The house was sold in installments, but the buyer did not fulfill the payment terms: whether the contract can be terminated will be determined by the Grand Chamber

The panel of judges of the Second Judicial Chamber of the Cassation Civil Court within the Supreme Court referred a case to the Grand Chamber of the Supreme Court that may influence future practice in resolving disputes regarding purchase and sale agreements.

The core issue is whether a seller who has already transferred the property to the buyer but has not received full payment can demand not only debt collection but also contract termination if such an option is explicitly provided by the parties in the contract.

The panel of the Cassation Civil Court concluded that the case should be referred to the Grand Chamber because it believes that the legal conclusion formulated in the ruling dated September 8, 2020, in case No. 916/667/18 requires revision or specification considering the principle of freedom of contract.

Circumstances of the case

In 2010, the seller concluded purchase and sale agreements with a married couple for a residential house and a land plot. The total value of the property was over 2.3 million UAH, and the parties agreed on installment payments over 20 years. The contracts provided for monthly payments and a special condition: in case of payment delay of more than six months or other improper fulfillment of contract terms, the seller had the right to demand contract termination.

After the death of the husband, the court recognized the respondent's ownership rights by inheritance to his share in the house and land plot. Subsequently, she registered ownership rights to these real estate objects in her name.

Later, the seller went to court. She claimed that the buyers did not pay for the purchased property, and the respondent unjustifiably registered ownership rights before full payment contrary to the contract terms. Therefore, the plaintiff requested to recover the debt, terminate both purchase and sale agreements, cancel the state registration of ownership rights, and recognize ownership of the house and land plot in her name.

What the courts decided

The court of first instance denied the claim. It noted that the plaintiff did not prove the amount of debt with proper evidence, and contract termination after property transfer to buyers is not an appropriate remedy. The court also denied debt recovery due to the lack of proper calculation for each contract separately.

The appellate court reached a different conclusion regarding the contract termination claims. It stated that the respondent improperly fulfilled the contract payment terms, and the contracts themselves provided for the possibility of termination in case of such violation. Therefore, the appellate court terminated the purchase and sale agreements and canceled the state registration of ownership rights to the house and land plot. However, the claim for the declared debt amount was also denied.

Why the case became significant

In the cassation appeal, the respondent referred to the legal conclusion of the Grand Chamber of the Supreme Court set out in the ruling dated September 8, 2020, in case No. 916/667/18.

In that ruling, the Grand Chamber concluded that if the buyer has already accepted the property but has not paid for it, the proper remedy for the seller is to demand payment of the price and legally prescribed charges, not judicial contract termination.

At the same time, the panel of judges of the Cassation Civil Court believes that this approach does not fully consider the principle of freedom of contract.

According to the panel, the parties have the right to provide in the purchase and sale agreement the possibility of its termination in case of payment delay even after the property has been transferred to the buyer. In such a case, the seller should be able to independently choose the method of protecting their violated right — to demand debt collection or contract termination if such an option is explicitly provided by the contract terms.

The panel also noted that a similar position was previously expressed by three judges of the Grand Chamber in a separate opinion to the ruling dated September 8, 2020, disagreeing with the view that after property transfer, the seller is deprived of the right to demand contract termination.

What the Cassation Civil Court decided

The Cassation Civil Court did not resolve the dispute on the merits.

The panel of judges referred case No. 509/3878/20 to the Grand Chamber of the Supreme Court because it concluded that it is necessary to depart from its previous legal conclusion or specify it for cases where the parties to a purchase and sale agreement explicitly provide for the possibility of contract termination in case of payment delay after the property has been transferred to the buyer. The ruling took legal effect upon signing and is not subject to appeal.

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