Ilyashev & Partners' Kharkiv Office has successfully represented a Ukrainian seed processing plant, a subsidiary of one of the world's largest agricultural traders, in a lawsuit with a private agricultural enterprise over penalties for breach of supply agreement.
In 2020, the plant signed an agreement with the agricultural company to supply 1,000 tons of sunflower seeds originating from Ukraine. The agricultural enterprise breached the contract by not delivering seeds by the deadline, which resulted in a penalty of 20% of the outstanding obligation, or roughly UAH 2.2 million.
The agricultural enterprise alleged that it failed to fulfill the terms of the supply agreement due to the alleged hostile takeover of its property and poor harvest, citing force majeure circumstances and the Ukrainian Chamber of Commerce and Industry Certificate.
In court, Ilyashev & Partners presented irrefutable evidence that the private agricultural enterprise unlawfully cultivated crops on a state enterprise's land. In fact, the harvest belongs to the state-owned enterprise that owns the land plots where it was grown. The agricultural enterprise had no grounds to refer to the alleged hostile takeover of its land as force majeure, and the certificate of the Ukrainian Chamber of Commerce and Industry is not sufficient evidence in the case. Consequently, the defendant's allegation that a drought affected the harvest cannot be used to justify the failure to fulfill agreement terms.
Based on the legal arguments provided by Ilyashev & Partners’ attorneys that the plant's claims for a penalty were legal and reasonable, the Commercial Court of Luhansk Region ordered the private agricultural enterprise to pay over UAH 2.2 million in penalties for breaching contractual obligations.
The agricultural enterprise appealed to the Eastern Commercial Court of Appeal in 2023, disagreeing with the decision of the court of first instance.
The Eastern Commercial Court of Appeal upheld the decision of the first instance court and accepted Ilyashev & Partners' legal position. In addition, the court ordered the agricultural enterprise to reimburse the plant’s legal expenses.
The case was handled by Andriy Lytvyn, Kharkiv Office Head, and Valeriia Gudiy, Partner.