On the legal nature of the termination fee

A new general norm of the amended Civil Code of the Russian Federation (CC of RF) sets up a possibility to include in the contract a termination fee. Thereby the subject being analyzed in the present article is a problem relating to the legal nature of the termination fee. The objectives of the present article are to consider available scientific approaches to the qualification of termination fee; to compare this instrument with means of securing an obligation, with compensation for release from obligation, with compensation of losses; to reveal application features of these instruments. The author considered different literature sources, statutes in force and judicial practice. The general scientific methods used in the study were analysis, synthesis and analogy. The specific scientific methods were technical and hermeneutic methods. As a result of the research, the author comes to a conclusion that it is incorrect to qualify termination fee as a means of securing an obligation. These instruments differ in the essence, characteristics, functions, application features. Termination fee does not give the creditor an additional source of getting performance as distinguished from the means of securing an obligation. In addition, the obligation to pay a termination fee is not accessory to the main obligation. Whereas all means of securing an obligation have a feature of accessority. The termination fee can not be regarded as compensation for release from obligation. This compensation is a way of discharge, but termination fee is a result of discharge of obligation. It is incorrect to regard termination fee as a compensation for damage, because termination fee is meant to be used by the lawful action (unilateral repudiation of obligations). A compensation for damage is a civil liability, which arises in tort. The author considers the qualification of termination fee as a fee for the exercise of a secondary right as a well-reasoned approach. There are some special aspects which the author analyzed. In particular, the author considers the situation, when a debtor abuses the right of unilateral repudiation of obligation and exceeds the term for payment. In this situation the creditor is on tenterhooks, their right should be in any manner protected. The author offers the lines of approach to this problem.

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