Problems of restoring the creditor's contractual position through full compensation of damages

Abstract

Problem. The rule of the Civil Code of the Russian Federation under study, concerning full compensation for losses (paragraph 2 of clause 2 of Article 393 of the Civil Code of the Russian Federation), is expressed in insufficiently definite terms. Owing to its ambiguous content, this wording requires theoretical consideration and the resolution of issues arising in law enforcement. Aim. To identify the meaning of the provision of the Civil Code of the Russian Federation under study and the problems of its application in various scenarios of improper performance of a contract. Methods. The study employed the formal-legal and comparative-legal methods, as well as the method of systemic analysis. Results. The study identified issues in satisfying the creditor’s unfulfilled expectations: in a contractual obligation of a strictly personal nature; where it is impossible for the creditor to obtain specific performance or where the creditor loses interest in performance; where the creditor fails to achieve the purpose of the contract and where reputational harm is present. Moreover, a problem is identified in comparing the creditor’s hypothetical proper position with their actual position after full compensation for losses. It is established that such a comparison is difficult owing to the absence of clear criteria for assessing losses and the impossibility of taking into account all legally significant circumstances. Such a comparison cannot always be regarded as correct from a practical standpoint. Conclusions. In certain circumstances, full compensation for losses to the creditor proves ineffective in resolving the identified problems. The very fact of placing the creditor in the proper position under the contract is not always possible and is even inappropriate owing to the irreversible consequences of improper performance of the contract. Resolving these problems requires more detailed regulation of the analysed provision of the Civil Code of the Russian Federation.