Attorney Rostyslav Salamakha was approached by a client who reported that the seller of a business, with whom she had entered into an agreement for the purchase of an enterprise, had provided her with false and misleading information regarding the actual condition of the business being sold. Upon inspecting the premises, the client discovered that the enterprise was in a significantly deteriorated state, which materially differed from the seller’s representations. As a result, the client decided to withdraw from the transaction.
When the client requested the return of the advance payment, the seller refused, asserting that the amount received was not an advance but a deposit, thus non-refundable.
As pre-trial settlement efforts failed to yield results, legal proceedings were initiated to protect the client’s rights and lawful interests. During the course of litigation, the defendant employed procedural stalling tactics, including abuse of procedural rights, manipulation of court jurisdiction, non-appearance at hearings, and even filed a clearly unfounded counterclaim for damages in an amount more than four times the advance payment received. The defendant also submitted manifestly invalid evidence in an attempt to delay adjudication.
Despite these tactics, attorney Rostyslav Salamakha’s prompt legal responses to procedural abuses, along with a well-reasoned legal position and credible evidence presented during the proceedings, led to a lawful and favorable court decision. The court fully dismissed the defendant’s counterclaim.
In the proceedings, the attorney emphasized that an advance payment is a form of prepayment and does not perform a security function, distinguishing it from a deposit. He referenced the legal conclusions set forth in the Ruling of the Civil Cassation Court within the Supreme Court of Ukraine dated April 16, 2020, in Case No. 479/974/17.
The defendant appealed the trial court’s decision to the Kyiv Court of Appeal, but the appeal was dismissed. The appellate court upheld the decision ordering the defendant to return the full amount of the advance payment.
Both the trial and appellate courts established that no legally valid contract for the sale and purchase of the enterprise had been concluded between the parties – neither in form nor in substance. Therefore, the amount received by the defendant pursuant to a handwritten receipt constituted an advance and must be returned.
The courts rightly applied Article 570 of the Civil Code of Ukraine, which defines a deposit as a sum of money or movable property given by the debtor to the creditor as part of the payments due under the contract, as confirmation of the obligation and security for its performance. Where it is not established that the payment qualifies as a deposit, it is presumed to be an advance.
The appellate court further emphasized that a deposit must serve as evidence of a concluded agreement, secure the performance of that agreement, and simultaneously function as both a payment and a form of security. A deposit may be paid only where a contractual obligation has arisen. This legal interpretation is consistent with the Supreme Court of Ukraine’s ruling dated February 13, 2013, in Case No. 6-176цс12.
Following the entry into force of the appellate decision, attorney Rostyslav Salamakha conducted an additional round of negotiations with the defendant, which resulted in a voluntary compliance agreement. However, the defendant failed to adhere to the agreed payment schedule, and the court’s decision was ultimately enforced through compulsory execution proceedings.
#advance #litigation #negotiations #business acquisition