Any science, including legal, is considered a sphere of continuous creativity - it is pointless to repeat what has already been done. Scientists, accordingly, are faced with the task of discovering something unknown. In such a situation, it may seem that there are no laws or traditions out of the question. Meanwhile, traditions form the "skeleton" of science. They are the defining principles of the scientist.
Traditions and innovations in law
First, let's deal with terminology.
The concept of tradition in science is used to denote the cultural pattern of the accumulation, preservation and transfer of experience. This term was borrowed by the philosophical direction of science from the sociological.
Innovations are called new tools leading to the progress of the scientific field. As science develops, they may well become traditions if accepted by society.
Novation as an effective dispute resolution tool
Today, the activities of rulemakers are aimed at creating such legal provisions that would satisfy the interests of the maximum number of entities. Much attention in the legislation is paid to the subjects of responsibility of subjects for failure to fulfill the terms of the contract. The rules provide for different ways to resolve such situations. One option is innovation. In civil law, it is considered as an effective way to regulate relations with the counterparty in the event that the company is not able to fulfill obligations under the contract.
Essence
Civil law provides for the possibility of the parties by mutual agreement to terminate the obligation by replacing it with another. This method of resolving relations is called innovation. In civil law, this option is used quite often when it is impossible to fulfill the terms of the contract, because it allows you to achieve mutual benefits without loss.
The concept itself has Latin roots. In a literal translation, it means "change", "update". The definition is disclosed in article 414 of the Civil Code. In accordance with the norm, novation is the replacement of an initial obligation by another, providing for a different method of execution or subject. The peculiarity of this method of resolving relations is that counterparties refuse an already concluded agreement to draw up a new agreement.
Distinctive features
In addition to novation, other "painless" ways to regulate relations between contractors are also provided for in civil law. This, in particular, is about making amendments to the initial conditions of the contract, compensation, as well as changing persons in the obligation.
It should be noted that a change in the deadline for the performance of work (under a contract) or the settlement procedure while maintaining other conditions of the transaction will not be recognized as an innovation. The fact is that in such cases the existing obligation does not end. It continues to operate, but under altered conditions.
As for the change of persons, here, too, the initial obligation does not end. Only the subject composition changes. In case of compensation, on the contrary, the obligation is completely terminated without replacement.
In civil law, for example, innovation does not recognize the conclusion of a new independent agreement between the same entities during the validity period of the main (initial) contract, unless it is expressly established in the relevant documents that the counterparties mutually agree to replace obligations.
Conditions
In civil law, novation can take place subject to a number of requirements. Consider them.
First of all, a new obligation should be established on the basis of an existing (initial) one and provide for a different way of performance or subject. In other words, the termination of one obligation and the establishment of a new one cannot be considered exclusively consistent actions of counterparties. The agreements that the parties will enter into must have a causal relationship. The previous obligation is terminated, because the counterparties agreed to establish another obligation. The new agreement is because the subjects agree to terminate the previous one. If this condition is not met, then the counterparties will have two different obligations.
Another requirement is the validity of the transaction. If any obligation is declared invalid, there are no grounds for updating it. Consequently, entities cannot apply the provisions of Article 414 of the Civil Code of the Russian Federation to their legal relations. If the new agreement is invalidated, the previous agreement will continue to be valid. In this case, the innovation is recognized legally invalid.
To apply article 414 of the Civil Code to a transaction, counterparties must not change its subject composition. Not only the retirement of individuals, but also the appearance of new participants is not allowed.
When concluding an agreement on novation, the parties must clearly indicate their intention to terminate the initial obligation. If there is no such indication, then a new agreement will exist along with the original one. When concluding a contract, the parties must comply with the general requirements enshrined in the Civil Code.
Novation: consequences
Choosing ways to resolve legal relations, counterparties must evaluate all the consequences of their actions. Novation in civil law is provided to release counterparties from an obligation that they cannot fulfill, replacing it with another. It must be remembered that updating the agreement is the right of the parties. Subjects themselves decide whether to use it or not. No one can be forced to apply novation.
The main consequence of the innovation is the termination of an existing obligation. This means that all disagreements will be settled by the counterparties in accordance with the provisions of the new agreement. It should be noted that in accordance with the provisions of Article 203 of the Civil Code, the statute of limitations for filing a claim for an initial obligation is interrupted when an innovation is committed. The statute of limitations begins anew under the renewed obligation.
Nuances
As indicated in article 414 of the Civil Code, by novation, the parties can terminate additional obligations that are associated with the original, unless otherwise provided in the agreement. Additional obligations include, for example, those aimed at ensuring the fulfillment of the conditions of the initial transaction. It is, in particular, the payment of a forfeit, withholding of property, the provision of a guarantee or a pledge, as well as the issue of a deposit. An exception is a bank guarantee. The obligation of the guarantor to pay the creditor to the debtor the specified amount does not depend on the original obligation, for the provision of which, in fact, the guarantee was provided. The corresponding provision follows from Article 370 of the Civil Code.
The requirement to pay the agreed amount will be satisfied even when it is presented after the notice of termination of the obligation secured by the guarantee. It follows from this that, in order to continue the action of measures aimed at ensuring the fulfillment of the obligation, the parties must re-establish them in the agreement on novation.
Update Features
As a rule, novation is used as a basis for termination of a monetary obligation. For example, the customer concluded a contract with the contractor, according to which he must pay the cost of work. If a person does not have the opportunity to fulfill the obligation, he may offer the counterparty to reissue the agreement into a loan obligation. Similarly, you can do with the obligation to carry out contract work in advance.
When talking about innovation, as a rule, they use the concept of “agreement”. It is in the form established for the loan agreement (808 article of the Civil Code). From the moment the agreement enters into force, the debt that existed earlier ceases. Instead, a person has a new duty. The initial transaction is governed by Ch. 37 of the Civil Code, and relations arising after the implementation of novation are covered by the provisions of Ch. 42 of the Code.
Unlike Art. 409, which sets the conditions for compensation, in article 414 there are no such indications. At the same time, the parties, concluding an agreement on novation, must clearly define the obligation to be terminated and indicate the obligation arising in its place. The remaining conditions, including the order and deadlines, are set by the counterparties independently, guided by general standards.
Important points
If the counterparties have expressed a mutual desire to terminate the debt obligation that arose as a result of the non-performance of the contract, replacing it with a loan obligation, then they have the right to draw up the relevant contract and not include a mention of the innovation. However, in doing so, they must draw up a separate agreement to replace obligations. Counterparties indicate in the loan agreement that this agreement is an integral part of it.
There is another option for registration of innovations. The parties can immediately conclude an agreement to replace the obligation and include in it the conditions on which the loan is provided.
Difficulties in taxation
As practice shows, enterprises have problems reflecting innovations if the obligation is replaced by a loan obligation:
- the contractor to carry out work in advance;
- customer pay for work performed.
The contractor will have accounts payable if the customer made an advance payment under the contract, but the contractor did not perform the work. For example, the contractor did not receive the necessary materials due to non-fulfillment by the other counterparty of the terms of the supply agreement. The customer and the contractor in this situation may well make innovation. In accordance with the agreement, the obligation to perform work against the advance payment will be replaced by the obligation to return the funds. Accordingly, the debtor (contractor) becomes the borrower, and the creditor (customer) becomes the lender.
The contractor at the date of receipt of the advance funds must calculate the amount of VAT from their amount and issue an invoice. The deducted amount can be taken for deduction on the day the advance payment is returned or work is performed.
A cash loan transaction is not subject to VAT. Accordingly, after the innovation is completed, no deductions to the budget are necessary.