal, which period may not exceed one year. If a member seeks to leave the union for a legitimate reason, then there is not a requirement for a period of time for withdrawal.
3. Membership may not be transferred to or inherited by other persons unless otherwise provided for in the charter.
4. In such cases as may be provided for in the charter, or if significant grounds exist, the General Meeting of the members may expel a member from the union. The expelled member may file an appeal against the decision to expel him with a court. 
5. If a union serves a significant function in meeting the vital social or other needs of a person interested in joining, then such person is entitled to demand admission to the union, unless his admission would contravene the fundamental principles of the union.

Article 45. Nonregistered Union [Unincorporated Association]

1. Matters concerning the organization and structure of a nonregistered union [unincorporated association] are defined by the mutual agreement of its members. A nonregistered union shall not be considered a legal person.
2. Membership fees or property acquired with such fees constitute the common property of the union.
3. A nonregistered union may be represented in court or in extrajudicial relations by its members, or by persons so authorized.
4. The claims of creditors may be satisfied from the common property of the [nonregistered] union. In addition, persons who have acted on behalf of the union shall be liable as obligors [debtors] both individually and jointly.

IV. Special Norms on Foundations

Article 46. Foundation for Recipients²

The objective of a foundation, in addition to the objectives defined in paragraph (3) of Article 30, may also be the support of certain persons or specifically defined groups of persons. All persons who are entitled to receive a share from the property of the foundation (recipients) may, subject to the consent of all members of the Governing Board, dissolve the foundation or alter its objective, provided the Ministry of Justice agrees as well.

Article 47. Obligation to Contribute to a Foundation

1. A founder (founders) shall assume liability, in the form of a notarized document creating the foundation, to contribute property to the foundation in the amount required to accomplish the purpose of the foundation. If the property is inadequate, the registration of the foundation shall be refused.
2. Refusal to transfer the [indicated] property to the foundation may occur at any time before registration of the foundation. Within one month after registration, the property shall be transferred in full; otherwise the registration shall become invalid.
3. The objectives of the foundation shall be financed from the income derived from its property, unless otherwise provided for in the charter. If for a certain period of time this income is not sufficient, then the activity of the foundation shall be reduced or suspended, and the income shall be added to the property of the foundation.
4. A report on the condition [state] of the property of the foundation shall be prepared annually, in an appropriate form.

Article 48. Supervisory Body

1. The charter may provide for establishment of a Supervisory Body (Board of Trustees), the members of which are selected by the Founders of the foundation, for the purposes of appointing, recalling, and supervising the Governing Board and special representatives. After the death of the Founders, new members may be added to the composition of the Supervisory Body, by the Recipients or within the limits defined in the charter (rule of “cooptation”).
2. In all other cases the Ministry of Justice ensures that the foundation is administered according to the law and its charter. The Ministry of Justice may obtain information on the activity of the foundation and examine its documentation.
3. The Supervisory Body (Board of Trustees) may suspend, declare invalid or demand revocation of the decisions and undertakings of the Governing Board if they contravene the law or the foundation’s charter.
4. The Supervisory Body ensures that the appointment of the Governing Board and other bodies conform to the charter. If the charter fails to regulate these relations, the Supervisory Body may issue additional instructions.

Article 49. Alteration of the Object of a Foundation

If the purpose of the foundation cannot be accomplished without Recipients, or if other grounds for the liquidation of the foundation exist, then the Ministry of Justice may, provided the charter does not otherwise address this issue, demand the alteration of the purpose of the foundation instead of liquidation, or the Ministry may, preserving the similarity with the initial purpose, carry out the

merger of the foundation with other foundations; and if any of the Founders is alive, his consent thereto shall be required.

TITLE TWO
TRANSACTIONS

CHAPTER ONE
GENERAL NORMS

Article 50. Concept

A transaction is a unilateral, bilateral or multilateral declaration of intent aimed at creating, changing or terminating legal relations.

Article 51. Validity of Unilateral Declaration of Intent

1. A declaration of intent that requires acceptance by the other party is considered effective [“real”] from the moment it reaches the other party.
2. A declaration of intent is not considered to be effective [or actual] if the other party rejects it in advance or contemporaneously.
3. The validity of the declaration of intent may remain unaffected by the death of the party to the transaction or by the loss of his legal capacity, if these events occurred after the declaration of intent.³
³ It appears that the “party to the transaction” referred to is the declarant, even though it is hardly likely that the declarant could have declared his intent after death. Because a declaration of intent is valid only when it reaches the target recipient, then it could not be valid if the target recipient died after the declaration but before the receipt. Accordingly, a declaration of intent remains valid even if the declarant dies or becomes legally incapacitated after making it.

Article 52. Interpretation of the Declaration of Intent

In interpreting the declaration of intent, the intention shall be ascertained as a result of reasonable deliberation, and not only from the literal meaning of its wording.

Article 53. Nonexistence of a Transaction when its Content Cannot be Ascertained

A transaction shall not exist when its content cannot be ascertained from its form of expression or from other circumstances.

Article 54. Unlawful and Immoral Transactions

A transaction, that violates rules and prohibitions determined by law, or that contravenes the public order or principles of morality, is void.

Article 55. Voidness of a Transaction by Reason of Abuse of Power

1. A transaction may be deemed void if the performance stipulated by the transaction is clearly disproportionate to the consideration in exchange for this performance, and the transaction has been made solely because one of the parties to the contract maliciously abused his market power or exploited the hardship or inexperience (naivete) of the other party.
2. A transaction that has been made by the abuse of influence of one party over the other party, when their relations are based on exceptional confidence, is void.

Article 56. Sham and Fraudulent Transactions

1. A transaction that has been made only for the sake of appearances, without the intent to create legal consequences corresponding to its terms, is void (sham transaction).
2. If, by making a sham transaction, the parties intended to conceal another transaction, then the rules applicable to concealed transactions shall apply (fraudulent transaction).

Article 57. Voidness of a Transaction when the Declaration of Intent is not Serious

1. A declaration of intent that has been made not seriously (humorously), under the presumption that the nonseriousness of the declaration would be recognized, is void.
2. A recipient of a declaration of intent shall be compensated for damages resulting from the fact that he trusted the seriousness of the declaration, provided he did not know and could not have know of its nonseriousness.

Article 58. Voidness of a Transaction For Lack of Legal Capacity or Mental Disorder

1. A declaration of intent is void when made by a minor (lacking legal capacity) or by a person who has been declared legally incapable by a court.
2. A declaration of intent made during a loss of consciousness or temporary mental disorder may be deemed void.
3. A declaration of intent made by a mentally ill person is void when the declaration is inconsistent with a correct perception of the reality of the situation, even if the court has not declared the person legally incapable.

Article 59. Transaction Made Without Observance of the Form

1. A transaction is void when it is made without observance of the form provided for by law or in the contract, and, likewise, a transaction is void when made without permission, if permission is required for the transaction.
2. If a voidable transaction is rescinded, then it is void from the moment of its execution. Rescission is declared to the other party to the contract.
3. An interested person holds the right of rescission.

Article 60. Conversion of Transaction

If a void transaction satisfies the requirements established for another transaction, then the latter transaction shall be considered valid, provided that the parties, upon detecting that the [first] transaction is void, wish it [the second transaction] to be valid.

Article 61. Significance of Confirmation when a Transaction is Void

1. An indisputably void (absolutely nuln( �/span> transaction is deemed void from the moment of its making.
2. If a person [who has made] an indisputably void transaction confirms it, then his action [in confirming it] is considered as the making of the transaction anew.
3. If the person having the right to rescind confirms the transaction, he thereby loses the right to rescind.
4. If the parties confirm an indisputably void bilateral transaction, then they are bound, when in doubt, to transfer to each other everything that would have accrued to them if the transaction had been valid initially.
5. The confirmation shall be valid only if the contract or the transaction does not contravene the principles of morality and the requirements of public order.

Article 62. Voidness of a Part of a Transaction

Voidness of a part of a transaction shall not cause the voidness of other parts thereof, if it is likely that the transaction would have been made even without the void part.

CHAPTER TWO
LEGAL CAPACITY AS A CONDITION FOR VALIDITY OF TRANSACTIONS

Article 63. Transaction Made by a Minor

1. If a minor makes a bilateral transaction (contract) without the required consent of his statutory representative [“legal representative”], then the validity of the transaction depends upon whether the representative subsequently approves it or not, except when the minor acquires a benefit by the transaction.
2. If a minor becomes a person with legal capacity, he decides himself the validity of his own declaration of intent.

Article 64. Repudiation of a Transaction Made by a Minor

1. Prior to the [statutory representative’s] approval of a contract made by a minor, the other party is entitled to repudiate the contract.
2. If the other party knew of the minority of the person, then he may repudiate the contract only if the minor deceived him by claiming that consent from the statutory representative had been received.

Article 65. Emancipation of a Minor

1. A contract entered into by a minor without the consent of his statutory representative is deemed to be valid if the minor has performed his part of the contract with means given to him, for this purpose or for his free disposal, by the representative or, with the latter’s consent, by a third party.⁴
2. If the statutory representative gives the right to independently manage an enterprise to a minor who has attained sixteen years of age, then the minor thereby acquires full legal capacity in relations routine for this field of activity. This rule applies to the establishment and the liquidation of the enterprise, as well as to the commencement and completion of labor relations.
3. The statutory representative may give consent for management of the enterprise only with the concurrence of the guardianship and curatorship agency.
⁴ See German Civil Code § 110.

Article 66. Voidness of a Transaction Made Without the Required Consent of the Representative

A unilateral transaction made by a minor without the required consent of the statutory representative is void. Such a transaction is likewise void if there has been consent by the statutory representative, but the minor failed to present a written document confirming it, and for this reason the other party repudiates the transaction without delay. Such repudiation shall not be allowed if the other party has been informed of the statutory representative’s consent.

Article 67. Obligation of Permission Prior to Limitation of Legal Capacity

A transaction made prior to the limitation of legal capacity requires permission [of the statutory representative] if it is established that the grounds for which legal capacity has been limited obviously existed at the time of making of the transaction.

CHAPTER THREE
FORM OF TRANSACTION

Article 68. Significance of Form for the Validity of a Transaction

The validity of a transaction requires the observance of the form prescribed by law. If no such form is prescribed, the parties may themselves determine it.

Article 69. Types of Form

1. In the case of a simple written form of a contract, the signatures of the parties to the transaction shall be sufficient for the validity of the transaction.
2. Renewal, reproduction or imprinting of a signature by mechanical means is allowed in cases where it is accepted as custom, namely in the affixing of signatures on securities issued in large numbers.
3. If the form of a transaction requires notarial authentication, then the authentication is made by a notary, a judge or other person prescribed by law.

Article 70. Entrusting Signature to Another Person

A person who, as a result of illiteracy, physical defect or illness, cannot sign a transaction in his own signature, may entrust the signature on the transaction to another. The signature of the latter shall be officially authenticated. In addition, the reason shall be indicated for which the person making the transaction was unable to affix his own signature.

Article 71. Making A Transaction by Drawing Up Several Documents [Counterparts]

If a transaction is made by drawing up several documents of the same content, it is sufficient that each party affixes his signature to that copy of the document which is intended for the [other] relevant party.⁵

CHAPTER FOUR
VOIDABLE TRANSACTIONS

I. Transactions Made by Mistake

Article 72. Concept

A transaction may become voidable if the declaration of intent has been made on the basis of a substantial mistake.⁶

Article 73. Types of Substantial Mistake

A mistake is deemed substantial when:

a.

A person intended to make a different transaction than that to which he gave his consent;

b.

A person was mistaken about the content of the transaction that he intended to make;

c.

The circumstances, which the parties considered to be the grounds for the transaction according to principles of good faith, do not exist.

Article 74. Mistake with Respect to the Identity of a Contracting Party

1. Mistake with respect to the identity of a contracting party is deemed substantial only when the identity of the contracting party itself or consideration of its personal characteristics is the principal foundation for making the transaction.
2. Mistake with respect to basic characteristics of a thing is deemed substantial only when these characteristics are significant in determining the value of the thing.

Article 75. Mistake with Respect to a Right

Mistake with respect to a right is deemed substantial only when that right has been the sole and principal foundation for making the transaction.

Article 76. Mistake with Respect to a Motive of a Transaction

Mistake with respect to a motive of a transaction shall not be deemed substantial, except when motive was the subject of the agreement.

Article 77. Consent of a Contracting Party in Transactions Made by Mistake

A declaration of intent made by mistake shall not be voidable if the other party agrees to perform the transaction according to the wish of the party that intends to make the transaction voidable. 

Article 78. Petty Mistakes

Petty mistakes in computations or in a written declaration of intent give rise to the right only to correct the mistake, and not to rescind.

Article 79. Validity of Rescission

1. Rescission shall be declared within one month from the moment at which the grounds for the rescission were detected.
2. If a transaction has become voidable and the mistake has been caused by the negligence of the person entitled to rescind, then he shall be bound to compensate the other party for the harm caused as a result of the voidness of the transaction. The obligation to compensate shall not arise if the other party knew of the mistake, or it was unknown to him due to his negligence.

Article 80. Mistake Caused by an Intermediary

A declaration of intent that has been wrongly communicated by a person employed as an intermediary may become voidable on the same conditions as a transaction made by mistake according to Article 73.

II. Transactions Made by Deceit

Article 81. Concept

1. If a person has been deceived for the purpose of inducing him to make a transaction, then he is entitled to demand voidance of the transaction. Voidance shall occur when it is evident that the transaction would not have been made without the deceit.
2. If one party keeps silent with respect to circumstances, which if the other part had known them he would not have declared his intent to enter into the transaction, then the deceived party may demand voidance of the transaction. The obligation to disclose circumstances with respect to a transaction exists only when the other party expected it in good faith.

Article 82. Transaction rendered Void by Reason of Deceit

When rendering a transaction void, it is of no importance whether the party, by communicating the wrong information, intended to gain some advantage or to inflict injury on the other party.

Article 83. Deceit by a Third Person

1. In the event that a third party has committed the deceit, the demand for voidance of the transaction may be made if the party benefiting from the transaction knew or ought to have known of the deceit.
2. If both parties to the transaction have acted deceitfully, then neither of them is entitled to demand voidance of the transaction or compensation for damages on the grounds of deceit.

Article 84. Limitation Period for Rescission

A transaction made by deceit is voidable within one year. The period shall be computed from the moment at which the party entitled to rescind detected the existence of the grounds for rescission. 

III. Transactions Made by Duress

Article 85. Concept

The use of duress (violence or threats) for the purpose of making a transaction shall entitle the person subjected to the duress to demand voidance of the transaction, even when a third person has exercised the duress.

Article 86. Nature of Duress

1. Voidness of a transaction is justified by such duress that by its nature may influence a person and inspire a fear of real injury to his person or property. 
2. In assessing the nature of duress, the age, sex and life circumstances of persons are taken into consideration.

Article 87. Duress Directed against the Near Relatives of a Person

Duress likewise constitutes grounds for voidness of a transaction when it is directed against the spouse, other family members or near relatives of one of the parties to the transaction.

Article 88. Duress by Lawful Means

Actions exercised neither for illegal purposes nor by using illegal means shall not be deemed to be duress under Articles 8587, except in those cases when the means [of influencing the person] and the purpose [of the influence] do not coincide.

Article 89. Limitation Period for Rescission

A transaction made by duress is voidable within one year from the moment at which the duress ended.

CHAPTER FIVE
CONDITIONAL TRANSACTIONS

Article 90. Concept

A transaction is deemed conditional when it depends upon a future or uncertain event, so that the performance of the transaction is either postponed until the occurrence of the contingency, or the termination of the transaction is timed to coincide with the occurrence of the contingency.

Article 91. Voidness of Unlawful and Immoral Condition

A condition that contravenes the provisions of law or the principles of morality, or the performance of which is impossible, shall be void. A transaction that depends upon such a condition shall be void in full.

Article 92. Condition Dependent upon Will

A condition is deemed to be dependent upon the will when its occurrence or nonoccurrence depends only upon the parties to a transaction. A transaction made on condition of will is void.

Article 93. Positive Condition

1. When a transaction is made on the condition that some event will occur within a certain period of time, then the condition will be deemed legally ineffective if this period of time has elapsed and the event has not occurred.
2. If no period of time is fixed, then the condition may be fulfilled at any time. The condition may be considered invalid when it is obvious that the occurrence of the event is already impossible.

Article 94. Negative Condition

1. When a transaction is made on the condition that some event will not occur within a certain period of time, then the condition is deemed fulfilled if this period of time has elapsed without occurrence of the event. The condition is also deemed fulfilled when prior to the complete lapse of the period, it is obvious that the event will not occur.
2. If no period of time is fixed, then the condition is deemed fulfilled only when it is obvious that the event will not occur.

Article 95. Influencing the Occurrence of the Condition Not Allowed

1. A person who has made a transaction contingent upon a certain condition has no right to perform, prior to the occurrence of the condition, any action that may hinder the performance of his obligation.
2. If the condition occurs at a certain time, and the person has already performed such action, then he is bound to compensate the other party for the damage caused thereby.

Article 96. Transaction on a Condition of Postponement

A transaction on the condition of postponement is deemed to be made if the creation of rights and duties stipulated by the transaction depends upon a future or uncertain event, or upon an event that has already occurred but is yet unknown to the parties.⁷

Article 97. Transaction on a Condition Subsequent

A transaction on the basis of a condition subsequent is deemed to be made when the occurrence of this condition causes termination of the transaction, and the state of affairs that existed prior to making of the transaction is restored.⁸

Article 98. Significance of Good Faith With Respect to Occurrence of the Condition

1. If the party for whom the occurrence of the condition is unfavorable intentionally delays its occurrence in bad faith, then the condition shall be deemed to have occurred.
2. If the party for whom the occurrence of the condition is favorable intentionally promotes its occurrence in bad faith, then the condition shall not be deemed to have occurred.

CHAPTER SIX
CONSENT IN TRANSACTIONS

Article 99. Concept

1. If the validity of a transaction depends upon the consent of a third person, both the consent and the rejection thereof may be declared to either party to the transaction.
2. The consent need not be in the form prescribed for the transaction.
3. If a transaction the validity of which depends upon the consent of a third person has been made

nd rd 9

with the consent of that person, then the 2and 3sentences of Article 66 shall apply accordingly.

Article 100. Consent Granted in Advance (Permission)

Consent granted in advance (permission) may be revoked prior to the making of a transaction unless otherwise agreed by the parties. Both parties shall be notified of the revocation of the consent ( permission). ¹⁰

Article 101. Subsequent Consent (Approvan( �/span>

Subsequent consent (approvan( �/span> shall be retroactive to the moment of the making of the transaction, unless otherwise established.

Article 102. Disposition of a Thing by an Unauthorized Person

1. Disposition of a thing by an unauthorized person is valid provided it is done with the prior consent of the authorized person. ¹¹
2. The disposition becomes valid if [subsequently] approved by the authorized person. ¹²

CHAPTER SEVEN
AGENCY IN TRANSACTIONS

Article 103. Concept

1. A transaction may be made through an agent [or “representative”] as well. The authority of an agent may arise either by operation of law or out of a mandate [power of attorney].
2. This rule shall not apply when, proceeding from the nature of a transaction, it must be performed [“entered into”] by a particular person, or whenever the law prohibits the making of a transaction through an agent.

Article 104. Agency and the Effects of a Transaction on an Addressee

1. A transaction made by an agent within the scope of his authority, and for and on behalf of the person represented by him [the principal], shall give rise only to the rights and obligations of the principal.
2. When a transaction is made for and on behalf of another person, then the other party to the transaction may not resort to the absence of the agent’s authority, if the principal has created such circumstances that the other party to the transaction believed in the existence of such authority in good faith. 
3. If, when making a transaction, an agent failed to indicate his authority of agency, then the transaction shall have legal consequences for the principal, only if the other party ought to have presumed the existence of the agency [from the circumstances]. The same rule shall apply when for the other party it does not matter with whom he makes the transaction.

Article 105. Limited Legal Capacity of an Agent

A transaction made by an agent is valid even if the agent was a person with limited legal capacity.

Article 106. Defect of Declaration of Intent in Agency

1. When a transaction is voidable by reason of a defect in the declaration of intent, the declaration of intent of the principal shall prevail.
2. If the defect in the declaration of intent relates to circumstances determined by the principal in advance, then this defect may give rise to the right to rescind only if the defect was caused by the principal. ¹³

Article 107. Authority of Agency

1. Authority (power of attorney) is conferred by a declaration of intent made towards the person who is given the power of attorney, or towards a third person with respect to whom the agency will be exercised.

¹¹ Compare German Civil Code § 185(1): “Disposition affecting an object which is made by a person without title, if
made with the approval of the person entitled, is valid.”
¹² Compare German Civil Code § 185(2). Disposition is valid if ratified by the person entitled.
¹³ Compare German Civil Code § 166.

2. The declaration of intent [for conferring authority on an agent] need not be in the form prescribed for making the transaction to which the power of attorney relates. This rule shall not apply when a special form [for the power of attorney] is predetermined. ¹⁴

Article 108. Obligation of Notification Upon Altering the Authority

Third persons shall be notified of alterations to the authorization and its revocation. In case of nonperformance of this requirement, such alterations and revocation of authority shall not be valid in the face of third persons, except when [such persons] knew or ought to have known of the alterations or revocation when making the transaction.

Article 109. Grounds for Termination of Authority

Representational authority is extinguished by:

a.

The expiration of the term for which the authority was conferred;

b.

Renunciation of the authority by the [agent];

c.

The revocation of the authority by the person who conferred it;

d.

The death of the person who conferred the authority or the occurrence of his legal
incapacity, unless otherwise provided for by agreement;

e.

Performance [of the authorized transaction].

Article 110. Obligation of Agent upon Extinguishment of Authority

Upon extinguishment of his authority, an agent shall return the instrument of authority to the person who conferred it. He has no right to keep the instrument.

Article 111. Making a Transaction Without Representational Authority

1. If a person without representational authority makes a transaction for and on behalf of another person, the validity of this transaction depends upon the [ratification] of the principal.
2. If the other party demands [ratification] from the principal, then only he [the other party] need be notified of the ratification. The ratification may be given within two weeks from [receipt of] a demand [for it]; otherwise the demand for ratification shall be deemed to be rejected. ¹⁵

Article 112. Right to Repudiate a Contract

Prior to ratification of the contract [by the principal], the other party is entitled to repudiate the contract, except when this party knew of the deficiency in the representational authority at the time the contract was entered into. Renunciation of the contract may be declared also towards the

16

agent.

Article 113. Agent’s Obligation when there is a Defect in Representational Authority

1. If a person who makes a transaction as an agent fails to prove his representational authority, then he shall be bound, at the option of the other party, either to perform the obligation assumed or to compensate him, if the principal refuses to ratify the contract.
2. If the agent did not know of the defect in his authority, then he shall be bound to compensate only that damage that the other party sustained in relying upon the authority.
3. The agent shall not be liable if the other party knew or ought to have known of the defect in his representational authority. Likewise, the agent shall not be liable if his legal capacity was limited, except when he acted with the consent of his legal [statutory] representative. ¹⁷

¹⁴ Compare German Civil Code § 167. ¹⁵ Compare German Civil Code § 177. ¹⁶ See German Civil Code § 178. ¹⁷ See German Civil Code § 179.

Article 114. Making of a Transaction with One’s Own Self Disallowed

Unless otherwise provided for by an agreement, an agent may not make a transaction in the name of the principal and with himself, either in his own name or as an agent of a third party, except when the transaction already exists for the performance of some obligation. ¹⁸

TITLE THREE
EXERCISE OF RIGHTS

Article 115. Abuse of Rights Disallowed

A civil right shall be exercised lawfully. Exercise of a right exclusively with the intention to inflict damage on another shall not be allowed.

Article 116. Damage Inflicted Within the Limits of Necessary SelfDefense

1. An action exercised within the limits of necessary selfdefense shall not be unlawful and the damage caused thereby may not be recovered.
2. Selfdefense shall be deemed to be necessary if it is required to repel a real and illegal assault against the person defending himself, or against others.

Article 117. Damage Caused by Extreme Necessity

1. Damage caused to eliminate a danger that in the given circumstances could not be eliminated by other means, and provided that the damage inflicted is less significant than the damage avoided, shall be compensated by the [one who initiated the danger]. ¹⁹
2. Upon consideration of the factual circumstances in which the damage was inflicted, the liability for compensation of the damage may be imposed on the third person in whose interests the harmdoer acted, or both this third person and the harmdoer may be excused from liability in whole or in part.

Article 118. Selfhelp

If assistance from competent bodies cannot be obtained on time, and without swift intervention there is a danger that a right cannot be exercised, or its exercise will be essentially complicated, then the action of a person who for the purpose of selfhelp seizes, destroys or damages a thing, or who for the same purpose captures an obligor who may escape, or stops the actions of an obligor that are contrary to an action that he [the obligor] ought to have performed, shall not be deemed unlawful. ²⁰

Article 119. Limits of Selfhelp

1. Selfhelp may not exceed the limits [of action] that are necessary to eliminate the danger.
2. In the case of seizure of a thing it shall be required to immediately make a declaration on the [appropriation and] attachment of the thing.
3. A captured obligor shall be handed over to the appropriate authorities immediately.

¹⁸ The meaning of the last clause is better understood when compared to the German Civil Code version: “An agent
may not without leave enter into a legal transaction in the name of his principal with himself in his own name, or as
agent of a third party, unless the legal transaction consists exclusively in the fulfillment of an obligation.” § 181.
¹⁹ Literally, “…by the one who inflicted the damage” in the original. See § 1001of this Code. Compare German Civil
Code § 228.
²⁰ See German Civil Code § 229. While the structure of the English translation of the German Civil Code is different,
the content of all the versions is the same.

Article 120. Obligation to Compensate Damage

A person who has exercised the actions provided for under Article 118 based upon an erroneous assumption that it was necessary to avoid an unlawful action shall be bound to compensate the other party for the damage thereby arisen. ²¹

TITLE FOUR
PERIODS OF TIME

CHAPTER ONE
COMPUTATION OF PERIODS OF TIME

Article 121. Scope of the Rules for Computation of Periods of Time

The rules prescribed in this chapter apply to the periods of time fixed in laws, court decisions and transactions.

Article 122. Point of Time Defining the Start of a Period of Time

If a period of time begins to run from an event or a point of time occurring during the course of a day, then in computing the period the day in which the event or the point of time occurs is not counted.

Article 123. End of a Period of Time

1. A period of time expressed in days shall end upon the expiration of the last day of the period.
2. A period of time expressed in weeks, months or periods including several months – year, halfyear, quarter – ends upon the expiration of that day of the last week or of the last month which corresponds [in name or number] to the day in which the event or point of time occurs. ²²
3. If a period of time expressed in months lacks a specified day in which the period ends, then the period shall end upon the expiration of the last day of the last month of the period. ²³

Article 124. Concepts

1. A halfyear denotes a period of time of six months, a quarter denotes a period of time of three months computed from the beginning of a year, and a halfmonth – a period of time of fifteen days.
2. If a period of time consists of one or more full months and a halfmonth, then the fifteen days shall be computed at the end of the period.

Article 125. Computation of a Period of Time in the Event of its Extension

If a period of time is extended, the new period of time shall be computed from the end of the expired period of time.

Article 126. Computation of a Period of Time by Months

1. If a period of time is expressed in months or years in such a manner that [they need not run consecutively] then a month shall be computed as thirty days, and a year as three hundred and sixtyfive days.²⁴
2. The first day of a month is deemed to be the beginning of the month, the fifteenth day of a month – the middle of the month, and the last day of a month – the end of the month.

²¹ Compare German Civil Code § 231, which makes it clear that the liability is strict, without regard to lack of
negligence on the actor’s part.
²² See German Civil Code § 188(2).
²³ This clause is best understood in light of the German Civil Code version. If, using the method in Art. 123(2), the
expiration of a period expressed in months would occur on a day that does not exist in that month (e.g., September 31),
then the end of the period is the expiration of the last day of that month (i.e. September 30).
²⁴ Literally translated the Georgian makes no sense in English. The translation here is taken from the German Civil
Code, § 191.

Article 127. Days Off and Holidays

If an action is to be performed on a certain day, and that day or the last day of the time period falls on a nonbusiness day or on a day declared to be an official holiday, or on another day off at the place of the performance of the action, then the next succeeding business day shall be used instead of [the designated] day.

CHAPTER TWO

PRESCRIPTION

[STATUTE OF LIMITATIONS]

Article 128. Concept; Types

1. A period of limitation shall apply to the right to demand from another person that he perform a certain action or that he refrain from an action.
1. A period of limitation shall not apply to:
1. Personal nonproperty rights, unless otherwise prescribed by law;
2. Demands of depositors for deposits made with a bank or other credit institutions.
2. The general period of limitation is ten years.

Article 129. Limitation Period on Claims Arising out of a Contract

1. The period of limitation on contractual claims is three years, and the period with respect to contractual claims regarding immovable things – six years.
2. The period of limitation on claims arising out of obligations subject to periodic performance is three years.
3. In individual cases, other periods of limitation may be fixed by law.

Article 130. Beginning of the Limitation Period

The period of limitation begins to run from the moment at which the claim arises. The claim shall be deemed to have arisen from the moment at which the person detected or ought to have detected the violation of the right.

Article 131. Origination of a Claim

If the origination of a claim depends upon an action of a creditor, then the period of limitation shall begin to run from the moment at which the creditor could have taken this action.

Article 132. Suspension of the Running of the Limitation Period

The running of the limitation period is suspended:

a.

If performance of the obligation is postponed by [state] executive authorities (moratorium);

b.

If the filing of a lawsuit is prevented by extraordinary and, under given circumstances, unavoidable force majeure;

c.

If the creditor or the debtor is in a unit of the Armed Forces that has been put in a war status;

d.

By virtue of other causes in the instances prescribed by law.

Article 133. Suspension of the Running of the Limitation Period During Marriage

The running of the limitation period is suspended between spouses as long as the marriage exists. The same rule applies to claims between parents and children until the attainment of majority, as well as to claims between guardians (curators) and their wards during the whole period of guardianship (curatorship).

Article 134. Suspension of the Running of the Limitation Period Due to Legal Incapacity

If a claim has been either brought by or directed against a person without legal capacity or a person with limited legal capacity who has no statutory representative, then the limitation period shall be deemed suspended until the person acquires full legal capacity or until a statutory representative is designated.

Article 135. Time During which the Running of the Limitation Period is Suspended

The time during which the running of the limitation period is suspended shall not be counted in computing the limitation period.

Article 136. The Moment of Suspension of the Running of Limitation Period

1. The running of the limitation period shall be suspended on the condition that the circumstances under Article 132 arose or continued to exist within the last six months of the limitation period or, if this period is less than six months, then anytime during the limitation period.
2. From the day of termination of the circumstances that caused the suspension of the limitation period, the limitation period shall continue to run for another six months or, if the limitation period itself is less than six months, then for the limitation period.

Article 137. Interruption of the Running of the Limitation Period

The running of the limitation period shall be interrupted if the obligor acknowledges the existence of the claim before the entitled person by paying an advance or an amount of interest, by delivering a guaranty, or otherwise.

Article 138. Interruption of the Running of a Limitation Period by Bringing an Action

The running of the limitation period shall be interrupted if the entitled person files a lawsuit for satisfaction of the claim or for its ascertainment [declaratory judgement], or tries to satisfy the claim by some other means such as by filing a declaration of the existence of the claim with a state body or with a court, or by [taking action to execute the claim or judgement]. Articles 139 and 140 shall apply accordingly. ²⁵

Article 139. Duration of Interruption of the Running of a Limitation Period

1. Interruption of the running of a limitation period on the grounds of the filing of a lawsuit shall continue until the court decision [on that lawsuit] takes effect, or until the litigation is otherwise completed.
2. If the litigation is interrupted as a result of an agreement between the parties or by reason of the impossibility of its further continuation, then the running of the limitation period shall be interrupted [sic] along with the agreement of parties, or upon completion of the last proceedings of the court. If one of the parties continues the litigation again, then the new limitation period that has begun to run after the interruption of the legal proceedings shall be interrupted in the same manner as the running of a limitation period is interrupted by the initial filing of a lawsuit. ²⁶

Article 140. Renunciation of a Lawsuit

1. The filing of a lawsuit shall not interrupt the running of the limitation period if the claimant renounces the lawsuit or if the lawsuit is left without consideration by virtue of a court decision that has entered into legal force.
2. If the entitled person files a new lawsuit within six months, then the limitation period shall be deemed interrupted as of the time of filing of the first lawsuit.

Article 141. Computation of the Running of Limitation Period Anew

If the running of the limitation period is interrupted, then the time elapsed before the termination shall not be counted and the period shall begin to run anew.

²⁵ See German Civil Code § 209.
²⁶ Where marked “sic,” the clause contains an editorial error. The second sentence makes it clear that in the prior
sentence, the running of the limitation period is resumed by the suspension of litigation, and the period is interrupted
[“tolled” in common law] if the litigation is resumed. See also German Civil Code § 211.

Article 142. Limitation Period on Claim Confirmed by a Court Decision

1. The period of limitation on a claim confirmed by a court decision that has entered into legal force is ten years, even if the claim is subject to a lesser limitation.
2. If the court’s confirmation of the claim relates to periodically repeated actions to be performed in the future, then the limitation under the second paragraph of Article 129 shall apply thereto.

143. Limitation Period on Claims in Rem

If a thing with respect to which a claim in rem exists is transferred by succession of title to the possession of a third person, then the limitation period elapsed during possession by the predecessor in title shall also apply to the successor in title [i.e., be counted in favor of the successor in title.].

Article 144. The Right of an Obligor upon the Lapse of Limitation Period

1. Upon the lapse of the limitation period, the obligor is entitled to refuse to perform the action.
2. If the obligor has performed the obligation after the lapse of the limitation period, then he has no right to revoke the performance, even if at the time of performance he did not know that the limitation period had expired.
3. The same rule applies to the means of acknowledgement and security of a debtor. ²⁷

Article 145. Prescription Period on Additional Demand

The prescription period on additional claims is deemed to expire simultaneously upon the lapse of the prescription period on the principal claim, even if the prescription period on the additional claims has not lapsed yet.

Article 146. Alteration of the Prescription period by Agreement of the Parties Not Allowed

Neither prescription periods nor their rule of computation may be altered by an agreement of the parties.

²⁷ The translation is literal. The English translation of the German Civil Code counterpart is perhaps sufficiently close to these words to be accepted as a proper translation of the meaning: “The same applies to a contractual acknowledgement and to the giving of security of the person bound.” § 222(2).

BOOK TWO
LAW OF THINGS (PROPERTY)²⁸
TITLE ONE

PROPERTY

Article 147. Concept

Property, according to this Code, is every thing, as well as any intangible property benefit, which may be possessed, used and disposed of by natural and legal persons, and which may be acquired without restriction, unless this is prohibited by law or contravenes moral standards.

Article 148. Types of Things

A thing may be either movable or immovable.

Article 149. Immovable Things Defined

Immovable things include a tract of land with its subsoil minerals, the plants growing on the land, and buildings and other structures firmly attached to the land.

Article 150. Essential Component Parts of a Thing

1. A component part of a thing that cannot be severed without either destroying the whole thing or this part, or extinguishing the purpose thereof (an essential component part of a thing), may individually be an object of a right only in the instances prescribed by law.
2. Essential component parts of a tract of land include buildings, structures and things firmly attached to the land and not intended for temporary use, that may be stipulated by contract as well.

Article 151. Appurtenance

1. An appurtenance is a movable thing which, although not being a component part of the principal thing, is intended to serve the principal thing and is connected to it by common economic purpose and thereby is linked in space to the principal thing and, according to established understanding, is deemed to be an appurtenance.
2. A thing that is attached to land and that may be severed therefrom without losing or substantially damaging its commodity value is also deemed to be an appurtenance.

Article 152. Concept of Intangible Property

Claims and rights that may be transferred to other persons, or that are intended either for bringing a material benefit to their possessor, or for entitling the latter to claim something from other persons, constitute intangible property.

Article 153. Accessory and Limited Rights

1. A right that is connected to another right in such a manner that it cannot exist without the latter right is an accessory right.
2. A limited right is one which is derived from a broader right and which encumbers the broader right.

Article 154. The Fruit of a Thing and a Right

1. The fruit of a thing is income, accrual and/or advantage derived from this thing.
2. The fruit of a right is income and/or advantage which is received as a result of the exercise of this right.

²⁸ Although the main title of this book is the “Law of Things,” and “things” as defined are only tangible (see Art. 147), the body encompasses also intangible propertyrights and claims (Art. 152) in its definition of property (see again Art. 147). A better title for the book would be “The Law of Property (Tangible and Intangible).”

1. Income and advantage, the derivation of which is ensured by a thing or a right through a legal relation, also constitute the fruit of the thing or of the right. 
2. Entitlement [or authorization to use] a thing or a right allows one to receive the fruit of such thing or right within the scope and duration of such entitlement.
3. If a person is obligated to return the fruit, then he may claim compensation for the expenses incurred with respect to the fruit, provided that such expenses result from proper economic management and do not exceed the value of the fruit.

TITLE TWO
POSSESSION

Article 155. Concept. Types

1. Possession arises through the intentional acquisition of actual control [enjoyment] of a thing.
2. A person who, although exercising actual control of a thing, nevertheless is doing this in favor of another person from whom he has received the possessory interest, shall not be deemed to be the possessor. Only the person who conferred the possessory interest shall be deemed to be the possessor.
3. If a person possesses a thing by virtue of a legal relation that either entitles him to possess the thing for a certain period of time or obliges him to possess the thing, then this person shall be deemed to be a direct possessor, and the one who conferred the possessory interest or laid on him the obligation shall be deemed to be an indirect possessor.
4. If one thing is jointly possessed by a number of persons, then these persons shall be deemed to be joint possessors.
5. If parts of one thing are possessed by a number of persons, then these persons shall be deemed to be the possessors of the individual parts.

Article 156. Termination of Possession

Possession is deemed terminated if the possessor cedes the thing forever or otherwise loses actual control of the thing.

Article 157. Transfer of Possession to Heirs

Possession is transferred to heirs in the same form in which it was held by the decedent (a testator or an intestate).

Article 158. Presumption of Ownership

1. The possessor of a thing is presumed to be its owner.
2. This rule shall not apply in cases when the nature of the ownership relation is identified through the Public Register. Also, the presumption of ownership shall not apply to the previous possessor if he lost this thing or it was stolen or otherwise dispossessed from him. The presumption of ownership operates in favor of the previous possessor only during the period of his possession.

Article 159. Possessor in Good Faith

A possessor is in good faith if he possesses a thing lawfully or if he may be deemed to be an entitled person on the grounds of the kind of prudent examination required in business relations.

Article 160. Claim by the Possessor in Good Faith to Return a Thing back from Illegal Possession

If a possessor in good faith is dispossessed, then within a threeyear period he may revendicate the thing from the new possessor. ²⁹ This rule shall not apply when the new possessor has the better

²⁹ Revendication is a civil law term for recovery of property, analogous to the common law action of replevin.

right to possession of the thing. The right to revendicate the possession may also be applied against the person having the better right to the thing if he acquired it by duress or deceit.

Article 161. Claim by the Possessor in Good Faith for Putting an End to Illegal Obstacles

If a possessor in good faith is not dispossessed, but he is otherwise obstructed in the exercise of his possession, then he may, as if he were the owner, demand that the obstruction be ended. In addition, he may claim damages sustained because of the disturbance of his possession. This rule of compensation for damages shall likewise apply when it is impossible to demand that the disturbance [obstruction] be ended.

Article 162. Rights of a Lawful Possessor

1. In no case may demand be made of a lawful possessor to return thing. During lawful possession, the fruits of a thing and of a right belong to him.
2. This rule also applies to relations between direct and indirect possessors.

Article 163. Duty of Nonentitled Possessor in Good Faith

1. A possessor in good faith who did not have the right to the possession initially or who lost this right is obligated to return the thing to the entitled person. Until the entitled person exercises this right, the fruit of the thing or of the right shall belong to the possessor.
2. The possessor in good faith may claim from the entitled person reimbursement for those improvements and expenses which the possessor incurred during possession of the thing in good faith, and which have not been compensated by the use of the thing or by the fruit derived from it. The value of fruit not derived due to the possessor’s fault shall be deducted [from the amount that he may claim from the entitled person for compensation]. The same rule [i.e., the possessor’s right to compensation] applies to such improvements that enhanced the value of the thing, provided the enhanced value still exists at the moment of the return of the thing.
3. The possessor in good faith may refuse to return the thing until his claims are satisfied.

Article 164. Duties of the Possessor in Bad Faith

A possessor in bad faith must return to the entitled person both the thing and the benefit derived, i.e., the fruit of the thing or of the right. The possessor is bound to compensate [the entitled person for] the fruit that the entitled person does not receive owing to the fault of the wrongful possessor. [The wrongful possessor] may claim reimbursement for the improvements he made and the expenses he incurred with respect to the thing only if, at the moment of return of the thing, they resulted in the enrichment of the entitled person. Other claims against the possessor in bad faith shall remain unaltered.

Article 165. Acquisitive Prescription of Movable Things

1. If a person uninterruptedly possesses a movable thing for five years as his own thing, he shall obtain the right of ownership to it (acquisitive prescription).
2. Acquisitive prescription of a movable thing is not allowed if the acquirer possessed the thing in bad faith or if he subsequently learned that the thing did not belong to him. 

Article 166. Presumption of Uninterrupted Possession of a Thing

If a person possessed a thing at the beginning and at the end of a certain period of time, it shall be presumed that he possessed the thing during the middle interval of the period as well.

Article 167. Acquisitive Prescription of Immovable Things

If a person is recorded in the Public Register as the owner of a tract of land or of other immovable property, while he did not in fact acquire the right of ownership thereof, he shall obtain the right of ownership provided the registration has existed for fifteen years, and during this period the person possessed the property as his own.

Article 168. Termination of Possession of a Thing by Complaint [Claim] of the Owner

Possession of a thing is terminated if the owner asserts a justified complaint [claim] against the possessor.

Article 169. Right of Preemption in Acquisition of a Thing

A possessor who has possessed and used a thing on a lawful basis for more than ten years shall have the preemptive [priority] right to acquire this thing unless otherwise prescribed by law.

TITLE THREE
OWNERSHIP

CHAPTER ONE
CONTENT OF OWNERSHIP

Article 170. Concept. Content of the Right of Ownership

1. An owner may, within the limits of legal or other, namely contractual restraints, freely possess and use the property (thing), exclude others from using this property, and dispose of it unless [the exercise of such rights] would violate the rights of neighbors or of other third persons, or unless such actions constitute abuse of the right [of ownership].
2. Use of the property in such a way that damage is inflicted only on others, so that the priority of the owner’s interest is not evident and the necessity of his action is not justified, shall be deemed to be abuse of the right [of ownership].
3. A person’s right to use also includes the possibility of not using the property. If nonuse or nonmaintenance of the thing is prejudicial to the public interest, then the law may prescribe an obligation for use or maintenance and storage of the thing. In this case the owner shall be bound either to perform the obligation by himself or to transfer the thing, in exchange for appropriate consideration, to the use of another person.

Article 171. Right of Ownership to the Essential Component Part of a Thing

The right of ownership of a thing shall likewise extend to the essential component parts of the thing.

Article 172. Revendication of a Thing from Illegal Possession and Demand for Putting an End to the Disturbance [of Ownership]

1. The owner may revendicate the thing from its possessor, except when the possessor had the right to the possess it.
2. If encroachment on or other disturbance of the right of ownership occurs without seizure or dispossession of the thing, then the owner may demand that the disturber put an end to such action. If the disturbance continues, the owner may demand putting an end to the action by filing a lawsuit in court.

Article 173. Common Property

1. Common (joint and shared) property shall arise by virtue of law or on the grounds of a transaction. Each coowner may assert a claim against third persons with respect to the property under common ownership. Each coowner is entitled to revendicate the thing only in favor of all coowners.
2. A thing under common ownership, subject to the agreement of the coowners, may be pledged or otherwise encumbered with a right in favor of and in the interests of one of the coowners.
3. Expenses for maintenance and storage of a thing under common ownership are borne equally by the coowners, unless otherwise provided for by law or the contract.
4. Each coowner has a preemptive [priority] right to the acquisition of any share of the common property.

CHAPTER TWO
LAW OF NEIGHBORING TENEMENTS

Article 174. Concept. Duty of Mutual Respect

The owners of neighboring tracts of land or other immovable properties are bound, in addition to the rights and duties prescribed by law, to hold each other in respect. All such tracts of land or other immovable properties between which a reciprocal nuisance may arise shall be deemed to be neighboring ones.

Article 175. Obligation to Tolerate Neighboring Nuisances

1. The owner of a tract of land or other immovable property may not prohibit gas, steam, smell, soot, smoke, noise, heat, vibrations or other similar incidents from invading his property from a neighboring tract provided that they do not obstruct the owner in the use of his tract or impair his rights significantly.
2. The same rule applies in such case when the nuisance is substantial, but is caused by an ordinary use of the other tract of land or immovable property and cannot be abated through such undertakings as are deemed to be regular economic activities for such kind of users.
3. If the owner is [hereby] bound to tolerate such a nuisance, he may demand from the owner of the influencing tract of land the appropriate monetary compensation, where the nuisance exceeds the use regarded as ordinary at the given place and is beyond economically permissible limits.

Article 176. Unallowable Encroachment

The owner of a tract of land may demand the prohibition of erection and utilization of such buildings on neighboring tracts that unallowably encroach on the right to use his tract of land and [such encroachment] is evident beforehand [foreseeable].

Article 177. Claim for Elimination of Danger

If a tract of land is endangered by the collapse of a building from a neighboring tract, the owner may demand that the neighbor undertake necessary measures to eliminate the danger. It shall not be allowed to change the direction of or to manipulate watercourses and underground streams running through several tracts of land in such a manner that may cause lessening of the amount of the water and/or the deterioration of its quality. It shall not be allowed to interfere with the natural flow of rivers.

Article 178. Right of the Owner of a Neighboring Tract to the Fruit

1. Fruit of a tree or bush that falls onto a neighboring tract of land shall be deemed to be the fruit of [the tract that it falls on].
2. The owner of a tract of land may cut those branches or roots of a tree or a bush that extend over or upon of his tract of land.

Article 179. Monetary Compensation for the Obligation of Tolerance

1. If the owner of a tract of land in the course of construction unintentionally encroaches on a neighboring tract of land, then the owner of the neighboring tract shall tolerate this, except when the latter made a declaration against the encroachment in advance or promptly upon detecting it. 
2. The encroaching neighbor is obligated to pay monetary compensation [to the encroached neighbor] that shall be paid annually in advance.

Article 180. Necessary Right of Way

1. If a tract of land lacks the access to public roads, electricity, oil, gas and water supply lines that are necessary for its adequate use, then the owner may claim from a neighbor to tolerate the use of his tract by the owner for the purpose of providing the necessary access. The neighbors on whose
2. tracts the necessary right of way or transmission line passes shall be given monetary compensation which, by agreement of the parties, may be made as a lumpsum payment.
1. The obligation to tolerate the necessary right of way or transmission line shall not arise if the already existing access to the tract of land was discontinued by the voluntary action of the owner.

Article 181. Duty of Fixing Boundaries

1. The owner of a tract of land may demand from the owner of a neighboring tract that he participate in fixing firm boundary markers, or in restoring already existing but missing or damaged boundary markers. The expense for fixing boundaries is borne equally between the neighbors unless otherwise stipulated by either mutual agreement or other legal relation.
2. If exact boundary lines cannot be determined, then the actual possession of the neighbors shall prevail in the determination. If actual possession cannot be exactly determined, then the disputed land shall be divided in equal parts between the tracts of land. If such division results in an unjust outcome, then a court shall determine the boundary lines on the petition of one of the parties.

Article 182. Right to Use A Boundary Structure

1. When two tracts of land are separated by a fence or other structure used as a boundary, it is presumed that the owners of the tracts of land have equal right to use this structure unless the exterior of the structure expressly indicates that it is under the ownership of one of the neighbors solely.
2. If both neighbors are entitled to the joint use of the boundary structure, then each of them shall use the structure in such a manner as not to obstruct the other neighbor’s use.
3. The expenses for maintenance and keeping of the structure shall be borne equally between the neighbors.
4. As long as one of the neighbors has an interest in the existence of the boundary structure, it may not be demolished or altered without the consent of [that] neighbor.

CHAPTER THREE
ACQUIRING AND LOSS OF OWNERSHIP
I. Acquiring Ownership of Immovable Things

Article 183. Grounds for Acquiring Ownership of Immovable Things

1. Acquiring ownership of an immovable thing shall require a notarized document and registration of the acquirer in the Public Register. Both the alienator and the acquirer may file the application for registration.
2. The document shall precisely specify the grounds for acquiring the immovable thing. If one of the parties participates through an agent, then the document shall precisely specify this.

Article 184. Abandonment of the Right of Ownership of an Immovable Thing

Relinquishment of the right of ownership of an immovable thing or other right [related to the thing] requires the declaration of the entitled person on the relinquishment of this right and the registration thereof in the Public Register. The declaration shall be filed with the [agency that maintains] the Public Register. Only after such filing shall the declaration on the relinquishment of the right enter into binding force.

Article 185. Protection of Acquirer’s Interests

Proceeding from the interests of an acquirer, an alienator is deemed to be an owner if he is so registered in the Public Register, except when the acquirer knew that the alienator was not the owner.

II. Acquiring Ownership of Movable Things

Article 186. Grounds for Acquiring Ownership of Movable Things

1. The transfer of ownership of a movable thing shall require transfer of the thing by the owner to the acquirer on the grounds of a valid right.
2. The following shall be deemed to constitute transfer of a thing: handing over of the thing to the acquirer into direct possession; transfer of indirect possession by a contract under which the previous owner may remain the direct possessor; granting, by the owner to the acquirer, of the right to claim possession from a third person. 

Article 187. Acquirer in Good Faith

1. An acquirer shall become the owner of a thing even if the alienator was not the owner, but the acquirer is in good faith with respect to this fact. The acquirer shall not be deemed to be in good faith if he knew or ought to have known that the alienator was not the owner. Such good faith must exist prior to the transfer of the thing.
2. The acquirer of movable things cannot be in good faith if the owner lost these things, or they were stolen, or the owner was otherwise dispossessed of them against his will, or if the acquirer received the things for free. These restrictions shall not apply to money, securities and/or to things alienated at auction.

Article 188. Conditional Ownership

1. If an alienator conditioned the transfer of ownership to an acquirer upon the prior payment of the price of a thing, then it is presumed that the ownership shall be transferred to the acquirer only after payment of the price in full. If the acquirer delays the payment of the price, and the alienator repudiates the contract, then the parties shall return the performances already rendered bilaterally.
2. The condition defined in paragraph (1) shall also be deemed fulfilled if the alienator is satisfied in any manner other than by payment of the price, or if the acquirer relies upon the limitation period on the claim.

Article 189. Transfer of Property through Securities

If, instead of the transfer of a thing, the transfer of a security [i.e., negotiable instrument or commercial paper] is required for the transfer of ownership to the acquirer, then the ownership shall be deemed to be transferred from the moment at which the alienator transfers the security to the acquirer.

Article 190. Acquiring Ownership of an Unowned Movable Thing

1. If a person takes into his possession an unowned movable thing, he acquires ownership of the thing unless the appropriation of it is prohibited by law, or unless the appropriation is prejudicial to the rights of another person who was entitled to appropriate the thing.
2. A movable thing shall be deemed unowned if the previous owner, having intended to relinquish ownership, has abandoned possession of the thing.

Article 191. Found Things

1. The finder of a lost thing shall immediately declare that he has found it to the person who lost the thing, the owner, the entitled person or, if the identities of the foregoing are unknown, to the police or other local agency, and hand the thing over to them.
2. One year after making the declaration the finder shall acquire ownership of the find, except when the owner has become known to him or when the right of the owner to the thing has been declared to the police. All other rights to this thing shall be extinguished simultaneously upon the acquisition of the right of ownership to the thing.
1. If the entitled person recovers the thing, the finder may demand from him a reward (finder’s fee) in the amount of up to five percent of the value of the thing. In addition, the finder may demand
2. from the entitled person or from the appropriate agency compensation for the expenses of storage of the property.
3. If the finder relinquishes ownership, the competent agency may sell the thing after one year at an auction and receive the profit or, if the thing is of low value, gratuitously alienate or destroy it.
4. The oneyear period shall not apply when animals, highly perishable items or things for which the storage cost is high are found, and the sum received through their alienation shall be returned to the owner.

Article 192. Treasure Trove

If a thing is found that has been buried for such a long time that its owner cannot be established (treasure trove), then the right of ownership of the treasure trove shall go in two equal shares to the finder and the owner of the thing [or place] in which the treasure trove was found.

Article 193. Acquiring Ownership of Essential Component Part of a Tract of Land

When a movable thing is attached to a tract of land in such a manner that it has become an essential component part of this tract, the owner of the tract of land, according to paragraph (2) of Article 150, shall simultaneously be the owner of this thing.

Article 194. Coownership of the Thing Created by the Merger of Movable Things

1. If movable things are attached to each other in such a manner that they have become essential component parts of a new integrated thing, or if the movable things have merged, the previous owners shall become the coowners of this new thing. The shares shall be determined according to the values of the things at the time of their merger.
2. If one of the things, according to established understanding, is deemed to be the principal thing, then its owner shall acquire ownership of the appurtenance as well [See Article 151].

Article 195. Coownership of a New Movable Thing Created by Processing of Material

When a new movable thing is created by processing or altering some material, then the manufacturer and the owner of the material shall become coowners of the new thing. The shares shall be determined according to the value of the material and the costs of manufacturing, unless otherwise stipulated by agreement.

Article 196. Extinguishment of Rights upon the Transfer of Ownership

If ownership is transferred under Articles 193195, all other existing rights to the thing shall be extinguished.

Article 197. Claim for Damages Against the New Owner

A person who loses his ownership under Articles 193195 or whose right is otherwise impaired may claim compensation for damage from the person who has become the owner. Claim for restoration of the initial state of affairs shall not be allowed.

III. Acquiring Ownership of Rights and Claims

Article 198. Concept. Content

1. The possessor of a claim or a right that can be assigned or pledged may transfer it to the ownership of another person. The claims and rights are transferred to the new person in the same state in which they existed with the former possessor.
2. The former possessor is obligated to hand over all documents in his possession with respect to the claims and rights, as well as all information that is required for use of these claims and rights, to the new possessor.
3. The former possessor is likewise bound to hand over to the acquirer, at his request, a duly authenticated document with regard to the assignment of these claims and rights. The expenses for authentication of this document are borne by the new possessor.

Article 199. Assignment of Claim

1. The possessor of a claim (creditor) may assign the claim to a third person without the consent of the debtor, unless to do so would contravene either the essence of the obligation, the agreement with the debtor, or law (assignment of claim). An agreement with the debtor on the inadmissibility of assignment of a claim may be made only if the debtor has a legitimate interest [in prohibiting assignment of the claim].
2. Assignment of a claim is effected by a contract concluded between the possessor of the claim and a third party. In such cases [following assignment], the third person shall stand in the place of the original possessor.

Article 200. Right of the Debtor in the Event of Assignment of a Claim

Until the debtor is notified of the assignment of the claim, he is entitled to give performance of the obligation to the original possessor of the claim.

Article 201. Transfer of the Means of Security upon Assignment of Claim

1. By assignment of a claim, both the means of security therefor and other rights in connection with the claim shall be transferred to the new possessor.
2. The debtor may assert against the new possessor all those defenses that he had against the original possessor at the time he received notification of the assignment of the claim.

Article 202. Order of Priority of Possessors of Claim

If a possessor of a claim has agreed on the assignment of one and the same claim with a number of persons, then the person with whom the possessor of the claim entered into relations first shall be entitled [to the claim] before the debtor. If this cannot be determined, then priority shall be given to the person of whom the debtor was notified earlier.

Article 203. Transfer of Debt

1. A third person may also assume a debt by agreement concluded with the possessor of the claim (transfer of debt). In such case [after assumption] the third person shall stand in the place of the original debtor.
2. The original debtor may disagree with this agreement between the possessor of the claim and the third person and pay the debt himself.

Article 204. Consent by the Possessor of a Claim upon Transfer of Debt

If a debtor and a third person enter into an agreement on the transfer of a debt, then the validity of the transfer shall depend upon the consent of the possessor of the claim.

Article 205. Rights of the New Debtor

The new debtor may assert against the possessor of the claim all defenses arising from the relations that existed between the possessor of the claim and the original debtor. He may not offset the claims that belonged to the original debtor.

Article 206. Termination of Means of Security upon Transfer of Debt

Immediately upon the transfer of a debt any guaranty [suretyship] or lien securing the debt shall be terminated if the guarantor or the pledgor refuses to continue this relationship.

Article 207. Assignment of Claim by Virtue of Law

The rules with respect to acquisition of ownership of rights and claims shall apply accordingly to the assignment of claims by virtue of law or on the grounds of a decision made by a court or by a competent state body.

CHAPTER FOUR
APARTMENT OWNERSHIP IN MULTIAPARTMENT BUILDINGS [CONDOMINIUMS]
I. General Provisions

Article 208. Concept

1. In a multiapartment building, there is a right of ownership of an apartment (ownership of apartment) and of the part of the building that is not used for dwelling (ownership of nonresidential area).
2. Ownership of the apartment, as well as ownership of the nonresidential area, is deemed to be individual ownership.
3. The tract of land, parts of the building, structures and equipment not designated for individual ownership shall be under the common ownership of the apartment owners. The share in common ownership is determined according to the number of apartments.
4. Individual ownership may exist only for separate apartments and for other separate parts of the building. Automobile parking lots are deemed separate if their boundaries are outlined as a result of longtime use.

Article 209. Preemptive Right to Purchase Apartment

1. Tenants who have lived in an apartment for more than three years shall have the preemptive [first priority] right to purchase the apartment. They shall apply to the last owner of the apartment with a declaration on the exercising of this right.
2. If a person purchases a rented apartment, he shall stand in the place of the landlord [in relation to the tenant].

Article 210. Grounds for Acquiring Ownership of an Apartment

Acquisition and termination of the right of ownership of an apartment shall require a notarized transaction and its registration in the Public Register.

Article 211. Subject of Individual Ownership

1. An area defined under paragraph (2) of Article 208, as well as those component parts of this area that may be altered, detached or attached in such a manner as to avoid alteration of the exterior of the building or the unjustifiable encroachment on either the common property or the right of another apartment owner arising from his individual ownership, is an object of individual ownership.
2. The parts of the building that are required for the stability and safety of the building, as well as structures and equipment under the common ownership of the apartment owners, may not be the objects of individual ownership even if they are located in areas under individual ownership.

Article 212. Determination of Shares in Common Property

1. The share of an apartment owner in common property is determined according to the ratio that the area under his individual ownership bears to the total area under individual ownership.
2. In case of liquidation of an apartment owners’ association, the shares of the owners in common shall be determined in accordance with paragraph (1) of this Article.

Article 213. Alienation of Individual Property Without the Corresponding Share of Common Property Not Allowed

1. Individual property may not be alienated, pledged or otherwise encumbered without regard to the corresponding share of the common property.

2. An apartment owner simultaneously is a shareholder in the common property.

Article 214. Registration of Ownership of Apartment in the Public Register

1. For each apartment ownership a separate sheet shall be filled out in the Public Register.
2. A construction certificate verified by the construction agency, plan of the building, and the location and dimensions of the parts of the building under common ownership shall be attached to the materials of registration of the apartment’s ownership in the Public Register.

II. Relations among Apartment Owners

Article 215. Registration of Agreements in the Public Register

1. Relations among apartment owners shall be regulated by this Code. Agreements by which the apartment owners regulate their relations differently than by the norms of this Code, as well as alteration or termination of such agreements, shall be valid before third persons only if these agreements are registered in the Public Register.
2. A decision that is subject to a majority of votes as prescribed by this Code or by agreement of the apartment owners, shall be binding when made even against those owners who did not participate in the voting or who voted against the decision.

Article 216. Apartment Owners’ Association Defined

The totality of individual owners constitutes an association of apartment owners, which is not a legal person.

Article 217. Claim for Dissolution of Apartment Owners’ Association Disallowed

An owner may not demand dissolution of the apartment owners’ association. Such a demand is allowed only if the building is partially or entirely collapsing.

Article 218. Rights of Apartment Owners

1. An apartment owner may use the parts of the building under his ownership at his own discretion and exclude any influence on it from other persons, unless to do so would violate the law or the rights of such other persons.
2. Each apartment owner, under Articles 219 and 220, is entitled to use the common property. In the case of some other use of the common property each apartment owner shall be given a corresponding share pursuant to the rules of Article 212.
3. The matters referred to in paragraphs (1) and (2) of this Article shall be specified in detail in the regulations of the apartment owners’ association, which under paragraph (4) of Article 224 is submitted by the chairman of the association and approved by the General Meeting of the apartment owners.

Article 219. Duties of Apartment Owners

1. An apartment owner shall:

a.

Maintain and use the parts of the building under individual ownership, as well as the common property, so as not to violate the rules of joint habitation of the owners or to cause them damage.

b.

Take care that persons who are employed in his enterprise located in the building, or to whom he transfers for use the tract of land or parts of the building under common ownership, observe the rules under subparagraph (a);

c.

Tolerate nuisances affecting the parts of the building under his individual ownership and the common ownership, provided these nuisances conform to the provisions defined in subparagraphs (a) and (b);

d.

Allow authorized persons to enter into those parts of the building under individual ownership and to use those parts, if required for restoring the common property to proper condition and for doing current repairs. The damage thereby arisen shall be compensated;

e.

Tolerate those measures that are necessary for the arrangement of communication and supply systems. An owner for whose benefit such measures are taken is bound to compensate the damage thereby arisen.

2. In case of collapse of the building, where the damage is not secured by insurance or by other means, the liability to participate in restoration and reconstruction of the building may not be put on individual owners. In such case the association is dissolved.

Article 220. Right to Use Common Property

1. Each apartment owner may use the common property proportionately to his share.
2. Regardless of the location of his apartment in the building, each apartment owner shall be liable before other apartment owners to bear the expenses for the common property proportionately to his share, in particular, the expenses for keeping the building in proper condition, performing current repairs, and administration and joint use of common property.
3. An apartment owner who has not voted for measures that are not in connection with keeping the building in proper condition and current repair shall not be bound to compensate for expenses resulting from such measures. Concurrently, he has no right to demand the benefits resulting from such measures.
4. A share is determined pursuant to Article 212.

Article 221. Determination of Shares upon Dissolution of the Association

Upon dissolution of the association, the share of a coowner is determined proportionately to the value of his apartment at the time of the dissolution of the association. If the value of the share in the common property has changed as a result of measures not supported by the apartment owner, then such change shall not be taken into consideration when assessing the value of his share.

Article 222. Imposition of Obligation to Alienate Apartment

1. If an apartment owner has breached his duties before other apartment owners in such a gross manner that the association with him cannot be continued any longer, then the other apartment owners may demand from him alienation of his apartment. 
2. In particular, the precondition defined in paragraph (1) exists when an apartment owner, in spite of written notice, grossly breaches the duties under Article 219.
3. A decision with respect to the demand under paragraph (1) of this Article shall require a twothirds’ majority of the votes cast by the persons having voting rights.

Article 223. Administration Bodies in Apartment Owners’ Association

Common property shall be administered by apartment owners under Articles 224228 and by the chairman of the apartment owners’ association under Articles 229231, and in the case of creating an advisory council, the administration shall be carried out pursuant to Article 232.

Article 224. Administration of Common Property

1. Apartment owners shall jointly administer common property unless otherwise stipulated by this Code or by agreement of the apartment owners.
2. An apartment owner is entitled to undertake, without the consent of the other apartment owners, necessary measures to avoid damage that directly endangers the common property. This owner has the right to claim compensation for the expenses incurred by him [in doing so].
3. Each apartment owner may demand that [management] activities be carried out in accordance with the agreements and decisions made, or, if they do not exist, in the common interests of the apartment owners.
1. In particular, proper management in the common interest of the apartment owners includes the following:
1. Approval of the regulations and bylaws of the apartment owners’ association;
2. The proper maintenance and repair of common property, if necessary, in order to keep the building suitable for residence;
3. The proper insurance of common property;
4. The collection of funds for proper maintenance of the building;
5. The adoption of economic plans;
6. The implementation of all measures that are required for the arrangement of
   communications and supply systems for the benefit of the apartment owners.
   

Article 225. Joint Competence of Apartment Owners

Apartment owners jointly resolve such matters as: drawing up economic and financial plans, restoration of the building in full or in part, approval of the bylaws, election and dismissal of the chairman of the association, and determination of the amount of expenses for maintenance of the building.

Article 226. Meeting of Apartment Owners

1. Apartment owners make decisions at a meeting of the apartment owners.
2. For a decision to be valid, its subject has to have been declared by at the time of invitation to the meeting.
3. A decision may be made without a meeting as well if the apartment owners give their written consent to the decision.

Article 227. Calling the Meeting of Apartment Owners

1. The chairman of the association shall call the meeting of apartment owners at least once a year.
2. The chairman of the association shall also call the meeting of apartment owners upon the request of more than onefourth of the apartment owners. If the chairman is absent or evades his duty of calling the meeting, then one of the apartment owners may call the meeting as well.
3. A meeting shall be held within one week from the day of the written notice calling the meeting; in case of urgency the meeting shall be held immediately.
4. The chairman of the association presides over the meeting of apartment owners unless otherwise decided by the meeting.
5. Resolutions of the meeting are recorded in the minutes to be kept by the chairman of the meeting. Each apartment owner is entitled to examine the minutes.

Article 228. The Meeting’s Competence to Make Decisions

1. Each owner shall have one vote in making decisions. If an apartment belongs to a number of owners, they may exercise a voting right only jointly.
2. The meeting is competent to make decisions if attended by more than half of the apartment owners.
3. If under paragraph (2) of this Article the meeting is not competent to make decisions, then the chairman may call a new meeting with the same agenda. This meeting shall be competent to make decisions regardless of the number of participants, which is to be stated upon the calling of the meeting.
4. Unless otherwise stipulated by this Code or by the regulations of the apartment owners’ association, the decisions are made by a simple majority.

Article 229. Rights and Duties of the Chairman of the Apartment Owners’ Association

1. The chairman of the apartment owners’ association is entitled and obligated to:

a.

Implement the decisions of the meeting of apartment owners and take care that the
regulations are observed;

b.

Undertake necessary measures for proper maintenance and current repair of the common property;

c.

Undertake measures that are required to observe some period of time or to avoid a negative legal effect;

d.

Dispose of the common funds.

2. The chairman, on behalf of all apartment owners, is entitled to:

a.

Demand, receive and pay amounts to cover expenses incurred, debts and mortgage interest, provided they relate to the common affairs of the apartment owners;

b.

Carry out the settlement of accounts and perform obligations and other monetary
transactions in connection with the current administration of the common property;

c.

Enter into contracts and submit necessary documentation, provided this relates to the
interests of the apartment owners;

d.

Appear in court or in other bodies, if so authorized by the apartment owners.

1. The chairman is obligated to keep the funds of the apartment owners separately from his property.
2. The chairman, where necessary, acts by mandate conferred upon him by the apartment owners, which specifies the scope of his authority.

Article 230. Economic Plan

1. The chairman shall draft an economic plan prior to the beginning of each calendar year.
1. The economic plan shall include:
1. Expected revenues and outlays with respect to administration of the common property;
2. The obligation to cover expenses proportionately to the shares of the apartment owners.
2. Each apartment owner is entitled to perform measures for the proper maintenance and current repair of the building, either himself or through a third person. In such cases the chairman takes into account this work, assesses it and enters it into the economic plan. The [required] contribution of the apartment owner for covering expenses shall be reduced according to the work performed.
3. The apartment owners are obligated, on demand of the chairman, to make a certain advance payment for securing the approved economic plan. In the event of difficulties regarding the payments, the chairman may use the appropriate bank credits.
4. The making of the decision concerning the economic plan entitles the chairman to procure a loan as well.
5. The chairman shall present a financial report at the end of each calendar year.
6. Apartment owners may claim from the chairman an accounting of the work performed at any time.

Article 231. Duty to Repair Dwelling

1. Each apartment owner is liable before the other apartment owners to bear expenses for the maintenance of common property, the current repair of the building and administration, as well as other expenses.
2. The expenses and payments defined in paragraph (1) of this Article shall be paid in an amount corresponding to the share of each apartment owner.
3. Unless otherwise stipulated, the expenses determined for a current year shall be paid in twelve equal installments. If the collection of funds for proper maintenance of the building is not provided for, then the chairman may demand payment of these amounts in advance, prior to making the announcement on the repair of building.

Article 232. Advisory Council

1. The apartment owners may create an advisory council by a simple majority of votes. The council consists of two members and a chairman.
2. The advisory council assists the chairman in doing his job.
3. The advisory council shall examine the financial and economic plans; the results of implementation of the economic plan; the report, accounts and estimate of expenses prior to their consideration on the meeting of the apartment owners, and shall make the corresponding conclusion.

CHAPTER FIVE
LIMITED USE OF PROPERTY BELONGING TO ANOTHER PERSON
I. Right to Build [Hereditary Building Right] ³⁰

Article 233. Concept

1. A tract of land may be transferred to the use of another person for a fixed period of time in such a manner as to grant him the hereditary and transferable right to erect on or beneath this tract some construction, as well as the right to alienate, inherit, lend or lease such right (right to build).
2. The right to build may extend to that part of the tract of land that is not necessary for the structure but provides the opportunity to use the construction better.
3. The duration of the right to build is fixed by agreement of the parties, and it may not exceed fiftynine years.

Article 234. Grounds Giving Rise to the Right to Build

1. The rules governing acquisition of immovable things shall apply accordingly to the creation and acquisition of a right to build.
2. A construction erected on the basis of the right to build shall be deemed to be an essential component part of this right.

Article 235. Alienation of the Right to Build

If by agreement of the parties the consent of the owner of the tract of land is required for alienation or leasing of the right to build, the owner may refuse to grant such consent only if there are sufficient grounds to do so.

Article 236. Payment for the Right to Build

1. The possessor of the right to build may be bound by contract to pay compensation [for the right]. This right of the owner of the tract of land [to receive compensation] shall be inseparable from the right of ownership to the tract of land.
2. The right to build may be unilaterally terminated by the owner only for nonpayment of the compensation for a period of two years.
3. The parties may predetermine the compensation for the right to build for a tenyear period. If economic conditions substantially change, then the parties are bound to agree on the compensation anew.

Article 237. Registration of the Right to Build

The right to build is entered in the Public Register only as a firstranking right among the property rights of nonowners. This order may not be altered. ³¹

Article 238. Termination of the Right to Build

1. Termination of the right to build shall require consent of the owner.
2. The right to build shall not be terminated by collapse of the construction erected on the tract of land.

Article 239. Termination of a Paidfor Right to Build

³⁰ In Roman and civil law, known as a “superficies.”
³¹ i.e., the right to build ranks before the rights of all other lienholders.

1. When the right to build has been paid for, then after expiration of the term of the right, the owner of the tract of land shall pay to the holder of the right adequate compensation for the construction erected on the tract of land. Any sum that fails to amount to at least twothirds of the value of the construction shall not be deemed adequate.
2. The owner of the tract of land may, instead of paying compensation, prolong the right of the holder for the presumed period of additional existence of the construction. If the holder of the right declines the extension, then he thereby loses the right to claim the compensation as well.
3. The holder of the right to build has no right to remove the construction or its component parts after expiration of the term of the right to build.

Article 240. Registration of the Claim for Compensation in the Public Register

1. At the termination of the right to build, the right to demand compensation arising from the structure shall take the place of the right to build in the Public Register, replacing it in the same order. ³²
2. If, upon expiration of its term, the right to build is still encumbered with a mortgage, then the mortgagee shall have a lien upon the holder’s claim for compensation against the owner.

Article 241. Succession in Title at the Termination of the Right to Build

At the termination of the right to build the owner of the tract of land shall become a party to any lease or rental agreement concluded by the holder of the right.

II. Usufruct

Article 242. Concept

An immovable thing may be transferred to the use of another person in such a manner as to grant to him the right to use this thing as if he were the owner, and to exclude third persons from its use; unlike the owner, however, he has no right to alienate, mortgage or transfer this thing by inheritance (a usufruct). The leasing or renting out of this thing shall require the consent of the owner. After the usufruct is extinguished, the owner shall [substitute the holder of the usufruct] in the existing relations of lease or rental [made with third parties].

Article 243. Legal Regulation of Creation of a Usufruct

The same rules that govern the acquisition of immovable things shall apply to the creation of a usufruct.

Article 244. Kinds of Usufructs

1. A usufruct is either subject to payment or free of the requirement that it be paid for. 
2. A usufruct may exist either for a certain period of time or for the life of its beneficiary (usufructuary). The usufruct shall be extinguished by the death of the natural person or liquidation of the legal person in whose favor the usufruct was established.

Article 245. Usufructuary’s Rights and Duties

1. Prior to the commencement of a usufruct the parties may inventory the condition of the things transferable under the usufruct.
2. The usufructuary may not alter the object of use without the consent of the owner.
3. The usufructuary is entitled to those fruits and benefits of the thing as well that are not derived from ordinary economic use of the thing. In such case he is bound to compensate the owner for the damage caused to the thing as a result of such use.
4. The usufructuary is not liable for natural wear and tear to the thing. He shall cover the current expenses, make repairs to the thing, as well as take care of the normal economic maintenance of the thing.
5. The usufructuary is bound to insure the thing properly for the duration of the usufruct. 
6. If the thing has perished or it has been damaged, or unexpected expenses have arisen for its maintenance, the usufructuary shall immediately notify the owner. He shall tolerate the measures that the owner undertakes in order to cure the situation. The owner is not obligated to undertake the appropriate measures. If the usufructuary himself undertakes these measures, then at the end of the usufruct he may remove from the thing the objects attached to it by him as a result of such measures, or he may demand from the owner proper compensation for these objects.
7. If the usufructuary, within the limits of normal economic activities, alienates individual objects, then objects acquired by him must take the place of the alienated objects.

³² That is, the holder of the right’s claim to compensation becomes a lien replacing the right to build in the Public Register.

Article 246. Termination of Usufruct

1. Upon the end of a usufruct the usufructuary is bound to return the thing to the owner.
2. A usufruct is extinguished when both the usufruct and the ownership are in the hands of the same person.

III. Servitude

Article 247. Concept

1. A tract of land or other immovable property may be used (encumbered) for the benefit of the owner of another tract of land or other immovable property in such a manner as to either grant this owner the right to use the encumbered [property] in particular instances, or to prohibit the exercise of certain actions on this [property], or to preclude the exercise of some rights of the owner of the encumbered [property] with respect to the other [property] (servitude).
2. The compensation [for the encumbrance] may be determined in the form of periodic payments.

Article 248. Servitude; Requirements

1. Servitude may exist only when it creates a benefit for the entitled person in using his tract of land.³³
2. The entitled person, in exercising the servitude, shall protect the interests of the owner of the used (encumbered) tract of land.

Article 249. Obligation of Maintenance of Construction

If the proper exercise of the servitude involves the usage of a construction situated on the encumbered tract of land, then the entitled person shall be bound to maintain this construction. At the same time, the parties may agree that the obligation of maintenance of the construction be imposed on the owner of the encumbered tract of land, if this is required in the interests of the entitled person.

Article 250. Effect of Division of a Tract of Land

If the tract of land of the entitled person is divided, then the servitude remains for the benefit of each portion separately. In such case the exercise of the servitude is allowed only if it does not worsen the situation of the owner of the encumbered tract of land.

Article 251. A Part Free of the Servitude as a Result of Division

³³ The concept definition of servitude begins by encompassing servitudes over, and for the benefit of, tracts of land “and other immovable property” such as a building. Even within article 247, and in subsequent articles the drafter switches to referring only to “tracts of land.” While in articles following 247 we have left the limited reference to “tracts of land” as it is, we believe the servitude provisions apply to all immovable property, including buildings.

If the encumbered tract of land is divided, and the servitude was laid only upon one part of the whole tract, then the part of the tract of land with respect to which the servitude was not due shall remain free of the servitude after the division as well.

Article 252. Protection of the Rights of the Entitled Person

If the entitled person is obstructed in the exercise of his rights, he has the same right to avoid the obstruction as if he were a possessor in good faith.

Article 253. Personal Servitude

1. An immovable thing may be encumbered with a servitude for the benefit of a specific person according to the provisions of Article 247. Such an encumbrance may be expressed in such a manner that the entitled person, who may not be the owner, may use a building or a part of the building for the habitation of himself or together with his family. ³⁴
2. A personal servitude limited in the manner defined in paragraph (1) of this Article may not be transferred to another person.

CHAPTER SIX
TITLE TO PROPERTY AS SECURITY FOR A CLAIM
I. Security Interest³⁵

Article 254. Concept

1. Movable things and intangible property that are transferable to another person may be used as security for a claim in such a manner that the secured creditor is entitled to priority over other creditors in the satisfaction of his claim at the expense of the collateral.
2. A security interest may attach to secure payment of future or contingent claims, if these claims can be determined at the time of the creation of the security interest.

Article 255. Procedure for Granting a Security Interest in Movable Things and Securities

1. A security interest in movable things and, where necessary, negotiable securities, as well as other intangible property, shall be granted pursuant to the procedure prescribed for the acquisition of ownership of such property. If, in relation to the property, a claim exists towards a third person, then creation of the security interest shall require that the third person be notified of the pledging of the thing. ³⁶
2. The debtor and the secured creditor may notarize the security agreement. In this case the security interest is created upon its registration in the Public Register, so that the transfer of the collateral into the possession of the secured party and the making of a declaration to other creditors [i.e., as previous clause] is not obligatory. The document shall indicate the identities of the debtor, any possible third debtor [i.e., guarantor] and the secured party, as well as the extent of the secured claim, the interest on the claim, and the period of time for satisfaction of the claim.

Article 256. Substitution

If a claim is pledged as collateral, and the debtor performs the obligation [underlying the claim] prior to the expiration of the security interest, then the performance shall replace the claim [as the object of collateral – the security interest will be attached to the performance given, instead of to the claim that has been satisfied].

³⁴ The exclusion of an owner may refer to the owner of the building, as in such case the seritude would merge with the
greater property right of ownership, and it may refer to ownership of a neighboring immovable property, as in such case
the servitude should be attached to the property, not the person.
³⁵ The terminology used here follows as closely as possible that used in the Uniform Commercial Code, Article 9105.
The concepts are strongly analogous.
³⁶ We have translated the second sentence literally, but it would make for more sense if translated as “If a third party has
a claim in relation to the property, then the third person must be notified of the creation of the security interest.”

Article 257. Rights of a Pledgee in Good Faith

If the object of a security interest (collateran( �/span> is transferred to another person by transfer of a document, and the debtor, at the time of creation of the security interest, possesses this thing (or holds this right) without being entitled to pledge it, then the secured creditor shall be deemed to be an acquirer in good faith, provided he does not know and could not have known [that the debtor did not have the right to pledge the collateral]. This good faith of the secured creditor grants him priority [in the collateral] over a third person.

Article 258. Scope of a Security Interest

A security interest secures a claim and other additional claims in connection therewith.

Article 259. Rights of Third Persons

1. If the person who gives a security interest in the collateral is not, at the same time, the debtor with respect to the claim [obligation] secured by the security interest, then he may still assert against the secured creditor any counterclaim to which the personal debtor is entitled; in the first place, these shall be counterclaims arising out of offsetting monetary obligations and defenses against the claim.
2. If the claim is secured by the property of the debtor [and] of third persons, then such third persons may demand that the creditors’ claims be satisfied out of the debtor’s property before their property is used for satisfaction of the claims. The same rule shall apply to the entitled person when the claim is secured by various pieces of property of the debtor, and this entitled person has a security interest in some of them only.³⁷

Article 260. Extension of the Security Interest to All Property Values Included in the Collateral

A security interest extends to all property values [i.e., all aspects of value] that are inherent in ownership of the object of the security interest (collateral).

Article 261. Pledge By Transfer of Possession

1. If a lien is secured [perfected] by transfer of the collateral into the possession of a pledgee, then the pledgee is obligated to keep it properly. He is entitled to receive [from the collateral] the interest that accrues on the secured claim. He may also claim from the pledgor compensation for necessary expenses incurred with respect to [maintenance of] the collateral.
2. If the pledgee fails to perform the duty put on him, the pledgor may claim transfer of the collateral to a third person. 
3. If there is a danger that the pledged object may perish or its value may substantially decrease, then the pledgor may demand that the object be returned, and may offer to the pledgee another kind of security. The pledgee shall immediately notify the pledgor of the danger of perishing of the pledged object or substantial reduction of its value, and fix a period of time for the pledgor to offer another kind of security. If the pledgor fails to offer another kind of security within this period, then the pledgee may sell the original collateral. The rules governing realization of collateral shall apply to such sale. The sum received through the sale shall replace the collateral. Until the period of the pledge is expired, this sum shall be kept, with the accrued interest.

Article 262. Debtor’s Duty in the Case of Registration of the Security Interest

1. If a security interest is registered, the debtor shall be bound to keep and properly maintain the collateral. He is entitled, as before, to derive benefit from the collateral. 

³⁷ The second sentence means, in other words, that the holder of a security interest in some of the debtor’s property (creditor 1) may demand that another secured creditor (creditor 2) satisfy his claim first out of property of the debtor not subject to creditor 1’s security interest. The rule appears to apply without regard to whose security interest attached first.

2. If there is a possibility that the debtor may fail to perform his obligation [to maintain the collateral], then the secured creditor may demand that the collateral be transferred to him. In the case of a pledged claim being registered [as collateral], then the secured creditor is entitled to notify the thirdparty debtor [that the secured creditor has taken direct possession of the claim]. From the moment of the notification, the [third party] debtor is obligated to pay the claim of the [secured creditor] when it becomes due.³⁸

Article 263. Subsequent Pledging of the Collateral

Subsequent pledging of the collateral by the debtor shall require the prior consent of the [first] secured creditor.

Article 264. Making a Transaction with the Collateral

The prior consent of the secured creditor shall be required for making a transaction with the collateral.

Article 265. Repeated Pledging of an Object

One and the same object may be pledged repeatedly. The order of priority shall be determined according to the moment of pledging.

Article 266. Protection of the Rights of the Secured Creditor

If a secured creditor is obstructed in the exercise of his rights, he may use the same rights against the obstructing party as if he [secured creditor] were the owner [of the collateral].

Article 267. Transfer of the Right to Obtain Security to a New Creditor

1. The transfer of a claim to another person shall also transfer the right to obtain security [for the claim] to this person (new creditor).
2. Any third person whose legal status may be aggravated as a result of alienation of the collateral shall be entitled to pay the [underlying] claim and thereby take over the security interest.
3. The collateral may not be transferred to another person without transferring the corresponding claim. If the transfer of the collateral is excluded upon the transfer of the claim, the security interest shall be extinguished as well.

Article 268. Security Interest Extinguished

A security interest is extinguished simultaneously with the extinguishment of the claim that it secures.

Article 269. Security Interest Extinguished by Waiver of [Right to] the Collateral

1. A security interest is extinguished when the secured creditor declares to the debtor or to the owner of the collateral that he waives [his right to] the collateral.
2. The lien secured by transfer of possession [pledge] of the collateral shall be extinguished when possession is returned to the pledgor.

Article 270. Security Interest Extinguished by Reason of Transfer of the Collateral into Ownership of the Secured Creditor

³⁸ A secured creditor may take possession of the collateral from the debtor if he has reason to believe that the debtor is not properly maintaining the collateral. The rule applies as well when the collateral is the right of the debtor to receive payment or performance on a claim against a third party [the third party debtor]. If the secured creditor “takes possession” of the debtor’s claim against the third party debtor, the secured creditor may notify the third party debtor thereof, and the third party debtor will be obligated to give performance of the pledged claim directly to the secured creditor.

A security interest is extinguished when the collateral is transferred into the ownership of the secured creditor. This rule shall not apply when the rights of a third person are encumbered with the claim for securing of which the lien is attached. ³⁹

Article 271. Obligation of Pledgee [Lienholder] Upon Extinguishment of the Security Interest

When the security interest is extinguished, the pledgee shall be bound to return the object [collateral] in his possession to the pledgor or to the owner.

Article 272. Satisfaction of Secured Creditor

1. The secured creditor shall be satisfied through either the sale or other proper realization of the collateral.
2. The secured creditor is entitled to realize the collateral when the monetary claim becomes due in full or in part.

Article 273. Voidness of Agreement on the Immediate Transfer of the Right of Ownership to the Secured Creditor

An agreement by which ownership of the collateral is immediately transferred to the secured creditor if his claim is not satisfied or the satisfaction failed to occur on time, shall be void.⁴⁰

Article 274. Right of Realization of the Collateral

A secured creditor has the right to realize the collateral only if this is necessary for satisfaction of his claim.

Article 275. Right of Realization of Object Given Repeatedly as Security

If one object is given as security several times, only the secured creditor whose security interest has first priority in the object shall have the right to realization of it. If the firstranking secured creditor waives this right, then the nextranking secured creditors shall assume the right to realize the object.

Article 276. Transfer of Collateral to the Person Having the Right of Realization

1. Collateral shall be transferred to the secured creditor who has the right to realize it.
2. If realization of the claim [collateral] depends upon [the prior] performance of some legal action, then the secured creditor may demand that the debtor perform this action. If the debtor fails to do so within two weeks, then the secured creditor shall be entitled to perform this action, on behalf of the debtor, towards third persons.

Article 277. Obligation to Give Notice of Possible Realization of the Object

The secured creditor is obligated to notify the debtor in advance of the possible realization of the object, and, in addition, to indicate the amount of the claim by reason of which the sale is to be executed. The realization may not be effected before the lapse of two weeks from the notification.

Article 278. Realization of the Collateral at Auction

1. The realization shall be executed through the sale of the collateral at auction.
2. If the collateral has a commodity exchange or market price, then the secured creditor may entrust its sale to a special trading institution.

³⁹ We have translated the second sentence from Georgian as it is, but the provision is unclear. The German Civil Code version says that ownership of the right of pledge (security interest) and the collateral by the same person extinguishes the security interest unless the claim which is secured by the collateral is encumbered with the rights (claims) of a third person. German Civil Code §1256(1). ⁴⁰ “Agreement” here means provision of a contract; not the contract as a whole. Only the invalid provision would be voided.

Article 279. Realization of the Collateral at a Price Lower than the Value of the Material Not

Allowed

Collateral may not be alienated at a price lower than the value of its material content. At the request of the debtor, prior to the sale, an independent expert shall determine this price.

Article 280. Other Procedures of Realization

The owner and the secured creditor may agree on another procedure for realization of the collateral, different from the procedures defined in this Chapter. If a third person has an interest in the collateral and it would be extinguished as a result of alienation of the collateral, then the alienation shall require the consent of this third person. If the parties fail to reach agreement, then a court shall decide [on disposition of the collateral].

Article 281. Participation of the Secured Creditor and the Owner in an Auction

The secured creditor and the owner [debtor] may jointly participate in the auction. The owner’s bid may be rejected unless he pays in cash.

Article 282. Obligation to Pay in Cash at an Auction

The collateral may be sold only on the condition that the buyer pays the price in cash. Otherwise he shall lose the right [of purchase]. If the sale is carried out without such a condition, then the purchase price shall be deemed to have been accepted by the secured creditor.

Article 283. Effects of Lawful Alienation of the Collateral

1. Lawful alienation and transfer of the collateral shall pass the property unencumbered to the ownership of the acquirer.
2. If an object, as collateral, is alienated in such a way that the seller has no security interest in it, or if the realization is not necessary for satisfaction of the claim, then the acquirer in good faith shall acquire ownership of the property without encumbrance all the same.

Article 284. Rule for Realization of a Claim

Realization of a claim is effected through payment by the [third party or primary] debtor in favor of the creditor.

Article 285. Proceeds of Realization

Inasmuch as the proceeds derived from the realization of the collateral are intended to satisfy the secured creditors, the claim shall be deemed to be satisfied by the owner [debtor] in favor of the creditor. Otherwise, the proceeds shall replace the collateral [i.e., the security interest shall attach to the proceeds.]

II. Mortgage

Article 286. Concept

1. An immovable thing may be used (encumbered) for securing a claim in such a manner as to grant to the creditor the right to receive satisfaction out of this thing and to have priority over other creditors in receiving such satisfaction (mortgage).
2. A mortgage may likewise be used to secure future or contingent claims if these claims can be determined at the time of creation of the mortgage. Similarly, the maximum extent to which the claim is to be satisfied out of the thing may be determined. This amount shall be determined by its entry in the Public Register.
3. A claim secured by a mortgage may be replaced by another claim. Such substitution shall require an agreement between the owner and the creditor (mortgagee), and registration of this agreement in the Public Register.

Article 287. Blanket Mortgage

If a claim is secured by a mortgage upon a number of immovable things (blanket mortgage), then each of these things shall be used to satisfy the claim in common. The creditor may satisfy the claim by any of these things at his discretion.

Article 288. Owner’s Mortgage

If the claim secured by the mortgage either has not arisen or is extinguished or is transferred to the owner of the immovable thing, then the mortgage is also transferred to the owner (owner’s mortgage).

Article 289. Registration of Mortgage

1. A mortgage is created by its registration in the Public Register. The registration is carried out pursuant to an established procedure, by the presentation of the [required] notarized documents by the owner of the immovable thing and by the mortgagee. The documents shall indicate the identities of the owner of the immovable thing, the mortgagee and any third party debtor, as well as the extent of the secured claim, the interest thereon and the period of time for performance.
2. A mortgage may also be created so that the right of the creditor arising from the mortgage is determined only according to the content of the claim, and the creditor, in such case, may not rely upon the registration to prove the existence of the claim. Such a mortgage is entered in the register as a guaranteed (secured) mortgage. Mortgages of large sums may only be guaranteed mortgages.

Article 290. Encumbering an Immovable Thing Repeatedly with Mortgages

1. One and the same immovable thing may be mortgaged several times. The order of priority of the mortgages shall be determined according to the time of their creation.
2. If the owner of an immovable thing assumes an obligation to another person to terminate the mortgage once it is, along with the ownership, in the hands of the same person, then this obligation to terminate may be registered in the Public Register.

Article 291. Right of an Owner Who is Not Personally the Debtor with Respect to the Claim Secured by the Mortgage

1. If the owner of an immovable thing is not personally the debtor with respect to the claim secured by the mortgage, then he may still assert against the mortgagee any counterclaim to which only the personal debtor is otherwise entitled; specifically, these are any counterclaims [that the debtor has] arising out of offsetting monetary obligations and defenses against the claim.
2. If the time of performance of a claim depends upon the dissolution of a legal relationship, then the dissolution shall be deemed valid only if it is declared by the owner to the creditor or by the creditor to the owner.

Article 292. Right of the Owner upon Satisfaction of the Creditor

1. The owner of an immovable thing [pledged as collateral] is entitled to satisfy the creditor when the performance of the claim is due, or when the debtor is entitled to perform the corresponding action. ⁴¹
2. If the owner of the collateral is not personally the debtor, then he shall assume ownership of the claim against the debtor if he satisfies the creditor’s claim against the debtor [i.e., subrogation].
3. Upon satisfaction of the creditor the owner [of the collateral] may demand any documents that are required for making an appropriate entry in the Public Register for termination of the mortgage.

Article 293. Extension of Mortgage to the Fruit of an Immovable Thing

1. A mortgage extends to the fruit of an immovable thing as well, unless the fruit is derived through normal economic activities, or until [the fruit] is alienated.
2. By virtue of the mortgage, both the interest accrued on the claim and the court costs shall be covered out of the immovable thing.

⁴¹ Again, this provision applies when the owner of the collateral and the debtor are not the same person.

Article 294. Obligation to Maintain the Mortgaged Thing

1. The owner is bound to preserve the actual value of the mortgaged thing. If due to a worsening of the circumstances [surrounding preservation of the thing] the existence of the mortgage is endangered, then the creditor may fix a period of time to the owner for elimination of the danger.
2. If the [mortgaged] thing is insured, the insurer may pay the proceeds of the insurance to the insured party after a worsening of the circumstances [surrounding preservation of the thing] only when the creditor has been informed of the fact of the damage to the mortgaged thing. The creditor may prevent the payment of the proceeds if he has reason to believe that the proceeds [to the owner/debtor] will not be used for restoration of the thing.
3. If it is found that the owner fails to perform his duty [to preserve the thing], the creditor may demand transfer of the thing into his care. A court shall make the decision with respect to such claim.
4. An agreement by which the owner assumes an obligation before the creditor not to use or otherwise encumber the immovable thing shall be void.⁴² The validity of such transactions with respect to third persons may not be subject to the consent of the creditor.

Article 295. Transfer of the Mortgage and the Claim Underlying it to Another Person

A mortgage and the claim underlying it may be transferred to another person only simultaneously and both together. Simultaneously with the transfer of the claim the mortgage is also transferred to the new creditor. Transfer of the claim shall be deemed valid only when the notarized document on creation of the mortgage is handed over to the new creditor, and he is registered in the Public Register as the new creditor.

Article 296. Debtor’s Obligation Before the New Creditor

If, after the transfer of the claim to a new creditor, the debtor pays the former creditor, this payment shall not excuse him from his obligation before the new creditor, even when he knew nothing about the transfer. ⁴³

Article 297. Presumption of Accuracy of the Entry in the Public Register Upon Passing of the Mortgage and the Claim to the New Creditor

The mortgage and the claim are transferred to the new creditor in the same state in which they were in the hands of the former creditor. The entry registered in the Public Register, proceeding from the interests of the [new] creditor, shall be deemed accurate. In this case the debtor may not assert that the claim is nonexistent. This rule shall not apply when the new creditor knew of the wrong entry in the Public Register.

Article 298. Rights of a Third Person

1. Any third person whose position would be aggravated as a result of realization of the mortgage shall be entitled to pay the claim himself and thereby take over the mortgage. Upon satisfaction of the creditor he may demand a duly authenticated document [memorializing payment of the claim] and may demand his registration as the [new] mortgagee.
2. If one who is personally the debtor satisfies the creditor, the mortgage is passed to him in such a manner that he may demand compensation from the owner [of the collateral]. ⁴⁴

⁴² Again, agreement here refers to a provision of a contract, so only the provision would be invalidated, not the whole contract. ⁴³ The rule charges the debtor with responsibility to know, through the public registry, that the claim and mortgage have been transferred to a new creditor. ⁴⁴ Compare § 1164 of the German Civil Code. The personal debtor who satisfies the creditor assumes the mortgage in the collateral put up by the owner and may demand “indemnification” from the owner. These articles regarding a

Article 299. Renunciation of the Claim or Mortgage by the Creditor

1. If a creditor renounces the claim or the mortgage, the owner shall become the mortgagee. The renunciation shall take legal effect upon its registration in the Public Register.
2. If the creditor renounces the mortgage but not the claim, then the personal debtor is discharged all the same provided that he [the personal debtor] could have received the compensation from the mortgage [under art. 298(2)]. ⁴⁵
3. If the owner has a right to rescind [the mortgage], which excludes the longterm use of the mortgage, then he may demand that the creditor renounce the mortgage.

Article 300. Claim for Realization of the Thing Encumbered with Mortgage

1. If the debtor delays satisfaction of the claim secured by the mortgage, then the mortgagee shall be entitled to claim realization of the immovable thing.
2. The realization is effected according to the procedure defined in this Chapter and the norms of the Civil Procedure Code. The norms of the Civil Procedure Code shall apply as special norms.

Article 301. Foreclosure Sale at Auction

1. Foreclosure sale at auction, on the application of the creditor, is executed by a court that shall designate a specialist (expert) [for conducting the auction].
2. The court decision shall be made public. In addition, the court shall be bound to notify the entitled persons entered in the Public Register of the prospective auction.

Article 302. Other Forms of Realization of Immovable Property

1. A court may, on the joint application of the owner and the creditor, establish a form of realization other than auction. Prior to rendering such a decision the court shall hear the parties.
2. An agreement by which the ownership of the immovable thing is immediately transferred to the creditor if he is not satisfied or the satisfaction failed to occur in time, shall be void.⁴⁶

Article 303. Debtor’s Rights to a Realized DwellingHouse

1. The debtor shall lose the right to retain the fruit of the thing as of the time of rendering the decision on the sale of the thing at auction.
2. If the debtor lives alone or with his family in a building or in a part of a building which is encumbered with a mortgage, then he is entitled to stay therein as a tenant [after realization] and is obligated to pay rent at the market rate to the acquirer of the property.

Article 304. Avoidance of Holding of an Auction

1. An owner or a third person whose rights may be impaired as a result of an auction shall have the right to avoid the auction by satisfying the claim prior to the holding of the auction. 
2. The filing of the owner’s petition with a court may suspend the holding of the auction, but not for longer than six months, if the entitled person [owner] deems that the auction may be avoided by such suspension. The same rule applies when the suspension is acceptable either proceeding from the owner’s personal and economic relations or according to the nature of the debt. The application shall not be allowed if the suspension will cause disproportionately negative effects to the creditor.

Article 305. Participation of the Creditor, the Debtor and the Owner in the Auction

The creditor, the debtor and the owner are entitled to participate themselves in the auction, during which the debtor and the creditor shall present security as deemed appropriate by the expert.

personal debtor who is not the same person as the owner of the collateral generally assume that the owner has some
obligation to the debtor which he is performing by pledging his property to secure the debtor’s debt.
⁴⁵ See German Civil Code, § 1165.
⁴⁶ Again, “agreement” here refers to a provision of a contract, not the contract as a whole.

49

Article 306. Auction Held a Second Time

If, during the first auction, no bid reaches the amount of seventy percent of the value of the thing as assessed by the expert, then the auction shall be held a second time. The second auction shall be announced in the same form in which the first one was announced. In addition, it must be indicated [in the notice] that the auction is being held a second time. The lowest price offered during the second auction must at least cover the litigation expenses and the claims of the creditor, otherwise the auction shall be deemed as not held. The expenses of the auction shall be borne by the owner.

Article 307. Mortgage Extinguished as a Result of Realization of the Thing

1. The buyer of the thing at the auction is obligated to deliver the amount of the purchase price to the expert who carried out the foreclosure execution; the amount of expenses in connection with the execution shall be deducted therefrom.
2. The buyer shall be the owner of the thing only upon payment of the price.
3. All mortgages and rights with which the thing was encumbered and which were registered later than the mortgage of the creditor carrying out the foreclosure execution shall be extinguished as a result of the transfer of ownership. Limited rights to the thing [i.e., mortgages, servitudes] registered earlier [than the mortgage of the creditor carrying out the foreclosure] shall remain unaltered.
4. The new owner shall become a participant in rental and lease relations that exist at the moment of the transfer of ownership. ⁴⁷ By the transfer of ownership to the new owner, the former owner is considered to be a lessee, in accordance with market conditions. ⁴⁸

Article 308. Procedure for Distribution of the Proceeds of Realization of a Thing

1. If the entitled person is registered as the sole mortgagee, or if the proceeds derived from the auction, less the expenses, cover the claims of all mortgagees, then the expert, after reexamining the expenses, shall distribute the amount of the purchase price among the creditors; and the remainder shall be given to the person whose thing was sold.
2. If the amount of the purchase price fails to satisfy all claims secured by the mortgage, then the expert shall reexamine the expenses, deposit the remaining amount [after payment of expenses] into a special account, draw up a plan for distribution of the proceeds according to the order of priority [of mortgages] entered in the Public Register, and submit this plan to the court. The court shall approve this plan and instruct the experts to carry out the distribution in accordance with it.

Article 309. Joint Liability of the State for Improperly Held Auction

If the officially designated expert fails to perform the duties laid on him with respect to the holding of the auction, then the state shall, along with the state expert, be jointly liable before the participants for the damage caused.

Article 310. Compulsory Administration of the Thing (Sequestration)

1. On the application of the mortgagee entitled to foreclosure execution, a court, in lieu of compulsory alienation at auction, may establish compulsory administration of the thing (sequestration). In such case the court shall designate the sequestrator or convey the administrative function to the owner. 
2. Prior to rendering a decision, the court shall hear the persons registered in the Public Register whose rights may be impaired by the sequestration.
3. Sequestration may be established only when it is expected that the income derived through the sequestration will exceed the current expenses of it.
4. If the debtor lives alone or with his family in a building or in a part of a building on which the sequestration is established, he shall be obligated to pay rent according to market rates from the commencement of the sequestration.
5. The sequestrator shall receive the fruit of the thing and, at the end of a year and after deducting all expenses including the sequestration expenses, he shall distribute the fruit [income] in accordance with the distribution plan drawn up by him and approved by the court.
6. The sequestration shall be extinguished when the creditor is satisfied or when it is evident that the creditor cannot be satisfied through the sequestration.

⁴⁷ That is, he replaces the previous owner in relation to any lessees on the property. ⁴⁸ This rule applies if the owner himself was occupying the property.

TITLE FOUR
PUBLIC REGISTER

Article 311. Purpose of the Public Register

1. The Public Register shall be available for inspection by any interested person. The rights of ownership of immovable things and other rights in things shall be entered in the Public Register. Rights to use, security interests and other rights in movable things may also be registered in the Public Register.
2. A separate law shall govern the procedure for organization of the Register.

Article 312. Presumption of Veracity and Completeness of Entries in the Public Register

1. The presumption of veracity and completeness shall operate with respect to the Public Register,

i.e. an entry in the Public Register shall be deemed to be accurate until its inaccuracy is proven.

2. In favor of a person who acquires some right from another person on the grounds of a transaction while this right was entered in the Public Register in the name of the alienator, the entry in the Public Register shall be deemed to be accurate except when a complaint has been lodged against this entry, or when the acquirer knew of the inaccuracy of the entry.

Article 313. Demand for Consent to the Rectification of an Entry

1. If a right is entered in the Public Register in the name of a person who no longer owns such right, then the person whose rights and legal status have been impaired by the registration may demand the consent to the rectification of the entry from that person whose right is affected by the rectification.
2. In order to determine the owner, a complaint may be lodged on the grounds of inaccuracy of the entry in the Register. Upon lodging of the complaint the inaccuracy of the entry shall be presumed.

Article 314. Rights Registered in the Register; Order of Priority

1. The order of priority of rights registered in the Register shall be determined according to the time of registration. The date of filing of the application for registration shall be deemed to be the date of registration.
2. The order of priority may afterwards be altered. This shall require an agreement on rectification among those persons who substitute each other and the registration of the alteration in the Register.
3. Upon the registration of a right the owner may set a condition that some right be registered prior to the other right. This condition shall also be registered.

Article 315. Preliminary Entry in the Public Register

1. A preliminary entry may be made in the Register in order to secure a claim for registration of a right in a thing that is subject to registration. Such a preliminary entry is allowed to secure a future or contingent claim.
2. A registration made after recording of the preliminary entry shall in no way affect the person secured by the registration of the preliminary entry, unless this subsequent registration impairs or extinguishes his claim.
3. The registration of the preliminary entry is made in order to establish the possessor [of a claim to be registered], on the basis of the permission of the person who owns the thing subject to registration and to which this entry relates.
4. If a person to whose thing the preliminary entry relates has the right to [contest the claim], and this contest excludes exercise of the claim secured by the preliminary entry for a long period of time, then this person may demand from the creditor cancellation of the preliminary entry. 
5. If the acquisition of some right is void for the person in whose favor the preliminary entry was made, then he may demand from the [person who does acquire] the right consent to such registration as will be required for effecting the claim secured by the preliminary entry. 

BOOK THREE
LAW OF OBLIGATIONS
GENERAL PART
GENERAL PROVISIONS ON OBLIGATIONS

Article 316. Concept

1. By virtue of an obligation the obligee is entitled to claim performance of a certain action from the obligor. Refraining from action may constitute performance as well.
2. With regard to its content and nature, an obligation may bind each party to act in accordance with extraordinary diligence as to the rights and property of the other party.

Article 317. Grounds Giving Rise to an Obligation

1. An obligation shall arise from the contract between the parties, except when the obligation arises from tort (delict), unjust enrichment or other grounds prescribed by law.
2. An obligation with regard to the duties under Article 316 may also arise from the grounds of drawing up of the contract.
3. A party in a negotiation may require from the other party reimbursement for expenses he has incurred for concluding a contract that, nevertheless, has not been concluded by reason of the other party’s culpable action.

Article 318. Obligation to Disclose Information

The right to receive some information may arise from an obligation. Disclosure of the information shall be ensured within the time that it retains significance for determining the content of the obligation and the contracting party can disclose this information without impairing his rights. The recipient of the information shall reimburse the obligor for the expenses of the disclosure.

TITLE ONE
CONTRACT LAW
PART ONE

CHAPTER ONE
GENERAL PROVISIONS

Article 319. Freedom of Contract. Obligation to Enter into a Contract

1. Subjects of private law are free to enter into contracts and determine their content within the scope of the law. They may also conclude contracts that are not prescribed by law, but do not contravene it. If, for the protection of the essential interests of society or a person, the validity of the contract depends upon the permission of the state, then a separate law shall govern this issue.
2. If one of the parties to a contract dominates the market, then it shall be bound by the obligation to enter into a contract in this field of activity. This party may not unjustifiably offer unequal (unfair) contractual terms to the contracting party.
3. Persons who acquire or use property and services either for noncommercial purposes or for meeting their vital needs may not be unjustifiably denied from entering into a contract, provided that the other party to the contract is acting within the scope of its business.

Article 320. Voidness of a Contract for Future Property

A contract by which one party undertakes the obligation to either transfer all of its future property or a part thereof to another person or encumber it with a usufruct shall be void, except where the contract has been concluded for particular items of future property.

Article 321. Contract for Transfer of [Existing] Property

A contract by which one party undertakes the obligation to either transfer all of its present property or a part thereof to another person or encumber it with a usufruct shall be subject to notarization, except for a contract that has been concluded for particular things of the present property.

Article 322. Voidness of a Contract for Estate

1. A contract concluded by other persons with respect to the estate of a person during his lifetime is void. The same rule applies to a contract concluded during a person’s lifetime for either a forced portion [legitime] of his estate and/or for a testamentary obligation [“legacy”]. ⁴⁹
2. The rule of paragraph (1) of this Article shall not apply to a contract entered into among the expectant heirs at law for the hereditary or forced portion of one of them.

Article 323. Rule for Alienation of an Immovable Thing

A contract by which one party undertakes the obligation to transfer ownership of an immovable thing to another person or to acquire it shall be subject to notarization.

Article 324. Scope of a Contract for Encumbrance of a Thing

If a person undertakes the obligation to alienate or encumber his own property, then this obligation shall also extend to an appurtenance thereof, unless otherwise stipulated in the contract.

Article 325. Definition of the Terms of an Obligation on a Fair Basis

1. If the terms for performance of an obligation are to be defined by one of the parties to the contract or by a third person, then it shall be presumed when in doubt that such a definition shall be constructed on a fair basis.
2. If a party considers the terms to be unfair, or that their definition is being delayed, a court shall make a decision on the issue.

Article 326. Application of the Rules on Contractual Obligations to NonContractual Obligations

The rules on contractual obligations shall likewise apply to noncontractual obligations unless otherwise following from the nature of an obligation. ⁵⁰

CHAPTER TWO
ENTERING INTO A CONTRACT

Article 327. Agreement on the Essential Terms of a Contract

1. A contract is considered entered into if the parties have agreed on all of its essential terms in the form stipulated for such an agreement.
2. Essential terms of the contract shall be those on which an agreement must be reached at the request of one of the parties, or those considered by law to be essential.
3. A contract may give rise to the obligation to conclude a future contract. The form stipulated for the [main] contract applies to the preliminary contract as well.

Article 328. Form of a Contract

1. If a specific form has been prescribed by law for the validity of a contract, or if the parties have determined such a form for the contract, then the contract shall have binding force only if it meets the requirements of this form.
2. If the parties have agreed on a written form, the contract may be concluded by drawing up of one document signed by the parties. A telegraph notice, telecopy or exchange of letters are likewise sufficient for observance of the form.

⁴⁹ See Book Six, Law of Inheritance, §§ 13711397. ⁵⁰ See generally Title II of this Book, “Statutory Obligations.”

Article 329. The Making of an Offer

1. A proposal for concluding a contract (offer) constitutes an offer if in this proposal, addressed to one or more persons, the proposalmaker (offeror) signifies his intention to be bound by the proposal in the case of consent (acceptance).
2. A proposal addressed to an unspecified circle of persons is an invitation to make an offer unless otherwise conspicuously signified in the proposal.

Article 330. Making Offer to Present and Absent Persons

1. A reply to an offer made to a present person shall be deemed to have been received immediately.
2. An offer made to an absent person must be accepted within a reasonable period of time in which the offeror may expect the reply.

Article 331. Acceptance

If the offeror has fixed a period of time for acceptance, then the offer must be accepted within this time.

Article 332. Late Acceptance

If the offeror receives a late acceptance, yet the notice of acceptance shows that it was sent out in due time, then the acceptance is deemed to be late only if the offeror so informs the offeree immediately.

Article 333. New Offer

1. A late acceptance shall be deemed to be a new offer.
2. When a reply indicates consent to conclude the contract but contains terms other than those specified in the offer, then such a reply is deemed to be a rejection of the offer and to constitute a new offer.

Article 334. Presumption of Consent of an Offeror

If in business relations the acceptance has been given with modifications, the contract shall be considered concluded provided that the offeree was entitled to presume consent [to the modifications] from the offeror and the latter did not object immediately [to the modifications].

Article 335. Silence as a Form of Acceptance

1. If a businessperson who performs business operations for other persons receives an offer for performance of such a business operation from a person with whom he has had a business relationship, he is bound to reply to this offer within a reasonable period of time; [otherwise] silence of the businessperson shall amount to acceptance. The same rule applies when the businessperson receives such an offer from a person from whom he has been requesting an order to perform such a business operation.
2. Even if the businessperson rejects the offer but the goods have already been shipped, then he, in order to avoid harm [to the offeror], is bound to temporarily preserve the goods at the expense of the offeror in a manner to avoid their deterioration.

Article 336. Contract Concluded in the Street

A contract concluded in the street, in front of a house or in like place between a consumer and a person conducting sales within his trade, is valid only if the consumer has not rejected the contract in writing within a week, unless the contract is performed [immediately] upon its conclusion.

Article 337. Interpretation of Particular Expressions in a Contract

If particular expressions in a contract may be interpreted differently, then preference shall be given to the version that is commonly used at the place of residence of the parties to the contract. If the parties reside in different places, then the interpretation according to the offeree’s place of residence shall prevail.

Article 338. Mutually Exclusive and Ambiguous Expressions in a Contract

In case of mutually exclusive and ambiguous expressions in a contract, preference shall be given to the expression that most closely accords with the overall content of the contract.

Article 339. Traditions and Usages of Trade

When determining the rights and duties of the parties to a contract, regard is to be given to the traditions and usages of trade.

Article 340. Interpretation of Mixed [Complex] Contracts

When interpreting a mixed contract, regard is to be given to the legal regulations that apply to those contracts that most closely accord with and correspond to the essence of the performance [of the mixed contract]⁵¹ .

Article 341. Acknowledgment of the Existence of a Debt

1. A contract which acknowledges the existence of a debt must be in writing. If another form is stipulated for creation of the obligational relation [i.e. the debt] that is being acknowledged, then the acknowledgement shall also require this form.
2. If the existence of a debt is acknowledged on the grounds of a mutual settlement (payment) or a settlement through negotiation, then observance of the form is not required.

CHAPTER THREE
STANDARD CONTRACT TERMS

Article 342. Concept

1. Standard contract terms are provisions prepared in advance for repeated use that one party (the offeror) proposes to the other party, and which stipulate rules that deviate from, or supplement, norms prescribed by law.
2. If the parties have determined the contract terms in detail, such terms shall not be deemed to be standard contract terms.
3. The terms agreed upon by the parties individually shall prevail over standard contract terms.

Article 343. When Standard Contract Terms Become an Integral Part of a Contract

1. Standard contract terms become an integral part of a contract only when:

a.

the offeror, at the [time and] place of conclusion of the contract, has made an explicit
notation referring to these terms and

b.

the other party to the contract was able to observe the content of these terms and, if he agrees to them, to accept them.

2. If the other party to the contract is a businessperson, then standard contract terms become an integral part of the contract if this was to be expected by him when acting with the due diligence required in business relations.

Article 344. Uncommon Provisions in Standard Contract Terms

Provisions contained in standard contract terms that are of such an uncommon character that the other party could not have expected them shall not become an integral part of the contract.

Article 345. Interpretation of Unclear Provisions In Favor of Other Party

⁵¹ The clause seems to be saying that where a single contract deals with multiple issues, such as lease of one thing and sale of another, or perhaps lease and sale of the same thing, then interpretation of the contract should follow the rules of the Civil Code regarding such type of contracts individually, i.e. for contracts of sale and contracts of lease.

If the text of standard contract terms is unclear, then an interpretation in favor of the other party [offeree] is preferred.

Article 346. Voidness of Terms Contravening Principles of Trust and Good Faith

A term among standard contract terms is void, notwithstanding its inclusion in the contract, if it disadvantages the other party to the contract and is irreconcilable with the principles of trust and good faith. In addition, regard is to be given to the circumstances in which this term has been included in the contract, to the mutual interest of the parties, etc.

Article 347. Voidness of Standard Contract Terms

When the offeror uses standard contract terms towards natural persons who are not conducting entrepreneurial activities, then the following provisions thereof shall be void:

a.	A provision by which the offeror fixes unreasonably long or obviously insufficient periods
	of time for accepting or refusing to accept an offer, or for performance of certain actions
	(periods of time for acceptance and performance);
b.	A provision by which the offeror, contrary to provisions prescribed by law, reserves for
	himself unreasonably long or insufficiently determined periods of time for performance of
	his obligations (periods of time before which breach is deemed to occur);
c.	A provision which gives the offeror the right to repudiate his obligation without a reason
	which is justified and named in the contract (reservation for repudiation of the contract);
d.	A provision which gives the offeror the right to modify, or to deviate from, the promised
	performance, if agreement on such a thing is unacceptable to the other party to the contract
	(reservation for amending the contract);
e.	A provision which gives the offeror the right to demand from the other party to the contract
	an unreasonably high reimbursement for expenses incurred (unreasonably high
	compensation for incurred expenses).

Article 348. Other Grounds for Voidness of Standard Contract Terms

When an offeror uses standard contract terms towards natural persons who are not conducting entrepreneurial activities, the following provisions of such terms shall likewise be deemed void:

a.

A provision which stipulates a price increase in an unreasonably short period of time (shortterm price increase);

b.

A provision which excludes or restricts: the right to refuse performance, which [otherwise] accrues to the [offeree, or party to a contract] under this law, or, the right of the [offeree] to suspend performance until the other party performs his binding obligation (right to refuse performance);

c.

A provision by which the [offeree] is deprived of his right to set off with a claim that is undisputed or has been recognized by a court of law (prohibition of setoff of counterclaims);

d.

A provision by which the offeror is freed from his statutory obligation to warn the other party or to fix a period of time for performance of the obligation [for cure of default] (warning on performance of an obligation, fixing a period [for cure])⁵² ;

e.

Agreement on the amount [that the offeror may] claim for damages when the stipulated amount exceeds the [actual] damage (exceeding claim for damages);

f.

A provision which excludes or limits the liability for damage caused by a grossly negligent breach of obligation by the offeror or by his agent (liability for negligence);

g.

A provision by which, in case of breach of the main obligation by the offeror: the other party to the contract is deprived of, or restricted in his right to repudiate the contract,

⁵² In context, the provision makes most sense if we understand it to mean that the offerer cannot free himself of the duty to warn the offeree that the offeree is in default and to give him additional time to perform – to cure the default.

or,
the other party to the contract is deprived of or, contrary to subparagraph (f) of this
article, restricted in his right to demand damages for nonperformance of the contract
(breach of the principal obligation);

h.

A provision which, in case of partial performance of the obligation by the offeror, excludes the right of the other contractual party to claim damages for nonperformance of the entire contract, or to repudiate the contract if partial performance of the contract is of no interest to this party (losing of interest in the event of partial performance of the obligation);

i.

Any provisions that, contrary to rules prescribed by law, limit the liability of the offeror for defects of “things” while supplying newly produced goods and performing works. ⁵³

CHAPTER FOUR
CONTRACT FOR THE BENEFIT OF A THIRD PERSON

Article 349. Concept

Both the creditor and a third person may demand performance of a contract which has been concluded for the benefit of the third person, unless otherwise prescribed by law or stipulated in the contract, or unless otherwise following from the essence of the obligation.

Article 350. Interpretation of a Contract Concluded for the Benefit of a Third Person

1. In the absence of a special stipulation, the circumstances of the matter, namely, the purpose of the contract, shall determine:

a.

whether the third person is to acquire the right [to demand performance] or not;

b.

whether this right is effective at once [unconditionally] or is subject to certain preconditions;

c.

whether the parties to the contract are entitled to revoke or modify the right accrued to the third person without his consent.

2. The party that has made a stipulation in the contract for the benefit of a third person shall retain the right to substitute the third person named in the contract regardless of the [other] contracting party’s consent.

Article 351. Third Person’s Renunciation of the Right Acquired Under Contract

If a third person renounces the right acquired under a contract, then [his] creditor may demand performance of the obligation himself, unless otherwise following from the contract or from the essence of the obligation.

CHAPTER FIVE
AVOIDANCE OF A CONTRACT

Article 352. Effects of Avoidance of a Contract

1. If one of the parties to the contract, in the circumstances under Article 405, repudiates the contract, the performances and benefits [already] derived shall be returned to the parties (restitution in kind).
1. Instead of restitution in kind, the obligor shall be obligated to pay monetary compensation if:
1. Given the nature of the acquired [performance, benefit] it cannot be returned;
2. The party has used, alienated, encumbered, transformed or altered the received object;
3. The received thing has deteriorated or perished; wear and tear resulting from its proper use shall not be taken into account [i.e., shall not exclude return of the thing].
2. If a return performance has been stipulated in the contract, then monetary compensation may not be substituted for such performance.

⁵³ Inclusion of the word “things” indicates that the offeror may not waive liability for defects in goods supplied or in materials used in performing works, but leaves open the possibility that he may waive liability for defects in workmanship in performing works. Cf. § 148.

4. The obligation of monetary compensation shall not arise if:

a.

The defect of the thing, which gives rise to the right to repudiate the contract, was
ascertained upon its transformation or alteration;

b.

The thing deteriorated or perished through the creditor’s [obligee’s] fault;

c.

The thing deteriorated or perished while in the custody of an authorized person, [and] he treated it with the same care as his own thing; [but] whatever remains shall be returned.

5. Pursuant to Article 394, the creditor [obligee] may claim damages for breach of the [obligor’s] obligation [to perform] under paragraph (1) of this article.

Article 353. Liability of the Obligor [When] Not Deriving Benefit Because of Breach of the Rules for Proper Use of the Thing

1. If the obligor has not derived the benefit [of the thing] owing to breach of the rules for proper use of the thing, when he should have been able to derive the benefit, he shall be bound to compensate the creditor [obligee] for the damage caused by not deriving the benefit.
2. If the obligor returns the thing, pays reimbursement in money or, under subparagraphs (a) and

(b) of paragraph (4) of Article 352, no claim for damages arises, then he shall be reimbursed for unavoidable expenses. Other expenses shall be reimbursed only if the creditor has benefited from them.

Article 354. Performance of Obligations Arising from Avoidance of a Contract

The parties shall be bound to simultaneously perform obligations arising from the avoidance of a contract.

Article 355. Obligation of Notice of Avoidance of a Contract

Avoidance of a contract is exercised by notice to the other party.

Article 356. Time Limits for Avoidance of a Contract

If no time limit is fixed for avoidance of a contract, then the other party to the contract may fix such a period of time for the person entitled to avoid the contract. The period of time shall be reasonable. The right to avoid the contract is extinguished unless notice of avoidance is given before the period of time lapses.

Article 357. Avoidance of a Contract by a Number of Persons

If a number of persons participate in one or another of the contractual parties, then the right to avoid the contract shall be exercised jointly by all participants of the party who avoids the contract, by giving the notice of avoidance to all participants of the other party. If the right to avoid the contract is extinguished for one of the persons [belonging to a party] entitled [to avoid the contract], then this right shall be extinguished for all of the persons [in that party.]

Article 358. Avoidance of a Contract Not Allowed

Avoidance of a contract shall not be allowed on the grounds of nonperformance of an obligation if the obligor could have performed the obligation through a setoff, and after avoidance he immediately declares a setoff against the obligation.

Article 359. Avoidance of a Contract by the Creditor

If a contract has been concluded with the stipulation that the obligor, under the contract, shall forfeit his rights in case of nonperformance of his obligations, then the creditor [obligee] shall be entitled to avoid the contract in the event that such nonperformance occurs. 

Article 360. Mistake in the Basis of a Settlement

1. A contract by which a dispute or uncertainty between the parties is settled through mutual compromises (settlement) is void if, proceeding from the content of the contract, this settlement
2. relies on grounds not relevant to the true state of affairs, and the dispute or uncertainty would not have occurred had the parties known the true state of affairs.
1. Uncertainty may exist when performance of some requirement is in doubt.

TITLE TWO
PERFORMANCE OF OBLIGATIONS

CHAPTER ONE
GENERAL PROVISIONS

Article 361. Presumption of Existence of Obligation

1. Each performance implies the existence of an [underlying] obligation.
2. The obligation must be performed duly, in good faith, and at the time and place determined. ⁵⁴

Article 362. Place of Performance of Obligation

If the place of performance is neither fixed nor determinable from the essence of the obligational relation, then delivery of the object must be effected as follows:

a.

In the case of an individually [specifically] defined object – at the place where it was located at the moment the obligation originated;

b.

In the case of an object defined by generic characteristics – at the obligor’s place of
business; and if no such place exists, then at his place of residence (legal address).

Article 363. Change in Domicile of Obligor or Creditor [Obligee]

1. If prior to the performance of an obligation the place of residence or the domicile of the enterprise of the obligor changes and the obligee thereby incurs additional expense, then the obligor shall compensate the creditor for such expenses.
2. If prior to the performance of the obligation the place of residence or legal address of the obligee changes and thereby the expenses increase or the [obligor’s] performance is endangered, then both the compensation for increased expenses and the risk of [nonperformance] with respect to delivery of the object shall be put on the obligee.

Article 364. Earlier Performance

The obligor is entitled to perform the obligation earlier than the time period fixed, unless the creditor rejects the [early] performance on legitimate grounds.

Article 365. Performance of the Obligation When No Period of Time for the Performance is Fixed

If a period of time for performance of the obligation is neither fixed nor determinable from other circumstances, the creditor may claim its performance at any time, and the obligor may perform it immediately.

Article 366. Demand for Earlier Performance Not Allowed

If a period of time [for performance] is fixed, then it shall be presumed when in doubt that the obligee may not demand performance before [the expiration of] this period of time, and the obligor may perform the obligation earlier than this period of time.

Article 367. Right to Demand Performance of the Obligation Immediately

If for the performance of an obligation some period of time is fixed in favor of the obligor, then the obligee may claim performance immediately if the obligor has become insolvent, has reduced the promised security, or has failed to submit it at all.

Article 368. Performance of Obligation in the Case of a Conditional Transaction

⁵⁴ The Georgian word for good faith may also be translated as “conscientiously.” Here, both meanings are appropriate.

If the validity of a transaction depends upon the occurrence of some condition, then the obligation shall be due from the day of occurrence of this condition.

Article 369. Refusal to Perform the Obligation

The person who is obligated [to perform] under a bilateral contract may refuse to perform the obligation until the counterperformance is rendered, except when he has been obligated to perform his obligation [before such counterperformance is rendered].

Article 370. Consumer Credit

1. In cases of consumer credit the beneficiary of the credit [i.e. the buyer] may refuse to repay the credit if the buyer has a counterclaim against the seller proceeding from the purchase contract that would entitle him to repudiate the performance of his obligation [i.e. the obligation to pay for the goods].
2. The contract of sale together with the contract of credit shall constitute an interrelated transaction if the credit serves to finance the purchase price and both contracts are regarded as an economic whole. An economic whole shall be deemed to exist when the seller has participated with the issuer of the credit in the preparation or conclusion of the contract of credit.

Article 371. Performance of the Obligation by a Third Person

1. Unless it follows from the law, the contract or the nature of the obligation that the obligor must perform the obligation personally, a third person may perform the obligation as well.
2. The obligee may reject the performance offered by a third person if the obligor is against it.

Article 372. Satisfaction of the Creditor by the Third Person [Subrogation]

If the creditor forcibly executes against a thing belonging to the obligor, then any person at risk of losing his right in the thing by the forced execution shall be entitled to satisfy the creditor. When the third person satisfies the creditor, the right to demand [against the debtorobligor] shall be passed to this person.

Article 373. Acceptance of Performance by an Unauthorized Person

1. The obligor is bound to give performance of the obligation to the creditor or to the person who is authorized by law or by a court judgment to accept the performance.
2. If an unauthorized person has accepted performance of the obligation, then the obligation shall be deemed to have been performed if the creditor [obligee] gave his consent thereto or received profit [benefit] from the performance. ⁵⁵

Article 374. Alternative Obligations

If one obligation is to be performed from among several obligations (alternative obligations), then the obligor shall have the right to choose from among them, unless otherwise following from the contract, the law or the essence of the obligation.

Article 375. Choosing Obligations to be Performed

If it occurs that the obligor may repudiate one obligation out of the two due obligations, then the obligation to perform the other action shall remain effective.

Article 376. The Rule for Choosing Alternative Obligations

Under Article 374, the choosing from among alternative obligations is effected by making a declaration to the other party to the contract or by effecting the performance. The chosen obligation shall be deemed to be the obligation due from the beginning.

⁵⁵ Logically, the clause must refer to postfacto consent, because if the creditor gave prior consent then the recipient of the performance would not have been “unauthorized at the time of the transaction.”

Article 377. Choosing More Than Two Obligations to be Performed

The rules of Articles 374376 shall likewise apply when [the obligor may choose from among more than two alternative performances in satisfying the obligation].

Article 378. Performance of an Obligation in Installments

The obligor has the right to perform the obligation in installments (performance of obligation in installments) if the creditor so agrees.

Article 379. Right of the Creditor to Accept Other Performance

The creditor shall not be obligated to accept a performance other than the one determined in the contract. This rule shall likewise apply when the performance is highly valuable.

Article 380. Quality of Performance of an Obligation

If the quality of performance is not specified in detail in the contract, then the obligor shall be bound to perform the work of at least average quality and to hand over the thing of average quality.

Article 381. Performance of Obligation In the Case of an Individually Defined Object

If an individually defined thing constitutes the subject of the contract, then the obligee shall not be obligated to accept another thing, even if the latter is of higher value.

Article 382. Performance of Obligation in the Case of a Generic Thing

If the subject of the performance is a thing that may be substituted (generic thing), then the obligor must always perform the obligation.

CHAPTER TWO
PERFORMANCE OF MONETARY OBLIGATIONS

Article 383. Concept

Monetary obligations are expressed in the national currency. Parties may establish a monetary obligation in foreign currency unless it is prohibited by law.

Article 384. Procedure for Fixing an Annual Rate of Interest

If by law or by contract the obligation is an interestbearing one, then the maximum amount of the annual rate of interest shall be fixed by special normative act.

Article 385. Procedure for Demanding Return of Payment Made Without Obligation

Whatever has been paid without an obligation [requiring the payment] may be claimed back under the rules regulating unjust enrichment.

Article 386. Place of Performance of Monetary Obligation

1. When the place of performance is in doubt, a monetary obligation must be performed at the creditor’s domicile (place of residence or legal address).
2. If the creditor has a banking account intended for [receiving] transfers of funds in that place or in that country where the payment is to be effected, then the debtor may perform his monetary obligation by transfer to this account, except when the creditor is against this.

Article 387. Order of Payment of Monetary Obligation

1. If the debtor is liable before the creditor for several like performances arising out of various obligations, and what has been performed is not enough to pay all the debts, then the obligation chosen by the debtor for satisfaction at the time of performance shall be paid off; and if the debtor does not choose, then that debt shall be paid off which was the first to fall due.
2. If the dates on which claims mature occur simultaneously, then the claim which is the most burdensome for the debtor shall be performed first.
3. If the claims are equally burdensome, then the claim for which the least security exists shall be performed first.

Article 388. Priority of Covering Court Costs

Payment by the debtor that is not sufficient to pay off all the debt due shall discharge first any court costs, then the principal (debt), and finally the interest.

Article 389. Payment of Monetary Obligations in Case of a Change in the Exchange Rate of the Currency

If, prior to the date of maturity of the payment, the currency (rate of exchange) appreciates or depreciates, or if the currency has been changed, the debtor shall be bound to make payment according to the rate of exchange that existed at the time of the creation of the obligation. In the case of a change in the currency, the exchange relations shall be based on the rate of exchange that existed between these currencies on the day of the change in currency.

CHAPTER THREE
CREDITOR [OBLIGEE] IN DEFAULT

Article 390. Concept

1. The creditor [obligee] shall be deemed to be in default if he fails to accept the performance offered to him when it is due.
2. When some action of the obligee is required for the performance of the [debtor’s] obligation, he shall be deemed to be in default if he fails to perform this action.

Article 391. Obligation of the Obligee to Compensate Damage

The obligee must compensate the damage sustained by the obligor because of the obligee’s fault in not accepting performed obligation when it was due.

Article 392. Liability of the Obligor when the Obligee is in Default

When the obligee is in default, the obligor shall be liable for nonperformance of the obligation only if the performance turned out to be impossible because of the intentional [misconduct] or gross negligence of the obligor.

Article 393. Obligee in Default; Effects

If an obligee is in default, then, regardless of his fault:

a.

He shall be obligated to compensate the obligor against additional expenses incurred for the storage of the object of the contract;

b.

He shall bear the risk of accidental deterioration or perishing of the thing;

c.

He shall no longer be entitled to receive interest on a monetary obligation.

TITLE THREE
BREACH OF OBLIGATION

CHAPTER ONE
GENERAL PROVISIONS

Article 394. Claim for Damages In Case of Breach of an Obligation

1. In case of breach of an obligation by the obligor, the obligee may claim damages arising from the breach. This rule shall not apply when the obligor is not responsible for breach of the obligation.
1. In case the obligor exceeds the time for his performance, the obligee may fix [an additional] period of time for the obligor to perform the obligation. If the obligor fails to perform the obligation
2. within this time period as well, then the obligee shall be entitled to demand damages instead of performance of the obligation.
2. Fixing an additional period of time is not required when it is evident that such a period will not yield any result, or when extraordinary circumstances exist which, taking into account the interests of both parties, justify the immediate application of the claim for damages.

Article 395. Preliminary Agreement on Release from Liability for Damages Not Allowed

1. An obligor shall be liable only for damage inflicted by intentional or negligent action, unless otherwise foreseen and otherwise following from the essence of the obligation.
2. A preliminary agreement of the parties on releasing the obligor from liability for damages in case of intentional breach of an obligation shall not be allowed.

Article 396. Liability of the Obligor for the Action of His Representative

The obligor shall be liable for the actions of his legal representative and of those persons whom he employs for performance of his obligations to the same extent as for his own culpable action.

Article 397. Liability of an Obligor Upon Receiving the Object of Performance From Another Person

The obligor shall be liable for his performance even when he was to receive the object of his performance from another person and could not receive it, unless otherwise provided for in the contract or by other circumstances.

Article 398. Adaptation of a Contract to Changed Circumstances

1. If the circumstances that constituted the grounds for execution of the contract have evidently changed after execution of the contract, and the parties, had they taken these changes into account, would not have executed the contract or would have executed it with different contents, then it may be demanded to adapt the contract to the changed circumstances. Otherwise, taking into account individual circumstances, a party to the contract may not be required to strictly observe the unchanged contract.
2. It is the same as a change in circumstances when the understandings, which constituted the grounds for execution of the contract, have turned out to be wrong.
3. In the first instance, the parties should try to adapt the contract to the changed circumstances. If such adaptation is impossible, or if the other party does not agree on it, then the party whose interest has been harmed may repudiate the contract.

Article 399. Repudiation of a Longterm Relationship of Obligation

1. Any party to the contract may, on legitimate grounds, repudiate a longterm relationship of obligation without observing the time period fixed for termination of the contract. The grounds are legitimate when, taking into account the specific situation, including force majeure and the mutual interests of the parties, the party [seeking to terminate] the contract cannot be required [expected] to continue the contractual relationship until lapse of the agreed period of time, or until expiration of the period of time fixed for termination of the contract.
2. If the grounds also constitute a breach of the contractual obligations, then repudiation of the contract is allowed only after expiration of the period of time fixed for elimination of the deficiencies or after an unsuccessful warning [to cure the breach]. Paragraph (2) of Article 405 shall apply accordingly.
3. The entitled person may repudiate the contract within a reasonable period of time after the grounds for termination of the contract have become known to him. 
4. If, as a result of termination of the contract, the already given performance is no longer of any interest to the entitled person, then the termination of the contract may be extended to this already given performance as well. In order to secure the return of the already given performance, articles 352354 shall apply accordingly.

5. Article 407 shall apply accordingly to the claim for damages [arising out of this article].

CHAPTER TWO
OBLIGOR EXCEEDING THE TIME PERIOD FOR PERFORMANCE

Article 400. Concept

The obligor shall be deemed to have exceeded the time period for performance of the obligation, if:

a.

He has not performed the obligation within the time period fixed for his performance;

b.

Even after warning by the obligee, following the date of maturity of the promised
performance, he fails to perform the obligation.

Article 401. Impossibility of Performing of Obligation

Exceeding of the time period for performance shall not be deemed to have occurred if the obligation was not performed due to circumstances that were not caused through the obligor’s fault.

Article 402. Obligor’s Liability

In cases where the obligor has exceeded the time for performance, he is liable for any negligence. ⁵⁶ He shall be liable even for an accident, unless he proves that the damage would have occurred even in the event of the timely performance of the obligation.

Article 403. Payment of Interest on Interest Not Allowed

1. An obligor who has exceeded the time for payment of a sum of money shall be obligated to pay for the period of delay a rate of interest prescribed by law, provided that the obligee, proceeding from other grounds, may not claim more.
2. Payment of interest on interest shall not be allowed.

Article 404. Obligee’s Right to Claim Damages

The obligee shall have the right to claim damages caused by the obligor’s exceeding of the time period for performance.

CHAPTER THREE
BREACH OF OBLIGATION DURING THE TERM OF A BILATERAL CONTRACT

Article 405. Fixing Additional Period of Time In Case of Breach of Obligation

1. If one of the parties to a bilateral contract breaches an obligation arising from the contract, then the other party to the contract may repudiate the contract after the unavailing lapse of an additional period of time fixed by him for performance of the obligation. If, proceeding from the nature of the breach of obligation, an additional period of time for performance is not afforded to the breaching party, then a warning shall be equivalent to the fixing of an additional period of time. If the obligation has been breached only in part, then the obligee may repudiate the contract only if the performance of the remaining part of the obligation is no longer of interest to him.
1. Fixing an additional period of time or issuing a warning is not required when:
1. It is obvious that it will yield no results;
2. The obligation has not been performed within the time period fixed under the contract, and the creditor has tied in the contract the continuation of the relation to the timely performance of the obligation [i.e. stipulated that time is of the essence];
3. Proceeding from specific grounds and taking into account the mutual interests of the parties, the immediate termination of the contract is justified.
1. The contract may not be repudiated if:
1. The breach of the obligation is insignificant [not material];
2. The requirements of paragraph (2) of Article 316 have been violated and, in spite of that, the obligee may be required to leave the contract in force;
3. The obligee himself is fully or principally liable for the breach of the obligation;
4. There is a counterclaim against the [obligee’s] claim of breach, which the obligor has already asserted or will assert immediately after [the obligee’s] repudiation of the contract.
2. The obligee is entitled to repudiate the contract prior to the date when [the obligor’s] performance is due, if it is obvious that grounds for repudiation will occur. ⁵⁷
3. The obligor is entitled to determine for the obligee a reasonable period for repudiation of the contract.

⁵⁶ Meaning is obscure, but it may mean that the obligor is liable for any negligence that caused the delay.

Article 406. Right to Receive Counterperformance

1. If under a bilateral contract the obligor has the right to repudiate his obligation and the circumstance that gives him this right has been caused through the obligee’s fault, then the obligor shall retain the right to receive counterperformance.
2. This rule shall not apply if the grounds for the counterperformance arose at a time when the obligee was delaying receipt of the [obligor’s] performance. ⁵⁸

Article 407. Compensation for Damages in the Case of Avoidance of the Contract

1. At the time of withdrawing from the contract, the obligee may demand compensation for damages caused by the nonperformance of the contract.
2. This rule shall not apply when the grounds for the obligee’s withdrawal from the contract did not arise through the fault of the obligor.

TITLE FOUR
DUTY TO COMPENSATE DAMAGES

Article 408. Duty to Restore the Original State of Affairs

1. A person who is obligated to compensate for damages must restore the state of affairs that would have existed if the circumstance giving rise to the duty to compensate had not occurred.
2. If, as a result of bodily injury or harm inflicted to the health of a person, his ability to work has been lost or reduced, or if his needs increase, then the injured person shall be compensated for such damage by the payment of monthly allowances.
3. The victim is entitled to demand the payment of expenses for medical care in advance. The same rule also applies when professional retraining becomes necessary.
4. The victim may demand compensation instead of allowances, if significant grounds exist therefor. ⁵⁹

Article 409. Impossibility of Restoration of the Original State of Affairs

If the compensation for damages is impossible by restoration of the original state of affairs, or if such restoration would require [unreasonably] high expenditures, then the obligee [claimant] may be given monetary compensation.

⁵⁷ The Georgian text does not clearly indicate whether the obligee may repudiate before his own performance or the obligor’s performance is due. The German Civil Code in its analogous article makes it clear, however, that the obligee is not required to give his performance or wait for the obligor’s performance if it is clear that one of the accepted grounds for repudiation will occur. ⁵⁸ The clause is equally obscure in the Georgian original. One must infer into it that the obligee was justifiably delaying receipt of performance from the obligor, and therefore the obligor has neither a right to repudiate nor a right to expect “counterperformance.” ⁵⁹ Note that 408(2)(4) generally apply to tort damages. See art. 326.

Article 410. Preliminary Renunciation of the Right to Damages Not Allowed

Renunciation by preliminary agreement of the right to damages for breach of an obligation is not allowed.

Article 411. Damages for Lost Profit

Damages shall be compensated not only for the loss of property actually incurred, but also for lost profit. Profit is deemed to be lost if the person did not receive it, but would have received it if the obligation had been duly performed.

Article 412. Damages to which the Obligation for Compensation Applies

The duty to compensate applies only to damages that the debtor could have foreseen and that are the direct consequence of the action causing the damages. 

Article 413. Compensation for Nonproperty Damages

1. Monetary compensation for nonproperty damages may be claimed only in the cases precisely prescribed by law, in the form of a reasonable and fair compensation.
2. In cases of bodily injury or harm inflicted on a person’s health, the victim may claim damages for nonproperty damage as well.⁶⁰

Article 414. Calculation of Damages

The interest that the creditor had in due performance of the obligation must be taken into account in calculating damages. The time and place for performance of the contract must [also] be taken into account in calculating damages.

Article 415. Fault of the Victim in Incurring Damages

1. If an action of the victim also contributed to the occurrence of the damages, then the duty to compensate and the amount of compensation shall depend on which party’s fault was more responsible for causing the damages.
2. This rule shall likewise apply when the fault of the victim is seen in having failed to take action to avoid or reduce harm.⁶¹

TITLE FIVE
ADDITIONAL MEASURES FOR SECURING A CLAIM
[ADDITIONAL REMEDIES]

Article 416. Kinds of Additional Measures for Securing the Performance of an Obligation

The parties, in order to secure the performance of an obligation, may also determine under the contract additional means for doing so: by penalty, earnest money or a debtor’s guaranty.

CHAPTER ONE
PENALTY

Article 417. Concept

Penalty: an amount of money [pre] determined by agreement of the parties to be paid by the obligor in case of nonperformance or improper performance of an obligation.

Article 418. Form of Determining the Penalty

1. The parties to the contract are free to determine a penalty that may exceed the possible damages.
2. An agreement on a penalty must be made in written form.

⁶⁰ See previous footnote. ⁶¹ See previous footnote.

Article 419. Demanding the Payment of a Penalty and the Performance of the Obligation Simultaneously Is Not Allowed

1. An obligee may not demand simultaneously the payment of a penalty and the performance of the obligation, unless the penalty has been stipulated to apply in those cases where the obligor has failed to perform the obligations on time.
2. The obligee is always entitled to claim compensation for damages.

Article 420. Reduction of Penalty by the Court

A court, taking into account the circumstances of the case, may reduce a disproportionately high penalty.

CHAPTER TWO
EARNEST MONEY

Article 421. Concept

Earnest money is a sum of money paid by one party to a contract to the other party as evidence of the execution of the contract.

Article 422. Counting Earnest Money Towards Payment of an Obligation

Earnest money is counted towards the payment account stipulated by the obligation, and if it is not counted towards this payment, then it shall be returned after performance of the obligation.

Article 423. Counting Earnest Money Towards Compensation for Damages

1. If the party who gave the earnest money breaches the obligation put on it, then the earnest money shall remain with the party who received it. In addition, the earnest money shall be counted towards any compensation for damages.
2. If nonperformance of the obligation is caused by the fault of the party who received the earnest money, then this party must return to the other party double the amount of the earnest money. In addition, the party who gave the earnest money may demand compensation for any damages.

CHAPTER THREE
DEBTOR’S GUARANTEE

Article 424. Concept

A debtor’s guaranty is an undertaking to perform an unconditional action or an action that is beyond the object [scope] of the contract.

Article 425. Validity of a Guarantee

The guarantee shall be considered real [valid] unless it contravenes [other] rules prescribed by law or unless it obliges the debtor excessively.

Article 426. Form of a Guarantee

A guarantee must be formulated in writing.

TITLE SIX
TERMINATION OF OBLIGATIONS

CHAPTER ONE
TERMINATION OF AN OBLIGATION BY PERFORMANCE

Article 427. Termination of an Obligation by Performance in Favor of the Obligee

A relationship of obligation is terminated by performance of the obligation in favor of the obligee (performance).

Article 428. Termination of an Obligation by Novation

A relationship of obligation is also terminated when, in place of performance of the originally foreseen obligation, the obligee accepts performance of another obligation (novation).

Article 429. Acceptance of the Performance of Obligation

1. The obligee, on demand of the obligor, shall issue a document confirming that performance of the obligation has been received in full or in part.
2. A document drawn up to confirm payment of a debt that says nothing about the interest on the debt shall be taken to mean that the interest has been paid and the monetary obligation is satisfied in full.
3. When the payment of a debt is made periodically, in installments, then the document confirming payment of the last installment shall, until proven otherwise, give rise to the presumption that the preceding installments have also been paid.

Article 430. Particulars of a Document On Receipt of Performance

A document on receipt of performance drawn up by a creditor or by a person authorized for such purpose must include data on the amount and the kind of the debt, the name and the last name of the debtor or of the person who is paying the debt, and the time and place of the performance [payment].

Article 431. Right to Demand a Document of Indebtedness

If a document of indebtedness [i.e. promissory note] was issued, then the debtor, along with the document on receipt of performance, may demand return or cancellation of the document of indebtedness. If the creditor is unable to return this document, then the debtor shall be entitled to demand an officially authenticated receipt indicating that the obligation is terminated.

Article 432. Compensation for Expenses of Issuing the Document of Receipt of Performance

1. The expense of issuing the document on receipt of performance shall be borne by the debtor, unless otherwise stipulated in the agreement between him and the creditor.
2. If a creditor changes his place of residence, or if he dies leaving heirs at another place of residence, then the increased expense of issuing the document on receipt of performance shall be borne by the creditor or by his heirs.

Article 433. Repudiation of Performance by Reason of the Creditor’s NonPerformance of His Duties

If a creditor refuses to issue a document on the receipt of performance, or to return or cancel the document of indebtedness, or to indicate in the document on receipt of performance that return of the document of indebtedness is impossible, or to [otherwise] acknowledge that the debt is extinguished, then the debtor shall be entitled to repudiate performance. In such cases the creditor shall be deemed to be in default [to have exceeded the term for performance of an obligation].

CHAPTER TWO
TERMINATION OF AN OBLIGATION BY DEPOSIT

Article 434. Concept

1. If an obligee delays acceptance of the performance or his location is unknown, then the obligor shall be entitled to place the object of performance on deposit with a notary public or with a court, and deposit the money or securities to the deposit account of a notary public.
2. By such deposit the obligor shall be released from the obligation before the obligee.

Article 435. Transfer of the Deposited Property to the Obligee

The judge or notary public [as the case may be] shall transfer the deposited property to the obligee. [In the obligee’s absence] the court or the notary shall select a keeper [trustee], but the documents shall be retained by them [i.e. the court or notary].

Article 436. Objects Suitable for Deposit

Deposited objects must be suitable for storage. Perishable objects shall not be accepted for storage.

Article 437. The Place of Storage

The safekeeping must be effected according to the place of performance.

Article 438. Demand that the Obligee Accept the Object

The court or the notary public shall notify the obligee of the acceptance of the object for storage and shall demand from him that he accept the object.

Article 439. Compensation for Expenses with Respect to Storage

All expenses with respect to the storage shall be borne by the obligee.

Article 440. Reclamation of the Deposited Object by the Obligor

1. The obligor is entitled to claim the deposited object back prior to its acceptance by the obligee, unless he refused to reclaim it initially. If the obligor reclaims the object, the storage shall be deemed not to have occurred.
2. The obligor may retrieve the deposited object if the obligee refuses to accept it, or if the period of time fixed under Article 441 has lapsed.
3. If the obligor retrieves the object, he shall bear the expenses of storage.

Article 441. Period of Time for Storage of the Object of Performance

The court or the notary public shall keep the object of performance for a period of up to three years. If within this time period the obligee does not accept the object, then the obligor shall be notified and it shall be demanded of him to retrieve the object. If, within the period of time [stipulated] for return [of the object to the obligor], the obligor fails to accept the object, then the object shall be deemed to have become the property of the state.

CHAPTER THREE
TERMINATION OF AN OBLIGATION BY SETOFF OF COUNTERCLAIMS

Article 442. Possibility of Setoff of Obligations

1. Counterclaims between two persons may be terminated by setoff, if these claims have become due.
2. Setoff of obligations is also possible when the time for performance with respect to one of these claims has not expired, but the party holding [such] claim agrees to the setoff. The setoff of the obligations is exercised by notice to the other party.

Article 443. Possibility of Setoff when the Prescription Period ["Statute of Limitations"] on a Claim has Lapsed