Member Article

Statute of limitations for appeal of public auction contracts

The Higher Commercial Court recently clarified several issues relating to the statute of limitations for appeals of public auction contracts. (Higher Commercial Court of Ukraine Resolution 10 ("On Certain Practical Issues of Statute of Limitation Application"), May 29 2013.)

Pursuant to the Mortgage Law, a mortgagor, mortgagee, debtor or other participant in a public auction can appeal the auction within three months of the conclusion of the auction.

Under the Law on Privatisation of Small State Enterprises, auction participants are limited to one month in which to appeal auction results.

All other persons may file claims within a general three-year statute of limitations. Therefore, the auction contract is subject to challenge for at least three years (or possibly longer if there are reasonable grounds for non-compliance with this term).

Admissibility of motion for application of statute of limitations

The Higher Commercial Court also clarified the conditions in which a claim for application of the statute of limitations may be accepted.

According to the general rules, the court will apply the statute of limitations where a party to a dispute files a motion requesting it to do so. However, the respective provision of the law should be interpreted narrowly, as allowing only the plaintiff (claimant) or defendant (respondent) to file such a motion before the court; other participants in court proceedings (eg, prosecutors and third parties) have no right to ask the court to apply the statute of limitations.

The motion should be filed before the first instance court issues its decision. However, the law permits such motions to be filed with the appeal court (together with an explanation of the filing party's inability to file the motion during the trial hearing), or with the first instance court during a new hearing of the relevant dispute.

The statute of limitations is not absolute grounds for refusal to satisfy claims. The court may consider the plaintiff's explanations for its failure to meet the statute of limitations; should the court find the explanation reasonable, it may admit the claim.

Extension of statute of limitations

The Higher Commercial Court also clarified the conditions in which the statute of limitations may be extended by mutual agreement of contractual parties.

Under the general rules, parties to a contract may agree to extend the statute of limitations for disputes arising from breaches of their contractual obligations. The parties' agreement on the extension can be embodied in the contract, a separate document, correspondence, telegrams, phonograms or other documents. The law requires only that:

• the parties have exchanged such documents; and

• such documents provide evidence of the parties' desire to extend the statute of limitations.

However, a clause stipulating the contract's validity until all contractual obligations have been fulfilled cannot be considered as a negotiated agreement on the extension of the statute of limitations.

Moreover, parties are entitled only to extend - and not to shorten - the term of the statute of limitations as prescribed by law.