The contract of sale is not legally terminated

The contract of sale is not legally terminated by the effective court decision to remove the buyer

Interpretative decision № 1 of 02.07.2021 of the General Assembly of the Civil and Commercial Chamber of the Supreme Court of Cassation, ruled on interpretative case № 1/2019, provided an answer to an extremely important legal question: whether the contract of sale or for transfer of other real rights is annulled by law with the effective court decision by which the buyer is removed from the property.

The jurisprudence was divided. Some court panels accepted that the law does not distinguish between an already completed or forthcoming eviction, because in both cases it is a question of full or inaccurate fulfillment of the seller's obligations. Therefore, in both cases, the buyer may file a claim for cancellation of the contract by which the right of ownership over the real estate has been transferred to him in accordance with the procedure provided by law.

Other court panels held that with the effective court decision to remove the buyer from the property, the contract of sale was terminated by law. In those cases, the action for annulment of the contract of sale was considered inadmissible.

In the case-law, there have even been cases in which it has been accepted that bringing an action for reimbursement of the sale price is an implied act of rescinding the contract of sale and that it is sufficient for the dismissed buyer to merely invoke the revocation without this. However, according to the provisions of the law, if the sold property belongs entirely to a third party, the buyer may file a claim for cancellation of the contract. The annulment of contracts by which real rights over real estate are transferred, established, recognized or terminated is done by court.

The thesis that the contract for purchase and sale of real estate is annulled by virtue of the court decision, which removes the buyer, contradicts the basic principle that the contract is terminated by a statement of the party in good standing. The court decision removing the buyer does not rightfully invalidate the contract of sale. This is because the consequences of non-performance of a contract could be different according to the will of the party to the contract. She could break it, but she could also prefer to keep the bond by demanding compensation.

Apart from the above, if it is assumed that the contract for sale of real estate is legally terminated by the eviction decision itself, without the need to file a separate claim for cancellation of the contract, the interests of third parties would remain unprotected. This is because the entry of the statement of claim on which the decision for eviction was issued has only a declaratory but not a protective effect, unlike the entry of the statement of claim for the termination of the contract, which also has a protective effect.

It is also necessary to take into account the fact that the buyer is not responsible for the judicial removal if he proves that there were sufficient grounds for rejecting the claim.

When the seller has not fulfilled his obligations and the non-fulfillment is due to reasons for which he is responsible, the buyer has the right to terminate the contract. The termination of the contract is an alternative to the other ways of its protection - a request for actual performance with compensation for delay or a request for compensatory compensation, respectively - reduction of the consideration.

The subject matter of the case, which establishes that the property belongs to a third party and the acquirer is removed from it, does not include the subjective right of the buyer to request the cancellation of the contract with which he acquired the real estate. The subject of this case is only to establish the fact that the property belongs to a third party and to order the buyer to return it to him. Therefore, even with the decision in the case for removal of the buyer, the contract of sale is not terminated. This contract remains valid and binding on the parties. It is up to the buyer to exercise his right to terminate the contract or to settle his relationship with the seller in another way.

The interpretative decision on eviction issued on 02.07.2021 is in accordance with the principles adopted in Interpretative Decision № 3 of 29.11.2012 on interpretative case № 3/2012 of the General Assembly of the Civil Chamber of the Supreme Court of Cassation . According to this decision, only notarial deeds are subject to annulment, which do not reflect the actual legal situation, and the constitutive ones should be preserved, because they are inherently a form of contract and even if the seller is not the owner, this contract remains binding. The interpretative decision of 2012 also accepted that the form of validity must be preserved in view of the future realization of rights arising from the non-performance of the valid contract, which has not produced a material-translational effect. In the same sense is the Interpretative Decision № 12 of 06.07.1990 in civil case № 99/1989 of the General Assembly of the Civil Collegium of the Supreme Court of Cassation, according to which there is a termination of a contract by right in other cases, but not in case of transfer real property transactions.

Many pending court proceedings were suspended pending the Supreme Court of Cassation's interpretation of the eviction. These proceedings will now be resumed. In deciding the pending and all subsequent cases related to the question of the consequences of the eviction, the interpretative decision of 02.07.2021 will have to be taken into account.

adv. Kamelia Yotova

The above article is not a mandatory opinion, consultation or advice, but rather a sharing of impressions from personal practice on the topic. For individual cases, it is best to make an appointment with a lawyer.