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October 27, 2014

 

 

COLLAPSE OF THE CONTRACT AND CONTRACTUAL DOCUMENTS.
WRONG SEAL.

 

Did you know that from what geometric shape of seal of your company or partner will be on the last page of the contract depends the validity of the contract or its invalidity?

Of course, you can argue to me that in article 366 of the Civil Code, there is no obligation to put seals, for the contract conclusion, as signatures is enough. In some cases, even signatures doesn’t need, exchange of the documents certifying the desire of the parties to conclude a contract, sent by fax, mail or the Internet, will witness the conclusion of the contract. However, we are talking about not some cases, but especially on the majority of cases, where from the conclusion of the contract depends the well-being of the legal entities. And when we are speak on the agreements between organizations we should redouble our vigilance, or maybe triple it. Because sums are not small, and salary is not enough for all consequences, then we will be obliged to reimburse them.

Speaking on agreements and contracts of the legal entities, it should be remembered that the seal is required for official confirmation of the parties desire to enter into a contract. It is stipulated in the "Regulations on the procedure of production, storage and use of seals and stamps" No 1077 from 27.10.2001 and in point 3.9 of  the "Regulations on the procedure for monitoring of foreign trade operations" No416 from 30.09.2003. Regulations No 1077, clearly states that "Seal - a tool that is used to further official confirmation of the validity of an authorized person actually willing or other information, and its is under special procedure for the manufacture, storage and use" and in Regulation No416 indicated that "the signature of business entities in the contract shall be certified by their seal".

It becomes clear that the seal of the legal entity plays an important role in the validation of the parties' agreement. And it is true, if the signature can be repeated by an unauthorized person, to repeat the sketches of the seal is difficult, not impossible, but much more difficult, as for the production, storage and use of the seal are given increased requirements and the sketches of the seals are stored in the internal affairs department. Surprising, just one little fact, why such an important contract requirement as an obligatory presence of the seal in it, declared only in the departmental act, rather than for example in a government decree or act of the legislature? Well, truth is probably somewhere nearby, but against the mandatory status of the Regulations No 1077 you cant argue, otherwise it will be a lot of problems in the recognition of the legitimacy of the contract.

No wonder that we have started talking from the shape of the seal. According to the Regulations No 1077 seals are divided into primary, structural, personal and auxiliary. Depending from their purpose, their shapes are defined. They may be circular, oval, diamond-shaped and triangular. For example, unlike other types of the seals, primary seal can only be a circular shape. The reason we focus our attention on the primary seal that the contracts on behalf of the legal entities may be certified only by major - round seals. For example, if you have specified in the contract, as a party, one organization and after signing of this contract trustee of this organization certified the contract not with the primary seal, but with the structural seal of the representative office or branch, then you should expect a trouble. Since, Regulation No 1077 stipulates that "the primary seal is the seal used for certification documents issued on behalf of the legal entity. Besides, contracts, powers of attorney, bank and other documents related to the order of funds and materials, certified only by primary seal". That is, the contract concluded directly with one legal entity can not be assured by a structural division, as in the contract as a party  indicated not representative offices or branch of that party but legal entity directly itself. This is confirmed by point number 12 of the Regulations No 1077, which states that "you can not use the structural and auxiliary seals of the legal entity for the certification documents issued on behalf of the entity".

You may say, how it could be, in fact representative and branch just created to serve functions of the legal entity, why do they need if they are elementary not entitled, to conclude a contract on my face. That is a rub, as under Article 47 of the Civil Code of the Republic of Uzbekistan representative offices and branches are not legal entities and are only intended to represent the interests of the legal entity and implementation of their protection. Branch in certain cases, may take over the function of the legal entity which established it, but they are limited to only those functions on behalf of the branch, not the headquarter. Its enough to look at the definition of the structural seal given in the Regulation No 1077, which says "structural seal is the seal used for certification of documents issued directly in the name of the structural unit of the legal person" in order, the last doubts have disappeared, like autumn leaves.

We are not saying that you can not enter into agreements and contracts with representative offices and branches. You can, but specify this directly in the text of the agreement.

Especially, situation with the seals very often occurs in foreign trade contracts. Due to the fact that many foreign companies have offices in Uzbekistan they make contracts with local companies and put rectangular or round seals of their local offices from their behalf. What could be the consequences? If the contract is governed by the law of Uzbekistan, such a contract, together with all the contract documents: invoices and acts, on the basis of Article 116 of the Civil Code of Uzbekistan will be considered null and in accordance with Article 114 of the Civil Code of Uzbekistan the parties will have to return to each other mutual obligations. If it is a contract of sale then return the goods for money is not difficult, but what if it is a contract for construction and a real estate is partly built? Its is good when contract partner  will react to the occasion in good faith manner and will meet in solving the problem. But it may happen so, that the partner after money acceptance, will not want to comply with the obligations under the contract and in this case it will be very difficult to get them back. Really, what we can do for it, or rather its subdivisions, as the contract is certified not by the parent entity, but by its division. And what you can take from the division, when it’s even has no real estate on the balance, not that money. It is also possible such a case when in a relationship of the parties may be differences, and foreign partner, taking advantage of the absence of its seal can recognize the contract as invalid and leave already committed payments under the contract for itself, considering them as incurred costs. Sending further claim to the court is unlikely to give something, because the issue of execution of the judicial act abroad, is another story. In addition, I'm not talking about the currency penalties that impose the tax authorities for non-fulfillment of the foreign trade contract. And what about time costs associated with the renegotiation of contracts and the search for a new partner?

Possible of course that the contract is governed by foreign law, but then the situation is quite uncertain and unpredictable.

To hold and control over the situation, do not allow putting into agreements and contracts of the seal of structural divisions and require assurances by the primary seal of legal entity with the presence of mandatory distinctive information about the legal entity inside the seal. This may take some time, as, for stamping, the contract will be need to bring it on the location of the headquarter of a legal entity, but it will still be many times less than the time needed to correct errors in the case of the invalidity of the contract.

 

Timur Abdulazizov
Legal expert

 

 

 




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