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Civil Code of Georgia — Law of obligations

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Book ThreeGeneral PartArticle 316 – ConceptArticle 317 – Grounds giving rise to an obligationArticle 318 – Obligation to disclose informationSection OnePart OneChapter OneArticle 319 – Freedom of contract. Obligation to enter into a contractArticle 320 – Invalidity of a contract for future propertyArticle 321 – Contract for transfer of propertyArticle 322 – Invalidity of a contract on estateArticle 323 – Procedure for transferring immovable thingsArticle 324 – Scope of a contract for encumbrance of thingsArticle 325 – Defining the terms of an obligation on a fair basisArticle 326 – Application of the rules on contractual obligations to non-contractual obligationsChapter TwoArticle 327 – Agreement on the essential terms of a contractArticle 328 – Form of a contractArticle 329 – Making an offerArticle 330 – Making offer to present and absent personsArticle 331 – AcceptanceArticle 332 – Late acceptanceArticle 333 – New offersArticle 334 – Presumption of consent of an offerorArticle 335 – Silence as a form of acceptanceArticle 336 – (Deleted)Article 337 – Interpretation of particular expressions in a contractArticle 338 – Mutually exclusive and ambiguous expressions in a contractArticle 339 – Traditions and usages of tradeArticle 340 – Interpretation of mixed contractsArticle 341 – Acknowledgment of the existence of a debtChapter ThreeArticle 342 – ConceptArticle 343 – Incorporating standard contract terms into a contractArticle 344 – Uncommon provisions in standard contract termsArticle 345 – Interpretation of unclear provisions in favour of the other partyArticle 346 – Invalidity of terms contravening the principles of trust and good faithArticle 347 – Invalidity of standard contract termsArticle 348 – Other grounds for invalidity of standard contract termsChapter FourArticle 349 – ConceptArticle 350 – Interpretation of a contract concluded for the benefit of a third personArticle 351 – Third person’s renunciation of the right acquired under contractChapter FiveArticle 352 – Effects of repudiating a contractArticle 353 – Liability of the obligor not deriving benefit due to breach of the rules for proper use of the thingArticle 354 – Performance of obligations arising from avoidance of a contractArticle 355 – Obligation of notice of avoidance of a contractArticle 356 – Time limits for avoidance of a contractArticle 357 – Avoidance of a contract by a number of personsArticle 358 – Inadmissibility of avoiding a contractArticle 359 – Avoidance of a contract by the obligeeArticle 360 – Mistake in the grounds for a settlementSection TwoChapter OneArticle 361 – Presumption of existence of obligationsArticle 362 – Place of performance of obligationsArticle 363 – Change in domicile of an obligor or an obligeeArticle 364 – Early performance of obligationsArticle 365 – Performance of obligations when no period for performance is fixedArticle 366 – Inadmissibility of demanding early performanceArticle 367 – Right to immediately demand performance of obligationArticle 368 – Performance of obligations in the case of conditional transactionsArticle 369 – Refusal to perform obligationsArticle 370 – Consumer creditArticle 371 – Performance of obligations by a third personArticle 372 – Satisfaction of a creditor by a third personArticle 373 – Acceptance of performance by an unauthorised personArticle 374 – Alternative obligationsArticle 375 – Choosing obligations to be performedArticle 376 – Rules for choosing alternative obligationsArticle 377 – Choosing more than two obligations to be performedArticle 378 – Performance of obligations in instalmentsArticle 379 – Right of the obligee to accept another performanceArticle 380 – Quality of performance of obligationsArticle 381 – Performance of obligations in the case of an individually defined objectArticle 382 – Performance of obligation in the case of a generic thingChapter TwoArticle 383 – ConceptArticle 384 – (Deleted)Article 385 – Procedure for demanding return of payment made without obligationArticle 386 – Place of performance of monetary obligationsArticle 387 – Order of priority for payment of monetary obligationsArticle 388 – Priority of covering court expensesArticle 389 – Payment of monetary obligations in the case of a change in the exchange rate of currencyChapter ThreeArticle 390 – ConceptArticle 391 – Obligation of the obligee to pay damagesArticle 392 – Liability of an obligor when an obligee is in defaultArticle 393 – Effects of default by an obligeeSection ThreeChapter OneArticle 394 – Claim for damages in cases of breach of obligationsArticle 395 – Inadmissibility of preliminarily agreeing on release from liability for damagesArticle 396 – Liability of the obligor for the action of his/her representativeArticle 397 – Liability of an obligor for receiving the object of performance from another personArticle 398 – Adapting a contract to changed circumstancesArticle 399 – Repudiation of a long-term relationship of obligationChapter TwoArticle 400 – ConceptArticle 401 – Impossibility to perform an obligationArticle 402 – Obligor’s liabilityArticle 403 – Payment of interest when delaying the payment of fundsArticle 404 – Obligee’s right to claim damagesChapter ThreeArticle 405 – Setting additional period of time in the case of breaching obligationsArticle 406 – Right to receive counter-performanceArticle 407 – Compensation for damages in the case of avoiding a contractSection FourArticle 408 – Duty of restitutionArticle 409 – Impossibility of restitutionArticle 410 – Preliminary renunciation of the right to claim damagesArticle 411 – Damages for lost profitsArticle 412 – Damages to which the duty to pay compensation appliesArticle 413 – Compensation for non-property damagesArticle 414 – Calculation of damagesArticle 415 – Fault of the injured person in causing damagesSection FiveArticle 416 – Kinds of additional remedies for securing the performance of obligationsChapter OneArticle 417 – ConceptArticle 418 – Form of determining a penaltyArticle 419 – Inadmissibility of simultaneous demands for payment of a penalty and performance of an obligationArticle 420 – Reduction of penalty by courtChapter TwoArticle 421 – ConceptArticle 422 – Counting earnest money towards payment of an obligationArticle 423 – Counting earnest money towards compensation for damagesChapter ThreeArticle 424 – ConceptArticle 425 – Validity of a guaranteeArticle 426 – Form of guaranteeSection SixChapter OneArticle 427 – Termination of obligations by performance in favour of an obligeeArticle 428 – Termination of obligations by novationArticle 429 – Accepting the performance of obligationsArticle 430 – Particulars of a document confirming the receipt of performanceArticle 431 – Right to demand a certificate of indebtednessArticle 432 – Compensation for expenses relating to issuing the document on receipt of performanceArticle 433 – Repudiation of performance by reason of the creditor’s non-performance of dutiesChapter TwoArticle 434 – ConceptArticle 435 – Transfer of the deposited property to the obligeeArticle 436 – Objects suitable for depositArticle 437 – Place of storageArticle 438 – Demand that the obligee accept objectsArticle 439 – Compensation for storage expensesArticle 440 – Reclamation of a deposited object by an obligorArticle 441 – Period of time for storing objects of performanceChapter ThreeArticle 442 – Possibility to set off obligationsArticle 442 1 – Mutual setoffs and final mutual setoffsArticle 443 – Possibility to set off time-barred claimsArticle 444 – Claims subject to setoffArticle 445 – Several claims subject to setoffArticle 446 – Setoff of obligations for different places of performanceArticle 447 – Inadmissibility of setting off claimsChapter FourArticle 448 – ConceptArticle 449 – Effects of forgiveness of debt for other joint and several debtorsArticle 450 – Effects of forgiving debt to the principal debtorArticle 451 – Effects of renunciation of the claim under a bilateral contractChapter FiveArticle 452 – Termination of obligation where the obligee and the obligor turn out to be the same personArticle 453 – Termination of obligations due to the obligor’s deathArticle 454 – Termination of obligations due to liquidation of a legal personSection SevenChapter OneArticle 455 – Joint entitlementArticle 456 – Grounds for joint entitlementArticle 457 – Performance of obligations to any obligeeArticle 458. Performance of obligations for one of the obligeesArticle 459 – Effects of renunciation by one of the joint and several obligeesArticle 460 – Inadmissibility of applying the facts related to other obligeesArticle 461 – Rights of the heirs of joint and several obligeesArticle 462 – Liability of a joint and several obligee before the rest of the joint and several obligeesChapter TwoArticle 463 – Joint obligationArticle 464 – Grounds for joint obligationArticle 465 – Right of the obligee to demand performance from any of the obligorsArticle 466 – Counterclaim of a joint and several obligor against the obligeeArticle 467 – Effects of the entire performance by one of the obligorsArticle 468 – Inadmissibility of applying facts relating to another obligorArticle 469 – Lawsuit against one of the joint and several obligorsArticle 470 – Effects of delay in accepting performanceArticle 471 – Rights of heirs of a joint and several obligorArticle 472 – Merger of the obligee’s claim with one of the joint obligor’s debtArticle 473 – Right of subrogation in the case of entire performance by one of the obligorsArticle 474 – Effects of insolvency of a joint and several obligorArticle 475 – Compensation of a joint and several obligorArticle 476 – Effect of expiry of the period of limitationSpecial PartSection OnePart TwoChapter OneArticle 477 – Concept; subject matterArticle 478 – Expenses of sale of a movable thingArticle 479 – Expenses of sale of an immovable thingArticle 480 – Duties of a seller when shipping goodsArticle 481 – Obligations of the seller of a plot of landArticle 482 – Transferring of the risk of accidental perishing of thingsArticle 483 – Presumption of acceptance of goodsArticle 484 – Grounds for repudiation of the contractArticle 485 – Selling goods to a number of personsArticle 486 – Delivery of sold goods in instalmentsArticle 487 – Duty to transfer a thing free of defectsArticle 488 – Thing free of material defectsArticle 489 – Thing free of legal defectsArticle 490 – Duties of the seller when selling a defective thingArticle 491 – Right of the buyer to terminate the contractArticle 492 – Demand for price reductionArticle 493 – Right to reject goodsArticle 494 – Procedure for compensation of damages arising out of the saleArticle 495 – Acceptance of a defective thing by the buyerArticle 496 – Duration of fitness of a thingArticle 497 – Exclusion of liability of the sellerArticle 498 – Transfer of right or other propertyArticle 499 – Repeated sale of thingsArticle 500 – Seller’s lienArticle 501 – Return of things by the buyerArticle 502 – Expenses for storing thingsArticle 503 – Right of the keeper of thingsArticle 504 – Peculiarities of keeping perishable thingsArticle 505 – ConceptArticle 505 1 – Obligation of a seller when selling by instalmentsArticle 625 of this Code with regard to the interest rate, fee, penalty and the imposition of any financial sanctions.Article 506 – Form of an instalment contractArticle 507 – Presumption of execution of a contract upon delivery of thingsArticle 508 – Bilateral restitution upon non-performance of obligationsArticle 509 – ConceptArticle 510 – Redemption priceArticle 511 – Fate of accessories upon saleArticle 512 – Reimbursement of damages occurring before redemptionArticle 513 – Invalidity of transfer of a thing before redemptionArticle 514 – Limitation period of the right of redemptionArticle 515 – OptionArticle 516 – ConceptArticle 517 – Duty to give notice of anticipated sale of thingsArticle 518 – Invalidity of an agreement to not exercise a right of pre-emptionArticle 519 – Performance of additional obligationsArticle 520 – Contract of Sale conditioned upon approval of a thingArticle 521 – ConceptArticle 522 – Unequal value of exchanged propertyArticle 523 – Rules applied to barterChapter TwoArticle 524 – ConceptArticle 525 – Execution of a gift contract; promise of a giftArticle 526 – Inadmissibility of giving a giftArticle 527 – Defect of property transferred as a giftArticle 528 – DonationArticle 529 – Revocation of the gift due to ingratitude of the doneeArticle 530 – Recovery of the thing given as a giftChapter ThreeArticle 531 – ConceptArticle 532 – Transfer of the object of rent in suitable conditionArticle 533 – Duty to transfer things free of defectsArticle 534 – Things free of legal defectsArticle 535 – Things free of material defectsArticle 536 – Reduction of rent by reason of defective thingsArticle 537 – Reimbursement of damage incurred by reason of defective thingsArticle 538 – Effects of not asserting a claim by reason of a defect in thingsArticle 539 – Invalidity of agreement to release liabilityArticle 540 – Obligation to tolerate nuisances when renting lodgingsArticle 541 – Right to terminate the contractArticle 542 – Termination of a tenancy agreement by a tenantArticle 543 – Duties of the lessee upon detecting a defect in rented thingsArticle 544 – Burden of encumbrance created on the rented thingArticle 545 – Obligations of the lessorArticle 546 – Right of the lessee to things added to the rented thingArticle 547 – Liability for normal wear and tear to thingsArticle 548 – Expenses of current repairArticle 549 – Consent of the lessor to a subleaseArticle 550 – Inadmissibility of refusing to subletArticle 551 – Fate of subletting upon completion of the tenancyArticle 552 – Amount of security for tenancy relationsArticle 553 – Procedure for payment of rentArticle 554 – Effect of non-payment of rent through the fault of the lesseeArticle 555 – Early termination of the tenancy agreement at the tenant’s initiativeArticle 556 – Counterclaims of the tenant against the landlordArticle 557 – Termination of the contract at the lessor’s initiativeArticle 558 – Termination of the agreement due to non-payment of rentArticle 559 – Termination of rental relations upon expiration of the termArticle 560 – Right to demand extension of the tenancy agreement for an indefinite termArticle 561 – Period of time for termination of the contractArticle 562 – Termination of a tenancy agreement for valid reasonsArticle 563 – Form of termination of a tenancy agreementArticle 564 – Duties of the lessee upon termination of the rental contractArticle 565 – Inadmissibility of the right to detain propertyArticle 566 – Transfer of rented property to third personsArticle 567 – Payment of damages arising from failure to return rented thingsArticle 568 – Lessor’s lien on lessee’s thingsArticle 569 – Form of a rental contract on a plot of landArticle 570 – Procedure for termination of contracts concluded for more than ten yearsArticle 571 – Transfer of rights of the tenant to his/her family membersArticle 572 – Succession of title in case of transfer of rented thingsArticle 573 – Limitation period on claims for damagesArticle 574 – Dispute between spouses in the case of divorceArticle 575 – Protection of a lessor’s rightsChapter FourArticle 576 – ConceptArticle 577 – Lessee’s rights with regard to the supplierArticle 578 – Rights to leased propertyArticle 579 – Inadmissibility of refusing to discharge obligationsArticle 580 – Accepting propertyArticle 580 1 – Violating the terms of the delivery of the propertyArticle 580 2 – Lessee’s rights during the assignment of claimsArticle 580 3 – Obligation to transfer property free of defectsArticle 580 4 – Lessee’s obligations with respect to maintaining and returning leased propertyArticle 580 5 – Termination of lease agreementArticle 580 6 – Possession and administration of propertyArticle 405(1) of this Code, except if such period of time need not be given under Article 405(2) of this Code. AtArticle 580 7 – Recovery of possession of a transport vehicle and/or an auxiliary technical equipment of anArticle 580 8 – A leasing certificateArticle 53(1) of the Law of Georgia on Traffic is registered with the Legal Entity under Public Law – the ServiceChapter FiveArticle 581 – ConceptArticle 582 – Dissolution of a lease contract concluded for a term of more than ten yearsArticle 583 – Lease of land together with inventoryArticle 584 – Risk of accidental loss of inventoryArticle 585 – Inadmissibility of prohibiting the administration of individual parts of inventoryArticle 586 – Lien on the inventoryArticle 587 – SubleaseArticle 588 – Early return of the leased propertyArticle 589 – Dissolution of lease contracts concluded with an unspecified termArticle 590 – Dissolution of the contract by reason of death of the lesseeArticle 591 – Recovery of damages in case of failure to return the leased propertyChapter SixArticle 592 – ConceptArticle 593 – Form of contractArticle 594 – Inventory of the leased propertyArticle 595 – Condition of leased property. Repair of leased propertyArticle 596 – Lien on the fruitsArticle 597 – Demand for reduction of lease paymentArticle 598 – Duty to reimburse necessary capital outlaysArticle 599 – Reimbursement of outlays incurred by consent of the lessorArticle 600 – Compensation for harvest not yet gatheredArticle 601 – Obligation of a lessee to a new lesseeArticle 602 – Obligation to return the leased propertyArticle 603 – Lessee’s rights to individual parts of leased propertyArticle 604 – Demand for extension of the lease relationshipArticle 605 – Termination of lease upon expiry of its periodArticle 606 – Termination of lease in the case of contracts with unspecified termChapter SevenArticle 607 – ConceptArticle 608 – Obligations of franchiserArticle 609 – Obligations of a franchiseeArticle 610 – Obligation not to disclose confidential informationArticle 611 – Form of contractArticle 612 – Duration of contractArticle 613 – Loyal competitionArticle 614 – Liability of a franchiserChapter EightArticle 615 – ConceptArticle 616 – Liability of a lenderArticle 617 – Obligation to pay damages for concealment of defectsArticle 618 – Using the loaned thing for its intended purposeArticle 619 – Obligation to bear ordinary expensesArticle 620 – Wear and Tear of loaned thingsArticle 621 – Obligation to return loaned thingsArticle 622 – Effect of death of the borrowerChapter NineArticle 623 – ConceptArticle 624 – Form of a loan contractArticle 624 1 – Procedure for granting secured loans/creditsArticle 625 – Obligation of a creditor and a loan interestArticle 626 – Termination of the contract and payment of the debtArticle 627 – Right of accelerationArticle 628 – Promise of a loanArticle 628 1 – Restriction of attracting fundsChapter TenArticle 629 – ConceptArticle 630 – Agreement for compensationArticle 631 – Effects of overrunning an approximate estimateArticle 632 – Obligation to perform work in personArticle 633 – Client’s obligation to pay damagesArticle 634 – Mechanic’s lien on movable thingsArticle 635 – Construction lien on a building lotArticle 636 – Termination of a contractArticle 637 – Termination of the contract on the contractor’s initiativeArticle 638 – Right to demand a portion of compensationArticle 639 – Obligation to deliver a thing free of defectsArticle 640 – Articles free of legal defectsArticle 641 – Articles free of material defectsArticle 642 – Demanding additional performanceArticle 643 – Elimination of defect in an article by the clientArticle 644 – Repudiation of a contract because of a defective articleArticle 645 – Reduction of compensation because of a defective articleArticle 646 – Performing work with the contractor’s materialsArticle 647 – Obligation to give a noticeArticle 648 – Payment for the work performedArticle 649 – Acceptance of the workArticle 650 – Contractor’s liability where client’s property is destroyedArticle 651 – Contractor’s riskArticle 652 – Effects of accepting defective articlesArticle 653 – Warranty periodArticle 654 – Effects of intentional concealment of a defect by the contractorArticle 655 – Limitation periodArticle 656 – Computation of limitation period where the work is accepted in instalmentsChapter ElevenArticle 657 – ConceptArticle 657 1 – Prohibition of misrepresentationArticle 657 2 – Necessity to provide detailed informationArticle 657 3 – Rules for changing and calculating the original contract price and the travel organiser’s obligationsArticle 658 – Transfer of a travel contractArticle 659 – Shortcomings in travelArticle 660 – Reduction of priceArticle 661 – Termination of a contract on a traveller’s initiative because of shortcomingsArticle 662 – Reimbursement of damages caused by shortcomings in travelArticle 662 1 – Travel organiser’s obligation to respond promptly to a traveller’s complaintArticle 662 2 – Travel organiser’s obligation to present guarantees to a travellerArticle 663 – Limitation period for claims arising out of travel contractsArticle 664 – Limitation of liabilityArticle 665 – Repudiation of a contract before the commencement of travelArticle 666 – Force majeureArticle 667 – Agreements prejudicial to travellers not allowedChapter TwelveArticle 668 – ConceptArticle 669 – Liability of the carrierArticle 670 – Obligation to enter into a contractArticle 671 – Carriage by several means of transportArticle 672 – Form of a contract of carriageArticle 673 – Rules for drawing up a waybillArticle 674 – Particulars of a waybillArticle 675 – Liability of the shipperArticle 676 – Liability of the carrier upon acceptance of freightArticle 677 – Presumption of execution of a contract of carriageArticle 678 – Liability of the shipper for damage caused by substandard packaging of freightArticle 679 – Obligation of the shipper to provide necessary informationArticle 680 – Rights of the shipperArticle 681 – Rights of the consignee upon delivery of freightArticle 682 – Impossibility to perform the contractArticle 683 – Circumstances impeding freight deliveryArticle 680(3) to deliver the freight to a third party, then in cases where paragraphs 1 and 2 of this article areArticle 684 – Right to claim expenses arising out of the shipper’s instructionsArticle 685 – Carrier’s lien on the freightArticle 686 – Concept; contentArticle 687 – Burden of proofArticle 688 – Delayed delivery of freightArticle 689 – Presumption of the loss of freightArticle 690 – Right to demand surchargeArticle 691 – Hazardous freight shipment rulesArticle 692 – Value of freight in the case of its partial or total lossArticle 693 – Compensation for damage to freightArticle 694 – Indicating special interest in a waybillArticle 695 – Claim of interest on secured compensation for damagesArticle 696 – Non-contractual claims in carriageArticle 697 – Inadmissibility of releasing a carrier from liabilityArticle 698 – Concept; contentArticle 699 – Limitation period for rights arising out of carriageArticle 700 – Suspension of the limitation periodArticle 701 – Liability during carriage by connecting carriersArticle 702 – Obligation to deliver appropriate documentsArticle 703 – Claiming damages from connecting carriersArticle 704 – Right of recourse in the event of compensation for damageArticle 705 – Effects of carrier’s insolvencyArticle 706 – Dispute over the exercised right of recourseArticle 707 – Mutual agreement among connecting carriersArticle 708 – Invalidity of unlawful agreementsArticle 707, shall be void. The invalidity of such agreements shall not void the rest of the provisions of the entireChapter ThirteenArticle 709 – ConceptArticle 710 – Remuneration for mandateArticle 711 – Transferring a mandate to a third personArticle 712 – Deviation from the mandator’s instructionsArticle 713 – Duty of informationArticle 714 – Duty to keep secretsArticle 715 – Duty to return the thing received for performing the mandateArticle 716 – Presumption of mandator’s ownership of propertyArticle 717 – Duty to reimburse expensesArticle 718 – Reimbursement of damages occurring through no faultArticle 719 – Reimbursement of damages caused by culpable actionArticle 720 – Termination of a contract of mandateArticle 721 – Effects of a mandator’s death or recognition as a beneficiary of supportArticle 722 – Effects of a mandatary’s deathArticle 723 – Contract of commission agencyChapter FourteenArticle 724 – ConceptArticle 725 – Rights and duties of a trusteeArticle 726 – Reimbursement of trust expensesArticle 727 – Form of a trust agreementArticle 728 – Liability of a trusteeArticle 729 – Application of the rules governing a contract of mandateChapter FifteenArticle 730 – ConceptArticle 731 – Good faith required from forwarding agentsArticle 732 – Client dutiesArticle 733 – Inspection of freight piece by pieceArticle 734 – Duty to insure freightArticle 735 – Forwarding insurance contractArticle 736 – Duty to give timely notice of damageArticle 737 – Effects of non-acceptance of freightArticle 738 – Impossibility to inspect the condition of freight upon receiptArticle 739 – Right to transport the freight by own meansArticle 740 – Liability of forwarding agentsArticle 741 – Damage caused by a third partyArticle 742 – Reimbursement of damages caused by the forwarding agent’s culpable actionArticle 743 – Fee payment termsChapter SixteenArticle 744 – ConceptArticle 745 – Fee for a broker’s servicesArticle 746 – Exclusive mandateArticle 747 – Dissolution of brokerage contractsArticle 748 – Inadmissibility of paying a broker’s feeArticle 749 – Apartment brokerArticle 750 – Inadmissibility of receiving brokerage feeArticle 751 – Loan brokerArticle 752 – Form of a loan brokerage contractArticle 753 – Duty to pay feeArticle 754 – Sales brokerChapter SeventeenArticle 755 – ConceptArticle 756 – Revoking a public promise of a rewardArticle 757 – Action performed by more than one personArticle 758 – Promising a prizeArticle 759 – Inadmissibility of making changes to the terms of a competitionArticle 760 – Deciding the winner of a competitionArticle 761 – Competition won by more than one personArticle 762 – Procedure for returning the works submitted to a competitionChapter EighteenArticle 763 – ConceptArticle 764 – Bailment feeArticle 765 – Bailee’s duty for gratuitous bailmentArticle 766 – Inadmissibility of transferring a thing to a third partyArticle 767 – Inadmissibility of using bailed thingsArticle 768 – Changing the procedure for storing thingsArticle 769 – Reimbursement of damages resulting from the features of the thingArticle 770 – Time frames for returning bailed thingsArticle 771 – Duty to collect bailed thingsArticle 772 – Place for returning deposited thingsArticle 773 – Duty to hand over the fruit of bailed thingsArticle 774 – Bailee’s liability for intentional misconduct or gross negligenceArticle 775 – Duty to pay a feeArticle 776 – Lien on the bailed propertyArticle 777 – Peculiarities of bailment of generic thingsArticle 778 – Peculiarities of depositing things with innkeepersArticle 779 – Release from liability due to force majeureChapter NineteenArticle 780 – ConceptArticle 781 – Duty to perform storage duties in good faithArticle 782 – Inspection of quantity of goods by the warehousemanArticle 783 – Right to inspect deposited goodsArticle 784 – Obligation to give noticeArticle 785 – Obligation to pay damagesArticle 786 – Peculiarities of storing generic thingsArticle 787 – Sale of deposited goodsArticle 788 – Warehouse receiptsArticle 789 – Particulars of a warehouse receiptArticle 790 – Warehouse warrantsArticle 791 – Negotiable warehouse receiptsArticle 792 – Liability for endorsed warehouse receiptsArticle 793 – Presumption of accuracy of endorsementsArticle 794 – Loss of warehouse receiptsArticle 795 – Pledging of the deposited goodsArticle 796 – Transfer of lien to the new holder of the warehouse receiptArticle 797 – Inadmissibility of taking back deposited goodsArticle 798 – Setting an additional period of time for reclaiming goodsChapter TwentyArticle 799 – ConceptArticle 800 – Obligation to enter into an insurance contractArticle 801 – Compulsory insuranceArticle 802 – Insurance certificate (policy)Article 803 – Types of insurance policiesArticle 804 – Effects of losing an insurance policyArticle 805 – Rights of insurance agentsArticle 806 – Time of commencement of insuranceArticle 807 – Effects of increasing the insurance premiumArticle 808 – Obligation to communicate informationArticle 809 – Effects of communicating incorrect informationArticle 810 – Termination of insurance contracts by reason of failure to communicate informationArticle 811 – Period for termination of contracts by reason of failure to communicate informationArticle 812 – Termination of a contract after the occurrence of insured eventsArticle 813 – Obligation to give notice of increased riskArticle 814 – Obligation of notifying about an insured eventArticle 815 – Obligation to pay insurance premiumsArticle 816 – First insurance premiumArticle 817 – Late payment of insurance premiumArticle 818 – Contract termination by reason of late payment of insurance premiumsArticle 819 – Discontinuing the payment of insurance premiumsArticle 820 – Monetary liability for damagesArticle 821 – Extent of liability for damagesArticle 822 – Insurance comparisonArticle 823 – Peculiarities of property insuranceArticle 824 – Insurance of lost benefitArticle 825 – Insurance of unity of thingsArticle 826 – Amount of insurance compensationArticle 827 – Underinsurance or partial insurance; double insuranceArticle 828 – Invalidity of double insuranceArticle 829 – The fault of the policyholder upon occurrence of the insured eventArticle 830 – Duty to fulfil the insurer’s instructionsArticle 831 – Insurance against damages caused by war or other force majeureArticle 832 – Claim for damages asserted against a third partyArticle 833 – Effects of alienating insured propertyArticle 834 – Obligation to notify of the alienation of the insured propertyArticle 835 – Termination of insurance upon alienation of propertyArticle 836 – Concluding an insurance contract for the benefit of another personArticle 837 – Rights of another person under insurance contractsArticle 838 – Rights of the policyholderArticle 839 – ConceptArticle 840 – Claim for direct payment of damagesArticle 841 – Court and out-of-court expensesArticle 842 – Releasing the insurer from liabilityArticle 843 – Liability under compulsory insuranceArticle 843 1 – The conceptArticle 843 2 – Assertion of a claim for damages against a third partyArticle 843 3 – Application of the damage insurance standards to health insuranceArticle 844 – ConceptArticle 845 – Inadmissibility of repudiating a contractArticle 846 – Termination of the contract where insurance premium is paid periodicallyArticle 847 – Transfer of the right to compensation to a third personArticle 848 – A non-rightful third partyArticle 849 – Releasing the insurer from liability for damagesArticle 850 – Release from liability for compensation in the case of suicideArticle 851 – Substitution of insurance contractsArticle 852 – Deductions upon termination of the contractArticle 853 – Effects of forced executionArticle 854 – ConceptArticle 855 – Effects of injury to healthArticle 856 – Effects of intentionally causing an accidentArticle 857 – Duty to notify accidentsArticle 858 – No right of recourseChapter Twenty-oneArticle 859 – ConceptArticle 860 – Obligation to issue account statementsArticle 861 – Debiting funds from the accountArticle 862 – Effects of cancellation of the account holder’s orderArticle 863 – Obligation to keep confidentialityArticle 864 – Termination of settlement account contractsArticle 865 – Cheque paymentsArticle 866 – Collection of checksArticle 867 – ConceptArticle 868 – Interest rates on bank creditsArticle 869 – (Deleted)Article 870 – Using additional securityArticle 871 – Termination of contractsArticle 872 – Compensation for damages incurred by prepayment of a creditArticle 873 – Termination of a credit contract in case of repayment in instalmentsArticle 874 – Concept; liability of the directors of credit institutionsArticle 875 – passbookArticle 876 – ConceptArticle 877 – Collection orderArticle 878 – International transaction practicesArticle 879 – ConceptArticle 880 – Fee for bank guaranteeArticle 881 – Independence of the guarantor’s obligation from the primary obligationArticle 882 – Irrevocability of a bank guaranteeArticle 882 1 – The right to transfer a bank guarantee issued by a bank to another bankArticle 883 – Inadmissibility of transferring the beneficiary’s claim to another personArticle 884 – Validity of the bank guaranteeArticle 885 – The form of presenting a claimArticle 886 – Guarantor’s obligation upon receipt of the beneficiary’s claimArticle 887 – Guarantor’s refusal to satisfy the beneficiary’s claimArticle 888 – Extent of the guarantor’s obligationArticle 889 – Reasons for terminating the guarantor’s obligationArticle 890 – Right to claim compensation by way of recourseChapter Twenty-twoArticle 891 – ConceptArticle 892 – Form of suretyshipArticle 893 – Basis for the surety’s liabilityArticle 894 – Surety’s refusal to satisfy the creditorArticle 895 – Joint and several liability of the suretyArticle 896 – Liability of co-suretiesArticle 897 – Liability for the obligations assumed by previous suretiesArticle 898 – Extent of the surety’s liabilityArticle 899 – Defences of suretyArticle 900 – Surety’s refusal to satisfy the creditorArticle 901 – Reduction of the surety’s liabilityArticle 902 – Effect of delayed payments by the principal debtorArticle 903 – Termination of an open-ended contract of suretyshipArticle 904 – Grounds for releasing a surety from suretyship obligationsArticle 905 – Effects of satisfaction of creditors by the suretyChapter Twenty-threeArticle 906 – Concept; contentArticle 907 – Cancellation of current accountsArticle 908 – Interest on payments madeArticle 909 – Personal or proprietary security for a claim entered into the current accountArticle 910 – AttachmentChapter Twenty-fourArticle 911 – ConceptArticle 912 – Defences of the issuerArticle 913 – Procedure for transfer of rightsArticle 914 – Rights of the issuerArticle 915 – Duty of the issuerArticle 916 – Re-registration of bearer securitiesArticle 917 – Replacement of securities unfit for circulationArticle 918 – Invalidation of securitiesArticle 919 – Issuing new bearer documentsArticle 920 – Limitation period on claimsArticle 921 – Issuing promissory notes of small valueArticle 911(1), Articles 913-915 and Article 920 shall apply.Article 922 – ConceptArticle 923 – Assignment of rights; endorsement typesArticle 924 – Procedure for using notes acquired by endorsementArticle 925 – Payment in the case of subsequent endorsementsArticle 926 – Claims guaranteed in writingArticle 927 – Limitation period of claimsArticle 928 – ConceptArticle 929 – (Deleted)Article 929 1 – The concept of uncertificated securities and the rights and obligations originated from itChapter Twenty-fiveArticle 930 – ConceptArticle 931 – Form of a partnership agreementArticle 932 – Obligation to make contributionArticle 933 – Inadmissibility of transferring a partner’s share to third personsArticle 934 – Obligation of joint managementArticle 935 – Procedure for distribution of revenuesArticle 936 – Non-transferability of partner rightsArticle 937 – Joint and several liability of partnersArticle 938 – Termination by a partnerArticle 939 – Grounds for terminating a partnershipArticle 940 – Procedure for terminating a partnershipChapter Twenty-sixArticle 941 – ConceptArticle 942 – Form of the contractArticle 943 – Amount of annuityArticle 944 – Annuity payment periodsArticle 945 – Inadmissibility of alienating transferred propertyArticle 946 – Disputes relating to annuity paymentsArticle 947 – Payment of annuity in kindArticle 948 – Risk of accidental destruction or damage of the transferred propertyArticle 949 – Termination of life annuity contractsArticle 950 – Effect of the death of the issuerChapter Twenty-sevenArticle 951 – ConceptArticle 952 – LotterySection TwoChapter OneArticle 953 – ConceptArticle 954 – Equal sharesArticle 955 – Share in the fruitsArticle 956 – Administration of a thing held in commonArticle 957 – Making decisions when administering things held in commonArticle 958 – Applying the procedure for administering things held in common to successors in interestArticle 959 – Procedure for administering a thing held in commonArticle 960 – Expenses for maintaining a thing held in commonArticle 961 – Cancellation of co-ownershipArticle 962 – Agreement on cancellationArticle 963 – Cancellation of co-ownership upon division in kindArticle 964 – Cancellation of co-ownership by saleArticle 965 – Joint liability of part ownersArticle 964.Article 966 – Satisfaction of a claim against a part ownerArticle 967 – Liability of part owners upon cancellation of co-ownershipArticle 968 – Limitation period on claims to cancellation of co-ownershipChapter TwoArticle 969 – Agency without specific authorisation in good faithArticle 970 – Liability for damagesArticle 971 – Obligation to notify the principalArticle 972 – Submitting performance reportsArticle 973 – Right to reimbursement of expensesArticle 974 – Inadmissibility of claiming reimbursement of expensesArticle 975 – False agency without specific authorisationChapter ThreeArticle 976 – Grounds for claims against pseudo creditorsArticle 977 – Inadmissibility of claiming back transferred propertyArticle 978 – Claim for return of property transferred under duress or threatArticle 979 – Scope of claims for return of propertyArticle 980 – Procedure for reimbursement of expenses and lossesArticle 981 – Liability to pay damagesArticle 982 – Effects of encroachment upon the legal goods of othersArticle 983 – Receipt of performance by unauthorised personsArticle 984 – Release from liabilityArticle 985 – Right to claim profitsArticle 986 – Paying the debts of another person by mistakeArticle 987 – Incurring expenses on another person’s property by mistakeArticle 988 – Effects of performance by instruction of pseudo creditorArticle 989 – Obligation of a third person to return unjustly received thingsArticle 990 – Effects of gratuitous administration of things by an unauthorised personArticle 991 – Effects of unjust enrichment at the expense of another personSection ThreeChapter OneArticle 992 – ConceptArticle 993 – Effects of disclosure of harmful informationArticle 994 – Liability of minors for damagesArticle 995 – Compensation for damages caused by beneficiaries of supportArticle 996 – Compensation for damages caused by a person in a state of temporary unconsciousness or temporaryArticle 997 – Compensation for damage caused in the line of dutyArticle 998 – Joint and several liabilities for damageArticle 999 – Compensation for damages caused by operation of vehiclesArticle 1000 – Liability for the risk of injury posed by structuresArticle 1001 – Liability for damages caused while extinguishing fireArticle 1002 – No prior release from liabilityArticle 1003 – Liability for damages caused by animalsArticle 1004 – Liability for damage caused by collapse of a buildingArticle 1005 – Liability of the State (Municipality) for the damage inflicted by state employees and publicArticle 1006 – Liability for damages in the event of the victim’s deathArticle 1007 – Liability for the harm caused by medical institutionsArticle 1008 – Limitation period on claims for damagesChapter TwoArticle 1009 – Liability of the manufacturer of defective productsArticle 1010 – Concept of a defective productArticle 1011 – Concept of a productArticle 1012 – Burden of proofArticle 1013 – Joint and several liabilities of the manufacturers of defective productsArticle 1014 – Liability for damages caused by injury to healthArticle 1015 – Limitation period on claimsArticle 1016 – No prior release from liability

General provisions · Property law · Law of obligations · Intellectual property · Family law · Inheritance law

Book Three

Law of Obligations

General Part

General Provisions on Obligations

Article 316 – Concept

1. By virtue of an obligation the obligee shall be entitled to claim performance of a certain action from the obligor.

Omission may also be regarded as performance.

2. Depending on its content and nature, an obligation may bind each party to exercise exceptional care for the

rights and property of the other party.

Article 317 – Grounds giving rise to an obligation

1. For an obligation to arise there shall be a contract between the parties except when the obligation arises from

tort (delictus), unjust enrichment or other grounds prescribed by law.

2. An obligation with regard to the duties under Article 316 may also arise from the preparation of a contract.

3. A party to a negotiation may demand from the other party reimbursement of expenses he/she incurred for

negotiating a contract that was not concluded by reason of the other party’s culpable action.

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Article 318 – Obligation to disclose information

The right to obtain information may arise from an obligation. Disclosure of information shall be required when it

is required in order to determine the contents of an obligation and when a contracting party can release the

information without prejudicing his/her rights. The recipient of the information shall reimburse the obligor for

the expenses of such release.

Section One

Contract Law

Part One

Chapter One

General Provisions

Article 319 – Freedom of contract. Obligation to enter into a contract

1. Subjects of private law shall be free to enter into contracts and determine their contents within the scope of the

law. They may also conclude contracts that are not prescribed by law but do not contravene it. If, for the

protection of the essential interests of society or a person, the validity of a contract depends upon the permission

of the state, then a separate law shall govern the matter.

2. If one of the parties to a contract holds a dominant position in the market, then it shall be bound by the

obligation to enter into a contract in this field of activity. This party may not unjustifiably offer unequal

contractual terms to another contracting party.

3. Persons who acquire or use property and services either for non-commercial purposes or for meeting their vital

needs may not be unjustifiably denied entry into a contract, provided that the other party to the contract is acting

within the scope of its business.

Article 320 – Invalidity of a contract for future property

A contract by which one party undertakes to either transfer all or part of his/her future property to another

person or encumber it by usufruct shall be void, except if the contract is concluded for particular items of future

property.

Article 321 – Contract for transfer of property

A contract by which one party undertakes to either transfer all or part of his/her present property to another

person or encumber it by usufruct shall be in written form, except if the contract is concluded for particular items

of present property.

Law of Georgia No 3879 of 8 December 2006 – LHG I, No 48, 22.12.2006, Art. 321

Article 322 – Invalidity of a contract on estate

1. A contract concluded by other persons on the estate of a person during his/her lifetime shall be void. The same

rule shall apply to a contract concluded during a person’s lifetime for either a compulsory portion of his/her estate

and/or for a testamentary burden.

2. Paragraph 1 of this article shall not apply to a contract concluded among the expectant heirs at law for the

hereditary or compulsory portion of one of them.

Article 323 – Procedure for transferring immovable things

A contract by which one party undertakes to transfer ownership of an immovable thing to another person or to

acquire it shall be in written form.

Law of Georgia No 3879 of 8 December 2006 – LHG I, No 48, 22.12.2006, Art. 321

Article 324 – Scope of a contract for encumbrance of things

If a person undertakes to transfer or encumber his/her thing, then this obligation shall also extend to the

accessories of that thing, unless otherwise provided for in the contract.

Article 325 – Defining the terms of an obligation on a fair basis

1. If the terms for performing an obligation are to be defined by one of the parties to the contract or by a third

person, then it is presumed, when in doubt, that such definition shall be constructed on a fair basis.

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2. If a party considers the terms to be unfair or if their definition is delayed, a court shall make a decision on the

matter.

Article 326 – Application of the rules on contractual obligations to non-contractual obligations

The rules on contractual obligations shall likewise apply to non-contractual obligations, unless it otherwise

follows from the nature of an obligation.

Chapter Two

Entering into a Contract

Article 327 – Agreement on the essential terms of a contract

1. A contract shall be considered entered into if the parties have agreed on all of its essential terms in the form

provided for such agreement.

2. Essential terms of a contract shall be those on which an agreement is to be reached at the request of one of the

parties, or those considered essential by law.

3. A contract may give rise to the obligation to conclude a future contract. The form stipulated for the contract

shall apply to the preliminary contract as well.

Article 328 – Form of a contract

1. If a specific form has been prescribed by law for the validity of a contract, or if the parties have determined

such a form for the contract, then the contract shall enter into force only if it meets the requirements of the form.

2. If the parties have agreed on a written form, the contract may be concluded by drawing up one document

signed by the parties. A telegraph notice, telecopy or exchange of letters shall also be sufficient for observance of

the form.

Article 329 – Making an offer

1. A proposal (offer) for concluding a contract shall be regarded as an offer if in the proposal, addressed to one or

more persons, the proposal-maker (offeror) indicates his/her intention to be bound by the proposal in the case of

consent (acceptance).

2. A proposal addressed to an unspecified circle of persons shall be regarded as an invitation to make an offer,

unless otherwise expressly indicated in the proposal.

Article 330 – Making offer to present and absent persons

1. A reply to an offer made to a present person shall be received immediately.

2. An offer made to an absent person shall be accepted within a period of time during which the offeror may

reasonably expect a reply.

Article 331 – Acceptance

If an offeror has fixed a period of time for acceptance, then the offer shall be accepted within such period.

Article 332 – Late acceptance

If an offeror receives a late acceptance, but the notice of acceptance shows that it was sent out in due time, then

the acceptance shall be deemed to be late only if the offeror so informs the offeree immediately.

Article 333 – New offers

1. A late acceptance shall be deemed to be a new offer.

2. When a reply indicates consent to conclude the contract but contains terms other than those specified in the

offer, then such reply shall amount to a rejection of the offer and shall simultaneously constitute a new offer.

Article 334 – Presumption of consent of an offeror

If in business relations the acceptance has been given with modified terms, the contract shall be considered

concluded provided that the offeree is entitled to presume consent from the offeror and the latter did not object

immediately.

Article 335 – Silence as a form of acceptance

1. If an entrepreneur who performs business operations for other persons receives an offer for performance of such

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business operations from a person with whom he has a business relationship, he shall be bound to reply to this

offer within a reasonable period of time; the silence of the entrepreneur shall amount to acceptance. The same

rule shall apply when the entrepreneur receives such offer from a person from whom he/she has requested orders

to perform such business operations.

2. Even if the entrepreneur rejects the offer but the goods have already been shipped, then he/she, in order to

avoid harm, shall temporarily preserve the goods at the expense of the offeror so as to avoid their deterioration.

Article 336 – (Deleted)

Law of Georgia No 1456 of 29 March 2022 – website, 6.4.2022

Article 337 – Interpretation of particular expressions in a contract

If particular expressions in a contract may be interpreted differently, then preference shall be given to the version

that is commonly used at the place of residence of the parties to the contract. If the parties reside in different

places, the interpretation according to the offeree’s place of residence shall prevail.

Article 338 – Mutually exclusive and ambiguous expressions in a contract

If there are mutually exclusive and ambiguous expressions in a contract, preference shall be given to the

expression that most closely accords with the overall content of the contract.

Article 339 – Traditions and usages of trade

When determining the rights and duties of the parties to a contract, account may be taken of the traditions and

usages of the trade.

Article 340 – Interpretation of mixed contracts

When interpreting a mixed contract, account shall be taken of the legal regulations that apply to those contracts

that most closely accord with and correspond to the essence of the performance.

Article 341 – Acknowledgment of the existence of a debt

1. A contract which acknowledges the existence of a debt shall be in writing. If another form is stipulated for the

creation of those relations of obligation the existence of which has been acknowledged, then the

acknowledgement shall also be in this form.

2. If the existence of a debt is acknowledged on the grounds of a mutual settlement (payment) or a settlement

through negotiation, then the form need not be observed.

Chapter Three

Standard Contract Terms

Article 342 – Concept

1. Standard contract terms are provisions prepared in advance for repeated use that one party (the offeror)

proposes to the other party, and which lay down rules that deviate from, or supplement statutory provisions.

2. If the parties have determined the contract terms in detail, then such terms shall not be deemed to be standard

contract terms.

3. The terms specifically agreed upon by the parties shall prevail over standard contract terms.

Article 343 – Incorporating standard contract terms into a contract

1. Standard contract terms shall become an integral part of a contract concluded between the offeror or the other

party to the contract only when:

a) the offeror, at the place of conclusion of the contract, makes an explicit notation referring to these terms, and

b) the other party to the contract is able to review the content of these terms and, if he/she agrees to them, to

accept them.

2. If the other party to the contract is an entrepreneur, then standard contract terms shall become an integral part

of the contract if this was to be expected by him/her when acting with the due diligence required in business

relations.

Article 344 – Uncommon provisions in standard contract terms

Provisions contained in standard contract terms that are of such an uncommon character that the other party

could not have expected them shall not become an integral part of the contract.

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Article 345 – Interpretation of unclear provisions in favour of the other party

If the text of standard contract terms is unclear, then it shall be interpreted in favour of the other party.

Article 346 – Invalidity of terms contravening the principles of trust and good faith

Standard terms of a contract shall be void, notwithstanding their inclusion in the contract, if they disadvantage

the other party to the contract and are irreconcilable with the principles of trust and good faith. In addition,

account shall be taken of the circumstances in which these terms have been included in the contract, also the

mutual interest of the parties, etc.

Article 347 – Invalidity of standard contract terms

When an offeror uses standard contract terms towards natural persons who are not conducting entrepreneurial

activities, then the following provisions of those terms shall be void:

a) a provision by which the offeror fixes unreasonably long or obviously insufficient periods of time for accepting

or refusing to accept an offer, or for performance of certain actions (periods of time for acceptance and

performance);

b) a provision by which the offeror, contrary to provisions prescribed by law, reserves for himself/herself

unreasonably long or insufficiently determined periods of time for performance of his/her obligations (periods of

time before which breach is deemed to occur);

c) a provision which gives the offeror the right to repudiate his/her obligation without a reason which is justified

and named in the contract (reservation to repudiate the contract);

d) a provision which gives the offeror the right to modify, or to deviate from, the promised performance, if

agreement on such a thing is unacceptable to the other party to the contract (reservation to amend the contract);

e) a provision which gives the offeror the right to demand from the other party to the contract an unreasonably

high reimbursement for expenses incurred (disproportionately high compensation for incurred expenses).

Article 348 – Other grounds for invalidity of standard contract terms

If an offeror uses standard contract terms towards natural persons who are not conducting entrepreneurial

activities, the following provisions of such terms shall also be deemed void:

a) a provision which stipulates a price increase in an unreasonably short period of time (short-term price increase);

b) a provision which restricts or excludes: the right to refuse performance, which the party to a contract has under

this Law or the right of the party to a contract to suspend performance until the other party performs his/her

obligation (right to refuse performance);

c) a provision by which the party to a contract is deprived of the right to set off a claim that is undisputed or has

been recognised by a court decision (prohibition of setoff of counterclaims);

d) a provision by which the offeror is released from the statutory obligation to warn the other party or to fix a

period of time for performance of the obligation (notice to perform an obligation, fixing a period);

e) agreement on claiming a sum higher than the amount of damages (excessive claim for damages);

f) a provision which excludes or limits the liability for damage caused by a grossly negligent breach of obligation

by the offeror or by his/her agent (liability for negligence);

g) a provision by which, in the case of breach of the main obligation by the offeror:

the other party to the contract is deprived of or restricted in his/her right to repudiate the contract,

or,

the other party to the contract is deprived of or, contrary to paragraph (f) of this article, is restricted in his/her

right to demand damages for non-performance of the contract (breach of the principal obligation);

h) a provision which, in the case of partial performance of the obligation by the offeror, excludes the right of the

other contracting party to claim damages for non-performance of the entire contract or to repudiate the contract

if partial performance of the contract is of no interest to this party (loss of interest in the case of partial

performance of the obligation);

i) any provisions that, contrary to rules prescribed by law, limit the liability of the offeror for defects of a thing

while supplying newly produced goods and performing works.

Chapter Four

Contract For the Benefit of a Third Person

Article 349 – Concept

Both the creditor and a third person may demand performance of a contract which has been concluded for the

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benefit of a third person, unless otherwise provided by law or stipulated in the contract or unless it otherwise

follows from the essence of the obligation.

Article 350 – Interpretation of a contract concluded for the benefit of a third person

1. In the absence of a special stipulation, the circumstances of the matter, namely, the purpose of the contract,

shall determine:

a) whether the third person is to acquire the right or not;

b) whether the right is effective at once or is subject to certain preconditions;

c) whether the parties to the contract are rightful to revoke or modify the right of the third person without his

consent.

2. The party that has made a stipulation in the contract for the benefit of a third person shall retain the right to

substitute the third person named in the contract regardless of the contracting party’s consent.

Article 351 – Third person’s renunciation of the right acquired under contract

If a third person renounces the right acquired under a contract, then the obligee may demand performance of the

obligation himself/herself, unless it otherwise follows from the contract or from the essence of the obligation.

Chapter Five

Avoidance of a Contract

Article 352 – Effects of repudiating a contract

1. If one of the parties to a contract, in the circumstances under Article 405, repudiates the contract, the

performances and benefits derived shall be returned to the parties (restitution in kind).

2. Instead of restitution in kind, the obligor shall pay monetary compensation if:

a) what has been acquired cannot be returned due to its nature;

b) the party uses, transfers, encumbers, transforms or alters the acquired object;

c) the acquired thing has been spoilt or perished; wear and tear resulting from its proper use shall not be taken

into account.

3. If the contract provides for performance in return, then monetary compensation shall be substituted for such

performance.

4. The obligation of monetary compensation shall not arise if:

a) the defect of the thing, which gives rise to the right to repudiate the contract, was detected upon its processing

or alteration;

b) the thing deteriorated or perished through the obligee’s fault;

c) the thing deteriorated or perished while in the custody of an authorised person despite the fact that he/she had

cared for it as for his/her own thing; however, whatever remains shall be returned.

5. Under Article 394, the obligee may claim damages for breach of the obligations arising from paragraph 1 of this

article.

Article 353 – Liability of the obligor not deriving benefit due to breach of the rules for proper use of the thing

1. If the obligor has not derived the benefit due to breach of the rules for proper use of the thing when he/she

should have been able to derive the benefit, he/she shall reimburse the obligee of the damages caused by not

deriving the benefit.

2. If the obligor returns the thing, pays reimbursement in money or, under Article 352(4)(a) and (b), no claim for

damages arises, he/she shall be reimbursed for unavoidable expenses. Other expenses shall be reimbursed only if

the obligee has benefited from them.

Article 354 – Performance of obligations arising from avoidance of a contract

The parties shall simultaneously perform obligations arising from the avoidance of a contract.

Article 355 – Obligation of notice of avoidance of a contract

Avoidance of a contract shall be exercised by notice to the other party.

Article 356 – Time limits for avoidance of a contract

If no time limit is fixed for avoidance of a contract, then the other party to the contract may fix such period of

time for the person entitled to avoid the contract. The period of time shall be reasonable. The right to avoid the

contract is extinguished unless notice of avoidance is given before the period of time lapses.

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Article 357 – Avoidance of a contract by a number of persons

If one or the other contractual party is a number of persons, then the right to avoid the contract shall be exercised

jointly by all participants of the party who avoids the contract, by giving notice of avoidance to all participants of

the other party. If the right to avoid the contract is extinguished for one of the rightful persons, then the right

shall be extinguished for all of the persons.

Article 358 – Inadmissibility of avoiding a contract

Avoidance of a contract shall not be allowed on the grounds of non-performance of an obligation if the obligor

could have performed the obligation through a setoff, and after avoidance he/she immediately declares a setoff

against the obligation.

Article 359 – Avoidance of a contract by the obligee

If a contract has been concluded with the stipulation that the obligor, under the contract, shall forfeit his/her

rights in the case of non-performance of his/her obligations, then the obligee may avoid the contract if such non-

performance occurs.

Article 360 – Mistake in the grounds for a settlement

1. A contract by which a dispute or uncertainty between the parties is settled through mutual compromises

(settlement) shall be void if, proceeding from the content of the contract, the settlement relies on grounds not

relevant to the true state of affairs, and the dispute or uncertainty would not have occurred if the parties had

known the true state of affairs.

2. Uncertainty may exist when performance of some requirement is doubtful.

Section Two

Performance of Obligations

Chapter One

General Provisions

Article 361 – Presumption of existence of obligations

1. Each performance implies the existence of an obligation.

2. The obligation shall be performed duly, in good faith, and at the time and place determined.

Article 362 – Place of performance of obligations

If the place of performance is neither fixed nor determined from the essence of the relations of obligation, then

the object shall be delivered as follows:

a) for an individually defined object – at the place where it was located at the moment when the obligation

originated;

b) for an object defined by generic characteristics – at the obligor’s place of business; and if no such place exists,

then at his/her place of residence (legal address).

Article 363 – Change in domicile of an obligor or an obligee

1. If before the performance of an obligation the place of residence or the domicile of the enterprise of an obligor

changes and due to this the obligee incurs additional expenses, then the obligor shall compensate the creditor for

such expenses.

2. If before the performance of the obligation the place of residence or legal address of the obligee changes and

due to this the expenses increase or the performance is at risk, then the obligee shall bear both the increased

expenses and the risk with respect to the delivery of the object.

Article 364 – Early performance of obligations

The obligor may perform the obligation earlier than the due date, unless the obligee refuses to accept the

performance for a valid reason.

Article 365 – Performance of obligations when no period for performance is fixed

If a period of time for performance of the obligation is neither fixed nor determinable from other circumstances,

the obligee may demand its performance at any time, and the obligor may perform it immediately.

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Article 366 – Inadmissibility of demanding early performance

If a period of time is fixed, then it shall be presumed, when in doubt, that the obligee may not demand

performance before and the obligor may perform the obligation earlier than the set period of time.

Article 367 – Right to immediately demand performance of obligation

If a period of time is fixed for the performance of an obligation in favour of the obligor, then the obligee may

immediately demand performance if the obligor has become insolvent, has decreased the promised security, or has

failed to present it at all.

Article 368 – Performance of obligations in the case of conditional transactions

If the validity of a transaction depends upon the occurrence of a condition, then the obligation shall be due from

the day of occurrence of that condition.

Article 369 – Refusal to perform obligations

The person who is obligated under a bilateral contract may refuse to perform an obligation until counter-

performance is rendered, except if he/she was obligated to perform his/her obligation in advance.

Article 370 – Consumer credit

1. In the case of a consumer credit, the beneficiary of the credit may refuse to repay the credit if the counterclaim

against the seller arising from a commutative contract relating to such credit would entitle the beneficiary to

repudiate the performance of his/her obligation.

2. The contract of sale together with the contract of credit shall constitute an interrelated transaction if the credit

serves to finance the purchase price and both contracts are regarded as an economic whole. An economic whole

shall be deemed to exist when the seller has participated with the issuer of the credit in the preparation or

conclusion of the contract of credit.

Article 371 – Performance of obligations by a third person

1. Unless it follows from the law, the contract or the nature of the obligation that the obligor is to perform the

obligation personally, any third person may perform the obligation as well.

2. The obligee may reject the performance offered by a third person if the obligor objects to it.

Article 372 – Satisfaction of a creditor by a third person

If a creditor seeks enforcement against a thing belonging to the obligor, then each person who is at risk of losing

the right to the thing as a result of the enforcement may satisfy the creditor. When a third person satisfies the

creditor, the right of claim shall be transferred to that person.

Article 373 – Acceptance of performance by an unauthorised person

1. An obligor shall give performance of the obligation to the creditor or to the person who is authorised by law or

by a court decision to accept the performance.

2. If an unauthorised person has accepted performance of the obligation, then the obligation shall be deemed to

have been performed if the obligee gave his/her consent to it or received benefit from the performance.

Article 374 – Alternative obligations

If one of several obligations (alternative obligations) is to be performed, the obligor may choose, unless otherwise

provided for in the contract, in the law or in the essence of the obligation.

Article 375 – Choosing obligations to be performed

If it turns out that the obligor may repudiate one obligation out of the two obligations that are due, then the

obligation to perform the other action shall remain effective.

Article 376 – Rules for choosing alternative obligations

Choice under Article 374 shall be made by making a declaration or effecting performance to the other party to the

contract. The obligation chosen shall be deemed to be the obligation due from the beginning.

Article 377 – Choosing more than two obligations to be performed

The rules of Articles 374-376 shall also apply when the obligor may choose more than two performances for

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satisfying an obligation.

Article 378 – Performance of obligations in instalments

An obligor may perform the obligation in instalments (performance of obligations in instalments) if the obligee

agrees.

Article 379 – Right of the obligee to accept another performance

The obligee shall not be obligated to accept any performance other than the one determined in the contract. This

rule shall also apply when the performance is of high value.

Article 380 – Quality of performance of obligations

If the quality of performance is not specified in detail in the contract, then the obligor shall perform work or

deliver a thing of at least average quality.

Article 381 – Performance of obligations in the case of an individually defined object

If an individually defined thing is the subject of the contract, the obligee shall not be obligated to accept another

thing even if it is of higher value.

Article 382 – Performance of obligation in the case of a generic thing

If the subject of performance is a thing, which may be substituted (a generic thing), the obligor shall always

perform the obligation.

Chapter Two

Performance of Monetary Obligations

Article 383 – Concept

Monetary obligations are expressed in the national currency. Parties may also determine a monetary obligation in

foreign currency, unless prohibited by law.

Article 384 – (Deleted)

Law of Georgia No 5127 of 29 June 2007 – LHG I, No 27, 17.7.2007, Art. 260

Article 385 – Procedure for demanding return of payment made without obligation

The amount that has been paid without an obligation may be reclaimed under the rules regulating unjust

enrichment.

Article 386 – Place of performance of monetary obligations

1. When there is doubt as to the place of performance, a monetary obligation shall be performed at the creditor’s

domicile (place of residence or legal address).

2. If the creditor has a banking account intended for transfers of funds at the place or in the country where the

payment is to be made, then the debtor may perform his/her monetary obligation by transfer to this account,

except where the creditor is against it.

Article 387 – Order of priority for payment of monetary obligations

1. If a debtor is liable to a creditor for several like performances arising out of various obligations and what has

been performed is not enough to pay all the debts, then the obligation chosen by the debtor for satisfaction at the

time of performance shall be paid; and if the debtor does not choose, then that debt, which was the first to fall

due, shall be paid.

2. If the dates on which claims mature occur simultaneously, then the claim which is the most burdensome for the

debtor shall be performed first.

3. If the claims are equally burdensome, then the claim for which the least security exists shall be performed first.

Article 388 – Priority of covering court expenses

Out of a payment made by a debtor that is not sufficient to pay all of the debt due, first shall be paid any court

expenses, then the principal (debt), and finally the interest.

Article 389 – Payment of monetary obligations in the case of a change in the exchange rate of currency

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If, before the date of maturity of payment, the currency (rate of exchange) appreciates or depreciates, or if the

currency has been changed, the debtor shall make payment according to the exchange rate that existed at the time

of the creation of the obligation. In the case of a change in the currency, the exchange relations shall be based on

the exchange rate that existed between these currencies on the day of the change in currency.

Chapter Three

Obligee in Default

Article 390 – Concept

1. The obligee shall be deemed to be in default if he/she does not accept the performance offered to him/her when

it is due.

2. When a certain action of the obligee is required to perform an obligation, he/she shall be deemed to be in

default if he/she does not perform the action.

Article 391 – Obligation of the obligee to pay damages

The obligee shall pay damages incurred to the obligor because of the obligee’s fault in not accepting an obligation

performed when due.

Article 392 – Liability of an obligor when an obligee is in default

When the obligee is in default, the obligor shall be liable for the non-performance of an obligation only if the

performance proved to be impossible because of the obligor’s intention or gross negligence.

Article 393 – Effects of default by an obligee

If the obligee is in default, then, regardless of his/her fault:

a) he/she shall reimburse the obligor any additional expenses incurred for the storage of the object of the contract;

b) he/she shall bear the risk of any accidental spoiling or perishing of the thing;

c) he/she shall no longer be entitled to receive interest on a monetary obligation.

Section Three

Breach of Obligations

Chapter One

General Provisions

Article 394 – Claim for damages in cases of breach of obligations

1. If the obligor breaches an obligation, the obligee may claim damages arising from the breach. This rule shall not

apply when the obligor is not responsible for breach of the obligation.

2. If the obligor delays performance, the obligee may give the obligor a necessary period of time to perform the

obligation. If the obligor does not perform the obligation within such period of time, the obligee may claim

damages instead of performance of the obligation.

3. No additional period of time need be given when it is evident that it will not yield any result, or when

extraordinary circumstances exist which, in the interests of both parties, justify an immediate claim for damages.

Article 395 – Inadmissibility of preliminarily agreeing on release from liability for damages

1. An obligor shall be liable only for the damages caused by an intentional or negligent action, unless it is

otherwise foreseen and unless it otherwise follows from the essence of the obligation.

2. A preliminary agreement of the parties to release the obligor from liability for damages in the case of an

intentional breach of an obligation shall not be allowed.

Article 396 – Liability of the obligor for the action of his/her representative

An obligor shall be liable for the actions of his/her legal representative and of the persons whom he/she employs

to perform his/her obligations to the same extent as for his/her own culpable action.

Article 397 – Liability of an obligor for receiving the object of performance from another person

The obligor shall be liable for performance even if he/she was to receive the object of performance from another

person and could not receive it, unless otherwise provided for in the contract or by other circumstances.

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Article 398 – Adapting a contract to changed circumstances

1. If the circumstances that were the grounds for the conclusion of a contract have evidently changed after

conclusion of the contract, and the parties, had they taken the changes into account, would not have executed the

contract or would have executed it with different contents, then it may be demanded that the contract be adapted

to the changed circumstances. Otherwise, taking into account individual circumstances, a party to the contract

may not be required to strictly observe the unchanged contract.

2. It shall also be regarded as a change in circumstances if the understandings, which constituted the grounds for

the conclusion of a contract, prove to be wrong.

3. The parties shall first try to adapt the contract to the changed circumstances. If such adaptation is impossible, or

if the other party does not agree, then the party whose interest has been harmed may repudiate the contract.

Article 399 – Repudiation of a long-term relationship of obligation

1. Any party to a contract may repudiate, for a valid reason, a long-term relationship of obligation without

observing the period of time fixed for termination of the contract. The reason shall be valid when, taking into

account the specific situation, including force majeure and the mutual interests of the parties, the party

terminating the contract cannot be required to continue the contractual relationship until the lapse of the agreed

period of time or until the expiry of the period of time fixed for termination of the contract.

2. If the grounds for repudiation are also a breach of contractual obligations, then repudiation of the contract shall

be allowed only after the period of time fixed for elimination of the deficiencies expires or after a warning proves

unsuccessful. Article 405(2) shall apply accordingly.

3. A rightful person may repudiate a contract within a reasonable period of time after the reason for termination

has become known to him/her.

4. If, as a result of termination of the contract, any already given performance is no longer of any interest to the

rightful person, the termination of the contract may be extended to the already given performance as well. To

secure the return of the already given performance, articles 352-354 shall apply accordingly.

5. Article 407 shall apply accordingly to a claim for damages.

Chapter Two

Obligor in Default

Article 400 – Concept

The obligor shall be deemed to be in default, if:

a) he/she has not performed the obligation within the time period fixed for performance;

b) even after being warned by the obligee he/she fails to perform the obligation after the due date of the promised

performance.

Article 401 – Impossibility to perform an obligation

No default shall be deemed to have occurred if the obligation is not performed due to circumstances not caused by

the obligor’s fault.

Article 402 – Obligor’s liability

If the obligor is in default, he/she shall be liable for any negligence. He/she shall be liable even for an accident,

unless he/she proves that the damage would have occurred even if the obligation had been performed in time.

Article 403 – Payment of interest when delaying the payment of funds

1. An obligor who has delayed payment of a sum of money shall pay, for the period of delay, the interest

determined by agreement of the parties, provided that the obligee may not claim more on any other grounds.

2. In the case of delaying the payment of a sum of money, the payment of interest on interest may be demanded

only in cases explicitly indicated in the contract.

Law of Georgia No 5127 of 29 June 2007 – LHG I, No 27, 17.7.2007, Art. 260

Article 404 – Obligee’s right to claim damages

The obligee may claim damages caused by the obligor’s delay of performance.

Chapter Three

Breach of Obligations during the Term of a Bilateral Agreement

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Article 405 – Setting additional period of time in the case of breaching obligations

1. If one of the parties to a bilateral contract breaches a contractual obligation, then the other party to the contract

may repudiate the contract if the obligation is not performed within an additional period of time fixed by him/her.

If, based on the nature of the breach, no additional period of time is afforded, then a warning shall be equivalent

to the fixing of an additional period of time. If the obligation is breached only in part, then the obligee may

repudiate the contract only if the performance of the remaining part of the obligation is no longer of any interest

to him/her.

2. An additional period of time need not be fixed or a warning need not be issued when:

a) it is obvious that it will yield no results;

b) the obligation was not performed within the period of time fixed under the contract, and the creditor has in the

contract tied continuation of the relation to the timely performance of the obligation;

c) an immediate termination of the contract is justified for specific reasons, in the mutual interests of the parties.

3. A contract may not be repudiated if:

a) the breach of an obligation is insignificant;

b) the requirements of Article 316(2) have been violated and, notwithstanding that, the obligee may be required

to maintain the contract in force;

c) the obligee himself/herself is fully or principally liable for the breach of the obligation;

d) there is a counterclaim against the claim of breach, which the obligor has already asserted or will assert

immediately after the repudiation of the contract.

4. The obligee may repudiate the contract before the due date of performance if it is obvious that reasons for

repudiation will occur.

5. The obligor may determine a reasonable period for the obligee to repudiate the contract.

Article 406 – Right to receive counter-performance

1. If under a bilateral contract the obligor has the right to repudiate his/her obligation and the circumstance that

gives him/her the right is caused through the obligee’s fault, then the obligor shall retain the right to receive

counter-performance.

2. This rule shall not apply if the grounds for the counter-performance arose at the time when the obligee was

delaying acceptance of the performance.

Article 407 – Compensation for damages in the case of avoiding a contract

1. Upon withdrawing from the contract, the obligee may claim damages incurred by him/her as a result of non-

performance of the contract.

2. This rule shall not apply when the reason for the obligee’s withdrawal from the contract did not arise through

the fault of the obligor.

Section Four

Duty to Pay Damages

Article 408 – Duty of restitution

1. A person who is liable to pay damages shall restore the state of affairs that would have existed if the

circumstances giving rise to the duty to pay damages had not occurred.

2. If, as a result of bodily injury or harm inflicted to the health of a person, his/her ability to work is lost or

diminished, or if his/her needs increase, then the injured person shall be compensated for such damage by paying

him/her a monthly allowance.

3. The injured person may demand the payment of expenses for medical care in advance. The same rule shall also

apply when professional retraining becomes necessary.

4. The injured person may demand compensation instead of allowances, if there is a compelling reason for doing

so.

Article 409 – Impossibility of restitution

If damages cannot be paid by restitution or if such restitution would require disproportionately high expenses,

then the obligee may be given monetary compensation.

Article 410 – Preliminary renunciation of the right to claim damages

Preliminary renunciation of the right to claim damages due to a breach of an obligation shall be allowed if so

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provided by law or by agreement of the parties.

Law of Georgia No 2284 of 4 December 2009 – LHG I, No 45, 21.12.2009, Art. 329

Article 411 – Damages for lost profits

Damages shall be compensated not only for the loss of property actually incurred but also for lost profits. Profit

shall be deemed to be lost if the person did not receive it, but would have received it if the obligation had been

duly performed.

Article 412 – Damages to which the duty to pay compensation applies

Only the damages which the debtor could have foreseen and which are the direct consequence of the action

causing them shall be compensated.

Article 413 – Compensation for non-property damages

1. Monetary compensation for non-property damages may be claimed only in the cases precisely prescribed by

law, in the form of a reasonable and fair compensation.

2. In cases of bodily injury or harm inflicted to a person’s health, the injured party may claim non-property

damages as well.

Article 414 – Calculation of damages

The interest that the creditor had in due performance of the obligation shall be taken into account when

calculating damages. The time and place for performance of the contract shall be taken into account when

calculating damages.

Article 415 – Fault of the injured person in causing damages

1. If actions of the injured person contributed to the occurrence of damages, then the duty to compensate and the

amount of compensation shall depend on which party was more at fault for the damages.

2. This rule shall apply also when the injured person is at fault because of his/her omission to avoid or reduce

harm.

Section Five

Additional Remedies for Securing a Claim

Article 416 – Kinds of additional remedies for securing the performance of obligations

To secure the performance of an obligation, the parties may also determine under the contract additional means

for doing so: penalty, earnest money or a debtor’s guarantee.

Chapter One

Penalty

Article 417 – Concept

Penalty – an amount of money determined by agreement of the parties to be paid by the obligor in the case of

non-performance or improper performance of an obligation.

Article 418 – Form of determining a penalty

1. The parties to the contract are free to determine a penalty that may exceed the possible damages, except as

provided for in Article 625(8) of this Code.

1 1 . The net obligation of a party determined after a mutual setoff or a final mutual setoff provided for by the Law

of Georgia of Financial Collaterals, Setoffs and Derivatives is not a penalty or other, similar penal sanction and

shall not be deemed to be a penalty or other, similar penal sanction.

2. The agreement for a penalty shall be made in written form.

Law of Georgia No 239 of 29 December 2016 – website, 13.1.2017

Law of Georgia No 5674 of 20 December 2019 – website, 31.12.2019

Article 419 – Inadmissibility of simultaneous demands for payment of a penalty and performance of an obligation

1. An obligee may not demand simultaneously the payment of a penalty and the performance of the obligation,

unless the penalty has been stipulated to apply in those cases where the obligor does not perform the obligations

in due time.

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2. The obligee may always claim damages.

Article 420 – Reduction of penalty by court

A court, taking into account the circumstances of the case, may reduce a disproportionately high penalty.

Chapter Two

Earnest Money

Article 421 – Concept

Earnest money is a sum of money paid by one party to a contract to the other party as the sign that the contract

has been concluded.

Article 422 – Counting earnest money towards payment of an obligation

Earnest money shall be credited against the performance owed, and if it is not credited, then it shall be returned

after performance of the obligation.

Article 423 – Counting earnest money towards compensation for damages

1. If the earnest money giver breaches the assumed obligation, then the earnest money shall remain with the party

who received it. In addition, the earnest money shall be counted towards any compensation for damages.

2. If the non-performance of an obligation is caused by the fault of the earnest money receiver, then this party

shall return to the other party double the amount of the earnest money. In addition, the party who gave the

earnest money may claim damages.

Chapter Three

Debtor’s Guarantee

Article 424 – Concept

A debtor’s guarantee is an undertaking to perform an unconditional action or an action that is beyond the scope of

the contract.

Article 425 – Validity of a guarantee

The guarantee shall be valid unless it contravenes the rules laid down by law or obligates the debtor excessively.

Article 426 – Form of guarantee

A guarantee shall be executed in writing.

Section Six

Termination of Obligations

Chapter One

Termination of Obligations by Performance

Article 427 – Termination of obligations by performance in favour of an obligee

A relationship of obligation shall be terminated by performance of the obligation in favour of the obligee

(performance).

Article 428 – Termination of obligations by novation

A relationship of obligation shall also be terminated when the obligee accepts performance of another obligation

in the place of performance of the originally foreseen obligation.

Law of Georgia No 1902 of 28 December 2002 – LHG I, No 4, 22.1.2003, Art. 20

Article 429 – Accepting the performance of obligations

1. The obligee, on demand of the obligor, shall issue a document confirming that performance of the obligation

has been accepted in full or in part.

2. A document drawn up to confirm the receipt of a debt that says nothing about the interest shall imply that the

interest has been paid and the monetary obligation is satisfied in full.

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3. When the payment of a debt is made periodically, in instalments, then the document on payment of the last

instalment shall, until proven otherwise, imply that the preceding instalments have also been paid.

Article 430 – Particulars of a document confirming the receipt of performance

A document on receipt of performance drawn up by a creditor or by a person authorised to do so shall include

data on the amount and the kind of the debt, the name and the surname of the debtor or of the person who is

paying the debt, and the time and place of the performance.

Article 431 – Right to demand a certificate of indebtedness

If a certificate of indebtedness has been issued relating to a claim, then the debtor, along with the document on

receipt of performance, may demand return or cancellation of the certificate of indebtedness. If the creditor is

unable to return the document, then the debtor may demand an officially certified document indicating that the

debt has been extinguished.

Article 432 – Compensation for expenses relating to issuing the document on receipt of performance

1. The expenses relating to issuing a document on receipt of performance shall be borne by the debtor, unless

otherwise stipulated in the agreement with the creditor.

2. If a creditor changes his/her place of residence or dies leaving heirs at another place of residence, the increased

expenses for issuing the document on receipt of performance shall be borne by the creditor or his/her heirs.

Article 433 – Repudiation of performance by reason of the creditor’s non-performance of duties

If a creditor refuses to issue a document on receipt of performance or return or cancel a certificate of indebtedness

or indicate in the document on receipt of performance that the certificate of indebtedness cannot be returned or

acknowledge that the debt is extinguished, then the debtor may repudiate performance. In such cases the creditor

shall be deemed to be in default.

Chapter Two

Termination of Obligations by Deposit

Article 434 – Concept

1. If an obligee delays acceptance of performance or his/her whereabouts are unknown, then the obligor may

deposit the object of performance with a court or a notary office, or deposit money or securities to the deposit

account of the notary.

2. By such deposit the obligor shall be released from the obligation to the obligee.

Article 435 – Transfer of the deposited property to the obligee

A judge or a notary shall transfer the deposited property to the obligee. The court or the notary shall select a

depositary but retain the documents.

Article 436 – Objects suitable for deposit

Deposited objects shall be fit for storage. Perishable objects shall not be accepted for storage.

Article 437 – Place of storage

Storage shall be effected according to the place of performance.

Article 438 – Demand that the obligee accept objects

A court or a notary shall notify the obligee of receiving the object of performance for storage and demand that the

obligee accept the object.

Article 439 – Compensation for storage expenses

All expenses with respect to the storage shall be borne by the obligee.

Article 440 – Reclamation of a deposited object by an obligor

1. An obligor may claim the deposited object back before its acceptance by the obligee, unless he/she initially

refused to reclaim it. If the obligor reclaims the object, the storage shall be deemed not to have occurred.

2. The obligor may take back the deposited object if the obligee refuses to accept it or if the period of time fixed

under Article 441 has elapsed.

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3. If the obligor takes back the object, he/she shall bear the storage expenses.

Article 441 – Period of time for storing objects of performance

A court or a notary shall keep the object of performance for up to three years. If the obligee does not accept the

object within that period, then the obligor shall be notified about it and it shall be demanded that the obligor take

back the deposited object. If the obligor does not accept the object within the period required for taking back, the

object shall be deemed property of the state.

Chapter Three

Termination of Obligations by Setting off Counterclaims

Article 442 – Possibility to set off obligations

1. Counterclaims between two persons may be terminated by setoff if these claims have become due.

2. Obligations may also be set off when one of the claims has not become due but the party holding such claim

agrees to the setoff. Obligations shall be set off by notice to the other party.

Article 442 1 – Mutual setoffs and final mutual setoffs

Bilateral obligations arising from a qualified financial contract entered into within a mutual setoff agreement may

be performed by a mutual setoff and/or a final mutual setoff, which is regulated by the Law of Georgia on

Financial Collaterals, Mutual Setoffs and Derivatives.

Law of Georgia No 5674 of 20 December 2019 – website, 31.12.2019

Article 443 – Possibility to set off time-barred claims

Lapse of the limitation period on a claim shall not exclude setoff of the obligations if the limitation period had not

expired at the time when the claim could still have been offset.

Article 444 – Claims subject to setoff

If the claims that are to be offset cannot compensate each other in full, only the lesser of the two claims shall be

offset.

Article 445 – Several claims subject to setoff

1. If a party to a contract who was notified of a setoff has several claims subject to setoff, then the rules of Article

387 shall apply.

2. If a party is obligated to pay interest and other expenses to the other party in addition to the principal

obligation, then the rules of Article 388 shall apply.

Article 446 – Setoff of obligations for different places of performance

Set-off of obligations shall also be allowed when different places have been designated for performance of the

respective claims.

Article 447 – Inadmissibility of setting off claims

Claims may not be set off:

a. if setoff of claims was excluded in advance by an agreement;

b. if the object of an obligation cannot be enforced or if the object of the obligation serves as a livelihood;

c. if the obligation envisages payment of damages caused by infliction of harm to health or by death;

d. in other instances provided for by law.

Chapter Four

Termination of Obligations by Forgiveness of Debt

Article 448 – Concept

Forgiveness of a debt by agreement of the parties shall terminate the obligation.

Article 449 – Effects of forgiveness of debt for other joint and several debtors

Forgiveness agreed between the obligee and one joint and several debtors shall also release the other joint and

several debtors, unless the obligee retains his/her claim against them. In such case, the obligee may assert against

the rest of the joint and several debtors only one claim, less the share of the released debtor.

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Article 450 – Effects of forgiving debt to the principal debtor

1. Forgiveness of debt granted to the principal debtor shall release any sureties as well.

2. Forgiveness of debt granted to the surety shall not release the principal debtor from performance of the

obligation.

3. Forgiveness of debt granted to one surety shall release the other sureties as well.

Article 451 – Effects of renunciation of the claim under a bilateral contract

Waiver by one of the parties to a bilateral contract of his/her claim shall not terminate the obligation. That party

shall perform its obligations under the contract until the other party also waives its claim.

Chapter Five

Other Grounds for Terminating Obligations

Article 452 – Termination of obligation where the obligee and the obligor turn out to be the same person

1. Obligation-based relations shall be terminated when the obligee and the obligor turn out to be the same person.

2. Irrespective of paragraph 1 of this article, obligation-based relations shall not be terminated if the obligation is

based on the debt securities and the issuer acquires the said securities. When the issuer holds its own debt

securities, the obligation-based relations shall be terminated if the time limit to pay for the securities has expired

or the issuer has decided to terminate the obligation-based relations. In the case of registered or uncertificated

securities, the decision of an issuer on terminating the obligation-based relations shall enter into force after the

decision is recorded in the securities register or the central depository.

3. Where so provided for by paragraph 2 of this article, for the purposes of exercising the rights based on debt

securities, the debt securities in the possession of an issuer shall not be taken into account, while the interest shall

continue to accrue without payment of the interest.

Law of Georgia No 3726 of 16 November 2023 – website, 7.12.2023

Article 453 – Termination of obligations due to the obligor’s death

1. The death of the obligor shall terminate the obligation if performance is impossible without his/her personal

participation.

2. The obligee’s death shall terminate the obligation if the performance was intended personally for the obligee.

Article 454 – Termination of obligations due to liquidation of a legal person

The obligation of a legal person shall be terminated from the moment of the registration of completion of its

liquidation.

Section Seven

Multiple Obligees or Obligors with Respect to Obligation

Chapter One

Joint and Several Obligees

Article 455 – Joint entitlement

If a number of persons are entitled to claim performance of the obligation so that each of them may claim the

performance in full and the obligor is liable for the performance only once, then these persons are jointly rightful

persons – joint and several obligees.

Article 456 – Grounds for joint entitlement

Joint entitlement shall arise out of a contract, by law or by the indivisibility of the object of an obligation.

Article 457 – Performance of obligations to any obligee

The obligor may perform the obligation to any of the obligees at his/her own discretion, unless one of the obligees

has asserted a claim against him/her under Article 455.

Article 458. Performance of obligations for one of the obligees

Performance of the obligation in full for one of the obligees shall release the obligor from the obligation with

respect to the rest of the obligees.

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Article 459 – Effects of renunciation by one of the joint and several obligees

If one of the joint obligees waives a claim against the obligor, the obligor shall be released from payment only to

the extent of the share of the payment which was due to this obligee.

Article 460 – Inadmissibility of applying the facts related to other obligees

The obligor may not use against one of the obligees the facts relating to another obligee.

Article 461 – Rights of the heirs of joint and several obligees

If a joint and several obligee leaves a number of heirs, each heir shall be entitled to only that part of the right to

the debt that corresponds to his/her portion of the estate.

Article 462 – Liability of a joint and several obligee before the rest of the joint and several obligees

1. A joint and several obligee who has received performance in full from the obligor shall be liable to pay to the

rest of the obligees the share to which they are entitled.

2. The joint and several obligees shall have equal shares in relation to each other unless otherwise determined

among them.

Chapter Two

Joint and Several Obligors

Article 463 – Joint obligation

If a number of persons are bound to perform the obligation so that each of them is to participate in the

performance of the whole obligation (joint obligation) and the obligee has the right to claim the performance only

once, then they are joint and several obligors.

Article 464 – Grounds for joint obligation

Joint obligation shall arise out of a contract, by law or by the indivisibility of the object of the obligation.

Article 465 – Right of the obligee to demand performance from any of the obligors

The obligee may demand, at his/her own discretion, performance from any of the obligors, both in part or in full.

Until the entire performance is rendered, the obligation of the rest of the obligors shall remain effective.

Article 466 – Counterclaim of a joint and several obligor against the obligee

A joint-and-several obligor may assert against the obligee all the counterclaims which arise out of the essence of

the obligation, or to which only the obligor is entitled, or which are common for all joint and several obligors.

Article 467 – Effects of the entire performance by one of the obligors

The entire performance by one of the obligors shall release the rest of the obligors from performance. The same

rule shall apply in the case of setoff exercised by the obligor with the obligee.

Article 468 – Inadmissibility of applying facts relating to another obligor

The facts relating to one of the joint and several obligors may be used only against that person, unless the

relationship of obligation dictates otherwise.

Article 469 – Lawsuit against one of the joint and several obligors

The filing of a claim against one of the joint and several obligors shall not deprive the obligee of his/her right to

file a claim against the rest of the obligors.

Article 470 – Effects of delay in accepting performance

1. The effects of the obligee’s delay in accepting performance from one of the joint and several obligors shall be

effective for the rest of the joint and several obligors.

2. The effects of a delay in performance by one of the joint and several obligors may not be used against the rest of

the joint and several obligors.

Article 471 – Rights of heirs of a joint and several obligor

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If a joint and several obligor leaves a number of heirs, each heir shall pay the claim according to his/her portion of

the estate. This rule shall not apply when the claim is indivisible.

Article 472 – Merger of the obligee’s claim with one of the joint obligor’s debt

If the claim of the creditor is merged with the debt of one of the joint and several obligors, the obligation of the

rest of the obligors shall be terminated in proportion to the share of that obligor.

Article 473 – Right of subrogation in the case of entire performance by one of the obligors

1. An obligor who has performed a joint obligation has the right of subrogation against the rest of the obligors

proportionately to their equal shares, though with subtraction of his/her own share, unless otherwise provided for

in a contract or law.

2. When the extent of the liability of each obligor cannot be determined, the obligors shall be equally liable to

each other.

Article 474 – Effects of insolvency of a joint and several obligor

If one of the obligors is insolvent, then the share fixed for him/her shall be distributed in equal shares among all

other, solvent obligors.

Article 475 – Compensation of a joint and several obligor

If a joint obligor has received a benefit from the joint obligation, another joint and several obligor who has not

received such benefit may claim from the former satisfaction for the performance of his/her obligation.

Article 476 – Effect of expiry of the period of limitation

Suspension or interruption of the period of limitation to one of the joint and several obligors shall not apply to the

other obligors.

Special Part

Section One

Contract Law

Part Two

Chapter One

Sale; Exchange

I – General Provisions

Article 477 – Concept; subject matter

1. Under a contract of sale, the seller shall transfer to the buyer the title to the property and the documents

relating to it and deliver the goods.

2. The buyer shall pay the seller the agreed price and accept the purchased property.

3. If the contract does not expressly indicate the price, the parties may agree on the method by which it is to be

determined.

Article 478 – Expenses of sale of a movable thing

Expenses relating to the transfer of a sold thing, in particular the expenses of weighing, measuring and packing,

shall be borne by the seller, and the expenses of receipt and shipping of the goods from the place of execution of

the contract to another place shall be borne by the buyer, unless otherwise provided for in the contract.

Article 479 – Expenses of sale of an immovable thing

The seller of a plot of land or other immovable thing shall bear the expenses of executing a contract of sale,

registering it with the Public Registry and submitting the necessary documents for registration, unless otherwise

provided for in the contract.

Law of Georgia No 3879 of 8 December 2006 – LHG I, No 48, 22.12.2006, Art. 321

Article 480 – Duties of a seller when shipping goods

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1. If the seller transfers goods to a carrier under a contract, and these goods are not clearly marked either with an

identification marker or by any other means, then the seller shall notify the buyer of the shipment of the goods

and, in addition, shall dispatch to the buyer a detailed list of the freight.

2. If the seller is obligated to ship the goods, he/she shall execute the contracts that are required for carriage of

freight to the agreed place and for regular terms of such carriage.

3. If the seller is not obligated to insure the freight during the carriage, then, upon request of the buyer, he/she

shall hand over to the buyer all the information at his/her disposal that is necessary for execution of such contract

of insurance.

Article 481 – Obligations of the seller of a plot of land

1. The seller of a plot of land shall pay the expenses for the development of the plot and for similar activities

performed on the plot incurred before the execution of the contract, regardless of the moment when the

obligation to pay arises.

2. (Deleted).

Law of Georgia No 4744 of 11 May 2007 – LHG I, No 18, 22.5.2007, Art. 158

Article 482 – Transferring of the risk of accidental perishing of things

1. Upon transfer of the sold thing the risk of accidental perishing or spoiling of the thing shall pass to the buyer,

unless otherwise agreed by the parties.

2. If the seller, upon request of the buyer, ships the sold thing to a place other than that provided for in the

contract, the risk of accidental perishing or spoiling of the thing shall pass to the buyer from the moment when

the seller delivers the thing to the carrier or to the person responsible for performance.

Article 483 – Presumption of acceptance of goods

The goods shall be considered accepted if the buyer performs the action that evidences acceptance.

Article 484 – Grounds for repudiation of the contract

1. Each party to the contract may refuse to perform his/her obligations if it turns out after execution of the

contract that there is a real danger of non-performance by the other party of a significant part of his/her

obligations.

2. Such refusal shall not be allowed if the safety of this party is secured.

Article 485 – Selling goods to a number of persons

If the seller has sold the same item to a number of persons, then priority shall be given to the buyer into whose

possession the item was first transferred, and if the item has not been transferred to any of them, then to the

buyer with whom a contract was earlier executed.

Article 486 – Delivery of sold goods in instalments

When the sold goods are delivered in instalments, a party to the contract may repudiate the contract if by reason

of non-performance of only one obligation of delivery by the other party, a real danger arose that the future

obligations of delivery will also not be performed.

Article 487 – Duty to transfer a thing free of defects

The seller shall transfer to the buyer a thing free of material and legal defects.

Article 488 – Thing free of material defects

1. A thing shall be regarded as free of material defects if it is of the agreed quality. If the quality is not agreed in

advance, then the thing shall be deemed free of defects if it is suitable for the use intended under the contract or

for customary use.

2. It shall also be a material defect if the seller transfers only one part of the thing or an entirely different thing or

transfers it in insufficient quantity, or if one part of the thing is defective, except if the defect will not materially

affect the performance of the thing.

Article 489 – Thing free of legal defects

1. A thing shall be regarded as free of legal defects if third persons cannot assert against the buyer any claim with

respect to his/her rights to it.

2. Any non-existent right registered in the Public Registry shall amount to a legal defect.

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Article 490 – Duties of the seller when selling a defective thing

1. If the thing sold is defective, the seller shall either remedy the defect or, in the case of a generic thing, replace it

within the time required for it.

2. Expenses required for remedying the defect, including expenses of transportation, transit, work and cost of

material, shall be borne by the seller.

3. The seller may refuse to eliminate the defect or to replace the thing if either action would require

disproportionately high expenses.

4. If the seller transfers to the buyer a thing free of any defect to remedy a defect, then he/she may demand that

the buyer return the defective thing.

Article 491 – Right of the buyer to terminate the contract

1. By reason of the defect of the thing, the buyer may demand termination of the contract under Article 352.

2. The seller shall compensate the buyer for the expenses incurred.

Article 492 – Demand for price reduction

If the buyer does not demand the remedying of the defect or replacement of the defective thing with a new thing

free of defects after lapse of the period of time accorded to the seller, nor the termination of the contract, then

he/she may demand reduction of the price of the thing in the amount necessary to remedy the defect. The price

existing at the time of execution of the contract shall be taken into account.

Article 493 – Right to reject goods

1. The buyer may refuse to accept the goods if the seller has delivered to him/her a smaller quantity of goods than

that specified in the contract. If the buyer accepts such goods, he/she shall pay the price in proportion to the

contractual price.

2. If the quantity of the goods delivered exceeds the amount specified in the contract, then the buyer may either

accept such quantity and pay the price in proportion to the contractual price or accept only the quantity specified

in the contract and return the excess at the expense of the seller.

Article 494 – Procedure for compensation of damages arising out of the sale

1. Damages incurred due to a defect of the thing sold or due to a breach of other conditions stipulated in the

contract shall be paid according to the general rules.

2. No rights shall accrue to the buyer on the grounds of a defect of the thing if at the time of execution of the

contract he/she had the knowledge of the defect.

Article 495 – Acceptance of a defective thing by the buyer

1. If the buyer is an entrepreneur, he/she shall inspect the thing immediately; if he/she fails to assert a claim

against the seller within an appropriate period of time after detecting a defect or within the period of time during

which he/she ought to have had knowledge of the defect, then he/she shall be deprived of the right to complain

on the grounds of the defect in the thing.

2. If the seller intentionally kept silent about the defect of the thing, he/she may not exercise the right provided

for in this article.

Article 496 – Duration of fitness of a thing

If the seller defines the duration of the fitness of the thing, it shall be presumed that any defect that may be

detected within this period of time shall entitle the buyer to make a claim with respect to the defect.

Article 497 – Exclusion of liability of the seller

The liability of the seller for defects may be excluded or limited by contract but such agreement shall be void if

the seller intentionally kept silent about a defect in the thing.

Article 498 – Transfer of right or other property

1. The rules governing the sale of a thing shall apply accordingly to the sale of a right or any other property.

2. When selling a right, the seller shall undertake the expenses of verification of the validity and of transfer of the

right.

3. If a right is sold that provides the possibility to possess a thing, then the seller shall transfer to the buyer that

thing free of material or legal defects.

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Article 499 – Repeated sale of things

If a thing is sold repeatedly, the right securing an obligation shall be passed to every subsequent buyer. A buyer

may assert claims within the scope of his/her rights against the relevant seller in this succession of sales.

Article 500 – Seller’s lien

If the buyer does not accept the thing in time or fails to pay its price in time, the seller shall keep the thing. The

seller may retain the thing or detain them in transit until the buyer reimburses the seller for the corresponding

expenses.

Article 501 – Return of things by the buyer

If the buyer has accepted a thing but is willing to return it lawfully, then he/she shall take care in storing the

thing. The buyer may retain the thing until the seller reimburses him/her for the corresponding expenses.

Article 502 – Expenses for storing things

The party obligated to keep the thing may, at the expense of the other party, store it in the warehouse of a third

person, unless doing so would result in disproportionate expenses.

Article 503 – Right of the keeper of things

1. The party keeping a thing according to the rules of Articles 500-502 may sell the thing by observing the

applicable rules if the other party delays accepting the thing or reimbursing the expenses of keeping them. He/she

shall notify the other party to that effect.

2. The party selling the thing may retain from the sale proceeds an amount corresponding to the expenses of

storing and selling the thing and shall hand over the remaining amount to the other party.

Article 504 – Peculiarities of keeping perishable things

If in the cases provided for in Articles 500 and 501 the thing is perishable or may depreciate or its storage requires

large expenses, the party liable to keep it shall sell it according to the provisions of Article 503.

II – Instalment Sale

Article 505 – Concept

In the case of an instalment sale the seller shall deliver the thing to the buyer before the price is paid. Payment of

the price of the thing shall be made in periodic instalments on fixed time intervals.

Article 505 1 – Obligation of a seller when selling by instalments

1. If a seller is an entrepreneur, when selling by instalments, he/she shall comply with the requirements under

Article 625 of this Code with regard to the interest rate, fee, penalty and the imposition of any financial sanctions.

2. When selling by instalments, if the total liabilities of a buyer to the same seller as a result of selling by

instalments do not exceed GEL 200 000 (two hundred thousand), the receipt by a seller of the price for an item of

up to GEL 200 000 (two hundred thousand) shall not, in any form, be attached or indexed to a foreign currency.

Law of Georgia No 239 of 29 December 2016 – website, 13.1.2017

Law of Georgia No 3315 of 21 July 2018 – website, 7.8.2018

Law of Georgia No 4104 of 22 December 2018 – website, 10.1.2019

Article 506 – Form of an instalment contract

1. An instalment contract shall be executed in writing.

2. The contract shall indicate:

a) the amount of cash payment;

b) the amount and time of payment by instalments;

c) the annual rate of interest.

3. The seller shall deliver to the buyer the copies of the documents of sale.

Article 507 – Presumption of execution of a contract upon delivery of things

If a contract is executed in violation of the requirements of Article 506, the contract shall be deemed to have been

executed from the moment of delivery of the thing. In such case, the buyer shall pay only the price of the thing,

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free of interest.

Article 508 – Bilateral restitution upon non-performance of obligations

Where the seller retains the right to repudiate the contract on the ground of the buyer’s default, then upon

repudiation both parties shall return to each other what they have received under the contract. Any agreement to

the contrary shall be void.

III – Redemption

Article 509 – Concept

If the seller has the right of redemption under a contract of sale, the exercise of the right shall depend on the will

of the seller.

Article 510 – Redemption price

Redemption shall be exercised by paying the initial price. At the same time, the buyer may also demand the

amount by which the value of the goods has increased up to the moment of redemption as a result of useful

expenditures, and the redeemer may demand deduction of the amount by which the value of the goods has

decreased before its redemption.

Article 511 – Fate of accessories upon sale

The buyer shall return the purchased thing together with its accessories.

Article 512 – Reimbursement of damages occurring before redemption

If the buyer damages or modifies the thing before the seller exercises the right of redemption, he/she shall

reimburse the seller for the damages so incurred.

Article 513 – Invalidity of transfer of a thing before redemption

If the buyer transfers a thing before the exercise of the right of redemption, such transfer shall

be void.

Article 514 – Limitation period of the right of redemption

The period of time during which the right of redemption may be exercised may not exceed ten years. This period

of time must not be extended.

Law of Georgia No 5445 of 9 December 2011 – website, 20.12.2011

Article 515 – Option

The parties may agree on the buyer’s unilateral right to buy an object up to a specific time or until the occurrence

of a specific event (option to purchase), or, under the same conditions, the seller’s right to sell the object to the

buyer (option to sell). The norms regulating a contract of sale shall apply to an option contract unless the parties

agree otherwise.

IV – Pre-emptive Right

Article 516 – Concept

1. A person having a pre-emptive right may exercise the right if the obligor executes a sales contract for a given

thing with a third party.

2. The pre-emptive purchase right is neither alienable nor hereditary unless otherwise stipulated.

Article 517 – Duty to give notice of anticipated sale of things

1. The obligor shall immediately notify the person who has a right of pre-emption of the contents of the contract

that he/she intends to execute with third persons.

2. The pre-emptive right shall be exercised by notice to the obligor. By the notice, a contract of sale shall be

executed between the rightful person and the obligor under the terms that the obligor offered to the third party.

3. A person having a right of pre-emption may exercise the right only within the period of time fixed by the

obligor.

Article 518 – Invalidity of an agreement to not exercise a right of pre-emption

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Any agreement between the obligor and a third person shall be void if, under that agreement, the contract of sale

is dependent on the non-exercise of the right of pre-emption, or the obligor may repudiate the contract if the

right of pre-emption is exercised.

Article 519 – Performance of additional obligations

1. If a third person has contractually assumed an additional obligation that the person having the right of pre-

emption is unable to perform, then he/she shall pay the value of the additional obligation instead of performing it.

2. If the additional obligation cannot be measured in monetary terms, the right of pre-emption may not be

exercised; the agreement on the additional obligation becomes invalid if the agreement was made in order to

elude the right of pre-emption.

Article 520 – Contract of Sale conditioned upon approval of a thing

A contract of sale may be executed on the condition of approval of a thing, provided the buyer does not reject the

thing within the agreed period of time. In the case of rejection the parties shall return to each other what they

have received under the contract.

V – Exchange

Article 521 – Concept

1. Under a barter agreement, the parties shall transfer ownership of property to each other.

2. Each party to the barter agreement shall be deemed to be the seller of the property he/she offers and the buyer

of the property that he/she receives in return.

Article 522 – Unequal value of exchanged property

If the bartered property is not equal in value to the property received in return, part of the property may be paid

with money by agreement of the parties.

Article 523 – Rules applied to barter

The corresponding rules regulating sales contracts shall apply to barter contracts.

Chapter Two

Gift

Article 524 – Concept

Under a contract of gift the donor gratuitously transfers to the donee ownership of property with the consent of

the donee.

Article 525 – Execution of a gift contract; promise of a gift

1. A gift contract shall be deemed to be executed from the moment of transfer of the property.

2. A gift contract with respect to an immovable thing shall be deemed to be executed from the moment that the

ownership right provided for in the contract is registered in the Public Registry.

3. A promise of a gift shall give rise to the obligation to give the gift only if made in writing.

Law of Georgia No 3879 of 8 December 2006 – LHG I, No 48, 22.12.2006, Art. 321

Article 526 – Inadmissibility of giving a gift

A person shall not have the right to transfer property as a gift if the gift would deprive the donor or his/her

dependents of their basic means of support.

Article 527 – Defect of property transferred as a gift

If the donor maliciously conceals a defect in the gift property, he/she shall reimburse the donee damages incurred.

Article 528 – Donation

1. The parties may determine that the validity of the contract of gift depends on the performance of certain

conditions or on the achievement of a particular objective. This objective may be the common good as well

(donation).

2. Besides the donor, the person in whose interests the condition was stipulated may also demand performance.

3. If the donee does not perform the condition, the donor may repudiate the contract.

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Article 529 – Revocation of the gift due to ingratitude of the donee

1. The gift may be revoked if the donee grossly insults or shows extreme ingratitude towards the donor or his/her

near relative.

2. If the gift is revoked, the donor may recover the gift property.

3. The gift may be revoked within one year after the donor becomes aware of circumstances that give him/her the

right to revoke the gift.

Article 530 – Recovery of the thing given as a gift

1. If after giving the gift the donor falls onto hardship and is unable to maintain himself/herself or his/her

dependents, then he/she may demand the return of the gift thing from the donee, provided it still exists and the

return would not put the donee in hardship.

2. The thing given as a gift may not be recovered if the donor put himself/herself into hardship intentionally or

through gross negligence.

Chapter Three

Rental

Article 531 – Concept

Under a rental contract the lessor shall transfer the thing to the use of the lessee for a specified period of time. The

lessee shall pay the landlord the agreed upon rent.

Article 532 – Transfer of the object of rent in suitable condition

The lessor shall transfer to the lessee the rented thing in a condition fit for the use specified under the contract

and shall maintain the object in that condition during the entire period of the rental contract.

Article 533 – Duty to transfer things free of defects

The lessor shall transfer to the lessee the rented thing free of legal or material defects.

Article 534 – Things free of legal defects

A thing shall be regarded as free of legal defects if a third person may not assert against the lessee any claims with

respect to the thing.

Article 535 – Things free of material defects

A thing shall be regarded as free of material defects if it has the stipulated characteristics. If these characteristics

are not stipulated, then the rented thing shall be deemed free of defects if it is fit for the use specified in the

contract or for ordinary use.

Article 536 – Reduction of rent by reason of defective things

1. If the rented thing is found to be defective, then the amount of the rent shall be reduced by the amount by

which the fitness of the thing is diminished by reason of the defect. The right shall expire upon elimination of the

defect. Minor defects shall not be taken into account.

2. A tenancy agreement manifestly prejudicial to the tenant shall be void.

Article 537 – Reimbursement of damage incurred by reason of defective things

1. If a defect diminishing the fitness of the thing exists at the moment of execution of the contract or if it is found

afterwards due to the circumstances for which the lessor is liable or if the lessor delays remedying the defect, then

the lessee may claim damages without forfeiting the right to claim reduction of the rent.

2. If the lessor delays remedying the defect, then the lessee may remedy it himself/herself and claim the expenses.

Article 538 – Effects of not asserting a claim by reason of a defect in things

If at the time of concluding the contract the lessee is aware of a defect in the thing and does not assert a claim by

reason of it, then the rights under Article 536 shall not accrue to him/her.

Article 539 – Invalidity of agreement to release liability

Any agreement by which the lessor’s liability for defective thing is relieved or limited shall be void if the lessor

has intentionally concealed the defect.

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Article 540 – Obligation to tolerate nuisances when renting lodgings

The tenant of lodging shall tolerate the influences applied to the rented thing that are required for maintenance of

the rented lodging or the building. If possible, the landlord shall notify the tenant of the measures and avoid any

actions not caused by necessity.

Article 541 – Right to terminate the contract

1. If transfer of the rented thing to the lessee, in whole or in part, is delayed, or if afterwards the lessee is deprived

of the right to use the thing, then the lessee may terminate the contract without observing the term stipulated for

its termination. Termination of the contract shall be allowed only if the lessor does not eliminate the

circumstances hindering the use of the thing within the period of time fixed by the lessee.

2. The period of time need not be fixed if the lessee has lost interest in the contract as a result of the circumstances

providing grounds for terminating the contract.

3. When renting lodging, a tenancy agreement that prohibits or restricts the right of termination defined in

paragraph 1 of this article shall be void.

Article 542 – Termination of a tenancy agreement by a tenant

If a dwelling or other lodging intended for human habitation is in a condition that presents a significant danger to

the health of the dwellers, then the tenant may terminate the tenancy agreement without observing the term. The

tenant shall still have this right even if at the time of conclusion of the agreement he/she was aware of the danger

but did not assert the claim.

Article 543 – Duties of the lessee upon detecting a defect in rented things

If the rented thing is found to be defective, or if necessary measures are to be taken to protect the thing from an

unforeseen danger, then the lessee shall immediately notify the lessor to that effect. The same rule shall apply

when a third person asserts his/her rights to the thing.

Article 544 – Burden of encumbrance created on the rented thing

The burden of an encumbrance created on the rented thing shall rest on the lessor.

Article 545 – Obligations of the lessor

1. The lessor shall be obligated to reimburse the lessee for necessary expenses incurred with respect to the rented

thing.

2. The obligation to pay other expenses shall be determined according to the rules governing the agency without

specific authorisation.

Article 546 – Right of the lessee to things added to the rented thing

1. The lessee may retain that with which he/she has equipped the rented thing.

2. The landlord of a dwelling place may replace the exercise of this right with appropriate compensation, except

when the tenant disagrees with the landlord for a valid reason.

Article 547 – Liability for normal wear and tear to things

The lessee shall not be liable for any alteration or deterioration of the rented thing caused by the use specified

under the contract.

Article 548 – Expenses of current repair

1. As a rule, the tenant shall carry out current repairs. He/she may not make alterations or reconstruction of the

dwelling place without the consent of the landlord.

2. The tenant shall perform the works at his/her own expense.

3. The landlord may claim damages caused by the tenant’s non-performance of the duty under paragraph 1 of this

article.

Article 549 – Consent of the lessor to a sublease

The lessee shall not have the right to transfer the rented thing to a third person (subleasing) without the consent

of the lessor. A family member of the lessee shall not be deemed to be a third person.

Article 550 – Inadmissibility of refusing to sublet

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The landlord may not refuse the subletting of a dwelling if the tenant, having a valid reason, is willing to sublet

some or all of the rented lodging to a third person. This rule shall not apply if the sub-tenant is an undesirable

person for the landlord, or if the lodging is overcrowded, or if a subletting is unacceptable to the landlord for

other reasons.

Article 551 – Fate of subletting upon completion of the tenancy

If the subletting is intended to evade the guaranties of termination of the tenancy agreement, then upon

completion of the tenancy the landlord shall assume the rights and duties existing between the tenant and the

subtenant.

Article 552 – Amount of security for tenancy relations

1. If under a tenancy agreement the tenant is required to submit a guarantee to secure the obligation, the amount

of the security may not exceed triple the amount of one month’s rent. If the amount of money is to be paid in

advance, then the tenant may pay it in equal monthly instalments over three months.

2. Interest at the rate determined by law shall accrue on the security paid in advance, and after completion of the

tenancy it shall be returned to the tenant together with the accrued interest.

3. Any agreement concluded otherwise to the detriment of the tenant shall be void.

Article 553 – Procedure for payment of rent

1. Rent shall be paid when the term of the rental contract expires. If the payment of rent is to be made

periodically, then it shall be paid at the end of each period.

2. The payment of additional expenses may be required only if an agreement on the matter exists between the

parties.

Article 554 – Effect of non-payment of rent through the fault of the lessee

If the lessee is impeded in the use of the rented property through his/her own fault, he/she shall not be released

from payment of the rent.

Article 555 – Early termination of the tenancy agreement at the tenant’s initiative

The tenant of a dwelling place may terminate the tenancy agreement before it expires, provided he/she gives the

landlord a one month’s notice to that effect and offers the landlord a tenant who is solvent and acceptable for the

landlord and who agrees to be the tenant for the remaining term of the tenancy.

Article 556 – Counterclaims of the tenant against the landlord

If against the claim for payment of rent the tenant has the tight to detain property or to set off other claims arising

out of the tenancy relation, then the tenant may exercise such right even if otherwise provided for in the

agreement, provided he/she gives advance notice to the landlord.

Article 557 – Termination of the contract at the lessor’s initiative

A lessor may terminate the contract before the expiration of its term if the lessee significantly damages the rented

thing or creates an apparent danger of such damage despite a warning given by the lessor.

Article 558 – Termination of the agreement due to non-payment of rent

A lessor may terminate the contract before the expiration of its term if the lessee has not paid the rent for three

months.

Article 559 – Termination of rental relations upon expiration of the term

1. Rental relations shall be terminated upon expiration of the term of the contract.

2. If the lessee continues to use the thing after expiration of the term of the contract and the lessor does not object

to it, then the contract shall be deemed to have been extended for an indefinite term.

3. If the term of the rental contract is not fixed, then the making a declaration of termination of the contract shall

terminate the tenancy.

Article 560 – Right to demand extension of the tenancy agreement for an indefinite term

If a tenancy agreement is concluded for a fixed term, then the tenant may demand extension of the tenancy

agreement for an indefinite term by giving a written notice at least two months before termination of the tenancy

relations, provided the landlord consents.

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Article 561 – Period of time for termination of the contract

The period of time for termination of a rental contract shall be three months unless it otherwise follows from the

circumstances or from the agreement of the parties.

Article 562 – Termination of a tenancy agreement for valid reasons

1. The landlord may terminate a tenancy agreement only for valid reasons.

2. A reason shall be valid if:

a) the tenant has substantially breached his/her obligations under the contract;

b) the landlord needs the dwelling place for himself/herself or for his/her close relatives;

c) the tenant refuses to pay the increased rent corresponding to market rates offered by the landlord;

d) the tenant has committed such illegal or immoral acts against the landlord that continuation of their relation is

no longer possible.

3. If the object of the tenancy is a furnished apartment, then the landlord may always terminate the tenancy

agreement, provided he/she observes the period fixed for termination of the contract.

Article 563 – Form of termination of a tenancy agreement

Termination of a tenancy agreement shall be made in writing.

Article 564 – Duties of the lessee upon termination of the rental contract

Upon termination of a rental contract, the tenant shall return the rented thing to the landlord in the same

condition in which he/she received it, taking into account normal wear and tear, or in the condition specified in

the contract.

Article 565 – Inadmissibility of the right to detain property

The lessee of a plot of land may not detain the plot of land in satisfaction of his/her claims.

Article 566 – Transfer of rented property to third persons

If the lessee has transferred the thing to the use of a third party, then after termination of the rental contract the

lessor may recover the thing from the third party.

Article 567 – Payment of damages arising from failure to return rented things

1. If after completion of the rental relations the lessee does not return the rented thing, the lessor may claim the

stipulated rent for the period of such delay as compensation for damages.

2. An agreement by which the lessee is bound to pay damages in excess of the damage incurred shall be void.

Article 568 – Lessor’s lien on lessee’s things

In order to secure any claims arising out of the rental relations, the lessor of a plot of land, house or apartment

shall have a lien on the things that the lessee has brought to the place. The lien lapses upon removal of the things

from the rented premises if this is done in the ordinary course of affairs.

Article 569 – Form of a rental contract on a plot of land

A rental contract on a plot of land for a term of more than ten years shall be in writing. If the form is not

observed, the contract shall be presumed to have been concluded for an indefinite term. The contract may be

terminated only after the expiration of the first year of the tenancy.

Article 570 – Procedure for termination of contracts concluded for more than ten years

If a rental contract is concluded for a term of more than ten years, then after ten years each party may terminate

the contract within the period prescribed under Article 561.

Article 571 – Transfer of rights of the tenant to his/her family members

If a tenancy agreement is concluded for a dwelling place where the tenant manages his/her common household

together with his/her family members, then in the case of the tenant’s death, his/her family members shall enter

into the legal relation with the landlord. They may terminate the tenancy agreement within the term determined

by law.

Article 572 – Succession of title in case of transfer of rented things

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If the lessor transfers the rented thing to a third person after having transferred it to the possession of the lessee,

the buyer shall takes the place of the lessor and the rights and duties arising out of the rental relations shall pass to

him/her.

Article 573 – Limitation period on claims for damages

1. By reason of substitution or deterioration of the rented thing the lessor, within six months, may claim damages

and the lessee may assert against him/her any claim for the recovery of expenses incurred.

2. The period of limitation on the lessor’s claim for damages begins to run from the moment the rented thing is

returned, and the period of limitation on the lessee’s claim from the moment the rental contract is terminated.

Article 574 – Dispute between spouses in the case of divorce

1. Where, in the case of divorce, the spouses cannot agree on who will live in the rented lodging, a court shall

settle the dispute.

2. It does not matter for the court which of the spouses is the tenant. If the court acknowledges the right of that

spouse to the lodging who is not the tenant, then that spouse becomes a party to the tenancy agreement.

Article 575 – Protection of a lessor’s rights

The lessor may protect his/her possessions from any encroacher, including the owner.

Chapter Four

Finance Lease

Article 576 – Concept

1. Unless otherwise determined by the legislation of Georgia, under a finance lease agreement the lessor shall

transfer the specified property to the use of the lessee for a term stipulated by the agreement, with or without the

right to purchase the property. The lessee shall pay compensation to the lessor with the specified periodicity,

provided that:

a) the lessee determines the property and chooses the supplier, from which to purchase or otherwise obtain the

property;

b) the lessor acquires the property to lease it out and the supplier is aware of the fact.

2. The supplier may concurrently be a lessor if the supplier’s ordinary business is the supply or leasing of property.

Property may also be acquired from the lessee.

3. The leased property may be re-leased upon expiry or early termination of the finance lease agreement but in

order for the provisions of this chapter to apply, the lessor shall obtain the lessee’s confirmation of an independent

selection of property.

4. The subject-matter of lease may not be money, security or share in an enterprise.

5. Unless otherwise determined by the legislation of Georgia, and if as a result of granting the amount of lease

financing the total liabilities of a lessee to the same lessor is less than GEL 200 000 (two hundred thousand), the

receipt by a lessor of the cost shall not, in any form, be attached or indexed to a foreign currency

6. If a lessor is an entrepreneur, when granting a lease, the annual effective interest rate of the lease shall not

exceed 50%. In addition, the lessor shall comply with the requirements under Article 625(5) and (8) of this Code

in relation to imposition of a fee, financial expense, penalty and any type of financial sanction. For these purposes,

the National Bank of Georgia may determine the procedure for calculating the annual effective interest rate of a

lease, the fee, financial expense, penalty and/or any type of financial sanction.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 3315 of 21 July 2018 – website, 7.8.2018

Law of Georgia No 4104 of 22 December 2018 – website, 10.1.2019

Article 577 – Lessee’s rights with regard to the supplier

1. The supplier’s obligations specified under the contract between the lessor and the supplier shall apply to the

lessee as well, but the supplier shall not be liable simultaneously to the lessor and the lessee for the same damage.

2. Upon request from the lessee, the lessor shall assign to the lessee its rights with respect to the demand of the

performance of the contract concluded with the supplier.

3. Any amendments to the contract concluded with the supplier which affect the lessee’s rights may be made only

with consent of the lessee.

4. Any agreement between the parties contrary to the provisions of paragraphs 1-3 of this article shall be void.

http://www.matsne.gov.ge 040.000.000.05.001.000.223

5. The lessee may not agree to amend, terminate or dissolve the contract with the supplier without the lessor’s

consent.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 578 – Rights to leased property

1. Leased property shall be the object of a separate right even if it becomes an essential component part of another

thing or intangible property.

2. The buyer of leased property takes the place of the lessor and the rights and obligations arising from the finance

lease agreement shall pass to the buyer.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 579 – Inadmissibility of refusing to discharge obligations

Neither party to a finance lease agreement may refuse to discharge an obligation due to the fact that the other

party does not fulfil its obligations, except when the lessee’s leasehold is impaired under Article 580 5 (2) of this

Code.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 580 – Accepting property

1. The property shall be regarded as accepted when the lessee confirms to the lessor or the supplier that the

property complies with the terms of the contract concluded with the supplier or when the lessee does not reject

the property after it had a reasonable opportunity to inspect it or when the lessee starts using the property.

2. After accepting the property, the lessee may claim damages from the supplier if the property does not comply

with the terms of the contract with the supplier.

3. The risk of destruction of, or damage to, the property shall pass to the lessee after accepting the property.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 580 1 – Violating the terms of the delivery of the property

1. If the property is not delivered to the lessee, delivery is delayed or does not comply with the terms of the

finance lease agreement, the lessee may refuse the property and demand from the supplier property that conforms

with the terms of the contract and/or claim damages from the supplier.

2. If the terms of delivery of the property are violated, the risk of perishing or damage to the property shall rest

with the supplier, subject to the provisions of Article 580 5 of this Code.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 580 2 – Lessee’s rights during the assignment of claims

If the lessor’s claim under the finance lease agreement is assigned, the parties may agree to a procedure different

from the one provided for in Article 201(2) of this Code.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 580 3 – Obligation to transfer property free of defects

1. The supplier shall be responsible for making sure that the property is in the condition specified by the finance

lease agreement and is fit for the use for which such property is normally intended.

2. The lessee shall be liable for damages caused by reason of the non-compliance of the property with the

description that the lessee has provided to the lessor or the supplier.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 580 4 – Lessee’s obligations with respect to maintaining and returning leased property

1. The lessee shall duly maintain the leased property, use it for the purpose for which such property is normally

intended, and preserve it in the same condition as it was accepted, normal wear and tear excepted.

2. If the finance lease agreement stipulates an obligation to duly maintain the leased property or the manufacturer

or the supplier lays down the rules for using the property, the lessee’s compliance with the obligation to duly

maintain the leasehold property or with the rules of using the property shall amount to the performance of the

lessee’s obligation under paragraph 1 of this article.

3. Upon expiry or early termination of a finance lease agreement, the lessee shall return the property to the lessor

in the condition defined in paragraph 1 of this article if it does not use the property or does not have the tight to

acquire the property or retain it for an additional lease period.

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Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 580 5 – Termination of lease agreement

1. The lessor may terminate the finance lease agreement if the lessee substantially breaches its obligations.

2. The lessee may not terminate the finance lease agreement after having accepted the leased property, except

when it can no longer exercise leasehold over the leased property or the leasehold is restricted by a person having

a pre-emptive right to the property if this right or claims arise from the lessor’s culpable action. In all other cases,

when the lessor substantially breaches its obligations, the lessee may demand only damages, not the termination

of the contract.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Article 580 6 – Possession and administration of property

1. Upon expiry or early termination of a finance lease agreement, the lessor may recover the property and

administer it.

1 1 . In the case provided for in paragraph 1 of this article, a lessor’s claim for recovery of possession of the subject

of leasing under Article 580 7 of this Code shall immediately be allowed.

2. The lessee may claim from the lessor damages caused by the lessor’s action if the lessor recovers the property by

unlawful interruption of the lessee’s leasehold or if the lessor has not fixed an additional period of time under

Article 405(1) of this Code, except if such period of time need not be given under Article 405(2) of this Code. At

the same time, the lessee may not claim restoration of leasehold over the leased property.

Law of Georgia No 5119 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 1195 of 30 June 2017 – website, 14.7.2017

Article 580 7 – Recovery of possession of a transport vehicle and/or an auxiliary technical equipment of an

agricultural machine under Article 53(1) of the Law of Georgia on Traffic to a lessor

1. A lessor has the right to claim for a forced recovery of possession of the subject of leasing on the basis of a

leasing certificate submitted to an enforcement institution, without referring to the court, if the subject of leasing

is a transport vehicle and/or an auxiliary technical equipment of an agricultural machine under Article 53(1) of

the Law of Georgia on Traffic.

2. Recovery by an enforcement institution of the subject of leasing provided for in paragraph 1 of this article to a

lessor shall be performed under the procedure established by the Law of Georgia on Enforcement Proceedings.

3. Appealing against a leasing certificate shall not result in suspending its enforcement.

4. A lessor, who recovered possession of the subject of leasing according to paragraph 2 of this article, in the case

provided for by the legislation of Georgia, shall register the subject of leasing provided for in paragraph 1 of this

article under the procedure established by the legislation of Georgia.

5. Costs related to the forced recovery of possession of the subject of leasing provided for in paragraph 1 of this

article to a lessor shall be imposed on a lessee.

Law of Georgia No 1195 of 30 June 2017 – website, 14.7.2017

Article 580 8 – A leasing certificate

1. When leasing of a transport vehicle and of an auxiliary technical equipment of an agricultural machine under

Article 53(1) of the Law of Georgia on Traffic is registered with the Legal Entity under Public Law – the Service

Agency of the Ministry of Internal Affairs of Georgia, if a lessee fails to fulfil an obligation defined in Article 580 6

(1 1 ) of this Code within 10 business days after receiving a written request of a lessor, the Legal Entity under Public

Law – the Service Agency of the Ministry of Internal Affairs of Georgia shall, based on an application of the lessor,

issue a leasing certificate.

2. A leasing certificate is a subordinate act of the enforcement to prove the fact of registration of the leasing of a

transport vehicle and of an auxiliary technical equipment of an agricultural machine under Article 53(1) of the

Law of Georgia on Traffic with the Legal Entity under Public Law – the Service Agency of the Ministry of

Internal Affairs of Georgia, and based on which a lessor has the right, under the legislation of Georgia, to make a

claim against an authorised body (an official) for recovery of possession of the subject of leasing.

3. A leasing issuing entity shall be responsible for the lawfulness of an application for issuing a leasing certificate

submitted by the leasing issuing entity to the Legal Entity under Public Law – the Service Agency of the Ministry

of Internal Affairs of Georgia.

Law of Georgia No 1195 of 30 June 2017 – website, 14.7.2017

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Chapter Five

Lease

Article 581 – Concept

1. Under a lease contract the lessor shall transfer the specified property to the temporary use of the lessee and

allow the lessee to obtain the fruit of the property during the lease period, if it is obtained through proper

management of the leased property. The lessee shall pay the lessor the stipulated lease payment. The lease

payment may be both in money and in kind. The parties may also agree on other means of determination of the

lease payment.

2. The rules governing a rental contract shall apply to a lease contract, unless otherwise provided under Articles

581-606.

Article 582 – Dissolution of a lease contract concluded for a term of more than ten years

If a lease contract is concluded for a term of more than ten years, then after expiration of the term each party may

dissolve the lease relationship within the period determined under Article 561 of this Code, provided the lease

contract provides for such condition.

Law of Georgia No 4627 of 5 May 2011 – website, 18.5.2011

Article 583 – Lease of land together with inventory

1. If a plot of land is leased together with inventory, then the lessee shall be liable for maintaining each part of the

inventory.

2. The lessor shall replace the parts of the inventory that have become unsuitable due to circumstances beyond the

lessee’s control. The lessee shall restitute the loss of any livestock included in the inventory, regardless of the

proper management of the leased property.

3. The lessee shall keep the inventory in such condition and replenish it over the lease period to an extent that

corresponds to properly managed property. Particular pieces of inventory purchased by the lessee and attached to

the common inventory shall become the property of the lessor.

Article 584 – Risk of accidental loss of inventory

1. If the lessee of a plot of land receives the inventory with an assessment of its value and undertakes to return it

also with an assessment of its value upon expiration of the contract, then the risk of accidental loss or spoliation

shall rest with the lessee. The lessee may administer individual parts of the inventory within the limits of proper

management of the property.

2. Upon expiration of the term of the lease contract the lessee shall return the inventory to the lessor. The lessor

may refuse to accept the inventory purchased by the lessee if it is unnecessary for proper management of the land

or if it is overly expensive; simultaneously with the lessor’s refusal, the right of ownership of unaccepted

inventory shall transfer to the lessee. If there is a difference in the assessments of the value of conveyed and

returned inventories, then the difference shall be compensated in money. The assessment shall be made on the

basis of the prices that were operative at the moment of completion of the lease contract.

Article 585 – Inadmissibility of prohibiting the administration of individual parts of inventory

Provisions of a lease contract that obligate the lessee not to administer individual parts of the inventory or to

administer them only with the consent of the lessor shall be valid only if the lessor assumes the obligation to

purchase the inventory in accordance with the inventory assessment performed upon expiration of the lease

relationship.

Article 586 – Lien on the inventory

1. The lessee of a plot of land shall have a lien on the inventory in his/her possession for claims that may be

asserted against the lessor in relation to the leased inventory.

2. The lessor may avoid the lessee’s lien by submitting other means of security. He/she may redeem each item of

inventory from the lien by offering security equal to the value of such items.

Article 587 – Sublease

1. The lessee may not sublease without the consent of the lessor.

2. The lessor may refuse to allow the sublease of individual parts of the leased property if doing so would incur

substantial damage to him/her.

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3. The lessee shall be liable to the lessor for any use of the thing by a sub-lessee or a renter that was not authorised

by the lessor. The lessor may directly terminate such use of the property by a sub-lessee or renter.

Article 588 – Early return of the leased property

1. If the lessee returns the property before termination of the lease, he/she shall be exempt from further lease

payments only if he/she offers the lessor a new lessee who is solvent and acceptable to the lessor in his/her place.

The new lessee shall agree to accept the lease contract on the same conditions.

2. If the lessee fails to offer such lessee, then he/she shall make lease payments until end of the lease.

Article 589 – Dissolution of lease contracts concluded with an unspecified term

1. If the term of a contract for lease of land or right is not specified, then the contract may be dissolved only after

one year; in such case it may be dissolved not later than one month after the end of the year of lease.

2. These rules shall also apply when a lease relationship may be dissolved earlier than prescribed by law.

Article 590 – Dissolution of the contract by reason of death of the lessee

1. If the lessee dies, both his/her heirs and the lessor may dissolve the lease relationship within six months after

the end of the calendar year.

2. The heirs may refuse to allow dissolution of the contract and may claim extension of the lease, provided they

can properly manage the leased property themselves or through third persons.

Article 591 – Recovery of damages in case of failure to return the leased property

If, after completion of the lease, the lessee does not return the leased property, the lessor may claim the stipulated

lease payment for the delayed return of the property; the lessor may claim other damages as well.

Chapter Six

Farm Lease

Article 592 – Concept

1. Under a farm lease contract, a plot of land is transferred for agricultural use, with or without residential or

utility buildings (enterprise) intended for economic use.

2. The rules governing lease contracts shall apply to a farm lease unless otherwise prescribed by the farm lease.

Article 593 – Form of contract

A farm lease contract shall be drawn up in writing. If this form is not observed, the contract shall be presumed to

have been made for an indefinite term.

Article 594 – Inventory of the leased property

At the beginning of the lease relationship the parties shall jointly make an inventory of the leased property in

which its extent and the condition in which it is leased is established. The same rule shall apply at the end of the

lease relationship. The inventory shall be signed by both parties and the date of its making shall be indicated.

Article 595 – Condition of leased property. Repair of leased property

The lessor shall transfer to the lessee leased property in a condition fit for the use specified under the contract and

maintain this condition during the whole term of the lease. The lessee shall perform current repairs of the

property at his/her own expense, shall repair the residential and utility buildings, roads, ditches, pipelines and

fences. The lessee shall use the leased property for economic purposes.

Article 596 – Lien on the fruits

To satisfy the claims arising out of the lease, the lessor shall have a lien on the things added by the lessee and on

the income (fruits) derived from the leased property.

Article 597 – Demand for reduction of lease payment

If more than half of the annual harvest of the leased land perishes due to a natural disaster or any other Force-

Majeure, then the lessee may demand a pro rata reduction of the lease payment. The lessee may demand reduction

of the lease payment only based on an act drawn up before the harvest specifying the amount and causes of loss.

Law of Georgia No 1282 of 14 February 2002 – LHG I, No 4, 5.3.2002, Art. 18

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Correction of mistake – LHG I, No 5, 21.3.2002, p. 11

Law of Georgia No 496 of 18 November 2008 – LHG I, No 33, 1.12.2008, Art. 210

Article 598 – Duty to reimburse necessary capital outlays

The lessor shall compensate the lessee for the capital outlays, which have been incurred under the lease contract

to improve the leased property (including land).

Law of Georgia No 1282 of 14 February 2002 – LHG I, No 4, 5.3.2002, Art. 18

Article 599 – Reimbursement of outlays incurred by consent of the lessor

Apart from the outlays defined under Article 598, upon expiration of the lease relation the lessor shall reimburse

the lessee any other necessary expenses to which the lessor has consented.

Law of Georgia No 1282 of 14 February 2002 – LHG I, No 4, 05.03.2002, Art. 18

Article 600 – Compensation for harvest not yet gathered

If a lease relationship is terminated during a year of the lease, the lessor shall compensate the lessee for the value

of the harvest not yet gathered under proper management rules but which is to be gathered before the end of the

current year of the lease.

Article 601 – Obligation of a lessee to a new lessee

1. Upon expiration of the farm lease, the lessee shall leave for a new lessee the buildings in a suitable condition,

and the equipment and agricultural products in the amounts necessary to continue management until the next

year’s harvest.

2. If the lessee leaves the products in a greater amount or of a better quality than he/she received at the beginning

of the lease, he/she may demand compensation from the lessor for the difference.

Article 602 – Obligation to return the leased property

After the lease relations expire the lessee shall be obligated to return the leased property in a condition that

ensures proper management of the property as it existed before the return.

Article 603 – Lessee’s rights to individual parts of leased property

1. The lessee may detach the equipment with which he/she equipped the leased property. The lessor may

substitute the lessee’s right to detach with corresponding compensation, except if the lessee has a legitimate

interest in the detachment.

2. An agreement that excludes the lessee’s right of detachment specified in paragraph 1 of this article shall be valid

only if the agreement stipulates a corresponding amount of compensation.

Article 604 – Demand for extension of the lease relationship

The lessee may demand from the lessor extension of the lease relationship if:

a) the leased property is the sustenance of the lessee’s business;

b) the plot of land is vitally essential for sustaining the lessee’s business and dissolution of the lease, even in

accordance with the contract, is so painful for the lessee and his/her family that it may not be justified even on the

grounds of the legitimate interests of the lessor.

Article 605 – Termination of lease upon expiry of its period

The lease relationship shall terminate by the lapse of the term of the contract. A contract concluded for a term of

more than three years may be extended for an indefinite term if an offer of one party to extend the lease is not

rejected by the other party within three months. The offer and the rejection shall be made in writing.

Article 606 – Termination of lease in the case of contracts with unspecified term

1. If a lease period is not specified, then each party to the contract may, not later than ten days from the

commencement of a lease year, declare its intention to dissolve the lease contract for the next year of the lease. A

calendar year shall be deemed to be a lease year. If the parties agree on a shorter period of time, then this shall be

drawn up in writing.

2. If a lease relationship may be terminated earlier than prescribed by law, this shall be allowed only at the end of

a lease year.

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Chapter Seven

Franchise

Article 607 – Concept

A franchise agreement is a long-term relationship of obligation under which independent enterprises are

bilaterally bound, as far as necessary, to promote the production and marketing of goods and rendering of services

by performing specific obligations.

Article 608 – Obligations of franchiser

1. A franchiser shall present to a franchisee, in the form in which the franchiser exercises them: intangible

property rights; trademarks and trade names; samples and packaging; the concepts of management, production,

purchase and marketing of goods, as well as any other information required to promote sales.

2. The franchiser shall protect the system of joint operation from the intervention of third parties, develop it

consistently, and support the franchisee by sharing business skills and providing information and training.

Article 609 – Obligations of a franchisee

A franchisee shall pay a franchise fee, the amount of which is essentially calculated taking into account the

contribution made towards the implementation of the franchise system, actively conduct the business with due

diligence, receive services, and purchase goods through the franchiser or through persons named by the franchiser

if this is directly related to the goal of the agreement.

Article 610 – Obligation not to disclose confidential information

At the time of execution of the contract, the parties shall openly and completely inform each other about the

circumstances relating to the franchise, especially the franchise system, and communicate the information to each

other in good faith. The parties shall not disclose the information disclosed to them even if the agreement is not

executed.

Article 611 – Form of contract

The validity of a franchise contract requires that it be in written form. In addition to clearly indicating the

bilateral obligations, the duration of the contract, provisions on termination or extension of the contract and other

essential clauses, the contract shall contain a complete description of the franchise system.

Article 612 – Duration of contract

1. The duration of the contract shall be determined by the parties taking into account the requirements for

marketing the given goods and services.

2. If the duration of the contract exceeds ten years, either party may dissolve the contract by observing a one-year

period of time required for dissolution. If neither party exercises the right to dissolve the contract, the contract

shall be extended for two years. If the contract is dissolved by the expiry of its term or at the initiative of the

parties, then the parties shall try, by observing the principles of mutual confidence, to continue the contract on

the same or altered terms until the business relationship is actually ended.

Article 613 – Loyal competition

1. Even after expiration of the contractual relationship the parties shall compete with each other loyally. Within

these limits, the franchisee may be prohibited from competing within a specified area for a period of time, which

shall not exceed one year.

2. If the prohibition of competition may endanger the professional business, then an appropriate monetary

compensation shall be given to the franchisee despite the expiration of the term of the contract.

Article 614 – Liability of a franchiser

The franchiser shall be liable for the rights and information specified by the franchise system. If he/she breaches

the contractual obligation by his/her fault, the franchisee may reduce the franchise fee. The amount of the

reduction shall be determined finally by an independent expert, the expenses of whose services shall be borne by

the parties.

Chapter Eight

Lending

http://www.matsne.gov.ge 040.000.000.05.001.000.223

Article 615 – Concept

Under a contract of lending, the lender undertakes the obligation to transfer property to the borrower for his/her

temporary and gratuitous use.

Article 616 – Liability of a lender

The lender shall be liable only for damages caused either intentionally or by gross negligence.

Article 617 – Obligation to pay damages for concealment of defects

If the lender knowingly conceals a defect of the right or thing from the borrower, he/she shall be obligated to

compensate damages incurred.

Article 618 – Using the loaned thing for its intended purpose

The borrower may not use the loaned thing otherwise than as stipulated in the contract. He/she may not transfer

the thing to the use of a third person without the consent of the lender.

Article 619 – Obligation to bear ordinary expenses

1. Ordinary expenses required for the maintenance of the loaned thing shall be borne by the borrower.

2. The lender’s obligation to pay other expenses shall be determined according to the rules governing agency

without specific authorisation.

Article 620 – Wear and Tear of loaned things

The borrower shall not be liable for modifications to or deterioration of the loaned thing if they are caused with

use that conforms to the contract.

Article 621 – Obligation to return loaned things

1. The borrower shall return the loaned thing after expiration of the period determined under the contract of

lending.

2. If no such period is fixed under the contract, then the lender may retrieve the thing after expiration of the

period of time required for the intended use; and if the intended use is not specified, then he/she may demand

return of the thing at any time.

3. The borrower may return the thing at any time.

Article 622 – Effect of death of the borrower

If the borrower dies or if the lender is in need of the thing due to unforeseen circumstances, then the lender may

dissolve the contract.

Chapter Nine

Loan

Article 623 – Concept

Under a loan contract the lender transfers to the ownership of the borrower money or some other generic thing,

and the borrower undertakes the obligation to return a thing of the same kind, quality and amount.

Article 624 – Form of a loan contract

A loan contract shall be made orally. The parties may agree on a written form as well. In the case of an oral

contract its validity may not be proved only on the grounds of witnesses’ testimony.

Article 624 1 – Procedure for granting secured loans/credits

When granting a loan/a credit secured by an immovable thing and/or by a transport vehicle defined under Article

53(1) of the Law of Georgia on Traffic and/or an auxiliary technical equipment of an agricultural machine, and by

a water, air and railway means of transportation, a creditor/loan holder must transfer financial resources to a

borrower/recipient of a loan in the form of non-cash settlement.

Law of Georgia No 3315 of 21 July 2018 – website, 7.8.2018

Article 625 – Obligation of a creditor and a loan interest

1. The parties may agree on an interest on the loan. A monthly interest rate agreed upon by the parties shall be

http://www.matsne.gov.ge 040.000.000.05.001.000.223

indicated in a mortgage-backed loan contract.

2. When determining a loan interest as agreed by the parties, an annual effective interest rate must not exceed

50%.

3. The monthly interest rate agreed upon by the parties and indicated in a mortgage-backed loan contract,

including the expenses (except for a mortgage notarisation and mortgage registration expenses) related to the use

of the loan, shall not exceed one twelfth of 2.5 times the previous calendar year’s arithmetical mean of the market

interest rates of loans issued by commercial banks posted by National Bank of Georgia on its official website,

which enters into force from 1 March each year.

3 1 . The requirement under paragraph 2 of this article shall apply to all loan types, and to the annual amount of a

monthly interest rate as agreed upon by the parties under paragraph 3 of this article.

4. Unless otherwise determined by the legislation of Georgia, provisions under paragraph 3 of this article shall not

apply to loan agreements made by a commercial bank, a micro-bank, a microfinance organisation, and a non-bank

depository institution – a credit union.

5. Unless otherwise determined by the legislation of Georgia, in case of granting a loan, the amount of any fee,

financial expense (except for the expenses included in the calculation of the effective interest rate of a loan), of a

penalty and any type of a financial sanction provided for/imposed on a borrower under the loan contract for

violation of any provision of the contract shall not exceed the annual 0.27% of the remaining principal amount of

the loan for each day. For the purposes of 0.27% provided for/imposed under the loan contract, the creditor shall

not include in the penalty and any type of financial sanction provided for/imposed on a borrower under the

contract, when the loan period is exceeded (until the exceeded loan period is fully corrected), the imposition of

one-time payment of a maximum of GEL 20 (or its equivalent in a foreign currency) as a penalty, and, in the case

of refinancing of a loan or an early repayment of a loan with his/her own resources and/or by a third person under

paragraph 8 of this article, the imposition of a fee for advance payment. The amount of a penalty and any type of

financial sanction provided for/imposed on a borrower under the contract for violation of any provision of the

loan contract at each exceeding of the loan period shall not exceed in total the 1.5-time amount of the currently

remaining principal amount of the loan. For the purposes of this paragraph, the remaining principal amount of the

loan shall not include, when the loan period is exceeded, the increment of the remaining principal amount of the

loan in the case of the loan deferment, loan refinancing and/or loan restructuring, and correction of the exceeded

loan period through loan restructuring, loan refinancing (if the refinancing is done through conclusion of a

contract with a primary creditor) and/or loan deferment shall not be deemed to be the full correction of the

exceeded loan period. For the purposes of this paragraph, loan restructuring, loan refinancing (if the refinancing is

done through conclusion of a contract with a primary creditor) and loan deferment shall only be deemed to be the

full correction of the exceeded loan period when the borrower has fully paid the financial resources related to the

penalty, any form of financial sanction, fee and financial expenses imposed on him/her for exceeding the loan

period.

6. For the purposes of this article, the ‘effective interest rate’ shall be defined under a legal act of the National

Bank of Georgia.

6 1 . For the purposes of paragraph 5 of this article, the National Bank of Georgia may establish the procedure,

which is different from the one defined in paragraph 5 of this article, for calculating the current remaining

principal amount of the loan, and for considering a fee, financial expenses, penalty and/or any form of financial

sanction.

7. Unless otherwise determined by the legislation of Georgia, a loan of up to GEL 200 000 (two hundred thousand)

shall be granted only in GEL, except when the total liabilities of a borrower to the same creditor as a result of

granting the loan exceed GEL 200 000 (two hundred thousand). For the purposes of this paragraph, any loan

attached or indexed, in any form, to a foreign currency shall not be considered as having been granted in GEL.

8. Unless otherwise determined by the legislation of Georgia, in case of granting of a loan, a lender shall be

prohibited, in the case of refinancing of a loan granted by it, or in the case of repayment of a loan by the customer

with his/her own resources and/or by a third person as determined under this Code, to impose on the customer a

fee and/or a penalty for advance payment, or any fine sanctions that, content-wise, is a fee and/or a penalty for

advance payment, which exceeds 2% of the remaining principal amount of the loan.

Law of Georgia No 5127 of 29 June 2007 – LHG I, No 27, 17.7.2007, Art. 260

Law of Georgia No 1864 of 25 December 2013 – website, 30.12.2013

Law of Georgia No 239 of 29 December 2016 – website, 13.1.2017

Law of Georgia No 1901 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 3315 of 21 July 2018 – website, 7.8.2018

Law of Georgia No 4104 of 22 December 2018 – website, 10.1.2019

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Law of Georgia No 2622 of 22 February 2023 – website, 10.3.2023

Article 626 – Termination of the contract and payment of the debt

1. If the time for payment of the debt is not specified in the contract, then the loan shall be repaid upon

termination of the contract by the lender or by the borrower.

2. The period of time for termination of the contract shall be three months. If no interest is promised, then the

borrower may prepay the debt before its due date. An interest-bearing loan may be prepaid only by the

preliminary agreement of the parties or with the consent of the lender.

3. Interest shall be paid after the lapse of each year. If the maturity date is specified in the loan, then both the debt

and the interest shall be paid when due.

Article 627 – Right of acceleration

The lender may accelerate the debt if the economic condition of the borrower deteriorates significantly,

endangering the repayment of the loan. This right shall also be effective if the deterioration of the borrower’s

economic condition preceded the conclusion of the contract but the lender became aware of it only after the

concluding the contract.

Article 628 – Promise of a loan

If a loan is promised, the promisor may refuse to grant the loan if the other party’s economic condition has

deteriorated so badly that the repayment of the loan may be endangered. The promise of a loan shall be made in

writing.

Article 628 1 – Restriction of attracting funds

1. An entrepreneurial entity shall have the right to attract repayable funds from more than 20 natural persons

(including from an individual entrepreneur) only in accordance with the procedure and requirements determined

by the Organic Law of Georgia on National Bank of Georgia.

2. If a microfinance organisation attracts funds in any form from more than 20 natural persons (including from an

individual entrepreneur), then the amount of money attracted from each natural person (including from an

individual entrepreneur) must not be less than GEL 100 000 (one hundred thousand) (or its equivalent in a foreign

currency). If the obligation to comply with the requirements under this paragraph arises for a microfinance

organisation, then it shall pay the amount less than GEL 100 000 (one hundred thousand) (or its equivalent in a

foreign currency) attracted from less than 20 natural persons (including from an individual entrepreneur) within

one year after that obligation has arisen.

Law of Georgia No 239 of 29 December 2016 – website, 13.1.2017

Law of Georgia No 1901 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 3315 of 21 July 2018 – website, 7.8.2018

Chapter Ten

Contract for Work

Article 629 – Concept

1. Under a contract for work, the contractor undertakes to perform the work specified in the contract and the

client assumes an obligation to pay the agreed compensation to the contractor.

2. If some article is to be manufactured under a contract for work, and the contractor manufactures it with the

materials that he/she purchased himself/herself, then he/she shall transfer the title to the manufactured thing to

the client. If a generic thing is manufactured, the rules governing a contract of sale shall apply.

3. Drawing up an estimate for a contract for work shall not be compensated, unless otherwise provided for in the

agreement.

Article 630 – Agreement for compensation

1. Compensation shall be deemed to have been tacitly agreed if, considering the circumstances of the case, the

contract work is expected to be performed only for compensation.

2. If the amount of compensation is not agreed upon, a tariff rate shall be deemed to apply where such rate exists,

but where no tariffs exist, a customary fee shall apply.

Article 631 – Effects of overrunning an approximate estimate

1. If a contractor significantly overruns an approximate estimate, he/she may demand only the agreed

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compensation, except when the cost overrun could not be foreseen.

2. The contractor shall immediately notify the client of any overrun of the approximate estimate that could not be

foreseen at the time the contract was made. If the client terminates the contract because of the cost overrun,

he/her shall pay for the work according to the approximate estimate.

Article 632 – Obligation to perform work in person

A contractor shall perform work in person only if specific circumstances or the nature of the work so require.

Article 633 – Client’s obligation to pay damages

1. The contractor may claim damages if the client does not accept the work performed. The client shall also pay

damages if he/she does not perform actions necessary for performance of the work.

2. The amount of damages shall be determined, on the one hand, according to the duration of delay and the

amount of compensation and, on the other, according to what the contractor would have received for his/her

labour used otherwise if the employer had accepted the work in time.

Article 634 – Mechanic’s lien on movable things

To secure his/her claims, a contractor may apply the right of lien on any movable thing manufactured or repaired

by him/her if this thing is in the contractor’s possession for the purpose of its manufacture or repair.

Article 635 – Construction lien on a building lot

If the object of a contract is a structure or some individual parts of a structure, the contractor may assert a lien on

the building lot for his/her claims arising out of the contract.

Article 636 – Termination of a contract

The client may repudiate the contract at any time before completion of the work, but he/she shall pay the

contractor for the work performed as well as the damages caused by the termination of the contract.

Article 637 – Termination of the contract on the contractor’s initiative

The contractor may terminate the contract before completion of the work only so as to enable the client to receive

the services otherwise, except when there is a significant reason for termination. In that case, the obligation to pay

damages shall be excluded.

Article 638 – Right to demand a portion of compensation

If the contractor terminates the contract under Article 637, he/she may demand a portion of compensation pro

rata to the services rendered before termination, provided the client is interested in the services rendered.

Article 639 – Obligation to deliver a thing free of defects

If the services include the manufacture of some article, then the contractor shall deliver to the client the article

free of material and legal defects.

Article 640 – Articles free of legal defects

An article shall be regarded as free of legal defects if no third party may assert any claims against the client.

Article 641 – Articles free of material defects

1. An article shall be considered to be free of material defects if it corresponds to the agreed conditions; and if no

such conditions are agreed upon, then an article shall be deemed to be free of material defects if it is suitable for

the use stipulated in the contract or for ordinary use.

2. A material defect shall exist if the contractor manufactures an article different from or in a smaller quantity

than what was ordered.

Article 642 – Demanding additional performance

1. If an article has a defect, the client may demand additional performance. The contractor may, at his/her choice,

either eliminate the defect or manufacture a new article.

2. For the purpose of additional performance, the contractor shall be obligated to incur any necessary costs,

including the costs of transportation, work and materials. The contractor may refuse to provide additional

performance if it requires disproportionate costs.

3. If a contractor manufactures a new article, he/she may demand that the client return the defective article.

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Article 643 – Elimination of defect in an article by the client

1. If a contractor does not refuse, on the grounds of disproportional costs, to provide additional performance but

the period fixed for the additional performance for a defect in the article has expired without any result, then the

client may eliminate the defect on his/her own and claim compensation for the expenses incurred.

2. No additional period need to be fixed in cases under Article 405(2).

3. The client may demand from the contractor an advance payment to cover the costs required to eliminate the

defect.

Article 644 – Repudiation of a contract because of a defective article

The client may repudiate the contract under Article 405 because of a defective article. In that case, the contractor

shall reimburse the client for the costs related to the contract.

Article 645 – Reduction of compensation because of a defective article

A client, who neither receives any additional performance of the contract after the expiry of the period fixed for it

nor repudiates the contract, may reduce the compensation by the amount by which the defect reduces the value

of the article.

Article 646 – Performing work with the contractor’s materials

1. If a contractor performs labour with his/her own materials, he/she shall be liable for any substandard material.

2. The contractor shall be liable for any improper use of the client’s materials. The contractor shall submit to the

client an account of material expenditure and return any remaining materials to him/her.

Article 647 – Obligation to give a notice

1. The contractor shall notify the client in a timely manner that:

a) the material received from the client is substandard and unfit for use;

b) if the client’s instruction is fulfilled, the work will not be durable or not fit for use;

c) there are other circumstances beyond the contractor’s control that endangers the durability and suitability of

the work.

2. If the client, notwithstanding the notice given by the contractor, does not replace the unsuitable or substandard

materials within the appropriate period of time, does not change the instructions given on the procedure for

performance and/or does not eliminate any other circumstance that can prejudice the suitability or durability of

the work, then the contractor may repudiate the contract and claim damages sustained by the repudiation.

Article 648 – Payment for the work performed

The client shall pay compensation to the contractor after the work has been performed, unless the contract

provides for payment in instalments.

Article 649 – Acceptance of the work

If the delivery of work is required under the contract or by the nature of the work performed, the client shall

accept the work performed. The client shall pay compensation upon acceptance. The work shall be deemed to

have been accepted if the client does not accept the work within the period fixed by the contractor.

Article 650 – Contractor’s liability where client’s property is destroyed

The contractor shall also be liable for the destruction or deterioration of the client’s property caused by

negligence.

Article 651 – Contractor’s risk

1. The risk of accidental destruction or deterioration of the work performed shall rest with the contractor until

the delivery of performance to the client. The risk of accidental destruction or deterioration shall shift to the

client upon the delivery of the work performed. The client’s delay in accepting performance shall amount to

delivery.

2. The risk of accidental destruction or deterioration of materials shall rest with the party providing the materials.

Article 652 – Effects of accepting defective articles

If the client is aware of a defect in an article and still accepts it without asserting a claim, then the client may not

assert any claims on the basis of the defect.

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Article 653 – Warranty period

If the contractor has given a warranty period for an article, then any defect detected during the period shall give

rise to corresponding rights.

Article 654 – Effects of intentional concealment of a defect by the contractor

If a contractor conceals a defect intentionally, he/she may not resort to any agreement that excludes or restricts

the client’s rights arising from the defect in the article.

Article 655 – Limitation period

The client may assert claims for the defects in the performance within one year, and claims concerning structures,

within five years after the date of acceptance of the work.

Article 656 – Computation of limitation period where the work is accepted in instalments

If under a contract the work is accepted in instalments, then the limitation period on claims arising from defects

shall start from the date of acceptance of the work in its entirety.

Chapter Eleven

Tourist Services

[Chapter Eleven – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 657 – Concept

1. Under a tourism contract, a travel organiser (travel agency) shall render the agreed services to a tourist

(traveller). The tourist shall pay the promised compensation to the travel organiser for the services rendered.

2. A tour package (‘the package’) is a complex of two or more tourist service components (food, accommodation,

transport services, etc.), the cost of which is included in the package price.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 657 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 657 1 – Prohibition of misrepresentation

Any descriptive form, cost and other contractual terms relating to travel (the package) provided to the client by a

travel organiser shall be free of false, incorrect or misleading information.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 657 1 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 657 2 – Necessity to provide detailed information

1. Before a contract is signed, a traveller shall be given detailed information about the travel (package) either in

writing or in any other form acceptable to the traveller. The information shall include:

a) the cost, payment methods and schedule;

b) the destination and goals, the vehicles to be used and their specifications;

c) the type, location, category, service quality, classification and other main features of accommodation;

d) food;

e) itinerary;

f) passport and visa requirements, as well as necessary health requirements for travel

g) the visits, tours and/or other services included in the package;

h) if a certain number of travellers required to organise the travel cannot be gathered, the information about the

deadline for informing the traveller.

2. A travel organiser shall give the traveller the following information within a reasonable period of time before

the travel begins:

a) times and places of stopovers;

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b) names and telephone numbers of the travel organiser or its local representative or, if there no such

representative, of the local travel agencies and/or relevant offices that the traveller can approach for assistance;

c) if a minor is traveling, the means for establishing direct contact with the minor or the person responsible for

the minor;

d) the traveller’s duties in relation to the reimbursement of expenses incurred as a result of the termination of the

contract by the traveller, as well as expenses for assisting the traveller in cases of repatriation, accident and/or

illness.

3. The information provided to the traveller in writing or in any other appropriate form shall be binding upon the

travel organiser.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 657 2 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 657 3 – Rules for changing and calculating the original contract price and the travel organiser’s obligations

1. The cost of the travel package shall not be revised, except as provided for in Article 660(1) of this Code, also

except where the contract itself allows for such revision and provides the rules for changing and calculating the

original contract price, subject to the following conditions:

a) transportation cost, including the cost of fuel;

b) fees for specific transport and carriage services, such as carriage of cargo at ports and airports, renting a taxi,

etc.;

c) the exchange rate included in the package.

2. The cost of the travel (package) shall not be increased during the twenty days before the departure day, but if

the travel organiser is forced, due to the circumstances beyond his/her control, to significantly change the

essential terms and conditions of the contract before the departure, he/she shall immediately notify the traveller

in order for the traveller to make a decision to either terminate the contract or accept the altered terms of the

contract. The traveller shall notify the travel organiser of his/her decision in a timely manner.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 657 3 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 658 – Transfer of a travel contract

1. Before the commencement of the travel, the traveller may demand that a third person travel in his/her place.

The travel organiser may refuse to allow such substitution if the third person does not meet the travel

requirements.

2. The travel organiser may demand that the traveller pay the extra expenses incurred by the participation of a

third person in the travel.

[Article 658 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 659 – Shortcomings in travel

1. A travel organiser shall be obliged to organise travel in such a way that it does not have any shortcomings that

may reduce or devalue the significance of the travel for ordinary or contractual purposes.

2. If a travel package has such shortcomings, then the traveller may demand their correction. The travel organiser

may refuse to remedy the shortcomings if it requires disproportionate expenses.

3. If the travel organiser does not eliminate shortcomings within a reasonable period of time set by the traveller,

then the traveller may himself/herself correct the shortcoming and demand reimbursement of the necessary

expenses incurred by this action. The period of time need not be specified if the travel organiser refuses to correct

the shortcoming or if the traveller is interested in an immediate correction of the shortcoming.

[Article 659 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 660 – Reduction of price

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1. If a travel has shortcomings, then its price shall be reduced in proportion to the duration of the shortcoming.

2. The price shall not be reduced if the traveller, thorough his/her fault, fails to notify the travel organiser of the

shortcoming.

[Article 660 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 661 – Termination of a contract on a traveller’s initiative because of shortcomings

1. If a traveller incurs significant damages as a result of the shortcoming referred to in Article 659, he/she may

terminate the contract. The same rule shall apply if he/she cannot travel for a valid reason which is also known to

the travel organiser.

2. A contract may be terminated if a travel organiser has not eliminated the shortcomings within the period of

time set by the traveller. A period of time need not be set if the shortcomings cannot be eliminated or if the travel

agency refuses to eliminate them, or if the termination of the contract is justified by a particular interest of the

traveller.

3. If a contract is terminated, the travel organiser shall lose his/her claim to the agreed compensation but he/she

may demand compensation for the travel services already provided without defect.

4. If a contract includes return travel, the travel organiser shall transport the tourist back after the contract is

terminated. In that case, any extra costs shall be borne by the travel organiser.

5. If a traveller terminates the contract under Article 657 3 (2) of this Code before the commencement of travel, the

travel package shall be cancelled and in that case the travel organiser shall:

a) offer the traveller a new travel package of a quality equivalent to or better than the previous travel package, if

possible;

b) or reimburse the difference in price if the offered new travel package is of lower quality;

c) or immediately refund the amount paid under the contract.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 661 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 662 – Reimbursement of damages caused by shortcomings in travel

1. If shortcomings in the travel result from circumstances for which the travel organiser is responsible, the

traveller may claim damages for non-performance without prejudice to his/her right to demand reduction of

compensation or the right to terminate the contract on the grounds of shortcomings.

2. If the travel has not been completed or has been improperly organised, then the traveller may also demand

appropriate monetary compensation for the wasted vacation.

3. If a contract is terminated not due to the traveller’s fault before the commencement of travel, the traveller may

claim damages for non-performance, except where:

a) the basis for terminating the contract is the lack of the necessary number of persons required to organise the

travel, of which the traveller has been notified in writing within the period of time indicated in the travel

(package) description;

b) the grounds for terminating the contract are force-majeure.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 662 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 662 1 – Travel organiser’s obligation to respond promptly to a traveller’s complaint

A travel organiser or its representative shall respond promptly to a traveller’s complaint and make an appropriate

decision.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 662 1 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 662 2 – Travel organiser’s obligation to present guarantees to a traveller

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A travel organiser shall present solid security guarantees to cover expenses related to the return travel of clients

and to refund the amount paid by the traveller in the event of its bankruptcy.

Law of Georgia No 2946 of 28 April 2006 – LHG I, No 15, 16.5.2006, Art. 99

[Article 662 2 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 663 – Limitation period for claims arising out of travel contracts

1. Claims under articles 659-662 may be asserted by a traveller against a travel organiser within one month after

the period of travel stipulated in the contract ends. After the end of the period, the traveller may only assert

claims if he/she exceeded the limitation period through no fault of his/her own.

2. The limitation period for claims of a traveller shall be six-months. This period shall commence on the day, on

which the travel was to end under the contract. If the traveller asserts claims before the commencement of the

limitation period, then the limitation period shall be suspended until the day the travel organiser rejects the claim.

[Article 663 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 664 – Limitation of liability

A travel organiser may, in agreement with a traveller, limit his/her liability to three times the amount of

compensation for its services if:

a) the damage caused to the traveller was not caused intentionally or through gross negligence,

or

b) the travel organiser is not solely and entirely responsible for the damage caused to the traveller due to the fault

of one of the persons performing the duties of the travel organiser.

[Article 664 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 665 – Repudiation of a contract before the commencement of travel

1. A traveller may repudiate the contract at any time before the commencement of travel.

2. If a traveller repudiates the contract, the travel organiser loses his/her claim to the agreed compensation. At the

same time, it may demand appropriate compensation, the amount of which shall be determined on the basis of the

agreed compensation by deducting the amount that it could have received by providing its services in any other

way.

[Article 665 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 666 – Force majeure

1. If travel is substantially obstructed, jeopardised or the traveller is harmed as a result of force majeure that could

not have been foreseen at the time when the contract was entered, then either the travel organiser or the traveller

may terminate the contract.

2. If the contract is terminated under paragraph 1 of this article, then the provisions of Article 661(3) and the first

sentence of Article 661(4) shall apply. Each of the parties shall bear half of the extra costs for return travel. In

other cases, extra costs shall be borne by the traveller.

[Article 666 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Article 667 – Agreements prejudicial to travellers not allowed

No provisions of this chapter may be changed to the prejudice of a traveller.

[Article 667 – (Deleted) (Shall become effective from 1 June 2027)]

Law of Georgia No 3970 of 15 December 2023 – website, 28.12.2023

Chapter Twelve

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Carriage

I – Contract of Carriage

Article 668 – Concept

Under a contract of carriage, the carrier shall be obligated to transport goods or passengers to the place of

destination for an agreed fee.

Article 669 – Liability of the carrier

1. The carrier shall be liable for any harm done to passengers as well as for any damage caused to the passenger’s

baggage or for its loss.

2. The liability shall not accrue if the damage is caused by force majeure or by a passenger himself/herself or by

his/her baggage.

3. The liability of the carrier may not be excluded or limited by contract.

Article 670 – Obligation to enter into a contract

A person publicly offering the carriage of goods or passengers shall be obligated to enter into a contract of carriage

unless there is a basis for refusal.

Article 671 – Carriage by several means of transport

If a loaded motor vehicle is transported across one section of the road by sea, rail or air and the goods are not

discharged in compliance with Article 682, the rules of this chapter shall nevertheless apply to the entire carriage.

Article 672 – Form of a contract of carriage

A contract of carriage shall be drawn up in the form of a waybill (or other document). Notwithstanding the

nonexistence, defectiveness or loss of the waybill, the content and validity of a contract of carriage shall be

determined by the rules of this chapter.

Article 673 – Rules for drawing up a waybill

1. A waybill shall be drawn up in three counterparts signed by the shipper and by the carrier. The first

counterpart shall be retained by the shipper, the second shall accompany the freight and the third shall be

retained by the carrier.

2. If the freight to be carried is distributed among several means of transport, or if different kinds of freight are

involved and/or freight is divided into individual shipments, both the shipper and the carrier may demand that as

many waybills be drawn up as there are kinds of freight or means of transport.

Article 674 – Particulars of a waybill

1. A waybill shall include the following particulars:

a) the date and place of issue;

b) the name and address of the shipper;

c) the name and address of the carrier;

d) the date and place of consignment, as well as the place of delivery of the freight;

e) the name and address of the consignee;

f) the regular name of the type of freight and packaging, and for hazardous freight, its universally recognised

marking;

g) the quantity, markings and numbers of the freight to be shipped;

h) the weight of the freight or otherwise indicated quantity;

i) the costs of carriage (price of carriage, extra charges, import duties and other expenses arising from the time of

execution of the contract until the delivery of freight);

j) the markings of the LEPL Revenue Service of the Ministry of Finance of Georgia;

k) the indication that the carriage, notwithstanding the bilateral agreement, is still subject to the rules of this

chapter.

2. If necessary, the waybill shall include the following additional data:

a) prohibition of transhipment to another transport;

b) the expenses assumed by the shipper;

c) the amount of the surcharge to be paid at the moment of shipping the freight;

d) the value of the freight and the indication of any special interest in delivery;

e) the freight insurance instructions given by the shipper to the carrier;

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f) the agreed period of time, within which the carriage is to be completed;

g) the list of the documents delivered to the carrier.

3. The parties may also enter on the waybill any other data that they consider appropriate.

Law of Georgia No 3806 of 12 November 2010 – LHG I, No 66, 3.12.2010, Art. 414

Article 675 – Liability of the shipper

1. The shipper shall be liable for all the expenses and damages resulting from incorrect or incomplete presentation

of:

a) the particulars referred to in Article 674(1)(b), (d), (e), (f), (g), (h) and (j);

b) the data referred to in Article 674(2);

c) all the other data or instructions of the shipper related to drawing up of the waybill or to be entered on the

waybill.

2. If the carrier enters, at the request of the shipper, the particulars set forth in paragraph 1 of this article on the

waybill, then the carrier shall be deemed to have acted on behalf of the shipper until proven otherwise.

3. If the waybill does not include the data referred to in Article 674(1)(k), then the shipper shall be liable for any

expenses and damages incurred to the person entitled to the freight due to the absence of this data.

Article 676 – Liability of the carrier upon acceptance of freight

1. When accepting the freight, the carrier shall inspect:

a) the number of pieces of the freight and the accuracy of the data appearing on the waybill with respect to the

marks and numbers of the freight;

b) the external condition of the freight and its packaging.

2. If the carrier lacks appropriate means to inspect the data defined in paragraph 1(a) of this article, then it shall

enter on the waybill the conditions to be performed. It shall likewise enter the conditions that pertain to the

external condition and packaging of the freight. These conditions shall not be binding upon the shipper except

where he/she has clearly acknowledged them in the waybill.

3. The shipper may demand that the carrier verify the weight of the freight or its otherwise indicated quantity.

He/she may also demand that the carrier check the contents of the freight. The carrier may demand compensation

for the expenses relating to such checks. The results of the inspection shall be indicated in the waybill.

Article 677 – Presumption of execution of a contract of carriage

1. Until proven otherwise, a waybill (or consignment or other forms accepted in the carriage business) shall serve

as proof that a contract of carriage has been entered into, its content has been determined and the carrier has

taken the freight into its custody.

2. If the waybill does not indicate the conditions of carriage, it shall be presumed, until proven otherwise, that at

the time the carrier took the freight into its custody, the freight and its packaging were in good external condition

and the number of pieces of the freight, its marks and numbers matched those indicated in the waybill.

Article 678 – Liability of the shipper for damage caused by substandard packaging of freight

The shipper shall be liable to the carrier for any harm or damage caused to persons, materials and other property

due to substandard packaging of the freight, as well as for any expenses incurred due to substandard packaging of

the freight, except where the defect was obvious, or the carrier knew of the defect when accepting the freight but

did not stipulate any condition in this respect.

Article 679 – Obligation of the shipper to provide necessary information

1. The shipper shall attach to the waybill all the documents that are required for the performance of customs

formalities and other similar actions before the delivery of the freight, or deliver the documents to the carrier and

provide it with all necessary information.

2. The carrier shall not be obligated to examine if these documents and information are accurate and sufficient.

The shipper shall be liable to the carrier for any damage caused by the incompleteness or inaccuracy of the

documents and data, unless this occurs due to the carrier’s fault.

3. The carrier shall be liable for the loss or misuse of the documents delivered to it or the documents indicated in

and attached to the waybill; the carrier’s liability may not exceed the liability that would have resulted from loss

of the freight.

Law of Georgia No 3806 of 12 November 2010 – LHG I, No 66, 3.12.2010, Art. 414

Law of Georgia No 5964 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 4925 of 28 June 2019 – website, 4.7.2019

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Article 680 – Rights of the shipper

1. The shipper may dispose of the freight or demand termination of the carriage; he/she may also demand that the

carrier not change the destination or the freight, or deliver it to any person other than the one indicated in the

waybill.

2. This right shall be extinguished as soon as the second counterpart of the waybill is delivered to the consignee or

as soon as the consignee exercises his/her rights under the first sentence of Article 681. From that moment on, the

carrier shall perform the consignee’s instructions.

3. The consignee shall acquire the right of disposal upon the drawing up of the waybill, provided the shipper so

indicates in the waybill.

4. If in exercising the right of disposal the consignee instructed that the freight be delivered to a third party, then

the third party may not name another consignee.

5. The right of disposal shall be exercised subject to the following rules:

a) if the shipper or, in the case defined under paragraph 3 of this article, the consignee, wishes to exercise his/her

right of disposal, he/she shall present the original copy of the waybill containing the new instructions to the

carrier, and reimburse the carrier for all the expenses and damages resulting from the performance of these

instructions;

b) it shall be possible to perform the instructions when they reach the person who is to perform them, and the

instructions may neither impede the carrier’s regular business activities nor inflict any damage to other freight of

the shipper or of the consignee;

c) the instructions shall not cause division of the freight.

6. If the carrier is unable to fulfil the instructions for the reason indicated in paragraph 5(b) of this article, it shall

immediately notify the person who has given the instructions.

7. A carrier not performing instructions given under this article or performing them without having demanded

the original copy of the waybill shall be liable to the rightful person for any resulting damage.

Law of Georgia No 1902 of 28 December 2002 – LHG I, No 4, 22.1.2003, Art. 20

Article 681 – Rights of the consignee upon delivery of freight

Upon delivery of the freight to the intended place of delivery, the consignee may demand that the carrier tender

the second counterpart of the waybill as confirmation of the receipt of the freight, and with that action the freight

shall be deemed to have been delivered. If a shortage of the freight is discovered or if the freight is not delivered

within the period of time defined under Article 688, the consignee may exercise in his/her own name the rights

arising out of the contract of carriage against the carrier.

Article 682 – Impossibility to perform the contract

1. If, before the acceptance of the freight at the intended place of delivery, it is impossible to perform the contract

in compliance with the conditions indicated in the waybill, the carrier shall demand instructions with respect to

the freight from the rightful person under Article 680.

2. If the circumstances allow for the carriage to be performed other than under the conditions indicated in the

waybill and the carrier is unable to receive, within the appropriate period of time, from the authorised person the

instructions with respect to the freight defined under Article 680, it shall take actions that are in the best interests

of the authorised person.

Article 683 – Circumstances impeding freight delivery

1. If circumstances impeding the delivery of the freight arise after the arrival of the freight at its destination, the

carrier shall demand instructions from the shipper. If the consignee refuses to accept the freight, the shipper may

dispose of the freight on his/her own without presenting the original copy of the waybill.

2. Until the carrier receives the shipper’s instructions to the contrary, the consignee may demand the delivery of

the freight to him/her even if he/she has refused to accept the freight.

3. If circumstances impeding the delivery of the freight arise after the consignee has issued instruction under

Article 680(3) to deliver the freight to a third party, then in cases where paragraphs 1 and 2 of this article are

applied, the consignee shall take the place of the shipper and the third party shall take the place of the consignee.

Article 684 – Right to claim expenses arising out of the shipper’s instructions

1. The carrier may claim the expenses incurred by him/her by reason of receiving or performing instructions,

except when these expenses arise through its own fault.

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2. In cases provided for in Articles 682(1) and 683, the carrier may urgently unload the freight at the expense of

the authorised person; after the unloading, the carriage shall be deemed complete. After that, the carrier shall

store the freight for the authorised person. He/she may entrust the storage of the freight to a third party; in that

case, he/she shall be liable only for selecting the third party. All claims and expenses arising out of the waybill

shall be paid from the value of the freight.

3. Without waiting for instructions from the authorised person, the carrier may sell the freight if the goods are

perishable or if the condition of the freight warrants such action and/or if the storage expenses exceed the value of

the freight. The carrier may sell the freight in other cases as well, unless he/she receives any instructions from any

party within a specified period of time.

4. If the freight is sold according to this article, then the sum, less the expenses relating to the freight, shall be

transferred to the authorised person. If the expenses exceed the proceeds, the carrier may claim the difference.

5. The procedure of sale shall be determined according to the laws and customs of the place where the freight is

located.

Article 685 – Carrier’s lien on the freight

For the expenses arising out of the contract of carriage, the carrier shall have a lien on the freight until he/she is

entitled to dispose of the thing.

II – Liability of the Carrier

Article 686 – Concept; content

1. The carrier shall be liable for partial or total loss of the freight and damage caused to it if the freight was lost or

damaged from the moment it was accepted up to the moment it was delivered, as well as for delayed delivery.

2. The carrier shall be released from liability if the loss of or damage to the freight or a delayed delivery is caused

through the fault of the authorised person and/or because of instructions from that person, for which the carrier is

not responsible; also, if the defect of the freight is caused by the circumstances that the carrier could not avoid,

nor could the carrier avoid the consequences of those circumstances.

3. The carrier may not claim a defect in the means of transport used for carriage or the fault of the staff of the

lessor or lessee of the means of transport to obtain release from liability.

4. In the cases specified in Article 687(2-5), the carrier shall be released from liability if the loss of or damage to

the freight was caused by extraordinary danger relating to the following circumstances:

a) an open, uncovered means of transport is used, provided its use was specifically agreed upon and indicated in

the waybill;

b) the freight is not packaged or the packaging is substandard that, considering the nature of the freight, presents a

risk of the loss of or damage to the freight;

c) the freight is inspected, loaded, stowed or unloaded by the shipper or the consignee or by a third party acting

for them;

d) because of the peculiarities of specific freight, there is a risk of partial or total loss or damage, namely the risk of

breaking, rusting, corroding, withering, spilling, normal wear and tear or the influence of insects and rodents;

e) the freight to be carried has not been sufficiently marked or numbered;

f) animals are to be carried.

Article 687 – Burden of proof

1. The burden of proving that the loss of or damage to or a delayed delivery of the freight was caused by the

circumstances indicated in Article 686(2) shall rest with the carrier.

2. If the carrier proves that, proceeding from the specific circumstances of the case, the loss or damage might have

been caused by one or more of the risks indicated in Article 686(4), the damage shall be presumed to have been

caused by such risk(s). The authorised person may prove that the damage was not caused by that risk or only by

that risk.

3. The presumption specified in paragraph 2 of this article shall not apply if the freight is lost or destroyed in the

extraordinary circumstances provided for in Article 686(4)(a).

4. If the carriage is performed by a means of transport that has special equipment for protecting freight from heat,

cold, temperature variation or wind, the carrier may resort to Article 686(4) only if he/she proves that he/she has

performed the necessary actions with respect to the selection, maintenance and use of the equipment and

complied with all the requirements incumbent upon him/her.

5. The carrier may resort to 686(4)(d) only if he/she proves that he/she has performed all actions and instructions

incumbent upon him/her.

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Article 688 – Delayed delivery of freight

The delivery of freight shall be deemed to have been delayed if the freight is not delivered within the agreed time

or, if no time was agreed, within an ordinary period of time required for carriage, considering the circumstances

relating to the determination of the time required for assembling parts of the freight when the freight is to be

loaded in parts, if the time that a prudent carrier ought to have normally observed has not been observed.

Article 689 – Presumption of the loss of freight

1. The authorised person may deem the freight lost, even without presenting any additional evidence, if the

freight is not delivered to its destination within thirty days after the agreed time of delivery expires or, if no such

time has been agreed, within sixty days after the carrier accepts the freight.

2. Upon receiving compensation for damages for the lost freight, the authorised person may demand in writing

that he/she be promptly notified if the lost freight is found within one year from the day of receipt of

compensation for damages. The reply to the demand shall be given also in writing.

3. Within thirty days after receipt of such notification, the authorised person may demand delivery of the freight

to him/her after satisfaction of the rights arising out of the waybill, and on condition that he/she returns the

compensation received, if necessary, by deducting the expenses incurred from the compensation for damages;

his/her claims for damages due to delay in delivery under Articles 692 and 694 shall remain unchanged.

4. If the demand provided for in paragraph 2 of this article is not asserted, or if there is no instruction because of

the thirty-day period referred to in paragraph 3, or if the freight is found after the lapse of one year from the date

of compensation, then the carrier may dispose of the freight according to the rules that are in force at the place

where the freight is located.

Article 690 – Right to demand surcharge

If the freight is delivered to the consignee without payment of the surcharge that should have been paid to the

carrier upon delivery of the freight at the place of destination, then the carrier may, by resorting to the right of

recourse, claim damages from the shipper.

Article 691 – Hazardous freight shipment rules

1. If a shipper ships a hazardous freight, he/she shall provide the carrier with accurate information and a warning

about the freight and, if necessary, insure the freight. If the obligation is not entered on the waybill, then the

shipper and the consignee are required to prove by other means that the carrier was precisely aware of the type of

the freight and of the expected danger.

2. The carrier may, at any time and place, discharge, destroy or render harmless the hazardous freight, of which

he/she had no knowledge under paragraph 1, without any obligation to pay damages; the shipper shall also be

liable for the damage and expenses incurred by tendering the freight for carriage or by its carriage.

Article 692 – Value of freight in the case of its partial or total loss

1. If the carrier is obligated under this chapter to pay damages for partial or total loss of the freight, then the

damages shall be calculated according to the price of the freight applicable at the place and time of delivering the

freight.

2. The value of the freight shall be determined according to a commodity exchange price, and if no such price is

available, according to a market price; and if no market price is available, the value shall be determined by analogy

to freight of the same kind and value.

3. The cost of carriage, as well as the expenses associated with customs formalities and other similar expenses, shall

be refunded in full in the event of a total loss of the freight or in part, in the event of partial loss.

4. If the delivery of the freight is delayed and the authorised person proves that he/she has sustained damages as a

result of the delay, the carrier shall compensate the damage only to the extent of the value of the freight. Damages

in excess of this value may be claimed only if there was a special interest under Article 694 in this carriage or if

the value of the freight was indicated.

Law of Georgia No 3806 of 12 November 2010 – LHG I, No 66, 3.12.2010, Art. 414

Law of Georgia No 5964 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 4925 of 28 June 2019 – website, 4.7.2019

Article 693 – Compensation for damage to freight

1. If the freight is damaged, the carrier shall pay compensation equivalent to the amount by which the value of

the freight was reduced and which shall be calculated according to the freight value determined under Article

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692(1), (2) and (3).

2. Compensation for damages may not exceed the amount that:

a) ought to have been paid for a total loss of the freight, provided the freight is totally devalued as a result of the

damage;

b) ought to have been paid for the loss of a devalued part of the freight, provided only part of the freight is

devalued as a result of the damage.

Article 694 – Indicating special interest in a waybill

1. By paying the agreed surcharge, the shipper can indicate in the waybill his/her special interest in the carriage in

the event of the loss or damage of the freight or its delayed delivery.

2. If a special interest in the carriage has already been expressed, additional damages in the amount of the special

interest expressed may be claimed independently from the compensation for damages provided for in Articles 692

and 693.

Article 695 – Claim of interest on secured compensation for damages

1. The person entitled to the freight may claim interest at the annual rate of five per cent on the damages secured

for him/her. The interest begins to accrue from the date a claim is presented to the carrier or, if the claim is not

presented, from the date a lawsuit is filed.

2. If the damages are to be paid in a unit of currency that is not effective in the country, and the payment is

demanded, the exchange rate shall be determined according to the exchange rate in force on the day and at the

place of the payment of the damages.

Article 696 – Non-contractual claims in carriage

1. If any loss, damage or delay occurring in the course of carriage governed by this chapter may give rise to non-

contractual claims under the rules in force, then in response the carrier may resort to the rules of this chapter that

exclude his/her liability or define and/or limit the amount of damages.

2. If non-contractual claims for the loss, damage or delay are asserted against one of the parties, then the party

may resort to the rules of this chapter that exclude his/her liability or define and/or limit the amount of damages.

Article 697 – Inadmissibility of releasing a carrier from liability

A carrier may not resort to the rules of this chapter that exclude or limit his/her liability and/or release him/her

from the burden of proof if the damage is caused through his/her fault.

III – Claim and Lawsuit

Article 698 – Concept; content

1. If a consignee accepts the freight without inspecting it together with the carrier and does not assert against the

carrier any claim of a general nature for loss or damage, then the consignee shall be deemed, until proven

otherwise, to have accepted the freight in the condition indicated in the waybill. The claim shall be asserted on

the day that the freight is delivered if the matter concerns externally visible shortages or damages, and in the case

of externally invisible shortages or damages, then no later than seven days after the delivery of the freight. In the

case of externally invisible shortages or damages, the claim (demand) shall be made in writing.

2. If the consignee and the carrier jointly inspect the condition of the freight, proof contradicting the results of the

inspection shall be allowed only in the case of externally invisible shortages or damages and if the consignee does

not file a written claim within seven days after receipt of the freight.

3. A claim for damages resulting from delay may be asserted only if the consignee submits to the carrier a written

claim within twenty one days after receipt of the freight.

4. The days, on which the freight is shipped, inspected and delivered to the consignee, shall not be counted when

calculating the times provided for in this article.

5. The carrier and the consignee shall assist each other in conducting the necessary inspections and establishing

the necessary facts.

Article 699 – Limitation period for rights arising out of carriage

The limitation period for rights arising out of the carriage governed by this chapter shall be one year. If

intentional misconduct or gross negligence is involved, the limitation period shall be three years. The limitation

period shall run:

a) from the day the freight is shipped in cases of partial loss, damage or delay in the delivery of freight;

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b) from the twenty-first day after the expiry of the agreed time for the carriage in cases of total loss of the freight

or, if no such time was agreed upon, from the sixtieth day after receipt of the freight by the consignee;

c) in all other cases, after the lapse of three months after the day of drawing up the contract of carriage.

Article 700 – Suspension of the limitation period

The limitation period shall be suspended on the basis of a written claim on the day the carrier rejects the claim

and returns the attached documents. If the claim is acknowledged in part, the limitation period for the disputed

part shall continue to run. The burden of proving the receipt of or response to the claim, as well as the return of

the documents shall rest with the person who resorts to them. Other claims concerning the same subject matter

shall not suspend the running of the limitation period.

IV – Carriage by Connecting Carriers

Article 701 – Liability during carriage by connecting carriers

If a number of different connecting carriers perform carriage under one contract, each of them shall be liable for

the performance of the entire carriage; the second and each subsequent carrier shall become a party to the

contract by accepting the freight and the waybill.

Article 702 – Obligation to deliver appropriate documents

1. The carrier accepting the freight from the preceding carrier shall issue a dated document, signed by him/her,

confirming the acceptance of the freight. He/she shall indicate his/her name and address on the second

counterpart of the waybill. If necessary, the subsequent carrier shall enter on the second counterpart of the

waybill the terms provided for in Article 676(2) and the confirmation of receipt of the freight.

2. Relations of connecting carriers shall be regulated by Article 677.

Article 703 – Claiming damages from connecting carriers

Claims for damages for the loss, damage or delay in the delivery of the freight, other than counterclaims and

counteractions, may be asserted only against the first carrier, the last carrier or the carrier that was carrying the

freight when it was lost, damaged or delayed. The same action may be brought against several carriers.

Article 704 – Right of recourse in the event of compensation for damage

If the carrier has already paid damages under this chapter, he/she shall have the right of recourse in the following

cases:

a) if the carrier causing the loss or damage of the freight is solely liable for the damage caused by him/her alone or

by several carriers;

b) if the loss of or damage to the freight has been caused by two or more carriers, then each of them shall pay

damages in the amount corresponding to their share of liability; and if the share cannot be determined, then each

of them shall be liable pro rata to their share in the carriage charges received;

c) if it cannot be determined which carrier is liable for the damages, then all the carriers shall pay the damages

according to the proportion defined in subparagraph (b).

Article 705 – Effects of carrier’s insolvency

If one of the carriers is insolvent, the amount to be paid but not yet paid by him/her shall be apportioned among

the rest of the carriers pro rata to their share in the carriage charges received.

Article 706 – Dispute over the exercised right of recourse

The carrier against whom recourse is sought under Articles 704 and 705 may not assert that the carrier that has

exercised the right of recourse paid the damages groundlessly, provided the decision on payment of damages was

made by a court and the carrier was duly notified of the litigation and was afforded the opportunity to participate

in the litigation.

Article 707 – Mutual agreement among connecting carriers

The carriers may enter into an agreement on the matters different from those defined in Articles 704 and 705.

Article 708 – Invalidity of unlawful agreements

1. Any agreement that directly or indirectly contravenes the rules of this chapter, other than the rules set forth in

Article 707, shall be void. The invalidity of such agreements shall not void the rest of the provisions of the entire

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contract.

2. Any agreement, under which the carrier waives claims arising out of the freight insurance, or any other similar

agreement, under which the burden of proof is shifted to another person, shall be void.

Chapter Thirteen

Mandate

Article 709 – Concept

Under a contract of mandate the mandatary shall be obligated to perform one or several actions mandated

(entrusted) to him/her on behalf and at the expense of the mandator.

Article 710 – Remuneration for mandate

1. The mandator shall be obligated to pay remuneration to the mandatary only if so provided by the contract of

mandate or by law.

2. Remuneration shall be deemed to have been tacitly agreed if, considering the circumstances involved, the

performance of the action is expected only against remuneration.

3. If the amount of remuneration is not determined, then if some tariff schedule exists, a tariff rate shall be

considered to be the agreed remuneration, or, if no tariff schedule exists, an ordinary remuneration.

Article 711 – Transferring a mandate to a third person

1. The mandatary shall perform the mandate personally, except when he/she is permitted or compelled by the

circumstances to transfer the mandate to a third party. The involvement of assisting persons shall be allowed.

2. If the transfer of the mandate to a third party is permitted, then the mandatary shall be liable only for his/her

fault in connection with the transfer and in the selection of the person.

Article 712 – Deviation from the mandator’s instructions

1. The mandatary shall be obligated to perform the mandator’s instructions.

2. The mandatary may deviate from the instructions of the mandator if, because of the circumstances, he/she may

assume that the mandator would approve such deviation if he/she were aware of the factual situation. The

mandatary shall give the mandator notice before such deviation and wait for the decision of the mandatory, unless

postponement entails danger to the mandatary.

3. If a mandatary’s performance of instructions may inflict significant damage to the mandator, the mandatary

may perform the instructions only after he/she notifies the mandator of the damage and the mandator does not

change the instructions.

Article 713 – Duty of information

1. The mandatary shall be obliged to provide the mandator with the required information and, at the mandator’s

demand, keep him/her informed on the status of the mandated task, and after carrying out the mandate to render

an account for it.

2. An agreement subsequently limiting or excluding the mandator’s duty under paragraph 1 of this article shall be

made in writing.

Article 714 – Duty to keep secrets

1. The mandatary may not disclose facts that have become known to him/her within the scope of his/her activity

and in the confidentiality of which the mandator has a legitimate interest, unless the disclosure of the secret is

required by law or permitted by the mandator.

2. The duty of non–disclosure of facts shall survive the end of contractual relations.

Law of Georgia No 1902 of 28 December 2002 – LHG I, No 4, 22.1.2003, Art. 20

Article 715 – Duty to return the thing received for performing the mandate

1. The mandatary shall be obliged to return to the mandator everything that he/she receives to perform the

mandate and does not use for it, as well as everything that he/she obtains from performing the mandate.

2. If the mandatary spends money for himself/herself that he/she ought to have returned to or spent for the

mandator, then the mandatary shall return the money with the accrued interest.

Article 716 – Presumption of mandator’s ownership of property

The property that the mandatary has acquired on his/her own behalf and at the mandator’s expense when

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performing the mandate and or received from the mandator to perform the mandate shall be presumed to be the

mandator’s property in the mandatary’s relations with creditors.

Article 717 – Duty to reimburse expenses

1. The mandator shall reimburse the necessary expenses that the mandatary incurred to perform the mandate.

2. The claim specified in paragraph 1 of this article shall not arise if the expenses are to be paid from the

remuneration.

3. The mandatary may demand from the mandator advance payment for the expenses for which he/she is to

receive compensation.

Article 718 – Reimbursement of damages occurring through no fault

1. The mandator shall be obligated to reimburse also the damages that the mandatary sustains when performing

the mandate, even if there was no fault on the mandator’s part, provided the damage occurred as a result of a

substantial danger involved in the performance of the mandate according to the mandator’s instructions.

2. The claim under paragraph 1 of this article shall not arise if the damage is to be paid from the remuneration or

if the damage is caused by the mandatary’s action. If the payment of the damages from the remuneration is

disputed, then the burden of proof shall rest on the mandatary.

Article 719 – Reimbursement of damages caused by culpable action

If the mandatary gratuitously performs the mandate, he/she shall be liable only for damages caused by intentional

misconduct or gross negligence.

Article 720 – Termination of a contract of mandate

1. The parties may terminate a contract of mandate at any time. Any agreement to waive this right shall be void.

2. If the mandatary terminates the contract when the mandator is unable to secure his/her interests otherwise, the

mandatary shall compensate the damage caused by the termination, except where the mandatary has a valid

reason to terminate the contract.

3. If the mandator revokes the contract, then he/she shall reimburse the mandatary of all the necessary expenses

incurred to perform the mandate and if the contract stipulated payment, to pay remuneration for the work

performed.

Article 721 – Effects of a mandator’s death or recognition as a beneficiary of support

1. The contract shall not be terminated due to the mandator’s death or recognition as a beneficiary of support

unless otherwise agreed, or otherwise stipulated by the content of the mandate.

2. If the contract is terminated due to the mandator’s death or recognition as a beneficiary of support, the

mandatary shall continue performing the mandate if the delay entails danger on the mandator or his/her heirs

until the heirs of the mandator, or the legal representative of the mandator/beneficiary of support can make the

necessary arrangements; during this time, the contractual relation shall be deemed to continue.

3. If the contract is terminated due to the mandator’s death or recognition as a beneficiary of support, then the

contract shall be deemed to continue for the mandatary until he/she is notified of the grounds for termination of

the contract.

Law of Georgia No 3339 of 20 March 2015 – website, 31.3.2015

Article 722 – Effects of a mandatary’s death

1. The contract shall be terminated due to the mandatary’s death unless otherwise agreed or unless the content of

the mandate provides otherwise.

2. If the mandatary dies, his/her heirs shall notify the mandator and make the necessary arrangements to safeguard

the mandator’s interests.

Article 723 – Contract of commission agency

The Law on Entrepreneurs shall apply to a contract of commission agency.

Chapter Fourteen

Entrusting Property

Article 724 – Concept

Under a trust agreement, the trustor assigns property to the trustee who holds and manages it in the interests of

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the trustor.

Article 725 – Rights and duties of a trustee

1. The trustee shall manage the entrusted property in his/her own name, but at the expense and risk of the trustor.

2. The trustee shall exercise the owner’s rights in relation with third parties. If the trustee, contrary to the

interests of the trustor, does not exercise the same due diligence as he/she would exercise in managing his/her

own affairs, he/she shall be obligated to pay the damages resulting from such action.

Article 726 – Reimbursement of trust expenses

1. The trustee shall be paid no remuneration from the trustor for managing the trust unless otherwise agreed by

the parties.

2. All expenses relating to the property held in trust shall be borne by the trustor.

3. The trustor shall retain the fruits of the trust.

Article 727 – Form of a trust agreement

A trust agreement shall be made in writing.

Article 728 – Liability of a trustee

The trustee shall be liable to third parties.

Article 729 – Application of the rules governing a contract of mandate

The rules governing a contract of mandate shall apply to trust agreements, except for pension scheme contracts

that are regulated by the Law of Georgia on Voluntary Private Pension.

Law of Georgia No 3353 of 28 June 2023 – website, 19.7.2023

Chapter Fifteen

Freight Forwarding

Article 730 – Concept

1. Under a freight forwarding contract, the forwarding agent undertakes to carry out the actions relating to the

carriage of freight in his/her own name and at the expense of a client. The client shall be obligated to pay an

agreed upon fee.

2. The rules governing a mandate shall apply accordingly to freight forwarding unless otherwise provided for in

this chapter.

Article 731 – Good faith required from forwarding agents

The forwarding agent shall ship freight and select the persons involved in the carriage with a bona-fide freight

forwarder’s diligence, and shall protect the interests and perform the instructions of the shipper.

Article 732 – Client duties

1. At the request of the forwarding agent, the client shall timely provide him/her with appropriate data on the

freight and give him/her instructions necessary for drawing up the transportation documents, furnish the

necessary data to perform customs formalities and other actions and, if necessary, to pay import duties. In

addition, the client shall give the forwarding agent the necessary documents to confirm the veracity of such data.

2. In the case of hazardous freight, the client shall give the forwarding agent notice of the precise type of hazard

involved and, if necessary, instruct him/her on safety precautions.

3. If the forwarding agent was not aware of the danger associated with the hazardous freight, the freight may be

unloaded, destroyed or rendered harmless at any time and place without incurring an obligation to pay damages.

4. If the type of freight requires packaging, the client shall package the freight according to the transportation

requirements.

5. If special markings are required to identify the freight, the markings shall be clearly visible until the freight is

delivered.

6. The client shall be liable for damages incurred to the forwarding agent due to the non-performance of the

duties defined in the preceding paragraphs of this article, unless the forwarding agent, under paragraphs 3 and 4 of

this article, raises any objections over the absence or defectiveness of packaging or markings, even though it was

evident, or he/she had information about it when accepting the freight.

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Law of Georgia No 3806 of 12 November 2010 – LHG I, No 66, 3.12.2010, Art. 414

Law of Georgia No 5964 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 4925 of 28 June 2019 – website, 4.7.2019

Article 733 – Inspection of freight piece by piece

The client may demand, by paying a special fee that the forwarding agent inspect the freight piece by piece when

accepting it.

Article 734 – Duty to insure freight

The forwarding agent shall be liable to insure freight only when so instructed by the client. In the absence of any

special instructions, the forwarding agent shall insure freight only under regular terms.

Article 735 – Forwarding insurance contract

Unless the client expressly refuses in writing, the forwarding agent shall insure the freight, at the customer’s

expense against damages that may be incurred to the client as a result of the forwarding agent’s actions in the

course of performing the order. The forwarding agent shall notify the client of the party with which he/she has

entered into the insurance contract.

Article 736 – Duty to give timely notice of damage

Under the insurance contract entered into under Article 735, the client shall be responsible for timely notification

of damage. If a notice of damage is sent to the forwarding agent, then he/she shall immediately forward it to the

insurer(s).

Article 737 – Effects of non-acceptance of freight

If at the place of destination the consignee does not accept the freight or it is impossible to receive it for any other

reason, then the rights and duties of the forwarding agent shall be regulated by the rules of a contract of carriage.

Article 738 – Impossibility to inspect the condition of freight upon receipt

If the condition of freight cannot be inspected in the presence of the parties, then, until proven otherwise, the

acceptance of the freight shall be deemed to be the proof that the freight was received without shortage or

damage, unless the consignee indicates the general character of the damage to the person delivering the freight. If

there is any obvious shortage or damage, this shall be indicated immediately upon receipt of the freight, and if

there is no such shortage or damage, then no later than three days after the day of receiving the freight.

Article 739 – Right to transport the freight by own means

1. Unless otherwise agreed, the forwarding agent may transport the freight by his/her own means. The exercise of

this right shall not contradict the client’s rights and interests.

2. If the forwarding agent exercises this right, he/she shall simultaneously assume the rights and duties of the

freight carrier.

Article 740 – Liability of forwarding agents

The forwarding agent shall normally be liable for the duties arising out of the contract of forwarding when he/she

or his/her assistant is at fault.

Article 741 – Damage caused by a third party

If the damage is caused by a third party participating in the contract, then the forwarding agent, at the request of

the client, shall be obligated to assign his/her claim against the third party to the client, except when the

forwarding agent undertakes to exercise the claim himself/herself under a special agreement, at the expense and

risk of the client.

Article 742 – Reimbursement of damages caused by the forwarding agent’s culpable action

1. The forwarding agent may not resort to rules that exclude or limit his/her liability or shift the burden of proof if

the damage was caused through his/her intentional misconduct or gross negligence.

2. The same rule shall apply to the non-contractual liability of the assistant if he/she is found to be at fault under

paragraph 1 of this article.

Article 743 – Fee payment terms

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The fee shall be paid after the forwarding agent has delivered the freight to the carrier.

Chapter Sixteen

Brokerage

I – General Provisions

Article 744 – Concept

A person who promises a fee for brokerage services that provide opportunity to enter into a contract shall pay the

fee only if the contract is entered into as a result of these brokerage services. If a contract is entered into subject to

a condition precedent, the brokerage fee may only be demanded if the condition occurs. If the amount of the fee is

not specified, then the customary fee shall be deemed to have been agreed upon. Any agreement differing from

the first and second sentences of this article that is entered into to the detriment of the client shall be void.

Article 745 – Fee for a broker’s services

1. The fee for a broker’s contractual services that are not included in the brokerage services may be agreed upon

irrespective of whether or not the contract is entered into.

2. The broker may not stipulate or receive any advance payment under Article 744.

3. The broker’s expenses shall be reimbursed only if it was so agreed. This rule shall apply also when the contract

could not be entered into. Any agreement stipulating the reimbursement of expenses that are not necessary to

perform the brokerage contract shall be void.

Article 746 – Exclusive mandate

1. If the client is required to refrain from engaging another broker for a certain period of time (exclusive

mandate), then the broker shall be obligated to facilitate the conclusion of the contract during this period of time.

If the client acts contrary to the obligation defined in the first sentence, then the broker may claim damage if the

contract is concluded by engaging another broker. The contract may provide for a lump-sum payment for

damages depending on proof of the existence of damages. The amount may not exceed two per cent of the

contract price if the contract was intended for brokering a contract of sale.

2. The client may enter into a contract with a third party without engaging the broker. At the same time, it may

be agreed that the client is obligated to pay the appropriate fee even if he/she enters into a contract without

engaging the broker. The fee may not exceed two per cent of the contract price if the contract was intended for

brokering of a contract of sale.

3. Any agreement differing from these rules, which is entered into to the detriment of the client, shall be void.

4. An agreement for an exclusive mandate shall be made in writing.

Article 747 – Dissolution of brokerage contracts

1. A brokerage contract may be dissolved at any time without observing any time limit unless the term of the

contract is fixed.

2. An exclusive mandate may be dissolved only for a valid reason. It may be dissolved at any time after the lapse of

six months.

3. The right to dissolve the contract may be not be exercised even when a period of more than six months has

elapsed because the type and subject-matter of the contract to be brokered requires otherwise.

Article 748 – Inadmissibility of paying a broker’s fee

1. A broker may not be paid any fee or be reimbursed for any expenses if the contract made with a third party

concerns a thing owned by the broker. The same rule shall apply when some extraordinary circumstances pose a

risk to the broker’s exercise of the client’s interests, namely when:

a) the broker is a legal person or an association in which the third party has a legal and pecuniary interest;

b) the third party is a legal person or an association in which the broker has a legal and pecuniary interest;

c) the broker is in official business or labour relations with the third party;

d) the broker is the spouse of the third party.

2. The broker may receive a fee or compensation for expenses if he/she notifies the client of the circumstances

before entering into the contract with a third party.

3. The broker shall forfeit the claim to a brokerage fee or reimbursement of expenses if he/she acted in favour of

the third party contrary to the content of the contract.

4. An agreement contravening the rules defined in paragraphs 1 and 2 of this article shall be void.

II – Apartment Brokerage

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Article 749 – Apartment broker

1. The general rules governing brokerage shall apply to a contract under which a person (apartment broker)

undertakes to broker a tenancy agreement, unless otherwise stipulated in the apartment brokerage contract.

2. The rules regulating apartment brokerage shall not apply to contracts that pertain to apartment brokerage

during tourism and business trips.

Article 750 – Inadmissibility of receiving brokerage fee

1. An apartment broker may not claim any fee or reimbursement of expenses if:

a) under the tenancy agreement, an already existing tenancy to the same apartment is extended or otherwise

changed;

b) the tenancy agreement is concluded on a residential space administered by the apartment broker.

2. Any agreement made to the detriment of the client shall be void.

III – Loan Brokerage

Article 751 – Loan broker

The general rules governing brokerage shall apply to a contract under which a person (loan broker), undertakes to

broker a loan contract unless specific rules specified in Articles 752 and 753 require otherwise.

Article 752 – Form of a loan brokerage contract

1. The contract shall be made in writing.

2. The contract shall include the amount of the loan broker’s fee by indicating the rate of interest to be received

from the loan; in addition the contract shall include: the loan amount, duration, interest rate, maturity date,

repayment exchange rate, interest accrual period, additional expenses, the total amount to be paid by the client,

and the name and address of the lender. These rules shall not apply when the brokerage concerns a mortgage loan

or a loan issued to buy a plot of land that is to be used by the client for his/her independent professional,

entrepreneurial, departmental or employment activities.

3. The text of the contract shall not have any connection to the brokerage for the issuance of a loan. The loan

broker shall hand over a counterpart of the contract to the client.

Law of Georgia No 1826 of 30 June 2005 – LHG I, No 41, 19.7.2005, Art. 284

Article 753 – Duty to pay fee

1. The client shall pay a fee only if he/she receives the loan as a result of brokerage. Any agreement made contrary

to the client’s interests shall be void.

2. The loan broker may not demand any fee other than the one defined in paragraph 1 of this article for actions

relating to the brokerage of the loan.

Article 754 – Sales broker

The Law on Entrepreneurs shall apply to sales brokers.

Chapter Seventeen

Public Promise of a Reward; Competition

Article 755 – Concept

Anyone publicly promising a reward for the performance of an act, including for producing a certain outcome,

shall be obliged to pay the reward to the person who has performed the action. The person shall be entitled to the

reward even if he/she did not act because of the public promise of the reward.

Article 756 – Revoking a public promise of a reward

1. A public promise of a reward may be revoked before the announced action is performed. The revocation of a

public promise of a reward shall be valid if it is announced in the same way as the promise of a reward or through

a special notice.

2. Revocability may be waived in a public promise of a reward; in cases of doubt, the promise shall be presumed to

have been revoked if the action is not performed within the agreed upon time.

Article 757 – Action performed by more than one person

1. If an action for which a reward has been promised is performed by more than one person, then the reward shall

be granted to the person who performed the action first.

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2. If the action is performed simultaneously by more than one person, then the reward shall be apportioned to

each person. Where the reward cannot be apportioned due to its characteristics, or if, according to the terms of

the public promise of a reward, only one person is to be given the reward, then the matter shall be decided by

drawing lots.

Article 758 – Promising a prize

1. The person publicly promising a prize for the best performance of a certain work shall award it to the best

performer of the work.

2. The announcement of a competition is valid only if it sets a specific period of time for performing the work.

Article 759 – Inadmissibility of making changes to the terms of a competition

No change that is prejudicial to the participants of a competition may be made to the terms of the competition.

Article 760 – Deciding the winner of a competition

The person specified in the competition announcement or, where there is no such a person, the person

announcing the competition shall decide whether or not the work submitted within the set period of time meets

the requirements of the competition or which of the works is the best.

Article 761 – Competition won by more than one person

If the work for which a prize has been promised is performed by more than one person, the corresponding rules

governing a public promise of a reward shall apply to these persons.

Article 762 – Procedure for returning the works submitted to a competition

The competition announcer shall return to the participants the works submitted by them to the competition

unless otherwise determined by the competition announcement.

Chapter Eighteen

Bailment

Article 763 – Concept

Under a bailment contract, the bailee undertakes to keep a movable thing delivered to him/her by the bailor.

Article 764 – Bailment fee

1. Bailment shall be regarded as gratuitous unless otherwise agreed upon. If the bailee assumes safekeeping within

the scope of its business activities, a bailment fee shall be deemed to have been tacitly agreed.

2. If the amount of the fee is not determined, a tariff rate shall be deemed to have been agreed where such tariffs

exist, but where no tariffs exist, a customary fee shall apply.

Article 765 – Bailee’s duty for gratuitous bailment

If bailment is assumed gratuitously, then the bailee shall keep the thing as diligently as he/she would keep his/her

own thing.

Article 766 – Inadmissibility of transferring a thing to a third party

1. The bailee may not sub-bail the thing to a third party without the bailor’s permission.

2. If the sub-bailment is permitted, the bailiee shall be liable for only the fault that he/she has in selecting the

third party or place.

Article 767 – Inadmissibility of using bailed things

Without the bailor’s permission, the bailee may not use the thing that has been entrusted to him/her, except

where the use of the thing is necessary for preserving it.

Article 768 – Changing the procedure for storing things

The bailee may, if necessary, change the procedure for storing the thing. He/she shall notify the bailor about it.

The bailee shall also notify the bailor of any claims of third parties to the bailed thing.

Article 769 – Reimbursement of damages resulting from the features of the thing

The bailor shall reimburse the bailee for damage resulting from the features of the bailed thing, except where

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he/she did not know and could not have known of the dangerous features of the thing.

Article 770 – Time frames for returning bailed things

The bailor may, at any time, demand the return of the bailed thing even if the time for storing this thing has been

specified.

Article 771 – Duty to collect bailed things

1. The bailee may, at any time, demand that the bailor collect the bailed thing unless the time for keeping is

specified.

2. The bailee may exercise this right only in such a way as to enable the bailor to deposit the thing otherwise,

except where there is a valid reason for returning the deposited thing.

Article 772 – Place for returning deposited things

The deposited thing shall be returned at the place identified in the contract, except where another place of return

has been agreed to. The transportation expenses shall be borne by the bailor.

Article 773 – Duty to hand over the fruit of bailed things

1. The bailee shall hand over to the bailor the fruit that he/she has received during the bailment.

2. The bailor shall reimburse the bailee for the necessary expenses incurred for storing the thing.

Article 774 – Bailee’s liability for intentional misconduct or gross negligence

If a time is specified for collecting the bailed thing, after the expiration of the time the bailee shall be liable only

for intentional misconduct or gross negligence.

Article 775 – Duty to pay a fee

If the bailment is for consideration, the bailor shall pay the agreed fee to the bailee upon termination of the

contract.

Article 776 – Lien on the bailed property

The bailee may refuse to return the bailed thing until he/she is paid the fee due and reimbursed for expenses that

he/she has incurred for storing the thing.

Article 777 – Peculiarities of bailment of generic things

1. If a generic thing is deposited in such a way that the ownership is to be transferred to the bailee, and the bailee

has the obligation to return the thing of the same kind, quality and quantity, then the appropriate provisions of a

loan contract shall apply.

2. If securities are deposited, the agreement defined by paragraph 1 of this article shall be true only when it has

been directly included in the relevant contract.

Law of Georgia No 3726 of 16 November 2023 – website, 7.12.2023

Article 778 – Peculiarities of depositing things with innkeepers

Hotels, sanatoriums and guesthouses shall be liable for the damage incurred to a guest as a result of the loss,

destruction or damage to the goods that the guests brought. This rule shall not apply to money and valuables

unless they were deposited in a special manner.

Article 779 – Release from liability due to force majeure

Liability shall be excluded if the damage is caused by force majeure, by the guest or a person accompanying

him/her or by the features of the thing.

Chapter Nineteen

Warehouse Bailment

Article 780 – Concept

The corresponding rules governing a bailment contract shall apply to a warehouse bailment contract unless

otherwise provided for in this chapter.

Article 781 – Duty to perform storage duties in good faith

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The warehouseman shall perform storage duties with the diligence of a faithful businessman.

Article 782 – Inspection of quantity of goods by the warehouseman

1. When accepting goods for storage, the warehouseman shall not be obligated to inspect their quantity, size,

weight, type, quality or other features unless the rules of this chapter stipulate otherwise.

2. If the goods tendered to the warehouseman for storage are found to be damaged or incomplete at the time of

tendering and such condition is visible by external inspection as well, the warehouseman shall immediately notify

the depositor to that effect. If the warehouseman fails to perform this obligation, then he/she shall pay the

damages.

Article 783 – Right to inspect deposited goods

The warehouseman shall permit the depositor to inspect, take samples from or perform the necessary actions in

connection with the goods during working hours.

Article 784 – Obligation to give notice

The warehouseman shall immediately notify the depositor if he/she moves the deposited goods to another

warehouse or if he/she discovers a change in the features of the goods or a risk of such change. The warehouseman

shall notify the last holder of a warehouse receipt known to him/her. If the warehouseman fails to discharge

his/her duties, he/she shall pay damages.

Article 785 – Obligation to pay damages

The warehouseman shall be liable for the damage resulting from the loss and/or damage to the deposited goods,

except where the damages could not have been avoided even by a conscientious warehouseman.

Article 786 – Peculiarities of storing generic things

1. In cases of storing generic things, the warehouseman may mix them with other things of the same kind and

characteristics only if the depositor so permits.

2. The bailors shall have a co-ownership right to the goods resulted from such mixing. The portion of each bailor

shall be determined by the quantity of the goods deposited by him/her.

3. The warehouseman shall return the bailed goods to each depositor according to their due shares, without the

permission of the rest of the depositors.

Article 787 – Sale of deposited goods

If the deposited goods are perishable or change to such extent that they may suffer devaluation and the

warehouseman has no time or is unable to notify the authorised person about it, he/she may sell the goods.

Article 788 – Warehouse receipts

Upon accepting goods, the warehouseman shall issue a warehouse receipt to the depositor.

Article 789 – Particulars of a warehouse receipt

1. A warehouse receipt shall indicate:

a) issue date and registration number of the warehouse receipt;

b) identity and addresses of the parties;

c) place of storage;

d) storage rules;

e) description (quantity, size or weight) and quality of the goods to be stored; the description of packaging if the

goods are packaged;

f) amount of storage fees and other necessary expenses;

g) the amount of insurance if the goods to be stored are to be insured;

h) effective period of the contract;

i) the depositor’s signature certified with the appropriate seal.

2. Failure to fully reflect the conditions set out in this article in the warehouse receipt shall not release the parties

from any liabilities. The parties may incorporate other conditions, too, in the warehouse receipt.

Article 790 – Warehouse warrants

The holder of a warehouse receipt may pledge, through a certificate of lien (warehouse warrant), the goods

deposited at the warehouse for securing another obligation without removing goods from the warehouse

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Article 791 – Negotiable warehouse receipts

If a warehouseman issues a negotiable warehouse receipt, the receipt may be transferred to a third party by

endorsement.

Article 792 – Liability for endorsed warehouse receipts

1. If a warehouse receipt is issued by endorsement, then the warehouseman shall be liable to the receipt holder for

the accuracy of the conditions indicated in it, except when the receipt clearly indicates that the data are based on

the information supplied by the depositor or by a third party.

2. If the warehouseman knew that the data were incorrect, then he/she shall be liable even if he/she made the

indication under paragraph 1 of this article.

3. In the case of mixed storage, the warehouseman may not make the indication specified in paragraph 1.

Article 793 – Presumption of accuracy of endorsements

1. When returning goods deposited for storage, the warehouseman who issued a negotiable warehouse receipt

shall hand the goods over only to the lawful holder of the warehouse receipt.

2. If a warehouse warrant is issued, then the warehouseman shall demand its return.

3. The warehouseman shall not be obligated to check the accuracy of the endorsement. The transfer shall be

confirmed with an appropriate inscription on the warehouse receipt.

Article 794 – Loss of warehouse receipts

1. If a warehouse receipt or warrant is lost or destroyed, its lawful holder may apply to a court and demand that

the lost document be declared void and a new receipt or warrant be issued instead. The court shall consider the

application in special proceedings.

2. Based on the court decision, the warehouseman shall issue a new warehouse receipt or warrant.

Article 795 – Pledging of the deposited goods

1. To pledge the goods deposited at a warehouse, the pledger shall make a special inscription (endorsement) on the

warehouse warrant and give it to the interested person in that form.

2. The endorsement shall include the bailor’s and creditor’s identities and the extent of the liability.

3. The warehouseman shall be notified of the transfer of the warehouse warrant to the creditor and the

warehouseman shall make the appropriate note.

Article 796 – Transfer of lien to the new holder of the warehouse receipt

1. Due to storage expenses, the warehouseman shall have lien on the goods until the goods are in his/her

possession.

2. If a warehouse receipt is issued by endorsement, then the lien shall exist in relation to the new holder of the

warehouse receipt.

Article 797 – Inadmissibility of taking back deposited goods

The warehouseman may not demand that the depositor take back the deposited goods until the agreed period of

time expires or where no such period is specified, until three months expire from the date of depositing.

Article 798 – Setting an additional period of time for reclaiming goods

1. If after the expiration of a storage period the warehouse receipt holder avoids reclaiming the goods from the

warehouse, the warehouseman shall set him/her an additional period of two weeks for reclaiming the goods. If the

warehouse receipt holder does not claim the goods within such period either, the warehouseman may sell the

goods.

2. The proceeds of the sale of the goods, less the amount of expenses payable to the warehouseman, shall be

transferred to the warehouse receipt holder.

Chapter Twenty

Insurance

I – General Provisions

Article 799 – Concept

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1. Under an insurance contract the insurer shall be obligated to compensate the insured for the damages resulting

from the occurrence of an insured event, subject to the terms of the contract. If insurance involves a firm fixed

insured sum, the insurer shall be obligated to pay the insurance amount or perform any other promised action.

2. The policyholder shall pay the insurance contribution (premium).

3. A derivative shall not be an insurance contract. Relations arising from derivatives shall be regulated under the

Law of Georgia on Financial Collaterals, Mutual Setoffs and Derivatives. This article and Articles 800-858 of this

Code shall not apply to relations arising from the said law.

Law of Georgia No 5674 of 20 December 2019 – website, 31.12.2019

Article 800 – Obligation to enter into an insurance contract

A person who publicly offers to conclude an insurance contract shall enter into the contract unless there is a valid

reason for refusal.

Article 801 – Compulsory insurance

The law may provide for compulsory insurance to which the rules of this chapter shall apply unless they

contradict compulsory insurance legislation. Matters relating to reinsurance shall be regulated according to the

procedure set down by law.

Article 802 – Insurance certificate (policy)

1. The insurer shall be obligated to deliver to the insured a document relating to the insurance contract (insurance

certificate (policy)). The document shall bear a handwritten or an electronic signature. However, an electronic

document issued by the insurer shall bear a qualified electronic signature and/or a qualified electronic seal. The

insurer may deliver an insurance certificate (policy) to the insured in electronic form as determined by the

legislation of Georgia.

2. The insurance policy shall include:

a) the identities of the parties to the contract and their domiciles (place of residence or legal address);

b) the object of the insurance and the name of the insured person;

c) the definition of the insurance risk;

d) the commencement and duration of the insurance;

e) the amount of insurance;

f) the amount of the insurance premium and the place and time of its payment.

3. If the object of the insurance is the life of a person, then additional data shall be required on the conditions of

calculating the profit of the insurer and on the conditions of distribution of the profit.

Article 803 – Types of insurance policies

If the insurance policy is issued to a bearer as blank endorsed or to order, the insurer may assert against the holder

of the policy all the claims that he/she has against the original policyholder. This rule shall not apply if the holder

of the insurance policy notifies the insurer of the transfer of insurance rights to him/her and the insurer does not

immediately assert his/her claims.

Article 804 – Effects of losing an insurance policy

1. If under a contract the insurer must perform his/her duty only after the insurance policy has been presented but

the policy is lost or destroyed, the policyholder may claim performance only if the insurance policy has been

declared void under special proceedings.

2. If the insurance policy is lost or destroyed, the insured may demand a copy from the insurer. The expenses of

issuing the copy shall be borne by the policyholder.

Article 805 – Rights of insurance agents

1 If an insurance agent (representative) is entitled to enter into an insurance contract, he/she may also amend the

terms of the contract, prolong the contract or dissolve it.

2. An insurance agent brokering an insurance contract may enter into such contract.

Article 806 – Time of commencement of insurance

1. The insurance shall commence at 24:00 on the day the contract is entered into and shall end at 24:00 on the last

day of the contract period.

2. If the insurance contract is made for a period of more than five years, either party may terminate the contract

three months after giving a notice of termination.

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Article 807 – Effects of increasing the insurance premium

If the insurer increases the insurance premium, the insured may terminate the contract one month after giving a

notice of termination. This right shall not arise if the insurance premium is increased slightly.

Article 808 – Obligation to communicate information

1. When entering into a contract, the insured shall inform the insurer of all circumstances known to him/her that

are material to the occurrence of the danger or event covered by the insurance. The circumstances that can

influence the insurer’s decision to repudiate the contract or enter into it on modified terms shall be deemed to be

material.

2. Any circumstance, about which the insurer clearly and unequivocally inquires of the insured, shall also be

deemed as material.

3. If contrary to the rules under paragraph 1 of this article the insurer is not informed of a material circumstance,

then the insurer may repudiate the contract. The same shall hold true if the insured intentionally avoids

informing the insurer of a material circumstance.

4. The contract may not be terminated if the insurer knew of the concealed circumstances or if the insured was

not responsible for the failure to communicate them.

Article 809 – Effects of communicating incorrect information

1. The insurer may also repudiate the contract if the notice of material circumstances includes incorrect data.

2. The contract may not be repudiated if the insurer knew of the inaccuracy of the data or if the insured was not

responsible for communicating the incorrect data. The insurer may terminate the contract within one month after

the communication of such data.

Article 810 – Termination of insurance contracts by reason of failure to communicate information

If the insured was required to respond to written queries about the circumstances of a danger, the insurer may

terminate the contract for the failure to communicate the circumstances, which, though not inquired about, were

intentionally withheld by the policyholder.

Article 811 – Period for termination of contracts by reason of failure to communicate information

1. The insurer may terminate the contract within one month after the failure to communicate the information

defined under this chapter. The period shall commence from the moment the insurer became aware of the breach

of the duty to give notice.

2. The insured shall be notified of termination of the contract.

Article 812 – Termination of a contract after the occurrence of insured events

If the insurer terminates the insurance contract after the occurrence of an insured event, it shall not be released

from its duty if the circumstance with respect to which the duty to give notice was breached had no influence on

the occurrence of the insured event and on performance of the insurer’s duty.

Article 813 – Obligation to give notice of increased risk

1. The policyholder shall immediately notify the insurer of an increased risk arising after the contract was

concluded if it would have a material influence on the conclusion of the contract.

2. Where so provided for in paragraph 1 of this article, the insurer may terminate the contract one month after

giving a notice of termination or demand a corresponding increase in the insurance premium. If the insured

intentionally causes the increased risk, the insurer may terminate the contract without observing the notice

period.

Article 814 – Obligation of notifying about an insured event

1. Upon becoming aware of the occurrence of an insured event, the policyholder shall notify the insurer.

2. After the occurrence of the insured event, the insurer may demand any kind of information from the insured

necessary to determine the extent of the insured event or of the liability.

3. The insurer may not resort to an agreement under which it is released from liability in the event of the

policyholder’s failure of notification, but if such failure of notification does not materially prejudice the insurer’s

interests.

4. The insurer shall perform its duty after having ascertained the insured accident and the extent of compensation.

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II – Insurance Premiums

Article 815 – Obligation to pay insurance premiums

1. The policyholder shall be obligated to pay the insurance premium only after obtaining the insurance document.

2. If interest in the insurance is lost, the insurer may demand that part of the insurance premium that corresponds

to the duration of the risk assumed. The insurer may demand corresponding compensation for the services.

Article 816 – First insurance premium

Until the first or one-time insurance premium is paid, the insurer shall be free from liability.

Article 817 – Late payment of insurance premium

1. If an insurance premium is not paid on time, the insurer may specify a two-week payment term in writing, and

shall indicate the consequences of the failure to pay within the specified term.

2. If the insured event occurs after the expiry of such term and by that time the policyholder has delayed the

payment of the premium or interests, the insurer shall be released from liability.

Article 818 – Contract termination by reason of late payment of insurance premiums

If the policyholder does not pay the insurance premium on time, the insurer can give the policyholder a one

month’s prior notice of termination of the contract and terminate the contract if the term expires without

payment.

Article 819 – Discontinuing the payment of insurance premiums

The policyholder may discontinue the payment of insurance premiums if it turns out after concluding the contract

that the insurer’s financial condition has worsened to the extent that there is a real risk that the insurer may

default on its contractual obligations if the insured event occurs.

III – Insurance against Damages

a) Content of the Contract

Article 820 – Monetary liability for damages

In cases of insured damage, the insurer shall pay the damages in money.

Article 821 – Extent of liability for damages

The insurer shall pay the damages only to the extent of the insured amount.

Article 822 – Insurance comparison

1. If it is discovered that the insured amount significantly exceeds the value of the insured interest (insured value),

then either the policyholder or the insurer may demand that the insured amount be reduced with immediate

corresponding reduction of the insurance premium in order to avoid excessive insurance.

2. If the policyholder, with the intent to receive illegal income, concludes the contract by increasing the

insurance, then the contract shall be deemed void. The insurer shall retain the insurance premiums paid before

the invalidity of the contract if it was not aware of the invalidity at the moment that the contract was concluded.

Article 823 – Peculiarities of property insurance

The value of a property shall be deemed to be the amount of the property insurance, unless otherwise determined

by the circumstances of the case.

Article 824 – Insurance of lost benefit

Insurance shall apply to the benefits lost due to the occurrence of an insured event, if so provided for in the

agreement.

Article 825 – Insurance of unity of things

If a unity of things is insured, the insurance shall apply to all the things in it.

Article 826 – Amount of insurance compensation

The insurer shall not be obligated to pay the policyholder any sum in excess of the extent of the damage even if

the insured amount exceeds the insured value at the moment when the insured event occurs.

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Article 827 – Underinsurance or partial insurance; double insurance

1. If the insured mount is less than the insured value at the moment when the insured event occurs

(underinsurance or partial insurance), the insurer shall pay the damages according to the ratio of the insured

amount to the insured value.

2. The person who has insured the same interest concurrently with several insurers shall immediately notify each

insurer about it. The notice shall indicate the identity of all the insurers and the amount of insurance.

3. If the given interest is insured against the same risk with several insurers and the combined amounts of

insurance exceed the insured value or if because of other reasons the combined amount of the compensations that

would have been paid by the insurer if there had been no other contract, exceeds the total damage (double

insurance), then the insurers shall be liable before the policyholder as joint and several debtors to the extent of the

sum that they have agreed under the contract of insurance, but the policyholder may not receive in total the sum

exceeding the real damage.

Article 828 – Invalidity of double insurance

If the policyholder concludes double insurance to receive illegal income, then each contract concluded for this

purpose shall be deemed to be void.

Article 829 – The fault of the policyholder upon occurrence of the insured event

The insurer shall be released from liability if the policyholder causes the event covered by the insurance by intent

or gross negligence.

Article 830 – Duty to fulfil the insurer’s instructions

1. If the event covered by insurance occurs, the policyholder shall be obligated to avoid or reduce the damage as

far as possible and fulfil the insurer’s instructions in that respect.

2. The insurer shall reimburse the expenses that have been incurred by its instructions.

Article 831 – Insurance against damages caused by war or other force majeure

The insurer shall be liable for damages caused by war or other force majeure only if so provided by a special

agreement.

Article 832 – Claim for damages asserted against a third party

1. If the policyholder can assert a claim for damages against a third party, then the claim shall be transferred to the

insurer if it pays the damages to the policyholder. If the policyholder waives his/her claim against the third party

or the right to secure his/her claim, then the insurer shall be released from liability for the damages to the extent

of the amount that it could have received by exercising its rights or by asserting its claim to receive compensation

for its expenses.

2. If the right of the policyholder to claim damages concerns family members living with him/her, the right may

not be transferred if the family member has intentionally caused the damage.

Article 833 – Effects of alienating insured property

If the insured property is alienated, then the rights and duties of the policyholder shall pass to the acquirer.

Article 834 – Obligation to notify of the alienation of the insured property

The insurer shall immediately be notified of alienation of the insured property. If the acquirer or the alienator

does not notify the insurer immediately, the insurer shall be released from liability if the insured event occurs

after two weeks from the moment when the insurer ought to have received the notice.

Article 835 – Termination of insurance upon alienation of property

1. The insurer may terminate the insurance contract with the acquirer after giving one month’s notice of

termination. The right to terminate the contract shall become invalid if the insurer does not exercise the right

within one month after it became aware of the alienation of the property.

2. The acquirer may terminate the insurance contract; it may terminate the contract only immediately or upon the

expiry of the current insurance period. The right to terminate shall be extinguished if the acquirer does not

exercise the right within one month after the acquisition; however, if the acquirer was not aware of the insurance,

the right to terminate shall be valid until the expiry of one month from the moment when the buyer became

aware of the insurance contract.

3. If the insurance contract is terminated under these rules, then the alienator shall be obligated to pay the insurer

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the insurance premium, but not more than what he/she ought to have paid during the insurance period up to and

including the moment of the termination of the contract; in that case, the acquirer shall not be liable for payment

of the insurance premium.

b) Insurance for the benefit of another person

Article 836 – Concluding an insurance contract for the benefit of another person

The policyholder may conclude an insurance contract with the insurer in his/her own name for the benefit of

another person. That person need not be named.

Article 837 – Rights of another person under insurance contracts

1. If the insurance is for the benefit of another person, the rights arising out of the contract shall accrue to that

person. Only the policyholder may demand the insurance policy.

2. The insured person may exercise his/her rights without agreement with the policyholder and seek the exercise

of his/her rights through a court only if he/she holds the insurance policy.

Article 838 – Rights of the policyholder

1. The policyholder may exercise, in his/her own name, the rights to which an insured person is entitled under

the insurance contract.

2. If the insurance policy is issued, then the policyholder may receive compensation without the insured person’s

consent or transfer the right to the insured person only if the policyholder holds the insurance policy.

3. The insurer shall pay the policyholder for the benefit of the insured person only if the policyholder proves that

the insured person consented to the insurance contract.

c) Civil liability insurance

Article 839 – Concept

Under a civil liability insurance contract, the insurer shall release the policyholder from the obligations imposed

on the insured as a result of his/her liability to a third party arising during the insurance period.

Article 840 – Claim for direct payment of damages

The insurer, within the limits of its liability, shall directly pay damages to the person who suffered the damages, if

that person presents a claim to the insurer.

Article 841 – Court and out-of-court expenses

The insurance shall also cover the court and out-of-court expenses incurred for defence against the claim of a

third party if the circumstances of the case warrant such expenses.

Article 842 – Releasing the insurer from liability

The insurer shall be released from liability if the policyholder intentionally causes the circumstance that creates

its liabilities to a third party.

Article 843 – Liability under compulsory insurance

1. If the insurer is released, in full or in part, from liability to the policyholder, its liability to the third party shall

hold where so provided by the law on compulsory insurance.

2. If the insured satisfies the claim of the third party, then the claim of the third party against the policyholder

shall pass to the insurer.

III 1 – Health Insurance

Law of Georgia No 1115 of 28 June 2017 – Website, 10.7.2017

Article 843 1 – The concept

1. Under a health insurance contract, an insurer shall reimburse for the treatment expenses connected with the

deterioration of the health status or the health injury of an insured person, and other medical service expenses

agreed upon under this contract in accordance with the procedure and conditions established by the same

contract.

http://www.matsne.gov.ge 040.000.000.05.001.000.223

2. A health insurance contract may be concluded by a policyholder in favour of an insured person.

Law of Georgia No 1115 of 28 June 2017 – Website, 10.7.2017

Article 843 2 – Assertion of a claim for damages against a third party

1. If an insured person has the right to assert a claim for damages against a third party, the claim shall be

transferred to an insurer if the insurer reimburses the insured person for the damages.

2. An insurer may assert a claim for damages against a third party only after it reimburses an insured person for

the damages, to the extent of the reimbursed amount of damage. If the insured person waives the claim for

damages asserted against the third party, the insurer shall be released from the duty to reimburse for the damages.

Law of Georgia No 1115 of 28 June 2017 – Website, 10.7.2017

Article 843 3 – Application of the damage insurance standards to health insurance

Only Articles 820 and 821 of this Code out of the damage insurance standards shall apply to health insurance.

Law of Georgia No 1115 of 28 June 2017 – Website, 10.7.2017

IV – Life Insurance

Article 844 – Concept

1. Life insurance may cover the policyholder or another person.

2. If a life insurance contract is concluded for the benefit of another person, the written consent of such person or

his/her legal representative shall be required.

Article 845 – Inadmissibility of repudiating a contract

If at the time of concluding the contract the policyholder breaches his/her duty to communicate information, the

insurer may not repudiate the contract if five years has passed since the contract was concluded. Repudiation of

the contract shall be allowed if the duty to communicate information was not fulfilled intentionally.

Article 846 – Termination of the contract where insurance premium is paid periodically

If the insurance premium is paid periodically, the insurer may terminate the insurance contract at any time but

only at the end of the current insurance period.

Article 847 – Transfer of the right to compensation to a third person

1. In the case of a cumulative insurance, the policyholder may transfer the right to receive benefits to a third party

or replace the third party with another person, unless otherwise provided by the contract.

2. The third party entitled to receive benefits may exercise the right only upon occurrence of the insured event,

unless the policyholder has instructed otherwise.

Article 848 – A non-rightful third party

1. If the right of the third party does not correspond to the duty of the insurer in the case of cumulative insurance,

then the policyholder shall retain this right.

2. If the third party does not exercise his/her right to receive the benefit in the case of cumulative insurance, then

the policyholder shall retain this right.

Article 849 – Releasing the insurer from liability for damages

1. If the insurance contract is covering the death of another person, then the insurer shall be released from

liability if the policyholder intentionally causes the death of such person by acting illegally.

2. If a third party has the right to receive the benefit in the case of life insurance, this right shall not be recognised

if he/she, by acting illegally, intentionally caused the death of the person whose life was insured.

Article 850 – Release from liability for compensation in the case of suicide

1. The insurer shall be released from liability if the person whose life was insured commits suicide.

2. The heir of the policyholder may claim a refund of the insurance premiums paid.

Article 851 – Substitution of insurance contracts

1. The policyholder may demand, at any time before the end of the current insurance period, substitution of the

insurance contract with a premium-free insurance contract.

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2. If the policyholder demands such substitution, then from that moment on the amount of insurance or the

amount of benefit shall be substituted with the amount that corresponds to the liability of the insurer, considering

the age of the insured person, provided the reserve of accumulated premiums is regarded as a single premium.

Article 852 – Deductions upon termination of the contract

If a life insurance contract is terminated due to repudiation, dissolution or dispute, the insurer shall refund the

amount of the premium that it has received under the contract. The insurer may also make appropriate

deductions.

Article 853 – Effects of forced execution

1. If a judgment on an insurance claim is enforced or if a legal proceeding is pending in relation to the bankruptcy

of the insured, then the person who is specifically named as the beneficiary may take the place of the policyholder

in the insurance contract. If the person entitled to the benefits participates in the contract, then he/she shall meet

all the requirements of the creditor or secure the bankruptcy assets to the extent of the amount that the

policyholder could have received from the insurer upon termination of the insurance contract.

2. If the person entitled to the benefit is not interested in receiving the benefit or if he/she is not designated by

name, then the spouse and children of the policyholder shall acquire this right.

V – Accident Insurance

Article 854 – Concept

1. An accident insurance contract may be concluded for an accident affecting either the policyholder or another

person.

2. If the accident insurance contract is concluded not by the insured person but for his/her benefit, then the life

insurance rules shall apply to such contract.

Article 855 – Effects of injury to health

If the insurer’s liability depends on injury (harm) intentionally done to health, then the absence of intent shall be

presumed until proven otherwise.

Article 856 – Effects of intentionally causing an accident

1. The insurer shall be released from liability if the person entitled to benefits under a contract concluded for the

benefit of another person intentionally causes the accident by acting illegally.

2. If another person has the right to receive the benefit, he/she shall be deprived of the right if he/she

intentionally causes the accident by acting illegally.

Article 857 – Duty to notify accidents

If the duties are to be performed for the benefit of the person entitled to benefits, then this person shall make a

declaration about the accident. This rule shall also apply to the duties of communicating information and handing

over documents.

Article 858 – No right of recourse

The policyholder has no right of recourse against the person who is liable for the damage.

Chapter Twenty-one

Banking

I – Settlement Account

Article 859 – Concept

1. Under a settlement account contract, a credit institution shall be obligated to make payments from its

customer’s account within the limits of the funds available in the account and credit incoming amounts to the

account.

2. The same operations may be performed in cash by the account holder’s instructions.

3. Under the agreement of the parties, the account holder may be obligated to pay service costs.

Article 860 – Obligation to issue account statements

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1. A credit institution shall keep a ledger for both cash and non-cash settlements.

2. A credit institution shall be obligated to provide information to the account holder on the status of his/her

account (account statement) within the times provided for in the contract; and the account holder may, at any

time, demand information on the status and credit and debit entries of the account.

Article 861 – Debiting funds from the account

A credit institution shall be obligated to debit funds from the account when the account holder permits or

instructs it to do so. Otherwise, the credit institution shall credit the damage incurred and wrongly transferred

sums to the account of the account holder.

Article 862 – Effects of cancellation of the account holder’s order

1. The account holder may cancel an order given to the credit institution before a transfer is actually made.

Otherwise, the credit institution shall immediately notify the appropriate persons of the refusal of performance.

2. If the order is cancelled timely, the credit institution must reinstate the amount to the holder’s account.

Article 863 – Obligation to keep confidentiality

1. A credit institution shall keep secret the facts relating to the account and other facts made known to it in the

course of business relations with the account holder except as provided by law or except where the matter

concerns ordinary banking information that is not prejudicial to the account holder’s interests.

2. This obligation of the credit institution shall survive the termination of the contract.

Article 864 – Termination of settlement account contracts

1. Either party may terminate a settlement account contract at any time.

2. The credit institution may terminate the settlement account contract only in such a way as to enable the

account holder to otherwise receive settlement account services, except when there is a material reason for its

termination or if termination of the contract by the credit institution is defined by law.

Law of Georgia No 4463 of 28 October 2015 – website, 11.11.2015

Article 865 – Cheque payments

Under the relevant agreement, the credit institution shall pay cheques signed by the account holder to the extent

of the assets in the account in accordance with the Law on Cheques. In this case, the rules governing non-cash

settlement contracts shall apply.

Article 866 – Collection of checks

Even without any additional agreement, a credit institution shall be obligated to the account holder under a

settlement account contract to collect the checks presented by the account holder by timely presenting such

checks to a credit institution and, in the case of non-payment, undertake necessary measures to secure the

payment.

II – Bank Credit

Article 867 – Concept

Under a bank credit contract, the lender makes or is bound to make available to the borrower a credit for

consideration in the form of a loan.

Article 868 – Interest rates on bank credits

1. Under the agreement of the parties, the fixed interest rate and the indexed interest rate may be defined for

creditors.

2. For the purposes of this article, the fixed interest rate shall be the interest rate which is fixed in an agreement

and does not change during the entire term of the agreement, or which may be changed upon the onset of certain

circumstances (except for the change of the public index) under the agreement. The automated change of the

interest rate which is caused by the onset of circumstances related to the actions of the customer, in accordance

with the pre-determined provisions of the agreement, shall not be construed as the change of the interest rate.

3. For the purposes of this article, the indexed interest rate shall be the interest rate which, under certain rules, is

related to the public index and the change of which is caused by the change of the said index.

4. The maximum and minimum fixed interest rate variation thresholds and the minimum interval of variation

shall be determined at the time of concluding a credit contract.

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5. The lender shall notify the borrower of the interest rate in an acceptable manner.

6. If the annual interest rate is not indicated, then only the annual interest rate provided by law shall apply. If the

imposition of costs was not provided at the time of calculating the annual interest rate, then such costs shall not be

compensated.

7. When a bank credit is granted, the requirements under Article 625 of this Code with regard to an interest rate,

a penalty, financial expenses and any type of financial sanction must be complied with.

8. Unless otherwise determined by the legislation of Georgia, a bank credit of up to GEL 200 000 (two hundred

thousand) shall be granted only in GEL, except when the total liabilities of a borrower to the same bank credit

provider as a result of granting the bank credit exceed 200 000 (two hundred thousand). For the purposes of this

paragraph, any bank credit attached or indexed, in any form, to a foreign currency shall not be considered as

having been granted in GEL.

Law of Georgia No 239 of 29 December 2016 – website, 13.1.2017

Law of Georgia No 1901 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 3315 of 21 July 2018 – website, 7.8.2018

Law of Georgia No 4104 of 22 December 2018 – website, 10.1.2019

Article 869 – (Deleted)

Law of Georgia No 5127 of 29 June 2007 – LHG I, No 27, 17.7.2007, Art. 260

Article 870 – Using additional security

1. If proprietary or personal security is agreed upon at the time of granting credit, then the lender may demand

the use of additional security if the loan is not repaid in full.

2. At the request of the borrower, the lender shall be obligated to return any security that exceeds the agreed

limits of repayment.

Article 871 – Termination of contracts

1. If a fixed interest rate for a credit is agreed for a certain period, the borrower may terminate the credit contract

if the obligation to pay interest ends before the stipulated loan repayment date and if no new agreement on the

interest rate is concluded. The time frame for termination shall be one month.

2. If the borrower is a consumer and the credit is not secured by a mortgage, then the right of termination shall

arise six months after the credit is granted. The time frame for termination shall be three months.

3. After the lapse of ten years the right of termination shall apply in any case. The time frame for termination shall

be six months.

4. The borrower may terminate a loan with a variable interest rate at any time, by giving three months’ notice of

termination.

Article 872 – Compensation for damages incurred by prepayment of a credit

If a borrower repays the credit before the end of the credit contract, then the lender may claim adequate damages.

At the same time, the damages shall include the value of saved expenses as well as the benefit that the creditor

would have received by using the loan currency otherwise, or if the borrower intentionally prevented the receipt

of such benefit.

Article 873 – Termination of a credit contract in case of repayment in instalments

A lender may terminate the credit contract if the repayment is to be made in instalments but the borrower has

delayed the repayment of at least two instalments in a row. The termination shall take effect if the repayment is

not made even within the additional two-week grace period.

III – Deposit

Article 874 – Concept; liability of the directors of credit institutions

1. When a sum of money is deposited with a credit institution (deposit), the institution shall acquire title to it and

shall return, when due, the sum received in the same currency.

2. If the maturity date is not fixed, the sum of money may be claimed back at any time.

3. Interest shall appropriately accrue on deposits.

4. The depository and the directors (managers) of the credit institution shall provide the depositor with

information on the liquidity of the bank and indicators of profit from bank deposits.

5. A person who culpably releases false information or refuses to release the necessary data shall be obligated to

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reimburse the depositor for any damage resulting from the release of false information or from the refusal to

release information.

6. The bank directors (managers) who publish false information on the liquidity and indicators of profit from bank

deposits through promotional brochures or otherwise shall likewise be jointly and severally liable.

Article 875 – passbook

A credit institution may issue a savings book in a nominative form (for a particular person) only.

Law of Georgia No 2617 of 23 July 2003 – LHG I, No 22, 8.8.2003, Art. 167

IV – Documentary (Commercial) Letter of Credit; Documentary Collection

Article 876 – Concept

1. By issuing a documentary letter of credit, the credit institution (issuing bank) shall be obligated to pay, on

instructions from the customer (account party), a certain amount to a third party (the beneficiary) against delivery

of the said document by order of the latter, or to pay a bill of exchange presented by the beneficiary, to perform

acceptance, or to instruct another bank to perform the transaction, provided the credit terms are met.

2. The customer shall be obligated to pay an agreed fee.

Article 877 – Collection order

By a collection order, the credit institution authorized for the collection operation (the bank) shall undertake to

issue negotiable securities on the order of the customer (principal), in exchange for acceptance and/or, where

necessary, in exchange for payment by the payer.

Article 878 – International transaction practices

Unless otherwise agreed, the rights and duties of the parties shall be determined according to the accepted

practices of international transactions for documentary letters of credit and collection orders.

V – Bank Guarantee

Article 879 – Concept

By virtue of a bank guarantee, a bank or any other credit institution or insurance organisation (guarantor)

undertakes in writing, at the request of another person (the principal), to pay a sum of money to the principal’s

creditor (the beneficiary), according to an assumed obligation, at the principal’s written request.

Article 880 – Fee for bank guarantee

1. The bank guarantee shall secure the due performance of the principal’s obligation before the beneficiary.

2. The principal shall pay the guarantor an agreed fee for issuing the bank guarantee.

Article 881 – Independence of the guarantor’s obligation from the primary obligation

In the relations between the guarantor and the beneficiary, the guarantor’s obligation under the guarantee to the

beneficiary shall not depend on the primary obligation, for the performance of which it is issued, even when the

guarantee includes a reference to this obligation.

Article 882 – Irrevocability of a bank guarantee

The bank guarantee may not be revoked by the guarantor unless otherwise provided for in the guarantee.

Article 882 1 – The right to transfer a bank guarantee issued by a bank to another bank

For the purposes of the liquidation of a bank, a liquidator shall be entitled to transfer a bank guarantee issued by

the bank to another bank without the consent of the beneficiary and the principal.

Law of Georgia No 1901 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 2622 of 22 February 2023 – website, 10.3.2023

Article 883 – Inadmissibility of transferring the beneficiary’s claim to another person

The beneficiary’s claim against the guarantor arising out of a bank guarantee may not be transferred to another

person unless otherwise provided for in the guarantee.

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Article 884 – Validity of the bank guarantee

The bank guarantee shall take effect from the day of its issuance unless otherwise provided for in the guarantee.

Article 885 – The form of presenting a claim

1. The beneficiary’s claim for the payment of a sum of money due under the bank guarantee shall be presented to

the guarantor in written form, together with the documents indicated in the guarantee. In the claim or in the

supporting documents the beneficiary shall indicate the nature of the principal’s breach of the primary obligation

for which the guarantee was issued.

1 1 . The beneficiary need not present to the guarantor a written claim for payment of a sum of money if there is an

agreement between the beneficiary and the guarantor on the receipt of payment claims through electronic means.

2. The beneficiary shall present its claim to the guarantor before the expiry of the guarantee period.

Law of Georgia No 3537 of 21 July 2010 – LHG I, No 47, 5.8.2010, Art. 304

Article 886 – Guarantor’s obligation upon receipt of the beneficiary’s claim

1. Upon receipt of the beneficiary’s claim, the guarantor shall notify the principal to that effect and deliver to

him/her a copy of the claim with all the documents relating to it.

2. The guarantor shall consider the beneficiary’s claim together with the enclosed documents within a reasonable

period of time and exercise reasonable diligence to determine whether or not the claim and the enclosed

documents meet the terms of the guarantee.

Article 887 – Guarantor’s refusal to satisfy the beneficiary’s claim

1. The guarantor shall deny the beneficiary’s claim if the claim or the enclosed documents do not meet the terms

of the guarantee, or if they are presented to the guarantor after the expiry of the period of time defined in the

guarantee. The guarantor shall immediately notify the beneficiary of the refusal to satisfy his/her claim.

2. If before satisfying the beneficiary’s claim the guarantor becomes aware that the primary obligation secured by

the bank guarantee has already been fully performed in the relevant part, has been terminated for other reasons or

is void, he/she shall immediately notify the beneficiary and the principal. If the beneficiary makes a repeated

claim to the guarantor after receiving such notification, the guarantor shall satisfy the beneficiary’s repeated

claim.

Article 888 – Extent of the guarantor’s obligation

A guarantor’s obligation under a bank guarantee to the beneficiary shall be limited to payment of the amount for

which the guarantee was issued.

Article 889 – Reasons for terminating the guarantor’s obligation

1. The guarantor’s obligation to the beneficiary shall terminate:

a) by payment to the beneficiary of the amount for which the guarantee was issued;

b) upon expiry of the guarantee period;

c) upon the beneficiary’s waiver of his/her rights arising out of the guarantee and return of them to the guarantor.

2. The guarantor who has become aware of the termination of the guarantee shall immediately notify the

principal.

Article 890 – Right to claim compensation by way of recourse

1. The guarantor’s right to claim from the principal, by way of recourse, the amount compensated to the

beneficiary under the bank guarantee shall be determined under the guarantee agreement concluded between the

guarantor and the principal.

2. The guarantor may not claim from the principal an amount that has been paid to the beneficiary contrary to the

terms of the guarantee, or due to the breach of the guarantor’s obligation to the beneficiary, unless otherwise

provided under the agreement between the guarantor and the principal.

Chapter Twenty-two

Suretyship

Article 891 – Concept

1. Under a contract of suretyship, the surety assumes an obligation to the creditor of a third party to be responsible

for discharging the third party’s liability.

2. The suretyship may be used for future and contingent liabilities as well.

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Article 892 – Form of suretyship

1. For the suretyship to be valid, a written application of the surety shall be required and the document (contract)

of suretyship shall indicate the maximum amount of the surety’s quantified liability.

2. If a person offers to stand as surety within the scope of his/her professional activities, this form need not be

observed.

Article 893 – Basis for the surety’s liability

The currently applicable amount of the main obligation shall determine the liability of the surety. The liability of

the surety shall not be extended by a transaction that the principal debtor undertakes after assumption of the

suretyship and shall not apply to relations arising out of such transaction.

Article 894 – Surety’s refusal to satisfy the creditor

The surety may refuse to satisfy the creditor until the creditor attempts forced execution against the principal

debtor.

Article 895 – Joint and several liability of the surety

If the surety undertakes liability jointly or in another equivalent form, then the claim may be asserted against

him/her even without the attempt of forced execution, if the principal debtor exceeded the payment due date and

has been given a notice to no effect or if his/her insolvency is obvious.

Article 896 – Liability of co-sureties

If several persons are sureties for the same obligation, then they shall be jointly and severally liable even if they do

not assume suretyship jointly.

Article 897 – Liability for the obligations assumed by previous sureties

A surety who has undertaken to a creditor to discharge the obligations assumed by previous sureties shall be

jointly liable with them in the same manner as, ordinarily, a surety is liable jointly with the principal debtor.

Article 898 – Extent of the surety’s liability

1. The surety shall in any case be liable only to the extent of the maximum amount indicated in the document of

suretyship.

2. Unless otherwise agreed, the surety shall be liable to the extent of that maximum amount:

a) for the corresponding amount of the principal debt, in particular, including when the principal debt has

changed due to the principal debtor’s fault or due to delay in payment. The surety shall be liable for contractual

penalties or for the total amount of damages that were stipulated up to the end of the contract, only if so

specifically agreed;

b) for the contract termination expenses and court charges that are to be compensated by the principal debtor,

provided the surety had the possibility to avoid the expenses by satisfying the creditor;

c) for the interest payable by the principal debtor under the contract, if so expressly agreed.

Article 899 – Defences of surety

1. The surety may assert the defences to which the principal debtor is entitled. If the principal debtor dies, the

surety may not invoke the fact that the heir has limited liability.

2. The surety shall not be deprived of the right to assert defences by the fact that the principal debtor has waived

this right.

Article 900 – Surety’s refusal to satisfy the creditor

The surety may refuse to satisfy the creditor as long as the principal debtor is entitled to dispute the transaction on

which the obligation is based.

Article 901 – Reduction of the surety’s liability

If the creditor, to the detriment of the surety, reduces the liens or other means or advantages of security, then the

surety’s liability shall be reduced by an amount corresponding to the above-mentioned reduction.

Article 902 – Effect of delayed payments by the principal debtor

1. If the principal debtor’s payment is overdue, the creditor shall notify the surety. At the request of the surety,

http://www.matsne.gov.ge 040.000.000.05.001.000.223

the creditor shall, at any time, provide him/her with information on the status of the principal debt.

2. If the creditor fails to perform one of these actions, he/she shall forfeit his/her claims against the surety to the

extent of the damages caused by the non-performance.

Article 903 – Termination of an open-ended contract of suretyship

1. If the suretyship is open-ended, then the surety must give a three-month notice to terminate the contract.

2. For a fixed-term suretyship, after the lapse of five years, the contract may be terminated by giving a three-

month notice.

3. In the case of unilateral termination, the surety shall perform the obligations undertaken before the

termination.

Article 904 – Grounds for releasing a surety from suretyship obligations

1. If a surety provides a suretyship on the principal debtor’s instructions, or if he/she is entitled, under the rules

governing agency without specific authorisation, as a result of assuming the suretyship, to the rights of an agent

against the principal debtor, then he/she may demand release from the suretyship if:

a) the property status of the principal debtor has substantially deteriorated;

b) pursuit of rights against the principal debtor is made appreciably more difficult due to a change of residence or

location after assumption of the suretyship;

c) the creditor has obtained an order of forced execution against the surety.

2. If the primary obligation has not yet fallen due, the principal debtor may provide security to the surety instead

of releasing him/her.

Article 905 – Effects of satisfaction of creditors by the surety

If a surety satisfies the creditor, the creditor’s claim against the principal debtor shall pass to the surety. The

defences of the principal debtor arising out of his/her relationship with the surety shall remain unaffected.

Chapter Twenty-three

Current Account

Article 906 – Concept; content

1. Under a current account agreement, the parties undertake to credit the claims and payments arising out of their

business relations to an account and deem them intact until the account is closed.

2. The balance of the account shall be paid within the agreed time. If at the closing of the account the party

rightful to the balance does not demand payment, then it shall be credited to the current account.

3. Closing of the account shall give rise to a claim for the balance that, for purposes of performance, substitutes the

claim placed on the current account.

4. The account shall be closed once a year unless stipulated otherwise.

Article 907 – Cancellation of current accounts

In case of doubt, a current account may be cancelled and the account closed at any time.

Article 908 – Interest on payments made

Interest at the rate prescribed by law shall be paid on scheduled payments unless the contract provides otherwise.

Article 909 – Personal or proprietary security for a claim entered into the current account

1. If there is a personal or proprietary security for a claim entered into the current account, then the creditor may

claim satisfaction from this security for the balance existing in his favour even after the account has been closed.

2. The rule laid down in paragraph 1 of this article shall apply even when there is joint and several liability for the

claim.

Article 910 – Attachment

If a creditor of one of the parties to the agreement obtains an attachment order against the balance in the current

account, which belongs to the debtor, then the parts of the debt arising out of a new transaction made after the

attachment order has been issued shall not be considered in relation to the creditor. A transaction that has already

been made on the basis of claims existing before the transaction shall not be regarded as a new transaction.

Chapter Twenty-four

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Obligations Arising out of Securities Transactions

I – Obligations arising out of bearer securities transactions

Article 911 – Concept

1. If a person issues a document by which he/she promises a payment to the holder of the document, then the

holder may claim the promised payment, except where he/she does not have the right to do so.

2. The genuineness of the signature on the issued document may depend on the observance of a special form

indicated in the document. The signature may be made in any technically possible way.

Article 912 – Defences of the issuer

The issuer of the document may assert against the holder of the security only those defences that relate to the

validity of the execution, the document itself or that the issuer has directly against the holder.

Article 913 – Procedure for transfer of rights

1. The right defined in the document shall be transferred according to the rules governing the transfer of movable

things. It may also be transferred by a contract concluded with a third party.

2. A person who acquires a document lost in some way shall be deemed to be the legitimate holder, except where

he/she acquired the document by intentional misconduct or gross negligence.

Article 914 – Rights of the issuer

1. The issuer may raise objections against the holder on the grounds that the security was not issued by him/her.

In addition, he/she may assert against the holder any defences arising out of the document.

2. If the issuer uses technical means to sign a document, he/she may not defend himself/herself against the holder

by stating that he/she had no right to use this method, except when the acquirer was aware of counterfeiting or

acted by gross negligence.

3. If the document is transferred to the holder, the issuer may not assert against him/her any defences arising out

the issuer’s direct relationship with the previous holder of the document, except where the subsequent holder

acted intentionally to the prejudice of the issuer when acquiring the document.

4. If the defence does not arise out of direct relationship, then it may be asserted only against the holder who

acquired title to the document by way of alienation and in doing so acted by intentional misconduct or gross

negligence.

Article 915 – Duty of the issuer

1. The issuer shall be obligated to perform his/her duties only if the document is delivered to him/her.

2. The debtor who performs his/her obligations to the holder of the document shall be released from his/her duty,

unless he/she acted by intentional misconduct or gross negligence and can prove the holder’s bad faith.

3. The debtor who is released from his/her obligations to the holder of the document shall acquire title to the

document delivered to him/her.

Article 916 – Re-registration of bearer securities

Only the issuer may re-register bearer securities in the name of a certain person. At the same time, the issuer shall

not be obligated to re-register bearer securities.

Article 917 – Replacement of securities unfit for circulation

If a damaged bearer security is no longer fit for circulation, the holder may demand the issue of a new bearer

security in return for delivery of the damaged document, as long as the content and essential distinguishing

features of the document can still be identified. The relating expenses shall be borne and prepaid by the holder.

Article 918 – Invalidation of securities

1. A lost or destroyed security may be declared invalid by a court unless the document otherwise provides.

2. The issuer shall provide the previous holder, when requested, with information necessary for a court to

consider the invalidation of the security and prohibition of payment. The issuer shall also issue the corresponding

certificate. The expenses of the issue of the certificate shall be paid in advance by the previous holder.

Article 919 – Issuing new bearer documents

A person who has obtained a declaration of invalidity of a promissory note made out to bearer, regardless of the

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exercise of the claim arising out of the document, may demand that the issuer issue a new bearer document in the

place of the invalid one. The person shall pay the expenses of the issue in advance.

Article 920 – Limitation period on claims

The limitation period on claims arising out of securities shall be thirty years from the maturity date of the

obligations defined in the documents.

Article 921 – Issuing promissory notes of small value

If the issuer has issued promissory notes or similar documents of small value, in which the creditor is not

indicated, and the circumstances of the case show that the issuer is willing to pay to the holder, the rules of

Article 911(1), Articles 913-915 and Article 920 shall apply.

II – Obligations arising out of negotiable securities

Article 922 – Concept

1. A promissory note by which the issuer promises payment to the person named in the note upon presentation of

the note may be issued in the form of a negotiable security.

2. The signature may be affixed in any technically possible manner.

Article 923 – Assignment of rights; endorsement types

1. The right defined in the note may be assigned by endorsement and delivery of the note.

2. The endorsement shall be made on the note or on its enclosure. The use of a technical device shall be allowed.

3. The endorsement does not require the indication of the endorsee and may contain only a signature (blank

endorsement). The authorised holder may fill in the blank endorsement in his/her name or on behalf of another,

issue the blank note or subsequently endorse the note himself/herself to the designated person.

Article 924 – Procedure for using notes acquired by endorsement

If a promissory note made out to order is acquired by endorsement, then Article 914 shall apply accordingly.

Article 925 – Payment in the case of subsequent endorsements

1. The holder of a negotiable security confirmed by subsequent endorsements may demand the promised payment

in return for the delivery of the signed document, except when he/she is not entitled to it.

2. Payment to a non-rightful person who has confirmed his/her right through subsequent endorsements shall

release the debtor unless the debtor acted intentionally or by gross negligence.

3. A debtor who has performed his/her duty before the endorsee shall become the owner of the document

delivered to him/her.

Article 926 – Claims guaranteed in writing

If negotiable securities guarantee in writing not only claims of small value, the rules governing the invalidation

and issue of documents substituting bearer promissory notes shall apply accordingly.

Article 927 – Limitation period of claims

The rules governing bearer promissory notes shall apply accordingly to the limitation of claims arising out of

promissory notes made out to order.

III – Registered Securities

Law of Georgia No 3726 of 16 November 2023 – website, 7.12.2023

Article 928 – Concept

1. Registered securities shall be the securities the ownership of which is confirmed by the registration in the

register maintained by an issuer or on behalf of an issuer, or in the records of a nominee shareholder.

2. The transfer of ownership of the registered securities shall be carried out by making an appropriate entry in the

register or in the records of a nominee shareholder.

Law of Georgia No 3726 of 16 November 2023 – website, 7.12.2023

Article 929 – (Deleted)

Law of Georgia No 3726 of 16 November 2023 – website, 7.12.2023

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IV – Uncertificated Securities

Law of Georgia No 3726 of 16 November 2023 – website, 7.12.2023

Article 929 1 – The concept of uncertificated securities and the rights and obligations originated from it

1. Uncertificated securities shall exist as a record in an account only. Its circulation and the rights and obligations

originated from it shall be defined by the Law of Georgia on Holding Uncertificated Securities, and other

legislative and subordinate normative acts of Georgia.

2. An issuer shall have the right to present to a holder of the uncertificated securities only such a statement of

defence that derives from these securities.

3. The limitation period of a claim based on the uncertificated securities shall be 30 years from the date when the

obligations concerned are due.

Law of Georgia No 3726 of 16 November 2023 – website, 7.12.2023

Chapter Twenty-five

Partnership

Article 930 – Concept

Under a partnership agreement, two or more persons undertake to jointly act towards achieving a common

business or other goals in the manner defined by the agreement, without creating a legal person.

Article 931 – Form of a partnership agreement

1. A partnership agreement may be made in writing or orally.

2. If the agreement is made in writing, it shall include:

a) names and addresses of the partners;

b) details on the type and goals of the partnership;

c) rights and duties of the partners;

d) structure and function of management bodies;

e) terms and conditions for distributing revenues and losses between the partners;

f) procedure for withdrawing from the agreement;

g) duration of the partnership;

h) procedure for termination of the agreement and distribution of the remaining assets.

Article 932 – Obligation to make contribution

1. The partners shall make contributions as determined under the agreement. If the amount of contribution is not

determined under the agreement, the partners shall make equal contributions.

2. Contributions may be made in the form of property or services.

3. Unless the agreement provides otherwise, the contributions shall be the joint property of the partners. The joint

property of the partners shall also include whatever is purchased under a co-ownership right or received as

compensation for the destruction, damage or seizure of the joint property.

Article 933 – Inadmissibility of transferring a partner’s share to third persons

1. A partner’s share in the form of property or right may not be transferred to a third party without the consent of

the other partners to the agreement. Consent may be withheld only for a valid reason.

2. The remaining partners to the agreement shall have a pre-emptive right to buy the share transferrable to a third

party.

Article 934 – Obligation of joint management

1. Unless the agreement provides otherwise, the partners shall jointly manage the affairs and represent the

partnership with third parties. Each transaction shall require the approval of all partners. If under the partnership

agreement a majority of votes is sufficient to make decisions, this majority shall be determined according to the

total number of partners, not by the amount of contribution.

2. If the partnership agreement entitles one or more partners to conduct business in such a way that each is

authorised to act on his/her own, then each may object to the undertaking of a transaction by another partner. In

the case of such objection, the transaction shall not be made.

3. If under the partnership agreement one of the partners is vested with the authority to manage the partnership

business, in case of doubt he/she shall represent the other partners with third parties and the transactions

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concluded by such partner shall be valid.

4. A partner may be deprived of the authority to manage the partnership business by a majority of votes and only

if he/she commits a gross breach of contractual duties. The partner may refuse to take part in the management of

the partnership business. Such person may at any time demand from the board the information necessary for

him/her.

5. Unless the agreement provides to the contrary, the rights and duties of managing partners shall be determined

according to the rules governing a mandate.

Article 935 – Procedure for distribution of revenues

1. Unless the agreement provides otherwise, revenues shall be distributed among the partners according to their

shares.

2. Each partner may demand that all the remaining partners perform their duties under the partnership agreement

in good faith.

Article 936 – Non-transferability of partner rights

The claims to which the partners are entitled against each other under the partnership agreement shall not be

transferred to other persons.

Article 937 – Joint and several liability of partners

1. The partners shall be jointly and severally liable for debts arising out of partnership activities. The liability with

respect to each other shall be determined according to the shares of the partners, unless the agreement provides

otherwise.

2. The partners shall not be obligated to disclose confidential information obtained as a result of the partnership.

Article 938 – Termination by a partner

1. If the agreement does not specify the period of the partnership, then each partner may terminate it at any time.

The agreement may not be terminated when or if the termination is prejudicial to the partnership.

2. If the period of the partnership is specified by agreement of the partners, the agreement may be terminated if

there is a valid reason.

3. The termination by one of the partners shall terminate the partnership. The agreement may provide for the

termination by one of the partners without terminating the partnership. In that case, the share of the terminating

partner shall be apportioned among the other partners. The terminating partner shall be given monetary

compensation for the share. At the same time, an account shall be taken of the transactions still not performed at

the time of termination. If at the time of termination the joint assets are too little to cover the joint liabilities, the

terminating partner shall pay the remaining partners the amount corresponding to his/her share. The terminating

partner’s liability to creditors existing at the moment of termination shall remain unchanged.

4. Any agreement excluding or limiting the right of a partner to terminate the agreement shall be void.

Article 939 – Grounds for terminating a partnership

1. The grounds for terminating a partnership shall be:

a) the expiry of the agreed period of the partnership;

b) the decision of the participants;

c) the institution of bankruptcy proceedings relating to the partnership assets;

d) the impossibility of accomplishing the partnership objects.

2. Unless the agreement provides otherwise, the following shall also serve as the grounds for terminating a

partnership:

a) the death of one of the partners to the agreement;

b) the opening of bankruptcy proceedings against the assets of one of the partners;

c) dissolution of the agreement.

Article 940 – Procedure for terminating a partnership

1. Upon termination of a partnership, transactions still outstanding shall be completed, an inventory shall be

drawn up, and the remaining assets shall be distributed among the partners pro rata to their shares.

2. At the time of distributing the assets, the debts accrued during the partnership shall be paid. If the assets are too

little to pay the debts, the partners to the agreement shall be obligated to pay the debts pro rata to their shares.

Chapter Twenty-six

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Life Annuity

Article 941 – Concept

A person who undertakes to pay a life annuity (issuer) shall pay it to the recipient of the annuity (annuitant)

during the recipient’s lifetime, unless the contract provides otherwise. The life annuity may be stipulated in

money or in kind (accommodation, food, care or other necessary assistance).

Article 942 – Form of the contract

The lifetime annuity contract shall be in writing. If any real estate is transferred, the contract shall be notarised.

Article 943 – Amount of annuity

The amount of life annuity shall be determined by agreement of the parties.

Article 944 – Annuity payment periods

Annuity payment periods shall be determined depending on the nature and objects of the annuity, by agreement

of the parties.

Article 945 – Inadmissibility of alienating transferred property

1 In the annuitant’s lifetime the issuer may not transfer, pledge or otherwise encumber the transferred property

without the annuitant’s written permission. A claim may not be enforced against this property due to the issuer’s

debts.

2. When the annuitant transfers real estate to the issuer, the annuitant shall have lien on the estate to secure

his/her claim.

Law of Georgia No 1826 of 30 June 2005 – LHG I, No 41, 19.7.2005, Art. 284

Article 946 – Disputes relating to annuity payments

Life annuity payment may be disputed by other persons who were legally entitled to the annuity from the issuer

but could not receive it because the issuer pays the life annuity. If the contract is terminated, the estate shall be

returned to the annuitant.

Article 947 – Payment of annuity in kind

Under an in-kind annuity contract the parties may agree to substitute money for an in-kind annuity.

Article 948 – Risk of accidental destruction or damage of the transferred property

Accidental destruction or damage of the property transferred to the issuer shall not release the issuer from the

obligation to pay the annuity.

Article 949 – Termination of life annuity contracts

1. Both the issuer and the annuitant may terminate the life annuity contract if a breach of contractual obligations

makes the relationship between the parties intolerable or other substantial reasons complicate or prevent its

continuation.

2. Upon termination of the contract, transferred real estate shall be returned to the annuitant and the expenses

incurred before termination of the contract shall not be reimbursed to the annuitant unless the contract provides

otherwise.

Article 950 – Effect of the death of the issuer

1. If the issuer dies, the obligation to pay annuities shall pass to his/her heirs who have received the transferred

property.

2. If the heir does not assume the obligation, the property shall be returned to the annuitant. In that case, the

contract shall be terminated.

Chapter Twenty-seven

Gaming; Betting

Article 951 – Concept

1. No claim shall arise from gaming or betting. This rule shall extend to loans and advances intentionally given for

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gaming or betting.

2. Performance given for gaming or betting may not be returned.

3. A qualified financial contract shall not be gaming or betting and shall not be subject to this article. Qualified

financial contracts shall be regulated by the Law of Georgia on Financial Collaterals, Mutual Setoffs and

Derivatives.

Law of Georgia No 5674 of 20 December 2019 – website, 31.12.2019

Article 952 – Lottery

Lottery contracts or similar games shall give rise to obligations if they (raffling, casting or drawing of lots) are

approved by the State.

Section Two

Statutory Obligations

Chapter One

Co-ownership

Article 953 – Concept

If a number of persons are jointly entitled to a right, then the rules of this chapter shall apply unless the law

provides to the contrary.

Article 954 – Equal shares

Unless otherwise specified, part owners shall be entitled to equal shares.

Article 955 – Share in the fruits

1. Each part owner shall be entitled to the portion of the fruit proportionate to his/her share.

2. Each part owner may use the thing held in common in such a way as not to impair the use by the rest of the

shareholders.

Article 956 – Administration of a thing held in common

1. The part owners shall jointly administer the thing held in common.

2. Each part owner may undertake measures necessary for maintaining the thing without the consent of the other

part owners.

Article 957 – Making decisions when administering things held in common

1. Decisions on the administration and use appropriate for the qualities of the thing held in common may be made

by a majority of votes. The majority of votes shall be determined according to the size of the shares.

2. Each part owner may, according to fairness, demand administration corresponding to the interests of all part

owners, unless the administration is regulated by agreement or by a majority vote.

3. The right of each part owner to a share of use may not be impaired without his/her consent.

Article 958 – Applying the procedure for administering things held in common to successors in interest

If part owners have laid down a procedure for administration and use of a thing held in common, the rule shall

apply to successors in interest as well.

Article 959 – Procedure for administering a thing held in common

Each part owner may administer his/her share but a thing held in common shall be administered only jointly.

Unless directly established by the legislation of Georgia, if a share is to be sold, the pre-emptive right to buy the

share of the rest of the part owners may be determined by agreement among the part owners.

Law of Georgia No 4744 of 11 May 2007 – LHG I, No 18, 22.5.2007, Art. 158

Law of Georgia No 4851 of 25 June 2019 – website, 2.7.2019

Article 960 – Expenses for maintaining a thing held in common

Each part owner shall be responsible to the other part owners for expenses relating to the thing held in common

pro rata to his/her share.

Article 961 – Cancellation of co-ownership

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1. Any part owner may demand cancellation of the co-ownership.

2. If the right to demand cancellation is excluded permanently or for a certain period of time, then cancellation

may still be demanded if there is a valid reason to do so.

3. Any agreement excluding or limiting the right to demand cancellation contrary to these rules shall be void.

Article 962 – Agreement on cancellation

If the part owners have excluded the right to demand cancellation of co-ownership for some period of time, then

the agreement shall cease to have effect upon the death of a part owner unless otherwise specified.

Article 963 – Cancellation of co-ownership upon division in kind

Co-ownership shall be cancelled upon a division in kind, provided the thing(s) in common may be divided into

equivalent parts without devaluation. Equal shares shall be distributed among the part owners by drawing lots.

Article 964 – Cancellation of co-ownership by sale

1. If a division in kind is excluded, then co-ownership shall be cancelled by sale of the thing held in common, of

the pledged property or mortgaged plot of land and by distributing the proceeds. For a plot of land, the rules

governing compulsory auction shall apply. If the alienation of the thing held in common is inadmissible, then the

thing shall be auctioned off among the part owners.

2. If the thing is not sold, then each part owner may demand a repeated auction, but shall be obligated to bear the

expenses if the repeated attempt fails.

Article 965 – Joint liability of part owners

1. If part owners are jointly and severally liable for an obligation that they have to discharge pro rata to their

shares under Article 600, or if they have undertaken to perform such an obligation, then upon cancellation of the

co-ownership, each part owner may demand that the debt is paid out of the thing held in common.

2. If the sale of the thing held in common is necessary to pay a debt, then the sale shall be conducted according to

Article 964.

Article 966 – Satisfaction of a claim against a part owner

If a part owner has a claim against another part owner based on the co-ownership, then when the co-ownership is

cancelled he/she may demand that his/her claim be satisfied from the part of the common property attributable to

the debtor.

Article 967 – Liability of part owners upon cancellation of co-ownership

If upon cancellation of co-ownership the thing held in common is allocated to one of the part owners, then each

of the remaining part owners shall be liable, pro rata to his/her share, in the same manner as a seller is liable for a

legal or material defect in a thing.

Article 968 – Limitation period on claims to cancellation of co-ownership

The claim to cancellation of co-ownership shall not be subject to a period of limitations.

Chapter Two

Agency without Specific Authorisation

Article 969 – Agency without specific authorisation in good faith

A person (agent) who conducts the affairs of another person (principal) without instructions or other grounds

shall do so in good faith.

Article 970 – Liability for damages

1. If the agency is intended to avert a danger threatening the principal, then the agent shall be liable only for

deliberate intent or gross negligence.

2. An agent who has sustained damages while averting a danger actually facing another person or property even

though the aversion of the danger was not his/her legal duty, shall be reimbursed for such damages by the person

who created the danger or by the person whose goods the manager tried to salvage.

Article 971 – Obligation to notify the principal

The manager shall notify the principal as soon as practicable of his/her assumption of the agency. The agent shall

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continue the agency until the principal is able to act on his/her own.

Article 972 – Submitting performance reports

The agent shall submit to the principal a performance report and hand over to the principal all that he/she has

received as a result of the agency.

Article 973 – Right to reimbursement of expenses

The agent may claim the expenses that were deemed necessary under the circumstances of the case.

Article 974 – Inadmissibility of claiming reimbursement of expenses

1. The agent may not claim reimbursement of the expenses incurred if the assumption of the agency does not

correspond to the will or interest of the principal. If the agent should have known about it, then he/she shall be

obligated to reimburse the damages caused by the agency.

2. This rule shall not apply if the will of the principal contradicts the provisions of law.

Article 975 – False agency without specific authorisation

The rules of this chapter shall not apply if a person conducts a transaction for another person in the belief that it is

his/her own.

Chapter Three

Unjust Enrichment

Article 976 – Grounds for claims against pseudo creditors

1. A person who has transferred something to another person as a result of the performance of an obligation may

claim it back from the pseudo creditor (recipient) if:

a) the obligation does not exist, will not arise, or was subsequently terminated due to invalidity or other reasons;

b) a defence has been asserted against the obligation which excludes the assertion of the claim for a long period of

time.

2. Return of the property may not be claimed if:

a) the performance complies with moral duties, or

b) the limitation period has elapsed, or

c) the recipient could presume that the performing person was willing to transfer the benefit irrespective of

whether or not the conditions of paragraph 1 of this article exist, or

d) the claim for return of property in the case of performing a void debt contract contradicts the protective

function of the provisions governing invalidity.

Article 977 – Inadmissibility of claiming back transferred property

1. A person who transfers something to another person not for performance of an obligation but in order for the

latter to perform or not to perform some action, may reclaim the transferred thing if the transferee’s action does

not correspond to the intended result.

2. The claim for return of property shall be excluded if:

a) the occurrence of the result was impossible from the outset and the transferor was aware of it, or

b) the transferor prevented achievement of the result in bad faith.

Article 978 – Claim for return of property transferred under duress or threat

A person who transfers something to another person not for performing an obligation but under duress or threats,

may reclaim it, except when the recipient had the legal right to what had been transferred to him/her.

Article 979 – Scope of claims for return of property

1. A claim for return of property shall extend to property acquired, the benefits received as well as to all that the

recipient has obtained as a reimbursement for the destruction, damage or deprivation of the received thing.

2. If restitution is impossible due to the condition of the transferred thing or if the recipient cannot return the

thing for another reason, then he/she shall reimburse the total value of the thing. The value shall be determined

according to the time of the origin of the claim for return of the property.

3. There shall be no reimbursement obligation if the recipient has not been enriched by either the thing or its

value, due to the use, transfer, destruction or deterioration of the thing or for any other reason.

4. When the parties to a bilateral contract are to return what they have received from the contract due to

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invalidity of the contract, but one of the parties is unable to return it for the reasons provided for in paragraph 2 of

this article, then that party shall not be liable to return it if it follows from the essence of the legal provision under

which the contract was voided.

5. Destruction or deterioration of the object of performance, for which the performer would be liable if the

contract were valid, shall always release the recipient from the obligation of restitution.

Article 980 – Procedure for reimbursement of expenses and losses

1. If the recipient incurs expenses or suffers property loss because he/she believes that he/she has acquired the

thing permanently, then he/she shall return the thing provided he/she is reimbursed for the expenses and losses.

This rule shall not apply if the transferred thing cannot reasonably be considered to have been acquired

permanently.

2. The reimbursement obligations under Articles 979 and 980 shall be performed simultaneously. The expenses

and risk of return of the property shall be borne by the performer.

Article 981 – Liability to pay damages

1. If the recipient, at the time of receipt, is aware of a defect in the legal basis or if he/she learns it later due to

gross negligence, or if the claim for restitution is pending in court, then the recipient shall be liable from the

moment he/she became aware of the defect or from the moment the claim is filed in court – under Article 979(1)

and (2), Article 980 and the rules set forth below.

2. If the recipient does not receive the benefits that he/she could have received from proper management of the

property, then he/she shall be liable to pay damages if he/she is at fault. Interest shall be paid on a monetary debt.

Any income received from the thing shall be returned.

3. If the thing transferred for performance is destroyed or deteriorated, the recipient shall be liable to pay damages

if he/she is at fault. The recipient may, under the rules governing agency without specific authorisation, claim the

expenses that he/she incurred on the object of the performance. No expenses other than necessary ones shall be

reimbursed.

4. These rules shall not apply to the liability of a debtor for delay.

Article 982 – Effects of encroachment upon the legal goods of others

1. A person who encroaches on the legal goods of another without the consent of that person by disposing,

spending, using, joining, mixing, processing or by other means, shall be obligated to pay the damages so incurred

to the authorised person.

2. If a disposition is void, the authorised person may claim immediate compensation from the encroacher.

Article 983 – Receipt of performance by unauthorised persons

If an unauthorised person receives the performance intended for a rightful person, he/she shall return the received

performance to the rightful person.

Article 984 – Release from liability

1. If the encroacher was not aware of a defect in the entitlement, except where the lack of knowledge was caused

by gross negligence, he/she shall be released from liability, provided the signs of enrichment have ceased to exist

by the time the claim of restitution is considered in court,.

2. The expenses incurred by the encroacher on the used goods shall not reduce the extent of his/her enrichment.

Law of Georgia No 1902 of 28 December 2002 – LHG I, No 4, 22.1.2003, Art. 20

Article 985 – Right to claim profits

1. If the encroacher intentionally disregards the entitlement of another person, then that person may claim the

profit that exceeds the property loss.

2. The encroacher shall present information on the extent of profit that he/she has received from using another

person’s property.

Article 986 – Paying the debts of another person by mistake

A person who pays, whether intentionally or by mistake, the debts of another person may claim the expenses

from the latter.

Article 987 – Incurring expenses on another person’s property by mistake

1. A person who incurs, whether intentionally or by mistake, any expenses on another person’s property may

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claim the expenses from that person, if that person was enriched as a result.

2. The existence of enrichment shall be determined from the moment when the thing is returned to the debtor, or

if the debtor receives benefit otherwise as a result of the increase in value of the thing.

3. The claim shall be excluded if:

a) the person against who the claim is made is able to demand the recovery of the expenses and recovers the

expenses, or

b) the claimant culpably delays notification of the claim for expenses, or

c) the person against who the claim is made disputes the expenses before they are incurred.

Article 988 – Effects of performance by instruction of pseudo creditor

1. A person who under Article 976 transfers something to a third party by a pseudo creditor’s instruction may

reclaim the performance from the pseudo creditor as if the performance had been rendered to the pseudo creditor.

If the pseudo creditor’s instruction is suspicious, then the claim may be used only against the third party.

2. A person who under Article 976 transfers something to a new pseudo creditor after the claim has been asserted

may reclaim it from the original pseudo creditor as if he/she had transferred something to him/her. If the original

pseudo creditor’s instruction is suspicious, then the claim may be used only against the new pseudo creditor.

3. Articles 979 and 980 shall accordingly apply to the reimbursement obligation.

Law of Georgia No 1902 of 28 December 2002 – LHG I, No 4, 22.1.2003, Art. 20

Article 989 – Obligation of a third person to return unjustly received things

1. If, in the cases defined under Articles 976 and 988, the recipient required to return the received thing,

gratuitously transfers it to a third party, the third party shall also be obligated to return the received thing as if

he/she has received something from the creditor without a legal basis if satisfaction from the recipient is

impossible.

2. Articles 979-981 shall accordingly apply to the compensation of damage.

Article 990 – Effects of gratuitous administration of things by an unauthorised person

1. If an unauthorised person gratuitously administers a thing and the administration is valid for the rightful

person, then the person having received a direct legal benefit as a result of the administration shall be obligated to

transfer the received thing to the rightful person.

2. If any fault exists, the requirements of Articles 984 and 985 shall apply accordingly.

Article 991 – Effects of unjust enrichment at the expense of another person

A person who has become unjustly enriched at the expense of another person by methods other than those

defined in this chapter shall be obligated to return what he/she has received.

Section Three

Torts

Chapter One

General Provisions

Article 992 – Concept

A person who unlawfully, intentionally or negligently causes damage to another person shall compensate the

damage to the injured party.

Article 993 – Effects of disclosure of harmful information

1. A person who intentionally or negligently disseminates or states any facts causing property damage to another

person shall be liable to compensate the damage so inflicted if the facts are manifestly wrong.

2. The liability for damages shall not arise for statements that are in the legitimate public interest.

Article 994 – Liability of minors for damages

1. A person who has not reached the age of ten shall not be responsible for the damage he/she has caused to

another person.

2. The parents or other persons responsible for supervising a person who has not reached the age of ten shall

compensate the damage that the person has inflicted to another by unlawful action. They shall not be responsible

if the persons responsible for supervision could not have avoided the damage.

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3. A minor over the age of ten shall be responsible for the damage that he/she has caused to another person, except

where he/she could not understand the implications of his/her action when committing the injurious act. If the

person’s property or income is not sufficient to pay the damage, the liability shall also rest with his/her

representatives.

Article 995 – Compensation for damages caused by beneficiaries of support

1. The obligation to compensate for damage caused by a beneficiary of support shall be imposed on the beneficiary

of support, except when a supporter is assigned to him/her under the court decision to prevent the beneficiary of

support from causing damage.

2. If a supporter is assigned to a beneficiary of support under the court decision to prevent him/her from causing

damage, the obligation to compensate for the damage caused by the beneficiary of support shall be imposed on the

supporter, except when it is impossible to prevent the damage.

3. The obligation to compensate for damage caused by a beneficiary of support shall not be imposed on a supporter

in the case provided for in paragraph 2 of this article if the supporter can prove that the beneficiary of support no

longer needed support to prevent him/her from causing damage at the time of causing damage.

Law of Georgia No 3339 of 20 March 2015 – website, 31.3.2015

Article 996 – Compensation for damages caused by a person in a state of temporary unconsciousness or temporary

mental disorder

A person shall not be liable for the damage caused by him/her in a state of temporary unconsciousness or

temporary mental disorder. If a person has induced such a state in himself/herself with alcoholic beverages or

with other similar means, he/she shall not be released from liability, except when he/she has come into this state

without fault.

Law of Georgia No 837 of 26 June 2025 – website, 3.7.2025

Article 997 – Compensation for damage caused in the line of duty

A person shall be obligated to pay the damages caused to a third party by his/her employee’s unlawful act when

the employee was on duty. No liability shall arise if the employee acted without fault.

Article 998 – Joint and several liabilities for damage

1. If more than one person has caused damage, they shall be liable as joint tortfeasors.

2. Tortfeasors as well as instigators and accessories, also those consciously benefiting from the damage caused to

another person shall be liable for the damage.

Article 999 – Compensation for damages caused by operation of vehicles

1. The owner of a vehicle used for the carriage of passengers or freight shall pay damages to an injured party if the

operation of his/her vehicle caused death, injury or disability of an individual or damage to a thing.

2. The obligation to pay compensation under paragraph 1 of this article shall not apply when:

a) transported freight is damaged, except when a passenger carries the freight with himself/herself;

b) the damaged thing was accepted for storage by the possessor of the vehicle.

3. The obligation to pay compensation under paragraph 1 of this article shall not apply if damage is caused by

force majeure, except when the damage is caused during the operation of an aircraft.

4. If a person operates a vehicle without the owner’s permission, then he/she shall be obligated to compensate for

damages instead of the owner. At the same time, the owner shall be obligated to pay compensation for damages if

the vehicle was made possible through his/her fault. The first sentence of this paragraph shall not apply if the

operator was appointed by the owner to operate the vehicle or if the owner assigned the vehicle to the operator.

Article 1000 – Liability for the risk of injury posed by structures

1. If a structure presents an increased danger because of the power or flammable, explosive, noxious or toxic

substances produced, stored in or supplied to the structure, the owner of the structure shall be liable for the

damages caused to the victim if the realisation of this danger causes death, bodily injury or disability to an

individual or damage to a thing. The same liability shall apply to the owners of inflammable, explosive, noxious or

toxic substances when such substances present an increased danger.

2. If a structure or thing presents an increased danger for reasons other than those indicated in paragraph 1 of this

article, the owner of the structure or thing shall similarly be liable for damages resulting from the realisation of

the danger.

3. The liability for damages specified in paragraphs 1 and 2 of this article shall be excluded if the damage is caused

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by force majeure, except when the damage is caused by the breakdown of power transmission lines or by

malfunction of the facilities supplying oil, gas, water, or oil product.

4. The damage caused by the use of radioactive substances shall be compensated by the user.

Article 1001 – Liability for damages caused while extinguishing fire

The damage caused to other persons while extinguishing a fire and preventing it from spreading to neighbouring

apartments and structures shall be compensated by the person responsible for the fire.

Article 1002 – No prior release from liability

The liability for the harm under Articles 999 and 1000 may not be excluded or limited in advance if it relates to

the harm inflicted to a person. The same rule shall apply to damage inflicted to a thing, except where the release

from or limitation of the liability was agreed upon between the person liable for the damages and a legal entity

under public law, a public-law foundation or an enterprise. Any agreements or provisions to the contrary shall be

void.

Article 1003 – Liability for damages caused by animals

The owner of an animal shall compensate for damages caused to another person by his/her animal. At the same

time, it shall not matter whether or not the animal escaped, was supervised or lost. The liability for damages shall

not apply if the owner of the animal took the necessary measures to protect third parties.

Article 1004 – Liability for damage caused by collapse of a building

1. The owner of a building shall compensate for damages resulting from the collapse of a building or by its parts

breaking off, except where the damage is not caused by an inadequate maintenance or defect of the building.

2. If the damage is caused by an object thrown out of the building, or objects falling or spilling out of the building,

the person occupying the dwelling shall be liable, except where the damage occurs as a result of the operation of

force majeure or through the victim’s fault.

Article 1005 – Liability of the State (Municipality) for the damage inflicted by state employees and public

servants

1. If a state employee or a public servant breaches his/her official duty in relation to other persons intentionally or

by gross negligence, then the State (Municipality) or the body by which the employee or the servant is employed

shall pay for the damage inflicted. When the damage is caused intentionally or by gross negligence, the state

employee or the public servant together with the State (Municipality) shall be jointly and severally liable.

2. The liability for damages shall not arise if the injured person did not try, intentionally or by gross negligence, to

avert the damage by lawful activity.

3. The damage inflicted on a rehabilitated person by an illegal conviction, illegal prosecution, illegal detention as a

measure of restraint, improper imposition of an administrative penalty in the form of administrative detention,

disciplinary detention or corrective labour shall be compensated for by the State irrespective of the fault of the

investigation, prosecution or court officials. If the damage is caused intentionally or by gross negligence, these

persons and the State shall be jointly and severally liable.

Law of Georgia No 2719 of 9 March 2010 – LHG I, No 12, 24.3.2010, Art. 56

Law of Georgia No 3619 of 24 September 2010 – LHG I, No 51, 29.9.2010, Art. 332

Law of Georgia No 4369 of 27 October 2015 – Website, 11.11.2015

Law of Georgia No 161 of 21 December 2016 – Website, 28.12.2016

Law of Georgia No 947 of 1 June 2017 – Website, 20.6.2017

Article 1006 – Liability for damages in the event of the victim’s death

1. If a victim dies, the tortfeasor shall compensate the harm by paying an annuity to the victim’s dependants to the

extent the victim would have been obligated to provide maintenance.

2. The victim may demand lump-sum compensation instead of the annuity if there is a valid reason for doing so.

Article 1007 – Liability for the harm caused by medical institutions

The harm caused to a person’s health during treatment in a medical institution (consequence of surgery or

misdiagnosis, etc.) shall be reimbursed on a general basis. The tortfeasor shall be released from liability if he/she

proves that he/she is not responsible for the harm.

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Article 1008 – Limitation period on claims for damages

The limitation period on claims for damages caused by tort shall be three years from the moment when the victim

becomes aware of the damage or of the person liable for damages.

Chapter Two

Product Liability

Law of Georgia No 6151 of 8 May 2012 – Website, 25.5.2012

Article 1009 – Liability of the manufacturer of defective products

1. The manufacturer of a defective product shall be liable for the damages caused by the product irrespective of

whether or not he/she was in a contractual relationship with the victim, except when:

a) he/she did not offer the product for sale;

b) it may be presumed from the circumstances of the case that at the time the product was offered for sale it did

not have the defect that caused the harm;

c) the manufacturer produced the product neither for sale nor for any other commercial purpose, nor within the

scope of his/her professional activity;

d) the product has a defect that complied with the standards that were in force at the time the product was offered

for sale;

e) the defect could not be discovered because the state of the scientific and technical knowledge at the time when

the product was offered for sale.

2. The liability of the manufacturer of a part of the product shall also be excluded if the defect is caused by the

structure of the product whose component this part has become.

3. The manufacturer’s liability for damages shall be reduced or disallowed if the damage is caused through the

culpable act of the victim or of the person responsible for the victim.

4. The manufacturer’s liability shall not be reduced if the damage is caused by the defect of the product and

simultaneously by the act of a third party.

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

Article 1010 – Concept of a defective product

1. A product shall be deemed defective if it does not provide the safety that is expected from the product, taking

all circumstances into consideration.

2. A product shall not be deemed defective for the sole reason that a better product is subsequently put into

circulation.

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

Article 1011 – Concept of a product

1. A product means all movable things and services relating to the thing even if the thing is a part of another

movable or immovable thing. For the purposes of this Code, a ‘thing’ shall not include primary food products or

products obtained by hunting. A ‘product’ also includes any goods put on the market, whether or not intended

directly for the end-user, which have been supplied or otherwise made available for commercial or non-

commercial purposes.

2. A manufacturer shall be a person who has manufactured a finished product, a principal element or a component

part of a product, or any person who by putting their own name, trademark or other distinguishing feature on the

product presents himself/herself as its manufacturer.

3. A manufacturer shall also be a person who offers a product for sale, hire or otherwise, for economic purposes, in

the course of his/her business in compliance with this Code.

4. If the manufacturer cannot be identified, then each supplier shall be deemed to be the manufacturer, unless

he/she informs the injured person, within one month after the presentation of a claim, of the identity of the

manufacturer or the person who supplied the product to him/her. This rule shall apply to imported goods when

the initial distributor cannot be identified even if the manufacturer’s name is known.

Law of Georgia No 5119 of 13 October 2011 – website, 30.10.2011

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

Article 1012 – Burden of proof

In the case of liability for damages caused by a defective product, the burden of proof shall rest with the victim.

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

http://www.matsne.gov.ge 040.000.000.05.001.000.223

Article 1013 – Joint and several liabilities of the manufacturers of defective products

If several manufacturers are liable for the same damages, they shall be jointly and severally liable.

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

Article 1014 – Liability for damages caused by injury to health

The liability for damages under Article 1009 shall extend to damage resulting from death, bodily injury or

disability.

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

Article 1015 – Limitation period on claims

1. The limitation period on claims under Article 1009 shall be three years from the moment when the victim

became aware or ought to have become aware of the damage, defect or the person liable for the damage.

2. Any claim under Article 1009 shall be extinguished ten years after the manufacturer offered the product

causing the damages for sale.

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

Article 1016 – No prior release from liability

The manufacturer’s liability for defective products may not be excluded or limited in advance. Any agreement to

the contrary shall be void.

Law of Georgia No 6151 of 8 May 2012 – website, 25.5.2012

Official source and text version

Official Georgian title: საქართველოს სამოქალაქო კოდექსი

Jurisdiction: Georgia

Official document on Matsne

Adoption date:

The text on LIDA.ge is an unofficial translation. Consult Matsne for the official document.

This text has not been independently matched to a specific official version. Check the relevant version on Matsne before relying on it.