FOURTH ASSIGNMENT: CONTRACT LAW

EXERCISE 1
Instructions for Exercise 1:
1) Here is a draft of the report. Similar reports are often made by law firms/lawyers when
their clients want to know what their legal situation is. Often this is requested to
prepare for future litigation or negotiations.
2) Your principal task: based on the facts given and using the DCFR answer 4 questions
posed, filling in Section IV.
3) Secondary task: once you have answered all 4 questions, you should make a very short
(2 sentence per question should be enough) summary of your answers. The idea that
the client can immediately see what the result of your analysis is, without the need to
read through whole reasoning.
4) Pay particular attention to the DCFR regulations on the question whether a contract
can be terminated in advance before the breach. We have not discussed that issue in
the lectures, but using the DCFR text and commentary you should be able to
determine under what circumstances such termination is possible.

Limited Liability Company

“Medical Equipements”
ABS Street 1, New City, 1453

1st of April, 2020 New City

REPORT
Based on the contract No. 13335/12 between the law firm “John and Partners” (hereinafter:
“Law Firm”) and LLC “Medical Equipment” (hereinafter: “Client” and “Seller”), the Law
Firm provides you a reply to your request to receive a report (hereinafter: “Report”) and
answer four questions that you have posed to the Law Firm concerning your contractual
relations with the limited liability company “New Health Technologies” (hereinafter:
“Buyer”).

I QUESTIONS POSED
1. Provided the export ban in Ruritania is extended until the 12th of May can the Client
invoke the impediment beyond its control as an excuse for non-performance under the
DCFR?
2. Is the Client’s right to invoke the impediment beyond its control affected by the Clause
25 of the Sale Contract under the DCFR?
3. Provided the Client could invoke the impediment beyond its control as an excuse for non-
performance, how would this affect the remedies available to the Buyer under the DCFR?
4. Under what circumstances (if any) could the Buyer terminate the contract before April
25, 2020 under the DCFR?

II CONCLUSIONS

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1. According to DCFR Book III article 3:104 the Client can apply it as defence on basis of
impediment beyond its control as an excuse for non-performance, but according to the
DCFR III.-3-104.(3) it is acting till the end of the export ban.
2. The export ban wasn’t mantioned in the Clause 25 and there was written situation that
concerns only military conflicts, but the client does not have the right to invoke the
impediment beyond its control affected by the Clause 25 according to the article 8:101 in
DCFR book II.
3. According to the DCFR III-3:101 (2) the Buyer can require any remedies except enforcing
specific performance and damages. So the client can ask for the reducing the price for non-
conforming performance or terminate the contract.
4. If the Buyer has reasons to believe that there will be non-performance or the Client did not
give an assurance of performance, then according to the DCFR III 3:504 and III 3:505 the
Buyer can terminate the contract before April 25, 2020.

III FACTUAL CIRCUMSTANCES

1. The Client is a producer of medical equipment located in Ruritania. In 2019, the Client
concluded a sale contract (hereinafter: “Sale Contract”) with the Buyer, who is located in
Oceania. The Sale Contract provided that the Client – who acted as a seller - was obliged
to deliver 500 000 surgical masks to the Buyer, 0.50 eurocent per item. The Buyer intended
to resell them to hospitals and pharmacies in Oceania.
2. The Sale Contract contained, among other clauses, the following ones:
1) “Clause 2: The object of the Sale Contract is delivery of 500 000 masks further referred
to as “Goods””.
2) “Clause 14: Delivery. The Seller delivers the Goods by handing them over to a carrier
for transportation by air to the Free City of Greenwich, Oceania.”
3) “Clause 16: Time of Delivery. The Seller must hand over the Goods as provided in
Clause 14 of this Contract no later than 19 th of April 2020. The Seller must ensure that the
carrier delivers the Goods to the Free City of Greenwich, Oceania before 25 th of April
2020.
4) “Clause 17: Delay. The Seller is considered to have delayed the performance if the
Goods do not reach Free City of Greenwich, Oceania before the 25th of April 2020.”
5) “Clause 22: Payment. The Buyer must pay the price in advance before the 1st of April.”
6) “Clause 25: “Impediment Beyond Contract (Force Majeure). The Parties are not obliged
to comply with their obligations in case of military conflicts that prevent production,
delivery or export of Goods.”
3. Clause 25 was included in the final version of the Sale Contract because the Client insisted
upon it. During the negotiations of the Sale Contract, the Client informed the Buyer that
“Ruritania has been in military conflicts before and they have paralyzed our production
capacities from time to time. Our country continues to have strong tensions with one of its
neighbours. We hope it won’t escalate, but we want to be sure that we are protected if this
happens.” After a short discussion, the Buyer’s representatives agreed to the inclusion of

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 Clause 25 stating that “We have an impression that Ruritania will not engage in any
military conflicts with its neighbours. Thus, it is unlikely that such a clause would affect
our interests, but if you consider such a clause important then let’s put in a contract.”
4. On the 5th of February, Ruritania had the first official death from Covid-19. On the 1 st of
March, Ruritania had 50 000 infected with Coronavirus (according to official reports) and
2 000 deaths due to the Covid-19. On the 15 th of March, the Ruritanian government
imposed a quarantine on its population. The same day, the Ruritanian government
informed the public that all the factories producing essential goods must stop all their
exports and work entirely for the local market. Surgical masks were mentioned among
essential goods. These restrictions were introduced for a month until the 15 th of April.
Violation of this restriction could lead to criminal penalties for the management of
companies. On the 17th of March, the prime minister of Ruritania stated that it is highly
likely that the ban on exports will be extended to the 12st of May 2020.
5. On the 20th of March, the Client received a call from the Buyer. The Buyer inquired
whether the Client would be able to perform the delivery before the 25 th of April. The
Client replied: “We assure you that we will do everything possible to get the masks on
time. There is no official decision on extension of the export ban, although we cannot
exclude it. Unfortunately, it is possible that the decision on extension will be announced a
few days before the 25th of April. Moreover, there is a risk that due to extensive demand
for masks in the local market we might lack the raw materials and capacity to satisfy your
order. However, we are working on it, so that once the ban is lifted, we can immediately
perform our obligations (at least partially) towards you. Of course, we also expect that you
will perform your obligations without any delay.”
6. On the 22nd of March, the Client’s Chief Executive Office (hereinafter: CEO) had a
short conversation with a representative of the Ruritanian Chamber of Commerce
(hereinafter: RCC), an organisation that represents the business of Ruritania and also is an
important participant in the political Ruritanian process, lobbying business interests before
the Ruritanian government. During the conversation, the representative of the RCC
informed the Client’s CEO that the political debate strongly supported a long-term
extension of the ban. Some of the leading politicians were proposing extension of the ban
throughout the summer.”
7. This position of the RCC was confirmed by an official email sent to the Client. In that
email, the director of the RCC stated that there were no indications that the drastic
restrictions would be lifted before the end of May. In the words of the director of the
RCC: “Currently, there is a political consensus that no restrictions will be lifted before 21 st
of May, 2020. In fact, six out of ten ministers in the government have stated in media that
they would prolong the restrictions if the number of people carrying the Coronavirus will
not fall below 10 000. In these circumstances, it is highly unlikely that the restrictions will
be lifted before the end of May and there is a risk that they will be extended even further.”
8. The factual circumstances as presented above, will be used to answer the questions
posed by the Client. While preparing this Report, the Law Firm relies on the documents
provided by the Client. All the documents that were used to prepare the Report are listed
in the Attachment No.1. If the Client considers that some of the conclusions reached by
the Law Firm are incomplete or incorrect or considers that they were based on incorrect
information, the Client should immediately inform the Law Firm.

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 IV Legal Analysis.
1. Provided the export ban in Ruritania is extended until the 12th of May, can the
Client invoke the impediment beyond its control as an excuse for non-performance
under the DCFR?
1.1. Article DCFR II 8:101 (1) clearly says that if the situtiaion, because of which the debtor
couldn’t provide folfillment of his obligations to the creditor, wasn’t under debtor’s
control or he could not reasonably expected to have avoided it, then the debtor shall be
excused. In taht particular case the Client couldn’t conrol or predict that situation with
Covid-19 in Ruritania will have the effect on the export.

2. Is the Client’s right to invoke the impediment beyond its control affected by the
Clause 25 of the Sale Contract under the DCFR?
2.1.

3. Provided the Client could invoke the impediment beyond its control as an excuse for
non-performance, how would this affect the remedies available to the Buyer under
the DCFR?
3.1. There are 6 main types of remedies can be used by the Creditor according to DCFR
Art.III 3:101.
◦ the Buyer can request performance (whether in the court or not )
◦ may ask compensation of damages caused by Debtor
◦ can claim interest for delay of monetary obligations withhold the performance,
◦ if the obligations and the creditor has to perform at the same time or after
◦ may reduce the price for non-conforming performance
◦ terminate the Agreement
but according to the DCFR III article 3:101 and that fact that the client invoke the
impediment beyond its control as an excuse for non-performance, the Buyer can not to
claim interest for delay , because the obligations is not monetary, and Withhold the
performance , hence the Buyer performed his obligations.

4. Under what circumstances (if any) could the Buyer terminate the contract before
April 25, 2020 under the DCFR?
4.1. There are next conditions for the Buyer to terminate contract according to the DCFR III
3:504:
◦ if the debtor has declared non-performance
◦ if the Client was not give an adequate assurance of performance.
◦ it is clear there will be such non-performance
◦ if the non-performance would have been fundamental
So if the debtor did not perform any guarantee to the creditor, the contract can be
terminated.

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 V Disclaimer.
This Report is an informative material for the Client’s use and should not be used for other
purposes. The Report can be distributed to third persons only with the Law Firm’s written
consent. The Client must abstain from rereferring to the Report or any of its parts in any
document that is intended to be distributed to third persons.
The Law Firm wants to underline that the Report is made against the background of the
DCFR and information provided by the Client. The conclusions in the Report cannot be
extended to factual circumstances not known to the Law Firm. Thus, the Report serves only as
a general advice.
When preparing the Report, the Law Firm assumed that the information provided by the
Client is up-to-date, correct and complete. If the Client considers that the information
provided to the Law Firm was not up to date, correct and compete or that the Law Firm’s
conclusions were incorrect, please, immediately inform the Law Firm about it. This Report is
confidential, and it is prepared exclusively for the Client to allow it to consider the viability of
legal claims and defences in future litigation, if such is to be initiated by the Client or the
Buyer in relation to the performance of the Sale Contract.
We hope that the Report answers the questions posed by the Client. In case, there are any
further questions or clarifications needed, please, contact the Law Firm, phone n.: 08643478,
email address: jonhpartners@partnersjonh.com. We will be honoured to help you.

Kind regards,
Peter John
Attorney, Partner at “John and Partners”

EXERCISE NO. 2

Instructions for Exercise 2: 1) Your principal task is to fill the part of the Statement of
Defence where the Defendant shows to the court, relying on LCL, that specific claims by
the Claimant have no legal basis.

Your secondary task: in the section 4 “Requests to the Court” you must mention all or
principal provisions of the LCL (no procedural rules are necessary) that you used to justify
Defendant’s objections to Claimant’s claims. This “secondary” task will not be separately
graded.

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3) Defendant must base its arguments on the rules of the Latvian Civil Law (“LCL”).
The Defendant can defend his objections on the LCL; the use of the DCFR as an
interpretive tool of the LCL is not prohibited but is not necessary!

4) Some of the facts are described differently by the Claimant and Defendant. In case of
contradictions you must rely on the description by Defendant (your client)!

5) Please do not focus on the amount of claim (whether the Claimant could ask a bit more or a
bit less money), the Defendant is arguing that Claimant’s claims are not justified in principle
(not only in some part).

6) I strongly recommend you to use a following method: first refer to a rule or rules (whether
citing or in your own words); interpret what that rule say, bearing in mind facts of the given
case, and apply specific facts, leading to a conclusion that Claimant’s claim is to be rejected.

HAPPYTOWN DISTRICT COURT

Town street 58, Happytown, 01984

Claimant:
LLC “Industrial Properties”
Registration number: 124455

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 Address: Happy Street 5, Happytown,
0754

In the case against:

Defendant:
LLC “New Solutions”
Registration number: 135645
Address: Joyful Street 10,
Happytown, 0863

STATEMENT OF CLAIM
On termination of a rental contract, payment of rent, interest and earnest money
1. Description of the Factual Circumstances.
1.1. Limited liability company “Industrial Properties”, registration number: 124455,
(hereinafter: Claimant) owns a number of immovables in Happytown. On the April 1,
2017, the Claimant was approached by limited liability company “New Solutions”,
registration number: 135645, (hereinafter: Defendant). At that time, the Defendant was a
start-up that planned to produce and assembly 3D printers. For that reason, it needed
industrial premises. The Claimant offered the Defendant to rent one of its the industrial
buildings. The object of the rent (hereinafter: Building) had a number of offices and a few
large spaces that could be used for different types of industrial activity.
1.2. The Defendant was satisfied with the offered premises, and on May 1, 2017 the Claimant
and Defendant (hereinafter called together: Parties) signed a contract (hereinafter: Rental
Contract). Clause 5 of the Rental Contract established the rent in the amount of EUR
30 000 per month. Clause 6 provided the Defendant had to pay the rent for the month no
later than May 30, 2017 and was able to use the Building as of June 1, 2017. Clause 8
stated that: “Every subsequent rent payment was to be done before the first date of the
upcoming month.” Clause 30 provided that the contract would expire automatically on
June 1, 2022 unless extended by the Parties in writing. Finally, Clause 25 specified that
the Parties agreed on earnest money in the amount of EUR 3 000 and the Defendant was
obliged to transfer it to the Claimant’s bank account together with the first rent payment.
In case of any late payment, the Claimant preserved the right to keep the earnest money.
1.3. The Defendant made an advanced rent payment as provided in the Rental Contract.
Therefore, the Rental Contract entered into force on June 1, 2017. Unfortunately, acting
contrary to the good faith principle, the Defendant did not transfer the earner money to
the Claimant’s bank account. However, the Claimant showing its goodwill to the
Defendant did not insist upon its payment, although during July and August 2017, the
Claimant sent three emails to the Defendant reminding about the missing transfer of the
earnest money. Nonetheless, the Defendant refused to follow honest business practice and
ignored these reminders. Thus, the earnest money remained unpaid.
1.4. The next problem with the performance of the Rental Contract occurred in May 2018
when the Defendant did not transfer the monthly rent – EUR 30 000 – for June 2018. Up
to this day, this money has not been transferred to Claimants bank account. In order
words, the Claimant has indirectly financed the Defendant without a just cause. While the
Claimant informed the Defendant about the non-payment, the Defendant only expressed
verbal commitment to pay the missing sum, once it would have additional income, but
never fulfilled the promise. However, seeing that the Defendant has missed only one

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 payment, the Claimant once again showed utmost personal benevolence to the Defendant
and refrained from terminating the Rental Contract.
1.5. The string of contractual breaches continued and became more severe than ever in March
2020 when the Claimant informed the Defendant about new problems with its income
that prevented it from paying the rent. The Claimant insisted that the Defendant paid the
rent as agreed in the Rental Contract. The Claimant informed the Defendant that if the
premises were too expensive for the Defendant then they could agree on amicable
termination of the contract, provided the Defendant would compensate Claimant’s lost
profits. However, the Defendant ignored this suggestion. Instead, the Defendant
unilaterally reduced the rent payments. In March, April and May, the Defendant paid
only EUR 10 000 per month, therefore severely breaching the Rental Contract.
2. Application of Legal Rules to the Facts of the Case.
2.1. The Claimant has a legal right to request termination (setting aside) of the Rental
Contract due to non-payment of rent and excessive loss.
2.2. Article 2170 LCL provides that each contracting party may unilaterally withdraw from a
contract, if excessive losses have been incurred; in such case, the same provisions shall
apply as for a purchase contract. Article 2042 further explains that in a case of excessive
loss, that is, where the purchase price does not amount to even half of the normal value of
the property, the seller may request the setting aside of the contract. This provision allows
the Claimant to terminate (set aside) the Rental Contract because the Claimant has
received less than half of the rent during the period of three months.
2.3. As it is stated above, pursuant to Clause 5 of the Rental Contract, the rent was established
- EUR 30 000 per month. However, during three months in a row – March, April, May
2020 – the Defendant has paid only EUR 10 000 per month. This means that the
Defendant has paid less than half of the agreed rent. Thus, the Claimant has all rights to
request the Court to terminate the Rental Contract.
2.4. The Defendant is obliged to pay the missing rent for June 2018 and late-payment
interest.
2.5. In accordance with Article 1587 LCL: a contract legally entered into shall impose on a
contracting party a duty to perform that which was promised, and neither the exceptional
difficulty of the transaction, nor difficulties in performance arising later, shall give the
right to one party to withdraw from the contract, even if the other party is compensated
for losses. The Defendant is thus obliged to pay the rent for June 2018 in the amount of
EUR 30 000.
2.6. Moreover, Article 1759 point 1 LCL provides that interest shall be paid even if not
specifically agreed to regarding lateness in regard to each payment of a debt, even though
the debt itself may be interest-free; such interest is called late-payment interest. Article
1765 further specifies that the interest rate shall be precisely stipulated in the document or
transaction. If this has not been done, as well as in cases where the law requires
calculation of lawful interest, that is, at six per cent per year. Since the Defendant’s did
not pay the rent for June 2018, then the Defendant has delayed its payment for 2 (two)
years and thus must pay 12% on EUR 30 000, that is, EUR 3 600.
2.7. Thus, in total the Defendant is obliged to pay EUR 33 600 to the Claimant.
2.8. The Defendant is obliged to pay the earnest money in the amount of EUR 3 000 to
the Claimant.
2.9. As already stated, Article 1587 LCL provides that a contract legally entered into shall
impose on a contracting party a duty to perform that which was promised, and neither the
exceptional difficulty of the transaction, nor difficulties in performance arising later, shall
give the right to one party to withdraw from the contract, even if the other party is
compensated for losses.
2.10. Clause 25 of the Rent Contract specified that the Parties agreed on the earnest money
in the amount of EUR 3 000 and the Defendant was obliged to transfer it to the Claimants

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 bank account together with the first rent payment. In case of any late payment, the
Claimant preserved the right to keep the earnest money. In this case, the Defendant: 1)
promised to transfer the earnest money in the amount of EUR 3 000 to Claimant’s bank
account; 2) the Rental Contract provided that the Claimant had a right to keep the earnest
money if the Defendant had delayed at least one rent payment. The said condition was
satisfied a number of times. Firstly, Defendant failed to rent for June 2018. Secondly, the
Defendant has failed to pay full rent for March, April, May 2020. Thus, the Defendant is
now obliged to transfer the earner money to the Claimant’s bank account as a
compensation for the breaches of the Rental Contract.

3. Jurisdiction.
3.1. In accordance with Article 26 part two of the Latvian Civil Procedure Law (hereinafter:
LCPL) jurisdiction of a court in an action against a legal person is at the place of its legal
address. The Defendant has a legal address Joyful Street 10, Happytown, 0863.
Therefore, the action falls within the jurisdiction of the Happytown District Court.
4. The Amount of State Duty.
4.1. Article 34 LCPL determines the amount of the state duty for different actions. In
particular, Article 34 part one point 1, sub-point f provides that for monetary claims that
are exceeding EUR 711 435, the state duty is EUR 8715 plus 0.6 per cent of the amount
claimed exceeding EUR 711 435. Article 35 part one points 1 and 8 LCPL provide that
the amount claimed shall be: 1) in claims regarding the recovery of money – the amount
to be recovered and 2) in claims for early termination of lease and rental agreements -
total amount of payments for the remaining period of the agreement, but for no more than
three years. In this case, the Claimant claims: 1) earnest money in the amount of EUR
3 000; 2) missing rental payment together with legal interest EUR 33 600; 3) termination
of the Rental Contract, which in accordance with Clause 30 would expire in 23 months
from the moment when the Statement of Claim is submitted to the Court. Taking into
account that pursuant to the Rental Contract the monthly rent is EUR 30 000 then the
remaining rent is EUR 690 000. Thus, the total claimed amount is EUR 726 600.
4.2. The state duty is EUR 8715 plus 0.6 per cent from EUR 15 165 (726 600 - 711 435). 0.6
per cent from this sum is equal to EUR 90,99. EUR 8715 + 99.99 is equal to EUR 8 806.
Thus, the overall state duty is EUR 8 806 (eight thousand eight hundred six euro).

5. On the Use of Mediation.

Mediation was not employed before the commencement of the proceedings. The
Claimant does not consider it possible to solve the dispute through mediation.

6. Requests to the Court.

Based on the foregoing and Articles 1587, 1759, 1765, 2042 and 2170 LCL, Articles 26
part one, 34 and 35 LCPL,
The Court is Requested:
1. To rule that the Rental Contract, concluded between LLC “Industrial Properties”,
registration number: 124455, and LLC “New Solutions”, registration number: 135645, on
May 1, 2017, is terminated (set aside).
2. To rule that LLC “New Solutions”, registration number: 135645, is obliged to transfer the
earnest money in the amount of EUR 3 000 (three thousand euro) to LLC “Industrial
Properties”, registration number: 124455, bank account: Wordea Bank, account number -
9766927621389;

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3. To rule that LLC “New Solutions”, registration number: 135645, is obliged to transfer
rental payments and legal interest in the amount of EUR 33 600 (thirty-three thousand six
hundred euro) to LLC “Industrial Properties”, registration number: 124455, bank
account: Wordea Bank, account number - 9766927621389;
4. To rule that LLC “New Solutions”, registration number: 135645, is obliged to transfer
state duty in the amount of EUR 8 806 (eight thousand eight hundred six euro) and all
other judicial expenses to LLC “Industrial Properties”, registration number: 124455, bank
account: Wordea Bank, account number – 9766927621389.

Attachments:
1. A copy of the Statement of Claim for the Defendant.
2. Rental Contract.
3. Receipt of payment of the State Duty.

Hopeville, 1st June 2020

In the name of LLC “Industrial Properties” K. Smith ____________________

HAPPYTOWN DISTRICT COURT

Town street 58, Happytown, 01984

Defendant:
LLC “New Solutions”
Registration number: 135645
Address: Joyful Street 10,
Happytown, 0863

In the case against:

Claimant:
LLC “Industrial Properties”
Registration number: 124455

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 Address: Happy Street 5, Happytown,
0754

STATEMENT OF DEFENSE
Replying to the claims on termination of rental contract, payment of rent, interest
and earnest money

1. Description of the Factual Circumstances.

1.1. In early 2017, limited liability company “New Solutions”, registration number:
135645, (hereinafter: Defendant) was searching for industrial premises to locate its 3D
printer manufacturing. After a few months of futile attempts to find such premises, in
March 2017, the Defendant found an advertisement of suitable premises. On April 1,
2017, the Defendant contacted the author of that advertisement - limited liability
company “Industrial Properties”, registration number: 124455, (hereinafter: Claimant).
As it turned out, the Claimant owned a number of immovables in Happytown and one of
them was suitable for the Defendant.
1.2. After a short round of negotiations, the Claimant offered the Defendant to rent an
industrial building (hereinafter: Building) with spaces for manufacturing and offices. On
the May 1, 2017, the Claimant and Defendant (hereinafter called together: Parties)
signed a rental contract (hereinafter: Rental Contract). The contract contained a number
of relevant clauses. Clause 5 of established the rent in the amount of EUR 30 000 per
month. Clause 6 provided the Defendant had to pay the rent for the month no later than
May 30, 2017 and was able to use the Building as of June 1, 2017. Clause 8 stated that:
“Every subsequent rent payment was to be done before the first date of the upcoming
month.” Clause 30 provided that the contract would expire automatically on June 1,
2022 unless extended by the Parties in writing. Clause 25 specified that the Parties
agreed on earnest money in the amount of EUR 3 000 and the Defendant was obliged to
transfer it to the Claimant’s bank account together with the first rent payment. In case of
any late payment, the Claimant preserved the right to keep the earnest money. Finally,
Clause 7 provided that the Claimant would ensure 24-hour presence of security guards in
the Building.
1.3. Before June 1, 2017., the Defendant transferred EUR 30 000 to the Claimant’s bank
account. On the June 1, 2017, the Defendant moved into the Building. However, the
Defendant never transferred the earnest money as it was not planning to infringe the
Rental Contract. Moreover, while on a few occasions the Claimant mentioned that it
would prefer to receive the earnest money, it never insisted upon it.
1.4. In fact, the Defendant was satisfied with the Rental Contract and its performance by the
Claimant until May 2018. In May 2018, the Claimant had a conflict with a limited
liability company “Safe and Secure”. LLC “Safe and Secure” was hired to ensure the 24-
hour presence of security guards in the Building. To the best knowledge of the
Defendant, LLC “Safe and Secure” wanted to change certain conditions in its contract
with the Claimant. The Claimant refused to do that and LLC “Safe and Secure”
unilaterally terminated the contract. As a result, there were no security guards in the
Building. This created a number of problems. Firstly, the Defendant had to employ its
own security guards, who however, were not present in the Building for 24 hours.
Secondly, the Defendant had to make additional payments to ensure that the equipment
and the products already manufactured were insured against theft or robbery. All of that

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 intervened with the normal functioning of the Defendant’s manufacturing and led to
additional expenses.
1.5. The Defendant recurrently informed the Claimant about the problem. However, the
Claimant was unable to find another company to provide security services until the end of
June 2018. In the late May 2018, the Defendant informed the Claimant that, taking into
account the absence of the security guards, the Defendant will not pay the rent. The
Claimant insisted upon the payment. However, through most of June, it was unable to
ensure security of the Building. Finally, by the end of June, the Claimant managed to
conclude a contract with the limited liability company “Security for Business” and the
Building was once again secured. At that moment, in an email, the Defendant informed
the Claimant that it was willing to pay full rent for July, but would withhold the payment
for June, since in May and June security was not ensured as required by Clause 7 of the
Rental Contract.
1.6. At the end of June, the Defendant received the Claimant’s 27.06.2018 email stating: “As
you know you owe us a rent payment for the month of June – EUR 30 000. However,
taking into account the situation and our problems to ensure provision of the security
services to the premises that you occupy, we are willing to revoke our rights to that rent
payment. This offer is valid if you would equally waive any claims that could have
against us in connection to the absence of guards during May and June”. In the
Defendant’s 29.06.2018 email, replying to the Claimants 27.06.2018 email, the
Defendant stated: “We accept your offer and all the conditions mentioned therein.” The
Defendant was more than persuaded that with the 29.06.2018 email, it had fully resolved
any differences concerning the missing rent for July 2018.
1.7. The Defendant used the Building and paid full rent until February 2020. In February 2020
Happytown’s hospitals started to register first victims of Covid-19. In mid-February, the
City Council of Happytown prohibited all manufacturing of non-essential goods. 3D
printers are non-essential goods. Moreover, the City Council adopted a regulation that
restricted the use of office premises. Companies now could have no more than two
persons in one office room. These regulations meant that the Defendant had to stop any
manufacturing work in the Building.
1.8. In early March, the Defendant stopped manufacturing work and until June no
manufacturing has been restarted as it would contrary to Council’s regulation. The
Defendant also has around 30 office workers. However, due to the City Council’s
regulations only 10 people can work in the Building in order to observe the “two-
persons” rule. Neverthless, even presence of 10 people in the Building is of no use for the
Defendant, because the Defendant cannot perform its main commercial objective -
produce 3D printers.
1.9. In its 25.02.2020 email, the Defendant informed the Claimant that its income has
decreased sharply and that it cannot pay rent EUR 30 000 per month for premises that it
cannot use. Hence, in the same email, the Defendant informed that it will pay no more
than EUR 10 000 per month for unusable premises. The Defendant was still willing to
pay EUR 10 000 because the Building was still usable for some of the office workers,
although in reality this was of no avail for the Defendant’s business that was put on halt
due to manufacturing prohibition.
2. Application of Legal Rules to the Facts of the Case.
2.1. The Claimant is not Entitled to Terminate the Rental Contract.
In Accordance with article 2170 LCL in case of unilateral withdrawl of the contract
regarding excessive losses shall be applied the same provisions as for a purchase contract.
So according to the article 2043 there is a right to request to cancel the contract due to
excessive loss, but only if acts of bad faith of the party who inflicted the losses has been
proven. In that case the defendant didn’t act in bad faith, he didn’t mislead the claimant and

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 provided all needed information about rising problems. There is no any reasons why
claimant can terminate the Rental Contract.
2.---. The Claimant is not Entitled to Claim the Rent Payment for June 2018.
The defendant is not obligated to pay 30 000 euro because he do not provide security to the
Rental object in May and June, According to Art.1577 of LCL , which states “A condition
shall be considered to have been performed when the person for whose benefit it was
prescribed releases the other party from the duty to perform it”. According to the article 1591
the claimant has to prove that his part of the agreement will be done or has been done before,
due to the claimant didn’t provide security of object in May and June, so he can not promise
appropriate performance of it and it is obvious that no objection may be raised against the
Defendant.
2.---. The Claimant is not Entitled to Legal Interest due to the Non-payment of Rent for
June 2018.
According to the article 1754 for interests or percent, there should be the main debt to which
interests is part of it. In that case wasn’t the main debt.
2.---. The Claimant is not Entitled to Claim the Earnest Money.

3. On the Use of Mediation.

Mediation was not employed before the commencement of the proceedings. The Defendant
considers it preferable to solve the dispute through litigation.

4. Requests to the Court.

Based on the foregoing and Articles _____________ LCL,

The Court is Requested:

1) To reject all LLC “Industrial Properties”, registration number: 124455, claims against
LLC “New Solutions”, registration number: 135645;

2) To rule that LLC “Industrial Properties”, registration number: 124455, is obliged to

transfer compensation of all judicial expenses to LLC “New Solutions”, registration
number: 135645, bank account: Medbank, account number – 19754681874647.

Attachment:
1. A copy of the Statement of Defence for the Claimant;
2. Defendant’s 29.06.2018 email.
3. Claimant’s 27.06.2018 email.
4. Defendant’s 25.02.2020 email.

Hopeville, 25st of June 2020

In the name of LLC “New Solutions” N. Andrew

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