Terminate a contract because the other party breached it: what to do under Georgian law

What to do

1. Classification: what was breached, whether the breach is material, and what the contract says about termination and penalties. If the contract is continuing (supply in batches, services), a breach allows termination after an unsuccessful period to remedy it or after a warning (Civil Code of Georgia, Art. 399). Termination must occur within a reasonable time after one learns of the ground (Art. 399).
2. Main route: for breach of a bilateral contract, you may terminate after the additional period you set has expired unsuccessfully. Where a period is inapplicable, a warning is required instead (Civil Code of Georgia, Art. 405). No period is needed if it is clearly futile, if the contract ties performance to an exact time, or if there are special grounds (Art. 405). For a partial breach, termination is allowed only if the remaining performance has lost interest for the other party (Art. 405). Termination is excluded for an insignificant breach or where the creditor itself is at fault (Art. 405). Termination is possible before the performance date if the grounds will clearly arise (Art. 405).
3. Formalities: send a written demand with a specific period, then terminate by notice to the other party, without going to court (Civil Code of Georgia, Art. 355). If the breaching party sets a reasonable period for a decision, the right to terminate expires when that period ends (Art. 356). Keep proof of delivery.
4. Consequences: what was received, including any prepayment, and the benefits derived from it are returned in kind, or in money if that is not possible (Civil Code of Georgia, Art. 352). The returns are made simultaneously (Art. 354). Losses from non-performance are also recoverable if the breach was the debtor’s fault (Art. 407). A contractual penalty does not exclude the right to damages (Art. 419).
5. If the money is not returned, bring a claim for return and damages. The limitation period for contractual claims is 3 years, and for immovable property 6 years (Civil Code of Georgia, Art. 129).
6. Where to apply: the counterparty (demand, notice); the district (city) court or magistrate; arbitration, if the contract provides for it.
7. Evidence: contract; payment orders; correspondence on deadlines; the demand with the additional period; the termination notice with proof of delivery; calculation of losses.
8. Traps: terminating without the required additional period makes the terminating party the breaching one; setting a period but accepting performance after it expires; going to court for a “termination” on the Russian model, when only a notice of termination is needed.

Be sure to check

• as a general rule, first an additional period or a warning; termination only after it has expired unsuccessfully
• when no additional period is needed and when termination is not allowed (insignificant breach, the creditor’s own fault)
• termination is made by written notice, with proof of delivery
• consequences: return of what was received (including prepayment) and compensation for losses; limitation