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Law of Obligations Act

Content

Law of Obligations Act - content
Issuer:Riigikogu
Type:act
In force from:01.07.2013
In force until:08.12.2013
Translation published:06.11.2013

Law of Obligations Act1

Passed 26.09.2001
RT I 2001, 81, 487
Entry into force 01.07.2002

Amended by the following legal instruments (show)

PassedPublishedEntry into force
05.06.2002RT I 2002, 53, 33601.07.2002, partially 01.09.2002, 01.01.2003 and 01.07.2003
single text on RT paperRT I 2002, 60, 374
19.11.2003RT I 2003, 78, 52327.12.2003
11.02.2004RT I 2004, 13, 8615.04.2004
22.04.2004RT I 2004, 37, 25501.05.2004
20.10.2004RT I 2004, 75, 52210.11.2004
08.12.2004RT I 2004, 87, 59301.01.2005
08.12.2004RT I 2004, 90, 61601.01.2005
15.06.2005RT I 2005, 39, 30801.01.2006
19.10.2005RT I 2005, 61, 47301.01.2006
11.10.2007RT I 2007, 56, 37512.12.2007
19.11.2008RT I 2008, 54, 30427.12.2008
10.12.2008RT I 2008, 59, 33001.01.2009
25.02.2009RT I 2009, 18, 10801.05.2009
18.11.2009RT I 2009, 60, 39501.07.2010
17.12.2009RT I 2010, 2, 322.01.2010
28.01.2010RT I 2010, 7, 3026.02.2010
22.04.2010RT I 2010, 22, 10801.01.2011, enters into force on the date which has been determined in the Decision of the Council of the European Union regarding the abrogation of the derogation established in respect of the Republic of Estonia on the basis provided for in Article 140(2) of the Treaty on the Functioning of the European Union, Council Decision 2010/416/EU of 13 July 2010 (OJ L 196, 28.07.2010, pp. 24 - 26).
30.09.2010RT I 2010, 77, 59023.02.2011, partially 01.07.2011
17.11.2010RT I, 06.12.2010, 105.04.2011
25.11.2010RT I, 21.12.2010, 131.12.2010
12.01.2011RT I, 04.02.2011, 105.04.2011
20.01.2011RT I, 04.02.2011, 223.02.2011, partially 05.04.2011 and 01.07.2011
09.06.2011RT I, 29.06.2011, 130.06.2011
16.06.2011RT I, 08.07.2011, 618.07.2011
14.11.2012RT I, 03.12.2012, 101.05.2013
20.03.2013RT I, 05.04.2013, 115.04.2013
23.05.2013RT I, 11.06.2013, 301.07.2013

Part 1 GENERAL PART 

Chapter 1 GENERAL PROVISIONS  

§ 1.  Application of Act

 (1) The provisions of the General Part of this Act apply to all contracts specified in this Act or other Acts, including employment contracts and other multilateral transactions, contracts which are not regulated by law but are not in conflict with the content and spirit of the law, and obligations which do not arise from a contract.

 (2) If a contract has the characteristics of two or more types of contract provided by law, the provisions of law concerning such types of contract apply simultaneously, except provisions which cannot apply simultaneously or the application of which would be contrary to the nature or purpose of the contract.

 (3) The provisions of this Act concerning contracts apply to contracts entered into by more than two parties (multilateral contract) unless they are contrary to the nature or purpose of the contract.

§ 2.  Definition of obligation

 (1) An obligation is a legal relationship which gives rise to the obligation of one person (obligated person or obligor) to perform an act or omission (perform an obligation) for the benefit of another person (entitled person or obligee), and to the right of the obligee to demand that the obligor perform the obligation.

 (2) The nature of an obligation may oblige the parties to the obligation to take the other party's rights and interests into account in a certain manner. An obligation may also be confined thereto.

§ 3.  Bases for obligation

  An obligation may arise from:
 1) a contract;
 2) unlawful damage;
 3) unjustified enrichment;
 4) negotiorum gestio;
 5) a public promise to pay;
 6) other bases provided by law.

§ 4.  Imperfect obligation

 (1) An imperfect obligation is an obligation which the obligor may perform but the performance of which cannot be required by the obligee.

 (2) The following are imperfect obligations:
 1) an obligation arising from gambling, except for an obligation arising from gambling or a lottery organised on the basis of a permit;
 2) a moral obligation the performance of which complies with public mores;
 3) an obligation assumed to secure performance of an imperfect obligation;
 4) an obligation which is an imperfect obligation pursuant to law.

 (3) Anything which has been delivered for an imperfect obligation to be performed shall not be reclaimed.

 (4) The provisions of law concerning obligations apply to an imperfect obligation unless the application of such provisions is contrary to the nature of the imperfect obligation.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

§ 5.  Principle of party autonomy of Act

  Upon agreement between the parties to an obligation or contract, the parties may derogate from the provisions of this Act unless this Act expressly provides or the nature of a provision indicates that derogation from this Act is not permitted, or unless derogation is contrary to public order or good morals or violates the fundamental rights of a person.

§ 6.  Principle of good faith

 (1) Obligees and obligors shall act in good faith in their relations with one another.

 (2) Nothing arising from law, a usage or a transaction shall be applied to an obligation if it is contrary to the principle of good faith.

§ 7.  Principle of reasonableness

 (1) With regard to an obligation, reasonableness is to be judged by what persons acting in good faith would ordinarily consider to be reasonable in the same situation.

 (2) In assessing what is reasonable, the nature of the obligation, the purpose of the transaction, the usages and practices in the fields of activity or professions involved and other circumstances shall be taken into account.

Chapter 2 CONTRACT  

Division 1 General Provisions  

§ 8.  Definition of contract

 (1) A contract is a transaction between two or more persons (parties) by which one party undertakes or the parties undertake to perform an act or omission.

 (2) A contract is binding on the parties.

§ 9.  Entry into Contract

 (1) A contract is entered into by an offer being made and accepted or by the mutual exchange of declarations of intent in any other manner if it is sufficiently clear that the parties have reached an agreement.

 (2) Upon acceptance of an offer, the contract is entered into when the acceptance reaches the offeror. In the case of acceptance by an act which is not an express declaration of intent, the contract is entered into as of the offeror becoming aware of the performance of the act unless, by virtue of the offer, practices which the parties have established between themselves or a usage, the contract is deemed to have been entered into as of the performance of the act.

 (3) If certain terms must be agreed upon pursuant to an agreement between the parties or at the request of one party, the contract shall not be deemed to have been entered into until agreement has been reached on such terms, unless otherwise provided by law.

§ 10.  Entry into contract by auction

 (1) In the case of an auction, a contract is deemed to have been entered into upon acceptance of the best tender. The person conducting the auction is presumed to be authorised to accept the best tender.

 (2) A tenderer shall be bound by the tender thereof until a better tender is made. In the absence of a better tender, the tenderer shall not be bound by the tender thereof if the tender is not accepted within a reasonable period of time as of it being made.

 (3) If a tender is not followed by a better tender, the last tender shall be accepted. If several persons have made equal tenders at the same time and such tenders are not followed by a better tender, the person conducting the auction has the right to select the best tenderer from among the participants in the auction who made equal tenders.

 (4) If the terms of an auction prescribe the right of the person conducting the auction to decide on the best tender, the best tender shall be accepted by publication of the corresponding decision within the period of time prescribed in the terms of the auction or, in the absence thereof, within a reasonable period of time. Until such time, persons who have made tenders shall be bound by their tenders.

§ 11.  Format of contract

 (1) A contract may be entered into orally, in writing or in any other form if no required format is provided for the contract by law.

 (2) If, pursuant to law or an agreement between the parties or at the request of one party, a contract must be entered into in a specific format, the contract shall not be deemed to have been entered into until the specified format is given to the contract.

 (3) If a contract must be entered into in a specific format, agreements on security, other accessory obligations, assignment of claims or assumption of obligations arising from the contract shall also be entered into in such format unless otherwise provided by law or the contract.

 (4) A written contract is deemed to have been entered into when the parties have signed the contract or have exchanged contractual documents or letters signed by both parties. The law may provide that a written contract is also deemed to have been entered into when the contract has been signed by the obligated party only.

 (5) If a contract must be notarially certified or notarially attested, the contract is entered into as of the notarial certification or notarial attestation of the contract. If mutual declarations of intent made for the entry into a contract are authenticated or certified separately, the contract is entered into as of certification or attestation of the last declaration of intent.

§ 111.  Durable medium

  Durable medium means an instrument which enables a person to store information addressed personally to that person in a way accessible for a period of time corresponding to the purposes of the information and which allows the unchanged reproduction thereof.
[RT I 2010, 77, 590 - entry into force 23.02.2011]

§ 12.  Validity of contract

 (1) The validity of a contract is not affected by the fact that, at the time of entry into the contract, performance of the contract was impossible or one of the parties did not have the right to dispose of the thing or right which is the object of the contract.

 (2) A contract shall also be valid with regard to the universal successors of the parties.

§ 13.  Amendment and termination of contract

 (1) A contract may be amended or terminated on the agreement of the parties or on another basis prescribed by the contract or law.

 (2) If a contract is entered into in a specific format pursuant to an agreement between the parties, amendment or termination of the contract need not be in such format unless the contract provides otherwise.

 (3) If a contract prescribes amendment or termination of the contract in a specific format, a party cannot rely on such condition of the contract if the other party could infer from the party's conduct that the party agreed to the amendment or termination of the contract in another format.

§ 14.  Precontractual negotiations

 (1) Persons who engage in precontractual negotiations or other preparations for entering into a contract shall take reasonable account of one another's interests and rights. Information exchanged by the persons in the course of preparation for entering into the contract shall be accurate.

 (2) Persons who engage in precontractual negotiations or other preparations for entering into a contract shall inform the other party of all circumstances with regard to which the other party has, based on the purpose of the contract, an identifiable essential interest. There is no obligation to inform the other party of such circumstances of which the other party could not reasonably expect to be informed.

 (3) If persons who engage in precontractual negotiations do not reach an agreement, no legal consequences arise for the persons from the negotiations. A person shall not engage in negotiations in bad faith, in particular if the person has no real intention of entering into a contract, nor break off negotiations in bad faith.

 (4) If information not subject to disclosure is submitted to a person in the course of precontractual negotiations, the person shall not disclose such information to other persons or use it in bad faith in the person's own interests whether or not a contract is entered into.

§ 15.  Party's awareness of deficiencies of contract

 (1) If a party has assumed the obligation to engage in preparations for the contract or to inform the other party of circumstances relating to the preparations for the contract and the contract is void due to failure to adhere to a formality, the other party shall be compensated for the damage created due to the fact that the other party believed the contract to be valid.

 (2) If, upon entry into a contract, one party is or should be aware of circumstances which do not constitute a violation of formalities but render the contract void or if such circumstances are caused by the party, the party shall compensate the other party for the damage specified in subsection (1) of this section.

 (3) Compensation for damage pursuant to the provisions of subsection (2) of this section shall not be demanded if the other party was also aware or should have been aware of circumstances rendering the contract void or if the contract was rendered void due to the party's restricted active legal capacity or the unconformity of the contract with good morals.

 (4) If a person was unaware of circumstances with legal effect due to gross negligence, it is deemed that the person should have been aware of the circumstances.

§ 16.  Offer

 (1) An offer is a proposal to enter into a contract in a manner which is sufficiently defined and which indicates the intention of the offeror to be legally bound by the contract to be entered into if the proposal is accepted.

 (2) A proposal to enter into a contract is not an offer if the person making the proposal expressly indicates that the person does not consider the person to be bound by the proposal or if the nature of the proposed contract or other circumstances dictate that the person making the proposal is not bound by the proposal. Such proposal is deemed to be an invitation to make offers.

 (3) A proposal which is addressed to a previously unspecified set of persons and is made by sending advertisements, price lists, rates, samples, catalogues or the like or by displaying goods or by offering goods or services to a previously unspecified set of persons on a public computer network is deemed to be an invitation to make offers, unless the person making the proposal clearly indicates that it is an offer.

§ 17.  Offer with fixed term for acceptance

 (1) If the term for acceptance is fixed in an offer, the offer is effective and may be accepted until the end of such term. An offer is not accepted in due time if the acceptance does not reach the offeror during the term for acceptance

 (2) A term for acceptance fixed by the offeror in a letter begins to run as of the date shown in the letter. If the beginning of the term for acceptance is not shown in the letter, the term for acceptance begins to run as of the moment the letter is posted.

 (3) If an offer is made in person, by telephone or by other means of instantaneous communication, the term for acceptance begins to run as of the moment the offer reaches the offeree unless otherwise indicated by the offeror.

§ 18.  Offer without fixed term for acceptance

 (1) An offer which is made in person without a fixed term for acceptance lapses if the offer is not accepted immediately, unless the circumstances indicate otherwise. The same applies to an offer made by telephone or other means of instantaneous communication.

 (2) An offer which is not made in person and does not have a fixed term for acceptance is effective during the time which is ordinarily necessary for an acceptance to reach the offeror, with due account being taken of the circumstances relating to the entry into the contract, including the rapidity of the means of communication selected by the offeror.

§ 19.  Lapse of offer

 (1) An offer lapses if it is not accepted in due time or when a rejection of the offer reaches the offeror.

 (2) An offer does not lapse if the offeror, after making the offer but before an acceptance reaches the offeror, is declared to have limited active legal capacity or dies or is declared a bankrupt or the property thereof is subjected to compulsory administration, unless it may be presumed that the offeror intended for the offer to lapse in such case.

§ 20.  Acceptance

 (1) An acceptance is assent to enter into a contract indicated by a direct declaration of intent or by an act.

 (2) Silence or inactivity is deemed to be acceptance only if so provided by law, an agreement between the parties, practices which the parties have established between themselves or a usage observed in their field of activity or profession.

 (3) If a person whose economic or professional activities include performance of certain transactions or supply of certain services receives an offer for the performance of such transactions or supply of such services from a person with whom the person has continuing business relations, the person shall respond to the offer within a reasonable time. In such case, silence is deemed to be acceptance.

§ 21.  Modified acceptance

 (1) A response to an offer which contains conditions which materially alter the conditions of the offer is a rejection of the offer and also a new offer.

 (2) A response which contains conditions which do not materially alter the conditions of the offer is an acceptance unless the offeror objects to the altered conditions without delay. In such case, the conditions of the contract are the conditions of the offer with the modifications contained in the acceptance, unless some other intention is indicated in the offer or acceptance.

 (3) If an offer and the acceptance refer to conflicting standard terms or conditions, the provisions of § 40 of this Act apply.

§ 22.  Late acceptance

 (1) If an acceptance does not reach the offeror in due time, the acceptance is deemed to have been sent in due time if it has been sent in such circumstances that, if its transmission had been normal, it would have reached the offeror in due time.

 (2) If an acceptance does not reach the offeror in due time because it was not sent in due time, the offeror may deem the acceptance to have reached the offeror in due time if the offeror informs the offeree thereof without delay. If the offeror does not do so, the acceptance is deemed to be a new offer.

 (3) If an acceptance does not reach the offeror in due time but it is evident to the offeror that it was sent in due time, such acceptance is deemed to be a late acceptance only if the offeror informs the offeree without delay of the late acceptance. If the offeror does so, the acceptance is deemed to be a new offer.

 (4) If an acceptance does not reach the offeror or does not reach the offeror in due time but, pursuant to law, is deemed to have reached the offeror in due time, the contract is deemed to have been entered into at the time the acceptance would have reached the offeror if there had been no delay.

§ 23.  Obligations of parties

 (1) The obligations of the parties may be set out in the contract or provided by law. The obligations of the parties may also arise from:
 1) the nature and purpose of the contract;
 2) any practice the parties have established between themselves;
 3) any usage observed in the profession or field of activity of the parties;
 4) the principles of good faith and reasonableness.

 (2) A party shall co-operate with the other party as necessary to enable performance of the obligations by the other party.

§ 24.  Contents of obligations of parties

 (1) A party may be obligated by a contract to achieve a specific result or to do all that is reasonably possible to achieve that result.

 (2) If a party is obligated to do all that is reasonably possible to achieve a result, the party is obligated to make such efforts as reasonable persons in the same field of activity or profession would make under the same circumstances.

 (3) If a contract does not expressly indicate whether a party is obligated to achieve a specific result or to do all that is reasonably possible to achieve that result, the obligations of the party shall be determined by taking primarily the following into account:
 1) the nature and purpose of the contract;
 2) the manner in which obligations are expressed in the contract;
 3) the terms and conditions of the contract;
 4) the probability of achieving the desired result;
 5) the ability of the other party to influence the performance of the obligation.

§ 25.  Usages and practices

 (1) In the case of contracts entered into with respect to the economic or professional activities of the parties, the parties are bound by any usage they have agreed to apply and by any practice they have established between themselves.

 (2) Unless the parties agree otherwise in the case of contracts entered into with respect to their economic or professional activities, they are also bound by any usage which persons who enter into contracts in the same field of activity or profession generally consider applicable and take into account, except where application of such usage would be contrary to law or would be unreasonable under the circumstances.

§ 26.  Terms deliberately left open

 (1) When entering into a contract, the parties may leave some of the terms open with the intention of reaching an agreement on such terms in the future or leaving the terms to be determined by one party or a third party (terms deliberately left open).

 (2) If the parties do not reach an agreement on a term left open or if a party or a third party does not determine the term left open, the validity of the contract is not affected unless it can be presumed that the parties intended otherwise.

 (3) If a term left open is to be determined by a party or a third party, the term must conform to the principles of good faith and reasonableness.

 (4) If a term left open is to be determined on the basis of circumstances independent of the party which do not exist at the time the term is to be determined, the term shall be determined on the basis of the nearest equivalent circumstance.

 (5) If a term determining the extent of a party's obligation is left open, the other party has the right to determine the term unless otherwise provided by an agreement between the parties or dictated by the nature of the contract.

 (6) If a term is to be determined by several third parties, the consent of all of them is required to determine the term. If an amount of money is to be determined by several third parties, the average amount determined by them shall be taken as the term.

 (7) If a term left open is to be determined by a party but the party fails to do so during the agreed period of time or, if no such agreement exists, during a reasonable period before the time by which performance of the obligation may be required, or during a reasonable additional term established by the other party for determining the term left open, the right to determine the term transfers to the other party.

 (8) If a term left open is to be determined by a party, the party shall determine the term by making a declaration to the other party. If a term is to be determined by a third party, the third party shall determine the term by making a declaration to both parties.

 (9) A party may require that a term left open be determined by a court if:
 1) the parties fail to reach an agreement on the term;
 2) a third party fails to determine the term during the agreed period of time or, if no such agreement exists, during a reasonable period of time before the time by which performance of the obligation may be required;
 3) the other party fails to determine the term left open after the right to determine the term has transferred to the other party pursuant to the provisions of subsection (7) of this section.

 (10) A court shall determine the terms left open in a contract based on the nature and purpose of the contract.

 (11) A party may also require that a court determine a term left open if the term determined by the other party or a third party does not conform to the principles of good faith and reasonableness.

§ 27.  Absence of agreement on fundamental terms

 (1) If the parties have not agreed or only believe that they have agreed on a fundamental term determining their rights and obligations, the contract shall be valid if it can be presumed that the contract would have been entered into even without an agreement on such term.

 (2) In the case specified in subsection (1) of this section, a term which is reasonable based on the circumstances, the intention of the parties, the nature and purpose of the contract and the principle of good faith applies.

§ 28.  Determination of price

 (1) Contracts entered into in economic or professional activities are presumed to have a price.

 (2) Where a contract does not determine the price or a method for determining the price and the nature of the contract or other circumstances do not dictate the price or the method of determining the price, the price to be paid shall be the price generally charged at the time of the entry into the contract at the place of performance of the contract for the performance of such contractual obligations or, if no such price can be determined, a price reasonable under the circumstances.

§ 29.  Interpretation of contract

 (1) A contract shall be interpreted according to the actual common intention of the parties. If such intention differs from the ordinary meaning of the words used in the contract, the common intention of the parties prevails.

 (2) A contract shall not be interpreted on the basis of an incorrect denotation or expression which the parties used due to an error or from a desire to conceal their actual intention.

 (3) If one party understands a term or condition of a contract to have a particular meaning and the other party was or should have been aware of such meaning at the time of entry into the contract, the term or condition shall be interpreted according the understanding of the first party.

 (4) If the actual common intention of the parties cannot be determined, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances.

 (5) In interpreting a contract, regard shall be had, in particular, to:
 1) the circumstances in which the contract was entered into, including the precontractual negotiations;
 2) the interpretation which the parties have previously given to the same term or condition of the contract;
 3) the conduct of the parties before and subsequent to entry into the contract;
 4) the nature and purpose of the contract;
 5) the meaning commonly given to terms and expressions in the field of activity or profession concerned;
 6) usages and practices established between the parties.

 (6) A term or condition of a contract shall be interpreted together with the other terms and conditions of the contract and shall be given the meaning to be inferred from the nature and purpose of the whole contract.

 (7) If a word or expression has several meanings, the word or expression shall be understood in the meaning which best conforms to the nature and purpose of the contract.

 (8) In interpreting a term or condition of a contract, an interpretation which renders the term or condition lawful or effective shall be preferred unless otherwise provided by law.

 (9) Where a contract is drawn up in several languages which are equally authoritative, the interpretation according to the version in which the contract was originally drawn up shall be preferred if there is any discrepancy between the versions.

§ 30.  Acknowledgement of obligation

 (1) A contract in which performance of an obligation is promised in such a manner that the promise creates an independent obligation or in which the existence of an obligation is recognised is an acknowledgement of obligation.

 (2) An acknowledgement of obligation shall be made by the obligated party in writing unless otherwise provided by law.

 (3) An acknowledgement of obligation need not be in writing if it is made on the basis of a current account or if the obligor acknowledges an obligation which has arisen in the course of the economic or professional activities thereof.

§ 31.  Merger clause

 (1) If parties have agreed in a written contract that the contract prescribes all of the terms of the contract (merger clause), any prior declarations of intent or agreements of the parties which are not embodied in the contract are deemed not to form part of the contract. The prior conduct of the parties shall also not affect the contract.

 (2) If a merger clause is prescribed in standard terms, it shall be presumed that the parties intended their prior declarations of intent, acts or agreements to be deemed not to form part of the contract.

 (3) In the case of a merger clause, the prior declarations of intent of the parties may be used to interpret the contract.

 (4) If, after entering into a contract, a party indicates to the other party by a declaration of intent or by conduct that the party considers a prior declaration of intent or agreement of the parties to form part of the contract or that the party will rely on the prior conduct of the parties, the party shall not rely on a merger clause to this extent.

§ 32.  Written confirmation

 (1) If a contract is entered into with respect to the economic or professional activities of the parties but is not in written form and if, within a reasonable time after entry into the contract, one party sends a written document to the other party confirming the content of the contract (written confirmation) which contains terms which do not differ materially from the terms agreed upon earlier or do not materially alter them, such terms shall become part of the contract unless the other party objects to them without delay after receipt of the written confirmation.

 (2) The provisions of subsection (1) of this section do not apply if the party which sent the written confirmation knew or should have known that the contract had not been entered into or if the contents of the written confirmation differ from the terms agreed upon earlier to such extent that the person who sent the written confirmation cannot reasonably rely on the other party's consent to the contents of the written confirmation.

§ 33.  Preliminary contract

 (1) A preliminary contract is an agreement under which the parties undertake to enter into a contract in the future under the terms agreed upon in the preliminary contract.

 (2) If, pursuant to law, a contract is to be entered into in a specific format, the preliminary contract shall also be entered into in the same format.

§ 34.  Consumer

  For the purposes of this Act, a consumer is a natural person who performs a transaction not related to an independent economic or professional activity.

Division 2 Standard Terms  

§ 35.  Definition of standard term

 (1) A contract term which is drafted in advance for use in standard contracts or which the parties have not negotiated individually for some other reason, and which the party supplying the term uses with regard to the other party who is therefore not able to influence the content of the term, is deemed to be a standard term.

 (2) It is presumed that standard terms have not been negotiated individually in advance.

 (3) Standard terms may be embodied in a contract or form a separate part of a contract. Standard terms may be terms of a contract regardless of the scope of the terms, the manner in which the terms are expressed in the contract or the form in which the contract is entered into.

 (4) The general provisions for entering into contracts apply to entering into contracts with standard terms unless otherwise provided for in this Division.

 (5) Agreements which derogate from the provisions of §§ 35–39 or 4145 of this Act to the detriment of the party with regard to whom the standard terms were applied are void.

§ 36.  Application of provisions

 (1) The provisions of this Division do not apply to contracts concerning relationships under the law of succession or family law or to contracts for the foundation of companies, other legal persons and civil law partnerships, or for the management thereof.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (2) If the other party to a contract with standard terms is a consumer whose residence is in Estonia or in a Member State of the European Union and the contract was entered into as a result of a public offer, advertisement or other such activity in Estonia or the contract is essentially related to the territory of Estonia for any other reason, the provisions of this Division apply even if the place of business of the party supplying the terms or, if no place of business exists, the residence or seat of such party is not in Estonia, regardless of which state's law is applicable to the contract.

 (3) If the parties to a contract with standard terms act for purposes relating to their economic or professional activities and their places of business related to the contract or the performance thereof are in Estonia, the provisions of this Division apply to the contracts entered into between them regardless of which state's law is applicable to the contract.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 37.  Standard terms as part of contract

 (1) Standard terms are part of a contract if the party supplying the standard terms clearly refers to them as part of the contract before entering into the contract or while entering into the contract and the other party has the opportunity to examine their contents. Standard terms are also part of a contract if their existence could be presumed from the manner in which the contract was entered into and the other party was given the opportunity to examine their contents.

 (2) The parties may, taking into account the provisions of subsection (1) of this section, agree in advance that standard terms apply to certain types of contracts.

 (3) Standard terms the contents, wording or presentation of which are so uncommon or unintelligible that the other party cannot, based on the principle of reasonableness, have expected them to be included in the contract or which the party cannot understand without considerable effort are not deemed to be part of the contract.

§ 38.  Standard terms and individual agreement

  If the content of a standard term contradicts a term individually agreed upon by the parties, the term individually agreed upon applies.

§ 39.  Interpretation of standard terms

 (1) Standard terms shall be interpreted according to the meaning that reasonable persons of the same kind as the other party would give to them in the same circumstances. In the case of doubt, standard terms shall be interpreted to the detriment of the party supplying the standard terms.

 (2) A standard term which is void shall not be interpreted such as to give it content by which the term is valid. If a term can be divided into several independent parts and one of them is void, the other parts remain valid.

§ 40.  Conflicting standard terms

 (1) If, upon entering into a contract, the parties each refer to their own standard terms, the contract is deemed to have been entered into under the terms which are not in conflict with each other. The provisions of law concerning the type of contract concerned apply in lieu of any conflicting terms.

 (2) In the case of conflicting standard terms, the contract is not deemed to have been entered into if one party has explicitly indicated before the contract is entered into or without delay thereafter and not by way of the standard terms that the party does not deem the contract to have been entered into. A party does not have this right if the party has performed the contract in part or in full or has accepted performance by the other party.

§ 41.  Validity of contract with standard terms

  If a standard term is void or is deemed not to be part of the contract, the rest of the contract is valid unless the party supplying the term proves that the party would not have entered into the contract without the standard term which is void or is deemed not to be part of the contract. The provisions of law concerning the type of contract concerned apply in lieu of such terms.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 42.  Invalidity of standard terms

 (1) A standard term is void if, taking into account the nature, contents and manner of entry into the contract, the interests of the parties and other material circumstances, the term causes unfair harm to the other party, particularly if it causes a significant imbalance in the parties' rights and obligations arising from the contract to the detriment of the other party. Unfair harm is presumed if a standard term derogates from a fundamental principle of law or restricts the rights and obligations arising for the other party from the nature of the contract such that it becomes questionable as to whether the purpose of the contract can be achieved. Invalidity of standard terms and the circumstances relating thereto shall be assessed as at the date of entry into the contract.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (2) A standard term is not deemed to be unfair if it relates to the main subject matter of the contract or to the relationship between the price and the value of the services or goods supplied in exchange or if the contents of the term is based on such legislation which must not be derogated from pursuant to an agreement between the parties.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (3) In a contract where the other party is a consumer, a standard term is considered to be unfair if, in particular, the term:
 1) precludes the liability arising from law of the party supplying the standard term or restricts such liability in the case where the death of the other party or damage to the health of the other party is caused or in other cases where damage is caused intentionally or due to gross negligence;
 2) precludes the use of legal remedies of the other party vis a vis the party supplying the terms, including the opportunity to set off claims, or unreasonably restricts the use thereof in the event of the party supplying the terms fails to perform the contractual obligation or performs it improperly, including delays the performance;
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 3) precludes or unreasonably restricts the other party's right arising from law to refuse acceptance of performance of an obligation and to refuse performance of the party's obligations in the case of a mutual contract, especially if the right to refuse is made subject to admittance of a deficiency by the party supplying the term;
 4) [repealed - RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 5) prescribes that the other party shall, in the event of non-performance of the party's obligations, pay an unreasonably high contractual penalty to the party supplying the term or an unreasonably high predetermined amount of compensation for damage or other compensation, or the other party is deprived of the opportunity to prove the actual size of the damage;
 6) restricts the obligation of the party supplying the term to perform obligations undertaken by a representative of the party or makes performance of the obligations of such party subject to compliance with a particular formality on unreasonable grounds;
 7) prescribes that a third party is liable for non-performance of the obligations of the party supplying the term;
 8) precludes or restricts rights which the other party could exercise pursuant to law with regard to a third party if the rights arising from the contract to the party supplying the term transfer to such third party;
 9) prescribes an unreasonably short term for the other party to submit claims, including an unreasonably short limitation period for claims arising from the contract or law;
 10) deprives the other party of the opportunity to protect the party's rights in court or unreasonably hinders such opportunity from being exercised;
 11) unreasonably restricts the other party's right to use evidence or imposes on the party a burden of proof which, according to law, should lie with the party supplying the term;
 12) prescribes that, in the event of a breach of the contract by the party supplying the term, the other party may exercise the party's legal remedies against the party supplying the term only if the other party has previously filed a claim against a third party with a court;
 13) prescribes that performance of the obligations of the party supplying the term is made subject to a circumstance the occurrence of which depends on the party's will alone, at the same time as the other party undertakes an obligation which is binding on the party regardless of such circumstance;
 14) prescribes the right of the person supplying the term to alter the terms or conditions of the contract unilaterally for a reason or in a manner not provided by law or specified in the contract;
 15) prescribes that the party supplying the term has the right to determine or increase the price of a movable or service at the time of delivery of the movable or provision of the service without the other party having the right to terminate the contract, except in cases where such terms are lawful terms for price indexation and expressly prescribe the method of adjusting the price;
 16) provides the party supplying the term with a unilateral right to deliver a movable without good reason or provide a service with characteristics other than those agreed upon;
 17) provides the party supplying the term with the right to unilaterally determine whether the movable delivered or service supplied or the performance of any other obligation is in conformity with the terms and conditions of the contract;
 18) provides the party supplying the term with the exclusive right to interpret the contract terms;
 19) provides the party supplying the term with the right to unilaterally determine the term for the performance of the party's obligations or prescribes an unreasonably long or unspecified term for the performance of the obligations of the party supplying the term;
 20) [repealed - RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 21) prescribes the obligation of the other party to make an unreasonably large advance payment before the party supplying the term performs the obligations thereof;
 22) provides the party supplying the term with the right to require security of unreasonably high value;
 23) prescribes the obligation of the other party to accept goods or services which were not ordered in addition to the goods and services agreed upon;
 24) prescribes the obligation of the other party to enter into another contract with the party supplying the term or a third party, unless entry into such other contract is reasonable taking into account the relationship between such contract and the contract with standard terms;
 25) provides the party supplying the term with the right to transfer the rights and obligations thereof arising from the contract to a third party without the consent of the other party where this may serve to reduce the likelihood of the contract being performed;
 26) precludes or unreasonably restricts the right of the other party to assign claims;
 27) prescribes that, at the end of the term of a contract for a specified term, the contract is automatically extended for a period exceeding one year without the other party making a corresponding request;
 28) prescribes that a contract for a specified term is extended at the end of the term if the other party does not give notice of the opinion of the party with regard to the extension of the contract at an unreasonably early time before the end of the term;
 29) provides the party supplying the term with the right to terminate the contract without giving reasons for the termination if the same right is not provided to the other party;
 30) prescribes that, upon unilateral termination of the contract by the party supplying the term, the party may refuse to refund the sums paid by the other party for obligations which the party supplying the term has not yet performed, or the party supplying the terms is permitted keep the money paid by the other party if the other party does not enter into or perform the contract, and if the other party is not prescribed as large a compensation in the event the supplier of the term does not enter into or perform the contract;
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 31) prescribes an unreasonably long term of advance notice for the other party to terminate the contract;
 32) prescribes an unreasonably short term of advance notice for the party supplying the term to terminate the contract;
 33) provides the party supplying the term with the right to terminate a contract entered into for an unspecified term without good reason and without a reasonable period of advance notice;
 34) [repealed - RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 35) prescribes that declarations of intent are to be made in a manner other than that provided by law and this causes harm to the other party, except where such specification applies to the format of the declaration of intent of the other party or unless it is prescribed that the party supplying the term may deem the address given thereto by the other party to be correct until the party supplying the term is notified of a new address;
 36) enables the party supplying the term to make use of an unreasonably long or insufficiently determined term for acceptance or refusal of an offer;
 37) prescribes that, upon performance or non-performance of a particular act, a declaration of intent of a party is deemed to have been made or not to have been made, unless the party supplying the term undertakes to specifically notify the other party of the consequences of the other party's conduct and gives the other party a reasonable term for confirming the declaration of intent.

§ 43.  Specifications concerning credit institutions

 (1) The terms specified in clause 42 (3) 14) of this Act is not deemed to be unfair for the other party if a credit institution or other supplier of financial services reserves the right under the standard terms to alter, with good reason and without advance notice, the rate of interest or other charge for financial services to be paid by the other party or to the other party, on the condition that the credit institution or other supplier of financial services is required to immediately inform the other party or other parties of such alteration and that the other parties have the right to terminate the contract immediately.

 (2) The terms specified in clause 42 (3) 14) of this Act is not deemed to cause unfair harm to the other party if a credit institution or other supplier of financial services reserves the right under the standard terms to unilaterally alter the terms of a long-term contract without a good reason specified in the contract if alteration of the terms is not unfair with regard to the other party and if the credit institution or other supplier of financial services undertakes to give advance notice to the other party of any alteration of the terms and to grant the other party the right to terminate the contract immediately.

§ 44.  Contracts relating to economic or professional activities

  If a standard term specified in subsection 42 (3) of this Act is used in a contract where the other party to the contract is a person who entered into the contract for the purposes of the economic or professional activities of the person, the term is presumed to be unfair.

§ 45.  Requirement to terminate application of unfair standard terms

 (1) A person or body provided by law may, pursuant to the procedure provided by law, require that a party supplying an unfair standard term terminates application of the term and that the person recommending application of the term terminates and withdraws such recommendation.

 (2) The requirement specified in subsection (1) of this section may be filed, inter alia, by a non-profit association whose objectives as specified in the articles of association thereof include protection of the rights of undertakings or persons engaged in professional activities and who is actually able to protect these interests resulting from the organisation and financing of the activities thereof.

 (21) The non-profit association specified in subsection (2) of this section may submit a claim for termination of the use of the contract terms or practices concerning such term of payment, penalty for late payment or compensation for collection costs or recommendation for the use thereof which, based on the circumstances, are grossly unfair with regard to the obligee. Such claim may also be submitted in the case of an individually agreed term.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (3) The provisions of the second sentence in subsection 39 (1) of this Act shall not apply upon settlement of the requirement provided for in subsection (1) of this section.
[RT I 2008, 59, 330 - entry into force 01.01.2009]

Division 3 Contracts Negotiated Away From Business Premises  

§ 46.  Definition of contracts negotiated away from business premises

 (1) A contract negotiated away from business premises is a contract for the delivery of movables or the provision of services where a person engaged in economic or professional activities (supplier) makes an offer to a consumer or makes a proposal to negotiate entry into a contract:
 1) in the dwelling or place of work of the consumer or in close proximity thereto, except where the visit to the consumer's dwelling or place of work in order to make the offer or proposal takes place at the express prior request of the consumer;
 2) by addressing the consumer unexpectedly in a public transport vehicle or in the street;
 3) outside the business premises of the supplier at a recreational event organised by the offeror or a third party.

 (2) The provisions concerning contracts negotiated away from business premises do not apply to contracts where the consumer pays the charge prescribed by the contract upon entry into the contract and the amount of the charge does not exceed 15 euro.
[RT I 2004, 13, 86 - entry into force 15.04.2004]

§ 47.  Application of provisions

 (1) The provisions of this Division also apply if the supplier visited the place of work or dwelling of the consumer at the express prior request of the consumer but the consumer, while requesting contractual negotiations, did not know and did not have to know that the offer of movables or services regarding which the contract was entered into was part of the supplier's economic or professional activities.

 (2) [Repealed - RT I 2003, 78, 523 - entry into force 27.12.2003]

 (3) If a contract negotiated away from business premises is entered into in Estonia with a consumer whose residence is in Estonia or in a member state of the European Union, the provisions of this Division apply regardless of which state's law applies to the contract.

§ 48.  Informing consumer of right of withdrawal

 (1) A supplier shall inform a consumer in writing or by means of any other durable medium accessible by the consumer of the consumer's right to withdraw from the contract on the basis provided for in § 49 of this Act or in the case of a consumer credit contract on the basis provided for in § 409 of this Act, and of the manner and term for exercising such right, setting out the name and address of the supplier and the time of sending or giving the notice.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) A notice specified in subsection (1) of this section shall enable identification of the contract regarding which the notice is given. The notice shall be given to the consumer in a manner which enables the consumer to understand his or her rights. Receipt of a notice by a consumer shall be proved by the supplier.

§ 49.  Right of withdrawal

 (1) A consumer may withdraw from a contract negotiated away from business premises within fourteen days as of receipt of a notice specified in § 48 of this Act. If the consumer receives the notice before the contract is entered into, the term of

 (2) A consumer is deemed to have used the right of withdrawal within the specified term if he or she has sent a corresponding notice to the supplier within the term specified in subsection (1) of this section.

 (3) [Repealed - RT I 2003, 78, 523 - entry into force 27.12.2003]

 (4) If a consumer withdraws from a contract, the sums paid by the consumer shall be refunded to him or her immediately but not later than within thirty days as of the withdrawal from the contract. The provisions of §§ 188–194 of this Act apply to other consequences of withdrawal.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (5) The provisions of this Act do not apply if the contract negotiated away from business premises is a consumer credit contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 491.  Withdrawal from consumer credit contract

 (1) If a contract negotiated away from business premises is a contract economically linked to a consumer credit contract for the purposes of § 414 of this Act, a consumer is deemed to have also withdrawn, in the case of withdrawal from a contract negotiated away from business premises under the conditions provided for in § 49 of this Act, from the consumer credit contract and collateral contracts linked thereto for the purposes of subsection 409 (32) of this Act.

 (2) In the case specified in subsection (1) of this section, a consumer shall not be required to pay interest or other expenses in the case of withdrawal from a consumer credit contract. The provisions of §§ 188–194 of this Act apply to other consequences of withdrawal.

 (3) If credit is provided by a third party and the amount of the credit has already been paid to the vendor, the rights and obligations of the vendor with regard to the consumer transfer to the creditor in the case of withdrawal by the consumer.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 50.  Prohibition on violation of provisions

  A person or body provided by law may, pursuant to the procedure provided by law, require a supplier who has violated the provisions of this Division to terminate such violation and refrain from future violation.

§ 51.  Mandatory nature of provisions

  Agreements which derogate from the provisions of this Division to the detriment of the consumer are void.

Division 4 Distance Contracts for Delivery of Goods or Provision of Services  

§ 52.  Definition of distance contract

 (1) A contract for the delivery of goods or the provision of services entered into between a consumer and the person supplying the object or service for the purposes of the economic or professional activities thereof (supplier) is deemed to be a long distance contract if:
 1) the contract is entered into under a marketing or service-provision scheme used by the supplier for the entry into of such contracts, and
 2) [repealed - RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 3) the supplier and the consumer are not present simultaneously at the same place upon entry into the contract, and
 4) the offer and the declaration of intent of the consumer to undertake contractual obligations (order) are made by a means of communication.

 (2) Any method which enables a consumer and a supplier who are not in the same place at the same time as one another to organise the exchange of information necessary for negotiations and entry into a contract, in particular the use of telephone, radio, computer, facsimile or television or the delivery of addressed or unaddressed printed matter, including a catalogue or a standard letter, to a consumer, or press advertising with an order form, is deemed to be use of a means of distance communication.

 (3) A contract for the provision of investment services and services permissible for management companies and for the conclusion of transactions permissible for credit institutions which complies with the conditions provided for in subsection (1) of this section, an insurance contract and the provision of a service on the basis of a payment order is deemed to be a distance contract for the provision of financial services.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

§ 53.  Application of provisions

 (1) The provisions of this Division apply to a distance contract entered into with a consumer whose residence is in Estonia or in a Member State of the European Union if the contract was entered into as a result of a public offer, advertisement or other such activity in Estonia or is essentially related to the territory of Estonia for any other reason, regardless of which state's law applies to the contract.

 (11) In the case of contracts provided for in this Division comprising an initial service agreement followed by successive operations or operations of the same nature linked in time, the provisions of this Division shall apply only with regard to the initial contract. In case there is no initial service agreement but the successive operations or the separate operations of the same nature linked in time are performed between the same contractual parties, the requirements concerning provision of information to consumers provided for in §§ 54 and 541 of this Act apply only when the first operation is performed. Where, however, no operation of the same nature is performed for more than one year, the next operation will be deemed to be the first in a new series of operations and, accordingly, the provisions of §§ 54 and 541 of this Act shall apply.

 (2) The provisions of this Division do not apply to contracts which are entered into:
 1) by using automatic vending machines;
 2) by means of a public telephone with a provider of electronic communications services if the object of the contract is use of a public telephone;
 3) for construction work or the transfer of an immovable, or with regard to a real right in an immovable.

 (3) The provisions of §§ 54–59 of this Act do not apply to contracts which are entered into:
 1) with regard to foodstuffs, beverages or other goods intended for everyday consumption which are delivered to the residence or workplace of the consumer on a frequent and regular basis;
 2) with regard to transport, accommodation, catering or leisure services if, upon entry into the contract, the supplier undertakes to provide such services by a specified date or within a specified term.

 (4) The provisions of clause 54 (1) 7) and clause (11) 6) and § 56 of this Act do not apply to contracts entered into:
 1) for the provision of financial services the price of which on the money market varies during the term for withdrawal regardless of the supplier, including contracts the object of which is services related to foreign currency or the securities specified in § 2 of the Securities Market Act;
 2) for delivery of goods manufactured taking into account the personal needs of the consumer who is a party to the contract;
 3) for delivery of goods manufactured according to the conditions established by the consumer;
 4) for delivery of goods which due to their nature cannot be returned or are highly perishable or the use-by date of which has expired;
 5) for delivery of newspapers, journals or other periodicals;
 6) for betting or lottery services;
 7) for delivery of audio or video recordings or computer software if the consumer has opened the package;
 8) at an auction;
 9) for travel and baggage insurance or other similar short-term insurance contracts entered into for a term of less than one month.

 (41) The provisions of §§ 55 and 59 of this Act do not apply to distance contracts.

 (5) If a distance contract also conforms to the provisions concerning package travel contracts, contracts relating to purchase of right to use buildings on timeshare basis, long-term holiday product contract, agency agreement or exchange system contract, the provisions of this Division apply together with the specifications provided for such types of contract.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

 (6) The provisions of this Division shall not preclude or restrict application of other provisions provided by law for the protection of consumers.
[RT I 2004, 87, 593 - entry into force 01.01.2005]

§ 54.  Informing consumers

 (1) Within a reasonable period of time before a contract is entered into, the consumer shall be provided with the following information:
 1) the name and address of the supplier;
 2) the main characteristics of the goods or services;
 3) the estimated time of entry into force of the contract;
 4) the price of the goods or services, including taxes and other components of the price and the size thereof;
 5) the size of the postal charges, transport costs and taxes which are not included in the price and the costs of using postal services or means of communication if such costs exceed the basic rate;
 6) the procedure for payment for the goods or services and the circumstances relating to delivery of the goods or provision of the services and to performance of the contract;
 7) the consumer's right of withdrawal pursuant to § 56 of this Act;
 8) the term of validity of the offer and the offered price;
 9) the minimum term of the contract if the contract is performed continuously or recurrently during a specific term;
 10) whether the supplier has the right to deliver goods or provide services other than those ordered or to refuse to deliver the goods or provide the services;
 11) the fact that the consumer is deemed to have also withdrawn, on the basis of § 57 of this Act, from a linked consumer credit contract if goods or services are acquired on credit and the consumer withdraws from the contract of sale or provision of services on the basis of § 56 of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (11) In addition to the provisions of subsection (1) of this section, upon the provision of a financial service, within a reasonable period of time before a contract is entered into, the consumer shall be provided with the following information:
 1) the area of activity, the address of the place of business of the supplier and any other address relevant for the customer's relations with the supplier;
 2) the name of the representative of the supplier in the state of residence of the consumer and an address relevant for the customer's relations with the supplier;
 3) the name of the undertaking other than the supplier and who mediates, recommends a financial service or participates in the provision of the service in any other way, the economic field or profession in which the undertaking is engaged when communicating with the consumer and an address relevant for the customer's relations with this undertaking;
 4) the commercial register code or registration number in the case of an undertaking entered in the commercial register or in any other similar public register and the name of the register;
 5) details of the supervisory authority if an authorisation is required for the activity of the supplier;
 6) in addition to the price of the goods or services, all the charges, taxes and costs related to the goods or services and all the taxes paid via the supplier or, when an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it;
 7) additional costs for using the means of distance communication required from the consumer and other possible taxes and costs not included in the price and not paid via the supplier;
 8) special risks involved in financial services arising from the special nature of financial instruments or financial operations or dependence of the price of financial services on the financial markets outside the supplier's control and that previous results are no indicators for future forecast;
 9) the existence or absence of the consumer's right of withdrawal in accordance with § 56 of this Act, the term and the conditions for withdrawal, including practical guidelines for exercising it indicating, inter alia, the address whereto the application for withdrawal is to be sent, the obligation of the consumer to pay the amount provided for in subsection 58 (1) of this Act, as well as the consequences of non-exercise of the right of withdrawal;
 10) the right of the parties to cancel the contract or withdraw from the contract and the contractual penalties imposed in such cases;
 11) the Member State or States whose laws are taken by the supplier as a basis for the establishment of relations with the consumer prior to the conclusion of the distance contract;
 12) agreements on law and jurisdiction applicable to the contract;
 13) in which language the contractual terms and conditions, and the information to be communicated to during the precontractual phase are supplied, and furthermore in which language the supplier, with the agreement of the consumer, undertakes to communicate information during the duration of this distance contract;
 14) information on the possibilities of the consumer to have recourse to a body settling extra-judicial complaints and disputes and the terms and conditions of recourse;
 15) information on the procedure for compensation for damages not regulated by the Guarantee Fund Act.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

 (12) If the financial service provided is a consumer credit, the information provided for in clause (11) 9) of this section shall be communicated to the consumer with the specification that the consumer may withdraw from the contract on the basis and with the consequences provided for in § 409 of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) The information specified in subsections (1), (11) and (12) of this section shall, taking into account the means of communication used, be provided in good faith, in a clear and comprehensible manner, in compliance with good morals and taking into account the need to protect persons with restricted active legal capacity and in a manner indicating the commercial purpose of the offer. In the case of communication by telephone, the name of the supplier and the commercial purpose of the telephone call shall be made clearly known to the consumer at the beginning of the conversation.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) Information on contractual obligations, to be communicated to the consumer during the precontractual phase, shall be in conformity with the obligations which would result from the law presumed to be applicable to the distance contract if the latter were concluded.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

 (4) In the case financial services are offered by voice telephony communications, subject to the explicit consent of the consumer only the following information may be given:
 1) the name of the caller and his or her link with the supplier;
 2) a description of the main characteristics of the financial service;
 3) the price to be paid by the consumer to the supplier for the financial service, including all taxes paid via the supplier or, when an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it;
 4) reference to possible taxes and costs that are not included in the price and not paid via the supplier;
 5) the existence or absence of the consumer's right of withdrawal in accordance with § 56 of this Act, the term and the conditions for withdrawal, including the obligation of the consumer to pay the amount provided for in subsection 58 (1) of this Act.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

 (41) If the financial service provided is a consumer credit:
 1) the information provided for in clause (4) 5) of this section shall be communicated to the consumer with the specification that the consumer may withdraw from the contract on the basis and with the consequences provided for in § 409 of this Act;
 2) the description of the main characteristics of the financial service specified in clause (4) 2) of this section shall contain at least the information specified in clauses 4031 (1) 3), 4), 5), 6), 7) and 8) of this Act, annual percentage rate by means of a representative example and, if necessary, the information specified in clause 4031 (2) 2) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (42) If the financial service provided is the entry into force of an overdraft agreement specified in subsection 407 (21) of this Act and it is possible to make the overdraft facility available with immediate effect, the description of the main characteristics of the financial service specified in clause (4) 2) of this section shall contain at least the information specified in clauses 4031 (1) 3) and 8) and clauses 407 (21) 3) and 5) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) In the case provided for in subsection (4) of this section, the supplier shall inform the consumer that other information is available and of what nature this information is. In any case the supplier shall provide the full information when he or she fulfils his or her obligations under § 541 of this Act.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

 (6) The provisions of subsections 711 (1) and 7111 (1) of this Act shall apply instead of clauses (11) 1)–6), 10) and 12)–14) of this section if payment services are provided for the purposes of subsection 3 (1) of the Paying Authorities and E-money Institutions Act.
[RT I 2010, 2, 3 - entry into force 22.01.2010]

§ 541.  Communication of contractual terms and conditions and information upon offer of financial services

 (1) Within a reasonable period of time before a contract is entered into or an offer is made by the consumer, the supplier of financial services shall communicate the contractual terms and conditions and the information provided for in subsections 54 (1) and (11) of this Act and other acts to the consumer on a durable medium.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) The supplier of financial services shall fulfil their obligation under subsection (1) of this section immediately after the conclusion of the contract, if the contract has been concluded on the consumer's initiative using a means of distance communication which does not enable providing the contractual terms and conditions and the information in conformity with subsection (1) of this section.

 (21) If the consumer credit contract is entered into on the initiative of the consumer and using a means of distance communication which does not enable to provide the information in conformity with § 4031 of this Act, in particular in the case specified in subsection 54 (4) of this Act, the creditor or the credit broker shall communicate full information to the consumer, immediately after the entry into the consumer credit contract, pursuant to § 4031 of this Act, using the Standard European Consumer Credit Information form.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (22) If the overdraft agreement specified in subsection 407 (21) of this Act is entered into on the initiative of the consumer and using a means of distance communication which does not enable to provide the information in conformity with subsections 407 (21) and (22) of this Act, in particular in the case specified in subsection 54 (4) of this Act, the creditor or the credit broker shall communicate full information to the consumer immediately after the entry into the consumer credit contract pursuant to subsection 407 (24) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) During the term of the contract the consumer is entitled to receive the contractual terms and conditions on paper. The consumer is entitled to change the means of distance communication used, unless this is incompatible with the contract or the nature of the financial service provided.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

§ 55.  Confirmation of information

 (1) If the information specified in subsection 54 (1) of this Act is not communicated to the consumer in writing or by means of any other durable medium accessible by him or her, such information shall be confirmed in writing or by means of any other durable data medium accessible by the consumer not later than during the time of the performance of the contract or, in the case of movables, not later than at the time of delivery thereof.

 (2) The following shall be communicated to a consumer in any event:
 1) information on the conditions of the right of withdrawal and the details of exercising such right, pursuant to § 56 of this Act;
 2) the address of the supplier's place of business to which complaints may be submitted;
 3) information on after-sales servicing;
 4) information on preconditions for the liability of the supplier and on the existence and conditions of warranty;
 5) the conditions for cancellation of a long-term contract if the contract is entered into for an unspecified term or for a term exceeding one year.

 (3) The provisions of subsections (1) and (2) of this section do not apply to services which are provided directly by a means of communication and on one occasion only and the charge for which is calculated by the provider of the electronic communications service. The consumer shall also in this case have the opportunity to obtain the address of the supplier's place of business to which complaints can be submitted.
[RT I 2004, 87, 593 - entry into force 01.01.2005]

§ 56.  Right of withdrawal from contract

 (1) A consumer may withdraw from a distance contract within fourteen days. In the case of goods, the term shall commence as of the day on which the consumer receives the goods or, in the case of delivery of goods of the same type, the first part of the goods and on which the obligations provided for in § 55 of this Act are performed. In the case of services, the term shall commence as of the date of entry into the contract if the obligations provided for in § 55 of this Act have been performed.

 (11) In the case of a contract for provision of financial services, the term for withdrawal shall begin from the day of the conclusion of the contract or from the performance of the obligation provided for in subsections 541 (1) and (2) of this Act if this takes place after conclusion of the contract.

 (12) The consumer may withdraw from a distance contract for life insurance or pension insurance within thirty days as of the date on which the consumer is informed of entry into the contract or performance of the obligation provided for in subsections 541 (1) and (2) of this Act if this takes place after entry into the contract.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (13) The deadline for the withdrawal from a distance contract for the provision of financial services shall be deemed to have been observed by the consumer, if the consumer has dispatched a notification concerning the withdrawal or made an application for withdrawal in any other way during the term for withdrawal by taking into account the practical guidelines given for exercising the right of withdrawal based on clause 54 (11) 9) of this Act.

 (2) If the supplier has failed to perform the obligations provided for in § 55 of this Act, the consumer may withdraw from the contract within three months as of the date on which the consumer receives the goods or, in the case of services, as of the date of entry into the contract. The consumer may withdraw from the contract for the provision of financial services within three months as of the date of entry into the contract if the supplier has failed to perform the obligations provided for in § 54 or § 541 of this Act. If information specified in § 55 of this Act or, in the case of a contract for the provision of financial services, information specified in subsections 54 (1) and (11) of this Act is communicated during this three-month term, the consumer may withdraw from the contract within the term specified in subsection (1) of this section. The right to withdraw from a contract for the provision of services expires if the supplier has commenced provision of the service before the expiry of the term for withdrawal with the consent or on the initiative of the consumer.

 (21) The right to withdraw from a contract for the provision of financial services expires if both parties have fully performed their contractual obligations at the consumer's express request before withdrawal.

 (3) If the consumer withdraws from a contract, the sums paid by the consumer shall be refunded to him or her immediately but not later than within thirty days as of the receipt of the notification on withdrawal from the contract by the supplier. The consumer shall return the money and other objects received from the supplier immediately but not later than within thirty days as of dispatching the application for withdrawal. The provisions of §§ 188–194 of this Act apply to other consequences of withdrawal.

 (4) The provisions concerning financial services provided for in this section shall not apply to consumer credit contracts provided for in §§ 57 and 384 of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) The provisions of this section do not apply if the distance contract is a consumer credit contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 57.  Withdrawal from consumer credit contract
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) If goods or services are acquired on credit and the contract of sale or provision of services is a contract economically linked to a consumer credit contract for the purposes of § 414 of this Act, the consumer is deemed to have also withdrawn, in the case of withdrawal from the contract under the conditions provided for in § 56 of this Act, from the consumer credit contract and collateral contracts linked thereto for the purposes of subsection 409 (32) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) In the case provided for in subsection (1) of this section, the consumer shall not be required to pay interest or expenses. The provisions of §§ 188–194 of this Act apply to other consequences of withdrawal.

 (3) If credit is provided by a third party and the amount of the credit has already been paid to the vendor, the rights and obligations of the vendor with regard to the consumer transfer to the creditor in the case of withdrawal by the consumer.

§ 571.  Withdrawal from contract linked to contract for provision of financial services

 (1) If a distance contract for the provision of financial services is linked to another distance contract for the provision of services by the supplier of financial services or a third person on the basis of an agreement between them, the consumer may also withdraw from the other contract by withdrawing from the contract for the provision of financial services. The provisions of §§ 188–194 of this Act apply to other consequences of withdrawal.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) If the distance contract for the provision of financial services is a consumer credit contract, the provisions of § 409 of this Act apply instead of the consequences specified in this section.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 58.  Consequences of withdrawal from contract for provision of financial services

 (1) In the case of withdrawal from a distance contract for the provision of financial services, the consumer may be required to compensate for the price of the financial services actually provided by the supplier. The performance of the contract may only begin after the consumer has granted the corresponding consent. The consumer may be required to pay the part of the price of the financial services which corresponds to the proportion of the provided services in the total amount of the agreed services.

 (2) The consumer shall not be required to pay the amount provided for in subsection (1) if:
 1) the supplier has failed to notify the consumer of the payment obligation in compliance with clause 54 (11) 9) of this Act, or
 2) the supplier began performance of the contract before expiry of the term for withdrawal without explicit consent of the consumer.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

 (3) If the distance contract for the provision of financial services is a consumer credit contract, the provisions of § 409 of this Act apply instead of the consequences specified in this section.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 59.  Performance of contract

 (1) Unless the parties have agreed otherwise, the supplier shall execute an order of the consumer not later than within thirty days as of communication of the order.

 (2) If a supplier is unable to execute an order, the supplier shall give corresponding notice to the consumer and shall refund all amounts paid by the consumer immediately but not later than within thirty days.

 (3) In lieu of the goods or services ordered, the supplier may provide the consumer with goods or services of at least equivalent quality and price if this possibility was agreed on by the parties beforehand. In the case of withdrawal by the consumer, the costs relating to the return of the goods shall be borne by the supplier.

§ 60.  Restrictions on use of means of communication

  An offer may be made to a consumer by automated calling systems without human intervention, fax, telephone answering machine or electronic mail only with the prior consent of the consumer. Other means of communication which allow individual communication may be used for communicating an offer only if the consumer has not expressly forbidden the use thereof.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

§ 61.  Prohibition on violation of provisions

  A person or body provided by law may, pursuant to the procedure provided by law, require a supplier who has violated the provisions of this Division to terminate such violation and refrain from future violation.

§ 62.  Mandatory nature of provisions

  Agreements which derogate from the provisions of this Division to the detriment of the consumer are void.

Division 5 Contracts Entered into through Computer Network 
[RT I 2004, 13, 86 - entry into force 15.04.2004]

§ 621.  Specifications for entry into contract through computer network

 (1) A person engaging in economic or professional activities who enters into contracts through a computer network when selling goods or providing services shall make available to customers suitable and efficient technical means which are accessible and by which customers are able to identify and correct typing errors before transmitting their orders.

 (2) Before transmission of an order specified in subsection (1) of this section, the supplier shall notify the customer of:
 1) the technical stages involved in entering into the contract;
 2) whether the supplier will preserve the text of the contract after entry into the contract and whether the text will remain available to the customer;
 3) the technical means for identifying and correcting typing errors;
 4) the languages in which the contract may be entered into;
 5) the rules observed by the supplier, and the electronic means for examining the rules.

 (3) The supplier shall confirm receipt of an order immediately in electronic form.

 (4) The order and the confirmation of receipt of the order are deemed to have been received when the person to whom the order or confirmation is addressed has had the opportunity to examine it.

 (5) The terms of the contract, including the standard terms, shall be presented to the customer in a manner which enables them to be saved and reproduced.

 (6) The provisions of subsections (1)–(3) of this section do not apply if the contract is entered into by electronic mail or any other similar personal means of communication.

 (7) Agreements derogating from the provisions of subsections (1)–(5) of this section may be entered into only by persons engaging in economic or professional activities. Derogating agreements do not affect the validity of the contract entered into.

 (8) The provisions of this section do not preclude or restrict any obligations of a supplier to provide customers with any other information prescribed by law.
[RT I 2004, 13, 86 - entry into force 15.04.2004]

Chapter 3 PLURALITY OF PERSONS IN OBLIGATIONS  

Division 1 Plurality of Obligors  

§ 63.  Joint obligors

 (1) If several persons are to perform a divisible obligation, they shall perform the obligation in equal shares. The law or a transaction may prescribe that several obligors shall perform an obligation in unequal shares.

 (2) The provisions of subsection (1) of this section do not apply if several persons are to perform an obligation as solidary obligors.

§ 64.  Collective obligors

  If several persons are to perform the same obligation and they can perform such obligation only collectively, the obligee shall require them to perform the obligation collectively.

§ 65.  Solidary obligors

 (1) If several persons are to perform an obligation solidarily (solidary obligors), the obligee may require full or partial performance of the obligation from all the obligors collectively, from any one obligor or from some of the obligors separately.

 (2) A solidary obligation arises if several persons are to perform an obligation with the same content and performance of the obligation may be required by the obligee only once, and in other cases provided by law or on the basis of a transaction.

 (3) A solidary obligation also arises if an obligation is indivisible.

 (4) If several persons undertake by a contract to perform an obligation collectively, it is presumed that they are solidary obligors.

§ 66.  Waiver of claim

 (1) If an obligee wholly or partially waives a claim against a solidary obligor, the other solidary obligors are nevertheless required to perform the obligation in full.

 (2) If an obligee reaches an agreement with a solidary obligor that the obligee will waive the obligee's claim against all of the solidary obligors, the other solidary obligors are also released from the obligation. A solidary obligor may, on behalf of the other solidary obligors, accept a proposal from the obligee that the obligee will waive the obligee's claim against all the solidary obligors free of charge.

 (3) The provisions of subsections (1) and (2) of this section also apply if an obligee waives the obligee's claim against a solidary obligor before the solidary obligation arises.

§ 67.  Defences of solidary obligors

 (1) If any one solidary obligor has performed an obligation in full, the other solidary obligors are not liable for the performance of the obligation. The same applies in the case of substituted performance, deposit or set off. A solidary obligor may only set off the obligee's claim against the obligor's claim.

 (2) Any solidary obligor may set up defences against the claim of the obligee which arise from the solidary obligation or from the obligor's own legal relationship with the obligee.

 (3) If a solidary obligor does not set up a defence against a claim of the obligee which could have been set up by any of the solidary obligors, the solidary obligor does not have a right of recourse against the other solidary obligors to the extent by which the solidary obligation would have diminished as a result of such defence, unless the solidary obligor did not know and did not have to know of the circumstances underlying the defence.

§ 68.  Applicability of circumstances with regard to solidary obligors

 (1) A solidary obligor shall not be liable for non-performance of the solidary obligation by another solidary obligor.

 (2) Consequences arising to one solidary obligor from a delay in acceptance by an obligee or from postponement of the due date for the performance of the obligation also apply to the other solidary obligors.

 (3) Circumstances not specified by law which affect the liability of solidary obligors, in particular defences regarding limitation periods, apply only to the solidary obligor concerned unless otherwise dictated by the solidary obligation.

§ 69.  Relations between solidary obligors

 (1) In relations between themselves, solidary obligors are liable for the performance of the obligation in equal shares unless otherwise provided by law, the contract or the nature of the obligation.

 (2) If a solidary obligor has performed the solidary obligation, the claim of the obligee against the other obligors transfers to the solidary obligor (right of recourse of solidary obligor) except to the extent of the solidary obligor's own share of the obligation.

 (3) In the case provided for in subsection 66 (1) of this Act, the other obligors have the right of recourse against the obligor who is released from the solidary obligation to the extent of the obligor's share of the obligation in relations between the solidary obligors. This does not apply if the obligee reduces the claim thereof to the extent of the share which the obligor with regard to whom the obligee waived the claim is to bear in relations between the solidary obligors.

 (4) If a solidary obligation involves performance of acts other than payment of money, the solidary obligor who has performed the obligation may only claim compensation in money from the other solidary obligors.

 (5) A solidary obligor may claim compensation for reasonable expenses made by the obligor upon performance of the obligation from the other solidary obligors according to their shares in the obligation. Compensation for expenses shall not be claimed if the expenses are exclusively related to the solidary obligor.

 (6) If a solidary obligor fails to perform the share thereof in the obligation with regard to the solidary obligor who performed the obligation, the solidary obligor who performed the obligation and the other solidary obligors shall be liable for the performance of such share proportionally to their shares in the obligation. The claim against the solidary obligor who fails to perform the obligation transfers to the solidary obligor who performed the obligation and to the other obligors.

 (7) The provisions of subsections (1)–(6) of this section apply correspondingly to relations between the persons who have secured performance of an obligation by an obligor with securities.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 70.  Limitation period for right of recourse by solidary obligor

 (1) The limitation period for the right of recourse by a solidary obligor who has performed the solidary obligation expires at the time when the claim of the obligee against the solidary obligor against whom the right of recourse is exercised would expire.

 (2) The limitation period for the right of recourse by a solidary obligor shall not expire earlier than six months as of the date on which the solidary obligor performed the obligation or the obligee filed an action with a court against the obligor for the performance of the obligation.

 (3) The provisions of subsection (2) of this section do not apply if a solidary obligor performs the obligation after the limitation period for the claim against the obligor or the solidary obligor against whom the obligor exercised the right of recourse has expired.

 (4) Claims for compensation for reasonable expenses provided for in subsection 69 (5) of this Act and claims arising from negotiorum gestio or unjustified enrichment which can be filed in lieu of exercising the right of recourse shall expire together with the right of recourse.

Division 2 Plurality of Obligees  

§ 71.  Joint obligees

  If a divisible obligation must be performed for the benefit of several obligees, each of the obligees has the right to require performance of the obligation for the benefit thereof in a share equal to the shares of the other obligees unless law or a transaction provides that the obligees may require performance of the obligation in unequal shares, for their collective benefit or solidarily.

§ 72.  Collective obligees

 (1) If, pursuant to law, a transaction or the nature of an obligation, several obligees may only require performance of the obligation for their collective benefit, the obligor has the right to perform the obligation only for the benefit of all the obligees collectively.

 (2) If an indivisible obligation must be performed for the benefit of several obligees, each obligee may only require performance of the obligation for the benefit of all the obligees collectively unless the obligees are solidary obligees.

 (3) Each collective obligee may require performance of the obligation, including the deposit or sale of the thing owed, only for the benefit of all the obligees collectively. Other circumstances which pertain to one collective obligee only do not apply with regard to the other collective obligees.

§ 73.  Solidary obligees

 (1) If, pursuant to law, a transaction or the nature of an obligation, the obligation must be performed for the benefit of several persons such that each of the persons may require full performance of the obligation, such persons are solidary obligees.

 (2) An obligor may perform an obligation for the benefit of all or some of the solidary obligees, even if one of the solidary obligees has already filed an action to claim the performance of the obligation.

 (3) Performance of an obligation for the benefit of one of the solidary obligees, including a set-off against a claim of a solidary obligee or deposit for the benefit of a solidary obligee, releases the obligor from performance of the obligation for the benefit of the other solidary obligees.

 (4) An obligor shall only set up such defences against the claim of a solidary obligee which the obligor has against the solidary obligee concerned.

§ 74.  Applicability of circumstances with regard to solidary obligees

 (1) If one solidary obligee delays acceptance of the performance of an obligation, the other solidary obligees are also deemed to have delayed acceptance of the performance of the obligation.

 (2) If a solidary obligee becomes an obligor with regard to the same obligation, the obligation terminates. Such solidary obligee shall nevertheless pay the shares of the other obligees thereto pursuant to the provisions of § 75 of this Act.

 (3) If a solidary obligee waives the claim thereof or assigns the claim to another person, the rights of the other solidary obligees remain unaffected.

 (4) Circumstances not specified in subsections (1)–(3) of this section apply only with regard to the solidary obligee concerned.

§ 75.  Relations between solidary obligees

 (1) A solidary obligee who accepts the performance of an obligation by an obligor shall pay the other solidary obligees their shares. The shares of solidary obligees shall be equal unless otherwise provided by law, a transaction or the nature of the obligation.

 (2) The limitation period for a claim by the other solidary obligees against the solidary obligee who accepts performance of the obligation expires at the time when the claim of the solidary obligees against the obligor would have expired but not before six months as of the date on which the obligor performed the obligation.

Chapter 4 PERFORMANCE OF OBLIGATION  

§ 76.  Performance of obligation

 (1) An obligation shall be performed pursuant to the contract or to law.

 (2) An obligation shall be performed pursuant to the principles of good faith and reasonableness, taking into account usages and practices.

 (3) Performance of an obligation is deemed to be conforming if the obligation is performed at the right time, at the right place and in the right manner for the benefit of the person who is entitled to accept performance.

 (4) If an obligee accepts that which is offered to the obligee as performance of the obligation, the performance is deemed to be full, that which is offered as performance is deemed to be that which was owed and the performance to be conforming.

§ 77.  Quality of performance of obligation

 (1) An obligor shall perform an obligation with the quality prescribed by the contract or by law. Where the quality of the performance of a contractual obligation is not determinable from the contract or from law, the party shall perform the obligation with a quality not less than average in the circumstances.

 (2) If a thing with specific characteristics is owed for performance of an obligation and if things with the specific characteristics may be of different quality, the obligor shall perform the obligation with a quality not less than average.

 (3) If a thing with specific characteristics is owed for performance of an obligation and the obligor has done all that is possible on the part of the obligor to perform the obligation, including acquiring the thing with such specific characteristics or separation of the thing from other things with the same specific characteristics, the thing acquired or separated is deemed to be the object of the obligation.

 (4) If a person is required to deliver a specific thing, the person shall take reasonable care of the thing until delivery.

§ 78.  Performance of obligation by third party

 (1) Except where an obligor must, pursuant to law or a contract or due to the nature of an obligation, perform an obligation in person, a third party may perform the obligation in part or in full. If a third party performs an obligation, the obligor is released from the duty to perform.

 (2) An obligee may refuse to accept performance of an obligation by a third party if the obligor objects to the performance of the obligation by a third party.

 (3) If an obligor objects to the performance of an obligation by a third party, the obligee shall not refuse to accept performance if:
 1) the third party performs the obligation in order to avoid compulsory execution with regard to an object which belongs to the obligor but is in the lawful possession of the third party or for which the third party has some other right and if, in the case of compulsory execution, such possession or right would terminate, or
 2) the third party has other legitimate interest in the performance of the obligation and the obligor fails to perform the obligation in due time or it is obvious that the obligor will not perform the obligation in due time, or if the rights from which the obligation arises have been pledged or seized and exercise of the rights may be at risk in the case of non-performance of the obligation.
[RT I 2008, 54, 304 - entry into force 27.12.2008]

 (4) A third party who has performed an obligation may exercise the right of recourse or right to claim compensation for the expenses relating to the performance only if such right is determinable from law or the relationship between the obligor and the third party, including unjustified enrichment or negotiorum gestio.

§ 79.  Performance of obligation for benefit of unentitled person

 (1) If an obligation is performed for the benefit of a person other than the obligee or for the benefit of a person who is not entitled to accept performance in lieu of the obligee, the obligation is deemed to have been performed if the obligation is performed for the benefit of such other person with the consent of the person entitled to accept performance or if performance for the benefit of such person is later approved by the person entitled to accept performance. The obligation is also deemed to have been performed in the case specified in subsection 169 (1) of this Act.

 (2) Upon performance of an obligation for the benefit of an obligee with restricted active legal capacity, the obligation is deemed to have been performed if the obligation is performed for the benefit of the obligee with the consent of his or her legal representative or if his or her legal representative approves of the performance. An obligor may perform an obligation for the benefit of the legal representative of an obligee with restricted active legal capacity if the representative has not granted consent to the performance of the obligation for the benefit of the obligee.

 (3) If an obligation is performed for the benefit of an obligee who does not have the right to dispose of the claim thereof due to compulsory execution or bankruptcy, the obligation is deemed to have been performed if the person who has the right to dispose of the claim consents to or approves of the performance.

§ 80.  Contract for benefit of third party

 (1) A contract may prescribe or the nature of an obligation may indicate that the obligation is to be performed for the benefit of a third party in lieu of the obligee (contract for the benefit of a third party).

 (2) A third party may require performance of a contract if so prescribed by the contract or determined from law.

 (3) If a life insurance contract or life annuity contract prescribes payment of life annuity to or performance of the obligations of an insurer for the benefit of a third party, the third party may require performance of the contract unless otherwise provided by the contract. The same applies to gratuitous contracts if the contract prescribes performance of an obligation by the donee for the benefit of a third party.

 (4) A third party for whose benefit a contract is entered into need not be personally identifiable at the time of entry into the contract.

 (5) If an obligor must perform an obligation for the benefit of a third party after the death of the obligee, the third party may require performance of the obligation as of the death of the obligee unless the contract or the nature of the obligation indicates that the obligation must be performed later.

 (6) The parties may amend or terminate a contract entered into for the benefit of a third party without the consent of the third party unless otherwise provided by law or the contract.

 (7) An obligor may set up the same defences against a third party as against the obligee.

 (8) If a third party waives a right granted thereto by a contract or if the right expires or is no longer in force, it is presumed that the obligee may designate another third party for the benefit of whom the obligation must be performed or that the obligee may require performance of the obligation for the obligee's own benefit.

 (9) If a third party waives a right granted thereto by a contract, it is deemed that the third party has not had such right. A waiver is valid if a declaration of intent to that effect reaches both parties to the contract.

§ 81.  Contract with protective effect for third party

 (1) A contract may prescribe the obligation to take into account the interests or rights of a third party to the same extent as the interests or rights of the obligee. Such obligation shall be presumed if:
 1) in the course of performance of the contract, the interests and rights of the third party are at risk to the same extent as the interests and rights of the obligee, and
 2) the intent of the obligee to protect the interests and rights of the third party can be presumed, and
 3) the third party and the intent of the obligee to protect the interests and rights of the third party are identifiable by the obligor.

 (2) In the case of non-performance of the obligation specified in subsection (1) of this section, the third party may claim compensation for damage caused thereto.

§ 82.  Time of performance of obligation and time when obligation falls due

 (1) If the due date for the performance of an obligation is set by or determinable from the nature of the obligation, the obligation shall be performed on such date.

 (2) If the term for the performance of an obligation is prescribed by or determinable from the contract, the obligation shall be performed during such term unless the contract or the circumstances indicate that the obligee may determine the due date for performance of the obligation.

 (3) If the time for the performance of an obligation is not set and is not determinable from the nature of the obligation, the obligor shall perform the obligation within a reasonable period of time after the entry into the contract or after an obligation has arisen on some other basis, taking into particular account the place, manner and nature of the performance of the obligation.

 (4) An obligor shall perform the entire obligation at one time if such performance can be rendered at one time and the contract or the nature of the obligation does not indicate otherwise.

 (5) The parties shall perform their mutual contractual obligations simultaneously if such performance can be rendered simultaneously and the contract or the nature of the obligation does not indicate otherwise. If one party is obliged to perform certain acts during a certain period of time and the other party may perform its obligation at one time, such other party shall perform the obligation thereof after the first party has performed the obligation thereof unless otherwise provided by the contract.

 (6) An obligor may perform an obligation arising from a contract entered into for the purposes of the economic or professional activities of the obligee during regular working hours and the performance shall be accepted during regular working hours, unless otherwise provided by the contract.

 (7) An obligation falls due at the time when the obligee is entitled to require performance of the obligation. Unless otherwise provided by the contract, the obligee may require performance of an obligation upon expiry of the due date or term prescribed for the performance of the obligation. If the time for performance of the obligation is not set and is not determinable from the nature of the obligation, the obligee may require performance of the obligation after a reasonable period of time specified in subsection (3) of this section which is necessary for the performance of the obligation.

§ 821.  Charges becoming collectable in case of mutual contracts

 (1) If no due date or term is agreed for payment of charges in the case of a mutual contract, the obligation to pay the charge shall become collectable at the latest after thirty days:
 1) from the receipt of the invoice or other such proposal for payment by the obligor;
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 2) from the receipt of the goods, services or other benefits if the date of the receipt of the invoice or other proposal for payment by the obligor is unclear or if the obligor receives the invoice or proposal for payment before the receipt of the goods, services or other benefits;
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]
 3) from receipt or examining of the goods, services or other benefits if the law or the contract prescribes the receipt or examination of the goods, services or other benefits, in the course of which the compliance thereof with the contract shall be verified, and if the obligor receives the invoice or other proposal for payment before or by the time of the receipt or examination.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (11) If an obligor is the person specified in subsection (1) or (2) of the Public Procurement Act, no such term shall be agreed upon the expiry of which the obligor is deemed to have received the invoice.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (2) An obligor who enters into a contract in the course of economic or professional activities shall not rely on an agreement which prescribes a term of payment in excess of 60 days as of the occurrence of the circumstances specified in clauses (1) 1)–3) of this section, except in the case it is expressly agreed otherwise in the contract and unless this is grossly unfair with regard to the obligee due to the circumstances.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (3) An obligor who is the person specified in subsection 10 (1) or (2) of the Public Procurement Act shall not rely on an agreement which prescribes a longer term of payment than that provided for in subsection (1) of this section, except in the case it is expressly agreed otherwise in the contract and if this is objectively determinable from the nature or particular characteristics of the contract.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (4) An agreement which prescribes a term of payment which is longer than 60 days for an obligor who is the person specified in subsection 10 (1) or (2) of the Public Procurement Act 60 shall be void.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (5) If a term of payment starts to run from the receipt or examination of the goods, services or other benefits, an obliger cannot rely in the course of economic or professional activities on an agreement based on which the term of receipt or examination of the goods, services or other benefits is longer than 30 days as of the receipt of the goods, services or benefits, except in the case it is expressly agreed otherwise and unless this is grossly unfair with regard to the obligee due to the circumstances.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

§ 83.  Performance of obligation in parts

 (1) If an obligation must be performed at one time, the obligee may refuse to accept performance of the obligation in parts unless this is contrary to the principle of good faith.

 (2) An obligee may refuse to accept performance of an obligation in parts regardless of whether the obligor, upon making the proposal to perform the obligation in parts, offers security for performance of the remaining part of the obligation or confirms performance of the obligation in full.

 (3) Additional expenses arising for an obligee from acceptance of the performance of an obligation in parts shall be borne by the obligor.

§ 84.  Earlier performance of obligation

 (1) An obligee shall not require performance of an obligation before the due date for performance but shall not refuse to accept performance of the obligation before the due date unless the obligee has a legitimate interest in such refusal.

 (2) Acceptance by a party of performance of an obligation before the due date shall not affect the time for performance of the party's own obligation if such time has been set irrespective of the performance of the other party's obligations.

 (3) Additional expenses arising for an obligee from performance of an obligation before the due date shall be borne by the obligor.

 (4) If, before the due date for performance, an obligor performs an obligation which involves the duty to pay interest, the obligee may claim interest until the due date prescribed for performance of the obligation. If an obligation performed before the due date does not involve the duty to pay interest, the obligor shall not claim interest from the obligee for the period of time between the performance of the obligation and the due date prescribed for performance.

§ 85.  Place of performance of obligation

 (1) An obligor shall perform an obligation at the place determined by the contract or by law. If the place of performance of an obligation is not prescribed by the contract or by law, the obligation shall be performed at a place determined on the basis of the nature of the contract.

 (2) If the place of performance of an obligation cannot be determined on the bases specified in subsection (1) of this section:
 1) a monetary obligation shall be performed at the obligee's place of business which was most closely related to the obligation at the time when the obligation arose or, if no such place exists, at the residence or seat of the obligee;
 2) an obligation to deliver a specific thing or a thing from a specific group of things shall be performed at the place where the thing or group of things was located at the time when the obligation arose;
 3) an obligation to deliver a thing which must be produced or prepared after the contract is entered into shall be performed at the place where the thing is produced or prepared;
 4) an obligation not specified in clauses 1)–3) of this subsection shall be performed at the obligor's place of business which was most closely related to the obligation at the time when the obligation arose or, if no such place exists, at the residence or seat of the obligor.

 (3) If an obligation must be performed at the place of business, residence or seat of the obligee and the obligee changes the place of business, residence or seat thereof after the obligation has arisen, the obligee may require performance of the obligation at the new place of business, residence or seat on the condition that the obligee bears any related additional expenses and risks.

 (4) If an obligation must be performed at the place of business, residence or seat of the obligor and the obligor changes the place of business, residence or seat thereof after the obligation has arisen, the obligor may perform the obligation at the new place of business, residence or seat on the condition that the obligor bears any related additional expenses and risks.

 (5) If several alternative places have been determined for the performance of an obligation, the obligor has the right to choose the place of performance unless law provides or the nature of the obligation indicates that such right rests with the obligee or a third party.

§ 86.  Alternative obligations

 (1) If an obligor is required to perform one of several obligations, the choice shall be made by the obligor unless law or the contract provides or the nature of the obligation indicates that such right rests with the obligee or a third party.

 (2) An obligor or an obligee who has the right to choose shall make the choice by informing the other party of the choice. If a third party has the right to choose, the choice shall be made by informing both the obligor and the obligee. After a choice has been made, it is deemed that performance of the chosen obligation only was required from the outset.

§ 87.  Transfer of right to choose in case of alternative obligation

 (1) If, in the case of an alternative obligation, the right to choose belongs to the obligor or the obligee and the choice is not made during the time period agreed upon or, if no agreement exists, within a reasonable period of time before the obligation falls due, the right to choose transfers to the other party to the obligation.

 (2) If the right to choose belongs to a third party and the third party fails to make the choice during the term specified in subsection (1) of this section, the right to choose transfers to the obligor.

§ 88.  Performance discharging different obligations

 (1) If an obligor is required to transfer money, or objects with specific characteristics, or to provide services of the same type to the obligee for the discharge of different obligations and if the money or objects transferred or the services provided do not suffice to discharge all the obligations, the obligor may specify the obligation for the discharge of which the money or objects are transferred or the services are provided.

 (2) If the obligations of an obligor do not have equal security, the obligor shall not resolve to perform an obligation with more security.

 (3) An obligor shall not resolve to perform an obligation the performance of which cannot yet be required by the obligee and with regard to which the obligee has a legitimate interest in refusing early performance.

 (4) If an obligor, before performance or during a reasonable period of time thereafter, does not specify the obligation discharged by the performance, the obligee may do so if:
 1) the obligee informs the obligor of the choice within a reasonable period of time after the performance, and
 2) performance of the obligation is lawful, and
 3) the obligation has fallen due, and
 4) the obligation has not been disputed.

 (5) If, under the circumstances specified in subsection (4) of this section, an obligee has chosen which obligation is deemed to have been performed by the obligor but the obligor has objected to the choice without delay, the obligor may choose which obligation is deemed to have been discharged by the performance. In such case, the obligation specified by the obligor is deemed to have been performed.

 (6) If neither the obligor nor the obligee has chosen which obligation the money, objects or services are deemed to have discharged, the performance is deemed to discharge:
 1) firstly, the obligation which is the first to fall due;
 2) secondly, the obligation for which the obligee has the least security;
 3) thirdly, the obligation which is the most burdensome for the obligor;
 4) fourthly, the obligation which arose first.

 (7) If the obligation deemed to have been discharged cannot be specified on the basis of the provisions of subsection (6) of this section, the performance is deemed to discharge all the obligations in proportion.

 (8) If an obligor is required to pay expenses and interest in addition to the principal monetary obligation, the performance is deemed to discharge first the expenses, then the interest due and finally the principal obligation.

 (9) An obligor shall not specify an order different from the order provided for in subsection (8) of this section for the performance of obligations without the consent of the obligee.

§ 89.  Substituted performance of obligation

 (1) An obligor may substitute performance of an act necessary for the performance of an obligation with the performance of another act (substituted performance) only with the consent of the obligee, even if the value of the other act is the same as or greater than the value of the act necessary for the performance. If the obligee accepts the performance of the other act as the performance of the obligation, the obligation is deemed to have been performed.

 (2) Assumption by an obligor of a new obligation for the benefit of the obligee in order to satisfy the claim of the obligee is not deemed to be substituted performance unless otherwise provided by law or the contract. If the obligee accepts the performance of the new obligation, the initial obligation is also deemed to have been performed.

 (3) In the case of substituted performance, the obligor shall be liable for the substituted performance on the same bases as if performance had not been substituted.

§ 90.  Costs of performance of obligation

  An obligor shall bear the costs of performance of the obligor's obligations.

§ 91.  Manner of performance of monetary obligations

 (1) A monetary obligation may be performed in cash. A monetary obligation may also be performed in some other form if so agreed by the parties or if such form is used in the ordinary course of business at the place of payment.

 (2) If an obligee has an account for execution of payment transactions in a credit institution or other payment service provider in the state in which a monetary obligation is to be performed, the obligor may perform the obligation by transferring the amount due to the account unless the obligee has expressly prohibited this option.
[RT I 2010, 2, 3 - entry into force 22.01.2010]

 (3) In the case of performance of a monetary obligation by transferring the amount due to the account of the obligee, the obligation is deemed to have been performed when the account of the obligee is credited with the amount due.

 (4) If an obligee accepts a cheque, bill of exchange or other similar means of payment as performance of a monetary obligation and the means of payment is later redeemed, the obligation is deemed to have been performed as of acceptance of the means of payment.

 (5) If an obligee has accepted a means of payment specified in subsection (4) of this section as performance of a monetary obligation, the obligee may only require performance of the obligation in money if the means of payment is not redeemed.

 (6) If an obligee has the right to withhold performance of the obligee's obligation until performance of a monetary obligation by the obligor and if the obligee has accepted a means of payment specified in subsection (4) of this section as performance of the monetary obligation, the obligee may withhold the performance of the obligee's obligation until the means of payment is redeemed.

 (7) Upon performance of a monetary obligation by post, the obligation is deemed to have been performed as of payment of the money to the obligee.

§ 92.  Payment of money at nominal value

  A monetary obligation shall be performed at the nominal value of the money unless otherwise provided by the law or the contract.

§ 93.  Currency of monetary obligation

 (1) The money paid to perform a monetary obligation shall be valid at the time of payment in the state in whose currency the payment is made.

 (2) If a monetary obligation is not expressed in a particular currency, it shall be performed in the currency of the place of performance of the obligation (place of payment).

 (3) If an obligation is expressed in a currency other than that of the place of payment, the obligor may also perform the obligation in the currency of the place of payment unless the currency is not freely convertible or the parties have agreed that payment in a currency other than that in which the monetary obligation is expressed is prohibited. Regardless of such agreement, the obligee may require performance of the monetary obligation in the currency of the place of payment if it is impossible for the obligor to make payment in the currency in which the monetary obligation is expressed.

 (4) If a monetary obligation expressed in a currency other than that of the place of payment is performed in the currency of the place of payment, the obligation shall be converted into the currency of the place of payment on the basis of the average rate of exchange at which the obligee can, at the place of payment and at the time when the obligation falls due, immediately purchase the currency in which the obligation was expressed. If an obligor does not perform a monetary obligation in a timely manner, the obligee may require payment according to the applicable rate of exchange prevailing either at the time when payment is due or at the time of actual payment.

§ 94.  Interest on obligations

 (1) If interest is to be paid on an obligation pursuant to law or the contract, the interest rate shall be applied on a half-year basis and shall be equal to the last interest rate applicable to the main refinancing operations of the European Central Bank before 1 January or 1 July of each year, unless otherwise provided by the law or the contract.

 (2) Eesti Pank shall organise timely publication of the interest rates specified in subsection (1) of this section in the official publication Ametlikud Teadaanded.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

 (3) A fixed interest rate is the interest rate agreed upon by the obligee and the obligor in the contract for whole term of the contract or the interest rate agreed upon for certain periods which is calculated only based on a specified percentage. If not all interest rates are specified in the contract, the interest rate shall be deemed fixed for the periods for which the interest rate is expressed, upon entry into the contract, only as a specified percentage.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) An interest rate not deemed to be a fixed interest rate pursuant to subsection (3) of this section is an unfixed interest rate.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 95.  Receipt for performance

 (1) Upon accepting the performance of an obligation, an obligee shall issue written evidence of acceptance (receipt for performance) to the obligor at the request of the obligor. An obligor may also require issue of a receipt in some other form if the obligor has a legitimate interest therein.

 (2) If a third party performs an obligation in lieu of an obligor, a receipt for the performance may be required by both the obligor and the third party.

 (3) If an obligation is to be performed for the benefit of a third party, the obligor may require issue of a receipt for the performance from both the third party and the obligee.

 (4) If a receipt for performance issued by an obligee is handed over to the obligor by a person other than the obligee, the person is deemed to be authorised to accept the performance of the obligation from the obligor. The person handing over the receipt is not deemed to be authorised to accept the performance of the obligation if the obligor knew or should have known that the person is not authorised to accept the performance or if the receipt has been removed from the obligee's possession against the obligee's will.

 (5) If a receipt is issued for the performance of a principal obligation, the expenses and interest are also presumed to have been paid.

 (6) If an obligee or a third party for the benefit of whom an obligation is to be performed refuses to issue a receipt, the obligor may withhold performance of the obligation until the obligor has obtained the receipt. In such case, the obligee is deemed to have delayed acceptance of the performance of the obligation.

§ 96.  Return of debt instrument

 (1) If an obligor issues a document certifying the existence of an obligation (debt instrument), the obligor may, upon performance of the obligation demand the return of the debt instrument in addition to or in lieu of a receipt. If the obligee does not return the debt instrument, the obligor may require written confirmation of the termination of the obligation from the obligee.

 (2) If an obligation is performed in part or if a debt instrument also sets out other rights of the obligee or if the obligee has some other legitimate interest in not returning the debt instrument, the obligee may refuse to return the debt instrument on the condition that the obligee make an inscription certifying performance of the obligation on the debt instrument.

 (3) If a debt instrument has been returned to the obligor, it is presumed that the obligation has been performed.

 (4) If an obligee refuses to return a debt instrument or to make an inscription on a debt instrument or to issue confirmation of the termination of an obligation, the obligor may withhold performance of the obligation until the debt instrument is received, the inscription is made or the confirmation is issued. In such case, the obligee is deemed to have delayed acceptance of the performance of the obligation.

§ 97.  Alteration of balance of contractual obligations

 (1) If the circumstances under which a contract is entered into change after the entry into the contract and this results in a material change in the balance of the obligations of the parties due to which the costs of one party for the performance of an obligation increase significantly or the value of that which is to be received from the other party under the contract decreases significantly, the injured party may demand amendment of the contract from the other party in order to restore the original balance of the obligations.

 (2) Amendment of a contract under the circumstances specified in subsection (1) of this section may be demanded if:
 1) at the time of entry into the contract, the injured party could not have reasonably expected that the circumstances might change, and
 2) the injured party could not influence the change in the circumstances, and
 3) the risk of a change in the circumstances is not borne by the injured party pursuant to the law or the contract, and
 4) the injured party would not have entered into the contract or would have entered into the contract under significantly different terms if the party had known of the change in the circumstances.

 (3) Amendment of a contract may also be demanded if the circumstances under which the contract was entered into had already changed before the contract was entered into but became known to the injured party after the contract was entered into.

 (4) The injured party may also demand amendment of the contract retroactively, but not as of a time earlier than the time when the balance of the obligations changed.

 (5) If the bases for amendment of a contract exist but, due to the circumstances, amendment of the contract pursuant to subsection (1) of this section is not possible or would not be reasonable with respect to the other party, the party aggrieved by alteration of the balance of the obligations may withdraw from the contract or, in the case of a long-term contract, cancel the contract pursuant to the procedure provided for in § 196 of this Act.

§ 98.  Obligation to provide security and confirm performance of obligations

 (1) If a person is required to provide security for the performance of an obligation but the type of the security is not exactly defined or if the provision of security is a condition for the creation of legal consequences, the person who provides security may choose the type of security. Security shall be sufficient to secure performance of the obligation and, if necessary, payment of interest and expenses, and the obligee shall be able to convert the security into money without difficulties.

 (2) If security provided under the circumstances specified in subsection (1) of this section is no longer sufficient for reasons independent of the obligee, the obligor shall supplement or replace the security.

 (3) If a person is required to confirm performance of an obligation but the method of confirmation has not been determined or confirmation of the performance of the obligation gives rise to certain legal consequences, the person shall provide sufficient evidence of the person's ability to perform the obligation.

§ 99.  Provision of goods or services not ordered

 (1) A person engaged in economic or professional activities shall not have the right of claim against a consumer to whom the person dispatches goods or provides services which the consumer did not order. Silence or inactivity of the consumer shall not be deemed to be acceptance by the consumer.
[RT I 2007, 56, 375 - entry into force 12.12.2007]

 (2) The provisions of subsection (1) of this section shall not preclude the filing of claims arising from the law if:
 1) the goods or services were not intended for the consumer;
 2) the person who dispatched the goods or provided the services erroneously believed that the consumer ordered the goods or services and the consumer was or should have been aware of the error.

 (3) The provisions of subsections (1) and (2) of this section do not apply if goods or services of a quality and price at least equal to that of the goods or services ordered are offered to the consumer in lieu of the goods or services ordered and if the consumer is notified that there is no obligation to accept the goods or services nor bear the expenses relating to their return.

Chapter 5 NON-PERFORMANCE  

Division 1 General Provisions  

§ 100.  Definition of non-performance

  Non-performance is failure to perform or defective performance of a prestation, including a delay in performance.

§ 101.  Legal remedies in case of non-performance

 (1) In the case of non-performance by an obligor, the obligee may:
 1) require performance of the obligation;
 2) withhold performance of an obligation which is due from the obligee;
 3) demand compensation for damage;
 4) withdraw from or cancel the contract;
 5) reduce the price;
 6) in the case of a delay in the performance of a monetary obligation, demand payment of a penalty for late payment.

 (2) In the case of non-performance, the obligee may resort to any legal remedy separately or resort simultaneously to all legal remedies which arise from law or the contract and can be invoked simultaneously unless otherwise provided by law or the contract. In particular, invoking a legal remedy arising from non-performance shall not deprive the obligee of the right to demand compensation for damage caused by non-performance.

 (3) An obligee shall not rely on non-performance by an obligor nor resort to legal remedies arising therefrom insofar as such non-performance was caused by an act of the obligee or by circumstances dependent on the obligee or by an event the risk of which is borne by the obligee.

§ 102.  Notification obligation

  An obligor shall notify the obligee of an impediment to performance by the obligor and of the effect of such impediment on the performance of the obligation immediately after the obligor becomes aware of the impediment.

§ 103.  Excused non-performance

 (1) An obligor shall be liable for non-performance unless the non-performance is excused. It is presumed that non-performance is not excused.

 (2) Non-performance by an obligor is excused if it is caused by force majeure. Force majeure are circumstances which are beyond the control of the obligor and which, at the time the contract was entered into or the noncontractual obligation arose, the obligor could not reasonably have been expected to take into account, avoid or overcome the impediment or the consequences thereof which the obligor could not reasonably have been expected to overcome.

 (3) If the effect of force majeure is temporary, non-performance is excused only for the period during which force majeure impeded performance of the obligation.

 (4) In the cases provided by law or the contract, a person shall be liable for non-performance regardless of whether the non-performance is excused.

§ 104.  Liability in case of culpability

 (1) In the cases provided by law or contract, a person shall be liable for non-performance only if the person is culpable of the non-performance.

 (2) The types of culpability are carelessness, gross negligence and intent.

 (3) Carelessness is failure to exercise necessary care.

 (4) Gross negligence is failure to exercise necessary care to a material extent.

 (5) Intent is the will to bring about an unlawful consequence upon the creation, performance or termination of an obligation.

 (6) If, pursuant to law or a contract, a person is required only to exercise such care as the person would exercise in the person's own affairs, the person shall nevertheless also be liable in the case of intent and gross negligence.

§ 105.  Legal remedies independent of liability of obligor

  In the case of non-performance by an obligor, the obligee has the right to withhold performance of the obligation of the obligee, withdraw from or cancel the contract or reduce the price regardless of whether the obligor is liable for the non-performance.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

§ 106.  Agreement to release person from liability or to restrict liability

 (1) An obligor and an obligee may agree in advance to preclude or restrict liability in the case of non-performance of an obligation.

 (2) Agreements under which liability is precluded or restricted in the case of intentional non-performance or which allow the obligor to perform an obligation in a manner materially different from that which could be reasonably expected by the obligee or which unreasonably exclude or restrict liability in some other manner are void.

§ 107.  Cure

 (1) A party who fails to perform a contractual obligation may, at the party's own expense, cure the non-performance, including improving or replacing defective performance, as long as the other party has not withdrawn from or cancelled the contract or demanded compensation for damage in lieu of performance, provided that:
 1) cure is reasonable in the circumstances, and
 2) cure does not cause unreasonable inconvenience or expenses to the injured party, and
 3) the injured party has no legitimate interest in refusing cure.

 (2) A non-performing party may cure non-performance within a reasonable period of time after the party has given notice to the injured party of the intention to cure and of the proposed manner and timing of the cure and if the injured party with a legitimate interest in refusing cure has not given notice of such refusal within a reasonable period of time.

 (3) The injured party may withhold performance as of receipt of the notice of cure until completion or failure of the cure. During the time for cure, the injured party may use other legal remedies only if these are not inconsistent with the cure.

 (4) Cure shall not deprive the injured party of the right to claim compensation for damage caused by a delay in performance or by the cure, including the right to claim payment of a penalty for late payment or a contractual penalty.

Division 2 Legal Remedies  

§ 108.  Requiring performance of obligation

 (1) In the case of non-performance by an obligor of an obligation to pay money, the obligee may require performance of the obligation.

 (2) In the case of non-performance by an obligor of an obligation other than one to pay money, the obligee may require performance of the obligation. Performance of the obligation shall not be required if:
 1) performance is impossible;
 2) performance is unreasonably burdensome or expensive for the obligor;
 3) the obligee may reasonably achieve the desired result of the performance in another manner;
 4) performance involves provision of services of a personal nature.

 (3) An obligee may require performance of an obligation specified in subsection (2) of this section only within a reasonable period of time after the obligee has or should have become aware of the non-performance.

 (4) An obligor may determine beforehand a reasonable term within which the obligee may require performance. If the obligor determines an unreasonably short term within which the obligee may require performance, the term is deemed to have been extended to a reasonable length.

 (5) If an obligee does not require performance during a term specified in subsection (3) or (4) of this section, the obligee may no longer require performance of the obligation but may resort to other legal remedies.

 (6) The right to require performance of an obligation includes the right of the obligee to require repair, replacement or other cure of a defective performance in so far as this may be reasonably expected from the obligor.

 (7) If, pursuant to subsection (2) of this section, an obligee does not have the right to require performance of an obligation from the obligor and the obligor receives compensation in lieu of the object of the obligation due or acquires the claim for payment of such compensation (claim for compensation), the obligee may require transfer of the compensation or assignment of the claim for compensation.

 (8) An obligee shall not require performance of an obligation if, at the request thereof, the obligee has in lieu of performance received compensation for the damage incurred due to non-performance.

§ 109.  Specifications concerning requirement to perform mutual contract

 (1) In the case of a mutual contract, the non-performing party may require the other party to perform its obligations even if performance by the non-performing party cannot be required for reasons specified in subsection 108 (2) of this Act and if the reason arises due to circumstances dependent on the other party or if the reason arises at the time when the other party delays acceptance.

 (2) In the case specified in subsection (1) of this section, the non-performing party shall nevertheless deduct from the party's claim whatever the party saves as a result of non-performance or obtains as a result of applying the party's labour or other resources elsewhere or fails to obtain in bad faith despite having a reasonable opportunity to do so.

§ 110.  Withholding performance of obligation

 (1) An obligor may withhold performance of an obligation until the obligee has satisfied a claim which is due for the benefit of the obligor against the obligee if the claim is not sufficiently secured and there is a sufficient link between the claim and the obligation of the obligor and unless indicated otherwise by law, the contract or the nature of the obligation. A sufficient link exists between a claim and an obligation primarily if the obligations of the obligor and the obligee arise from the same legal relationship, a prior regular relationship between the obligor and the obligee or from another sufficient economic or temporal relationship.

 (2) An obligor does not have the right to withhold performance on the bases specified in subsection (1) of this section if:
 1) satisfaction of the obligor's claim against the obligee is impossible;
 2) the obligee has failed to perform due to circumstances dependent on the obligor, including where performance has been impeded by a delay in acceptance by the obligor;
 3) the claim of the obligee arises from the obligation of the obligor to provide maintenance to the obligee;
 4) the claim of the obligee against the obligor arises from the obligation to compensate for damage resulting from health damage or from damage caused by death;
 5) pursuant to law, the claim cannot be subject to a claim for payment.

 (3) The right of an obligor to withhold performance terminates when the obligee performs or secures the performance of the obligee's obligation.

 (4) If the claim of an obligor against the obligee has expired, the obligor may withhold performance if the right to withhold performance arose before the expiry of the limitation period.

 (5) If the obligee requires performance of an obligation by the obligor in court and the obligor withholds performance on the basis of this section, the court shall make a judgement whereby it orders the obligor to comply with the judgement only if the obligee has performed his or her obligation with respect to the obligor or acceptance of the performance by the obligor is delayed.
[RT I 2008, 59, 330 - entry into force 01.01.2009]

§ 111.  Withholding performance in case of mutual contract

 (1) If the parties have mutual obligations arising from a contract (mutual contract), a party may withhold performance until the other party has performed, offered to perform, secured or confirmed the performance.

 (2) If an obligation is to be performed for the benefit of several persons, the obligated party may, in the case specified in subsection (1) of this section, withhold performance for the benefit of all such persons until the obligation due for the benefit of the obligated party has been performed in full.

 (3) A party shall not withhold performance if this would be unreasonable in the circumstances or contrary to the principle of good faith, in particular if the other party has performed the obligations thereof for the most part or without significant deficiencies.

 (4) A party required to perform an obligation before performance by the other party may withhold performance of the contract if circumstances which become evident to the party after the entry into the contract give sufficient reason to believe that the other party will not be able to perform the obligation thereof due to insolvency, or if the other party's conduct in preparing for performance or during performance or any other good reason gives reason to believe that the party will not perform the obligation thereof.

 (5) In the case specified in subsection (4) of this section, the party entitled to withhold performance may require the other party to perform the obligation thereof at the same time as the first party and may set a reasonable term for the performance of the obligation, for confirmation of the performance or for the provision of security. If the other party fails to perform or to secure or confirm performance of the obligation during the term, the party entitled to withhold performance may withdraw from the contract pursuant to the provisions of § 117 of this Act.

 (6) If a party who is to perform before performance by the other party has sufficient reason to believe that the other party's performance will be partial or in any other manner defective, the first party may withhold performance on the bases provided for in subsection (4) of this section only if it can be presumed that there will be a fundamental breach of the contract by the other party.

 (7) If the obligee requires performance of an obligation by the obligor in court and the obligor withholds performance on the basis of subsection (1) or (4) of this section, the provisions of subsection 110 (5) shall be applied. Upon withholding the performance of a contract on the basis of subsection (4) of this section, the court may require the obligor to perform his or her obligation only against security.
[RT I 2008, 59, 330 - entry into force 01.01.2009]

§ 112.  Reduction of price

 (1) If a party accepts defective performance, the party may reduce the price payable by the party by the proportion of the ratio of the value of defective performance to the value of conforming performance. The values of conforming and defective performances shall be determined as at the time of performance of the obligation. If the values of conforming and defective performances cannot be precisely determined, a court shall decide the values taking into account the circumstances.

 (2) In order to reduce a price, a corresponding declaration shall be made to the other party. If several persons participate in a contract as one party, the price may be reduced only jointly by all persons acting as one party and with regard to all persons. If the right to reduce the price terminates for one entitled person, it shall also terminate for the other persons acting as one party with the entitled person.

 (3) A party which is entitled to reduce the price but has already paid a sum exceeding the reduced price may, in the case of a price reduction, claim a refund of the sum paid in excess pursuant to the provisions of subsections 189 (1) and 191 (1) of this Act.

 (4) A price may also be reduced before the obligation of the other party falls due under the same conditions as provided for in § 117 of this Act for withdrawal from a contract before an obligation falls due.

 (5) A party shall not reduce the price to the extent to which the other party cured the non-performance of the other party's obligation.

§ 113.  Penalty for late payment

 (1) Upon a delay in the performance of a monetary obligation, the obligee may require the obligor to pay interest on the delay (penalty for late payment) for the period as of the time the obligation falls due until conforming performance is rendered. The interest rate specified in § 94 of this Act plus eight per cent per year shall be the rate of penalty for late payment. If a contract prescribes payment of interest exceeding the rate provided by law, the interest rate prescribed by the contract shall be the rate of penalty for late payment.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (2) If the time for performance of a monetary obligation is not set, including in the case of claims for the compensation of damage or for delivery of the object of unjust enrichment or for delivery arising from withdrawal, the penalty for late payment on the money owed shall be calculated as of the time when the obligee informed the obligor of the claim or filed an action to collect the money or a petition for application of expedited procedure in the matter of payment order. If the date of making the payment of the charge is not set in the case of a mutual contract, the penalty for late payment shall be calculated on the charge as of the expiry of the term provided for in subsection 821 (1) of this Act.
[RT I, 06.12.2010, 1 - entry into force 05.04.2011]

 (3) If a person is to be compensated for expenses incurred by the person, payment of a penalty for late payment on such expenses may be required as of the time the expenses were incurred. If expenses are related to a thing to be delivered to a person who is required to compensate for such expenses, the person is not required to pay a penalty for late payment for the time for which the person entitled to receive compensation retains the fruits of the thing or other benefit arising therefrom.

 (4) An obligor is not required to pay a penalty for late payment for the time the obligor is unable to perform the obligation thereof due to a delay in acceptance by the obligee or for the time the obligor legitimately withholds performance of the obligation.

 (5) If the damage caused by a delay in performance exceeds the penalty for the delay, compensation for the sum which exceeds the penalty for late payment may be claimed if a claim for compensation for damage exists. Regardless of the payment of the penalty, the obligee may require compensation from the obligor for any reasonable expenses of debt collection caused by the delay.
[RT I, 06.12.2010, 1 - entry into force 05.04.2011]

 (6) A penalty for late payment shall not be required for a delay in the payment of interest. Agreements which derogate from such requirement to the detriment of the obligor are void.

 (7) The provisions of subsection (6) of this section shall not preclude or restrict the right of the obligee to claim compensation for damage caused by a delay in the payment of interest.

 (8) A person required to pay a penalty for late payment may claim for a reduction of the fine pursuant to the provisions of § 162 of this Act.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

 (9) An obligor engaged in economic or professional activities may not rely on an agreement which restricts the right to claim penalty for late payment provided for in subsection (1) of this section, if this agreement is grossly unfair with regard to the obligee due to the circumstances.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

 (10) An agreement which precludes charging of penalty for late payment from a person engaged in economic or professional activities or pursuant to which the person specified in subsection 10 (1) or (2) of the Public Procurement Act is obliged to pay penalty for late payment at a rate lower than that provided for in subsection (1) of this section shall be void.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

§ 1131.  Compensation for collection costs

 (1) If an obligee may charge penalty for late payment, the obligee may require the obligor to pay compensation for collection costs in the amount of 40 euros.

 (2) If the damage caused by a delay in performance of an obligation exceeds the rate of the compensation provided for in subsection (1) of this section, the obligee may claim penalty for late payment and compensation for damage which exceeds the determined sum of the collection costs, if a claim for compensation for damage exists.

 (3) An obligor may not rely on an agreement which precludes compensation for collection costs or which restricts the right of claim of compensation for collections costs provided for in subsection (1) of this section if such agreement is grossly unfair with regard to the obligee due to the circumstances. It is presumed in the case compensation for collection costs is precluded that this is grossly unfair with regard to the obligee.

 (4) This section does not apply to an obligor who is a consumer.
[RT I, 05.04.2013, 1 - entry into force 15.04.2013]

§ 114.  Additional term for performance

 (1) In the case of non-performance of an obligation by an obligor, the obligee may grant a reasonable additional term for the obligor to perform the obligation. If the obligee requires performance of an obligation but does not grant an additional term therefor, a reasonable additional term shall be presumed to have been granted. If the obligee grants an unreasonably short additional term for performance, the term shall be extended to a reasonable length.

 (2) The grant of an additional term shall not release the obligor from liability for non-performance.

 (3) If an additional term is granted in the case of non-performance of a contractual obligation, the obligee may withhold performance of the obligations thereof during the term, claim compensation for damage caused by the non-performance and claim payment of a penalty for late payment but shall not resort to any other legal remedies.

 (4) If an obligor gives notice that the obligor will not perform an obligation or if the obligor fails to render a conforming performance during an additional term, the obligee may, after receipt of such notice or upon expiry of the term, resort to other legal remedies, including claiming compensation for damage in lieu of performance, withdrawing from the contract or cancelling the contract.

§ 115.  Compensation for damage

 (1) In the case of non-performance of an obligation by an obligor, the obligee may together with or in lieu of performance claim compensation for damage caused by the non-performance from the obligor except in cases where the obligor is not liable for the non-performance or the damage is not subject to compensation for any other reason provided by law.

 (2) Compensation for damage in lieu of performance may be required upon the expiry of the additional term provided for in § 114 of this Act. If performance of an obligation involves return of a particular object, compensation for damage in lieu of performance may be required only if the obligee has lost interest in the return of the object due to the delay.

 (3) Compensation for damage in lieu of performance may also be required without granting an additional term if it is evident that the grant of the additional term would not have any effect or, in the cases specified in clauses 116 (2) 1)–4) of this Act or under the circumstances, if immediate compensation for the damage is reasonable for any other reason.

 (4) If an obligor performs an obligation in part, the obligee may claim compensation for damage in lieu of full performance only if the obligee does not have a reasonable interest in partial performance. In such case, that which was delivered as partial performance shall be returned pursuant to the provisions of §§ 189–191 of this Act.

 (5) [Repealed - RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 116.  Withdrawal and cancellation as legal remedies

 (1) A party may withdraw from the contract in the case of fundamental non-performance of a contractual obligation by the other party (fundamental breach of contract).

 (2) A breach of contract is fundamental if:
 1) non-performance of an obligation substantially deprives the injured party of what the party was entitled to expect under the contract, except in cases where the other party did not foresee such consequences of the non-performance and a reasonable person of the same kind as the other party could not have foreseen such consequences under the same circumstances;
 2) pursuant to the contract, strict compliance with the obligation which has not been performed is the precondition for the other party's continued interest in the performance of the contract;
 3) non-performance of an obligation was intentional or due to gross negligence;
 4) non-performance of an obligation gives the injured party reasonable reason to believe that the party cannot rely on the other party's future performance;
 5) the other party fails to perform any obligation thereof during an additional term for performance specified in § 114 of this Act or gives notice that the party will not perform the obligation during such term.

 (3) If contractual obligations are to be performed in parts and fundamental breach of contract is committed only with regard to one obligation or some obligations or one part or some parts thereof, the injured party may withdraw from the contract only with regard to such obligation or part of an obligation. In such case, the injured party may withdraw from the entire contract only if the party is justifiably not interested in partial performance or if the non-performance is fundamental with regard to the contract as a whole.

 (4) Withdrawal from a contract without granting an additional term for performance specified in § 114 of this Act is prohibited if the damage suffered by the non-performing party in the case of the withdrawal would be disproportionate in relation to the expenses incurred in the performance or preparation for the performance of the obligation. However, withdrawal from a contract without granting an additional term is permitted in the case of non-performance of an obligation specified in clause (2) 2) of this section or if the other party gives notice that the party will not perform the obligation thereof.

 (5) Upon granting an additional term specified in § 114 of this Act, the injured party may prescribe withdrawal from the contract on the occasion where the other party fails to perform the other party's obligation during the additional term. The injured party shall not withdraw from the contract in such manner if the obligation which the non-performing party fails to perform during the additional term is only a minor part of the non-performing party's contractual obligations.

 (6) In the case of a fundamental breach of a long-term contract, the injured party may cancel the contract pursuant to the provisions of § 196 of this Act.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 117.  Withdrawal before obligation falls due

 (1) If it is evident before the obligation of a party falls due that such party will commit a fundamental breach of the contract, primarily if the party gives notice that the party does not intend to perform the contract, the other party may withdraw from the contract before the obligation falls due.

 (2) A party which intends to withdraw from the contract before an obligation falls due shall give notice of such intention to the other party in order to give the other party an opportunity to secure or confirm the performance of the obligation. The party which intends to withdraw may withhold performance of the obligations thereof until security or confirmation is received. If the performance is not secured or confirmed during a reasonable period after notice of the intention to withdraw is given, the party which gave notice of the intention thereof may withdraw from the contract.

 (3) Notice to the other party of an intention to withdraw from a contract need not be given if the other party has given notice that the party will not perform the obligation thereof.

§ 118.  Prohibition on withdrawal

 (1) A party entitled to withdraw from a contract loses the right to withdraw if the party does not a make a declaration of withdrawal within a reasonable period of time after:
 1) the party becomes or should have become aware of a fundamental breach of the contract;
 2) the additional term for performance granted pursuant to § 114 of this Act expires.

 (2) Withdrawal from a contract due to a breach of the contract is void if the claim for the performance of the obligation has expired and the obligor relies on such claim or if the obligor legitimately refuses to perform the obligation.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

Chapter 6 IMPEDIMENTS TO PERFORMANCE OF OBLIGATION  

§ 119.  Definition and consequences of delay in acceptance

 (1) Acceptance by an obligee is delayed if the obligor cannot perform the obligation thereof due to circumstances dependent on the obligee, in particular if the obligee unjustifiably refuses to accept a conforming performance actually offered to the obligee or to perform an obligation which is the precondition for performance by the obligor or to perform any other act necessary for performance by the obligor or to co-operate with the obligor.

 (2) In the case of a delay in acceptance by an obligee, the obligor shall be liable for non-performance of the obligation thereof only if the obligor causes such non-performance intentionally or due to gross negligence.

§ 120.  Deposit of money, securities, other documents and valuables

 (1) If an obligee delays acceptance or if the obligor does not know and does not have to know the identity of the obligee, the obligor may deposit the money, securities, other documents or valuables owed with a notary for the purposes of transfer to the obligee. The procedure for depositing shall be established by the Minister of Justice.

 (2) An obligor may deposit money, securities, other documents or valuables owed at the place of performance of the obligation. If the obligor deposits such objects at another place, the obligor shall compensate the obligee for any expenses and damage arising therefrom.

 (3) An obligor shall give immediate notice of a deposit to the obligee or the person presenting himself or herself as the obligee.

 (4) If an obligor and an obligee are required to perform their obligations simultaneously, the obligor may make the transfer of deposited property to the obligee conditional on the performance of the obligation of the obligee.

 (5) The person with whom property is deposited may refuse to transfer the deposited property to the obligee if the obligee does not pay all of the person's expenses relating to the deposit. After the deposited property has been transferred, the person with whom the property was deposited shall refund the sums paid by the obligor for depositing regardless of whether the obligee has paid the expenses relating to the deposit. If an obligor reclaims the deposited property, the obligor shall bear the expenses relating to the deposit.

§ 121.  Reclamation of deposited property

 (1) An obligor may reclaim deposited property from the depositary only if, upon depositing the property, the obligor notifies the depositary of the intention to retain the right to reclaim the property (right of reclamation of deposited property).

 (2) The right of reclamation of deposited property extinguishes if:
 1) the obligor gives notice to the depositary that the obligor waives the right to reclaim the property;
 2) the obligee gives notice to the depositary that the obligee will accept the deposited property;
 3) a court decision which has entered into force or is subject to immediate enforcement and which recognises the right of the obligee to the deposited property is presented to the depositary;
[RT I 2008, 59, 330 - entry into force 01.01.2009]
 4) a court declares the bankruptcy of the obligor.

 (3) A right of reclamation of deposited property shall not be subject to a claim nor seized.

 (4) If an obligor reclaims deposited property, the property is deemed not to have been deposited and the claim against the obligor is restored together with all rights arising from accessory obligations.

§ 122.  Legal consequences of deposit

 (1) If property is deposited without the obligor having the right of reclamation, it is deemed that by depositing the property the obligor has performed the obligation at the time of the deposit. If the obligor has retained the right to reclaim the deposited property, the obligation is deemed to have been performed upon expiry of the right of reclamation.

 (2) If property is deposited with the right of reclamation, the obligor may set up a defence against an obligee's claim concerning performance of the obligation, indicating that the obligor has deposited the money, securities, documents or valuables owed under the obligation. In such case, the obligee shall not require performance of the obligation in any other manner than out of the deposited property.

 (3) During the period for which property is deposited with the right of reclamation, the risk of accidental loss of or damage to the property shall be borne by the obligee. The obligor is not required to pay interest for the period of the deposit nor compensate the obligee for loss of profit incurred during such period.

 (4) The right of an obligee to receive deposited property extinguishes when seven years have passed from receipt of the notice of the deposit if, within that term, the obligee fails to give notice to the depositary of the intention to accept the deposited property. If the term has expired and the obligee has not given notice of the intention to accept the deposited property, the obligor may reclaim the deposited property even if the obligor has not retained the right of reclamation.

 (5) The claim of an obligee against an obligor expires upon expiry of the term specified in subsection (4) of this section unless the claim has expired earlier.

§ 123.  Declaration for receipt of deposited property

  If a declaration from an obligor certifying the right of the obligee to receive deposited property is necessary for the receipt of the property, the obligee may require the obligor to issue the declaration under the same conditions as the obligee could require performance of the obligation if the property were not deposited. If an action filed by the obligee is satisfied, the obligor is deemed to have granted consent upon the entry into force of the judgment.

§ 124.  Depositing other things

 (1) In the case specified in subsection 120 (1) of this Act, an obligor may deposit movables other than money, securities, other documents or valuables with a reasonably chosen third party whose economic activities include the deposit of movables of the corresponding type, unless such deposits involve unreasonably high costs.

 (2) The provisions of subsections 120 (2)–(5) and §§ 121–123 of this Act apply as appropriate upon depositing movables specified in subsection (1) of this section.

§ 125.  Sale of moveable owed

 (1) In the case specified in subsection 120 (1) of this Act and in the case where a movable cannot be transferred to the obligee for reasons independent of the obligor, the obligor may, instead of depositing the movable, sell the movable in a reasonable manner if:
 1) the movable cannot be deposited due to its nature or because there is no reasonable opportunity to deposit the thing;
 2) the movable is highly perishable;
 3) the preservation or storage of the movable would involve unreasonable costs;
 4) the period of deposit may be of unpredictable length because the obligor does not know and does not have to know the identity of the obligee.

 (2) A movable may be sold at the place of performance of the obligation. If a reasonable result cannot be expected at the place of performance, the movable may be sold in another place suitable therefor.

 (3) An obligor shall sell a movable if sale is clearly in the interests of the obligee or if the obligee gives notice that the obligee requires the movable to be sold.

 (4) A movable shall be sold by auction. If the movable is highly perishable or has a current exchange or market price or if the price which could be expected at an auction would be unreasonably low in comparison to the costs of the auction, the obligor may sell the movable in some other reasonable manner.

 (5) Within a reasonable period before the intended sale of a movable, the obligor shall give notice to the obligee of the intention to sell the movable. Notice need not be given if the movable is highly perishable or if notification is impossible.

 (6) An obligee shall bear the reasonable costs of the sale of a movable and the costs shall be deducted from the money received from the sale of the movable. The remainder of the money shall be paid to the obligee by the obligor.

 (7) Upon the sale of a movable, the obligee shall retain the rights arising from defective performance.

§ 126.  Performance by third party

  The provisions of this Chapter concerning the rights and obligations of obligors apply also to third parties who perform an obligation in order to avoid compulsory execution with regard to an object belonging to the obligor which is in the lawful possession of the third party or with regard to which the third party has some other right and such right or possession would terminate in the case of compulsory execution.

Chapter 7 COMPENSATION FOR DAMAGE  

§ 127.  Purpose and extent of compensation for damage

 (1) The purpose of compensation for damage is to place the aggrieved person in a situation as near as possible to that in which the person would have been if the circumstances which are the basis for the compensation obligation had not occurred.

 (2) Damage shall not be compensated for to the extent that prevention of damage was not the purpose of the obligation or provision due to the non-performance of which the compensation obligation arose.

 (3) A non-conforming party shall only compensate for such damage which the party foresaw or should have foreseen as a possible consequence of non-performance at the time of entering into the contract unless the damage is caused intentionally or due to gross negligence.

 (4) A person shall compensate for damage only if the circumstances on which the liability of the person is based and the damage caused are related in such a manner that the damage is a consequence of the circumstances (causation).

 (5) Any gain received by the injured party as a result of the damage caused, particularly the costs avoided by the injured party, shall be deducted from the compensation for the damage unless deduction is contrary to the purpose of the compensation.

 (6) If damage is established but the exact extent of the damage cannot be established, including in the event of non-patrimonial damage or future damage, the amount of compensation shall be determined by the court. If compensation for damage is claimed due to violation of copyright or related rights or violation of industrial property right, the court may, if this is reasonable, determine compensation for the damage as a fixed amount, taking account, inter alia, the amount of fee the violator should have paid if he or she had obtained authorisation for the use of the relevant right.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

 (7) [Repealed - RT I 2008, 59, 330 - entry into force 01.01.2009]

§ 128.  Types of damage subject to compensation

 (1) Damage subject to compensation may be patrimonial or non-patrimonial.

 (2) Patrimonial damage includes, primarily, direct patrimonial damage and loss of profit.

 (3) Direct patrimonial damage includes, primarily, the value of the lost or destroyed property or the decrease in the value of property due to deterioration even if such decrease occurs in the future, and reasonable expenses which have been incurred or will be incurred in the future due to the damage, including reasonable expenses relating to prevention or reduction of damage and receipt of compensation, including expenses relating to establishment of the damage and submission of claims relating to compensation for the damage.

 (4) Loss of profit is loss of the gain which a person would have been likely to receive in the circumstances, in particular as a result of the preparations made by the person, if the circumstances on which compensation for damage is based would not have occurred. Loss of profit may also include the loss of an opportunity to receive gain.

 (5) Non-patrimonial damage involves primarily the physical and emotional distress and suffering caused to the aggrieved person.

§ 129.  Compensation for patrimonial damage upon causing death

 (1) In the case of an obligation to compensate for the damage arising from the death of a person, the obligated person shall compensate for the expenses arising from the death of the deceased person, in particular for reasonable funeral expenses, reasonable medical expenses relating to the health damage or bodily injury which caused the death of the person, and the damage arising from the aggrieved person's interim incapacity for work.

 (2) Compensation for funeral expenses shall be paid to the person who is obligated to bear the expenses. If funeral expenses are borne by another person, compensation for the expenses shall be paid to the other person.

 (3) If a person whose death is caused bears, at the time of his or her death, an obligation arising from law to maintain another person, the person obligated to compensate for the damage shall pay the person reasonable monetary compensation corresponding to the maintenance payments which the deceased person would have paid to the person during the deceased person's presumed life-span.

 (4) A person obligated to compensate for damage shall also pay compensation to a third party on the basis and to the extent specified in subsection (3) of this section if the obligation to maintain such person would have arisen pursuant to law in the future and during the presumed life-span of the deceased.

 (5) A person obligated to compensate for damage shall also bear the obligation provided for in subsections (3) and (4) of this section with regard to a person who, by the time of the death of the deceased person, had been conceived but not yet born.

 (6) If a person whose death is caused maintained, on a continuous basis up to the death of the person, another person with whom the deceased lived together as a family or whom the deceased person maintained on the basis of a moral obligation, the person obligated to compensate for the damage shall pay compensation to the person to the extent specified in subsection (3) of this section if:
 1) the person needs maintenance, and
 2) the person cannot receive maintenance in any other manner, and
 3) the person whose death was caused would presumably have continued to maintain the person in the future.

 (7) A person obligated to compensate for damage may set up the same defences against claims for compensation for damage by persons specified in subsections (2)–(6) of this section as the person could have set up against the person whose death the obligated person caused.

§ 130.  Compensation for damage in case of health damage or bodily injury

 (1) In the case of an obligation to compensate for damage arising from health damage or bodily injury caused to a person, the obligated person shall compensate the aggrieved person for expenses arising from such damage or injury, including expenses arising from the increased needs of the aggrieved person, and damage arising from total or partial incapacity to work, including damage arising from a decrease in income or deterioration of the future economic potential of the aggrieved person.

 (2) [repealed - RT I, 21.12.2010, 1 - entry into force 31.12.2010]

§ 131.  Compensation for patrimonial damage in case of deprivation of liberty or violation of personality rights

  In the case of an obligation to compensate for damage caused by unlawfully depriving a person of liberty, by defamation or by violation of any other personality right, the obligated person shall compensate the aggrieved person for the expenses caused to the person and for damage arising from a decrease in income or deterioration of the future economic potential of the aggrieved person.

§ 132.  Compensation for damage in case of destruction, loss of or damage to thing

 (1) In the case of an obligation to compensate for damage arising from destruction or loss of a thing, compensation shall be paid in an amount covering the reasonable expenses made to acquire a new thing of equal value. If by the time of the destruction or loss of a thing the value of the thing has considerably decreased in comparison to the value of an equivalent new thing, the decrease shall be taken into account in a reasonable manner when determining the amount of compensation for the damage.

 (2) If acquisition of a new thing of equal value is not possible, the value of the thing which was destroyed or lost shall be compensated for.

 (3) If damage is caused to a thing, compensation for the damage shall cover, in particular, the reasonable costs of repairing the thing and the potential decrease in the value of the thing. If repairing the thing is unreasonably expensive in comparison to the value of the thing, compensation shall be paid pursuant to subsection (1) of this section.

 (4) If a thing damaged was necessary or useful for the aggrieved person, in particular, for the person's economic or professional activities or work, compensation for the damage shall also cover the costs of using a thing of equal value during the time in which the damaged thing is being repaired or a new thing is being acquired. If the person does not use a thing of equal value, the person may claim compensation for loss of the advantages of use which the person could have benefited from during the time in which the thing is repaired or a new thing is being acquired.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 133.  Compensation for damage caused by environmentally hazardous activities

 (1) If damage is caused by environmentally hazardous activities, damage related to deterioration in environmental quality shall also be compensated for in addition to the damage caused to persons or the property thereof. Expenses relating to preventing an increase in the damage and to applying reasonable measures for mitigating the consequences of the damage, and the damage arising from the application of such measures shall also be compensated for.

 (2) Damage and expenses specified in subsection (1) of this section shall be compensated for to the extent and pursuant to the procedure provided by law.

§ 134.  Specifications for compensation for non-patrimonial damage

 (1) Compensation for non-patrimonial damage arising from non-performance of a contractual obligation may only be claimed if the purpose of the obligation was to pursue a non-patrimonial interest and, under the circumstances relating to entry into the contract or to the non-performance, the obligor was aware or should have been aware that non-performance could cause non-patrimonial damage.

 (2) In the case of an obligation to compensate for damage arising from depriving a person of liberty, causing bodily injuries to or damage to the health of a person or violation of other personality rights, including defamation of a person, the aggrieved person shall be paid a reasonable amount of money as compensation for non-patrimonial damage.
[RT I, 21.12.2010, 1 - entry into force 31.12.2010]

 (3) In the case of an obligation to compensate for damage arising from the death of a person or a serious bodily injury or health damage caused to the person, the persons close to the deceased or the aggrieved person may also claim compensation for non-patrimonial damage if payment of such compensation is justified by exceptional circumstances.

 (4) In the case of destruction or loss of a thing, the aggrieved person has, taking into account exceptional circumstances, the right to claim a reasonable amount of money as compensation for non-patrimonial damage in addition to compensation for patrimonial damage regardless of the usefulness of the thing if the person had a special interest in the destroyed or lost thing primarily for personal reasons.

 (5) The gravity and scope of the violation and the conduct and attitude of the person who caused damage to the aggrieved person after the violation shall be taken into account for the purposes of determining the compensation for non-patrimonial damage.
[RT I, 21.12.2010, 1 - entry into force 31.12.2010]

 (6) In addition to the provisions of subsections (5), the court may, upon determining the compensation for non-patrimonial damage for defamation of a person, inter alia by passing undue judgement or by disclosure of incorrect information, for unjustified use of the name or image of the person, or for breaching the inviolability of the private life or other similar personality rights of the person, take into consideration the need to exert influence upon the person who caused the damage to avoid causing further damage, taking into account the financial situation of the person who caused the damage.
[RT I, 21.12.2010, 1 - entry into force 31.12.2010]

§ 135.  Offsetting price differences

 (1) If, after withdrawing from a contract, an injured party performs a transaction within a reasonable time and in a reasonable manner with which the injured party achieves the same purpose which was to be achieved by the contract from which the party withdrew (substitute transaction), the injured party may claim for the non-conforming party to offset the difference between the contractual price and the price arising from the substitute transaction as compensation for damage.

 (2) If an injured party withdraws from a contract, the party may claim for the difference between the contractual price and the current market price of the contractual obligation of the non-conforming party at the time of withdrawal from the contract to be offset as compensation for damage if there is a market price for the object of the contractual obligation at the place of performance or at any other place which appears reasonable to take as a reference, even if the injured party does not perform a substitute transaction.

 (3) The provisions of subsections (1) and (2) of this section shall not preclude or restrict the right to make a claim for compensation for damage exceeding the price difference.

§ 136.  Manner of compensation for damage

 (1) Damage shall be compensated for in a lump sum unless the nature of the damage makes it reasonable to pay the compensation in instalments.

 (2) In the event that death, a bodily injury or health damage is caused, the damage shall be compensated for in money and in instalments unless the nature of the damage makes it reasonable for the compensation to be paid as a lump sum.

 (3) If damage is to be compensated for in instalments, payments shall be made in advance for each three month period unless otherwise decided by a court taking into account the circumstances. If the person entitled to receive compensation dies before the end of the period for which an instalment is or should have been paid, the obligation to pay compensation for such period remains in effect.

 (4) If a court orders an obligor to pay compensation in instalments, the court may alter the period and amount of the instalments on the application of either party if, after the judgment is made, circumstances become evident which are relevant to the determination of the period and amount of the instalments and the occurrence of which was not taken into account in the determination of the instalments. The court may prescribe indexation of instalments or alteration thereof in any other way already upon order of payment of instalments if this is clearly reasonable.
[RT I 2008, 59, 330 - entry into force 01.01.2009]

 (5) In the cases provided by law or a contract and in other cases where this is reasonable under the circumstances, the aggrieved person may claim compensation for damage in a manner other than monetary compensation.

§ 137.  Compensation for damage paid by several persons

 (1) If several persons are liable, on the same or different grounds, to a third party for the same damage caused to the third party, they shall be solidarily liable for payment of compensation.

 (2) In relations between the persons specified in subsection (1) of this section, liability shall be divided taking into account all circumstances, in particular the gravity of the non-performance or the unlawful character of other conduct and the degree of risk borne by each person.

 (3) If one of the persons obligated to compensate for damage has the right to set up defences which would preclude or restrict the person's liability to the person requiring the compensation, the claim for compensation against other obligors shall be reduced to the extent of the share of the obligation which the person entitled to set up the defences bears in relations between the persons obligated to compensate for the damage.

§ 138.  Common liability for damage

 (1) If several persons may be liable for damage caused and it has been established that any of the persons could have caused the damage, compensation for the damage may be claimed from all such persons.

 (2) A person obligated to compensate for damage shall be released from liability if the person proves that the damage was not caused thereby.

 (3) In the case specified in subsection (1) of this section, compensation for damage may be claimed from each person to an extent in proportion to the probability that the damage was caused by the person concerned.

§ 139.  Damage due in part to aggrieved person

 (1) If damage is caused in part by circumstances dependent on the injured party or due to a risk borne by the injured party, the amount of compensation for the damage shall be reduced to the extent that such circumstances or risk contributed to the damage.

 (2) The provisions of subsection (1) of this section also apply if the aggrieved person failed to draw the attention of the person causing the damage to an unusually high risk of damage or to prevent the risk of damage or to perform any act which would have reduced the damage caused if the aggrieved person could have reasonably been expected to do so.

 (3) In the event that the death of a person or damage to the health of a person is caused, the compensation for damage may be reduced on the grounds specified in subsection (1) of this section only if the aggrieved person contributed to the damage intentionally or through gross negligence.

 (4) The restriction on reducing compensation for damage provided for in subsection (3) of this section shall not be applied to the extent that the injured party is compensated for the damage by an insurer.

§ 140.  Limits on compensation for damage

 (1) The court may reduce the amount of compensation for damage if compensation in full would be grossly unfair with regard to the obligated person or not reasonably acceptable for any other reason. In such case, all circumstances, in particular the nature of the liability, relationships between the persons and their economic situations, including insurance coverage, shall be taken into account.

 (2) Limits on the extent of the liability of a person who causes damage, or a fixed amount of compensation for damage may be provided by law.

Chapter 8 ACCESSORY OBLIGATIONS  

§ 141.  Accessory obligations

  Accessory obligations are, primarily:
 1) obligations arising from a suretyship or from granting a guarantee;
 2) obligations arising from payment of earnest money;
 3) obligations arising from an agreement on a contractual penalty.

Division 1 Suretyship and Grant of Guarantee  

§ 142.  Definition of suretyship

 (1) Under a contract of suretyship, the surety undertakes to be liable to the obligee of a third party (principal obligor) for the performance of the principal obligor's obligation.

 (2) A conditional obligation may also be secured with a suretyship. A future obligation may be secured with a suretyship only if the obligation is sufficiently defined.

 (3) Suretyship may be of a limited term or amount or related to another condition.

 (4) The validity of a suretyship shall not depend on the relationship between the principal obligor and the surety.

 (5) If a suretyship applies to an obligation against which defences regarding limitation periods may be set up or which may be annulled due to an error of the principal obligor or which is based on a transaction which is invalid due to the restricted active legal capacity of the principal obligor, and if the surety is aware of such circumstances at the time the contract is entered into, the surety shall be liable for the performance of the obligation under the same conditions as in the case of granting a guarantee.

 (6) Agreements derogating from the provisions of this Chapter to the detriment of a surety shall be void unless otherwise provided by law.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 143.  Contract of consumer surety

 (1) A contract of consumer surety is a contract of suretyship where the surety is a natural person.
[RT I, 06.12.2010, 1 - entry into force 05.04.2011]

 (2) A contract of consumer surety is void if the maximum amount of money covered by the liability of the surety is not agreed upon.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 144.  Contract of consumer surety

 (1) An obligee is presumed to consent to a contract of suretyship being entered into.

 (2) In the case of a contract of consumer surety, the application of the surety by which the surety undertakes to assume the obligations arising from the suretyship shall be made in writing.

 (3) A contract of suretyship is valid even upon non-compliance with formal requirements arising from law or a transaction if the surety performs the obligation of the principal obligor arising from the contract.

§ 145.  Liability of surety

 (1) In the case of non-performance, the principal obligor and the surety shall be solidarily liable to the obligee unless the contract of suretyship prescribes that the surety is liable only if the claim of the obligee against the principal obligor cannot be satisfied.

 (2) A surety shall be liable for the obligation secured by the suretyship in full. The surety shall also be liable for the consequences arising from non-performance, in particular for payment of fines for delay, contractual penalties and compensation for damage, and for compensation for expenses relating to withdrawal from or cancellation of the contract. The surety shall be liable for payment of compensation for costs relating to the collection of the debt from the principal obligor if the surety had been notified of the intention to collect on time and therefore the surety could have avoided the costs.

 (3) If a suretyship pertains to an obligation other than the payment of money, the suretyship is deemed to pertain to the obligation to pay compensation for damage in the case of non-performance of the obligation. In other aspects, the provisions of subsection (2) of this section apply.

 (4) Transactions concluded by a principal obligor after a contract of suretyship is entered into shall not extend the liability of the surety.

 (5) If the activities of an obligee reduce other security which exists at the time a contract of suretyship is entered into and which is given to secure the claim to which the suretyship applies, the liability of the surety shall be reduced by the amount corresponding to the reduction in security unless the obligee proves that the damage incurred by the surety is smaller.

§ 146.  Notification obligation of obligee

 (1) At the request of a surety, the obligee shall provide the surety with information concerning performance of the obligation of the principal obligor.

 (2) In the event of the bankruptcy of a principal obligor, the obligee shall file the claim thereof in a bankruptcy proceeding pursuant to the procedure prescribed in the Bankruptcy Act. Upon receiving notification of a bankruptcy proceeding, the obligee shall immediately inform the surety of the proceeding.

 (3) If an obligee fails to perform the obligations specified in subsections (1) and (2) of this section, the claim of the obligee against the surety shall be reduced by the amount of damage caused to the surety by such non-performance.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

§ 147.  Notice of performance of obligation

 (1) If a surety performs an obligation of the principal obligor in part or in full, the surety shall notify the principal obligor of the performance.

 (2) If a surety fails to notify the principal obligor of the performance of an obligation and the principal obligor performs the same obligation, the surety shall not have a right of recourse against the principal obligor if the principal obligor did not know and did not have to know that the surety has performed the obligation. This shall not preclude nor restrict the right of the surety to make a claim arising from unjustified enrichment against the obligee.

§ 148.  Right of surety to require security or performance

 (1) A surety may require the principal obligor to provide security or, once the obligation has fallen due, to perform the obligation for the benefit of the obligee if:
 1) the principal obligor changes the place of business, residence or seat thereof and this renders the filing of a claim for payment against the obligor more complicated;
 2) the risk borne by the surety has increased significantly due to deterioration of the principal obligor's economic situation, a decrease in the value of an item given as security, or an intentional act or gross negligence on the part of the principal obligor;
 3) the principal obligor fails to perform an obligation arising from a contract entered into with the surety;
 4) the principal obligor fails to perform the obligation thereof in due time.

 (2) A surety may also require the principal obligor to perform an obligation for the benefit of the obligee also if the court has made a judgment by which an action of the obligee against the surety is satisfied.

§ 149.  Defences by surety

 (1) A surety may set up all such defences against a claim of the obligee which could have been set up by the principal obligor, except defences which are directly related to the person of the principal obligor. The surety has the right to set up such defences even if the principal obligor waived the defences.

 (2) A defence which a principal obligor may set up against a claim secured by suretyship shall not be set up by the surety if the purpose of the contract of suretyship is also to provide security to the obligee for the occasion that a defence is set up by the principal obligee. In such case, the surety shall not, above all, set up a defence concerning the limited liability of a successor or a defence concerning termination or reduction of the obligation of the principal obligor in the case of liquidation or bankruptcy proceedings of the obligor or termination of a civil law partnership without legal succession.

 (3) A surety may withhold satisfaction of a claim of the obligee until the end of the term during which the principal obligor may annul the transaction on which the principal obligor's obligation is based or withdraw from the contract. The surety shall retain such right even if the principal obligor may set off the claim arising from the transaction on which the principal obligor's obligation is based.

 (4) [Repealed - RT I 2003, 78, 523 - entry into force 27.12.2003]

 (5) If an obligation subject to suretyship is secured by a right of security established with regard to the property of the principal obligor or if the obligee may exercise a right of security arising from law with regard to the property of the principal obligor, the surety may, until the principal obligor is declared bankrupt, require the obligee to satisfy the claim thereof out of the pledged property to the extent of the pledge.

 (6) If a surety establishes a right of security in order to secure performance of an obligation of the principal obligor, the surety may require suspension of the compulsory execution initiated against the surety until the pledged object is sold.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 150.  Co-sureties

  If one and the same obligation is secured by several persons (co-sureties), such persons shall be solidarily liable to the obligee even if they do not undertake the suretyship together.

§ 151.  Performance of obligation by surety

 (1) If a surety performs an obligation in lieu of the principal obligor before the obligation has fallen due, the surety shall not make the claims arising from the suretyship against the principal obligor before the due date for the performance of the obligation of the principal obligor.

 (2) Once the obligation of a principal obligor has fallen due, the surety may perform the obligation in lieu of the principal obligor at any time.

§ 152.  Surety's right of recourse against principal obligor

 (1) If a surety performs an obligation of the principal obligor, the claim of the obligee against the principal obligor transfers to the surety to the extent that the claim is satisfied. Against such claim, the principal obligor may set up all such defences which the principal obligor had against the obligee as well as defences arising from the legal relationship between the principal obligor and the surety. The provisions of § 70 of this Act apply mutatis mutandis to the limitation period for the right of recourse of the surety.

 (2) If a surety performs an obligation without setting up the defences which the principal obligor had against the obligee, the claim of the obligee shall not transfer to the surety to the extent that the liability of the surety would have been reduced as a result of such defences unless the surety proves that the surety was not and did not have to be aware of such defences.

§ 153.  Termination of suretyship

 (1) A suretyship terminates:
 1) upon termination of the obligation secured by the suretyship;
 2) upon a transfer of the obligation unless the surety consents to be liable for the new obligor;
 3) in the case of a suretyship for a specified term, upon the expiry of the term.

 (2) In the case of a contract of consumer surety, the consent specified in clause (1) 2) of this section shall be granted in writing.

 (3) Upon termination of a suretyship for a specified term, it is presumed that the liability of the surety extends to the obligations which arose before the expiry of the term.

 (4) If a situation arises where the principal obligor and the surety are one and the same person, the obligee shall retain the security and other rights arising from the suretyship.

§ 154.  Specifications for termination of contract of consumer surety

 (1) A contract of consumer surety entered into for an unspecified term in order to secure a future obligation may be cancelled by the surety at any time. If such contract is entered into for a specified term, the contract may be cancelled after five years have passed from the contract being entered into.

 (2) Upon cancellation of a contract of consumer surety, the suretyship remains in force with regard to obligations which arose before the cancellation.

§ 155.  Provision of guarantee

 (1) A person engaged in an economic or professional activity (guarantor) may, by a contract, assume an obligation (guarantee) before an obligee, according to which the person undertakes to perform obligations arising from the guarantee on the demand of the obligee.

 (11) It is presumed that the obligee consents to the guarantee.

 (2) The obligation of a guarantor before the obligee which arises from the guarantee shall not be affected by the obligation of the obligor secured by the guarantee nor the validity of the obligation even if the guarantee contains a reference to the obligation.

 (3) A guarantor may only set up such defences against the obligee which arise from the guarantee.

 (4) The obligation of a guarantor arising from the guarantee terminates:
 1) when the guarantor has paid the obligee the amount of money for the payment of which the guarantor was obligated pursuant to the guarantee;
 2) upon expiry of the term for which the guarantee is provided;
 3) if the obligee waives the rights arising from the guarantee, including cases where the obligee returns the document on which the guarantee was based to the guarantor.

 (5) If a guarantor performs an obligation arising from the guarantee, the guarantor shall have a right of recourse against the obligor only if such right arises from the relationship between the guarantor and the obligor.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

Division 2 Earnest Money  

§ 156.  Definition of earnest money

 (1) Earnest money is a sum of money given by one party to a contract to the other party to certify that the contract has been entered into and to secure the performance thereof.

 (2) Upon performance of a contract secured with earnest money, it is presumed that the earnest money will be used towards performance of the obligation or, if performance is impossible, that the earnest money will be refunded.

§ 157.  Consequences of non-performance of contract secured with earnest money

 (1) If the non-performance of a contract secured with earnest money is the fault of the party which gave the earnest money, the other party shall retain the earnest money. If the party which receives the earnest money requires compensation for the damage incurred by the party due to non-performance of the contract, the earnest money shall be used towards such compensation.

 (2) If a contract secured with earnest money is not performed for a reason other than the fault of the party which gave the earnest money, the party may require the earnest money to be refunded.

Division 3 Contractual Penalty  

§ 158.  Definition of contractual penalty

 (1) A contractual penalty is an obligation which is prescribed in the contract and under which the party which fails to perform the contract undertakes to pay an amount of money determined by the contract to the injured party.

 (2) The provisions concerning contractual penalties also apply to acts which a non-performing party must perform in the interests of the injured party.

 (3) The provisions of this Division apply mutatis mutandis in cases where the parties have agreed in advance on the amount of the damage to be compensated for by the non-performing party.

§ 159.  Contractual penalty and claim for performance of obligation

 (1) If a contractual penalty is agreed upon for the occasion of non-performance of an obligation, the injured party may claim performance of the obligation in addition to payment of the contractual penalty. Performance of the obligation in addition to payment of a contractual penalty shall not be claimed if the contractual penalty was agreed upon as a substituted performance and not as a measure for achieving performance.

 (2) An injured party loses the right to claim payment of a contractual penalty if the party fails to notify the other party during a reasonable period after becoming aware of the non-performance that the party is claiming payment of the contractual penalty.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 160.  Contractual penalty in case of excused non-performance

  If non-performance of an obligation is excused, payment of a contractual penalty shall not be claimed unless otherwise prescribed by the contract.

§ 161.  Contractual penalty and damage

 (1) In the case of non-performance of a contract, the injured party may claim payment of a contractual penalty regardless of the actual damage.

 (2) If an injured party has the right to claim compensation for damage incurred due to non-performance of the contract, compensation shall be paid to the extent not covered by the contractual penalty.

§ 162.  Reduction of contractual penalty

 (1) If a contractual penalty to be paid is unreasonably high, the court may reduce the penalty to a reasonable amount at the request of the party obligated to pay the penalty, taking into particular account the extent to which the obligation has been performed by the party, the legitimate interests of the other party and the economic situation of the parties.

 (2) Agreements which derogate from the provisions of subsection (1) of this section to the detriment of the party obligated to pay a contractual penalty are void.

 (3) A party obligated to pay a contractual penalty does not have the right to require a reduction of the penalty after the party has paid the penalty.

§ 163.  Contractual penalty if contract is void

  If a contract is void, agreements concerning the payment of contractual penalties are also void.

Chapter 9 TRANSFER OF CLAIMS AND OBLIGATIONS  

Division 1 Transfer of Claims  

§ 164.  Assignment of claim

 (1) An obligee may transfer the claim thereof to another person on the basis of a contract in part or in full regardless of the consent of the obligor (assignment of claim). A claim shall not be assigned if assignment is prohibited by law or if the obligation cannot be performed for the benefit of any other person but the original obligee without altering the content of the obligation.

 (2) Upon assignment of a claim, the new obligee assumes the position of the original obligee.

 (3) If an obligee assigns one and the same claim more than once, the earliest assignment is deemed to be valid.

§ 165.  Assignment of contingent claims and future claims

  Future claims and contingent claims may also be assigned if they are sufficiently defined at the time of the assignment.

§ 166.  Restrictions on assignment

 (1) Claims for maintenance, claims for compensation for damage arising from a bodily injury, health damage or the death of a person and any other claims which cannot be subject to a claim pursuant to law shall not be assigned. Such claims may be assigned if counter-performance of equal economic value is received in exchange for the assignment.

 (2) Agreements concluded between an obligor and an obligee whereby assignment of the claim is precluded or the right to assign the claim is restricted have no effect against third parties.

 (3) The provisions of subsection (2) of this section shall not preclude or restrict the liability arising from agreements entered into between the original obligee and the obligor for violation of the prohibition to preclude or restrict the right to assign the claim. The person to whom the claim is assigned shall not be liable for violation of such agreement.

§ 167.  Transfer of security and other rights

 (1) Security given to secure a claim and rights arising from accessory obligations which are related to the claim, including pre-emptive rights for the occasion of bankruptcy or compulsory execution, which are not inseparably bound to the person assigning the claim and which are transferable shall transfer to the new obligee upon assignment of the claim. The obligation of the person assigning the claim also to transfer the security and the rights arising from accessory obligations which are not related to the claim is presumed.

 (2) Security and rights arising from accessory obligations are related to the claim if the security and the rights extinguish upon termination of the claim secured thereby. Security and rights arising from accessory obligations are not related to the claim if the security and the rights do not extinguish upon termination of the claim secured thereby.

 (3) Upon assignment of a claim, the rights of the original obligee to interest and contractual penalties also transfer to the new obligee.

 (4) Upon assignment of a claim, the right to exercise rights arising from execution documents existing with respect to the claim also transfers to the new obligee.

 (5) If a claim is assigned in part, the original obligee shall retain the pre-emptive right before the new obligee to the satisfaction of the claim to the extent that the claim is not assigned to the new obligee and the pre-emptive right to rights and security arising from accessory obligations.

 (6) Upon transfer of security and rights arising from accessory obligations, the original obligee shall do all that is necessary to enable the new obligee to exercise the rights arising from the security and accessory obligations, including handing over the pledged objects held by the original obligee to the new obligee. Upon transfer of a claim secured by a mortgage or by a registered security over a moveable, the obligee assigning the claim shall provide assistance in registering the transfer of the right of security.

 (7) Upon assignment of a claim for which another claim is assigned or another right is transferred to the obligee as security, it is presumed that they shall be transferred to the new obligee.

 (8) The provisions of this section shall not preclude or restrict the validity of agreements to preclude or restrict the transfer of security which are entered into between an obligee assigning a claim and an obligor or a person providing the security.

§ 168.  Evidence of assignment of claim

 (1) An obligee who assigns a claim shall hand over documents certifying the claim and rights arising from accessory obligations, including execution documents specified in subsection 167 (4) of this Act, to the new obligee and provide the obligee with information necessary for filing the claim. If the original obligee has further use for a document, the new obligee may, in lieu of the document, require a copy of or extract from the document or performance of other acts which would enable the new obligee to exercise the rights thereof.

 (2) At the request of the new obligee, the original obligee shall provide the new obligee with a document certifying the assignment of the claim.

§ 169.  Performance of obligation for benefit of original obligee

 (1) If an obligor performs an obligation for the benefit of an obligee who has assigned the claim and, at the time of performance of the obligation, the obligor is not and does not need to be aware of the assignment of the claim, the obligor is deemed to have performed the obligation for the benefit of the correct person.

 (2) If an obligor performs a transaction or other act relating to the claim with the obligee after the obligee has assigned the claim but, at the time of performance of the transaction or other act, the obligor is not and does not need to be aware of the assignment of the claim, the transaction or other act is deemed to be valid.

 (3) [Repealed - RT I 2008, 59, 330 - entry into force 01.01.2009]

§ 170.  Notice of assignment

  If an obligee notifies an obligor of assignment of the claim to a new obligee, the assignment is deemed to have occurred in respect of the obligor even if the claim was actually not assigned or the assignment is invalid. The same applies if the obligee has issued a document concerning assignment of the claim and the new obligee submits the document to the obligor.

§ 171.  Defences of obligor against claim of new obligee and set-off against assigned claim

 (1) In addition to defences which an obligor has against the claim of a new obligee, the obligor may set up all such defences which the obligor had against the original obligee at the time of assignment of the claim.

 (2) An obligor shall not set up such defences against a new obligee which arise from non-performance of a contract which precluded or restricted the right of the obligee to assign the claim and the obligor shall not set off the claim on such basis.

 (3) An obligor may also set off a claim against the original obligee against the claim of the new obligee unless:
 1) the obligor has acquired the claim thereof from a third party and, at the time of acquiring the claim, the obligor knew or should have known that the claim against the obligor had been assigned;
 2) the claim of the obligee falls due later than the assigned claim and after the obligor became or should have become aware of the assignment.

§ 172.  Document certifying assignment

  An obligor may withhold performance of an obligation to a new obligee if the original obligee fails to provide the obligor with a document certifying assignment of the claim unless the original obligee has given written notice to the obligor of the assignment of the claim.

§ 173.  Transfer of claim on basis of law

 (1) If a claim transfers from an obligee to another person (acquirer of claim) on the basis of law, the transfer of the claim shall be valid without a declaration of intent from the original obligee.

 (2) The provisions concerning assignment of claims apply to the transfer of a claim on the basis of law.

 (3) A claim transfers on the basis of law:
 1) to a person whose assets are sold in an execution proceeding in order to satisfy a claim against an obligor;
 2) to a person who performs an obligation because satisfaction of the claim against the obligor is secured with the assets of the person;
 3) to a person who performs an obligation in order to avoid compulsory execution in the cases specified in subsection 78 (3) of this Act;
 4) in other cases provided by law.

 (4) In the cases provided for in clauses (3) 1)–3) of this section, the obligation to satisfy the claim shall not transfer to the extent that the obligation is borne by the acquirer of the claim in the legal relationship between the acquirer and the obligor.

 (5) Upon transfer of a claim on the basis of law, the acquirer of the claim acquires the right to the interest and contractual penalties agreed upon only to the extent that such interest or penalties have arisen after the transfer of the claim.

§ 174.  Transfer of other rights

  The provisions of this Division concerning transfer of claims apply mutatis mutandis to the transfer of other rights unless otherwise prescribed by law or the nature of the rights.

Division 2 Transfer of Obligations  

§ 175.  Assumption of obligation

 (1) A third party may assume the obligation of an obligor on the basis of a contract entered into with the obligee whereby the third party assumes the position of the original obligor.

 (2) A third party may also assume the obligation of an obligor on the basis of a contract entered into with the obligor, but the obligation transfers only on the condition that the obligee consents to such transfer.

 (3) If an obligor has entered into a contract with a third party for the assumption of an obligation, the obligor or the third party may make a proposal to the obligee to give notice within the term set by the obligee as to whether the obligee consents to the transfer of the obligation. If the obligee does not grant consent within such term, the obligee is deemed to have refused to grant consent.

 (4) If a third party assumes an obligation on the basis of a contract entered into with the obligor and the obligee has not yet granted consent or refuses such consent, the obligor is deemed to have the right to require timely satisfaction of the obligee's claim from the transferee of the obligation. If the obligee refuses to grant consent to the assumption of the obligation, the obligor may require the transferee of the obligation to secure performance of the contract on the basis of which the obligation is assumed.

 (5) If an obligee has granted advance consent to the assumption of an obligation, the obligation is deemed to have been assumed by entry into the contract for the assumption of the obligation and notification of the obligee of the entry into the contract. An obligee shall not revoke advance consent unless the obligee has reserved the corresponding right upon granting the consent.

 (6) If a person acquires an immovable and, by an agreement with the transferor, assumes the transferor's obligation secured by a mortgage over the immovable, the transferor shall give written notice of the assumption of the obligation to the obligee after the new owner has been entered in the land register. If the obligee does not refuse to grant consent to the assumption of the obligation within three months as of receipt of the notice, the obligee is deemed to have granted consent. After the obligee has granted or refused to grant consent to the assumption of the obligation, the transferor of the immovable shall notify the transferee of the grant or refusal to grant consent.

 (7) [Repealed - RT I 2003, 78, 523 - entry into force 27.12.2003]

 (8) If one and the same obligation transfers to several persons, the persons are presumed to be solidarily liable for the performance of the obligation.

§ 176.  Defences of transferee of obligation

 (1) In addition to the defences which the transferee of an obligation has against the obligee, the transferee may set up such defences against the claim of the obligee which arise from the legal relationship between the obligee and the original obligor, except the defences which the original obligor personally has against the obligee. Also, the transferee shall not set off the claim of the original obligor against the claim of the obligee.

 (2) The transferee of an obligation shall not set up such defences against the claim of the obligee which the transferee has against the original obligor pursuant to the legal relationship on which the assumption of the obligation is based.

 (3) If an obligation is assumed with the consent of the obligee on the basis of a contract entered into with the obligor, the transferee of the obligation may set up defences arising from the invalidity of the assumption of the obligation against the obligee only if the obligee was or should have been aware of the reason for such invalidity upon granting the consent.

§ 177.  Accessory obligations and security upon assumption of obligation

 (1) Upon assumption of an obligation, accessory obligations related to the claim shall transfer to the new obligor unless they are of a personal nature or inseparably bound to the person of the original obligor for any other reason. The obligation to pay the interest and contractual penalties agreed upon transfers to the new obligor even if these fall due after the assumption of the obligation.

 (2) Upon assumption of an obligation, the security given for and related to the obligation shall terminate. If security given for the performance of the obligation is not related to the obligation, the security shall be returned to the person who provided the security pursuant to the agreement on the basis of which the security was provided.

 (3) The provisions of subsection (2) of this section do not apply if the person who provided security consents to be liable for the performance of the obligation by the new obligor.

§ 178.  Joining in obligation

 (1) An obligation may also be assumed by a third party joining in the obligation as a new obligor in addition to the original obligor (joining in obligation).

 (2) A third party may enter into an agreement joining in an obligation with the obligee or the obligor.

 (3) If a person joins in an obligation in order to secure the claim of the obligee, the formalities provided for in § 144 of this Act apply mutatis mutandis.

 (4) Joining in an obligation creates solidary obligation. If a person joins in an obligation in order to secure the claim of the obligee, the provisions of §§ 145, 149 and 152 of this Act also apply.

Division 3 Assumption of Contract  

§ 179.  Definition of assumption of contract

 (1) A party to a contract may, with the consent of the other party, transfer the party's rights and obligations arising from the contract to a third party on the basis of a contract entered into with the third party unless otherwise provided by law.

 (2) Upon assumption of a contract, all rights and obligations arising from the contract are deemed to have transferred to the transferee of the contract.

 (3) The provisions of §§ 167, 168, 171, 176 and 177 of this Act apply mutatis mutandis to the assumption of contracts.

Division 4 Transfer of Enterprise  

§ 180.  Transfer of enterprise

 (1) The transferor of an enterprise may undertake to transfer the enterprise to the transferee on the basis of a contract entered into with the transferee. An enterprise may also be transferred to a transferee pursuant to law.

 (2) An enterprise comprises the things, rights and obligations relating to and in the service of the management of the enterprise, including contracts relating to the enterprise.

§ 181.  Restrictions on application

  The provisions of this Division do not apply to the transfer of an enterprise in the event of the merger, division or transformation of legal persons or if an enterprise is taken over pursuant to law, in particular in the case of compulsory execution or bankruptcy proceeding.

§ 182.  Acquisition of enterprise

 (1) Things belonging to an enterprise are transferred to the transferee pursuant to the provisions concerning the transfer of such things, the rights pursuant to the provisions concerning the transfer of such rights and contracts pursuant to the provisions concerning the transfer of such contracts. The transferor of an enterprise is required to transfer possession of things to the transferee and, in the case of property subject to registration, to ensure that the corresponding entries are made in the registers.

 (2) By taking over the things and rights belonging to an enterprise, the transferee takes over all of the transferor's obligations related to the enterprise, including obligations with regard to the employees of the enterprise which arise from employment contracts, unless otherwise provided by law. The consent of the obligee or the other party is not required for the assumption of an obligation or the transfer of the contract unless otherwise provided by law.

 (3) Agreements derogating from the provisions of subsection (2) of this section have no effect against third parties. Such agreements apply to obligees who have consented to the agreements in a format which can be reproduced in writing.

 (4) The transferee of an enterprise shall promptly notify the obligees of the acquisition of obligations and the transferor of the enterprise shall promptly notify obligors of the assignment of the claims to the transferee.

 (5) The provisions of this section apply mutatis mutandis to the grant of the use of an enterprise.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 183.  Liability of transferor of enterprise

 (1) A transferor and the transferee shall be solidarily liable to the obligee for obligations which have arisen before the transfer of the enterprise and which, by the time of the transfer, have fallen due or will fall due within five years after the transfer. It is presumed that, in relations with the transferor, the transferee of the enterprise is the obligated person.

 (2) Agreements derogating from the provisions of subsection (1) of this section have no effect against third parties, except to obligees who have consented to such agreements in a format which can be reproduced in writing.

 (3) The limitation period for claims arising from obligations specified in subsection (1) of this section shall be five years as of the transfer of the enterprise unless a shorter limitation period applies to some of the claims.

 (4) The provisions of this section apply mutatis mutandis to the grant of the use of an enterprise.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 184.  Right to business name

 (1) The right to use the existing business name of an enterprise subject to transfer transfers to the transferee unless this is contrary to law, the rights of a third party or an agreement between the parties. The fact that the activities of the transferee continue in a legal form other than that of the transferor shall not hinder the transfer of the business name if the transferee adheres to the requirements for business names provided by law.

 (2) If the transferor of an enterprise is a natural person, the right to use the existing business name transfers to the transferee with the written consent of the transferor of the enterprise.

§ 185.  Transfer of part of enterprise

  The provisions of this Division also apply to contracts under which a part of an enterprise which is an organisational whole (an installation) is transferred.

Chapter 10 TERMINATION OF OBLIGATION  

Division 1 General Provisions  

§ 186.  Bases for extinction of obligation

  An obligation extinguishes:
 1) upon a conforming performance;
 2) upon a set-off;
 3) upon merger;
 4) by an agreement to terminate the obligation;
 5) upon withdrawal from the contract;
 6) upon cancellation of the contract;
 7) upon the death of an obligor who is a natural person if the obligation cannot be performed without his or her personal participation;
 8) upon the death of an obligee who is a natural person if the obligation is to be performed personally for the benefit of the obligee;
 9) in other cases prescribed by the law or the contract.

§ 187.  Termination of accessory obligations and security

 (1) Upon termination of an obligation, the security and accessory obligations relating to the obligation also terminate unless otherwise provided by law.

 (2) If the security provided to secure a claim is not related to the claim and the obligation terminates, the security shall be returned, pursuant to the agreement on the basis of which the security was provided, to the person who provided the security.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

Division 2 Withdrawal from Contract  

§ 188.  Declaration of and consequences of withdrawal

 (1) A party withdraws from a contract by submitting a declaration of withdrawal to the other party.

 (2) If a party may withdraw from a contract pursuant to law or the contract, withdrawal from the contract shall release both parties from the performance of their contractual obligations. Withdrawal shall not affect the validity of rights and obligations which have arisen from the contract before the withdrawal.

 (3) Withdrawal shall not affect agreements on the resolution of disputes arising from the contract or other contract terms concerning the rights and obligations of the parties after withdrawal from the contract.

§ 189.  Return of and compensation for that which was delivered under contract

 (1) In the event of withdrawal from a contract, each party may claim return of that which was delivered by the party under the contract and delivery of the fruits and other gain received if the party returns all property that has been delivered to the party. Obligations arising from withdrawal shall be performed by the parties simultaneously, and the provisions of § 111 of this Act apply mutatis mutandis. Interest shall be paid on money refunded as of the moment of receipt of the money.

 (2) In lieu of return or delivery, a party shall compensate for the value of that which was received by the party if:
 1) return or delivery is impossible due to the nature of that which was received, including in the case of the provision of a service or the use of a thing;
 2) the party has consumed or transferred the object received, encumbered it with the right of a third party or processed it;
 3) that which was received has been destroyed.

 (3) If the price of that which was received is set in the contract, the price is deemed to be the value of that which was received for the purposes of subsection (2) of this section.

 (4) If a thing subject to return or delivery has deteriorated and such deterioration is not the result of the regular use of the thing, the decrease in the value of the thing shall be compensated for.

 (5) A party who, under the circumstances, should reasonably be able to foresee the possibility of withdrawal from the contract shall ensure that it is possible to return that which was received in the case of withdrawal from the contract.

§ 190.  Preclusion of compensation

 (1) A party is not required to compensate for the value of that which was received by the party in lieu of return or delivery thereof if:
 1) the circumstances on which withdrawal is based become evident only upon processing the thing;
 2) deterioration or destruction occurred due to circumstances dependent on the other party or due to circumstances the risk of which is borne by the other party, or if the damage would also have occurred if that which was received had been in the possession of the other party;
 3) upon exercising the right of withdrawal arising from the law, that which was received has deteriorated or been destroyed although the party exercised such care as the party would exercise in the party's own affairs.

 (2) In the case of unjustified enrichment of a party under the circumstances specified in subsection (1) of this section, the party shall return that which was received pursuant to the provisions concerning unjustified enrichment.

§ 191.  Gains and expenses

 (1) In the case of withdrawal by a party who does not receive fruits or other gain which the party could have received upon adherence to the requirements for regular management, the party shall compensate the other party for the value of such fruits or other gain. If the right of withdrawal arises from the law, the party entitled to withdrawal shall be liable only for the exercise of such care in the receipt of fruits and gain as the party would exercise in the party's own affairs.

 (2) If a party returns an object or compensates for the value of the object or if the obligation to compensate for the value of the object is precluded pursuant to clause 190 (1) 1) or 2) of this Act, the other party shall compensate the first party for the necessary expenses incurred with respect to the object. In the case of unjustified enrichment of the other party through other expenses incurred by the first party, the first party shall be compensated for such other expenses pursuant to the provisions concerning unjustified enrichment.

§ 192.  Indivisibility of right of withdrawal

 (1) If several persons participate in a contract as one party, the persons may only exercise the right of withdrawal collectively. If the right of withdrawal extinguishes for any one person entitled to withdrawal, the right shall also extinguish for all the other persons.

 (2) If a party withdraws from a contract where several persons participate as the other party, the first party may exercise the right of withdrawal only with regard to all such persons collectively.

 (3) In the case of a multilateral contract, a party may withdraw from the contract only if the other party or parties fail to perform an obligation assumed with regard to the first party.

§ 193.  Set-off after fundamental breach of contract

  Withdrawal from a contract due to a fundamental breach of the contract is void if the party with regard to whom the right of withdrawal is to be exercised may terminate the obligation by a set-off and gives notice of the set-off immediately after the other party has given notice of withdrawal from the contract.

§ 194.  Specifications for withdrawal from consumer contracts

 (1) If a consumer withdraws from a contract on the grounds specified in §§ 49, 56, 57, 571, 383, 384, 3841, 409, 414 and 433 of this Act, the provisions of §§ 188–192 of this Act apply together with the specifications provided for in subsections (2)–(9) of this Act.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

 (2) A consumer may withdraw from a contract on the grounds specified in subsection (1) of this section without specifying the reason for withdrawal. Return of a thing by a consumer within the term prescribed for the return is also deemed to be withdrawal. Dispatch of an application or the thing within the specified term is sufficient for adherence to the term.

 (3) Contract terms which, in comparison to the provisions of this Act, impede the right of withdrawal from being exercised, in particular agreements pursuant to which withdrawal is bound to payment of earnest money or a contractual penalty, are void.

 (4) In the case of withdrawal on the grounds specified in subsection (1) of this section, the expenses relating to the return of the thing or compensation for services and the related risks shall be borne by the other party to the contract unless otherwise provided by law. The parties may agree that the consumer will bear the regular expenses relating to the return of the thing to the extent of a sum corresponding to 10 euro, except in cases where the thing delivered or service provided is not that which was ordered.

 (5) If a consumer is not notified of the right of withdrawal, the consumer shall, in the case of withdrawal, be liable only for any damage caused to the thing intentionally or through gross negligence.

 (6) If a consumer withdraws from a contract the object of which is performance of an obligation other than the delivery of a thing, the consumer shall compensate for the value of that which was received until withdrawal from the contract.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (61) In the case of a thing subject to return, a consumer shall not be required to compensate for decrease in the value of the thing resulting from its proper use and delivery of the fruits and other gain received.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (7) In the cases specified in subsections (4)–(61) of this section, the other party to the contract shall not make claims not specified in the same subsections against the consumer.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (8) The provisions of this section shall not preclude or restrict the use of legal remedies arising from a breach of contract.

 (9) Agreements which derogate from the provisions of this section to the detriment of the consumer are void.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

Division 3 Cancellation of Contract  

§ 195.  Ordinary cancellation of contract

 (1) A party cancels a contract by making a declaration of cancellation to the other party.

 (2) If a party may cancel the contract pursuant to law or the contract, cancellation of the contract shall release both parties from the performance of their contractual obligations. The rights and obligations which arise from the contract before cancellation remain valid.

 (3) A contract for the performance of a continuing obligation or recurring obligations (long-term contract) which is entered into for an unspecified term may be cancelled by either party by giving reasonable advance notice unless otherwise prescribed by law or the contract (ordinary cancellation).

 (4) If several persons participate in a contract as one party, the persons may only exercise the right of cancellation collectively. If a party cancels a contract where several persons participate as the other party, the first party may cancel the contract only with regard to all such persons collectively.

 (5) Upon cancellation of a contract, the parties are only required to return that which has been delivered in advance with respect to the time of cancellation of the contract. The provisions of §§ 189–191 of this Act apply mutatis mutandis to the return.

§ 196.  Extraordinary cancellation of contract

 (1) Either party to a long-term contract may cancel the contract with good reason without giving advance notice, in particular if the party cancelling the contract cannot reasonably be expected to continue performing the contract until the due date agreed upon or until expiry of the term for advance notice taking into account all the circumstances and the mutual interests of the parties (extraordinary cancellation).

 (2) If non-performance of a contractual obligation by the other party provides good reason for cancelling the contract, the contract may only be cancelled if the other party fails to render a conforming performance within the term granted therefor. Such term need not be granted in the cases provided for in clauses 116 (2) 2)–4) of this Act.

 (3) A person entitled to cancel a contract may cancel the contract only during a reasonable period of time after the person becomes aware of the circumstances substantiating the cancellation.

 (4) If a person entitled to cancel a contract is, due to the cancellation, no longer interested in the obligations which have already been performed, the person may also extend the cancellation to such obligations. The provisions of §§ 189–191 of this Act apply mutatis mutandis to the return of that which was delivered.

Division 4 Set-off  

§ 197.  Definition of set-off

 (1) If two persons (parties to a set-off) are required to pay each other a sum of money or perform another obligation of the same type, either party (the party requesting set-off) may set off the claim thereof against the claim of the other party if the party requesting set-off has the right to perform the obligation thereof and to require performance from the other party.

 (2) As a result of a set-off, the claims of the parties to the set-off extinguish as of the time they could be set off and to the extent that they overlap unless the parties agree otherwise. If interest has already been paid on one or both of the claims, the set-off shall have retroactive effect only for the last period for which interest was paid.

 (3) Monetary claims expressed in different currencies may be set off at an exchange rate calculated as at the date of the set-off at the place of business of the party requesting set-off or, in the absence of a place of business, at the location of the residence or seat of the party. Set-off is not permitted if the exchange rates have not freely developed in the market.

§ 198.  Declaration of set-off

  A claim is set off by making a declaration of set-off to the other party. A declaration which is made conditionally or by setting a term is void.

§ 199.  Set-off in case of different places of performance

  If claims with different places of performance are set off, the party requesting set-off shall compensate the other party for damage caused by the fact that due to the set-off the other party cannot accept performance at the place prescribed or perform the obligation thereof at the place prescribed.

§ 200.  Restrictions on set-off

 (1) The following claims shall not be set off:
 1) claims for maintenance, claims for compensation for damage arising from health damage or the death of a person and claims arising from unlawful or intentional causing of damage which the other party has against the party requesting set-off;
 2) claims of the other party which pursuant to law cannot be subject to a claim;
 3) claims of the other party the set-off of which is prohibited by law.

 (2) A party requesting set-off may also set off the claim thereof against the claim of the other party if the claim of the party requesting set-off has expired, on the condition that the right to set off the claim arose before the expiry of the claim.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

 (3) A party requesting set-off shall not set off a seized claim against the party's claim against the other party if the party requesting set-off acquired the claim after the seizure or if the claim thereof fell due after the seizure and later than the seized claim.

 (4) A party requesting set-off shall not set off a claim against which the other party may set up defences.

§ 201.  Set-off in event of several claims

 (1) If the parties to a set-off have several claims suitable for set-off, the party requesting set-off may determine the claims to be set off. If the claims to be set off are not specified in the declaration of set-off or if the other party immediately objects to the choice of the claims specified in the declaration, the following claims are deemed to be set off:
 1) firstly, the obligation which is the first to fall due;
 2) secondly, the obligation for which the obligee has the least security;
 3) thirdly, the obligation which is the most burdensome for the obligor;
 4) fourthly, the obligation which arose first.

 (2) If a party requesting set-off is required to pay interest to the other party or compensate the other party for expenses in addition to the performance of the principal obligation, the set-off is deemed to discharge first the expenses, then the interest due and finally the principal obligation. The party requesting set-off shall not determine a different order for the performance of the obligations without the consent of the other party.

 (3) The provisions of this section do not apply to set-offs effected under the circumstances specified in § 203 of this Act.

§ 202.  Restrictions on set-off in event of contract entered into for benefit of third party

  In the case of a contract entered into for the benefit of a third party, the party which is to perform an obligation for the benefit of the third party shall not set off a claim filed against such party for the performance of the obligation.

§ 203.  Current account

 (1) If monetary claims and obligations arising for both parties from contracts entered into in the continuing business relationship between the parties are to be calculated in total (current account), the claims and obligations are deemed to be set off by such calculation. In such case, the balance of the claims and obligations is the amount due.

 (2) Claims not related to a continuing relationship between the parties shall not be set off pursuant to the procedure specified in subsection (1) of this section.

 (3) Claims which may not be set off shall not be entered in a current account.

 (4) The entry of a claim in a current account shall not deprive a party of the right to resort to legal remedies with regard to transactions from which the claim arose.

 (5) If a claim entered in a current account is secured, the obligee may use the security to the extent of the secured claim in order to secure a claim for payment of the balance for the benefit of the obligee.

 (6) The entry of a claim in a current account shall not preclude or restrict the liability of third parties for claims entered in the current account.

 (7) Claims entered in a current account shall not be seized or be subject to a claim. Only claims for payment of the balance may be seized or be subject to a claim.

 (8) If a claim for payment of the balance is seized for the benefit of the obligee of the party requesting set-off, the entry into a current account of obligations which arise from transactions concluded after the seizure does not apply with regard to the obligee.

§ 204.  Acts relating to current account

 (1) A party requesting set-off who organises the maintenance of a current account shall notify the other party of the balance of the account at the end of each calculation period, indicating the claims which have been entered in the account and of which the other party has not yet been notified. The duration of a calculation period is presumed to be one year.

 (2) If the other party does not contest the balance sent to the party within a reasonable period of time, the balance is deemed to be correct. In such case, a negative balance is deemed to be an acknowledgement of an obligation.

 (3) Interest shall be paid on the balance as of the receipt of the balance to the party for whom the balance is positive even if interest has already been paid on claims entered in the current account.

 (4) A claim for payment of the balance falls due upon notification of the balance.

 (5) The limitation period for a claim for payment of the balance shall be five years as of the date when the balance falls due.

§ 205.  Termination of contract on current account

 (1) If a contract on a current account is entered into for an unspecified term, either party may cancel the contract at the end of each calculation period by giving at least ten days' notice of the cancellation.

 (2) Upon the death of a party to a contract on a current account, the other party and the successors of the deceased party may cancel the contract at any time.

 (3) Regardless of the termination of a contract on a current account, payment of the balance may be required only after the end of the calculation period.

Division 5 Merger  

§ 206.  Termination of obligation by merger

 (1) If an obligor and an obligee are consolidated in one and the same person, the obligation terminates. If an obligor and an obligee are consolidated in an obligation but the person has legitimate interest in the continuation of the obligation, the obligation shall not terminate.

 (2) If merger is partial, the obligation terminates with respect to the consolidated part.

 (3) If a pledge or other real right is established with regard to a claim, the claim remains in force with regard to the pledgee or the person holding the real right regardless of merger.

 (4) The provisions of this section do not apply to claims arising from securities.

Division 6 Agreement on Termination of Obligation  

§ 207.  Termination of obligation by agreement

 (1) An obligation terminates if the obligee and the obligor have agreed on the termination of the obligation due to the obligee waiving the claim.

 (2) The provisions concerning termination of obligations apply if the parties to an obligation have agreed or the obligee admits that the obligation no longer exists.

Part 2 TRANSFER DEEDS 

Chapter 11 CONTRACT OF SALE  

Division 1 General Provisions  

§ 208.  Definition of contract of sale

 (1) By a contract of sale of a thing, a seller undertakes to deliver an existing thing, a thing to be manufactured or produced or a thing to be acquired in the future by the seller to the purchaser and to allow the transfer of ownership to the purchaser, and the purchaser undertakes to pay the purchase price for the thing to the seller in cash and to take delivery of the thing.

 (2) The provisions of this Chapter also apply to contracts which are entered into to order a thing to be manufactured or produced, unless the party who orders the thing supplies the other party with a substantial part of the materials necessary for such manufacture or production. The provisions of this Chapter do not apply to contracts in which the preponderant part of the obligations of the party who furnishes the things consists of the supply of labour or other services.

 (3) The provisions of this Act concerning the sale of things apply to the sale of rights and other objects, including the sale of energy, water and heat through a network, unless otherwise provided for in this Act and if this is not contrary to the nature of the object. The seller of a right shall allow the purchaser to acquire the right which is the object of the contract of sale.

 (4) Consumer sale is the sale of a thing on the basis of a contract of sale where a consumer is sold a movable by a seller who enters into the contract in the course of his or her economic or professional activities.

§ 209.  Obligation to deliver

 (1) If a thing is to be delivered to a purchaser at a particular place, the seller shall make the thing ready to be placed at the disposal of the purchaser at the particular place and notify the purchaser that it is ready. If things with specific characteristics are the object of a contract, the things are not deemed to have been made ready to be placed at the disposal of the purchaser before the things have been clearly identified for delivery pursuant to the contract by use of markings, shipping documents or otherwise.

 (2) The obligation to deliver a thing to the purchaser is deemed to have been performed if the seller has made the thing ready to be placed at the disposal of the purchaser at the particular place and has notified the purchaser thereof.

 (3) If a thing is to be delivered to a purchaser at a particular place and the characteristics of the thing do not allow its separation by the seller before the purchaser takes delivery thereof, the thing is deemed to have been delivered to the purchaser if the seller has done all that is necessary to allow the purchaser to take delivery of the thing.

 (4) If a seller is required to bring a thing to the purchaser, the seller shall deliver the thing to the purchaser. If a contract prescribes the carriage of things but the obligation of the seller to bring the thing to the purchaser does not relate thereto, the obligation to deliver the thing to the purchaser is deemed to be performed upon delivery of the thing to a carrier who is required to carry the thing from the place of dispatch.

 (5) Failure of the seller to deliver a thing to the purchaser in time in the event of consumer sale is deemed to be a fundamental breach of contract.

§ 210.  Additional obligations of seller in event of carriage of things

 (1) If a seller is required to hand over things to a carrier and the things are not clearly identified by markings, by shipping documents or otherwise, the seller shall notify the purchaser that the things have been handed over to the carrier and provide a detailed description of the things.

 (2) If a seller is required to organise the carriage of things, the seller shall enter into such contracts as are necessary for carriage of the things to the destination according to the usual terms and by means of transport which are appropriate in the circumstances.

 (3) If a seller is not required to enter into an insurance contract in respect of the carriage of the goods, then the seller shall, at the request of the purchaser, provide the purchaser with all available information necessary for the insurance contract to be entered into.

§ 211.  Handing over of documents

 (1) A seller shall hand over documents required for taking delivery of the thing and for the possession, use and disposal thereof (documents relating to the thing) to the purchaser in the form prescribed in the contract at the place and time of delivery. If a seller has a legitimate interest in retaining the original of a document relating to a thing, the seller shall, at the request of the purchaser, give the purchaser a transcript or an extract instead of the original document.

 (2) Documents relating to things which are subject to carriage shall be handed over to the purchaser at the purchaser's place of business which has the closest relationship to the contract or, if the purchaser does not have a place of business, at the residence or seat of the seller. If documents are to be handed over against payment of the purchase price, the documents shall be handed over at the place of payment of the purchase price.

 (3) The documents relating to things shall be handed over to the purchaser such that the purchaser has sufficient time to take delivery of the things at their destination without unreasonable delay or to dispose of the things freely.

§ 212.  Notification obligation of seller

  If the purchaser is required to transport the thing from the place of delivery and the seller has the right to specify the time of delivery of things, the seller shall notify the purchaser timely of when the thing is ready to be placed at the disposal of the purchaser.

§ 213.  Obligation to pay purchase price

 (1) If the purchase price of a thing is to be calculated on the basis of the amount, measurement or weight of the thing, the calculation shall be based on the amount, measurement or weight of the thing at the time when the risk of accidental loss of or damage to the thing passes to the purchaser. If the purchase price of a thing is to be determined by the weight of the thing, it shall be presumed that the price is to be determined by the net weight of the thing.

 (2) If a purchaser is required to pay the purchase price against the delivery of the thing or the handing over of a document, the purchaser shall pay at the place of delivery of the thing or the place where the documents are handed over.

 (3) A purchaser is not required to pay the purchase price before being granted the opportunity to examine the things unless this is not possible due to the agreed manner of delivery or payment.

 (4) [Repealed - RT I, 04.02.2011, 1 - entry into force 05.04.2011]

§ 214.  Obligation to pay purchase price when risk of accidental loss of or damage to thing passes to purchaser

 (1) A purchaser shall pay the purchase price even if the purchased thing is accidentally lost or damaged after the risk of accidental loss of or damage to the thing has passed to the purchaser.

 (2) The risk of accidental loss of or damage to a thing passes to the purchaser upon delivery of the thing.

 (3) The risk of accidental loss of or damage to a thing also passes to the purchaser at the time when the purchaser is in delay with the performance of an act by which he or she is to facilitate the delivery of the thing, in particular if the purchaser fails to take delivery of the thing. If things with specific characteristics are sold and in the case where the purchaser is in delay, the risk of accidental loss of or damage to the things does not pass to the purchaser until the things which are the object of the contract are separated and the purchaser is notified thereof.

 (4) The risk of accidental loss of or damage to a thing sold in transit passes to the purchaser retroactively as of the thing being handed over to the first carrier. This does not apply when a seller, at the time of entry into a contract of sale, is aware or ought to be aware that the thing is lost or has been damaged and does not notify the purchaser thereof.

 (5) If, in the event of consumer sale, the seller or a third person specified by the seller is required to deliver a thing to the purchaser, the risk of accidental loss or damage does not pass to the purchaser before the delivery of the thing to the purchaser or the third person specified by the purchaser or before the purchaser is in delay in taking delivery of the thing.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (6) The right of a seller to withhold documents relating to a thing does not affect the passing of the risk of accidental loss or damage.

§ 215.  Costs of entry into and performance of contracts

 (1) The seller shall incur the delivery costs of a thing, in particular the measurement and weighting costs, and the purchaser shall incur the costs of taking delivery of the thing and costs relating to payment of the purchase price, as well as possible costs of preparing or attesting the contract of sale and costs relating to the making of an entry in a public register on the basis of the contract.

 (2) If, at the request of the purchaser, a thing sold is to be dispatched to a place other than the contractual place of performance of the obligation, the purchaser shall incur the additional costs relating thereto.

 (3) If, in the event of consumer sale, a thing is delivered to the purchaser by the seller or by a carrier authorised by the seller on the basis of a contract, the reimbursement of transport costs may be claimed from the purchaser only if the size of the costs or the information on the basis of which such costs are calculated was communicated to the purchaser not later than on entry into the contract. This also applies to costs which are related to the provision by the seller of other services to the purchaser with the consent of the purchaser in connection with the sale.

 (4) Upon the sale of a right, the seller shall incur the costs of the acquisition and transfer of the right.

§ 216.  Benefit, costs and duties relating to thing

 (1) Benefit which is received from a thing before it is to be delivered belongs to the seller, unless the receipt of such benefit may reasonably have been expected after the thing is to have been delivered. Benefit which is received from a thing after it is to have been delivered belongs to the purchaser, unless the receipt of benefit may reasonably have been expected before the thing is to have been delivered.

 (2) The seller shall incur all costs and duties relating to a thing until delivery of the thing or until the purchaser is in delay in taking delivery of the thing, except for costs which are caused by any circumstance arising from the purchaser.

§ 217.  Conformity of thing

 (1) Things delivered to a purchaser shall conform to the contract, in particular in respect of the quantity, quality, type, description and packaging. Documents relating to a thing shall also conform to the contract.

 (2) A thing does not conform to a contract if:
 1) the thing does not have the agreed characteristics;
 2) failing an agreement concerning the characteristics of the thing, the thing is not fit for the particular purpose for which the purchaser needs it and of which the seller was or ought to have been aware at the time of entry into the contract if the purchaser could reasonably expect to rely on the professional skills or expertise of the seller, and in other cases for purposes for which such things would ordinarily be used;
 3) the use of the thing is hindered by provisions of legislation of which the seller was aware or ought to have been aware at the time of entry into the contract;
 4) third parties have claims or other rights which they may submit with respect to the thing;
 5) the movable is not packaged in the manner usual for such things or, where there is no such manner, in a manner adequate to preserve and protect the thing;
 6) in the event of consumer sale, the thing does not possess the quality usual for that type of thing which the purchaser may have reasonably expected based on the nature of the thing and considering the statements made publicly with respect to particular characteristics of the thing by the seller, producer or previous seller of the thing or by another retailer, in particular in the advertising of the thing or on labels.

 (3) The liability of a seller in the case of statements made by the seller, producer or previous seller of the thing or another retailer specified in clause (2) 6 of this section does not apply if the seller was not aware or did not need to have been aware of the statement or if the seller proves that the statement had been withdrawn or changed by the time of entry into the contract or that the statement did not affect the purchase of the thing.

 (4) In the case of an immovable or a movable entered in a public register, the rights which are entered in the land register or another public register but are not valid are also deemed to be third party rights encumbering a thing within the meaning of clause (2) 4) of this section.

 (5) The lack of conformity of a purchased thing arising from the incorrect installation of the thing is deemed to be equal to the lack of conformity arising from the thing if the installation was carried out by the seller or at the responsibility of the seller. This also applies if the thing is installed by the purchaser and the incorrect installation is the result of insufficient information provided by the seller with respect to installation of the thing.

 (6) Upon sale of the right to possess a thing, the seller shall deliver the thing to the purchaser without any lack of conformity, including being free from any right or claim of a third party.

 (7) For the purposes of this Division, a producer is a person specified in § 1062 of this Act and also a person who operates as a distributor or a supplier of services on the basis of a contract entered into with a producer.

§ 218.  Liability of seller in event of lack of conformity of thing

 (1) The seller is liable for any lack of conformity of a thing which exists at the time when the risk of accidental loss of or damage to the thing passes to the purchaser even if the lack of conformity becomes apparent after that time. In the event of consumer sale, the seller is liable for any lack of conformity of a thing which exists at the time when the thing is delivered to the purchaser even if the passing of the risk of accidental loss of or damage to the thing is agreed for an earlier date.

 (2) In the event of consumer sale, the seller is liable for any lack of conformity of a thing which becomes apparent within two years as of the date of delivery of the thing to the purchaser. In the event of consumer sale, it is presumed that any lack of conformity which becomes apparent within six months as of the date of delivery of a thing to the purchaser already existed before the delivery of the thing, unless such presumption is contrary to the nature of the thing or the deficiency.

 (3) The seller is also liable for any lack of conformity of a thing which becomes apparent after the risk of accidental loss of or damage to the thing passes to the purchaser if the lack of conformity of the thing arises from a violation of obligations by the seller.

 (4) The seller is not liable for any lack of conformity of a thing if the purchaser was or ought to have been aware of the lack of conformity of the thing upon entry into the contract.

 (5) Upon sale of an immovable or of a ship entered in the ship register, the seller shall have the notation concerning the right entered in the corresponding register or the claim securing the establishment of such right deleted even if the purchaser is aware of the right or the notation.

 (6) The seller of an immovable shall not be held liable for the fact that the thing is subject to public taxes or non-monetary obligations.

§ 219.  Obligation to examine things

 (1) If a purchaser has entered into a contract of sale in the course of the purchaser's professional or economic activities, the purchaser shall promptly examine the purchased thing or have the purchased thing examined.

 (2) If a contract of sale involves carriage of the thing, the purchaser may examine the thing upon its arrival at its destination.

 (3) If a thing is redirected in transit or redispatched to another destination by the purchaser without a reasonable opportunity for examination of the thing by the purchaser, examination of the thing may be deferred until the thing has arrived at its new destination if, at the time of entry into the contract, the seller was aware or ought to have been aware of the possibility of such redirection or redispatch.

§ 220.  Notification of lack of conformity of things

 (1) The purchaser shall notify the seller of any lack of conformity of a thing after he or she becomes or should become aware of the lack of conformity. In the event of consumer sale, the consumer shall notify the seller of any lack of conformity of a thing within two months after becoming aware of the lack of conformity.

 (2) A purchaser who enters into a contract of sale in the course of the professional or economic activity thereof shall provide a detailed description of the lack of conformity when giving notification thereof.

 (3) The purchaser shall not rely on the lack of conformity of a thing if the purchaser does not notify the seller thereof on time or, in the case of a contract entered into by the purchaser in the course of the professional or economic activity thereof, if the purchaser does not provide a sufficiently detailed description of the lack of conformity. If a purchaser has a reasonable excuse for the failure to give notice, the purchaser may, relying on the lack of conformity, reduce the purchase price or claim compensation for damages from the seller, except for any loss of profit.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 221.  Specifications for relying on lack of conformity of things

 (1) A purchaser may rely on the lack of conformity regardless of the purchaser's failure to examine a thing or give notification of the lack of conformity of the thing on time if:
 1) the lack of conformity of the thing has been caused by the intent or gross negligence of the seller;
 2) the seller is aware or ought to be aware of the lack of conformity of the thing or the circumstances related thereto and does not disclose such information to the purchaser.

 (2) The seller shall not rely on an agreement which precludes or restricts the rights of the purchaser in connection with the lack of conformity of a thing if the seller is aware or ought to be aware that the thing does not conform to the contract and fails to notify the purchaser thereof.

§ 222.  Requirement to perform contract as legal remedy

 (1) If a thing does not conform to the contract, the purchaser may demand the repair of the thing or delivery of a substitute thing from the seller if this is possible and does not cause the seller unreasonable costs or unreasonable inconvenience compared to the use of other legal remedies considering, inter alia, the value of the thing, the significance of the lack of conformity and the opportunity for the purchaser to acquire a thing which conforms to the contract from elsewhere without inconvenience. The seller may, instead of repairing the thing, deliver a substitute thing which conforms to the contract.

 (2) In the case specified in the first sentence of subsection (1) of this section, the purchaser may, upon the lack of conformity of a thing, demand the delivery of a substitute thing only if the lack of conformity of the thing constitutes a fundamental breach of contract and provided that the given contract of sale is not a contract of customer sale.

 (3) If a seller replaces a non-conforming thing with a thing which conforms to the contract, the seller may require the return of the non-conforming thing from the purchaser. In such case, the provisions of §§ 189–191 of this Act apply.

 (4) The seller shall incur the costs relating to the repair of the thing or delivery of a substitute thing, in particular costs relating to transport, postage, work, travel and materials.

 (5) If the purchaser legitimately requires the repair of a thing and the seller fails to repair the thing within a reasonable period of time, the purchaser may repair the thing or have the thing repaired, and claim compensation for any reasonable costs incurred thereupon from the seller.

 (6) The purchaser loses the right to require the repair of a thing or delivery of a substitute thing from a seller if the purchaser does not submit a corresponding claim to the seller at the same time as a notice concerning the lack of conformity of the thing or within a reasonable period of time after submission of the notice, unless the behaviour of the seller is contrary to the principle of good faith.

 (7) The provisions of subsection (6) of this section do not apply to customer sale.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

§ 223.  Fundamental breach of contract of sale by seller

 (1) The seller is deemed to be in fundamental breach of a sales contract also if, inter alia, the repair or substitution of a thing is not possible or fails, or if the seller refuses to repair or substitute a thing without good reason or fails to repair or substitute a thing within a reasonable period of time after the seller is notified of the lack of conformity.

 (2) In the event of customer sale, any unreasonable inconvenience caused to the purchaser by the repair or substitution of a thing is also deemed to be a fundamental breach of contract by the seller.

 (3) In the cases specified in subsections (1) and (2) of this section, the purchaser is not required to determine an additional term specified in § 114 of this Act and has the right, inter alia, to withdraw from the contract.

§ 224.  Restrictions on reduction of purchase price

  The purchaser shall not reduce the purchase price:
 1) if the seller repairs the thing or delivers a substitute thing which conforms to the contract;
 2) if the purchaser unreasonably refuses to accept the proposal of the seller concerning the repair of the thing or delivery of a substitute thing;
 3) upon the purchase of a used thing which is sold by public auction.

§ 225.  Specifications for compensation for damage

  The purchaser may also claim compensation from the seller for such damage as is caused due to use of the thing for purposes other than those intended if the damage arises from the seller providing insufficient information to the purchaser, and compensation for damage which is caused to the thing due to the lack of conformity thereof.

§ 226.  Specifications regarding liability of seller upon sale according to sample, description or model

 (1) In the event of sale according to a sample, description or model, it is presumed that the sample, description or model is the only standard for assessing the conformity of a thing. In such case, any deviation from the sample, description or model gives the purchaser the right to withdraw from the contract or use other rights which arise from the lack of conformity of the thing.

 (2) If, based on an agreement or generally accepted practice, the sample, description or model is to be used only to assess approximate quality, the purchaser may withdraw from the contract only if the deviation from the sample, description or model is material.

§ 227.  Beginning of expiry of claims arising from lack of conformity of purchased thing

  The limitation period of a claim arising from the lack of conformity of a purchased thing begins as of the delivery of the thing to the purchaser. Upon delivery of a substitute thing by the seller, the limitation period begins as of the delivery of the substitute thing to the purchaser. Upon repair of a thing by the seller, the limitation period of claims against the eliminated deficiency begins anew as of the repair of the thing.

§ 228.  Liability of producer, previous seller or other retailer to purchaser

  If, in the event of consumer sale, the seller who sells a thing to a consumer is liable for any lack of conformity of the thing to the purchaser as a result of a statement made by the producer, previous seller or other retailer with respect to particular characteristics of the thing, it is presumed that the seller may claim compensation for damage caused thereto from the corresponding person in accordance with the relationship between them and to the extent of the liability of the seller to the consumer.

§ 229.  Obligation of purchaser to take possession of and preserve things

 (1) If a purchaser has taken possession of a thing but intends to withdraw from the contract or requires the delivery of a substitute thing or exercises another right as a result of which the thing is to be returned, the purchaser shall take reasonable measures to preserve and protect the thing. The purchaser has the right to refuse to deliver the thing until the seller reimburses the reasonable costs incurred in the preservation and protection of the thing.

 (2) If a thing dispatched to a purchaser is placed at the disposal of the purchaser at its destination and the purchaser legitimately refuses to take delivery of the thing, the purchaser shall nevertheless take possession of the thing on behalf of the seller if this is possible without payment of the purchase price and without unreasonable inconvenience or expense to the purchaser. The purchaser is not required to take possession of the thing if the seller or the person who has the right to take possession of the thing on behalf of the seller is present at the destination.

 (3) If the purchaser takes possession of a thing according to subsection (2) of this section, he or she has the rights specified in subsection (1) of this section.

 (4) In the cases specified in subsections (1) and (2) of this section, the purchaser may deposit the thing with a third party pursuant to § 124 of this Act or sell the thing pursuant to § 125 of this Act.

§ 230.  Warranty against defects

 (1) Within the meaning of this Chapter, a warranty against defects is a promise made by a seller, previous seller or producer (warrantor) to replace or repair a sold thing without charge or for a charge and under the conditions prescribed in the warranty or advertising, or to ensure in other ways the compliance of the thing with the conditions prescribed in the warranty or advertising whereby the purchaser is given a broader warranty than that provided by law.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (2) A warranty period begins to run as of the delivery of the thing to the purchaser unless a later time for the beginning of the warranty period is prescribed in the contract or letter of guarantee. If the seller is required to dispatch the thing to the purchaser, the warranty period does not begin to run before the thing is delivered to the purchaser. The running of the warranty period is suspended for the time when the purchaser cannot use the thing due to a lack of conformity for which the warrantor is liable.

 (3) It is presumed that a warranty against defects covers all defects of a thing which become apparent appear during the warranty period.

 (4) The procedure for exercising rights arising from a warranty against defects shall not be unreasonably cumbersome to the purchaser.

 (5) A warranty against defects does not preclude or restrict the right of the purchaser to use other legal remedies arising from law or the contract.

§ 231.  Specifications for warranty against defects in event of consumer sale

 (1) In the event of consumer sale, a warranty against defects shall set out, in a manner understandable to the consumer, information concerning the subject matter of the warranty and the procedure for exercising the rights arising from the warranty. A warranty shall set out, inter alia, the following:
 1) the name and address of the warrantor;
 2) the person to address to exercise the rights arising from the warranty;
 3) the rights granted to the consumer by the warranty;
 4) the procedure for exercising the rights arising from the warranty;
 5) the warranty period;
 6) the scope of the warranty;
 7) an explanation that, in addition to the rights arising from the warranty, the consumer has other rights arising from law.

 (2) A consumer shall be given the opportunity to freely examine the conditions of the warranty before entering into a contract of sale. At the request of the consumer, the warranty shall be presented to the consumer in writing or by other durable medium which the consumer is able to use.

 (3) Failure by the warrantor to present the information specified in subsections (1) or (2) of this section does not preclude or restrict the validity of the warranty.

 (4) In the event of consumer sale, it is presumed that:
 1) the warranty grants the purchaser the right to demand the repair of the thing or delivery of a substitute thing without charge during the warranty period;
 2) a new warranty with the same duration as the original warranty will be granted for things replaced during the warranty period;
 3) if a thing is repaired during the warranty period, the warranty is automatically extended by the length of the period of repair.

§ 232.  Services provided in event of consumer sale

  If, in the event of consumer sale, the purchaser may reasonably expect that services related to the use, maintenance or repair of the thing will be provided but the seller does not provide such services, the seller shall provide sufficient information to the purchaser at the time of delivery and, at the request of the consumer, after the delivery of the thing regarding the possibilities of using such services.

§ 233.  Reservation of ownership

 (1) If, upon the sale of a movable, it is agreed that the ownership of a thing remains with the seller until payment of the purchase price, ownership is presumed to transfer to the purchaser upon payment of the full purchase price (reservation of ownership).

 (2) On the basis of a reservation on ownership, a seller may demand the purchaser to deliver the thing only if the seller has withdrawn from the contract. If the claim of the seller which is secured by the agreement on a reservation of ownership expires, the seller may demand the transfer of the thing pursuant to the provisions concerning protection of ownership.

§ 234.  Extension and expiry of contract of sale of energy

 (1) A contract to supply electric or thermal energy through a connection network entered into for a specified term is deemed to be extended for the same term and under the same conditions if at least one month before the expiry of the term of the contract neither party has notified the other of any desire to do otherwise.

 (2) The provisions of subsection (1) of this section apply to contracts to supply gas, petroleum, water or other similar supplies through a connection network which are entered into for a specified term.

 (3) Purchasers who are consumers may cancel contracts specified in subsections (1) and (2) of this section with one month's notice regardless of whether the contracts were entered into for a specified or unspecified term. Agreements which derogate from this to the prejudice of the consumer are void.

§ 235.  Sale on approval

 (1) Sale on approval is the sale of a thing on the basis of a conditional contract of sale upon which the thing is dispatched to the purchaser.

 (2) A contract of sale on approval shall be entered into by the purchaser with a suspensive condition of approval or a resolutive condition of non-approval. It is presumed that a contract of sale with a suspensive condition is entered into in the case of sale on approval.

 (3) In the case of a contract of sale on approval with a suspensive condition, the seller shall bear the risk of accidental loss of or damage to the thing until approval by the purchaser. In the case of a contract of sale on approval with a resolutive condition, the purchaser shall bear the risk of accidental loss of or damage to the thing until the contract fails to be approved.

§ 236.  Prohibition on violation of provisions

  In the event of consumer sale, persons and agencies specified in law may, pursuant to the procedure provided by law, demand a seller who is in breach of provisions concerning a contract of sale specified in this Division and in the General Part of this Act to terminate such violation and refrain from violating the provisions.

§ 237.  Mandatory nature of provisions concerning consumer sale

 (1) In the event of consumer sale, agreements which are related to the legal remedies to be used in the case of a breach of contract and which derogate from the provisions of this Division and the provisions of the General Part of this Act to the prejudice of the purchaser are void.
[RT I, 04.02.2011, 1 - entry into force 05.04.2011]

 (2) If a contract is entered into as a result of a public tender, advertising or other similar economic activities taking place in Estonia, the provisions of this Division apply to contracts of consumer sale entered into with a purchaser residing in Estonia or in a Member State of the European Union regardless of the country whose law is applied to the contract.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

Division 2 Sale with Right of Repurchase  

§ 238.  Sale with right of repurchase

 (1) Parties may agree in a contract of sale or after entry into a contract of sale that the seller has the right to repurchase the thing (sale with the right of repurchase).

 (2) In the event of sale with the right of repurchase, the thing is deemed to have been repurchased by the seller when the seller submits corresponding notification to the purchaser.

 (3) The notification specified in subsection (2) of this section shall be made in the same form as the contract of sale. In the case of a written contract of sale, the submission of a notarially attested or verified statement is sufficient.

 (4) Upon repurchase, it is presumed that the price for which the object was sold is the repurchase price.

§ 239.  Term for exercise of right of repurchase

  The right of repurchase may be exercised in the case of immovables within ten years and in the case of other things within three years as of agreement on the conditions of the right of repurchase.

§ 240.  Liability of purchaser

 (1) If a purchased thing has perished or deteriorated before the right of repurchase has been exercised or if it cannot be transferred for any other reason due to circumstances arising from the purchaser, or if the purchaser has materially altered the thing, the purchaser shall compensate the seller for the damage arising therefrom. If a thing has deteriorated due to circumstances for which the purchaser is not liable or if it has not been altered materially, the seller shall not claim compensation for the damage caused thereby or reduce the purchase price.

 (2) If a purchaser has disposed of a purchased thing before the exercise of the right of repurchase by the seller or if the thing has been disposed of upon compulsory execution or in bankruptcy proceedings, the purchaser is required to remove the rights of third persons arising from such disposal.

§ 241.  Compensation of costs

  A purchaser may claim compensation from the seller for costs incurred by the purchaser on the thing purchased thereby before repurchase and to the extent that the value of the thing has increased as a result of the costs incurred.

§ 242.  Repurchase at value of thing at time of repurchase

  If the parties agree that the repurchase price is the value of an object at the time of repurchase, the provisions of §§ 240 and 241 of this Act do not apply.

§ 243.  Several persons entitled to repurchase

  If the right of repurchase belongs to several persons jointly, these persons may exercise the right of repurchase only jointly to the full extent. If the right of repurchase terminates for one entitled person or if one of them waives the right, the remaining entitled persons have the right to exercise the right of repurchase jointly to the full extent.

Division 3 Sale by Right of Pre-emption  

§ 244.  Definition and exercise of right of pre-emption

 (1) The right of pre-emption is a right upon the exercise of which a contract of sale between a person with a right of pre-emption and a seller is deemed to be entered into on the same conditions which the seller agreed with the buyer. A contract of sale entered into with a purchaser or obligations arising therefrom do not become invalid upon the exercise of the right of pre-emption.

 (2) A right of pre-emption is created on the basis of law or by a transaction.

 (21) A right of pre-emption created on the basis of a transaction applies to a contract of sale entered into by a seller with whom the creation of the right of pre-emption was agreed upon. A right of pre-emption created on the basis of law may be exercised upon each sale of a thing.

 (3) A person with a right of pre-emption with respect to a thing may exercise the right if the seller has entered into a contract of sale with a purchaser. A right of pre-emption may be exercised also in case of other forms of transfer for charge.

 (4) The right of pre-emption is exercised by the person with the right of pre-emption submitting corresponding notification to the seller.

 (5) The notification specified in subsection (4) of this section shall be made in the same form as the contract of sale. In the case of a written contract of sale, the submission of a notarially attested or verified statement is sufficient.

 (6) Disposition of a thing to which a right of pre-emption created on the basis of law applies is void if the disposition is made after the right to exercise the right of pre-emption is created and if it would prejudice or restrict the exercising of the right of pre-emption. The provisions of this subsection do not apply to a pre-emptive right created on the basis of law in the case of the transfer of an immovable or a part thereof.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 245.  Void conditions

  An agreement between the seller and purchaser is void with respect to a person with the right of pre-emption if, according to the agreement,:
 1) the contract of sale is valid only if the right of pre-emption is not exercised;
 2) the seller has been granted the right to withdraw from the contract in the case where the right of pre-emption is exercised.

§ 246.  Accessory obligations

 (1) If the purchaser has an accessory obligation arising from a contract which the person with the right of pre-emption is not able to perform, the person with the right of pre-emption shall, instead of performing the accessory obligation, pay the usual value thereof.

 (2) The right of pre-emption cannot be performed if the purchaser has an accessory obligation arising from a contract which is not monetarily appraisable and which the person with the right of pre-emption is not able to perform. An accessory obligation does not impede the right of pre-emption being exercised and the person with the right of pre-emption is not required to perform the accessory obligation if it may be presumed that the seller and the purchaser would not have agreed on an accessory obligation if no right of pre-emption had existed.

§ 247.  Exercise of right of pre-emption concerning several things

  If a purchaser purchases a thing concerning which a right of pre-emption applies together with other things for an aggregate price, the person with the right of pre-emption shall pay a part of the aggregate price in proportion to the value of the thing. The seller may demand that the person with the right of pre-emption also purchase other things which cannot, without harmful consequences for the seller, be separated from the thing concerning which the right of pre-emption applies.

§ 248.  Payment of purchase price by instalments

 (1) If, pursuant to the contract of sale, the purchaser is not required to pay the purchase price upon entry into the contract, the person with the right of pre-emption has the same right only if he or she gives security for the amount paid by instalments.

 (2) If an immovable or a movable or right entered in a public register is the object of a contract of sale with the right of pre-emption and if the purchaser is not required to pay the purchase price upon entry into the contract, the person with the right of pre-emption is not required to give security in so far as establishment of a pledge on the object of the contract of sale has been agreed in order to ensure payment of the purchase price by instalments, or an obligation has been taken over for the ensurement of which a pledge has been established on the object of the contract of sale.

§ 249.  Notification of sale to person with right of pre-emption

 (1) A seller shall promptly notify the person with the right of pre-emption of any contract of sale entered into with a purchaser and the content thereof.

 (2) If a contract of sale is entered into in written form, the seller is required to present the contract to the person with the right of pre-emption at the request of such person.

 (3) The notification obligation of a seller is also deemed to have been performed if the purchaser notifies the person with the right of pre-emption of the contract of sale and the content thereof or presents the contract to such person.

§ 250.  Term for exercise of right of pre-emption

  The right of pre-emption may be exercised within two weeks after the receipt of the notice specified in § 249 of this Act or, in the case of immovables, within two months after the receipt of the notice specified in § 249 of this Act, unless a different term is prescribed by law or the contract.

§ 251.  Restrictions on exercise of right of pre-emption

 (1) The right of pre-emption cannot be exercised if the thing is sold upon compulsory execution or in bankruptcy proceedings or if the thing is expropriated.

 (2) The right of pre-emption cannot be exercised if the thing is sold to the descendants, or ascendants or spouse of the seller.

§ 252.  Exercise of right of pre-emption by several persons

 (1) If a right of pre-emption belongs to several persons jointly, these persons may exercise the right of pre-emption only jointly to the full extent. If the right of pre-emption terminates for one entitled person or if one entitled person waives the right, the remaining entitled persons have the right to exercise the right of pre-emption jointly to the full extent.

 (2) If the right of pre-emption belongs to several persons separately and they wish to exercise the right, they shall draw lots unless otherwise provided by law or an agreement of the parties.

 (3) A right of pre-emption acquired pursuant to law shall be preferred to a right of pre-emption established by a transaction.

§ 253.  Non-transferability of right of pre-emption

 (1) A right of pre-emption is not transferable.

 (2) A right of pre-emption for a specified term passes to the successors of the person with the right of pre-emption.

Chapter 12 BARTER AGREEMENTS  

§ 254.  Definition of barter agreement

 (1) In a barter agreement, the parties mutually undertake to transfer an object to the other party and to allow the transfer of ownership of the object and the transfer of any other right which grants the right to dispose of the object.

 (2) The provisions concerning contracts of sale of apply to barter agreements. In a barter agreement, the party who transfers is deemed to be the seller and the party who takes delivery is deemed to be the purchaser of the object of the agreement.

§ 255.  Price of bartered objects

  The price of objects subject to barter is presumed to be equal.

Chapter 13 FACTORING CONTRACT  

§ 256.  Definition of factoring contract

  In a factoring contract, one person (client in factoring) undertakes to assign to another person (factor) financial claims against a third person (obligor in factoring) which arise from a contract on the basis of which the client, in the client's economic or financial activities, sells an object or provides services to the obligor, and the factor undertakes to:
 1) pay for the claim and bear the risk of non-fulfilment of the claim, or
 2) grant credit to the client out of the fulfilment of the claim, administer the claim for the client and exercise rights arising from the claim, including organising related accounting, and collect the claim.

§ 257.  Notification of assignment of claim

  A client in factoring is required to notify the obligor of the assignment of the claim.

§ 258.  Breach of contract

 (1) If a client in factoring violates a contract of sale or provision of services entered into between the client in factoring and the obligor and if a financial claim arising from the contract is assigned to the factor, the obligor shall not claim repayment of money paid to the factor on the basis of the claim if the obligor can claim repayment from the client.

 (2) In the case of a breach of contract by a party specified in subsection (1) of this section, the obligor in factoring may still claim repayment of money from the factor which was paid to the factor on the basis of a claim to the extent that the factor:
 1) did not perform the obligation to make a payment to the client in the part of this claim;
 2) made the payment to the client at a time when he or she was or ought to have been aware of the breach of the contract of sale or provision of services by the client.

Chapter 14 GRATUITIOUS CONTRACT  

§ 259.  Definition of gratuitious contract

 (1) In a gratuitious contract, one person (donor) undertakes to transfer an object belonging thereto to another person (donee) and allow the transfer of ownership to the donee or waive a patrimonial right in favour of the donee or enrich the donee in another manner.

 (2) The following are not deemed to be gifts in favour of another person:
 1) avoidance of acquiring assets,
 2) waiving of rights which have not yet been acquired;
 3) renunciation of an estate or legacy.

§ 260.  Gratuitious contract in favour of unborn child

  A gratuitious contract may be entered into in favour of an unborn but conceived child or in favour of a future child of a specified person alive at the time the gift is made even if the child has not yet been conceived. In such case, the parent or guardian of the future child shall decide on the acceptance of the gift.

§ 261.  Form of gratuitious contract

 (1) An application by a donor to assume obligations arising from a gift shall be prepared in writing unless otherwise provided by law.

 (2) A gratuitious contract is deemed to be valid upon performance of the obligations which arise from the gratuitious contract even if the formal requirements provided for in subsection (1) of this section are not complied with.

§ 262.  Donatio causa mortis

  If a gratuitious contract is entered into causa mortis, the provisions of the Law of Succession Act (RT I 1996, 38, 752; 1999, 10, 155; 88, 807; 2001, 56, 336; 93, 565; 2002, 53, 336) concerning legacy or testament apply thereto. If such obligation arising from a gratuitious contract is still performed during the lifetime of the donor, the provisions concerning gratuitious contracts apply thereto.

§ 263.  Donor's obligation to transfer

  A donor shall deliver the gift to the donee or allow the receipt to take possession of the gift in another manner, and shall remove all impediments to possession of the object.

§ 264.  Liability of donor for breach of contract

 (1) Upon assessment of the conformity of a gift to the contract, the provisions of §§ 217 and 218 of this Act apply as appropriate.

 (2) If a gift does not conform with the contract, the donor is liable only if the donor did not notify the donee of the lack of conformity intentionally or due to gross negligence or if the donor has undertaken such liability.

 (3) If a donor had promised to deliver a thing only with specific characteristics and which the donor first had to acquire, and if the delivered thing did not conform to the contract, the donee may demand the delivery of a thing which conforms to the contract instead of the defective thing if the donor was aware or ought to have been aware of the defect at the time of acquiring the thing. If a donor does not give notification of the defects of a thing intentionally, a donee may claim compensation for the damage caused by violation of the obligation instead of delivery of a thing which conforms to the contract.

 (4) The provisions concerning the liability of the seller for the lack of conformity of a sold thing apply to the demands of a donee specified in subsection (3) of this section.

 (5) A donor shall not pay a penalty for late payment if the transfer of a gift is delayed, or transfer the benefit received from the granted object.

§ 265.  Encumbrances and obligations for donees

 (1) A gratuitious contract may prescribe duties and obligations for donees.

 (2) If the performance of duties or obligations is in the public interest, a competent state agency or local government agency may also demand the performance thereof after the death of the donor.

 (3) If an encumbrance is in favour of several persons without specifying the share of each person and one of these persons dies, the share of the deceased shall accrue to the shares of the other persons.

 (4) If the value of a gift does not cover the costs necessary to fulfil a duty due to its lack of conformity, a donee may refuse to fulfil the duty to the extent exceeding the value of the gift until the expenses which exceed the value of the gift are compensated thereto. If a donee still fulfils a duty, the recipient may demand that the donor compensate the expenses which exceed the value of the gift and are incurred upon fulfilment of the duty.

§ 266.  Specifications for termination of gratuitious contract

 (1) A gratuitious contract which has not yet been performed by the donor terminates upon the suspension of execution proceedings due to a lack of assets or on the declaration of the donor as bankrupt.

 (2) If a gratuitious contract prescribes the payment of an allowance which comprises payment by instalments to a donee who is a natural person, the contract terminates upon the death of the donor or donee who is a natural person or on the dissolution of the donor who is a legal person.

§ 267.  Withdrawal from gratuitious contract before performance thereof

  A donor may refuse to perform a contract before transferring a gift to a donee and withdraw from the contract if:
 1) the donee behaves in a manner displaying gross ingratitude towards the donor or a person close to the donor;
 2) in the case of performance of the contract, the donor is unable to perform a maintenance obligation arising from law or to maintain himself or herself reasonably, unless the donor has placed himself or herself in this situation intentionally or due to gross negligence or unless the donor pays the necessary maintenance sum;
 3) the donee unjustifiably fails to fulfil a duty or condition related to the contract;
 4) new or significantly greater maintenance obligations arise for the donor after entry into the contract.
 5) the donee dies.

§ 268.  Withdrawal from gratuitious contract after performance thereof

 (1) If a gratuitious contract is performed, the donor may withdraw from the contract and reclaim the gift from the donee according to the provisions concerning unjustified enrichment in the cases prescribed in clauses 267 1)–3) of this Act.

 (2) If a donor withdraws from a gratuitious contract on the basis provided for in clause 267 2) of this Act, the contract is not deemed to have been terminated if the donee pays the sum needed for the maintenance of the dependant pursuant to the procedure provided for in § 571 of this Act as of the transfer of the gift until the death of the donor.

§ 269.  Restriction on compensation for damage

  In the cases specified in §§ 267 and 268 of this Act, the donee does not have the right to claim compensation for the damage caused to him or her by withdrawal from the contract.

§ 270.  Restrictions on withdrawal

 (1) A donor may withdraw from a gratuitious contract within one year as of the time when the donor becomes or should have become aware of the creation of the right of withdrawal. If a gratuitious contract is performed, the donor may not withdraw from a gratuitious contract after the death of the donee.

 (2) If a donor dies before the expiry of the term provided for in subsection (1) of this section, the rights specified in subsection (1) transfer to his or her successors to the extent of the remaining term. Successors may withdraw from a gratuitious contract within the term specified in subsection (1) of this section only if the donee intentionally and unlawfully caused the death of the donor or hinders his or her withdrawal from the contract.

 (3) A donor shall not withdraw from a gratuitious contract which is entered into for the observation of a moral obligation.

Part 3 CONTRACTS FOR USE 

Chapter 15 LEASE CONTRACT  

Division 1 General Provisions  

§ 271.  Definition of lease contract

  By a lease contract, one person (the lessor) undertakes to grant the use of a thing to another person (the lessee) and the lessee undertakes to pay a fee (rent) therefor to the lessor.

§ 272.  Application of provisions upon lease of dwellings and business premises

 (1) A dwelling is a residential building or apartment which is used for permanent habitation. Business premises are premises used in economic or professional activities.

 (2) The provisions concerning the lease of immovables also apply to the lease of dwellings and business premises unless otherwise provided by law.

 (3) The provisions concerning residential lease contracts and lease contracts of business premises also apply to the lease of things granted for use together with the dwelling or business premises by a lessor to a lessee.

 (4) The provisions concerning residential lease contracts and lease contracts of business premises do not apply to the following:
 1) lease contracts, with a term not exceeding three months, of premises of accommodation establishments and premises intended for holidays, and lease contracts entered into for the temporary use of other premises;
 2) lease contracts the purpose of which is to sublease rooms for profit;
 3) lease contracts the object of which is a dwelling which is part of the dwellings used by the lessor and the greater part of which is furnished by the lessor;
 4) lease contracts the object of which is a dwelling which the state, a local government or other legal person in public law leases, in order to perform its functions arising from law, to persons who urgently need a dwelling or persons acquiring education, if the lessee is informed of the intended use of the room upon entry into the contract.

§ 273.  Nullity of agreement related to residential lease contract

  An agreement which makes entry into or continuation of a residential lease contract dependent on an obligation of a lessee in respect of a lessor or third party is void unless the obligation is directly related to the use of the leased dwelling.

§ 274.  Effect of format of residential lease contract on term of contract

  If a residential lease contract with a term exceeding one year is not entered into in writing, the contract is deemed to have been entered into for an unspecified term, but the contract shall not be cancelled such that it terminates earlier than one year after the transfer of the dwelling to the lessee.

§ 275.  Mandatory nature of provisions

  An agreement which derogates from the provisions of law regarding the rights, obligations and liability of the parties to a residential lease contract to the detriment of the lessee is void.

Division 2 Rights and Obligations of Parties  

§ 276.  General obligations of parties

 (1) A lessor is required to deliver a thing, together with its accessories, to a lessee by the agreed time and in a suitable condition for contractual use and to ensure that the thing is maintained in such condition during the validity of the contract.

 (2) A lessee shall use a thing with prudence and according to the intended purpose which is the basis for the lease.

 (3) The lessee of a dwelling or business premises shall take the interests of other residents and neighbours into account.

§ 277.  Failure to transfer leased thing on time and transfer of thing not conforming to contract

 (1) If a lessor does not deliver a thing at an agreed time or transfers a thing the defects of which preclude the use of the thing for its intended purpose or restrict the use thereof to a significant extent, the lessee may withdraw from the contract.

 (2) If, upon transfer of a thing, the lessee knows or ought to know that the thing does not conform to the contract but accepts the thing irrespective thereof, the lessee loses the right to withdraw from the contract and may exercise the rights provided for in § 278 of this Act only if the lessee reserves this right upon accepting the thing.

§ 278.  Defects in leased thing which arise during term of contract and obstacle to use of thing

  If a leased thing is, during the term of a contract, affected with a defect for which the lessee is not responsible and which the lessee need not remove at the expense thereof, or if there is an obstacle to the contractual use of the thing, the lessee may:
 1) demand that the lessor remove the defect or obstacle pursuant to the provisions of § 279 of this Act;
 2) demand that the lessor take over a legal dispute with a third party;
 3) demand compensation for the damage from the lessor;
 4) reduce rent pursuant to the provisions of § 296 of this Act;
 5) deposit rent pursuant to the provisions of § 298 of this Act.

§ 279.  Removal of defect or obstacle

 (1) If a lessor knows or ought to know about a defect or obstacle specified in § 278 of this Act but does not remove it within a reasonable period of time after the lessor becomes or ought to have become aware thereof, the lessee may cancel the contract without advance notice if the defect or obstacle precludes the use of the thing for the intended purpose or restricts such use to a significant extent.

 (2) A lessee does not have the right to demand the removal of a defect if the lessor substitutes the defective thing with a thing not affected by defects within a reasonable period of time.

 (3) A lessee may remove a defect or obstacle and demand reimbursement of the necessary expenses incurred therefor if the lessor delays removal of the defect or obstacle or if the defect or obstacle only restricts the possibility of using the thing for the intended purpose to an insignificant extent.

 (4) Agreements which derogate from the provisions of subsections (1) and (3) of this section to the detriment of the lessee are void.

§ 280.  Removal of minor defects

  A lessee shall remove the defects of a leased thing at the expense of the lessee if these defects can be removed by light cleaning or maintenance which is in any case necessary for the ordinary preservation of the thing.

§ 281.  Prohibition on restriction of rights of lessee

  An agreement concerning preclusion or restriction of the rights of a lessee in connection with the non-conformity of a leased thing to the contract is void if the lessor knows or ought to know, upon entry into the contract, that the thing does not conform to the contract and fails to notify the lessee thereof.

§ 282.  Notification obligation of lessee

 (1) A lessee shall promptly notify the lessor of the following:
 1) the lack of conformity of the thing to the contract unless the lessee is required to correct the instance of non-conformity;
 2) danger to the thing if it is necessary to take measures in order to avert the danger;
 3) the right of a third party to the thing which becomes known to the lessee.

 (2) If a lessee violates an obligation specified in subsection (1) of this section, the lessee shall compensate the lessor for loss caused by violation of the obligation.

 (3) If a lessor cannot remove the defect of a leased thing or an obstacle to use of the thing for the reason that the lessee has violated an obligation specified in subsection (1) of this section, the lessee shall not exercise the rights provided for in § 278 of this Act in respect of the lessor or exercise the right of extraordinary cancellation of lease contract in the case provided for in subsection 314 (1) of this Act without granting the lessor a reasonable term to re-enable use of the leased thing.

§ 283.  Obligation of lessee to tolerate

 (1) A lessee shall tolerate work performed in respect of a thing and also other effects on the thing which are necessary in order to preserve the thing, remove defects, prevent danger or eliminate the consequences thereof. The obligation to tolerate work performed in respect of a thing and other effects on the thing does not preclude or restrict the right of a lessee to reduce rent or demand compensation for damage due to the work or other effects.

 (2) A lessee shall allow the lessor to examine a thing if this is necessary to preserve the thing or to transfer or lease the thing to another person.

 (3) A lessor shall notify a lessee of work performed and examination of a thing in good time and take the interests of the lessee into account upon performance of the work.

§ 284.  Improvements and alterations made to thing by lessor

 (1) A lessor may make improvements and alterations to a thing and the lessee shall tolerate the works and other effects on the thing related to the improvements and alterations, unless the work and effects are unfairly burdensome to the lessee.

 (2) At least two months before commencement of the making of improvements and alterations, the lessor shall notify the lessee in a format which can be reproduced in writing of the nature, extent, time of commencement and expected duration of the measures planned for making the improvements and alterations, and of any potential increase in the rent which may arise therefrom.

 (3) A lessee may cancel a contract within fourteen days as of receipt of a notice specified in subsection (2) of this section by giving at least thirty days' notice. If a lessee cancels a contract, the making of improvements and alterations shall not commence before termination of the contract.

 (4) The provisions of subsections (2) and (3) of this section do not apply if the improvements and alterations are insignificant and do not bring about an increase in the rent.

 (5) Upon making improvements and alterations, the lessor shall take the interests of the lessee into account. The obligation to take the interests of the lessee into account does not preclude or restrict the right of the lessee to reduce the rent or demand compensation for damage. The lessor shall, to a reasonable extent, reimburse the expenses incurred by the lessee as a result of the improvements and alterations and, at the request of the lessee, pay such expenses to the lessee in advance.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 285.  Improvements and alterations made to thing by lessee

 (1) A lessee may make improvements and alterations to a leased thing only with the lessor's consent which is submitted in a format which can be reproduced in writing. The lessor shall not refuse to grant consent if the improvements and alterations are necessary in order to use the thing or manage the thing reasonably.

 (2) If the lessor consents to improvements and alterations, the lessor may demand that the original condition be restored only if this has been agreed in a format which can be reproduced in writing.

 (3) Upon expiry of a lease contract, the lessee may remove an improvement or alteration made to a thing if this is possible without damaging the thing. The lessee does not have the right to remove an improvement or alteration if the lessor pays a reasonable compensation therefor, unless the lessee has a legitimate interest in removing the improvement or alteration.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 286.  Compensating lessee for expenses

 (1) If, upon expiry of a lease contract, it becomes evident that the value of the thing has increased considerably due to the improvements or alterations made with the consent of the lessor, the lessee may demand reasonable compensation therefor.

 (2) A lessee may demand that the lessor compensate for expenses other than those specified in subsection (1) of this section pursuant to the provisions regarding negotiorum gestio.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 287.  Prohibition on agreement on contractual penalty upon lease of dwellings

  Any agreement which requires the lessee of a dwelling to pay a contractual penalty upon violation of a contract is void.

§ 288.  Sublease of thing

 (1) A lessee may, with the consent of the lessor, transfer the use of a thing fully or partially to a third party (sublease), particularly to sublet the thing.

 (2) A lessor may refuse to grant consent for the sublease of a thing only if the lessor has good reason therefor, particularly if:
 1) the lessee does not disclose the conditions for the sublease to the lessor;
 2) the sublease would cause significant loss to the lessor;
 3) the sublease would be unreasonably burdensome on the leased premises;
 4) the lessor has good reason therefor arising from the identity of the sublessee.

 (3) If a lessor refuses to grant consent for the sublease of a thing without good reason, the lessee may cancel the contract taking into account the terms provided for in § 312 of this Act.

 (4) If the sublease of a thing may be expected only in conjunction with a reasonable increase in the rent, the consent may be made subject to the condition that the lessee agrees to the increase in the rent.

 (5) If a lessee transfers the use of a thing to a sublessee, the lessee shall be equally responsible for the activities of the sublessee and for the activities of the lessee.

 (6) A sublessee shall not use a thing after expiry of the lease contract or in any other manner than that permitted to the lessee. The lessor may demand this directly from the sublessee.

§ 289.  Accommodation of family members of lessee of dwelling

  The lessee of a dwelling has the right to accommodate in the leased dwelling his or her spouse, minor children and parents who are incapacitated for work without the consent of the lessor unless it is agreed in the lease contract that the lessee may do so only with the consent of the lessor.

§ 290.  Transfer of lease contract

 (1) A lessee may transfer the rights and obligations arising from a lease contract to a third party with the lessor's consent in a format which can be reproduced in writing.

 (2) Upon transfer of the rights and obligations arising from a lease contract, the initial lessee and the person to whom the rights and obligations of the lessee are transferred shall be solidarily liable for performance of the obligations to the lessor which arise from the contract. The liability of the initial lessee expires as of the time when the lessor could cancel the lease contract for the first time or as of the time when the lease contract is terminated, but not later than two years after the transfer of the rights and obligations.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 291.  Transfer of lease contract upon change of ownership of leased immovable

 (1) If a lessor transfers an immovable after transfer of the immovable into the possession of a lessee, or if the owner of a leased thing changes after transfer of the thing into the possession of the lessee in the event of the transfer of the thing upon compulsory execution or in bankruptcy proceedings, the rights and obligations of the lessor arising from the lease contract are transferred to the acquirer of the thing.

 (2) Upon constitution of a right of superficies or establishment of a usufruct on a leased thing after transfer of the thing into the possession of the lessee, the rights and obligations arising from the lease contract are transferred from the owner of the thing to the person with the limited real right.

 (3) Upon establishment of a real servitude or personal right of use on a thing and if the exercise of the servitude restricts the rights of the lessee arising from the lease contract, the rights and obligations of the lessor are transferred to the person who is entitled according to the real servitude or personal right of use.

 (4) If the new lessor violates an obligation arising from the lease contract, the previous lessor shall be liable as a surety for three years as of the transfer of the rights and obligations of the lessor for damage caused to the lessee due to violation of the obligation.

Division 3 Rent and Accessory Expenses  

§ 292.  Accessory expenses

 (1) In addition to the payment of rent, a lessee shall bear other expenses related to the leased thing (accessory expenses) only if so agreed. Charges for the services and acts of a lessor or a third party which are related to the use of a thing are accessory expenses.

 (2) The lessor shall, at the request of the lessee, enable the lessee to examine documents certifying accessory expenses.

§ 293.  Taxes and duties

  All taxes and duties related to a thing shall be borne by the lessor unless agreed otherwise.

§ 294.  Due date

  If the rent is measured by certain periods of time, the rent and accessory expenses shall be payable after expiration of each of the corresponding periods of time, unless the parties have agreed otherwise. If the rent is not measured by periods of time, the lessee shall pay the rent and accessory expenses upon expiry of the contract.

§ 295.  Obligation to disclose previous rent

  Upon entry into a contract, the lessee may demand to be informed by the lessor of the rent payable according to the previous lease contract.

§ 296.  Refusal to pay rent and reduction of rent

 (1) A lessee need not pay rent or bear accessory expenses during any period when the lessee cannot use the thing for its intended purpose due to a defect or obstacle specified in § 278 of this Act or for the reason that the lessor has not granted use of the thing to the lessee.

 (2) If the possibility of using the thing for its intended purpose has only diminished due to a defect or obstacle specified in § 278 of this Act, the lessee may reduce the rent to an extent corresponding to the defect for the period from becoming aware of the defect until removal of the defect.

 (3) The lessee shall also pay rent for the period when the lessee is not able to use the thing due to circumstances depending on the lessee, particularly due to the absence of the lessee, although the lessee may deduct the amounts saved by the lessor from the rent and the value of any benefit received from the thing being used differently.

§ 297.  Notification of set-off and refusal to pay rent

 (1) The lessee of a dwelling or business premises may set off a claim belonging to the lessee against a lease claim of the lessor or may refuse to pay the rent on the bases provided by law if the lessee notifies the lessor of this intention at least one month prior to the due date for payment of the rent and in a format which can be reproduced in writing.

 (2) Agreements which derogate from the provisions of subsection (1) of this section are void.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 298.  Deposit of rent

 (1) If the lessee of a dwelling or business premises demands that the lessor remove defects or obstacles specified in § 278 of this Act, the lessee may set a term therefor a format which can be reproduced in writing and warn the lessor that, if the defects or obstacles are not removed, the lessee will deposit the rent which falls due after expiry of the term pursuant to the provisions of § 120 of this Act. The lessee shall notify the lessor of such deposit in a format which can be reproduced in writing.

 (2) The lessor may demand payment of the deposited amount if the lessee does not file a claim specified in subsection (1) of this section against the lessor with a lease committee or court within thirty days as of the time when the first rent deposited becomes collectable.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 299.  Increase in rent in case of lease contract for unspecified term

 (1) In the case of a lease contract for an unspecified term, it is presumed that the lessor may raise the rent as follows:
 1) upon the lease of immovables, ships entered in the ship register and aircraft entered in the Estonian aircraft register, after each six months as of entry into the contract;
 2) upon the lease of furnished rooms or separately leased parking places, places in garages and the like, each month as of entry into the contract.

 (2) The lessor of a dwelling shall notify the lessee of any increase in the rent in a format which can be reproduced in writing not later than thirty days before the increase in the rent and shall provide the reasons therefor. The notice shall clearly set out the following:
 1) the extent of the increase in the rent and the new amount of rent;
 2) the date as of which the rent is increased;
 3) the reasons for increasing the rent and a calculation of the rent;
 4) the procedure for contesting the increase in the rent.

 (3) An increase in the rent is void if the lessor does not give notification thereof in the manner and form specified in subsections (1) and (2) of this section or warns the lessee that the lessor will cancel the lease contract if the increase in the rent is contested.

 (4) Even if it is agreed in the lease contract that the lessor may unilaterally amend the terms and conditions of the contract not related to the amount of rent, the provisions of subsections (1)–(3) of this section apply if the lessor unilaterally amends the contract terms to the detriment of the lessee, particularly if the lessor reduces the services hitherto provided to the lessee or imposes new accessory expenses on the lessee.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 300.  Agreement on periodical increase in rent of dwelling

  An agreement on a periodical increase in the rent of a dwelling is valid only if:
 1) the lease contract is entered into with a term of at least three years and
 2) the rent increases not more than once a year and
 3) the extent of the increase in the rent or the basis for calculation thereof are precisely determined.

§ 301.  Excessive amount of rent for dwelling

 (1) The rent for a dwelling is excessive if unreasonable benefit is received from the lease of the dwelling, except in the case of a luxury apartment or house.

 (2) The amount of the rent for a dwelling is not excessive if it does not exceed the usual rent for a dwelling in a similar location and condition.

 (3) An increase in the rent is not excessive if it is based on an increase in the expenses incurred in relation to the dwelling or an increase in the obligations of the lessor or if the increase in the rent is necessary in order to make reasonable improvements or alterations, including improving the condition of a part of a leased room or building such that the room or building is in the usual condition for such rooms and buildings.

§ 302.  Contestation of amount of rent for dwelling during period of validity of contract

 (1) If a lessor receives excessive benefit due to significant changes in the bases for calculation of the rent, particularly a decrease in expenses, the lessee may contest the excessive amount of the rent for the dwelling and claim a reduction of the rent as of the submission of an application with a lease committee or court.

 (2) A lessee shall submit a request for reduction of the rent in a format which can be reproduced in writing to the lessor, who shall notify the lessee of the opinion of the lessor concerning the request within thirty days.

 (3) If a lessor does not consent in full or in part to the reduction of the rent or does not respond to the request of a lessee specified in subsection (2) of this section within the prescribed term, the lessee may file a claim for reduction of the rent with a lease committee or court within thirty days as of the expiry of the term for responding.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 303.  Contestation of increase in rent for dwelling

 (1) A lessee may contest an excessive increase in the amount of the rent for a dwelling as defined in § 301 of this Act within thirty days as of informing the lessee thereof.

 (2) Even if it is agreed in the lease contract that the lessor may unilaterally amend the terms and conditions of the contract which are not related to the amount of rent, the lessee may, within the term provided for in subsection (1) of this section, contest an amendment made unilaterally by the lessor to the detriment of the lessee, particularly any reduction of the services provided to the lessee or the imposition of new accessory expenses on the lessee.

§ 304.  Lease claim upon change of ownership of leased thing

 (1) Upon a change of the ownership of a leased thing, the acquirer may demand that the lessee pay rent as of the calendar month following the calendar month in which ownership is transferred. Any rent for the time before the transfer shall be paid to the former lessor.

 (2) If, before a change of ownership, the lessor has disposed of a lease claim transferable to the acquirer of the thing, the claim applies to the acquirer only in so far as the acquirer is aware of the disposal of the claim upon the transfer of ownership.

 (3) If the lessee has given security to the lessor of an immovable for performance of the obligations of the lessee, the security shall be transferred to the acquirer of the immovable upon transfer of the immovable.

 (4) The provisions of subsections (1)–(3) of this section also apply correspondingly to the transfer of the rights and obligations arising from a lease contract if the acquirer of the leased thing transfers the thing or the thing is encumbered with a right of superficies or servitude.

Division 4 Securities for Lessor  

§ 305.  Right of security of lessor

 (1) The lessor of an immovable has the right of security over movables located on the leased immovable and, upon the lease of a room, over movables which are part of furnishings or are used together with the room in order to secure claims arising from a lease contract even if the movables are not in the possession of the lessor. Claims for the rent of the current year and the previous year and claims for compensation shall be secured by a pledge.

 (2) The right of security does not extend to things which cannot be the object of a claim.

 (3) The rights of third parties to things concerning which the lessor knew or ought to have known that the things do not belong to the lessee and the rights of third parties to things in the possession of the lessee which are stolen from or lost by the owner or previous possessor or of which the owner or previous possessor is dispossessed in any other manner against the will thereof shall precede the right of security of the lessor.

 (4) The provisions of the Law of Property Act concerning security over movables apply to the right of security of lessors, unless otherwise provided in this Division.

§ 306.  Extinction of right of security

 (1) The right of security of a lessor extinguishes with the removal of a thing from a leased immovable, unless the thing is removed without the knowledge of the lessor or the lessor contests the removal of the thing.

 (2) A lessor shall not contest the removal of a thing if the removal corresponds to the regular management of the immovable or the daily living arrangements or if the remaining things are sufficient security for the lessor.

 (3) The right of security of a lessor extinguishes when the lessee gives the lessor another security in order to secure performance of the obligations of the lessee. The right of security of a lessor over a thing extinguishes if the lessee gives the lessor another security which is equal to the value of the thing.

 (4) If, during the term of a lease contract, the lessor learns that things brought into the premises by the lessee do not belong to the lessee and the lessor does not cancel the lease contract at the earliest opportunity, the right of security over these things extinguishes.

§ 307.  Exercise of right of security

 (1) If a lessee wants to move out or to remove things from the premises, the lessor may withhold things to the extent which is necessary in order to secure the claims of the lessor. The lessor may use self-help in order to exercise the right of security.

 (2) If things are removed from an immovable without the knowledge of the lessor or regardless of the fact that the lessor contested the removal of the things beforehand, the lessor may reclaim the things in order to return them to the premises. If the lessee has moved out, the lessor may demand that the possession of the removed things be transferred to the lessor.

 (3) The right of security extinguishes one month after the lessor becomes aware of the removal of the thing unless the lessor has filed an action for reclamation of the thing before.

§ 308.  Deposit

 (1) A residential lease contract may prescribe that the lessee pays a deposit in the amount of up to three months' rent to the lessor in order to secure claims arising from the contract. The lessee may pay the deposit within three months in equal instalments. The first instalment shall be paid after entry into the lease contract.

 (2) The deposit shall be kept by the lessor in a credit institution separately from the assets of the lessor and at least at the local average interest rate. The interest belongs to the lessee and increases the deposit.

 (3) The lessee may demand repayment of a deposit if the lessor does not inform the lessee of a claim of the lessor against the lessee within two months after expiry of the lease contract.

Division 5 Duration and Expiry of Lease Contract  

§ 309.  Duration of lease contract

 (1) A lease contract entered into for a specified term expires upon expiry of the term unless the contract is extraordinarily cancelled earlier. The lessee and the lessor may cancel a lease contract entered into for an unspecified term according to the provisions of this Chapter.

 (2) Withdrawal from a lease contract is permitted only in the cases provided for in this Chapter.

 (3) Any agreement according to which the lessor of a dwelling has the right to cancel a lease contract entered into for an unspecified term on bases other than those specified in this Act is void.

 (4) If a residential lease contract is entered into with a resolutive condition, the lease contract is deemed to have been entered into for an unspecified term after fulfilment of the condition. Upon fulfilment of the condition, the lessor may cancel the contract by adhering to the terms provided for in § 312 of this Act.

§ 310.  Extension of lease contract entered into for specified term

 (1) If, after expiry of the term of a lease contract, the lessee continues to use the thing, the lease contract is deemed to have become a lease contract entered into for an unspecified term unless the lessor or lessee expresses some other intention to the other party within two weeks. The term for the expression of such intention shall commence for the lessee as of expiry of the lease contract and for the lessor as of the time when the lessor learns that the lessee is continuing to use the thing.

 (2) If, in the case of a residential lease contract entered into for a term of at least two years, neither party gives notification at least two months before expiry of the term that the party does not wish to extend the contract, the lease contract becomes a lease contract entered into for an unspecified term after expiry of the term.

§ 311.  Ordinary cancellation of lease contract entered into for unspecified term

 (1) Parties may cancel a lease contract entered into for an unspecified term by adhering to the terms provided for in § 312 of this Act. If the parties have agreed on a longer term for cancellation, they shall adhere to that term.

 (2) If, upon cancellation, a party does not adhere to the term prescribed for cancellation, the contract is deemed to have been cancelled after expiry of the prescribed term.

§ 312.  Terms for ordinary cancellation of lease contract for unspecified term

 (1) Upon the lease of immovables, dwellings or business premises, ships entered in the ship register or aircraft entered in the Estonian aircraft register, either party may cancel a lease contract entered into for an unspecified term by giving at least three months' notice.

 (2) Upon the lease of furnished rooms or separately leased parking places, places in garages and the like, a lease contract entered into for an unspecified term may be cancelled by giving at least one month's notice.

 (3) Upon the lease of movables not specified in subsection (1) of this section, either party may cancel a lease contract entered into for an unspecified term by giving at least three days' notice.

§ 313.  Extraordinary cancellation of lease contract

 (1) Either party may, with good reason, cancel a contract entered into for an unspecified term and a contract entered into for a specified term. A reason is good if, upon the occurrence thereof, a party who wishes to cancel cannot be presumed to continue performing the contract taking into account all the circumstances and considering the interests of both parties.

 (2) Extraordinary cancellation is permitted mainly under the circumstances specified in §§ 314–319 of this Act.

 (3) Advance notice of extraordinary cancellation is not required unless otherwise provided by law.

§ 314.  Extraordinary cancellation of lease contract if lessee cannot use leased thing

 (1) If a lessee cannot use a leased thing for a reason dependent on the lessor, the lessee may cancel the lease contract if the lessee has already granted the lessor a reasonable term to enable the thing to be used and the lessor has not enabled the lessee to use the thing within that term. The lessee need not grant a term for cancellation of the contract to the lessor beforehand if the lessee is no longer interested in performance of the contract due to the circumstances which cause the cancellation.

 (2) If the possibility for a lessee to use a thing is restricted only to an insignificant extent, the lessee may cancel the contract for that reason only if there is a particular reason for cancellation of the contract.

§ 315.  Extraordinary cancellation of lease contract upon non-stipulated use of thing

 (1) A lessor may cancel a lease contract if:
 1) the lessee or sublessee of the thing violates the obligations provided for in subsections 276 (2) or (3) of this Act regardless of any prior warning given by the lessor;
 2) the lessee or sublessee of the thing violates the obligations specified in subsections 276 (2) or (3) of this Act materially or intentionally;
 3) the lessee grants the use of the thing to a third party without authorisation therefor and if, as a result, the lessor or neighbours are so affected that the lessor cannot be expected to continue the lease contract.

 (2) The lessor of dwellings or business premises may cancel a lease contract in the cases specified in subsection (1) of this section by giving at least thirty days' notice. If the lessee or sublessee damages the dwellings or business premises intentionally, the term for cancellation need not be adhered to.

§ 316.  Extraordinary cancellation of lease contract due to delay in payment

 (1) A lessor may cancel a lease contract if:
 1) the lessee is in delay for rent subject to payment, accessory expenses or a significant share thereof on three consecutive due dates;
 2) the amount of rent due exceeds the amount of rent subject to payment for three months;
 3) the amount of the accessory expenses due exceeds the amount of accessory expenses subject to payment for three months.

 (2) A lessor does not have the right of cancellation specified in subsection (1) of this section if the lessee performs the obligations thereof before cancellation. Cancellation is void if the lessee had the right to set off the lease claim and the lessee submits an application for set-off promptly after receipt of a declaration of cancellation.

§ 317.  Extraordinary cancellation of lease contract due to health hazard related to dwelling

  Either party may cancel a residential lease contract if the dwelling is in such a condition that the use thereof may involve significant hazard to human health.

§ 318.  Cancellation of long-term lease contract

 (1) Either party may cancel a lease contract entered into for longer than thirty years after thirty years by adhering to the terms provided for in § 312 of this Act.

 (2) The provisions of subsection (1) of this section do not apply if a lease contract is entered into for the life of the lessor or lessee.

§ 319.  Extraordinary cancellation of lease contract due to bankruptcy of lessee

 (1) If the lessee is declared bankrupt, the lessor may demand security for payment of the future rent and accessory expenses. The lessor shall grant a reasonable term for providing security. The notice for granting the term shall be in a format which can be reproduced in writing.

 (2) If security is not given to a lessor within the term specified in subsection (1) of this section, the lessor may cancel the contract without adhering to the term for cancellation.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 320.  Validity of lease contract upon death of party

  A lease contract is not terminated upon the death of a party unless the parties have agreed otherwise.

§ 321.  Taking place of lessee in lease contract upon death of lessee

 (1) Upon the death of a lessee of a dwelling, the spouse who lived in the dwelling together with the lessee has the right to take the place of the lessee in the lease contract. If the lessee did not have a spouse who has the right or who wishes to take the place of the lessee in the lease contract, other family members who lived in the dwelling together with the lessee have the right to take the place of the lessee in the lease contract pursuant to an agreement between them.

 (2) A spouse or other family member may take the place of the lessee in a lease contract within one month as of the death of a lessee by submitting a corresponding notice to the lessor.

 (3) If several family members take the place of the lessee in a lease contract, they can exercise the rights arising from the contract only jointly and they shall be solidarily liable for performance of the obligations arising from the contract. A spouse or family member who takes the place of the lessee in a lease contract shall be solidarily liable with the successor of the lessee for obligations which have arisen from the contract before the death of the lessee. In the relations between the spouse or family member and the successor, the successor shall be solely liable.

 (4) If the lessee has paid the rent in advance for a period of time extending beyond his or her death and if his or her spouse or a family member take the place of the lessee in the lease contract, the spouse or family member is required to return to the successor the amount which he or she obtained or saved as a result of the advance payment.

 (5) If the spouse or a family member of the lessee does not take the place of the lessee in the lease contract, the rights and obligations arising from the lease contract transfer to the successor of the lessee. In such case, the lessor or the successor of the lessee may cancel the lease contract within three months as of the death of the lessee by giving at least three months' notice.

 (6) After the death of one lessee, a residential lease contract entered into jointly by lessees is valid with regard to the other lessee. The surviving lessee may cancel the lease contract within three months as of the death of the other lessee by giving at least three months' notice.

 (7) Agreements which derogate from the provisions of subsections (1)–(6) of this section are void.

§ 322.  Extraordinary cancellation of lease contract of movable entered into for specified term

 (1) A lessee of a movable may cancel a lease contract entered into for a specified term by giving thirty days' notice if the movable is leased for purposes other than those related to the economic or professional activities of the lessee and the lessor has leased the movable as part of the economic or professional activities thereof. The lessor does not have the right to claim compensation for any damage caused by such cancellation.

 (2) Agreements which derogate from the provisions of subsection (1) of this section to the detriment of the lessee are void.

§ 323.  Cancellation of lease contract upon transfer of rights and obligations of lessor

 (1) Upon the transfer of rights and obligations arising from a lease contract to a new lessor due to the transfer or encumbrance of a leased thing (§ 291 of this Act), the new lessor may cancel the lease contract within three months by adhering to the terms for cancellation provided for in § 312 of this Act unless the contract can be terminated earlier. The acquirer may cancel a residential lease contract or a lease contract of business premises for such reason only if the acquirer urgently needs the leased premises.

 (2) If, in the case specified in subsection (1) of this section, the new lessor cancels a lease contract entered into for a specified term before expiry of the term of the contract, the previous owner shall be liable for any damage caused by termination of the contract to the lessee.

 (3) The provisions of subsections (1) and (2) of this section also apply if the acquirer of a leased thing transfers the thing further.

§ 324.  Notation in land register

 (1) The lessee of an immovable may demand that a notation regarding the lease contract be made in the land register.

 (2) A notation entered in the land register ensures that the actual owner of an immovable or a person for whose benefit the immovable is encumbered with a limited real right shall permit the lessee to use the immovable pursuant to the lease contract and that a new owner does not have the right to cancel the lease contract pursuant to the provisions of § 323 of this Act.

§ 325.  Form of cancellation of residential lease contracts and lease contracts of business premises

 (1) The lessor and the lessee may cancel a residential lease contract or a lease contract of business premises with a declaration of cancellation which is submitted in a format which can be reproduced in writing.

 (2) A declaration of cancellation submitted by a lessor shall contain at least the following information:
 1) the leased thing;
 2) the date of termination of the contract;
 3) the bases for cancellation;
 4) in case of cancellation of a residential lease contract, the procedure and limitation period for contestation of the cancellation.

 (3) In order to cancel a residential lease contract, the lessee requires the consent of his or her spouse who is living together with him or her in the leased dwelling and the consent shall be in a format which can be reproduced in writing.

 (4) If the consent of the spouse specified in subsection (3) of this section cannot be obtained or if the spouse refuses to grant consent without good reason, the lessee may demand the consent of the spouse in court. In such case, a court judgment which satisfies the action shall replace consent.

 (5) Cancellation which does not comply with the requirements provided for in subsections (1)–(4) of this section is void.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 326.  Contestation of cancellation of residential lease contracts and extension of lease contracts

 (1) A lessee of a dwelling may contest the cancellation of the lease contract by the lessor in a lease committee or court if the cancellation is contrary to the principle of good faith.

 (2) Upon cancellation of a lease contract by the lessor or expiry of the term of a lease contract entered into for a specified term, the lessee of the dwelling may demand that the lessor extend the lease contract for up to three years if termination of the contract would result in serious consequences for the lessee or his or her family. If the lessor does not consent to the extension of the contract, the lessee may demand extension of the lease contract in a lease committee or court.

§ 327.  Cancellation of residential lease contract contrary to principle of good faith

 (1) The cancellation of a residential lease contract by the lessor is contrary to the principle of good faith if, above all, the lessor cancels the contract for one of the following reasons:
 1) the lessee files a claim arising from the lease contract in good faith;
 2) the lessor wishes to amend the lease contract to the detriment of the lessee and the lessee does not consent thereto;
 3) the lessor wishes to induce the lessee to acquire the leased dwelling;
 4) the marital status of the lessee changes, although this does not result in any significantly harmful consequences for the lessor.

 (2) The cancellation of a residential lease contract by the lessor is contrary to the principle of good faith if the lessor cancels the contract during a period when proceedings are being conducted concerning the lease contract in a lease committee or court, or before three years have passed from the termination of proceedings concerning the lease contract in a lease committee or court if the decision or judgment was made to the detriment of the lessor.

 (3) In the cases specified in subsection (2) of this section, the cancellation of a lease contract by the lessor is not contrary to the principle of good faith if the lessor cancels the contract with good reason, above all for one of the following reasons:
 1) the lessee initiated the current proceedings in bad faith;
 2) the lessor urgently needs the dwelling;
 3) the lessee has arrears;
 4) the lessee materially violates the obligations regarding prudence and the taking into account of the interests of others (subsections 276 (2) and (3) of this Act);
 5) the lessee is declared bankrupt.

§ 328.  Restrictions on extension of residential lease contract

 (1) An application from the lessee of a dwelling for extension of the lease contract specified in subsection 326 (2) of this Act shall not be satisfied if extension of the lease contract is contrary to the legitimate interests of the lessor, above all for the following reasons:
 1) the lessee owes rent or accessory expenses;
 2) the lessee has materially violated an obligation specified in subsections 276 (2) or (3) of this Act;
 3) the lessor cancels the lease contract on the basis specified in subsection 319 (2) of this Act;
 4) taking into account future reconstruction work, the lease contract is entered into for a specified term until the commencement of the work or receipt of a building permit;
 5) the lessor offers another equivalent dwelling to the lessee;
 6) the lease contract may be cancelled without advance notice for any other reason.

 (2) Upon deciding on the extension of a lease contract and considering the interests of the parties, the court and lease committee shall take, inter alia, the following into account:
 1) the circumstances relating to entry into the lease contract and the content of the contract;
 2) the duration of the lease contract;
 3) the personal, family and economic relations of the parties;
 4) the need of the lessor to use the dwelling;
 5) the situation on the local residential market.

 (3) If the lessee repeatedly demands extension of the lease contract, the fact of whether the lessee has done all that is reasonable in order to find new housing shall also be taken into account.

§ 329.  Procedure for contestation of cancellation and for extension of contract

 (1) In order to contest cancellation of a residential lease contract pursuant § 326 of this Act, the lessee shall submit an application to a lease committee or court within thirty days as of the receipt of the declaration of cancellation.

 (2) In order to extend a residential lease contract entered into for an unspecified term which is cancelled by the lessor, the lessee shall submit an application to a lease committee or court within thirty days as of the receipt of the notice of cancellation.

 (3) In order to extend a residential lease contract entered into for a specified term or a contract which has already been extended by a lease committee or court, the lessee shall submit an application not later than sixty days before expiry of the term of the contract.

 (4) During proceedings in a lease committee or court, the lease contract is valid under the conditions applicable up to that time unless otherwise agreed by the parties.

 (5) If a lease committee or court has declared the cancellation of a lease contract to be contrary to the principle of good faith, the lease contract is deemed not to have been cancelled.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 330.  Amendment of terms and conditions of contract upon extension of residential lease contract

 (1) Either party to a residential lease contract may, in a lease committee or court, request that the terms and conditions of the contract be amended together with the extension of the contract in accordance with the changed circumstances.

 (2) If the terms and conditions of the contract are not amended, the contract is valid throughout the extended term under the former terms and conditions. This does not preclude any other possibilities arising from law to amend the contract.

§ 331.  Cancellation upon extension of residential lease contract

  If a lease committee or court extends a residential lease contract, the lessee may exercise the right of extraordinary cancellation by giving at least two months' notice, unless the decision of the lease committee or the court judgment prescribes a different term for cancellation.

§ 332.  Contestation of cancellation of sublease contract and extension of contract

 (1) The provisions of §§ 326–331 of this Act also apply to sublease contracts unless the lease contract is terminated.

 (2) A sublease contract shall not be extended for a period of time exceeding the duration of the lease contract.

§ 333.  Application of provisions to residential lease contract of employer's dwelling

  The provisions of §§ 326–332 of this Act do not apply to a residential lease contract which is entered into between an employer or mandator as a lessor and an employee, mandatary or public servant as a lessee if:
 1) the lessee has terminated the employment contract, authorisation agreement or service relationship without the employer or mandator having provided the lessee with a basis therefor arising from law;
 2) the lessee has, by his or her behaviour, provided the employer or mandator with a basis arising from law for the termination of the employment contract, authorisation agreement or service relationship;
 3) the lessor urgently needs the dwelling for another employee, mandatary or public servant.

Division 6 Return of Leased Thing upon Expiry of Contract and Claims  

§ 334.  Return of leased thing

 (1) A lessee shall return a leased thing together with its accessories in a condition which conforms to the contractual use after the expiry of the contract. If, upon delivery of the leased thing to the lessee, an instrument of delivery concerning the thing is prepared, the thing is presumed to have been delivered in the condition set out in the instrument of delivery.

 (2) The lessee shall be liable for the destruction and loss of and damage to a leased thing which occurs when the thing is in the possession of the lessee unless the lessee proves that the destruction, loss or damage occurred under circumstances which were not caused by the lessee or the person to whom the lessee transferred use of the thing in compliance with the contract. The lessee shall not be liable for the natural wear or deterioration of the thing or changes which accompany the contractual use.

 (3) If a lessee has incurred expenses with respect to a movable for which the lessee can claim compensation, the thing may be withheld by the lessee until the expenses are reimbursed.

 (4) Any agreement according to which the lessee, before termination of a lease contract, undertakes to pay compensation other than possible compensation for damage upon expiry of the lease contract is void.

 (5) If the lessee transfers the right to use the thing to a third party, the lessor may, after expiry of the contract, demand the return of the thing even from the third party.

 (6) A movable shall be returned at the place at which it was delivered, unless agreed otherwise.

§ 335.  Claims arising from delay in return of leased thing

  If a lessee does not return a thing after termination of the contract, the lessor may demand the rent agreed in the lease contract or rent which is usual in the case of a similar thing in a similar location as compensation for damage for the period of delay, unless the lessee justifiably withholds the thing in order to ensure payment for the expenses incurred thereby. This does not preclude the right of the lessor to demand compensation for damage caused to the lessor by the delay in the return of the thing in an amount which exceeds the amount of rent.

§ 336.  Inspection of thing and giving of notification of defects to lessee

 (1) Upon return of a leased thing, the lessor shall inspect the condition of the thing and promptly notify the lessee of any defects for which the lessee is responsible. If the lessor fails to do this, the lessor loses the rights which belong thereto based on the defects of the thing, unless these are defects which cannot be identified by ordinary inspection.

 (2) If the lessor subsequently identifies a defect of the thing which cannot be identified by ordinary inspection, the lessor shall promptly notify the lessee thereof. In the event of failing to give notification of a defect of a thing, the lessor loses the rights based on the defect.

§ 337.  Repayment of rent and accessory expenses paid in advance

  If a lessee has paid rent or accessory expenses in advance for the period after expiry of lease contract, the lessor shall repay the advance payment to the lessee together with the interest provided for in § 94 of this Act.

§ 338.  Expiry of claims

 (1) The limitation period of a claim by a lessor for compensation for alteration or deterioration of a leased thing and a claim by a lessee for compensation for expenses incurred in relation to a thing or for removal of alterations is six months.

 (2) The limitation period of a claim of a lessor for compensation shall commence as of the return of the thing. The limitation period of the claims of a lessee shall commence as of the termination of the contract.

 (3) The limitation period of a claim of a lessor for compensation for alteration or deterioration of a leased thing shall expire together with a claim for the return of the thing.

Chapter 16 COMMERCIAL LEASE CONTRACT  

Division 1 General Provisions  

§ 339.  Definition of commercial lease contract

  By a commercial lease contract, one person (the commercial lessor) undertakes to grant the use of the object of the commercial lease contract to another person (the commercial lessee) and enables the fruits received from the object of the commercial lease contract to be enjoyed under the rules of regular management. The commercial lessee is required to pay a fee (rent) therefor.

§ 340.  Agricultural lease contract

 (1) Enterprises designated mainly for agricultural production, including non-agricultural enterprises connected with agricultural production, agricultural immovables or parts thereof, may be the objects of an agricultural lease contract. Upon the lease of an agricultural immovable, the lease contract is presumed to include the accessories and rights relating to the immovable.

 (2) The provisions concerning agricultural lease contracts also apply to commercial lease contracts regarding immovables intended for forestry use if such immovables are part of the assets of the leased agricultural enterprise.

 (3) The provisions concerning agricultural lease contracts do not apply to commercial lease contracts the object of which is a plot of land with an area of less than two hectares.

 (4) Agreements which derogate from the provisions of this Chapter to the detriment of the commercial lessee of an agricultural immovable or enterprise are void.

§ 341.  Application of provisions concerning lease contracts to commercial lease contracts

  The provisions concerning lease contracts also apply to commercial lease contracts unless the provisions of this Chapter provide otherwise.

Division 2 Rights and Obligations of Parties  

§ 342.  Description of immovable subject to commercial lease

 (1) Upon transfer of an immovable after entry into or expiry of a commercial lease contract, the commercial lessor and the commercial lessee of the immovable shall jointly prepare a description of the immovable which describes the parts, accessories and condition of the immovable upon transfer. The description shall set out the time of preparation of the description and it shall be signed by both parties.

 (2) If one party refuses to participate in the preparation of a description or if material disagreements arise upon preparation of the description, either party may demand that an expert prepares the description, unless more than nine months have passed since the transfer of the immovable or more than three months have passed since the expiry of the commercial lease contract. The parties shall bear the costs of the expert's fees in equal shares.

 (3) In the case of preparation of a description specified in subsection (1) of this section, the description is deemed to be correct in relations between the parties. If a description is not prepared, the immovable is deemed to have been transferred in good condition.

§ 343.  Commercial lessor's right to check

  A commercial lessor has the right to check the management of the object of the commercial lease contract and that the maintenance thereof is ensured.

§ 344.  Obligation to manage according to intended purpose

  A commercial lessee shall manage the object of the commercial lease contract according to its intended purpose, particularly by preserving the economic purpose of the object of the commercial lease contract and using the object in a regular manner and prudently.

§ 345.  Removal of defects

 (1) The commercial lessee shall ensure the ordinary maintenance of the object of the commercial lease contract at the expense of the commercial lessee, particularly by removing defects which can be removed by cleaning or repair as part of ordinary preservation, and by carrying out customary small repairs and replacing equipment and tools of low value if, due to their age or use, they have become unusable.

 (2) The commercial lessee of an agricultural immovable or enterprise shall, inter alia, ensure the ordinary maintenance of equipment necessary for the use and servicing of roads, tracks, ditches, dams, roofs, fences, water conduits and other objects of the commercial lease contract according to local custom.

§ 346.  Commercial lease of immovable with accessories

 (1) Upon the commercial lease of an immovable with accessories, the commercial lessee shall preserve the accessories and replace any destroyed or lost accessories even if they are destroyed or lost through no fault of the lessee. The commercial lessee shall replace animals forming part of the accessories that have become unfit for service by regular use in so far as this conforms to regular management.

 (2) The commercial lessee shall preserve the accessories in a condition which conforms to regular management practice and replace accessories to this extent as and when necessary. Accessories replaced by the commercial lessee shall be transferred into the ownership of the commercial lessor.

 (3) A condition of a contract which prohibits the commercial lessee from disposing of things forming part of the accessories or allows this to be done only with the consent of the commercial lessor or requires the accessories to be transferred to the commercial lessor is valid only if the commercial lessor undertakes to acquire the accessories at least at their usual value upon expiry of the commercial lease contract.

§ 347.  Care for leased animals

 (1) The commercial lessee shall bear the costs of feeding and caring for leased animals.

 (2) The commercial lessee shall be liable for any damage caused to a leased animal unless the lessee proves that the damage could not have been prevented by the commercial lessee, regardless of the regular feeding and care.

 (3) The commercial lessee may demand reimbursement of expenses incurred in relation to the extraordinary care of an animal from the commercial lessor unless these expenses are caused by circumstances dependant on the commercial lessee.

§ 348.  Alterations and improvements made by commercial lessor of agricultural immovable or enterprise

 (1) In the case of an agricultural lease contract, the commercial lessee shall tolerate the measures taken by the commercial lessor to alter or improve the object of the commercial lease contract. The commercial lessee need not tolerate such measures if they have consequences which are not justified taking into account the legitimate interests of the commercial lessor. The commercial lessor shall compensate the commercial lessee to a reasonable extent for the expenses caused by application of the measures and for the loss of profit. At the request of the commercial lessee, the commercial lessor shall pay the compensation in advance.

 (2) If the commercial lessee receives more profit due to measures specified in the first sentence of subsection (1) of this section or could receive such profit by regular management, the commercial lessor may increase the rent to the same extent unless payment of a larger amount of rent cannot be expected from the commercial lessee in the circumstances. Any increase in the rent does not enter into force before the profit actually increases.

§ 349.  Change of way of management

 (1) The commercial lessee may change the regular way of managing the object of a commercial lease contract and may make alterations and improvements to the object of the commercial lease contract which exceed ordinary maintenance only with the consent of the commercial lessor provided in a format which can be reproduced in writing. If the commercial lessor consents to the alterations and improvements, the commercial lessor may demand the restoration of the former situation only if the obligation to restore was agreed on in a format which can be reproduced in writing.

 (2) If a commercial lessor has not consented to changing the regular way of management in a format which can be reproduced in writing and if the commercial lessee does not restore the previous way of management within a reasonable period, the commercial lessor may cancel the commercial lease contract without advance notice. In the case of business premises, the contract may be cancelled for that reason by giving at least thirty days' notice.

 (3) If the commercial lessor refuses to grant consent specified in subsection (1) of this section, the commercial lessee may apply for the grant thereof by a court proceeding if the changes are necessary in order to maintain or bring about a long-term improvement in the profitability of the enterprise and if the commercial lessor may be expected to grant consent taking into account the legitimate interests of the commercial lessor. The grant of consent shall not be demanded if the commercial lease contract has been cancelled or the contract expires within less than three years.

 (4) In the case specified in subsection (3) of this section, a court judgment which satisfies an action shall replace consent.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 350.  Amendment of terms of agricultural lease contract

 (1) The amendment of an agricultural lease contract shall not be demanded on the bases and under the conditions provided for in § 97 of this Act before two years have passed since entry into the commercial lease contract or the last amendment thereof. This restriction does not apply if relations between the parties change significantly and permanently due to force majeure.

 (2) If, in the case of an agricultural lease contract, the rent is unreasonably high, the commercial lessee may, taking into account the profit received upon regular management of the object of the commercial lease contract, demand a reduction of the rent by a reasonable amount as of the due date for payment of the rent following submission of the application for a change of the rent. The commercial lessee shall not demand a reduction of the rent if the value of the thing has changed as a result of the activities of the lessee unless such right has been agreed upon.

 (3) Any agreement whereby the commercial lessee or commercial lessor waives the right to apply for amendment of a contract is void.

§ 351.  Right of security of commercial lessor of agricultural immovable or enterprise

  The commercial lessor of an agricultural immovable or enterprise has the right of security over things brought into the immovable or the enterprise by the lessee and over the fruits of the object of the commercial lease contract in order to secure the claims of the lessor arising from the commercial lease contract. The right of security does not secure future claims for compensation.

Division 3 Duration and Expiry of Commercial Lease Contract  

§ 352.  Extension of agricultural lease contract

  If, in the case of an agricultural lease contract entered into for at least three years, neither party gives notification at least two months before the expiry of the contract that the party does not wish to extend the contract, the contract is presumed to have become an agricultural lease contract entered into for an unspecified term after expiry of the term. Agreements which derogate from this to the detriment of the commercial lessee are void.

§ 353.  Ordinary cancellation of commercial lease contract entered into for unspecified term

 (1) The parties may cancel a commercial lease contract entered into for an unspecified term by giving at least six months' notice.

 (2) The parties may cancel an agricultural lease contract entered into for an unspecified term by giving at least one year's notice. The contract may be cancelled only such that it expires on 1 April or 1 October.

 (3) Either party may at any time cancel an animal lease contract entered into for an unspecified term and not linked to an agricultural lease contract. Cancellation shall take place in good faith and not at a time unsuitable for the other party.

§ 354.  Form of cancellation

  The cancellation of an agricultural lease contract or a commercial lease contract of premises is valid only if it is prepared in a format which can be reproduced in writing.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 355.  Cancellation in event of incapacity for work of commercial lessee of agricultural immovable

  If, in the case of an agricultural lease contract, the commercial lessee becomes permanently incapacitated for work, the commercial lessee may cancel the commercial lease contract by giving at least one month's notice.

§ 356.  Death of commercial lessee in agricultural lease contract

 (1) If, in the case of an agricultural lease contract, the commercial lessee dies, the spouse who lived together with the commercial lessee may take the place of the commercial lessee in the agricultural lease contract. If the commercial lessee did not have a spouse who lived together with him or her or the spouse does not wish to take the place of the commercial lessee in the agricultural lease contract, other successors have the right to take the place of the commercial lessee in the agricultural lease contract pursuant to an agreement between them.

 (2) The spouse or other successors of a commercial lessee may take the place of the commercial lessee in an agricultural lease contract within one month as of the death of the commercial lessee by submitting a corresponding notice to the commercial lessor.

 (3) If the person who takes the place of a party to an agricultural lease contract is evidently unable to manage the object of the commercial lease contract in a regular manner or if the commercial lessor cannot be expected to continue the commercial lease contract for other reasons, the commercial lessor may cancel the contract within thirty days as of receipt of a notice concerning the fact that the person will take the place of the party to the contract.

 (4) If the spouse of the commercial lessee or any other entitled person does not take the place of the commercial lessee in the contract, the successors of the commercial lessee or the commercial lessor may cancel the commercial lease contract and shall give at least six months' notice thereof in a format which can be reproduced in writing.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 357.  Extension of agricultural lease contract at request of commercial lessee

 (1) Upon the cancellation of an agricultural lease contract by the commercial lessor, the commercial lessee may demand the extension of the contract by a court proceeding within three months as of the receipt of the notice concerning cancellation, if extension could have been expected on the part of the commercial lessor. A commercial lessee shall submit an application to a court for extension of a commercial lease contract entered into for a specified term nine months before the expiry of the contract.

 (2) The commercial lessor shall prove that the commercial lessor cannot be expected to extend the contract. Extension of the commercial lease contract cannot be expected from the commercial lessor particularly:
 1) if the commercial lessee has materially violated the obligations thereof arising from law or the contract;
 2) upon insolvency of the commercial lessee;
 3) if the commercial lessor, his or her spouse, close relative or close relative by marriage wishes to manage the object of the commercial lease contract himself or herself;
 4) if the agricultural enterprise is not worth maintaining;
 5) if the planning prescribes that the immovable will be used in a different manner.

 (3) A court shall decide on the extension of a commercial lease contract for not longer than six years. Upon determination of the term for extension, the personal situation of the parties, the type of object of the commercial lease and other relevant circumstances shall be taken into account.

 (4) Upon deciding on the extension of a commercial lease contract, the court may, at the request of either party, amend the commercial lease contract in order to bring the contract into conformity with the changed circumstances.

§ 358.  Return of object of commercial lease contract

 (1) After expiry of a commercial lease contract, the commercial lessee shall return the object of the commercial lease contract together with the accessories. The object of the commercial lease contract and the accessories shall be returned in a condition corresponding to regular management having been continued until the return of the object of the commercial lease contract.

 (2) The commercial lessee shall pay reasonable compensation to the commercial lessor for any deterioration of the object of the commercial lease contract which could have been avoided by the commercial lessee by regular management.

§ 359.  Reimbursement of expenses to commercial lessee

 (1) If, upon expiry of a commercial lease contract, it becomes evident that the value of the object of the commercial lease contract has permanently and considerably increased due to improvements or alterations made with the consent of the commercial lessor, the commercial lessee may demand reasonable compensation therefor.

 (2) The commercial lessee may demand compensation for any increase in the value of the accessories if the increase occurs due to work performed or expenses incurred by the commercial lessee. The commercial lessor may refuse to accept accessories created by the commercial lessee which, under the rules of regular management, are useless or too valuable for the immovable.

 (3) Expenses other than those specified in subsections (1) and (2) of this section shall be reimbursed by the commercial lessor only if the commercial lessor is required to do so pursuant to the provisions regarding negotiorum gestio.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 360.  Fruits of agricultural immovable

 (1) The commercial lessee of an agricultural immovable does not have the right to fruits unsevered as of the expiry of the commercial lease contract, although the commercial lessee may demand reimbursement of any expenses incurred to obtain the fruits.

 (2) The provisions of subsection (1) of this section also apply to trees not yet cut but subject to cutting. If the commercial lessee has cut more trees than necessary for regular management, the commercial lessee shall reimburse the cost of the timber to the commercial lessor to the extent which exceeds regular management.

Chapter 17 LEASING CONTRACT  

§ 361.  Definition of leasing contract

  By a leasing contract, the lessor undertakes to acquire a certain object (the object of leasing) from a seller determined by the lessee and to grant use of the object to the lessee, and the lessee is required to pay a fee for use of the object of leasing.

§ 362.  Obligations of lessor

 (1) The lessor is required to ensure transfer of the possession of the object of leasing to the lessee and not to hinder the lessee upon possession or use of the object of leasing.

 (2) The lessee may withdraw from the contract if the object of leasing is not delivered to the lessee within the term prescribed in the contract or, in the absence of such an agreement, within a reasonable period of time, and if the delay is caused by circumstances dependant on the lessor.

 (3) The lessor is not liable to the lessee if the object of leasing does not conform to the contract unless:
 1) the object of leasing or the seller thereof was selected by the lessor;
 2) the lessee is a natural person and damage arising from reasonable belief in the professionalism of the lessor is caused to the lessee, particularly if the lessor specialises in leasing certain objects.

§ 363.  Obligations of lessee

  A lessee is required to:
 1) use the object of leasing with prudence and according to the intended purpose thereof which was the basis for entry into the leasing contract or, in the absence of such an agreement, according to its ordinary purpose;
 2) maintain the object of leasing in the condition in which it is delivered to the lessee, except for changes resulting from the use of the object of leasing for its intended purpose;
 3) return, upon termination of the contract, the object of leasing to the lessor in the condition specified in clause 2) of this section, unless the lessee exercises the contractual right thereof to acquire the object of leasing.

§ 364.  Transfer of risk of accidental loss or damage

  The risk of accidental loss of or damage to an object of leasing transfers to the lessee upon delivery of the object of leasing to the lessee.

§ 365.  Liability of seller

 (1) A lessee may make a claim of a lessor as a purchaser directly against the seller if the claim arises from violation of the contract of sale entered into with the lessor. Upon filing such claim, the lessee has all the rights and obligations of the purchaser, except the obligation to pay for the object and the right to demand the transfer of the ownership of the object.

 (2) A lessee has the right to exercise the right of a lessor to withdraw from a contract of sale entered into with a seller only with the consent of the lessor.

§ 366.  Cancellation in event of defects or destruction of object of leasing

  If the object of leasing is destroyed or becomes unusable or if the lessee exercises the right, arising from the contract of sale entered into with the seller instead of the lessor, to withdraw from the contract, the lessor and the lessee may both cancel the leasing contract without advance notice.

§ 367.  Consequences of cancellation

 (1) Upon cancellation of a leasing contract, the lessee shall reimburse all expenses borne by the lessor in connection with the object of leasing to the lessor, particularly the purchase price of the object of leasing and the costs of financing the purchase price to the extent to which these are not covered by the leasing payments already paid.

 (2) Determination of the expenses specified in subsection (1) of this section shall be based on the amount of the leasing payments to be paid by the lessee after cancellation, from which interest arising from the contract and other amounts which are not related to the expenses incurred for acquisition of the object of leasing shall be deducted.

 (3) If the object of leasing remains in the ownership of the lessor after the cancellation of the leasing contract, the value of the object of leasing at the time of return of the object to the lessor shall be taken in account upon determining the amount of the claim for reimbursement of expenses provided for in subsection (1) of this section.

 (4) A lessee shall reimburse any additional expenses caused by cancellation to the lessor, unless the cancellation is caused by circumstances dependant on the lessor.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

Chapter 18 LICENCE AGREEMENT  

§ 368.  Definition of licence agreement

  By a licence agreement, one person (the licensor) grants another person (the licensee) the right to exercise the rights arising from intellectual property to the agreed extent and on the agreed territory, and the licensee undertakes to pay a fee (the licence fee) therefor.

§ 369.  Prerequisites for validity of right of use

 (1) In the cases provided by law, it is necessary, in order for the right of use arising from a licence agreement to be created, for an entry to be made in a register in which the property concerning which the agreement is entered into has been entered.

 (2) The licensee shall exercise the rights arising from a licence agreement if the licensor has a legitimate interest in the rights arising from the licence agreement being exercised, particularly if the existence of the rights arising from the licence agreement depends on the exercise of these rights.

§ 370.  Non-exclusive licence agreement and exclusive licence agreement

 (1) In the case of a non-exclusive licence agreement, the licensor may also exercise the right which is the object of the agreement or grant the right of use to other persons besides the licensee.

 (2) An exclusive licence agreement grants the licensee the right to exercise the rights arising from intellectual property to the agreed extent and precludes the right of use of other persons and of the licensor to the same extent.

 (3) If the right of use to which a licence agreement extends is not clearly specified in the agreement, the extent of the right of use shall be determined pursuant to the objective of the agreement.

 (4) The right of use arising from a non-exclusive licence agreement which arises before the right of use arising from an exclusive licence agreement shall remain valid in respect of the person who was granted the right of use on the basis of the exclusive licence agreement.

§ 371.  Transfer of right of use arising from licence agreement

 (1) It is presumed that the right of use arising from a licence agreement may be transferred only with the consent of the licensor. The licensor shall grant consent if this can be expected of the licensor based on the principle of good faith.

 (2) The provisions of subsection (1) of this section do not apply upon transfer of an enterprise if the right of use belongs to the enterprise.

§ 372.  Communication of information

 (1) The licensor shall deliver documents and communicate information necessary for exercise of the rights pursuant to the agreement to the licensee within a reasonable time after entry into the agreement.

 (2) The licensee shall maintain the confidentiality of documents delivered and information communicated to the licensee unless:
 1) the licensee communicates the information to persons who work in licensee's enterprise and who are required to maintain the confidentiality of the information;
 2) the licensor cannot be expected to intend to maintain the confidentiality of the information based on the agreement or the nature of the delivered documents and communicated information.

 (3) After expiry of an agreement, the licensee shall return the documents which have been delivered to the licensee to the licensor and maintain the confidentiality of the received information.

§ 373.  Protection of rights

  If a third party hinders a licensee when the licensee is exercising the rights thereof arising from a licence agreement or if a third party violates these rights, the licensee shall promptly give notification thereof to the licensor who shall immediately take all necessary measures to enable the rights arising from the licence agreement to be exercised and to terminate the violation of the rights of the licensee. If the licensor takes such measures, the licensee shall co-operate with the licensor to the necessary extent.

§ 374.  Cancellation of agreement entered into for unspecified term

  Either party may cancel an agreement entered into for an unspecified term by giving at least one year's notice.

Chapter 19 FRANCHISE CONTRACT  

§ 375.  Definition of franchise contract

  By a franchise contract, one person (the franchisor) undertakes to grant to another person (the franchisee) a set of rights and information which belongs to the franchisor for use in the economic or professional activities of the franchisee, including the right to the trade mark, commercial identifications and know-how of the franchisor.

§ 376.  Obligations of franchisor

  The franchisor is required to provide the franchisee with instructions for the exercise of the rights thereof and to provide permanent assistance related thereto to the franchisee.

§ 377.  Obligations of franchisee

  A franchisee is required:
 1) in the activities thereof, to use the commercial identifications of the franchisor;
 2) to ensure that the quality of the goods manufactured or services provided by the franchisee pursuant to the contract is the same as those manufactured or provided by the franchisor;
 3) to follow the instructions of the franchisor which are directed at the exercise of rights on the same bases and in the same manner as the franchisor;
 4) to provide clients with all additional services which they could expect upon acquiring goods or contracting for services from the franchisor.

§ 378.  Franchisor's right to check

  A franchisor has the right to check the quality of the goods manufactured or services provided on the basis of a franchise contract by the franchisee.

Chapter 20 CONTRACTS RELATING TO PURCHASE OF RIGHT TO USE BUILDINGS ON TIMESHARE BASIS, LONG-TERM HOLIDAY PRODUCT CONTRACTS, AGENCY AGREEMENTS AND EXCHANGE SYSTEM CONTRACTS 
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 379.  Definition of contract relating to purchase of right to use buildings on timeshare basis

 (1) By a contract relating to the purchase of the right to use immovables, buildings or parts of buildings or movables used for accommodation purposes (a building) on a timeshare basis, a person who is engaged in professional or economic activities (the vendor) undertakes to grant a consumer the right to use the building for accommodation purposes over the course of more than one year for a specified or specifiable period during several periods of use. The consumer is required to pay a fee therefor.

 (11) In calculating the duration of the contract, any agreement in the contract concerning extension of the contract shall be taken into account.

 (2) The right specified in subsection (1) of this section may be a real right, any other right relating to the use of one or more buildings, or membership in an association of persons or holding in a company which grants such right of use.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 3791.  Definition of long-term holiday product contract

  By a long-term holiday product contract, the vendor undertakes to grant a consumer the right to obtain benefits upon the use of the building over the course of more than one year and the consumer undertakes to pay a fee therefor. In calculating the duration of a contract, the provisions of subsection 379 (11) of this Act apply.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 3792.  Definition of agency agreement and exchange system contract

 (1) By an agency agreement, the vendor undertakes to act as an intermediary for a consumer who enters into contracts with third persons or to indicate opportunities for entering into contracts with third persons, and the consumer undertakes to pay a fee therefor to the vendor. The objective of the contract with the vendor is the delivery, acquisition or transfer of the rights arising from a contract relating to the purchase of the right to use the building on a timeshare basis or a long-term holiday product contract.
The provisions concerning brokerage contracts also apply to agency agreements unless the provisions of this Chapter provide otherwise.

 (3) By an exchange system contract, the vendor undertakes to enable the consumer, for a charge, to share in a system which purpose is to grant on timeshare basis the rights arising from a contract relating to the purchase of the right to use the building on a timeshare basis between the consumers for a charge or without a charge.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 380.  Precontractual information and advertising

 (1) In good time before the consumer enters into a contract relating to the purchase of the right to use the building on a timeshare basis or makes a binding declaration of intent, the vendor shall submit to the consumer on a durable medium which is easily accessible to the consumer, in a clear and comprehensible manner and free of charge the precontractual information setting out the following data:
 1) name, address and legal status of a vendor which is a party to the contract;
 2) short description of the use of the building on timeshare basis, e.g. description of the building;
 3) exact nature and content of the right;
 4) exact period within which the right which is the subject of the contract may be exercised and, if necessary, its duration;
 5) date on which the consumer may start to exercise the contractual right;
 6) date on which the building and facilities or services will be complete or become available if the subject of the contract is a specific building under construction;
 7) charge to be paid by the consumer for acquiring the right;
 8) outline of additional obligatory costs imposed under the contract, e.g. annual fees, other recurrent fees, levies, local taxes, including type of costs and indication of amounts;
 9) summary of key utilities services available to the consumer, e.g. electricity, water, maintenance, refuse collection, and an indication of the amount to be paid by the consumer for such services;
 10) summary of facilities, such as swimming pool and sauna, which the consumer has the right to use;
 11) information concerning whether the cost of using such utilities services and facilities are included in the costs indicated in clause 8) of this subsection;
 12) specification of what is included in the costs indicated in clause 8) of this subsection and what has to be paid for, if the cost of using such utilities services and facilities are not included in the costs indicated in clause 8) of this subsection;
 13) information concerning whether the consumer has the possibility to join the exchange system;
 14) name of the exchange system, if the consumer has the possibility to join the exchange system;
 15) indication of costs for membership in an exchange of the exchange system, if the consumer has the possibility to join the exchange system;
 16) information concerning whether the vendor has signed a code of conduct and, if yes, where can it be found;
 17) the right of the consumer to withdraw from the contract within 14 calendar days from the entry into the contract or a preliminary contract or receipt of these contracts if that takes place later;
 18) prohibition of advance payments during the withdrawal period according to which it is explained that the prohibition concerns any payments, provision of guarantees, explicit acknowledgement of debt and performance of other such transactions or acts, and it includes not only payments from the consumer to the vendor, but also to third parties;
 19) information on that the consumer shall not bear any costs or obligations other than those specified in the contract;
 20) information on that in accordance with international private law, the contract may be governed by a law other than the law of this member state of the European Union in which the consumer is resident or is habitually domiciled, and possible disputes may be referred to courts other than those of the member state of the European Union in which the consumer is resident or is habitually domiciled.

 (11) In addition to the information specified in subsection (1) of this section, the vendor shall also present the following information to the consumer:
 1) conditions governing the exercise of the right which is the subject of the contract within the territory of the member states of the European Union in which the building is situated and information on whether those conditions have been fulfilled or, if they have not been fulfilled, what conditions remain to be fulfilled,
 2) where the contract provides the right to use the building to be selected from a pool of buildings, information on restrictions on the consumer's ability to use any building in the pool at any time;
 3) an accurate and detailed description of the immovable and its location or sufficient description of the building and its location if the object of the contract concerns a number of buildings (multi-resorts), or a sufficient description of the building and facilities belonging thereto if the object of the contract is not an immovable;
 4) the utilities services, e.g. electricity, water, maintenance, refuse collection, to which the consumer has or will have access to and under what conditions;
 5) the common facilities, such as swimming pool, sauna, and the conditions for the use thereof, where the consumer has or may have the right for the use thereof;
 6) accurate and appropriate information concerning all costs associated with a contract relating to the purchase of the right to use the building on a timeshare basis and on how these costs will be divided between the consumers and how and when such costs may be increased, and the method for the calculation of the amount of charges relating to use of the building, statutory monetary obligations, e.g. taxes and fees, and the administrative overheads, e.g. management, maintenance and repairs;
 7) information concerning any charges, encumbrances, mortgages or other rights of security entered in a register;
 8) information concerning the procedure for and consequences of termination of linked contracts if the consumer is offered to terminate the linked contract;
 9) conditions for terminating the contract, the consequences of termination and information on any liability of the consumer for any costs which might result from such termination;
 10) information concerning how maintenance and repairs of the building and its administration and management are arranged, including whether and how consumers may influence and participate in the decisions regarding these issues,
 11) information concerning whether or not it is possible to join a system for the intermediation of the contractual rights, information concerning the system and an indication of costs related to the intermediation through this system,
 12) indication of the language available for communication with the vendor in relation to the contract, for instance in relation to management board decisions, increase of costs and the handling of queries and complaints;
 13) the possibility for out-of-court dispute resolution, if such possibility exists.

 (2) If the right of use concerns a building which is being designed or is under construction, the vendor shall set out the following information in addition to the description specified in subsections (1) and (11) of this section:
 1) the state of completion of the building and the utilities services which will render the building fully operational, e.g. gas, electricity, water, telephone connections, and of any such facilities, which the consumer has the right to use;
 2) the date of completion of the building and the utilities services rendering it fully operation, e.g. gas, electricity, water, telephone connections, and a reasonable estimate of the date of completion of any such facilities, which the consumer has the right to use;
 3) the number of the building permit and the name and address of the administrative agency which exercises supervision over the building;
 4) a guarantee regarding completion of the building or a guarantee regarding reimbursement of any payment made if the building is not completed and, where appropriate, the conditions governing the operation of such guarantees.

 (21) In good time before the consumer enters into a long-term holiday product contract or makes a binding declaration of intent, the vendor shall submit to the consumer on a durable medium which is easily accessible to the consumer in a clear and comprehensible manner and free of charge the following information:
 1) name, address and legal status of a vendor which is a party to the contract;
 2) short description of the long-term holiday product contract;
 3) exact nature and content of the right;
 4) exact period within which the right which is the subject of the contract may be exercised and, if necessary, its duration;
 5) date on which the consumer may start to exercise the contractual right;
 6) fee to be paid by the consumer for acquiring the right, including any recurring costs the consumer can expect to incur resulting from the right of the consumer to obtain access to the building, travel and any other related products or services as specified in the contract;
 7) equal amounts of instalments of the fee for each year of the length of the contract and the dates on which they are due to be paid;
 8) information on that after the first year the subsequent amounts may be adjusted by agreement of the parties to ensure that the real value of those instalments is maintained, for instance to take account of inflation;
 9) outline of additional obligatory costs imposed under the contract, e.g. annual fees, including type of costs and indication of amounts;
 10) summary of key services available to the consumer, e.g. discounted hotel stays and flights, etc.;
 11) information concerning whether the cost of using key services are included in the costs indicated in clause 6) of this subsection;
 12) specification of what is included in the costs indicated in clause 6) of this subsection and what has to be paid for, if the cost of using the key services are not included in the costs indicated in clause 6) of this subsection;
 13) the information specified in clauses (1) 16)–20) of this section.

 (22) In addition to the information specified in subsection (21) of this section, the vendor shall also present to the consumer the following information:
 1) an appropriate and correct description of discounts available for future bookings, illustrated by a set of examples of recent offers,
 2) information concerning the restrictions on the consumer's ability to exercise the rights, such as limited availability or offers provided on a first-come-first-served basis, and time limits on particular promotions;
 3) the information specified in clauses (11) 8), 9) and 13) of this section;
 4) indication of the language available for communication with the vendor in relation to the contract, for instance in relation to the handling of queries and complaints.

 (23) In good time before the consumer enters into an agency agreement or makes a binding declaration of intent, the vendor shall submit to the consumer, on a durable medium which is easily accessible to the consumer, in a clear and comprehensible manner and free of charge the following information:
 1) name, address and legal status of a vendor which is a party to the contract;
 2) short description of the service, e.g. concerning marketing;
 3) duration of the contract;
 4) charge to be paid by the consumer for acquiring the services;
 5) outline of additional obligatory costs imposed under the contract, e.g. local taxes, notary fees, advertising expenses, including type of costs and indication of amounts;
 6) the information specified in clauses (1) 16), 17), 19) and 20) of this section;
 7) prohibition of advance payments until the entry into of the contract intermediated or expiry of the agency agreement in any other manner according to which it is explained that the prohibition concerns any payments, provision of guarantees, explicit acknowledgement of debt and performance of other such transactions or acts, and it includes not only payment to the intermediaries, but also to third parties;

 (24) In addition to the information specified in subsection (23) of the section, an intermediary shall also present to the consumer the information specified in clauses (11) 9) and 13) and clause (22) 4) of this section.

 (25) In good time before the consumer enters into an exchange system contract or makes a binding declaration of intent, the vendor shall submit to the consumer, on a durable medium which is easily accessible to the consumer, in a clear and comprehensible manner and free of charge the following information:
 1) name, address and legal status of a vendor which is a party to the contract;
 2) short description of the right;
 3) exact nature and content of the right;
 4) exact period within which the right which is the subject of the contract may be exercised and, if necessary, its duration;
 5) date on which the consumer may start to exercise the contractual right;
 6) charge to be paid by the consumer for the exchange membership fees;
 7) outline of additional obligatory costs imposed under the contract, e.g. renewal fees, other recurrent fees, levies, local taxes, including type of costs and indication of amounts;
 8) summary of key services available to the consumer;
 9) information concerning whether the cost of using the services are included in the costs specified in clause 7) of this subsection;
 10) specification of what is included in the costs indicated in clause 7) of this subsection and what has to be paid for, including type of costs and indication of amounts, e.g. an estimate of the amount to be paid by the consumer for individual exchange transactions, including all additional charges;
 11) information specified in clause (1) 17) of this section and information stating that in the cases where the exchange system contract is offered at the same time with entry into the contract relating to the purchase of the right to use the building on a timeshare basis, only a single withdrawal period shall apply to both contracts;
 12) the information specified in clauses (1) 16), 18), 19) and 20) of this section.

 (26) In addition to the information specified in subsection (25) of this section, the vendor shall also present to the consumer the following information:
 1) explanation of how the exchange system works, including the possibilities and modalities for granting the use on timeshare basis, an indication of the value allotted to the consumer's timeshare in the exchange system and examples of specific possibilities for granting the use;
 2) an indication of the number of resorts available and the number of members in the exchange system, including all limitations on the availability of the building selected by the consumer, for example, as the result of peak periods of demand, the potential need to book a long time in advance, and indications of any restrictions on the choice resulting from the timeshare rights deposited into the exchange system by the consumer;
 3) a brief and sufficient description of the immovables and their location, or a sufficient description of the building and the facilities attached to it, if the object of the contract is not an immovable, and a description of where the consumer can obtain further information;
 4) information on the obligation of the vendor to provide details before the grant of use is arranged in respect of the grant of use, and of any additional charges for which the consumer is liable in respect of the exchange;
 5) the information specified in clauses (11) 8) and 9) of this section;
 6) the information specified in subsection clause (22) 4) of this section.

 (27) The information specified in subsections (1), (21), (23) and (25) of this section shall be presented to the consumer according to the standard information form set out in Annexes I, II, III and IV to Directive 2008/122/EC of the European Parliament and of the Council on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts (OJ L 33, 03.02.2009, pages 10–30). The vendor may use the applicable standard information form for submission of the information specified in subsections (11), (2), (22), (24) and (26) of this section. If the information specified in subsections (11), (2), (22), (24) and (26) of this section is not submitted to the consumer on a standard information form, the standard information form shall refer to the place where the respective information may be accessed.

 (3) A vendor may change the information contained in the precontractual information before entry into a contract only if this is necessary due to force majeure circumstances. The data contained in the precontractual information may be changed by agreement of the parties. These changes shall be communicated to the consumer on a durable medium easily accessible to the consumer before the contract is entered into.

 (4) Any advertising referring to the right to use a building on a timeshare basis, long-term holiday product contract, exchange system and the intermediation thereof shall always indicate the possibility to access the precontractual information specified in subsections (1)–(26) of this section and the place at which the precontractual information may be accessed.

 (41) Where a contract relating to the purchase of the right to use buildings on a timeshare basis, long-term holiday product contract, exchange system contract or agency agreement is to be offered to a consumer at a promotion or sales event, the vendor shall clearly indicate the commercial purpose and the nature of the event in the invitation. The information specified in subsections (1)–(26) of this section shall be accessible by the consumer according to the type of the contract offered during the whole promotion or sales event.

 (42) A right to use a building on a timeshare basis and a long-term holiday product shall not be defined as an investment product or service in any advertising or offer.

 (5) Before the entry into the contract, the vendor shall explicitly draw the consumer's attention to the existence of the right of withdrawal, the length of the withdrawal period referred to in § 383 of this Act, and the ban on advance payments during the withdrawal period referred to in § 385 of this Act.

 (6) Code of conduct means a set of rules or agreement not imposed by legislation, which describes the activities of the vendor having jointed it in certain economic of professional activities and which the vendor undertakes to comply with.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 381.  Requirements for contracts

 (1) A contract relating to the purchase of the right to use the building on a timeshare basis, long-term holiday product contract, exchange system contract and agency agreement shall be entered into in writing unless more stringent requirements for the format are provided by law. The contract or a copy of the contract shall be given to the consumer immediately after the entry into thereof.

 (2) Information contained in the precontractual information specified in § 380 of this Act shall form a part of the contract. In addition to the information specified in subsections 380 (1) and (2) of this Act in the case of a contract relating to the purchase of the right to use the building on a timeshare basis, information specified in subsections 380 (21) and (22) of this Act in the case of a long-term holiday product contract, information specified in subsections 380 (23) and (24) of this Act in the case of an agency agreement, information specified in subsections380 (25) and (26) of this Act in the case of an exchange system contract, the contract shall also contain the following information:
 1) the name, address and signature of the contracting parties;
 2) the date and place of entry into the contract.

 (3) If the information contained in the precontractual information has been changed by agreement of the parties or due to force majeure for the purposes of subsection 380 (3) of this Act, the contract shall explicitly refer to the amendment.

 (4) The consumer shall sign separately the contractual clauses which contain the provisions of subsection 380 (5) of this Act. The contract shall include a standard withdrawal form intended to facilitate the exercise of the right of withdrawal.

 (5) The standard withdrawal form shall be established by a regulation of the Minister of Justice.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 382.  Language of precontractual information and contract

 (1) The precontractual information provided for in § 380 and the contracts provided for in § 381 of this Act shall be prepared, as chosen by the consumer, in one of the following languages:
 1) Estonian;
 2) the language of another member state of the European Union which is the state of residence of the consumer;
 3) the language of this member state of the European Union of which the consumer is a citizen.

 (2) In the case of a contract relating to the purchase of the right to use the building on a timeshare basis, the object of which is one specific immovable and the contract is drawn up in a language other than that of the state where the building is situated, the vendor shall provide a certified translation of the contract to the consumer in the language of the state in which the building is situated.

 (3) If the state of residence of the consumer is Estonia, the vendor shall provide a translation of the contract in Estonian to the consumer.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 383.  Right of consumer to withdraw

 (1) A consumer may withdraw from a contract within fourteen days as of the date of entry into the contract. If the consumer receives the contract or a copy of the contract later than specified in the first sentence of this subsection, the withdrawal period shall start from the day the consumer receives it. The provisions of this section concerning contracts also apply to preliminary contracts.

 (2) If the consumer is provided the standard withdrawal form specified in the second sentence of subsection 381 (4) of this Act in a filled in form on a durable medium within one year from the day when the withdrawal period specified in subsection (1) of this section starts, the withdrawal period is deemed to start on the day when the consumer receives such standard form.

 (21) The consumer may withdraw from the contract within one year and fourteen days from the day when the withdrawal period specified in subsection (1) of this section starts if the vendor has failed to submit in a filled in form the standard withdrawal form specified in subsection 381 (5) of this Act on a durable medium to the consumer.

 (3) If the information specified in subsections 380 (1)–(26) of this Act is submitted to the consumer on a durable medium within three months from the day when the withdrawal period specified in subsection (1) of this section start, the withdrawal period is deemed to start on the day when such information is given to the consumer.

 (31) The consumer may withdraw from the contract within three months and fourteen days from the day when the withdrawal period specified in subsection (1) of this section starts if the vendor has failed to submit the information specified in subsections 380 (1)–(26) of this Act on a durable medium to the consumer.

 (4) If a consumer withdraws from a contract, the vendor shall not demand a charge for the services provided or the use of the building or any other expenses related to the contract.

 (5) The consumer's withdrawal application shall be in a format which can be reproduced in writing. The consumer may use the standard withdrawal form specified in subsection 381 (5) of this Act for submitting a withdrawal application.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 384.  Withdrawal from consumer credit contract

 (1) If the amount payable on the basis of the contract is fully or partly covered by the vendor or a third person by the credit granted based on an agreement between the third person and the vendor and the contract is a contract economically linked to a consumer credit contract for the purposes of § 414 of this Act, the consumer is deemed to have also withdrawn, in the case of withdrawal from the contract under the conditions provided for in § 383 of this Act, from the consumer credit contract and collateral contracts linked thereto.

 (2) In the case specified in subsection (1) of this section, a consumer shall not be required to pay interest or other expenses in the case of withdrawal from a consumer credit contract.

 (3) If credit is provided by a third party and the amount of the credit has already been paid to the vendor, the rights and obligations of the vendor with regard to the consumer transfer to the creditor in the case of withdrawal by the consumer.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 3841.  Withdrawal from linked contract

 (1) If the consumer exercises the right of withdrawal specified in § 383 of this Act with regard to the contract relating to the purchase of the right to use the building on a timeshare basis or long-term holiday product contract, the consumer is deemed to have also withdrawn from the contract linked to the contract relating to the purchase of the right to use the building on a timeshare basis or long-term holiday product contract, which the consumer has entered into with the vendor or the third person based on an agreement between the third person and the vendor.

 (2) In the case specified in subsection (1) of this section, the vendor or the third person shall not demand payment by the consumer for any expenses for withdrawal from a contract linked to the contract relating to the purchase of the right to use the building on a timeshare basis or long-term holiday product contract.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 385.  Prohibition on demanding and accepting advance payments

 (1) In the case of a contract relating to the purchase of the right to use the building on a timeshare basis, long-term holiday product contract and exchange system contract, the vendor or the third person is prohibited to demand and accept from a consumer any payments, provision of guarantees, explicit acknowledgement of debt and performance of other such transactions or acts prior to the expiry of the withdrawal period specified in § 383 of this Act.

 (2) In the case of an agency agreement, the vendor or the third person is prohibited to demand or accept from the consumer any payments, provision of guarantees, explicit acknowledgement of debt and performance of other such transactions or acts before the actual entry into the contract intermediated or expiry of the agency agreement.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 3851.  Specifications for long-term holiday product contracts

 (1) In the case of long-term holiday product contracts, the payment shall be in instalments of equal value for each year of the duration of the contract. The vendor shall send a corresponding notice to the consumer on a durable medium at least 14 days before the due date for the payment of the instalment.

 (2) From the second instalment period onwards, the consumer has the right to cancel the contract without incurring any expenses by giving notice to the vendor within fourteen days of receiving the last notice specified in subsection (1) of this section.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 386.  Application of provisions

  The provisions of this Chapter apply to a contract entered into with a consumer residing in Estonia or in another member state of the European Union if the immovable, building or any part thereof which is the object of the contract is located in Estonia or if the vendor pursues commercial or professional activities in Estonia or the contract is entered into as a result of a public tender, advertising or other similar economic activities in Estonia, or if the contract is essentially linked to the territory of Estonia for any other reason, regardless of the state which state's law applies to the contract.
[RT I, 04.02.2011, 2 - entry into force 23.02.2011]

§ 387.  Prohibition on violation of provisions

  A person or agency provided by law may, pursuant to the procedure provided by law, demand that a vendor who violates the provisions of this Chapter and of § 194 of this Act terminate the violation and refrain from violating the provisions.

§ 388.  Mandatory nature of provisions

  Agreements which derogate from the provisions of this Chapter to the detriment of the consumer are void.

Chapter 21 CONTRACT OF LOAN FOR USE  

§ 389.  Definition of contract of loan for use

  By a contract of loan for use, one person (the lender) undertakes to grant the use of an object to another person (the borrower) free of charge.

§ 390.  Liability of lender

 (1) The lender shall be liable for any damage caused to the borrower by violation of the contract of loan for use only if the lender acts intentionally or with gross negligence.

 (2) If the lender intentionally does not notify the borrower of the rights of a third party to the object or of the defects of the object, the lender shall compensate the borrower for the damage caused thereby.

§ 391.  Costs of preservation of object

 (1) The borrower shall bear the expenses necessary for preservation of the object granted for use.

 (2) The borrower may demand the reimbursement of expenses other than those specified in subsection (1) of this section only pursuant to the provisions regarding negotiorum gestio. The borrower may remove improvements made to the thing by the borrower if this is possible without damaging the thing.

§ 392.  Use of object

 (1) The borrower may use the object only in the manner prescribed in the contract or, in the absence of an agreement, in a manner arising from the nature of the object or the purpose of use thereof.

 (2) The borrower shall not transfer use of the object to a third party without the consent of the lender.

 (3) The borrower shall not be liable for any alterations to or deterioration in an object lent if such alterations or deterioration are caused by the contractual use.

§ 393.  Obligation to return

 (1) The borrower shall return the lent object upon expiry of the term for use.

 (2) If the term for use of the object is not specified, the object shall be returned after the purpose of the contractual use of the object has been attained. The lender may also demand that the object be returned earlier if the period during which the borrower could have attained the purpose of use has passed.

 (3) If the term of use of the object is not specified and does not derive from the purpose of use of the object, the lender may cancel the contract and demand the return of the object at any time after entry into the contract.

 (4) If the borrower transfers the use of the object to a third party, the lender may also demand that the object be returned by the third party after expiry of the contract.

§ 394.  Extraordinary cancellation of contract by lender

  The lender may cancel the contract of loan for use, regardless of the provisions of § 393 of this Act, and demand the return of the lent object if:
 1) the lender needs the object due to unforeseeable circumstances;
 2) the borrower uses the object contrary to the provisions of § 392 of this Act, in particular by unjustifiably transferring use of the object to a third party or if the object is seriously endangered due to violation of the obligations of the borrower;
 3) the borrower is a natural person and dies or the borrower is a legal person and is dissolved.

§ 395.  Expiry of claims

 (1) Claims of lenders for compensation for damage on account of alterations to or deterioration in a lent object shall expire within six months as of the return of the object.

 (2) Claims of borrowers for reimbursement of expenses or removal of improvements shall expire within six months as of the expiry of the contract.

 (3) The limitation period for a claim for return of a lent thing begins to run upon termination of the contract.

Chapter 22 LOAN AGREEMENT AND CREDIT AGREEMENT  

Division 1 General Provisions  

§ 396.  Definition of loan agreement

 (1) By a loan agreement, one person (the lender) undertakes to grant a sum of money or a fungible thing (a loan) to another person (the recipient of the loan), and the recipient of the loan undertakes to repay the same sum of money or return a thing with the same characteristics in the same amount and with the same quality.

 (2) A person who owes a sum of money or a fungible thing on any other legal basis may agree with the obligee that the sum of money or thing is owed as a loan.

 (3) The provisions of this Chapter also apply if the objects of a loan agreement are things with specific characteristics, particularly securities, unless the parties have agreed otherwise.

§ 397.  Loan interest

 (1) Interest shall be paid on loans granted in economic or professional activities. In the case of other loan agreements, interest shall be paid only if so agreed.

 (2) If the interest rate is not agreed on in the agreement, the ordinary rate which is usual in the case of loans of the same type at the time when and in the place where the loan is granted is presumed to be the rate or, in the absence of an ordinary rate, the rate provided for in § 94 of this Act is deemed to be the rate.

 (3) Interest shall be calculated and paid at the end of each calendar year. If a loan is to be repaid before the end of a year, interest shall be paid upon repayment of the loan.

 (4) The provisions of subsections (1)–(3) of this section do not preclude or restrict the rights of the parties as regards fines for delay.

§ 398.  Ordinary cancellation of loan agreement entered into for unspecified term

 (1) If the term for repayment of a loan is not agreed, the lender may demand repayment of the loan after cancellation of the loan agreement. The lender and the recipient of the loan may cancel the loan agreement entered into for an unspecified term by giving at least two months' notice.

 (2) The recipient of a loan may cancel the loan agreement without interest and repay the loan without giving advance notice.

§ 399.  Extraordinary cancellation of loan agreement by lender

 (1) A lender may cancel a loan agreement and demand immediate repayment of the loan if:
 1) according to the agreement, the loan is to be repaid in parts and the recipient of the loan delays the repayment of more than two parts or delays the repayment of one part for longer than three months;
 2) the recipient of the loan fails to perform the obligation to pay interest;
 3) the recipient of the loan violates the requirement to use the loan only for a certain specified purpose.

 (2) A lender may cancel a loan agreement before the grant of the loan or may refuse to grant the loan if the financial situation of the recipient of the loan has deteriorated such that the repayment of the loan is at risk or if the recipient of the loan has knowingly submitted false information in order to obtain the loan. The lender also has this right if the recipient of the loan has become insolvent before entry into the agreement and if this becomes known to the lender only after entry into the agreement.

§ 400.  Extraordinary cancellation of unfixed interest rate loan agreement by borrower
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) The recipient of an unfixed interest rate loan may cancel the loan agreement at any time by giving at least three months' notice.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) A loan agreement is not deemed to have been cancelled by the recipient of the loan pursuant to subsection (1) of this section if the recipient does not repay the loan within two weeks after the cancellation enters into force.

 (3) Any agreement to preclude the right of cancellation which belongs to the recipient of a loan who is a consumer pursuant to subsections (1) and (2) of this section or to impair the exercise thereof is void.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) The provisions of this section do not apply to a consumer credit contract, in the case of which the consumer may perform the obligations arising from it before the prescribed time pursuant to § 411 of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 401.  Credit agreement

 (1) A credit agreement is an agreement by which one person (the creditor) undertakes to transfer a sum of money (the credit) to the disposal of another person (the debtor), and the debtor undertakes to pay a fee for the use of the credit and repay the credit upon the expiry of the agreement.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) The postponement of a due date for a charge, leasing or any other similar financial accommodation may be the object of a credit agreement.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) The provisions concerning loan agreements apply to credit agreements unless otherwise provided by law.

§ 4011.  Credit brokerage contract

  A credit brokerage contract is a contract by which one person (credit broker) undertakes to arrange, for a charge, for credit to be granted to consumers in the course of the economic or professional activities of the credit broker or to indicate the possibility to enter into a credit contract or undertakes, in the interests of and for the benefit of the creditor, to negotiate or enter into contracts in the name and on account of the creditor independently and on a permanent basis.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

Division 2 Consumer Credit Contract and Contracts Linked Thereto  

§ 402.  Definition of consumer credit contract

  A consumer credit contract is a credit contract by which a creditor, in the course of the economic or professional activities thereof, grants or undertakes to grant credit or a loan to a consumer.

§ 403.  Application of provisions

 (1) Where the credit brokerage activities are carried out as an ancillary activity, the credit broker is not required to perform the obligations specified in subsections 54 (41) and (42), subsection 541 (21), §§ 4031 and 4032 and subsections 407 (21)–(23) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) The provisions of this Division also apply to contracts entered into by a natural person to obtain credit to commence independent economic or professional activities in the case where the credit to be drawn down or the net price of the thing or service to be acquired for the credit does not exceed an amount equivalent to 50,000 euros.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) The provisions of this Division do not apply to credit contracts or credit brokerage contracts:
 1) [repealed - RT I 2009, 18, 108 - entry into force 01.05.2009]
 2) [repealed - RT I 2009, 18, 108 - entry into force 01.05.2009]
 3) entered into between an employer and an employee as an ancillary activity, free of interest or at the annual percentage rate below which is lower than the market average and if the entry into such contract is not offered to third persons;
[RT I 2010, 77, 590 - entry into force 01.07.2011]
 4) in the case of which the liability of the consumer for the obligations arising from a consumer credit contract shall be limited only to the value of the pledged thing in the possession of the creditor;
[RT I 2010, 77, 590 - entry into force 01.07.2011]
 5) which the consumer enters into with an investment firm or credit institution in the course of provision of ancillary investment services specified in clause 44 2) of the Securities Market Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) The provisions of clause 4031 (1) 7) and §§ 409, 414 and 417 of this Act do not apply to consumer credit contracts secured by mortgages which are entered into under the usual conditions for such contracts.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (41) The provisions of § 411 of this Act do not apply to lease contracts which do not prescribe the obligation of the consumer to purchase the object of the contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) The provisions of clause 4032 (1) 3) and subsection (4), §§ 409, 410 and subsection 414 (2) of this Act do not apply to credit contracts entered into as a judicial compromise.
[RT I, 04.02.2011, 2 - entry into force 01.07.2011]

 (51) The provisions of subsection 54 (41), subsection 541 (21), § 4031, clause 4032 (1) 3) and subsection (4), subsections 404 (2)–(22), subsections 407 (4) and (41), § 409, subsection 410 (2), § 411 and §§ 4141 and 4142 of this Act do not apply to overdraft agreements specified in subsection 407 (21) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (52) Only the provisions specified in subsections 407 (4) and (41) and § 415 of this Act apply to the overdraft agreements specified in subsection 407 (4) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (53) The provisions specified in subsection 407 (21) of this Act with regard to consumer credit contracts apply to such contracts pursuant to which credit shall be repaid within three months and in the case of which insignificant charges have to be paid.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (6) The provisions of this Division apply to consumer credit contracts entered into with a consumer residing in Estonia or in a Member State of the European Union even if the contract is entered into as a result of a public tender, advertising or other similar economic activities in Estonia or if the contract is essentially linked to the territory of Estonia for any other reason, regardless of the state whose law is applicable to the contract.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 4031.  Precontractual information

 (1) The consumer shall be given the opportunity to compare different offers in order to make an informed decision on entry into the consumer credit contract. For this purpose, the creditor or credit broker shall provide the consumer, in good time before the consumer enters into a contract or is bound by their offer, on a durable medium on the Standard European Consumer Credit Information form the following information based on the terms and conditions of the contract of the creditor and, if applicable, preferences expressed and the information submitted by the consumer:
 1) the name and address of the creditor;
 2) the type of credit;
 3) the amount of credit drawn down or the upper credit limit;
 4) the terms and conditions of governing the drawdown;
 5) the duration of the consumer credit contract;
 6) the amount of the principal sum, interest and any other charges (hereinafter repayment) number and frequency of repayments as at the time of submitting the information and, where appropriate, which payments arising from the consumer credit contract are covered by the repayment made by the consumer in the case of outstanding balances charged at different interest rates;
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]
 7) the total amount of all the payments made by the consumer for repayment of the credit and the payments made to cover the total cost of the credit;
 8) the annual interest rate and the conditions governing the application of that rate. In the case of an unfixed interest rate, the creditor shall specify the periods, conditions and procedure for changing thereof. Where the loan interest depends on the reference interest rate, the reference rate applicable to the initial interest rate shall be specified. If different interest rates apply in difference circumstances, the above mentioned information in respect of all the applicable interest rates;
[RT I, 04.02.2011, 2 - entry into force 01.07.2011]
 9) the annual percentage rate;
 10) a warning regarding the consequences of missing payments;
1l) the rate of penalty applicable upon delay of payments and the arrangements for its adjustment, and, where applicable, any charges payable upon a delay;
 12) the existence or absence of a right of withdrawal;
 13) the right of early repayment, and, where applicable, information concerning the creditor's right to compensation and the way in which the compensation is determined;
 14) the consumer's right to be informed immediately and free of charge pursuant to subsection 4032 (5) of this Act of the information used for the purposes of assessing the consumer's creditworthiness;
 15) the consumer's right to get a copy of the draft consumer credit contract from the creditor free of charge pursuant to the provisions of subsection (6) of this section.

 (2) The creditor or the credit broker shall also provide the consumer in addition to the information specified in subsection (1) of this section the following information using the Standard European Consumer Credit Information form:
 1) the name and address of the credit broker, if the entry into the consumer credit contract is provided by a credit broker;
 2) charges deriving from the consumer credit contract and the conditions under which those charges may be changed, if the consumer is charged. Such charges include, for example, the charges for maintaining an account recording payment transactions and drawdowns, unless the opening of an account is optional, and charges for using a means of payment for both payment transactions and drawdowns;
 3) securities, if securities are required from the consumer;
 4) the obligation to enter into a contract where the entry into a collateral contract, in particular an insurance policy, is compulsory in order to obtain the credit or to obtain it on the terms and conditions offered;
 5) the obligation to pay notary fees if the consumer is to cover these fees upon entry into the consumer credit contract;
 6) a clear and concise statement that the consumer credit contract shall not guarantee the repayment of the credit drawn down under the consumer credit contract if the payments made by the consumer do not give rise to an immediate reduction of the obligation of the consumer to the creditor but are used to constitute capital during periods and under conditions laid down in the credit contract or in a collateral contract. No such statement is submitted if the repayment of the credit drawn down under the consumer credit contract is guaranteed;
 7) the period of time during which the creditor is bound by the precontractual information, if the creditor has determined such period of time pursuant to subsection (7) of this section;
 8) in the case of a consumer credit contract the object of which is the acquisition of a thing, provision of a service or financing of another object of the contract and in the case of economically linked consumer credit contracts, the thing or service which is the object of the contract and its cash price (net price). In the case of a leasing contract, the price for which the lessor purchases the object of leasing is deemed to be the net price.

 (3) The total cost of the credit to the consumer means all the costs, including interest, commissions, taxes and other fees which the consumer is required to pay in connection with the consumer credit contract and which are or should be known to the creditor. The notary fees shall not be taken into account upon calculation of the total cost of the credit. Where a collateral contract, in particular an insurance contract, has to be entered into in order to obtain a credit or to obtain it on the terms and conditions offered, the costs arising from the specified contract, in particular insurance premiums, shall also be taken into account upon calculation of the total cost of the credit.

 (4) The total amount of all the payments made by the consumer for the repayment of the credit and covering the total cost of the credit and the annual percentage rate specified in clauses (1) 7) and 9) of this section shall be provided by means of a representative example. The creditor shall specify all the information and assumptions used in order to calculate the annual percentage rate. Where the consumer has informed the creditor of the consumer's preferred terms and conditions of the contract, such as the duration of the consumer credit contract, amount of credit or upper credit limit, the creditor shall take the information obtained from the consumer into account upon providing a representative example.

 (5) Where the consumer credit contract provides different ways of drawdown with different charges or interest rates relating to the consumer credit contract and the creditor uses the assumption provided for in subsection 4061 (2) of this Act, the creditor shall indicate that other drawdown mechanisms for this type of consumer credit contract may result in higher annual percentage rates.

 (6) At the request of the consumer, the creditor shall also supply the consumer, free of charge, with a copy of the draft consumer credit contract in addition to the Standard European Consumer Credit Information form, unless the creditor is not willing to continue precontractual negotiations with the consumer.

 (7) The creditor may designate a term during which the consumer is bound by the precontractual information provided to the creditor.

 (8) The formats of the Standard European Consumer Credit Information form shall be established by a regulation of the Minister of Justice. The Standard European Consumer Credit Information form shall not be altered or supplemented. Any information which the creditor wishes to supply to the consumer in addition to the provisions of this section shall be provided in a separate document which may be annexed to the Standard European Consumer Credit Information form.

 (9) In the case of distance consumer credit contracts, the creditor is deemed to comply with the requirements for information specified in subsections 54 (11) and (2) of this Act if the creditor has provided the Standard European Consumer Credit Information form to the consumer with the information specified in this section and additional information concerning distance marketing of financial services.

 (10) The obligation specified in subsection (1) of this section to supply the precontractual information on the Standard European Consumer Credit Information form shall not apply to such consumer credit contracts which are entered into with a restricted number of consumers under a statutory provision with a general interest purpose and on the terms and conditions which are more favourable to consumers than those prevailing on the market or at interest rates which are lower than those prevailing on the market.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 4032.  Implementation of principle of responsible lending

 (1) A creditor is obliged to comply with the principle of responsible lending in connection with consumer credits. To comply with the principle of responsible lending, the creditor is obliged, prior to entry into a consumer credit contract:
 1) to acquire information which allows to assess whether the consumer is able to pay back the credit under the conditions agreed upon in the credit contract (hereinafter creditworthiness). Where appropriate, the creditor shall request relevant information from the consumer and consult the relevant databases;
[RT I, 11.06.2013, 3 - entry into force 01.07.2013]
 2) to assess the creditworthiness of the consumer; and
 3) to provide adequate explanations to the consumer, in order to place the consumer in a position enabling the consumer to assess whether the proposed consumer credit contract corresponds to the needs and to his financial situation of the consumer.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (11) In assessing the creditworthiness of a consumer, the creditor shall adhere to due diligence. In assessing the creditworthiness of the consumer, the creditor shall take into consideration all the circumstances known to the creditor which may have an impact on the consumer's ability to repay the credit under the terms and conditions agreed upon in the contract, including the consumer's financial situation, regular income, other financial obligations, performance of earlier payment obligations and the impact of potential increase of the financial obligations arising from the consumer credit contract by means of determining the extent of the required assessment operations according to the terms and conditions of the consumer credit contract, available consumer data and the amount of the financial commitment undertaken.
[RT I, 11.06.2013, 3 - entry into force 01.07.2013]

 (2) In order to obtain the information which allows assessing of the creditworthiness of a consumer, a creditor shall inform the consumer about what kind of information specified in subsection (11) of this section the consumer shall submit to the creditor. The creditor shall not promote or encourage the consumer not to provide the information required for the assessment of the credit status of the consumer.
[RT I, 11.06.2013, 3 - entry into force 01.07.2013]

 (3) Where the creditor and the consumer agree to change the amount of credit drawn down by the consumer or the upper credit limit after the entry into the consumer credit contract, the creditor shall update the information at the disposal of the creditor concerning the creditworthiness of the consumer and assess the creditworthiness of the consumer each time before changing the amount or upper limit of the credit.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) If it may be presumed that the consumer needs or requests additional explanations concerning the precontractual information supplied pursuant to § 4031 of this Act, the essential characteristics and effect that the contracts proposed to the consumer may have on the consumer, including consequences of payments delayed by the consumer, the creditor is obliged to provide additional explanations to the consumer and warn the consumer of potential risks upon obtaining a consumer credit.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) If the decision not to grant a credit to the consumer is made on the basis of consulting databases, the creditor shall inform the consumer immediately and free of charge of the results of such consultation and of the information used. The information obtained from databases shall not be provided if the provision of such information is prohibited by legislation or is contrary to objectives of public policy or public security.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (6) The creditor is not obliged to assess the creditworthiness of the consumer if the consumer credit contract to be entered into is a contract which is entered into with a restricted number of consumers under a statutory provision with a general interest purpose and on the terms and conditions which are more favourable to the consumer than those prevailing on the market or at interest rates which are lower than those prevailing on the market.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (7) If necessary, a creditor shall demonstrate the performance of the obligations required for compliance with the principles of responsible lending.
[RT I, 11.06.2013, 3 - entry into force 01.07.2013]

§ 404.  Application of consumer to enter into contract

 (1) In the case of a consumer credit contract, an application submitted by a consumer to assume obligations shall be in a format which can be reproduced in writing. The contract or a copy of the contract shall be promptly given to the consumer on a durable medium.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) A declaration of intent of the consumer shall set out the following information in a clear and concise manner:
 1) the name and address of the consumer;
 2) the information specified in clauses 4031 (1) 1)–11) of this Act;
 3) the right of the consumer to request from the creditor, free of charge and at any time throughout the duration of the consumer credit contract, the consumer credit contract amortisation table which specifies the term of repayment of the principal sum;
 4) a statement showing the periods and conditions for the payment of the interest and of any associated recurrent and non-recurrent charges if the charges and interest have to be paid without repaying the principal sum of the credit;
 5) the existence or absence of the right of withdrawal, the period during which that right may be exercised and other conditions governing the exercise thereof, including information concerning the obligation of the consumer pursuant to subsection 409 (3) of this Act to repay the principal sum of the credit and the interest accrued thereon from the date the credit was drawn down until the date of repayment thereof to the creditor, and the amount of interest per day;
[RT I, 04.02.2011, 2 - entry into force 01.07.2011]
 6) in the case of an economically linked consumer credit contract, the rights arising from § 414 of this Act and the procedure for the exercise thereof;
 7) the procedure for cancellation of consumer credit contracts;
 8) the right of early repayment, the procedure for early repayment, as well as information concerning the creditor's right to compensation and the way in which that compensation will be calculated;
 9) the name and address of the competent supervisory authority:
 10) the information concerning the possibility for out-of-court resolution of disputes arising from consumer credit contracts;
 11) the securities and insurance required from the consumer, if required;
 12) the information specified in clauses 4031 (2) 2), 5) and 6) of this Act;

 (13) where applicable, other contractual terms and conditions.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (21) The annual percentage rate specified in clauses 4031 (1) 7) and 9) of this Act and the total amount of all the payments made by the consumer for repayment of the credit and the payments made to cover the total cost of the credit shall be calculated as at the time of entry into the consumer credit contract and all the information and assumptions used in order to calculate the annual percentage rate shall be specified in the contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (22) At the request of the consumer, the creditor shall make available to the consumer, free of charge and at any time throughout the duration of the consumer credit contract, an amortisation table specified in this clause (2) 3) of this section. The amortisation table shall indicate the amounts owing and the due dates and conditions of repayment of such amounts. The table shall contain a breakdown of each repayment showing the repayment of the principal sum of the credit, the interest calculated on the basis of the annual interest rate and any additional costs, where the consumer is required to pay additional costs. In the case of an unfixed interest rate consumer credit contract or in the case the additional costs may be changed under the consumer credit contract, the amortisation table shall indicate, clearly and concisely, that the data contained in the table remain valid only until such time as the interest rate or the additional costs are changed in accordance with the consumer credit contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 4041.  Information concerning interest rate

 (1) Changes of interest rates shall enter into force in the case of a consumer credit contract if the creditor has notified the consumer beforehand, on a durable medium, of the change in the interest rate. The information shall state the amount of payments due after the entry into force of the new interest rate and where the number or frequency of the payments changes, the respective particulars thereof.

 (2) The parties may agree in the consumer credit contract that the information specified in subsection (1) shall be provided to the consumer periodically in the cases where the change in the interest rate is caused by a change in a reference rate, and the new reference rate is made publicly available by appropriate means and the information concerning the new reference rate is available in the premises of the creditor.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 405.  Contracts to finance acquisition of things or provision of services

  1) In the case of a consumer credit contract the object of which is the acquisition of a thing, provision of a service or financing of another object of the contract and in the case of economically linked consumer credit contracts, the following shall be indicated in the contract:
 1) In the case of a consumer credit contract the object of which is the acquisition of a thing, provision of a service or financing of another object of the contract and in the case of economically linked consumer credit contracts, the following shall be indicated in the contract:
 1) a description of the thing, service or other performance of an act which is the object of the contract;
 2) the price of the thing or service acquired for the credit, if payment is to be made immediately (net price);
 21) the information specified in subsections 404 (2) and (21) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) In the case of a leasing contract, the price for which the lessor purchases the object of leasing is deemed to be the net price.

 (4) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 406.  Annual percentage rate

 (1) The annual percentage rate of the credit is the total cost of the credit to the consumer expressed as an annual percentage of the credit amount drawn down or the upper credit limit provided that the consumer credit contract is valid for the agreed term and that the creditor and the consumer fulfil their obligations under the terms and conditions and by the dates agreed upon in the consumer credit contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) The total cost of the credit to the consumer determined upon calculation of the annual percentage rate of the credit does not contain the costs which the consumer is required to bear upon violation of the obligations arising from the contract, or costs which the consumer is required to bear in connection with the acquisition of a thing or the use of a service. Upon calculation of the annual percentage rate, the price of the thing or the charge for the use of the service shall be taken into account regardless of whether the payment for the thing or the use of the service is made by means of drawing down the credit or not.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) The costs of the charges for using the means of payment enabling the payment transactions and drawdowns, and charges for maintaining such an account where the payment transactions and drawdowns are made and other charges relating to payment transactions shall be taken into account upon calculation of the total cost of the credit, unless the opening of the account is optional and the costs of the account have been clearly and separately shown in the consumer credit contract or in any other contract entered into with the consumer.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) If changes in the interest rate or changes unquantifiable at the time of calculation have been agreed, the consumer credit contract shall set out, instead of the annual percentage rate, the initial annual percentage rate based on the initial interest rate and other conditions at the time of entry into the contract as if they were to be applicable during the whole term of the contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (51) If it is know at the time of entry into force of the credit contract that certain costs will change upon expiry of a specific period, this shall be taken into account upon calculation of the rate.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (6) The specific procedure for calculation of the annual percentage rate based on the requirements of the European Union.

§ 4061.  Additional assumptions for calculation of annual percentage rate

 (1) If a consumer credit contract allows the consumer to choose the time of drawdown by the consumer, the total amount of the credit shall be deemed to be drawn down immediately and in full upon calculation of the annual percentage rate.

 (2) If a consumer credit contract provides different ways of drawdown with different charges and interest rates, the total amount of the credit shall be deemed to be drawn down at the highest charges and interest rate applied to the most common drawdown mechanism for this type of consumer credit contracts.

 (3) If a consumer credit contract provides different ways of drawdown but the consumer credit contract imposes, among the different ways of drawdown, a limitation with regard to the amount and period of time, the total amount of the credit shall be deemed to be drawn down on the earliest date provided for in the contract in accordance with those drawdown limitations upon calculation of the annual percentage rate.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (4) If it is not an overdraft, it is deemed upon calculation of the annual percentage rate in the case of a consumer credit contract for an unspecified term and a consumer credit contract pursuant to which the credit has to be repaid within a certain term or after the expiry of a certain term, whereafter drawdown is possible again, that:
 1) the credit is provided for a period of one year as of the first drawdown of the credit and the consumer shall repay with the last payment the whole remaining principal sum, interest and other charges, if any;
 2) the credit drawn down shall be repaid in twelve equal repayments at equal intervals as of when one month has passed from the first drawdown of the credit. If the principal sum has to be repaid in full during each payment term as a single payment, it shall be deemed upon calculation of the annual percentage rate that thereafter the credit is drawn down and the repayments are made within one year;
 3) the interest and other charges are calculated on the credit drawn down pursuant to the consumer credit contract and the interest and other charges are paid together with the repayments of the principal sum.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (5) If it is not an overdraft or a contract specified in subsection (4) of this section and if the amount of repayments is not determined, the amount of each repayment shall be deemed upon calculation of the annual percentage rate to be the lowest for which the contract provides.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (6) If it is not an overdraft or a contract specified in subsection (4) of this section and if the date of making the repayments is not determined, it shall be deemed upon calculation of the annual percentage rate that the repayment is made on the earliest date provided for in the contract.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (61) If it is not an overdraft or a contract specified in subsection (4) of this section and if the date of entry into a consumer credit contract is unknown, it shall be deemed upon calculation of the annual percentage rate that the credit is first drawn down on the due date which will result in the shortest period of time between the due date of drawing down the credit and the due date of the first repayment.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (7) If the consumer credit contract does not specify the upper credit limit, it shall be deemed upon calculation of the annual percentage rate that the upper credit limit is 1500 euros.

 (8) In the case of overdraft facilities the total amount of the credit shall be deemed to be drawn down for the whole duration of the of the overdraft agreement. If the duration of the overdraft agreement is not known, the percentage rate shall be calculated on the assumption that the duration of the overdraft agreement is three months.

 (81) If the date of making the repayment or the amount of the repayment cannot be determined pursuant to the consumer credit contract or the conditions provided for in subsections (4), (5), (6), (61) or (8) of this section, it shall be deemed upon calculation of the annual percentage rate that the repayment is made on the due date and on the terms and conditions specified by the creditor.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (82) If the terms and conditions specified in subsection (81) of this section are unknown, it shall be deemed upon calculation of the annual percentage rate that:
 1) the interest is paid together with the repayments of the principal sum of the credit;
 2) a single other charge, which is not interest, shall be paid on the day of entry into the consumer credit contract;
 3) other multiple charges, which are not interest, shall be paid at regular intervals as of the due date of the first repayment of the principal sum and if the amount thereof is unknown, it shall be deemed that they are equal amounts;
 4) the last payment shall pay the whole remaining principal sum, interest and other charges, if any.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (9) If different interest rates and charges are offered to the consumer within a specified period, the interest rate and charges shall be deemed to be the agreed highest interest rate and the highest charges throughout the duration of the consumer credit contract upon calculation of the annual percentage rate.

 (10) In the case of consumer credit contracts for which a fixed interest rate is agreed for the initial period, which is subsequently regularly adjusted according to an agreed indicator, it shall be deemed upon the calculation of the annual percentage rate that starting from the end of the fixed interest rate period the interest rate is the interest rate deriving from the value of the agreed indicator in force at the time of calculation of the annual percentage rate.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 407.  Overdraft agreement
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) An overdraft agreement means a consumer credit contract whereby a creditor permits the consumer to overdraw the payment account by a particular amount. The provisions concerning consumer credit contracts apply to overdraft agreements with the specifications provided for in this section.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (21) The consumer shall be given the opportunity to compare different offers in order to make an informed decision on entry into the overdraft agreement pursuant to which the credit has to be repaid on demand of the creditor or within three months. For this purpose, the creditor or credit broker shall provide the consumer in good time before the consumer enters into a contract or is bound by his offer, on a durable medium, the following information based on the terms and conditions of the contract of the creditor and, if applicable, preferences expressed and the information submitted by the consumer:
 1) the information specified in clauses 4031 (1) 1), 2), 3), 5), 11), 14) and 15) of this Act;
 2) the information specified in clause 4031 (2) 1) of this Act in the case of credit brokerage;
(g) the information concerning that the consumer may be requested to repay the amount of credit in full on demand at any time;
 4) the annual interest rate and the conditions governing the application of that rate. Where the loan interest depends on the reference interest rate, the reference rate applicable to the initial interest rate shall be specified;
 5) the annual percentage rate by means of a representative example indicating all the information and assumptions used in order to calculate the annual percentage rate;
 6) the charges due from the time the contract is entered into and, where applicable, the conditions under which those charges may be changed;
 7) the period of time during which the creditor is bound by the precontractual information, if the creditor has determined such period of time pursuant to subsection 4031 (7) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (22) The information specified in subsection (21) of this section shall be provided in a clear and comprehensible manner. For the purpose of providing the information specified in subsection (21) of this section, the creditor or the credit broker may use the European Consumer Credit Information form established by a regulation of the Minister of Justice for overdrafts.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (23) In the case of a distance contract specified in subsection (21) of this section, the creditor has fulfilled the information requirements specified in subsections 54 (11) and (2) of this Act if the creditor has provided the Standard European Consumer Credit Information form to the consumer for overdraft with the information specified in subsection (21) of this section and additional information concerning distance marketing of financial services.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (24) The contract specified in subsection (21) of this section shall provide, in a clear and comprehensible manner, the following information:.
 1) the information specified in clauses 4031 (1) 1)–5) and 8) of this Act;
 2) the information specified in clause 4031 (2) 1) of this Act;
 3) the information specified in clause 404 (2) 1) of this Act;
 4) the annual percentage rate and the total cost of the credit to the consumer;
 5) the information specified in subsection clauses (21) 3) and 6) of this section.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (25) The annual percentage rate and the total cost of the credit to the consumer shall be calculated as at the time of entry into the overdraft agreement and the contract shall specify all the information and assumptions used in order to calculate the annual percentage rate.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (31) The creditor shall notify the consumer regularly by providing a statement of account to the consumer a durable medium. A statement of account shall set out the following information:
 1) the precise period to which the statement of account relates;
 2) amounts drawn down by the consumer and dates of drawdowns;
 3) the balance from the previous statement, and the date thereof;
 4) the new balance;
 5) the dates and amounts of payments made by the consumer;
 6) applicable interest rate;
 7) applicable charges;
 8) the minimum amount to be paid if so agreed.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (32) Changes of interest rates shall enter into force in the case of an overdraft agreement with unfixed interest rate if the creditor has notified the consumer beforehand on a durable medium of the change in the interest rate. In the overdraft agreement the parties may agree that the information concerning the change of the interest rate shall be provided in the manner specified in subsection (31) of this section in the cases where the change in the interest rate is caused by a change in a reference rate, the new reference rate is made publicly available by appropriate means and the information concerning the new reference rate is available in the premises of the creditor.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) In the absence of an agreement to grant an overdraft and if the creditor allows the consumer to overrun the payment account or if the creditor permits the consumer to overrun the upper overdraft limit agreed upon in the overdraft agreement, the consumer shall be notified of the circumstances specified in clauses (21) 4) and 6) of this section. The creditor shall provide that information regularly on a durable medium.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (41) In the case of a consumer credit contract specified in subsection (4) of this section, the creditor shall inform the consumer without delay on a durable medium in the event of a significant overrunning of the payment account exceeding the period of one month:
 1) of the overrunning;
 2) of the amount of such overrunning;
 3) of the interest rate;
 4) of any contractual penalties, charges or interest on arrears applicable.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 408.  Consequences of failure to conform with format of contract

 (1) A consumer credit contract is void upon failure to comply with the requirement for format provided for in subsection 404 (1) of this Act or the absence of any of the information provided for in §§ 404 or 405 of this Act.

 (2) In the absence of the information provided for in subsection 404 (2) of this Act, a credit contract becomes valid if the consumer receives the loan or begins to use the credit.

 (3) In the absence of information provided for in § 405 of this Act, a credit contract becomes valid if the thing is delivered or service is provided to the consumer or another obligation is performed with respect to the consumer.

 (4) If, in the case specified in subsection (2) of this section, there is no information on the interest rate, annual percentage rate or initial annual percentage rate, or the gross amount of all the payments to be made by the consumer in order to repay the credit and bear the total cost of the credit, the interest rate provided for in § 94 of this Act is deemed to be the interest rate, unless this is higher than the interest rate previously agreed. If, in the case specified in subsection (2) of this section, there is no information on other expenses owed by a consumer, the consumer does not owe costs of which the consumer is not informed. The creditor shall re-determine the repayments taking into account the reduction in the interest rate and other costs and inform the consumer thereof.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (5) If, in the case specified in subsection (3) of this section, there is no information on the gross amount of all the payments to be made by the consumer in order to repay the credit and bear the total cost of the credit, the annual percentage rate or the initial annual percentage rate, the interest rate shall not be higher than the interest rate provided for in § 94 of this Act unless this is higher than the interest rate previously agreed. If, in the case specified in subsection (3) of this section, there is no information on other expenses owed by a consumer, the consumer does not owe costs of which the consumer is not informed. The creditor shall re-determine the repayments taking into account the reduction in the interest rate and other costs and inform the consumer thereof.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (6) If, in the case specified in subsection (2) of this section, the prerequisites for changing the conditions which affect the size of the costs relating to credit are not communicated to the consumer, the size of the costs relating to the credit shall not be changed to the detriment of the consumer.

 (7) If, in the case specified in subsection (3) of this section, the net price is not communicated to the consumer, the market price is deemed to be the net price.

 (8) If, upon entry into a consumer credit contract, the creditor has not informed the consumer of the security which is required from the consumer, security may be demanded later only if the net amount of credit exceeds an amount equivalent to 50 000 euro.

 (9) If the annual percentage rate is indicated in a consumer credit contract as being lower than the actual rate, the rate of interest which is agreed in the consumer credit contract shall be reduced by the percentage rate by which the indicated annual percentage rate is lower than the actual rate.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 409.  Right of consumer to withdraw

 (1) A consumer may withdraw from a consumer credit contract within fourteen days. If a consumer withdraws from a consumer credit contract, a person who joined in an obligation arising from the consumer credit contract may also withdraw from the contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) The term specified in subsection (1) of this section commences to run as of the date of entry into the consumer credit contract or as of the date when the consumer received the contractual terms and conditions and the information specified in § 404 of this Act, if this date is later than the date of entry into the contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (21) If a consumer exercises the right to withdraw from a contract specified in subsection (1) of this section, the application for withdrawal shall be submitted before the expiry of the term specified in subsection (1).
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) The consumer shall repay the creditor immediately, but not later than within thirty days as of the submitting the application for withdrawal, the principal sum of the credit and the interest on the principal sum as of the drawdown of the credit until repayment of the principal sum. In the event of withdrawal, the creditor shall have no right to demand any other compensation from the consumer besides the non-returnable charges paid by the creditor based on a public law relationship in the credit relationship. The provisions of §§ 188–194 of this Act apply to other consequences of withdrawal.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (31) If the consumer fails to repay the credit within the term specified in the first sentence of subsection (3) of this section, the consumer is deemed not to have withdrawn from the contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (32) If the consumer exercises the right of withdrawal specified in this section with regard to the consumer credit contract, the consumer is deemed to have withdrawn from the collateral contract linked to the consumer credit contract which objective is to provide a service or another benefit and which the creditor or a third person provides based on an agreement between the third person and the creditor.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) The provisions of subsections (3) and (31) of this section do not apply in the case the consumer withdraws from the credit contract and leasing contract specified in § 405 of this Act which do not prescribe the obligation of the consumer to purchase the object of the contract. In the case of withdrawal from these contracts, the creditor shall have the right to demand delivery of the fruits and other gain received.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (6) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (7) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 410.  Consumer credit contract entered into as contract negotiated away from business premises and distance consumer credit contract
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) The formal requirement specified in subsection 404 (1) of this Act shall not preclude distance consumer credit contracts. The contract or a copy of the contract shall be promptly given on a durable medium to the consumer having entered into a distance consumer credit contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) The consumer may withdraw from a consumer credit contract entered into as a contract negotiated away from business premises or as a distance contract without specifying the reason for withdrawal only pursuant to the procedure and in the manner provided for in § 409 of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 411.  Right of consumers to early repayment

 (1) A consumer may perform the obligations arising from a consumer credit contract in part or in full before the prescribed time. In such case, the consumer does not owe interest or other charges for the period when the credit is not used.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (11) If the early repayment of the credit falls within the period for which the interest rate is fixed, the creditor has the right to demand only reasonable compensation from the consumer for the damage directly linked to early repayment of the credit. The damage shall be determined in particular based on the opportunity of the creditor to lend out the repaid credit on the loan market due to early repayment, taking into account the savings of the creditor due to early repayment.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (12) The amount of the compensation specified in subsection (11) of this section shall not exceed 1 % of the amount of the credit repaid early, if the period of time between the early repayment of the credit and termination of the consumer credit contract agreed in the consumer credit contract exceeds one year, and 0.5 percent of the amount of the credit repaid early, if this period does not exceed one year.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (13) The creditor shall not demand the compensation specified in subsection (11) of this section from the consumer, if the credit is repaid based on an insurance contract entered into for securing the repayment of the credit, in the case of overdraft facilities, or within the period for which the interest is not fixed.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (14) If the credit specified in subsection (11) of this section is a credit secured by mortgages, the limitations specified in subsection (12) of this section shall not preclude the right of the creditor to claim additional compensation from the consumer, if the creditor suffered a bigger loss due to early repayment of the credit.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) If the early repayment of a consumer credit contract secured by mortgages falls within the period for which the interest rate is not fixed, the creditor may claim from the consumer, differently from the provisions of the second sentence of subsection (1) of this section, the amount of interest lost for the term of three following months.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) The compensation claimed from the consumer subject to this section shall not exceed the amount which the consumer would have paid as interest during the period between the early repayment and the date of expiry of the consumer credit contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 412.  Assignment of claims of creditor arising from consumer credit contract
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) If the creditor assigns a claim arising from the consumer credit contract, the consumer shall be informed of the assignment of the claim, unless the creditor continues to be an obligee with respect to the consumer by agreement with the new obligee.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) Agreements which preclude or restrict the right of a consumer to plead defences arising from a contract against third parties to whom the obligee assigns the claims arising from the consumer credit contract against the creditor or which preclude or restrict the right of set-off of the consumer are void.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 413.  Use of bills of exchange and cheques

 (1) Consumers shall not be required to give security for claims arising from a consumer credit contract by means of bills of exchange or to issue cheques, and creditors shall not accept such bills of exchange or cheques.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) If a bill of exchange or cheque specified in subsection (1) of this section is accepted, the consumer may reclaim this from the creditor at any time. The creditor shall compensate the consumer for the costs and damage caused by issue of the bill of exchange or cheque.

§ 414.  Contract of sale economically linked to consumer credit contract
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) A contract of sale forms a contract linked to a consumer credit contract if the purpose of the credit contract is to finance the payment of a purchase price and both contracts are deemed to be economically uniform. Contracts are deemed to be economically uniform if the seller grants credit for financing the purchase price, if the creditor uses the assistance of a seller in preparing or entering into the consumer credit contract or if the object of the contract of sale is explicitly specified in the consumer credit contract.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) If a consumer withdraws from a consumer credit contract pursuant to the provisions of § 409 of this Act, the consumer may also withdraw from a contract of sale economically linked to the consumer credit contract. The provisions of §§ 188–194 of this Act apply to withdrawal from contracts of sale. If the credit amount is received by the seller, the rights and obligations of the seller are transferred to the creditor in the event of the seller's withdrawal from the contract of sale.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) If the seller fails to perform the obligation to deliver a thing arising from the contract of sales linked to the consumer credit contract or if the thing does not confirm to the terms and conditions of the contract and the seller illegitimately refuses to follow the legal remedies of the consumer, the consumer may refuse to perform the consumer's obligations with respect to the creditor based on the contract of sale. If the consumer withdraws from the contract of sale, the consumer may also withdraw from the credit contract linked to the contract of sale.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (4) The provisions of subsections (1)–(3) of this section also apply to consumer credit contracts by which the performance of obligations other than the delivery of things is financed.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (5) The provisions of subsections (1)–(3) of this section do not apply to consumer credit contracts the purpose of which is to finance the acquisition of securities, foreign currency or precious metals.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 4141.  Specifications for ordinary cancellation of consumer credit contract for unspecified term

 (1) If no period of notice has been agreed on ordinary cancellation of a consumer credit contract for unspecified term, the consumer may cancel the contract at any time without adhering to the term for advance notice. If a term of advance notice is agreed, it shall not exceed one month.

 (2) Ordinary cancellation of a consumer credit contract by the creditor is permitted if such possibility is prescribed by the contract. The creditor's declaration of cancellation shall be in a format which can be reproduced in writing and communicated to the consumer at least two months before the cancellation enters into force unless a longer period of notice has been agreed in the contract. Any declaration of cancellation which derogates from the formal requirements is void.

 (3) If the right to cancel the contract is exercised with respect to the person, the cancellation not in compliance with the agreed term to the detriment of the person shall be deemed to enter into force upon expiry of the agreed term from the submission of the declaration of cancellation. If the creditor has the right to ordinary cancellation of the consumer credit contract but there is no agreement on the term of cancellation, the parties are deemed to have agreed upon the term specified in subsection (2) of this section. Failure to comply with the term of cancellation shall not render the cancellation void.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 4142.  Right of creditor to refuse drawdown

 (1) In the case of a consumer credit contract for an unspecified term, the creditor may refuse drawdown to the consumer for good reason if this is agreed upon in the contract. Refusal is permitted in particular in the case of a significantly increased risk of the consumer being unable to fulfil the obligation to repay the credit or upon existence of circumstances which give reason to believe that the credit is drawn down for criminal purposes.

 (2) In the case specified in subsection (1) of this section, the creditor shall inform the consumer of the refusal to draw down the credit and the reasons therefor on a durable medium, unless the provision of such information is prohibited or is contrary to objectives of public policy or public security. The consumer shall be notified in advance, if possible, but at the latest immediately after the refusal to draw down the credit.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 415.  Penalty for late payment and making of insufficient payments

 (1) If a consumer delays the payments owed, any penalty for late payment demanded from the consumer shall not exceed the amount provided for in subsection 113 (1) of this Act. This does not preclude or restrict the right of the creditor to demand compensation for damage from the consumer in an amount which exceeds the penalty for late payment. Agreements which allow to claim payment of earnest money or contractual penalty from the consumer in the case of late payments are void.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) If, on the basis of a consumer credit contract, a consumer has made a payment which is insufficient for the performance of all obligations which have fallen due, the payment shall cover:
 1) firstly, the expenses incurred for collection of the debt;
 2) secondly, the principal sum owed;
 3) thirdly, interest;
 4) fourthly, other obligations.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (3) The provisions of subsection (2) of this section do not apply if the consumer makes payments on the basis of an execution document which is prepared as a principal claim in order to reclaim interest.

 (4) A creditor shall not refuse to accept insufficient payments.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 416.  Restrictions on cancellation of consumer credit contracts

 (1) In the case where credit is repayable in tranches, the creditor may cancel the consumer credit contract due to a delay in payment by the consumer only if the consumer is wholly or partly in delay for at least three consecutive repayments and if the creditor has, without success, granted an additional term of at least two weeks to the consumer for the payment of the remaining amount together with notification that the creditor will cancel the contract upon failure to pay the tranches within the term and will claim for payment of the whole debt. The creditor's declaration of cancellation shall be in a format which can be reproduced in writing, and upon failure to comply with such requirement the cancellation is deemed void.

 (2) A creditor shall, not later than at the same time as granting a term specified in subsection (1) of this section, offer a consumer the opportunity to negotiate in order to reach an agreement.

 (3) If a creditor cancels a contract, the total outstanding amount of all the payments made by the consumer for repayment of the credit and the payments made to cover the total cost of the credit shall be respectively reduced by the interest and the costs calculated for the consumer for the period when the credit is not used.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

§ 417.  Withdrawal of creditor from consumer credit contract
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) If a consumer is in delay with the repayment of credit, the creditor may withdraw from the consumer credit contract the object of which is the delivery of things or performance of obligations for payment of repayments only under the conditions specified in subsection 416 (1) of this Act.
[RT I, 03.12.2012, 1 - entry into force 01.05.2013]

 (2) [Repealed - RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 4171.  Additional notification obligation of credit broker

 (1) A credit broker shall notify a consumer prior to entry into a credit brokerage contract of the following:
 1) the extent of the powers of the credit broker, in particular whether the credit broker works with one or more creditors or independently;
 2) the amount of the fee payable for credit brokerage, if this is paid by the consumer.

 (2) The credit broker shall notify the creditor of the fee payable by the consumer to the credit broker in such a manner that the creditor would be able to take it into account upon calculation of the annual percentage rate.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 418.  Requirements for credit brokerage contract
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (1) A credit brokerage contract shall be entered into in a format which can be reproduced in writing before the consumer submits an application for assuming the obligations arising from the consumer credit contract for the purposes of subsection 404 (1) of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (11) A credit brokerage contract shall set out:
 1) the extent of the powers of the credit broker, in particular whether the credit broker works with one or more creditors or independently;
 2) the amount of the fee payable by the consumer to the credit broker;
 3) the fact whether the credit broker also agrees the fee with the creditor and the amount of such fee.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) A credit brokerage contract and a credit application shall not be contained in one document.

 (3) A credit broker shall issue a copy of a contract to the consumer.

 (4) Credit brokerage contracts which do not comply with the requirements provided for in subsection (1), clauses (11) 2) and 3) or subsection (2) of this section are void.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 419.  Commission payable to credit brokers

 (1) A consumer shall pay commission to a credit broker only if the consumer is granted credit as a result of the activities of the broker and the consumer can no longer withdraw from the consumer credit contract pursuant to § 409 of this Act.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

 (2) If credit is taken for the early payment of other credit with the knowledge of the credit broker, the credit broker has the right to receive commission only if the annual percentage rate or the initial annual percentage rate does not increase. Upon calculation of the annual percentage rate or the initial annual percentage rate for repayable credit, the possible brokerage costs for the repayable credit shall not be taken into account.

 (3) With respect to services related to arranging for credit to be granted to a consumer or informing the consumer of the possibility to enter into a consumer credit contract, a credit broker shall not claim anything other than the commission specified in subsections (1) or (2) of this section and, with the agreement of the consumer, reimbursement of the necessary expenses incurred by the credit broker.
[RT I 2010, 77, 590 - entry into force 01.07.2011]

§ 420.  Prohibition on violation of provisions

  A person or agency provided by law may, pursuant to the procedure provided by law, demand that a creditor or credit broker who violates the provisions of this Division or § 194 of this Act terminate the violation and refrain from violating the provisions.

§ 421.  Mandatory nature of provisions

  Agreements which derogate from the provisions of this Division to the detriment of the consumer are void. The provisions of this Division also apply if an attempt is made to avoid application of the provisions by different wording of agreements, in particular upon division of the credit amount between several contracts.

Part 4 INSURANCE CONTRACT 

Chapter 23 GENERAL PART  

Division 1 General Provisions  

§ 422.  Definition of insurance contract

 (1) Pursuant to an insurance contract, a person (insurer) undertakes, upon the occurrence of an insured event, to compensate for damage caused by the insured event or to pay the agreed amount of money as a lump sum or in instalments, or to perform the contract as otherwise agreed (insurer's performance obligation). The other person (policyholder) undertakes to pay insurance premiums to the insurer.

 (2) In the cases provided by law, the policyholder is required to enter into an insurance contract (obligatory insurance).

§ 423.  Insured event and insured risk

 (1) An insured event is an incident previously agreed upon, upon the occurrence of which the insurer shall fulfil the performance obligation arising from the contract.

 (2) Insured risk is the hazard against which insurance is provided.

§ 424.  Insured person and object of insurance

 (1) An insured person is the policyholder or a third party, whether identified by name or not, whose insured risk is insured. It is presumed that the insured risk against which insurance is provided relates to the policyholder.

 (2) An object of insurance is an object the insured risk of which is insured.

§ 425.  Beneficiary

 (1) A beneficiary is a person who, upon the occurrence of an insured event, is entitled to the insurance indemnity, agreed amount of money or performance by the insurer of any other obligation provided in the contract.

 (2) After a policyholder dies, the successors of the policyholder shall not replace the beneficiary.

§ 426.  Sum insured

 (1) In indemnity insurance, the insurer shall compensate for damage caused upon the occurrence of the insured event only to the extent of the agreed amount of money which is the maximum amount payable by the insurer (sum insured). This shall not affect the provisions of § 477 of this Act.

 (2) The sum insured may be expressed in a manner other than in the form of the maximum amount payable.

§ 427.  Limitations on freedom of contract

 (1) Any agreement which derogates from the provisions of §§ 428, 432, 433 and 435, subsections 436 (2) and 438 (3), § 439, subsections 441 (2) and (3), § 442, subsection 445 (3), §§ 449 and 450, subsections 452 (2) and 454 (2), §§ 457–459, 461, 462, 468–472, 474, 475, 487 and 491, subsection 492 (3), and §§ 515, 519–531, 535–537, 542–547 and 557–567 of this Act to the detriment of the policyholder is void.

 (2) The provisions of subsection (1) of this section shall not apply to:
 1) reinsurance contracts;
 2) railway rolling stock, aircraft and ship insurance contracts;
 3) insurance contracts with respect to the carriage of goods;
 4) aircraft and ship liability insurance contracts;
 5) credit and suretyship insurance contracts if insured risks arising from business or professional activities are being insured.

 (3) The provisions of subsection (1) of this section also do not apply to land vehicle, fire and natural forces or financial loss insurance contracts or to general liability insurance contracts, if the policyholder satisfies at least two of the following conditions:
 1) the balance sheet total exceeds an amount which is equivalent to 6 200 000 euro;
 2) the net turnover of the financial year exceeds an amount which is equivalent to 12 800 000 euro;
 3) the average number of employees during the financial year is not less than 250.

 (4) In the case of companies belonging to the same consolidation group within the meaning of the Accounting Act, the figures provided in subsection (3) of this section shall be calculated on the basis of the company data in the consolidated reports.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

Division 2 Entry into Contract  

§ 428.  Information to be disclosed to persons wishing to enter into insurance contracts

 (1) An insurer shall ensure that a natural person who wishes to enter into an insurance contract is provided, prior to entering into the contract, with at least the following information:
 1) the name and legal form of the insurer;
 2) the address of the insurer, and the address of the office through which the contract is entered into if this is not done at the seat of the insurer;
 3) standard terms applicable to the insurance contract, including the insurance premium rate and information concerning the provisions of law applicable to the contract;
 4) obligations of the insurer if different form those prescribed in the policy conditions and in the insurance premium rate;
 5) the period of validity of the insurance contract and conditions for termination thereof;
 6) the size of the insurance premiums and the procedure for payment thereof, stating separately the size of the different insurance premiums if the insurance relationship is to comprise several independent insurance contracts;
 7) the amount payable by the policyholder together with the insurance premiums, including the fees payable by the policyholder relating to the insurance contract and related costs of the policyholder and the principles of their formation;
[RT I 2010, 2, 3 - entry into force 22.01.2010]
 8) the term during which the person wishing to enter into the insurance contract is bound by the application to enter into the contract;
 9) the address of the competent insurance supervisory body where the policyholder may lodge a complaint concerning the activities of the insurer.

 (2) Prior to entry into a life insurance contract or an accident insurance contract with the return of premiums, the insurer shall ensure that the policyholder who is a natural person is provided with the following information in addition to the information set out in subsection (1) of this section:
 1) the principles and methods of calculating the life provision;
 11) in the case of an insurance contract with profit sharing feature, the principles of determination and distribution of the profit;
[RT I 2010, 2, 3 - entry into force 22.01.2010]
 2) the surrender value of the insurance;
 3) the minimum sum of insurance premiums to convert premium-free insurance and the obligations of the insurer arising from premium-free insurance;
 4) in the case of unit linked life assurance, information concerning the nature of the underlying assets of the insurance and the risks related thereto which allow the policyholder to make a carefully considered investment decision, whereas it is not permitted to emphasise any potential benefits arising from the entry into a unit linked life insurance without clear indication of the risks related to the entry into that contract;
[RT I 2010, 2, 3 - entry into force 22.01.2010]
 5) general information concerning the principles of taxation applicable to the corresponding class of insurance.

§ 429.  Provision of information during period of validity of contract

  During the period of validity of an insurance contract, the insurer shall ensure that information concerning changes to the information specified in § 428 of this Act is forwarded to the policyholder who is a natural person. In the case of life insurance and accident insurance with the return of premiums, the size of the life provision of the insurance contract and in the case of life insurance contracts with profit sharing feature the amount of the additional profit determined during the period and the rate of the additional profit and the aggregate amount of the additional profit of the life insurance contract shall be disclosed once a year to the policyholder who is a natural person.
[RT I 2010, 2, 3 - entry into force 22.01.2010]

§ 430.  Manner of notification

  Information specified in §§ 428 and 429 of this Act shall be forwarded to the policyholder in a format which can be reproduced in writing and shall be unambiguously worded, clearly organised and prepared in Estonian or, if so agreed, in another language.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 431.  Application for entry into insurance contract

 (1) Application forms for entering into an insurance contract may contain only so many proposals for varying insurance contracts as not to compromise their clarity, readability or intelligibility.

 (2) An insurer shall indicate the standard terms applicable to an insurance contract on the application form issued by the insurer or make the standard terms available to the applicant prior to submission of the form or at the same time therewith.

§ 432.  Consequences of violation of notification obligation

 (1) If an insurer fails to perform the obligations provided for in § 428 of this Act, including making the standard terms applicable to an insurance contract available to the policyholder, the contract is deemed not to have been entered into if the policyholder objects to the contract in a format which can be reproduced in writing within fourteen days after the information and standard terms are made available to the policyholder.

 (2) The term set out in subsection (1) of this section shall commence only if, in addition to the provisions of subsection (1) of this section, the policyholder has been informed in a format which can be reproduced in writing and in typographically clear form of the right to contest and about the beginning and length of the term. The insurer shall prove that the documents were received. Sending the objection within the term shall suffice to make it timely.

 (3) Regardless of the provisions of subsection (2) of this section, the policyholder's right to contest expires after one year after payment of the first insurance premium.

 (4) The policyholder shall not have the right specified in subsection (1) of this section if the insurer provides the policyholder with immediate insurance cover and the parties agree to waive the delivery of policy conditions and of the information specified in § 428 of this Act. At the request of the policyholder, the information and policy conditions shall still be delivered thereto together with the policy at the latest.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 433.  Withdrawal of policyholder from contract

 (1) If an insurance contract, including a life insurance contract, is entered into for a term of more than one year, the policyholder may withdraw from the contract within fourteen days after entry into the contract. Sending the application for withdrawal within the term shall suffice to make it timely. The provisions of § 56 of this Act apply to distance contracts for life insurance or pension insurance.

 (2) The term specified in subsection (1) of this section shall not commence until the insurer has informed the policyholder of the right to withdraw and the policyholder has confirmed this by a signature. If the policyholder is not informed of the right to withdraw, the right to withdraw shall expire one month after payment of the first insurance premium.

 (3) The policyholder shall not have the right to withdraw if the insurer provides the policyholder with immediate insurance cover or if the insurance contract is entered into for the policyholder's ongoing business or professional activities.

 (4) The provisions of subsection (3) of this section shall not apply to life insurance contracts.
[RT I 2004, 75, 522 - entry into force 10.11.2004]

§ 434.  Policy

 (1) An insurer shall issue the policyholder with a document signed by the insurer concerning entry into the insurance contract (policy).

 (2) At least the information provided for in § 428 of this Act shall be set out in a policy along with:
 1) the name and address of the policyholder and the insured person, unless the policy is a bearer policy;
 2) the class of insurance, a definition of the object of the insurance contract, a list of insured risks and the term for notification of an insured event;
 3) the sum insured or the bases for calculation thereof;
 4) the effective date of the contract and the duration of any possible extension of the contract, and the duration of insurance cover;
 5) in the case of obligatory insurance, the legislation which renders entry into the insurance contract obligatory.

§ 435.  Replacement of policy and copies of applications

 (1) If a policy is lost or destroyed, the policyholder may request the insurer to issue a replacement policy.

 (2) The policyholder may request copies of any declarations of intent made in a format which can be reproduced in writing thereby with respect to the contract. The insurer shall inform the policyholder of this right when the policy is issued.

 (3) If the policyholder needs a copy in order to perform a legal act with respect to the insurer which has to be performed within a certain period of time and the insurer fails to issue the copy to the policyholder in advance, the running of the term shall be suspended from the submission of a request for a copy to be issued until the receipt of the copy.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 436.  Disparity between policy and application of policyholder

 (1) If the contents of a policy deviate from the application of the policyholder, the deviation shall be deemed to have been approved by the policyholder if the policyholder does not object thereto in a format which can be reproduced in writing within fourteen days after receiving the policy.

 (2) A deviation shall be deemed to have been approved only if the insurer has brought the provisions of subsection (1) of this section to the attention of the policyholder with a separate notice in a format which can be reproduced in writing at the time the policy is issued. The notice may be replaced by a notation on the policy which is highlighted and separate from the contents of the policy. Each deviation shall be indicated separately.

 (3) If the provisions of subsection (2) of this section are not complied with, any deviation shall not be binding on the policyholder and the terms and conditions included in the policyholder's application shall be deemed to be the terms and conditions of the contract.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 437.  Commencement of insurance cover

  If the term of the obligations of an insurer (insurance cover) is determined in days or a longer period of time, it is presumed that the insurance cover commences at 00.00 on the day following entry into the contract and expires at 24.00on the last day of the term.

§ 438.  Retroactive insurance cover

 (1) A contract may prescribe that insurance cover commences retroactively prior to entry into the contract.

 (2) The insurer shall not require payment of an insurance premium for retroactive insurance cover if the insurer knew or should have known at the time of entry into the contract that the insured event had not occurred.

 (3) The insurer does not have a performance obligation when providing retroactive insurance cover if the policyholder knew or should have known at the time of entry into the contract of the occurrence of the insured event. In this case, the insurer may demand that the insurance premiums be paid until the end of the period of insurance in which the insurer became aware of the insured event having occurred, unless the insurer already knew or should already have known of the occurrence of the insured event at the time of entry into the contract.

§ 439.  Immediate insurance cover

 (1) A policyholder may, prior to entering into a contract and using the application to enter into the insurance contract, apply for the insurer to provide the insurance cover prescribed in the contract during the term for which the policyholder is bound by the application (immediate insurance cover).

 (2) If an application for immediate insurance cover is submitted, the insurer shall inform the policyholder of whether immediate insurance cover will be provided for or not.

§ 440.  Obligation of policyholder to notify of material circumstances

 (1) Upon entering into a contract, the policyholder shall inform the insurer of all circumstances known to the policyholder which, due to their nature, may influence the insurer's decision to enter into the contract or to enter into the contract on the agreed terms (material circumstances). Material circumstances are presumed to be circumstances concerning which the insurer has directly requested information in a format which can be reproduced in writing.

 (2) The policyholder is under no obligation to inform the insurer of circumstances which are already known to the insurer or which the policyholder may reasonably assume to be known to the insurer.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 441.  Withdrawal of insurer from contract upon violation of notification obligation

 (1) If, in violation of the provisions of § 440 of this Act, a policyholder fails to provide information concerning material circumstances, intentionally prevents material circumstances becoming known or provides incorrect information concerning material circumstances, the insurer may withdraw from the contract.

 (2) The insurer shall not withdraw from a contract in the case specified in subsection (1) of this section if:
 1) the insurer knew that the information was incorrect or knew of circumstances concerning which information was not provided;
 2) failure to provide information or the provision of incorrect information was not the fault of the policyholder;
 3) circumstances concerning which information was not provided or concerning which incorrect information was provided ceased to exist before the insured event occurred;
 4) the insurer has waived the right to withdraw.

 (3) If the policyholder has to inform the insurer of material circumstances on the basis of questions submitted by the insurer in a format which can be reproduced in writing, the insurer may withdraw from the contract on the direct grounds of failure to provide information regarding circumstances not included in the questions only if the circumstances are concealed intentionally.

 (4) If the insurer cannot withdraw from an insurance contract on the basis of the provisions of subsection (2) of this section, the insurer may demand higher insurance premiums from the policyholder pursuant to the provisions of § 460 of this Act.

 (5) The provisions of subsections (1)–(4) of this section do not preclude the insurer's right to annul the contract on the grounds of misrepresentation.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 442.  Term for insurer to withdraw from contract

 (1) An insurer may withdraw from a contract on the basis specified in § 441 of this Act only within one month as of the time when the insurer becomes aware or should have become aware of the violation of the notification obligation specified in § 440 of this Act. An insurer may not withdraw from a contract if three years have passed since entry into the contract.

 (2) If an insurer withdraws from a contract on the basis specified in § 441 of this Act after the insured event has occurred, the insurer shall perform the obligations arising from the contract if the circumstances concerning which information was not provided had no bearing on the occurrence of the insured event and do not preclude or restrict the validity of the insurer's performance obligation. When assessing the existence of the insurer's performance obligation, the proportion of the insurance premiums paid to the insurance premiums which should have been paid if information concerning the circumstances had been provided shall be taken into account.

Division 3 Increase in Probability of Insured Risk  

§ 443.  Notification of increase in probability of insured risk

  A policyholder shall immediately notify the insurer of an increase in the probability of the insured risk, unless the increase in the probability of the insured risk is caused by circumstances which are common knowledge and which do not affect the insured risk of this policyholder alone.

§ 444.  Prohibition on increasing probability of insured risk

  After entering into a contract, a policyholder shall not increase the probability of the insured risk without the consent of the insurer or allow the risk to be increased by persons for whom the policyholder is responsible.

§ 445.  Release of insurer from obligation to perform insurance contract upon increase in probability of insured risk

 (1) If a policyholder violates the requirement provided for in § 443 of this Act, the insurer shall be released from the obligation to perform the insurance contract if the insured event occurs at least one month after the time when the insurer should have received the notice unless, at the time when the insurer should have received the notice, the insurer was or should have been aware of the increase in the probability of the insured risk.

 (2) If a policyholder violates the requirement provided for in § 444 of this Act, the insurer shall be released from the obligation to perform the insurance contract to the extent of the increase in the probability of the insured risk due to the circumstances caused by the policyholder, if the insured event occurs after an increase in the insured risk.

 (3) The provisions of subsections (1) and (2) of this section shall not apply if:
 1) by the time the insured event occurs, the term for the insurer to cancel the contract due to an increase in the probability of the insured risk or to request amendment thereof has expired without the insurer cancelling the contract or requesting amendment thereof;
 2) the increase in the probability of the insured risk had no bearing on the occurrence of the insured event;
 3) a higher insured risk would not have affected the validity or scope of the insurer's performance obligation;
 4) the increase in the probability of the insured risk was the fault of the insurer.

 (4) If, pursuant to the provisions of subsection (1) or (2) of this section, an insurer is released from the performance obligation only with respect to certain insured objects or persons, the insurer shall be released from the entire performance obligation if, under the circumstances, it can be presumed that the insurer would not have entered into the contract on the same terms solely for such objects or persons.

§ 446.  Amendment and cancellation of contract in event of increase in probability of insured risk

 (1) If a policyholder violates the obligation provided for in § 444 of this Act, the insurer may cancel the insurance contract without prior notice. If the violation was not the fault of the policyholder, the insurer may cancel the contract by giving one month's advance notice.

 (2) If the probability of the insured risk increased due to a change effected by the policyholder without the consent of the insurer and the policyholder failed to give notice of the increase in the probability of the insured risk in time, the insurer may cancel the insurance contract without prior notice. If the policyholder was not responsible for the violation of the prohibition on increasing the probability of the insured risk, the insurer may cancel the contract by giving one month's advance notice.

 (3) If the insured risk increases after entry into the contract and independently of the policyholder, the insurer may demand amendment of the contract retroactively, as of the increase in the insured risk. If the policyholder does not agree to the amendment of the contract or if the insurer would not have entered into the contract under the circumstances of the increased insured risk, the insurer may cancel the contract by giving one month's advance notice.

 (4) The insurer's right to demand amendment of a contract or to cancel the contract in the cases specified in subsections (1)–(3) of this section expires if the insurer does not exercise the right within one month as of becoming aware of the increase in the insured risk. The insurer also has the right to cancel the contract in the cases specified in subsections (1)–(3) of this section even if the situation prior to the increase in the insured risk is restored.

 (5) The provisions of subsections (1)–(4) of this section do not apply if the insured risk increased due to circumstances related to the insurer.

§ 447.  Application of provisions

 (1) The provisions of this Division shall also apply to an increase in the insured risk which took place during the period of time between the submission of an application to enter into a contract by the policyholder and entry into the contract if the insurer was not aware of the increase in the insured risk at the time of entering into the contract.

 (2) The provisions of this Division shall not apply if an increase in the insured risk is insignificant or if the parties to the contract agree that the increase in the insured risk does not affect the insurance contract.

 (3) The provisions of this Division shall not affect any agreement by which the policyholder undertakes to reduce the insured risk or prevent the insured risk from increasing.

Division 4 Occurrence of Insured Event  

§ 448.  Notification of insured event

 (1) A policyholder shall immediately notify the insurer of the occurrence of an insured event.

 (2) An insurer may, after the occurrence of an insured event, request information from the policyholder which is necessary to determine the obligation to perform the contract. The insurer may request the submission of evidence insofar as the policyholder can reasonably be expected to submit such evidence.

§ 449.  Consequences of failure to give notice of insured event

 (1) If an insurer suffers damage as the result of a violation of the obligation provided for in § 448 of this Act, the insurer may reduce its performance obligation to the extent of such damage.

 (2) If the policyholder intentionally violates the obligation provided for in § 448 of this Act, the insurer shall be released from its performance obligation.

§ 450.  Insurer's performance obligation upon occurrence of insured event

 (1) An insurer's obligation to perform a contract falls due after the occurrence of an insured event and the completion of the process of determining the extent of the insurer's performance.

 (2) Irrespective of the provisions of subsection (1) of this section, the insurer's obligation to perform a contract falls due if, two months after notifying the insurer of the insured event, the policyholder requests an explanation from the insurer as to why the process of determining the extent of performance has not yet been completed and the insurer fails to respond to the enquiry within one month.

 (3) If the process of determining the extent of the insurer's performance is not completed within one month after notification being given of an insured event, the policyholder may, if the occurrence of the insured event is established, request that money be paid at the expense of the insurer's performance obligation in the minimum amount which the insurer should pay under the circumstances. The running of the term shall be suspended for the period during which completion of the process is hindered by circumstances arising from the policyholder.

§ 451.  Requirement to pay policyholder penalty for late payment

  Any agreement by which the insurer is not required to pay a fine for a delay in the performance of its obligation is void.

§ 452.  Release of insurer from performance obligation upon violation of obligations by policyholder

 (1) An insurer shall be released from the performance obligation if the policyholder, the insured person or the beneficiary intentionally caused the occurrence of the insured event. Any agreement which derogates from this requirement is void.

 (2) The insurer shall not rely on an agreement whereby the insurer is released from the performance obligation upon the occurrence of the insured event due to the policyholder violating an obligation if:
 1) the policyholder has violated an obligation, other than the obligation to pay the insurance premium, which is to be performed with respect to the insurer prior to the occurrence of the insured event and the violation is caused by reason other than the fault of the policyholder or if the violation did not affect the occurrence of damage or the extent thereof;
 2) the policyholder violates an obligation with respect to the insurer to reduce the insured risk or prevent an increase of the insured risk and the violation had no bearing on the occurrence of the insured event or the insurer's performance obligation;
 3) the obligation was to be fulfilled with respect to the insurer after the occurrence of the insured event and the policyholder did not violate the obligation intentionally;
 4) the obligation was to be performed with respect to the insurer after the occurrence of the insured event and the policyholder violated the obligation due to gross negligence, but the violation had no bearing on establishing the occurrence of the insured event or the insurer's performance obligation.

Division 5 Insurance Premium  

§ 453.  Period of insurance

  A period of insurance is the period of time based on which insurance premiums are calculated. It is presumed that a period of insurance lasts for one year.

§ 454.  Payment of insurance premium

 (1) A policyholder shall pay the insurance premium or, in the event of an agreement to pay periodic insurance premiums, the first insurance premium immediately after entry into the contract.

 (2) If the policyholder is to be issued with a policy, the policyholder may refuse to pay the insurance premium until the policy has been issued to the policyholder.

 (3) It is presumed that the beginning of each new period of insurance is the due date for payment of the insurance premium for the subsequent period of insurance.

§ 455.  Payment of insurance premium by third party

 (1) An insurance premium which has become collectable or another amount payable pursuant to an insurance contract may, rather than by the policyholder, be paid by the insured person or the beneficiary or a pledgee in whose favour the claim of the policyholder against the insurer arising from the insurance contract is pledged. The insurer shall not refuse to accept payment from the above-mentioned person even if the insurer could refuse to accept the payment pursuant to the provisions of the General Part of this Act.

 (2) If an insurance premium is paid by the insured person or the beneficiary or a pledgee, the insurer's claim for payment of the insurance premium against the policyholder transfers to the person who made the payment to the extent that the claim is satisfied. If a payment pursuant to an insurance contract is made by a pledgee, the pledgee's claim against the policyholder shall be secured by a pledge on the policyholder's claim against the insurer.

§ 456.  Right to set-off insurance premium

  An insurer may set off an insurance premium which has become collectable or another claim which belongs to the insurer pursuant to a contract against the insurer's performance obligation even if the insurer owes performance of an obligation arising from the contract to a third party other than the policyholder. The insurer does not have such right with respect to the injured party in obligatory liability insurance.

§ 457.  Delay in payment of first insurance premium

 (1) If a policyholder fails to pay a single premium or the first premium within fourteen days after entry into the insurance contract, the insurer has the right, as long as the premium has not been paid, to withdraw from the contract. The insurer is presumed to have withdrawn from the contract if the insurer does not file an action to collect the insurance premium within three months after the premium becomes collectable.

 (2) If the insurance premium or first insurance premium which has become collectable has not been paid by the time the insured event occurs, the insurer shall be released from its performance obligation.

 (3) The insurer shall not rely on the provisions of subsections (1) and (2) of this section if the insurer did not inform the policyholder of these consequences prior to entry into the contract.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 458.  Delay in payment of subsequent insurance premiums

 (1) If the policyholder fails to pay the second or a subsequent premium in time, the insurer may, in a format which can be reproduced in writing, set a term of at least two weeks or, if a structure is insured, one month for the policyholder to pay. In the notice, the legal consequences resulting from the expiry of the term shall be indicated.

 (2) If the insurer has set an additional term for the payment of an insurance premium and the insured event occurs after the expiry of the term and if at the time of occurrence of the insured event the policyholder is in default with payment of the insurance premium, the insurer shall be released from its performance obligation, unless failure to pay the insurance premium was due to circumstances beyond the control of the policyholder.

 (3) If the insurer has set a term for payment specified in subsection (1) of this section and the policyholder fails to pay the insurance premium within the specified term, the insurer may cancel the insurance contract without prior notice. The insurer may state in the notice specified in subsection (1) of this section that it will consider the contract as having been cancelled upon expiry of the term if the policyholder fails to pay the premiums within the term.

 (4) If the policyholder pays the insurance premium within one month as of the cancellation of the contract or the expiry of the term for payment and the insured event does not occur before payment, the contract shall not be deemed to have been cancelled in the case specified in subsection (3) of this section.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 459.  Payment of insurance premium upon termination of contract

  If an insurance contract is terminated prematurely during a period of insurance by cancellation or withdrawal or for any other reason, the insurer is entitled to the insurance premium only for the period of time up to the termination of the contract.

§ 460.  Insurer's right to demand increase of insurance premium

 (1) If, upon entry into a contract, the policyholder has violated the obligation to notify provided for in § 440 of this Act, the insurer may demand payment of a reasonably higher insurance premium by the policyholder as of the beginning of the current period of insurance and if the insurer does not have the right to withdraw from the contract since the violation of the obligation to notify was not due to the fault of the policyholder and the higher premium is reasonable given the increased probability of the insured risk.

 (2) The insurer shall not demand an increase of the insurance premium under the circumstances specified in subsection (1) of this section later than within one month as of becoming aware of the facts of which the policyholder did not inform the insurer.

§ 461.  Policyholder's right to cancel contract upon increase of insurance premium

  If the insurer increases the insurance premium pursuant to the terms of the insurance contract without changing the insurance cover, the policyholder may, within one month after receipt of the insurer's notice, cancel the insurance contract as of the effective date of the increase.

§ 462.  Policyholder's right to demand reduction of insurance premium

 (1) A policyholder may demand the reduction of the insurance premium for subsequent periods of insurance if a larger insurance premium was agreed upon due to circumstances increasing the insured risk and such circumstances cease to exist or become insignificant within the period of time between the submission of an application to enter into a contract and entry into the contract or thereafter or if the insured risk has continuously decreased during such period of time.

 (2) The provisions of subsection (1) of this section shall also apply if a higher insurance premium was agreed upon because the policyholder provided erroneous information concerning circumstances increasing the insured risk.

Division 6 Insurance of Insured Risk of Third Party  

§ 463.  Rights of third party and policyholder with respect to insurer

 (1) If insured risk relating to a third party is insured, the third party has the right to demand performance and all the rights related thereto from the insurer. The third party shall not dispose of such rights without the consent of the policyholder.

 (2) The policyholder may dispose of the rights arising from the insurance contract for a third party in the policyholder's own name, including collecting the claim of the insured person against the insurer, waiving the claim or entering into transactions involving the claim.

 (3) The insurer shall perform its obligation to the policyholder only if the policyholder proves that the third party had granted its consent for the insurance contract to be entered into.

§ 464.  Preferential right of policyholder to have claims satisfied

  A policyholder has a preferential right to satisfy the policyholder's claim against a third party and related to the insured object at the expense of a claim against the insurer to perform the insurance contract before the third party and obligees of the third party.

§ 465.  Knowledge and conduct of insured person serving as that of policyholder

 (1) If the knowledge and conduct of a policyholder have legal effect according to this Act, the knowledge and conduct of a third party shall be deemed equal to the knowledge and conduct of the policyholder upon insurance of an insured risk relating to the third party.

 (2) Knowledge of the third party regarding a fact shall not be deemed equal to the knowledge of the policyholder if the contract was entered into without the knowledge or against the will of the third party.

Division 7 Termination of Insurance Contract and Expiry of Claims  

§ 466.  Withdrawal from insurance contract

  Withdrawal from an insurance contract is permitted only in the cases provided by law.

§ 467.  Invalidity of agreement to extend insurance contract

  Any agreement under which an insurance contract which is not cancelled prior to expiry thereof is deemed to be extended for longer than one year is void.

§ 468.  Ordinary cancellation of insurance contract entered into for indefinite period

 (1) If an insurance contract has been entered into for an indefinite period of time, it may be cancelled by either party at the end of the current insurance period.

 (2) The term for giving notice of cancellation shall be the same for both parties and may not be less than one month or longer than three months.

 (3) Both parties may, by mutual agreement, waive their rights to cancel the contract for up to two years.

§ 469.  Cancellation of long-term insurance contract

  A policyholder may cancel an insurance contract entered into for a period of more than five years at the end of the fifth year or any subsequent year by giving at least three months' notice thereof, unless otherwise provided by law.

§ 470.  Cancellation of contract due to violation of obligations of policyholder

 (1) If a policyholder materially violates an obligation prescribed by the contract due to circumstances arising from the policyholder, the insurer may cancel the contract without prior notice within one month as of becoming aware of the violation, unless otherwise provided by law.

 (2) If the insurer does not cancel the contract within the term specified in subsection (1) of this section, the insurer shall not rely on the agreement of being released from the performance obligation later in the event the policyholder violates an obligation.

§ 471.  Cancellation of contract upon withdrawal of activity licence of insurer

  A policyholder may cancel an insurance contract if the activity licence of the insurer is withdrawn or suspended, unless otherwise provided by law.

§ 472.  Expiry of contract due to bankruptcy of insurer

  An insurance contract expires upon the declaration of the insurer as bankrupt, unless otherwise provided by law.

§ 473.  Cancellation of contract due to insolvency of policyholder

  If a policyholder is declared bankrupt or compulsory administration is ordered for an insured immovable, the insurer may cancel the insurance contract by giving at least one month's notice.

§ 474.  Partial termination of contract

 (1) If an insurer has the right to withdraw from a contract or cancel the contract only with respect to certain insured objects or persons, the insurer may do so with respect to the remaining objects or persons only if, under the circumstances, it can be presumed that the insurer would not have entered into the contract on the same terms solely for such objects or persons.

 (2) If an insurer withdraws from a contract or cancels the contract with respect to certain objects or persons only, the policyholder has the right to cancel the entire contract by the end of the period of insurance during which the insurer's withdrawal or cancellation is effected at the latest.

§ 475.  Expiry of claims arising from insurance contract

 (1) The limitation period for claims arising from an insurance contract is three years. The limitation period commences from the end of the calendar year during which the claim falls due.

 (2) If an insurer has been informed of a claim arising from an insurance contract, the running of the limitation period shall be suspended until the policyholder receives the decision made by the insurer concerning the claim. In this case, the claim expires ten years after the end of the calendar year during which the claim fell due.

 (3) If a policyholder submits an application to an insurer for the performance of an obligation of the insurer arising from the insurance contract and the insurer notifies the policyholder in writing of the denial of the application, the insurer shall be released from the performance obligation if the policyholder does not file an action for compulsory performance of the obligation within one year as of the receipt of the response denying the application. The insurer shall not be released from the performance obligation if the insurer does not inform the policyholder of the legal consequences of the expiry of the one year term in its response.

Chapter 24 NON-LIFE INSURANCE  

Division 1 General Provisions  

Subdivision 1 Contents of Contract  

§ 476.  Insurer's obligation to compensate

 (1) In the case of non-life insurance and upon the occurrence of an insured event, the insurer shall, pursuant to the contract, compensate the insured person for any damage sustained by the insured person due to the insured event. If a thing is insured, the insurer shall, among other things, compensate for damage sustained as a result of eliminating the consequences of the insured event and for damage sustained if insured things are lost in the course of the insured event.

 (2) If a body of things is insured, the insurance shall cover all the things which constitute the body of things upon the occurrence of the insured event.

 (3) The insurer shall compensate for damage in money, unless the contract prescribes compensation for damage in another manner.

 (4) Non-life insurance shall cover loss of income due to the occurrence of the insured event only if so agreed separately.

§ 477.  Restriction of liability of insurer

  The performance obligation of the insurer to a policyholder is limited to the actual extent of the damage even if the sum insured exceeds the insurable value at the time the insured event occurs.

§ 478.  Lack of insurable interest

 (1) Insurable interest is the interest of the policyholder in being insured against a certain insured risk.

 (2) If there is no insurable interest upon the commencement of insurance cover or no insurable interest arises upon the insurance of future insured risk, the policyholder shall be released from the obligation to pay insurance premiums. In this case, the insurer may demand compensation for reasonable administrative expenses from the policyholder.

 (3) If insurable interest ceases to exist after the commencement of insurance cover, the insurer shall be entitled to the insurance premiums which the insurer could have claimed had insurance been taken out only until the time when the insurer became aware of the cessation of insurable interest.

 (4) If insurable interest ceases to exist due to the occurrence of the insured event, the insurer shall be entitled to the insurance premium for the current period of insurance.

Subdivision 2 Insurable Value  

§ 479.  Insurable value

 (1) Insurable value is the value of insurable interest at the time an insured event occurs.

 (2) The insurable value of a fungible movable is the sum of money needed to obtain a similar thing, taking reasonably into account the decrease in the value of the thing caused by depreciation.

 (3) The insurable value of a structure is its ordinary local construction value from which a reasonable amount reflecting the condition, and in particular the age and depreciation, of the structure has been deducted.

§ 480.  Agreed value

 (1) Insurable value may be determined in advance as a fixed amount (agreed value).

 (2) Agreed value shall not be determined upon the insurance of loss of income due to the occurrence of the insured event.

 (3) Agreed value shall not be deemed to be insurable value if, at the time of the occurrence of the insured event, it differs significantly from the actual insured value. In this case, the actual insured value applies.

 (4) If a structure is insured, the parties may agree to using the cost of restoring the insured structure as the insurable value of the structure.

§ 481.  Over-insurance

  If it becomes evident that the sum insured exceeds the insurable value to a significant extent (over-insurance), both the insurer and the policyholder may reduce the sum insured, together with a corresponding reduction of the insurance premium, in order to eliminate over-insurance. The sum insured and the insurance premium shall be reduced by making a corresponding declaration of intent to the other party to the contract.

§ 482.  Under-insurance

  If the sum insured is less than the insurable value at the time of the occurrence of the insured event (under-insurance), the insurer shall be liable for the damage in proportion to the relation of the sum insured to the insurable value at the time of the insured event.

Subdivision 3 Multitude of Insurers  

§ 483.  Notification of entry into new insurance contract

  A policyholder shall notify the insurer immediately if the same insured risk is insured by another insurer, including cases where loss of income is insured by one insurer and other damage by another insurer. The name of the other insurer and the sum insured shall be indicated in the notice.

§ 484.  Co-insurance

  If one and the same insurance or the insurance of insured risks relating to the same assets is divided in fixed parts between several insurers (co-insurance), each insurer is required to pay indemnities only in proportion to the part which it insures.

§ 485.  Leading insurer in co-insurance

 (1) In the case of co-insurance, the leading insurer, which is deemed to be the representative of the other insurers, shall be designated in the contract.

 (2) The leading insurer shall forward declarations of intent prescribed by the contract and the policyholder shall forward such declarations the leading insurer. The leading insurer shall also organise the satisfaction of claims arising from the insurance contract.

 (3) If no leading insurer is specified in the contract, the policyholder may select one of the co-insurers to be the leading insurer. The selection is deemed to have been made when the selected insurer is informed thereof.

§ 486.  Multiple insurance

 (1) If a policyholder insures the same insured risk with several insurers and the total amount of indemnities payable by the insurers would exceed the extent of the damage or the total of the sums insured would exceed the insurable value (multiple insurance), the insurers shall be liable as solidary obligors.

 (2) In the case specified in subsection (1) of this section, each insurer shall be liable to the policyholder to the extent of the sum insured to be paid by the insurer pursuant to the contract, but the policyholder shall not claim more in total than the extent of damage.

 (3) In the case specified in subsection (1) of this section, insurers shall be liable between themselves in proportion to the amount each of them has to pay the policyholder pursuant to the insurance contract.

 (4) Contracts entered into by a policyholder who takes out multiple insurance with the intention of acquiring an unlawful patrimonial advantage shall be void. If the insurer was unaware of the invalidity of the contract at the time of entry into the contract, the insurer shall be entitled to insurance premiums until the end of the period of insurance during which the insurer became or should have become aware of the invalidity of the contract.

 (5) Any agreement which derogates from the provisions of subsections (1)–(4) of this section is void.

§ 487.  Elimination of multiple insurance

 (1) If a policyholder unknowingly entered into a contract resulting in multiple insurance or if multiple insurance occurred later due to a decrease in insurable value, the policyholder may cancel the contract which was entered into later or reduce the sum insured to the amount not covered by earlier insurance. Together with a reduction of the sum insured, the policyholder may also reduce the insurance premium.

 (2) In the case specified in subsection (1) of this section, the policyholder may only cancel the contract or reduce the sum insured immediately after becoming aware of multiple insurance.

 (3) A contract shall be deemed to have been cancelled under the circumstances specified in subsection (1) of this section or the sum insured and the insurance premium shall be deemed to have been reduced by the end of the period of insurance during which the policyholder cancelled the contract or notified the insurer of the reduction of the sum insured and the insurance premium.

Subdivision 4 Insured Event  

§ 488.  Obligation to prevent and reduce damage and to ensure possibility of establishing damage

 (1) Upon the occurrence of an insured event, the policyholder shall, insofar as is possible, attempt to prevent and reduce any damage and, in so doing, observe the instructions given by the insurer. If circumstances permit, the policyholder shall ask the insurer for such instructions.

 (2) Prior to damage being established, the policyholder shall not make any changes with respect to the damaged thing without the permission of the insurer if such changes would hinder or render impossible establishment of the cause or extent of the damage, unless the change is necessary to reduce the damage or in the public interest.

 (3) If the policyholder violates the obligation specified in subsection (1) or (2) of this section and the insurer sustains damage as the result thereof, the insurer shall have the right to reduce the indemnity by the extent of the damage sustained.

§ 489.  Establishment of damage

 (1) The insurer shall immediately establish the extent of damage to be compensated for.

 (2) If one of the parties to the contract refuses to participate in establishing the extent of the damage or if the parties are unable to agree on the extent of the damage, they may turn to a court for the extent of the damage to be established.

 (3) An insurer shall not lose the right to contest the policyholder's claim for compensation if the insurer participates in establishing the extent of damage.

 (4) Any agreement which restricts the policyholder's right to be assisted by a representative in establishing the extent of damage is void.

§ 490.  Expert assessment

 (1) An agreement between an insurer and a policyholder pursuant to which the insurer's obligation to pay an indemnity or the extent of damage is to be determined by an expert shall be valid only if the expert is appointed by a third party not involved in the matter or if the insurer and the policyholder both appoint an equal number of experts.

 (2) Neither the insurer nor the policyholder shall rely on the insurer's obligation to pay the indemnity or the extent of damage being established by an expert, if this is obviously significantly different from the actual circumstances. Any agreement which derogates from this requirement is void.

 (3) In the case specified in subsection (2) of this section and also if the expert cannot or will not establish the extent of damage or delays so doing, the parties may turn to a court for the extent of the damage to be established.

§ 491.  Compensation for expenditure to policyholder

 (1) If an insurer has to compensate for damage sustained, the insurer shall also compensate for the expenses incurred by the policyholder in connection with establishment of the extent of the damage. The insurer need not compensate the policyholder for the expenses of hiring an expert or advisor if the policyholder was not required to hire an expert or advisor pursuant to the contract.

 (2) In addition to the provisions of subsection (1) of this section, the insurer shall compensate the policyholder for expenses incurred in connection with the prevention or reduction of damage pursuant to the provisions of subsection 488 (1) of this Act which the policyholder deemed necessary under the circumstances even if these expenses failed to produce the desired result. The insurer shall compensate for expenses incurred according to the insurer's instructions even if such expenses in combination with the other indemnities exceed the sum insured. If the policyholder so requests, the insurer shall, pursuant to the instructions of the insurer, make an advance payment of the expenses to be incurred.

 (3) In the case of under-insurance, the insurer shall compensate for expenses only in the proportion provided for in § 482 of this Act.

§ 492.  Transfer of claim

 (1) A claim for the compensation of damage against a third party which belongs to a policyholder or the insured person shall transfer to the insurer to the extent of damage to be compensated by the insurer.

 (2) If the policyholder waives a claim against a third party or waives the right which secures such claim, the insurer shall be released from its performance obligation with respect to the policyholder insofar as the policyholder could have claimed compensation on the basis of the claim or right.

 (3) If the policyholder has a claim against his or her ascendant, descendant or spouse or another family member who lives with the policyholder, the insurer shall have the rights provided for in subsections (1) and (2) of this section only insofar as the liability of the relevant person is insured or if the person caused damage intentionally.

§ 493.  Performance of contract after occurrence of insured event

 (1) After the occurrence of an insured event, the insurer shall be liable for damage caused by a later insured event only to the extent of the sum insured remaining after compensating the earlier damage. For future periods of insurance, the insurer is entitled to insurance premiums which are smaller than the previous insurance premiums in the same proportion as the residual sum insured is smaller than the initial sum insured.

 (2) After the occurrence of the insured event, either party to the contract may cancel the contract within one month as of completion of the process of establishing the extent of damage. The insurer shall give one month's notice of cancellation of the contract. The policyholder may cancel the contract on these grounds such that the contract terminates not later than by the end of the current period of insurance.

 (3) An agreement which derogates from the provisions of subsection (2) of this section shall only be valid if the right to cancel is the same for both parties.

Subdivision 5 Transfer of Insured Thing  

§ 494.  Continuation of insurance upon transfer of thing

 (1) If a policyholder transfers an insured thing, all the policyholder's rights and obligations arising from the insurance contract transfer to the acquirer of the thing.

 (2) The transferor and acquirer of the thing shall be solidarily liable to the insurer for payment of the insurance premium for the period of insurance during which the transfer takes place.

 (3) The policyholder's rights and obligations arising from the insurance contract shall not be deemed to have been transferred with respect to the insurer until the insurer becomes aware of the transfer of the insured thing.

§ 495.  Cancellation of insurance contract upon transfer of thing

 (1) An insurer may, upon the transfer of an insured thing, cancel the insurance contract with respect to the acquirer of the thing within one month as of becoming aware of the transfer of the thing if the insurer gives at least one month's notice of the cancellation.

 (2) The acquirer of an insured thing may cancel the insurance contract by the end of the current period of insurance within one month as of acquiring the thing. If the acquirer did not know that the thing is insured, the right to cancel expires one month after the time of becoming aware of the insurance.

 (3) If an insurance contract is cancelled on the grounds provided for in subsection (1) or (2) of this section, the transferor of the thing shall pay the insurer insurance premiums, but not for longer than for the period of insurance during which the insurance contract terminates. In such case, the acquirer shall not be liable for the payment of insurance premiums.

§ 496.  Notification of transfer

 (1) Upon the transfer of an insured thing, the transferor or acquirer of the thing shall notify the insurer of the transfer immediately.

 (2) If the insurer is not notified of the transfer of a thing in time, the insurer shall be released from its performance obligation if the insured event occurs more than a month after the time when the insurer should have received the corresponding notice.

 (3) The provisions of subsection (2) of this section shall not apply if:
 1) the insurer was aware of the transfer at the time when the insurer should have been notified;
 2) at the time of the occurrence of the insured event, the insurer's right to cancel the contract has expired and the insurer has not exercised the right.

§ 497.  Agreement which derogates to detriment of acquirer

 (1) Any agreement which derogates from the provisions of §§ 494–496 of this Act to the detriment of the acquirer is void.

 (2) A contract may prescribe that the notice regarding the transfer of a thing and the cancellation of a contract on these grounds shall be in a particular format.

§ 498.  Application of provisions

  The provisions of §§ 494-497 of this Act shall also apply to the transfer of insured things in execution proceedings and bankruptcy proceedings.

Subdivision 6 Liability of Insurer to Mortgagee upon Insurance of Structures  

§ 499.  Notification obligation of insurer and policyholder

 (1) A policyholder shall immediately notify the insurer who insured a structure of any encumbrance of the registered immovable under the structure with a mortgage.

 (2) If, upon the insurance of a structure, the immovable on which the structure is located is encumbered with a mortgage, the insurer shall immediately notify the mortgagee known to the insurer in a format which can be reproduced in writing of the setting of a term for the policyholder to pay the insurance premium if the policyholder has failed to pay the premium and of the cancellation of the contract.

 (3) The insurer shall notify the mortgagee known to the insurer of the occurrence of an insured event within one week as of becoming aware of the occurrence of the insured event, unless the damage is insignificant to the mortgagee.

 (4) The insurer shall inform the mortgagee of the existence of insurance cover and the size of the sum insured immediately at the request of the mortgagee.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 500.  Validity of payment of indemnity with respect to mortgagee

 (1) If the insurance contract of a structure prescribes that the policyholder is required to use the insurance indemnity to restore the structure, the payment of the insurance indemnity for other purposes or without ensuring restoration of the structure shall not be valid with respect to the mortgagee and the mortgagee may request another payment from the insurer, unless the mortgagee consents to payment of the insurance indemnity in such manner.

 (2) The consent specified in subsection (1) of this section shall be deemed to have been granted by the mortgagee if the mortgagee has been informed, in a format which can be reproduced in writing, of the intention to pay the indemnity but has not responded thereto within one month.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 501.  Rights of mortgagee upon violation of obligations by policyholder

  If a policyholder violates an obligation arising from the insurance contract and, as a result thereof, the insurer is released from its performance obligation with respect to the policyholder, the insurer shall still perform the obligation to the mortgagee, unless the insurer is released from its performance obligation with respect to the policyholder because the policyholder has failed to pay the insurance premiums or intentionally caused the insured event.

§ 502.  Transfer of mortgage

  If an insurer satisfied a claim to the mortgagee of a policyholder pursuant to § 501 of this Act, the mortgage shall transfer to the insurer to the extent that the insurer satisfied the claim. The insurer shall not exercise rights arising from the mortgage to the disadvantage of a mortgagee of the same or lower ranking with respect to whom the insurer's performance obligation still remains.

§ 503.  Application of provisions to real encumbrance

  The provisions of §§ 500-502 of this Act shall apply correspondingly if an immovable is encumbered with a real encumbrance.

§ 504.  Inapplicability of mortgagee's rights to policyholder

  The rights of mortgagees provided for in §§ 500-503 of this Act shall not be exercised on the basis of mortgages where the mortgagee is a policyholder.

Division 2 Goods in Transit Insurance  

§ 505.  Insured risks

  If the risk of transporting goods on land or an internal water body is insured, it is presumed that the insurance covers all risks relating to the goods.

§ 506.  Restriction of liability of insurer

 (1) An insurer shall not compensate for damage which:
 1) is caused by the policyholder or by the consignor or consignee of the goods;
 2) is caused by the nature of the goods or by their defective packaging;
 3) is caused by vermin.

 (2) If circumstances specified in subsection (1) of this section have increased the damage, the insurer shall only compensate for damage to the extent for which the insurer would have been liable if the circumstances had not occurred.

§ 507.  Duration of insurance

  Insurance commences when a carrier accepts goods for transport and continues for as long as the goods are in the carrier's care.

§ 508.  Insurable value of goods

 (1) The insurable value of goods is the usual value of the goods at the place of dispatch at the time of commencement of insurance. This is also deemed to be the insurable value at the time of occurrence of the insured event.

 (2) If goods are damaged, the actual value of the goods at the place of delivery shall be deducted from the value the goods would have had at the place of delivery had they not been damaged. The proportion of insurable value corresponding to the decrease in the value of the goods shall be deemed to be the extent of the damage.

§ 509.  Restriction of cancellation of contracts

  Upon the insurance of goods in transit, the insurer shall not cancel the insurance contract during transportation of the goods due to the probability of the insured risk increasing regardless of the intent of the policyholder or due to the transfer of the insured goods.

Division 3 Liability Insurance  

Subdivision 1 General Provisions  

§ 510.  Definition of liability insurance

  In liability insurance, the insurer shall, in place of the policyholder, perform the obligation to compensate for damage caused by the policyholder to a third party (injured party) as the result of an insured event which occurs during the period of validity of the insurance, and to cover the costs of legal assistance.

§ 511.  Covering costs of legal assistance

 (1) Insurance shall cover the costs of legal assistance incurred by a policyholder against whom a claim is filed to the extent that the policyholder could consider such costs necessary to protect the rights of the policyholder in court and extra-judicially, even if the claim proves to be unfounded.

 (2) Insurance shall also cover costs incurred for the protection of the interests of the policyholder in criminal proceedings or administrative court proceedings if the facts established in the course of the proceedings may constitute a basis for the civil liability of the policyholder with respect to the injured party, insofar as such costs are incurred according to the insurer's instructions. The insurer shall cover the costs in advance at the request of the policyholder.

 (3) If the sum insured is agreed upon, the insurer shall cover the costs incurred in relation to a court action which the insurer requested from or recommended to the policyholder and the costs of defence specified in subsection (2) of this section even if such costs together with the rest of the indemnity exceed the sum insured. The same shall apply to interest payable for a delay initiated by the insurer in the satisfaction of a claim of the injured party.

 (4) If the policyholder has the right to avoid compulsory execution of a court decision by providing security or depositing money, the insurer shall, at the request of the policyholder, provide security for the compulsory execution or deposit money up to the extent of the sum insured and, in the case specified in subsection (3) of this section, in addition to the extent of costs related to the court action. The insurer shall be released from the obligation to provide security or deposit money if the insurer admits that the claim of the injured party against the policyholder is justified.
[RT I 2008, 59, 330 - entry into force 01.01.2009]

§ 512.  Insurance of liability arising from economic activities

 (1) Insurance of the liability arising from a policyholder's economic activities covers the liability of persons employed for service or hired by representatives of the policyholder and the policyholder to manage an enterprise or a part thereof or to exercise supervision over an enterprise.

 (2) If an enterprise is transferred or use thereof is granted to another person, the policyholder's rights and obligations arising from the contract shall transfer to the transferee, unless such rights and obligations are related to the period of time prior to the transfer or grant of use. The provisions of subsections 494 (2) and (3) of this Act and §§ 495–497 of this Act shall apply accordingly.

§ 513.  Release of insurer from performance obligation

  An insurer shall be released from its performance obligation if the policyholder intentionally and unlawfully caused the occurrence of the event due to which the liability of the policyholder with respect to the injured party arises.

§ 514.  Notification of circumstances

 (1) A policyholder shall notify the insurer of circumstances which may result in the occurrence of an insured event and of a claim being filed against the policyholder by an injured party within one week as of the time when the policyholder became aware of the circumstances or the claim being filed.

 (2) Sending the notice within the term specified in subsection (1) of this section shall suffice to make it timely.

 (3) The policyholder shall immediately notify the insurer of the initiation of judicial or other proceedings against the policyholder which may result in the liability of the insurer and of circumstances which may constitute the basis for a claim being filed against the policyholder.

§ 515.  Payment of indemnity

 (1) The insurer must pay the indemnity without delay but not later than within two weeks as of the satisfaction of the claim of the injured party by the policyholder or as of the claim being established by a court decision, admission of the claim or a compromise agreement. If costs are to be compensated for pursuant to § 511 of this Act, the insurer shall cover the costs within two weeks as of being notified of the total size of the costs.
[RT I 2008, 59, 330 - entry into force 01.01.2009]

 (2) Any agreement between the insurer and policyholder is void if, under the agreement, the insurer is to be released from the performance obligation if the policyholder satisfies the claim of the injured party or admits such claim without the consent of the insurer if, given the interests of the injured party, failure to satisfy or admit such claim is clearly contrary to the principles of good faith.

§ 516.  Payments by instalment

  If the policyholder is to pay the injured party in instalments and if the sum insured is less than the estimated total size of the instalments, the policyholder may only demand the corresponding part of the payments by instalment from the insurer.

§ 517.  Rights of injured party

 (1) The insurer has the right to pay the indemnity directly to the injured party if:
 1) the amount payable by the policyholder to the injured party is determined by a court decision or a compromise agreement, and
[RT I 2008, 59, 330 - entry into force 01.01.2009]
 2) the insurer informs the policyholder of its intention in advance.

 (2) The insurer shall pay the indemnity directly to the injured party if the policyholder so requests.

 (3) Disposal of a claim of the policyholder against the insurer is void with respect to the injured party. The same shall apply to the disposal of a claim in execution proceedings or if the claim is disposed of in order to secure an action.

 (4) If the circumstances which caused the policyholder's liability result in claims from several injured parties and the total size of such claims exceeds the sum insured, the insurer shall satisfy the claims in proportion to the size of the claims.

§ 518.  Rights of injured party upon bankruptcy of policyholder

  Upon the bankruptcy of a policyholder, an injured party has the right to satisfy a claim against the policyholder at the expense of a claim for compensation against the insurer before the other obligees of the policyholder.

§ 519.  Cancellation of contract after occurrence of insured event

 (1) Either party may cancel a liability insurance contract if, after the occurrence of an insured event, the insurer has admitted its obligation to compensate the policyholder or has refused to compensate after the indemnity became collectable.

 (2) A contract may be cancelled within one month after the admission of the obligation to compensate or refusal to compensate. The provisions of § 493 of this Act shall also apply.

Subdivision 2 Obligatory Liability Insurance  

§ 520.  Duty to enter into contract

  An insurer shall enter into a liability insurance contract required by law (obligatory liability insurance) if the policyholder meets the requirements prescribed in the standard terms.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 521.  Claim for compensation of damage of injured party

 (1) An injured party may demand the compensation of damage caused thereto by the policyholder from both the policyholder and the insurer. Compensation for damage may be requested from the insurer only in monetary form.

 (2) If a claim for the compensation of damage is filed against both the policyholder and the insurer, they shall be liable as solidary obligors. In the relationship between the insurer and the policyholder, only the insurer shall be liable. If the insurer is released from its performance obligation, only the policyholder shall be liable for performance of the obligation in the relationship between the insurer and the policyholder.

 (3) The insurer may present the same objections against the claim of an injured party as the policyholder.

 (4) The claim of an injured party against an insurer shall expire after the same term as a claim against a policyholder. Suspension or interruption of the limitation period with respect to the policyholder shall also apply to the insurer and vice versa.

 (5) The insurer shall not refuse to satisfy the claim of an injured party on the grounds that the insurer has been released from its liability to the policyholder in part or in full.

 (6) [Repealed - RT I 2008, 59, 330 - entry into force 01.01.2009]

 (7) [Repealed - RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 522.  Notification obligation of injured party

 (1) An injured party shall notify the insurer within two weeks as of becoming aware of the insurer and in a format which can be reproduced in writing of an insured event and of the filing of a claim against the policyholder and shall notify the insurer immediately of the filing of an action against the policyholder.

 (2) The insurer may request information necessary to determine the cause and extent of damage from the injured party. The injured party shall provide information only insofar as it is reasonable to expect that such information can be obtained from the injured party.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 523.  Violation of obligation by injured party

 (1) If an injured party fails to give notice in a timely manner of an insured event or the filing of an action against the policyholder or violates the obligation specified in subsection 522 (2) of this Act, the insurer shall not be liable for the compensation of damage to an extent exceeding the liability of the insurer had the insurer been notified of the insured event or the filing of an action in a timely manner.

 (2) If the obligation specified in subsection 522 (2) of this section is violated, the insurer may rely on the provisions of subsection (1) of this section only if the injured party has been expressly informed of the consequences of the violation beforehand in a format which can be reproduced in writing.

 (3) The restriction on the liability of the insurer provided for in subsection (1) of this section shall apply accordingly if the policyholder enters into compromise agreement with an injured party or admits the claim of an injured party without the consent of the insurer. The restriction on the liability of the insurer shall not apply if, given the interests of the injured party, entry into the compromise agreement or failure to admit the claim would clearly be contrary to the principles of good faith.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 524.  Transfer of insurance contract

 (1) In the event of obligatory insurance of a liability which may arise from a thing and if the right of ownership of the thing is transferred, the policyholder's rights and obligations arising from the insurance contract transfer to the acquirer of the thing. The provisions of §§ 494–498 of this Act apply accordingly.

 (2) If, in the case specified in subsection (1) of this section, the acquirer of the thing enters into a new obligatory liability insurance contract, the insurance contract which transferred to the acquirer shall expire.

§ 525.  Limitation of release from performance

 (1) If, upon the insurance of insured risk relating to a third party, the insurer is released from its performance obligation with respect to the policyholder, the insurer shall only be released from its performance obligation with respect to the third party if the circumstances which are the basis for such release arise from the third party or if the third party was or should have been aware of these circumstances.

 (2) If the insurer has to perform its obligation with respect to a third party under the circumstances specified in subsection (1) of this section, the insurer may, upon performance of the obligation with respect to the third party, demand that the policyholder compensate any expenses incurred in order to perform the obligation.

Division 4 Legal Expenses Insurance  

§ 526.  Obligations of insurer

 (1) In legal expenses insurance, the insurer shall, to the extent prescribed by the contract, protect the legal interests of the policyholder upon the occurrence of an insured event and cover the costs of legal assistance, procedure expenses and other similar expenses incurred as a result thereof. It is presumed that the insurance covers legal assistance both in court and in administrative proceedings and outside administrative agencies.

 (2) The provisions of this Division concerning insurers shall also apply to insured persons who are not policyholders.

§ 527.  Information in insurance contract

  If insured risks in the field of legal expenses insurance are insured together with other insured risks, the scope of the insurance cover in legal expenses insurance and the insurance premiums payable therefor shall be indicated separately in the insurance contract. If the insurer entrusts an independent loss adjuster with the task of managing the performance of obligations arising from an insurance contract, this shall also be indicated in the contract.

§ 528.  Choice of advocate

 (1) The policyholder may choose an advocate to represent the policyholder and to protect the interests of the policyholder in judicial or administrative proceedings or to protect the legal interests of the policyholder in any other manner, including in the policyholder's relationship with the insurer.

 (2) If the policyholder applies to the insurer for the appointment of an advocate, the insurer shall expressly inform the policyholder of the right specified in subsection (1) of this section.

 (3) Persons other than advocates may be appointed to represent the policyholder in judicial or administrative proceedings or to protect the legal interests of the policyholder in any other manner only by agreement with the insurer.

§ 529.  Provision of expert assessment

 (1) An insurance contract shall prescribe the provision of expert assessment which complies with the conditions provided for in § 490 of this Act to assess the prospects of legal assistance being effective or being in bad faith and which the policyholder may use if the insurer refuses to perform the obligation because, in the insurer's opinion, the prospects of legal assistance being effective are not sufficient or if legal assistance would be in bad faith.

 (2) If the insurer refuses to perform its obligation, the insurer shall inform the policyholder of the right to obtain expert assessment.

 (3) If the provisions of subsection (1) or (2) of this section are not complied with, the policyholder's need for legal assistance in this particular case shall be deemed to have been recognised by the insurer.

 (4) The limitation period of the policyholder's claim shall be suspended while the expert assessment provided for in subsection (1) of this section is provided, although the period shall not be suspended for longer than three months.

§ 530.  Insurer's obligation to inform policyholder of insurance cover

 (1) If a policyholder submits a claim arising from subsection 526 (1) of this Act to an insurer, the insurer shall inform the policyholder within two weeks and in a format which can be reproduced in writing of whether the insurer will perform the obligation arising from the contract. Refusal to perform the obligation shall be justified and the facts or the provisions of law or of the contract which are the basis for refusal shall be indicated.

 (2) If the policyholder has not forwarded all the information necessary to verify the claim arising from subsection 526 (1) of this Act to the insurer, the insurer may demand the submission of additional documents during the term provided for in subsection (1) of this section. In such case, the term provided for in subsection (1) of this section shall begin to run as of the submission of documents.

 (3) If the insurer fails to prove that the insurer performed the obligation provided for in subsection (1) of this section, the insurer shall compensate for all costs for legal assistance which are covered by the insurance and which have been incurred during the period of time from the expiry of the term specified in subsection (1) of this section to communication of the insurer's position to the policyholder.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 531.  Transfer of insurance contract

  If the costs for legal assistance relating to the enterprise of a policyholder are insured and the enterprise is transferred or use thereof is granted to another person, the policyholder's rights and obligations arising from the insurance contract transfer to the transferee or the person to whom use thereof is granted. The provisions of §§ 494–498 of this Act apply accordingly.

Chapter 25 LIFE INSURANCE  

§ 532.  Insurer's performance obligation

  In life insurance, the insurer shall, pursuant to the contract, pay the beneficiary the agreed amount as a lump sum payment or in instalments if the insured person attains a certain age, marries, dies or has a child.

§ 533.  Restrictions on insuring life of third party

 (1) A life insurance contract relating to the death of a third party shall only be valid if the third party grants written consent to the contract.

 (2) If the third party is a person with restricted active legal capacity and the policyholder is his or her legal representative, the policyholder may represent the third party in the grant of consent only with the permission of the court of the residence of the third party.
[RT I 2009, 60, 395 - entry into force 01.07.2010]

§ 534.  Consequences of stating incorrect age

  If the age of the insured person is stated incorrectly and, as a result thereof, the insurance premium is established at too low a level, the liability of the insurer shall be reduced in proportion to the relation of the insurance premium corresponding to the actual age of the person to the insurance premium agreed upon.

§ 535.  Increase in Probability of Insured Risk

 (1) Only a change in circumstances relating to the insured risk which is explicitly deemed to be an increase in the probability of the insured risk pursuant to a written agreement shall be deemed to be an increase in the probability of the insured risk.

 (2) The insurer shall not rely on an increase in the probability of the insured risk if three years have passed since the increase of the risk, unless the policyholder intentionally violated the obligation to obtain the consent of the insurer or to notify the insurer.

§ 536.  Specifications of cancellation of contracts

  A policyholder may at any time cancel a life insurance contract as of the end of the current insurance period.

§ 537.  Appointment and change of beneficiary

 (1) A policyholder has the right to determine a third party as beneficiary without the consent of the insurer and to change that person even if the beneficiary is specified in the contract.

 (2) The beneficiary shall have the right to demand performance by the insurer only upon the occurrence of the insured event.

 (3) If the beneficiary dies before the occurrence of the insured event, the insurer shall perform the obligation with respect to the policyholder or the successors of the policyholder unless the policyholder specifies otherwise.

§ 538.  Several beneficiaries

  If several persons have been appointed beneficiaries without their respective shares having been specified, they shall be deemed to be beneficiaries in equal shares. Any share which a beneficiary refuses to accept or cannot accept shall be added to the shares of the other beneficiaries.

§ 539.  Release of insurer from performance obligation

  In the case of insurance for the event of death, the insurer shall be released from its performance obligation if the insured person commits suicide within two years as of entering into the contract. The insurer's obligation remains valid if the insured person who commits suicide has a pathological mental condition which precludes free will.

§ 540.  Death of insured person caused by policyholder or beneficiary

 (1) In the case of a life insurance contract entered into for the event of the death of a third party, the insurer shall be released from its performance obligation if the death of the third party is caused by an intentional unlawful act by the policyholder.

 (2) If a beneficiary is appointed in a life insurance contract entered into for the event of death and the beneficiary causes the death of the insured person by an intentional unlawful act, the beneficiary shall be deemed not to have been appointed.

§ 541.  Notification of insured event

 (1) The insurer need not be notified of an insured event if the attainment by the insured person of a certain age has been agreed upon as the insured event.

 (2) If a third party is entitled to performance of the obligation by the insurer, the third party shall give notice of the insured event and provide information and submit evidence concerning the insured event.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 542.  Change in size of insurance premium

 (1) An insurer has the right to increase an insurance premium if this is necessary to ensure continuous performance of its obligations arising from insurance contracts.

 (2) The insurer shall not amend a contract solely on the grounds that the insured person is ageing or his or her state of health is deteriorating. The parties may, however, agree that, when the insured person attains a certain age, the initial insurance premium will be increased to an amount which, according to the relevant insurance premium rate, is payable with regard to an insured person who enters into an insurance contract at that age.

 (3) Any declaration by the insurer which increases the insurance premium retroactively is void.

 (4) An increase in the insurance premium shall not take effect earlier than one month after the policyholder is notified of the increase.

§ 543.  Conversion of insurance into premium-free insurance

 (1) A policyholder may apply for the insurance to be converted as of the end of the current period of insurance in such a manner that the policyholder need not pay any more insurance premiums during the period of validity of the contract but that the insurer shall still perform the obligation arising from the insurance contract on account of the insurance premiums already paid (premium-free insurance).

 (2) The policyholder may demand that the insurance be converted into premium-free insurance if the minimum amount agreed upon by the insurer and the policyholder has been reached on account of the insurance premiums already paid. If the minimum amount of insurance premiums agreed upon has not been reached, the policyholder shall be entitled to receive the surrender value of the insurance from the insurer.

§ 544.  Insurer's performance obligation in premium-free insurance

 (1) If insurance is converted into premium-free insurance, the extent of the insurer's performance obligation as at the end of the current period of insurance shall be calculated according to the recognised principles of actuarial mathematics.

 (2) If insurance is converted into premium-free insurance, the insurer may make deductions from its performance obligation only to the extent agreed upon by the parties, provided that such deductions are reasonable.

§ 545.  Conversion of insurance into premium-free insurance if insurer cancels contract

 (1) If the insurer cancels an insurance contract due to failure to pay the second or a subsequent insurance premium, the insurance is converted into premium-free insurance.

 (2) In the case provided for in subsection 458 (2) of this Act, the insurer shall be required to perform to the extent which would have been the extent of the insurer's obligation if the insurance had been converted into premium-free insurance by the time of the occurrence of the insured event.

 (3) The notice which, pursuant to the provisions of § 458 of this Act, sets a term for payment of the insurance premium shall contain information which states that failure to pay the outstanding insurance premium in time will result in the insurance being converted into premium-free insurance.

§ 546.  Surrender value

 (1) If a life insurance contract terminates due to withdrawal or cancellation or if the contract is recognised as void or if one of the parties annuls the contract on the bases provided for in the General Part of the Civil Code Act, the insurer shall pay the surrender value of the insurance to the policyholder. This shall not apply if the parties agree to convert the contract into premium-free insurance.

 (2) The insurer shall pay the surrender value even if the insurer has been released from its performance obligation after the occurrence of the insured event. The insurer need not pay the surrender value in the case specified in subsection 540 (1) of this Act.

 (3) The surrender value of insurance shall be calculated according to the recognised principles of actuarial mathematics as at the end of the current period of insurance.

 (4) Any insurance premium arrears shall be deducted from the surrender value upon calculation thereof. The insurer may make deductions from the surrender value only to the extent agreed upon by the parties, provided that such deductions are reasonable.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 547.  Beneficiary becomes policyholder

 (1) The beneficiary may replace the policyholder in an insurance contract with the consent of the policyholder if the policyholder's claim against the insurer for the performance of the insurer's obligation is seized or if an execution proceeding is initiated with respect to such claim or if the policyholder is declared bankrupt.

 (2) Upon taking the place of the policyholder in the contract in the case provided for in subsection (1) of this section, the beneficiary shall satisfy the claims of the policyholder's obligees to the extent of the surrender value of the insurance which the policyholder would have received from the insurer if the policyholder had cancelled the contract at the time of seizure, initiation of the execution proceeding or declaration of bankruptcy.

 (3) If no beneficiary is named, the policyholder's spouse and children shall have the rights and obligations provided for in subsections (1) and (2) of this section.

 (4) Taking the place of the policyholder in the contract is effected by notifying the insurer thereof. Notice may be given within one month as of the time when the person who is entitled to take the place of the policyholder in the contract became aware of the seizure, initiation of the execution proceeding or declaration of bankruptcy.

 (5) Any agreement which derogates from the provisions of subsections (1)–(4) of this section to the detriment of the beneficiary is void.

Chapter 26 ACCIDENT INSURANCE  

§ 548.  Insurer's obligation to compensate

  In the case of accident insurance, the insurer shall, upon the occurrence of an accident, pay the amount specified in the contract as a lump sum payment or in instalments, compensate for patrimonial damage caused by the occurrence of the insured event or perform the contract in any other agreed manner.

§ 549.  Application of life insurance and non-life insurance provisions

 (1) If payment of an agreed amount of money rather than compensation for damage is prescribed as the insurer's performance obligation, the policyholder shall have the right to appoint a beneficiary pursuant to the provisions of §§ 537 and 538 of this Act.

 (2) The parties to the contract may agree upon the application of relevant provisions of non-life insurance insofar as such provisions do not contradict the nature of accident insurance.

§ 550.  Persons covered by accident insurance

 (1) If an accident involving a third party is insured against, it shall be presumed that the third party is the insured person.

 (2) If a policyholder has taken out insurance against an accident involving a third party in order to insure the insured risk of the policyholder, the written consent of the third party is needed for the contract to be valid. If the third party is a person with restricted active legal capacity and the policyholder is his or her legal representative, the policyholder may represent the third party in the grant of consent only with the permission of the court of the residence of the third party.
[RT I 2009, 60, 395 - entry into force 01.07.2010]

§ 551.  Intentional causing of accident

 (1) If a policyholder has taken out insurance against an accident involving a third party in order to insure the insured risk of the policyholder, the insurer shall be released from its performance obligation if the accident is caused by an intentional unlawful act of the policyholder.

 (2) If the beneficiary causes an accident by an intentional unlawful act, the beneficiary shall be deemed not to have been appointed.

§ 552.  Deterioration of health of insured person

  It is presumed that the health of the insured person deteriorated due to circumstances beyond his or her control.

§ 553.  Notification obligation of beneficiary

  If a beneficiary is entitled to performance of the obligation by the insurer, the beneficiary shall give notice of the insured event and provide information and submit evidence concerning the insured event.

Chapter 27 SICKNESS INSURANCE  

§ 554.  Classes of sickness insurance

  Sickness insurance may be provided as:
 1) medical expenses insurance;
 2) hospital insurance;
 3) insurance against incapacity for work;
 4) long-term care insurance;
 5) insurance of another class.

§ 555.  Obligations of insurer

 (1) In the case of medical expenses insurance, the insurer shall, to the extent of the sum insured, compensate the insured person for medical expenses which are incurred as a result of an illness or accident and are medically necessary and perform other contractual obligations. The costs of out-patient examinations conducted in order to establish and prevent illnesses shall also be compensated for.

 (2) In the case of hospital insurance, the insurer shall pay the insured person the agreed hospital daily allowance agreed for in-patient treatment which is medically necessary.

 (3) In the case of insurance against incapacity for work, the insurer shall compensate the insured person for loss of income or a reduction thereof due to incapacity for work caused as a result of an illness or accident by paying the insured person a daily allowance, making periodic payments or paying a lump-sum amount, as agreed.

 (4) In the case of long-term care insurance and if the need to provide care arises, the insurer shall compensate for the costs of caring for the insured person to the extent agreed upon (long-term care expenses insurance) or pay an agreed daily allowance for the care (long-term care daily allowance insurance).

§ 556.  Application of non-life insurance provisions

  If sickness insurance cover is provided pursuant to the principles of non-life insurance, the provisions concerning non-life insurance shall apply to sickness insurance accordingly. The provisions of §§ 443–447 and § 460 of this Act do not apply to sickness insurance.

§ 557.  Duration of sickness insurance contract

 (1) Sickness insurance contracts are entered into for an unspecified term.

 (2) An insurance contract against incapacity for work may be entered into for a specified term but not for less than three years.

 (3) A sickness insurance contract may be entered into for a specified term if it is related to training, stay in a foreign state, travelling or the performance of work or an activity during a specified term.

§ 558.  Waiting periods

 (1) If the parties agree that the obligations of the insurer commence after a certain period of time has passed from the insurance contract being entered into (waiting period), the waiting period shall not exceed five months in the case of medical expenses insurance, hospital insurance and insurance against incapacity for work and nine months in the case of childbirth and health services related thereto. In the case of long-term care insurance, the waiting period shall not exceed three years.

 (2) If the insured event occurs before the end of the waiting period, the insurer shall be required to perform only if the policyholder proves that the illness occurred or that the child was conceived only after entry into the contract.

§ 559.  Insurance of born child

  If, at the time of the birth of a child, at least one of the parents is covered by sickness insurance, the insurer shall enter into an insurance contract to insure the child as of his or her birth without any additional insurance premiums or waiting periods, provided that an application for the child to be insured is submitted not later than two months after his or her date of birth. The insurer has the obligation to insure the child to the extent that the insurance cover applied for the child does not exceed the scope of the insurance cover of the insured parent.

§ 560.  Change in size of insurance premium

 (1) An agreement under which the insurer may, after entry into a sickness insurance contract, unilaterally increase the insurance premium or unilaterally change the scope of insurance cover, including establishing the excess which the policyholder has to pay, shall be valid only if agreement is reached to change the insurance premium or the scope of insurance cover if any of the following circumstances change:
 1) circumstances which are specified in the insurance contract as basis for the calculation of the insurance premium and which are beyond the control of the parties;
 2) the average life expectancy of the insured persons;
 3) the frequency at which the insurer's performance obligation is used by persons insured according to this insurance premium rate;
 4) the scope of state compensation for sickness insurance services;
 5) fees charged by providers of health care services for the use of their services;
 6) legislation changing health care administration.

 (2) Agreement shall not be reached on the right to increase the insurance premium unilaterally or to change the scope of insurance cover unilaterally solely on the grounds that the insured person is ageing or his or her state of health is deteriorating. The parties may, however, agree that, when the insured person attains a certain age, the initial insurance premium will be increased to an amount which, according to the relevant insurance premium rate, is payable with regard to an insured person who enters into an insurance contract at that age.

 (3) Any declaration by the insurer which retroactively increases the insurance premium or changes the scope of insurance cover is void.

 (4) An increase in the insurance premium and a change in the scope of insurance cover shall not take effect earlier than one month after the policyholder is notified of the increase or change.

§ 561.  Policyholder's right to cancel

 (1) The policyholder may cancel a sickness insurance contract by giving at least three months' notice of the cancellation so that the contract terminates at the end of the year. The policyholder may cancel a sickness insurance contract which is entered into for a term of less than one year by giving at least three days' notice of the cancellation.

 (2) If the insurer increases the insurance premium or reduces its obligations, the policyholder may cancel the contract within one month as of receiving notice of the change. In such case, the contract terminates on the effective date of the increase of the insurance premium or reduction of obligations.
[RT I 2003, 78, 523 - entry into force 27.12.2003]

§ 562.  Restriction of ordinary cancellation by insurer

  Ordinary cancellation of a contract of hospital insurance or medical expenses insurance by the insurer is only permitted within the first three years after entry into the contract and by giving at least three months' notice of the cancellation.

§ 563.  Restriction on withdrawal from contract

  If more than three years have passed since a sickness insurance contract was entered into, the insurer shall not withdraw from the contract on the grounds that the policyholder has violated the notification obligation upon entry into the contract.

§ 564.  Release of insurer from performance obligation

 (1) The insurer shall be released from its performance obligation if the policyholder or the insured person intentionally caused his or her illness or an accident.

 (2) If the policyholder intentionally caused the illness or accident of the insured person, the insurer's performance obligation with respect to the insured person shall remain in force. Upon performance of the obligation, the claim of the insured person for compensation of damage against the policyholder shall transfer to the insurer.

§ 565.  Insurer's obligation to provide information

  The insurer shall, at the request of an insured person, grant access to the information concerning the state of health of the insured person obtained by the insurer upon entry into the insurance contract or during the period of validity of the insurance contract.

§ 566.  Death or dissolution of policyholder

 (1) If an insurance contract terminates with the death of the policyholder or the dissolution of a policyholder who is a legal person, the insured person has the right to extend the insurance contract within two months after the death or dissolution of the policyholder if the insured person gives notice of the name of the new policyholder.

 (2) The provisions of subsection (1) of this section apply accordingly if the policyholder cancels the insurance contract. The cancellation shall only be valid if the policyholder proves that the insured person is aware of the declaration of cancellation.

§ 567.  Group sickness insurance

 (1) If a person is excluded from the circle of persons who are insured with group insurance, including on the grounds of the person's retirement or the termination of a contract entered into between the policyholder and the insurer, the person who was insured under the group insurance may submit an application to the insurer to continue insurance of the same class separately for the person pursuant to insurance premium rates applicable to individual insurance without any waiting periods or additional charges besides the insurance premium being applied.

 (2) The right of the insured person provided for in subsection (1) of this section shall expire if the person does not submit an application specified in subsection (1) of this section within one month as of being excluded from the circle of insured persons or termination of the group sickness insurance and performance of the notification obligation by the insurer.

 (3) Upon the submission of an application specified in subsection (1) of this section, the insurance premium shall be determined based on the age of the person when the person entered into the group sickness insurance contract.

 (4) The insured person shall not have the right provided for in subsection (1) of this section if the person is excluded from the circle of insured persons because of the extraordinary cancellation of the insurance contract by the insurer on the grounds of a violation of the insurance contract by the insured person.

 (5) The insurer shall inform each person who is insured with a group insurance upon entry into the group sickness insurance contract or at the time the insurance cover extends to such person of the conditions under which the insurance is terminated and of the consequences regarding the size of the insurance premium if separate insurance were to be continued.

 (6) Ordinary cancellation of a group sickness insurance contract by the insurer is only permitted if the insured persons may continue the insurance relationship in the form of individual insurance.

Part 5 SUPPORT CONTRACTS 

Chapter 28 LIFE ANNUITY  

§ 568.  Definition of life annuity contract

 (1) In a life annuity contract, one person (the grantor of a life annuity) undertakes to pay, on a periodic basis, a specific sum of money or deliver other objects which are limited by specific characteristics (life annuity) to the other party or a third party (life annuitant) during the lifetime of the grantor, annuitant or other person. The payment of a life annuity is presumed to be without charge.

 (2) The provisions of this Chapter apply to life annuities established by law or a court judgment unless otherwise provided by law or the court judgment.

§ 569.  Term

 (1) A life annuity contract is presumed to have been entered into for the duration of the lifetime of the annuitant.

 (2) A life annuity established for the duration of the lifetime of the grantor of the life annuity or a third party shall transfer to the successors of the annuitant in the case of death of the annuitant.

§ 570.  Form

  Life annuity contracts shall be entered into in writing.

§ 571.  Payment of annuity

 (1) Monetary life annuities shall be paid three months in advance. Life annuities in a form other than in money shall be paid a reasonable period in advance if such advance payment may be reasonably presumed on the basis of the nature of the life annuity.

 (2) If a person for the duration of whose life a life annuity is established dies before the expiry of the period for which the life annuity has been paid in advance, the life annuity which has already been paid cannot be reclaimed.

 (3) If in the case specified in subsection (2) of this section the life annuity has not yet been paid, the life annuity for the period shall be paid to the successors of the life annuitant.

Chapter 29 MAINTENANCE CONTRACT  

§ 572.  Definition of maintenance contract

 (1) In a maintenance contract, one person (dependant) undertakes to deliver assets or specific objects into the ownership or possession of another person (maintenance provider), and the maintenance provider undertakes to maintain the dependant and provide him or her with care during the lifetime of the dependant or another period as agreed.

 (2) The provisions concerning succession contracts apply to a maintenance contract if assets or other objects are to be delivered after the death of the dependant.

§ 573.  Form of maintenance contract

  Maintenance contracts shall be notarised.

§ 574.  Obligations of maintenance provider

  A maintenance provider shall maintain the dependant and provide him or her with care in a manner which it is reasonable for the dependant to expect on the basis of the value of that which is delivered by him or her and on the basis of his or her existing way of life. The maintenance provider shall ensure that the dependant has reasonable housing and provide him or her with the necessary care and health services if he or she is or falls ill.

§ 575.  Withdrawal from Contract

  A dependant may withdraw from a maintenance contract on the same bases and pursuant to the same procedure as a donor from a gratuitous contract.

§ 576.  Death of maintenance provider

  A maintenance contract is not presumed to terminate with the death of the maintenance provider.

§ 577.  Restriction on waiver of claim

  A claim for maintenance of a dependant arising from a maintenance contract is not subject to waiver or claim for payment.

Part 6 COMPROMISE CONTRACT 

§ 578.  Definition of compromise contract

 (1) A compromise contract is a contract which is entered into in order to render a contestable or ambiguous legal relationship incontestable by way of mutual concession. Amongst other things, uncertainty as to whether a claim can be enforced is also deemed to be ambiguity.

 (2) It is presumed that the parties will waive their claims as a result of the compromise contract and acquire new rights on the basis of the compromise contract.

§ 579.  Validity of rights of third parties

  A compromise contract does not affect the rights of third parties which arise from contestable or ambiguous legal relationships.

Part 7 CONTRACT OF PARTNERSHIP 

Chapter 30 GENERAL PROVISIONS  

§ 580.  Definition of contract of partnership

 (1) In a contract of partnership, two or more persons (partners) undertake to act to achieve a mutual objective and to help to achieve the objective in the manner established by the contract, above all by making contributions.

 (2) Partners are required to protect the partnership from loss and to consider the interests of the other partners.

§ 581.  Contributions

 (1) The contribution made by a partner may be any manner of promotion of a mutual objective, including the transfer of assets to the partnership, grant of the use of assets to the partnership or provision of services to the partnership.

 (2) The contributions of all partners are presumed to be equal.

 (3) When contributions are made, the provisions relating to lease contracts apply to the transfer of risk of accidental loss of or damage to objects and to liability for any defects of objects if a partner grants the use of an object to the partnership, and the provisions relating to contracts of sale apply thereto if a partner transfers an object to the partnership.

 (4) A partner is not required to increase an already agreed upon contribution or to make additional contributions.

Chapter 31 RELATIONS BETWEEN PARTNERS  

§ 582.  Management of partnership

 (1) Each partner has the right and the obligation to participate in the management of the partnership.

 (2) The partners shall manage the partnership jointly and the consent of all partners is needed for any transaction to be concluded.

§ 583.  Management by one or several partners

 (1) The right to manage a partnership may be granted by the contract of partnership to one or several partners. In this case, the other partners shall not participate in the management of the partnership. If the right to manage is granted to several partners, they shall manage the partnership jointly and the consent of all authorised partners is needed for any transaction to be concluded.

 (2) A partner who holds a management right granted to him or her by the contract of partnership may be deprived of the right with good reason by a unanimous resolution of the other partners unless the contract of partnership prescribes that any such resolution of the partners be taken by a majority of votes. The primary good reason shall be a material violation of an obligation by a partner or his or her inability to manage the partnership.

 (3) A partner may relinquish his or her right to manage if he or she has good reason therefor. If a partner relinquishes his or her right to manage at a time when the partnership cannot be managed in any other manner, he or she shall compensate any damage incurred by the other partners for this reason except in the case where, taking into consideration the interests of the partner and the partnership, the partner cannot have been expected to continue managing the partnership.

 (4) The provisions concerning authorisation agreements apply to the rights of partners authorised to manage the partnership and to their obligations before other partners, unless otherwise provided by this Part.

§ 584.  Right to contest

  A partner authorised to manage the partnership shall not perform an act if another partner authorised to manage the partnership contests it.

§ 585.  Personal execution of management right

  It is presumed that a partner authorised to manage the partnership shall not delegate his or her managerial duties to other persons. A partner authorised to manage may use the assistance of other persons when performing his or her managerial duties.

§ 586.  Reporting and provision of information

 (1) Upon the dissolution of a partnership, the partner authorised to manage the partnership is required to give a report on his or her activities to the other partners. This shall also be done during the term of the contract of partnership if the objective of the partnership or the managerial duties dictate such reporting.

 (2) The partner authorised to manage the partnership shall inform the other partners of any significant circumstances concerning the partnership and, if they so request, provide them with information with respect to the transactions of the partnership.

 (3) A partner has the right to examine all documents relating to the partnership.

 (4) Agreements which derogate from the provisions of subsection (2)–(3) of this section are void.

§ 587.  Resolutions

 (1) A resolution of the partners is required in order to conclude any transaction beyond the scope of the everyday activities of the partnership. It is presumed that the consent of all partners is required to pass a resolution.

 (2) If the contract of partnership prescribes that any resolution be passed by a majority of votes, it shall be presumed that the majority is calculated on the basis of the number of partners.

§ 588.  Non-transferability of rights of partners

  Claims of partners which are created against one another on the basis of a contract of partnership are not subject to waiver, except for claims for compensation of costs arising from the management of the partnership and claims on profits or on assets acquired by liquidation.

§ 589.  Partnership property

 (1) Contributions made by partners and assets acquired for the partnership shall be transferred to the joint property of the partnership (partnership property).

 (2) Assets which are acquired on the basis of a right included in the partnership property or as compensation for the destruction of, damage to or seizure of objects included in the partnership property are also included in the partnership property.

 (3) If an obligor of a partnership performs an obligation to a partner and, while doing so, does not or need not know that the claim from which the obligation to be performed by the obligor arises is actually included in the partnership property, the partners shall not jointly claim performance of such obligation subsequently. In such case, the provisions provided in §§ 169 and 171 of this Act concerning waiver of claims apply correspondingly.

§ 590.  Integrity of partnership property

 (1) Partners shall not dispose of objects which are included in the partnership property or demand the division of the partnership property.

 (2) An obligor of a partnership shall not set off a claim which is included in the partnership property with a claim against a partner.

§ 591.  Submission of reports and distribution of profits

  Upon the dissolution of a partnership, the partners authorised to manage the partnership shall prepare a management report, submit it to the partners and make a proposal for the profits to be distributed or losses covered. If a partnership is founded for a period longer than one year, it shall be presumed that a report is to be prepared and profits distributed after the end of each financial year.

§ 592.  Shares in distribution of profits and covering of losses

 (1) If the shares of partners in the distribution of profits and covering of losses have not been determined, the share attributable to each partner shall be calculated in proportion to the size of the partner's contribution.

 (2) If the shares of partners have been determined only in the distribution of profits or in the covering of losses, it shall be presumed that such determination is valid for both profits and losses.

Chapter 32 RELATIONS OF PARTNERS WITH THIRD PARTIES  

§ 593.  Representation

  If, on the basis of the contract of partnership, a partner is authorised to manage the partnership, it shall be presumed that the partner is also authorised to represent other partners in relations with third parties.

§ 594.  Withdrawal of right of representation

 (1) A partner who holds a right of representation granted to him or her by the contract of partnership may be deprived of such right with good reason by a unanimous resolution of the other partners unless the contract of partnership prescribes that any resolution be taken by a majority of votes. The primary good reason shall be a material violation of an obligation by a partner or his or her inability to represent the partners.

 (2) If a partner is authorised to manage the partnership and represent other partners by the contract of partnership, he or she may be deprived of the right of representation only together with the withdrawal of his or her management right.

§ 595.  Liability of partners

  It shall be presumed that all partners are solidarily liable to third parties for obligations assumed by the partnership.

Chapter 33 DISSOLUTION OF PARTNERSHIP AND DEPARTURE OR EXCLUSION OF PARTNERS  

§ 596.  Bases for dissolution of partnership

 (1) A partnership is dissolved:
 1) by a resolution of the partners;
 2) by cancellation of the contract of partnership by a partner;
 3) by cancellation of the contract of partnership by an obligee of a partner in the case specified in § 599 of this Act;
 4) by the death of a partner;
 5) if the objective of the partnership is achieved or if it becomes clear that it is impossible to achieve the objective;
 6) upon the expiry of the term of the partnership if the partnership is founded for a specified term;
 7) if a partner is declared bankrupt.

 (2) The dissolution of a partnership does not terminate or alter the obligations of the partners to third parties.

§ 597.  Cancellation by partner

 (1) A partner has the right, at any time, to cancel a contract of partnership entered into for an unspecified term. A contract of partnership which is entered into for a specified term may be cancelled only with good reason. The primary good reason shall be a material violation of an obligation by another partner.

 (2) Even if a term for cancellation has been determined in the contract of partnership, the partnership may be cancelled without adhering to the term for cancellation for the good reason specified in subsection (1) of this section.

 (3) A contract of partnership entered into for the duration of the lifetime of a partner may be cancelled in the same manner as a contract of partnership entered into for an unspecified term. This also applies if partners continue the activities of a partnership entered into for a specified term after the expiry of the term.

 (4) A contract of partnership shall not be cancelled at a time when the dissolution of the partnership would unreasonably damage the lawful interests of the other partners. If a partner cancels a contract of partnership at such time without good reason, the cancelling party is required to compensate any damage incurred by the other partners for this reason.

 (5) Any agreements which preclude the right of a partner to cancel a contract of partnership with good reason or which limit such right, contrary to the provisions of subsections (1)–(4) of this section, are void.

§ 598.  Obligation to inform of death or bankruptcy of partners

  The successors of a partner shall immediately inform the other partners of the death of the partner even if the death of the partner does not constitute a basis for the dissolution of the partnership according the contract of partnership. A trustee in bankruptcy has the same obligation upon the declaration of a partner as bankrupt.

§ 599.  Cancellation by obligee of partner

 (1) If, in order to satisfy a claim made by an obligee of a partner, execution proceedings have been conducted against the assets of a partner but the claim made by the obligee has not been satisfied, the obligee has the right to cancel the contract of partnership on behalf of the partner without adhering to the term for cancellation.

 (2) Rights of a partner arising from the contract of partnership shall not be subject to a claim for payment made by an obligee of the partner during the term of the contract of partnership, except for the rights to a share of the profits.

§ 600.  Liquidation of partnership

 (1) Upon the dissolution of a partnership, the partnership shall be liquidated and the partnership property shall be distributed between the partners. The provisions concerning distribution of common ownership apply to liquidation unless otherwise provided by this Chapter.

 (2) Upon liquidation, partnership property shall be sold in so far as this is necessary to perform the obligations of the partnership and to return contributions.

§ 601.  Specifications of management right upon liquidation of partnership

 (1) Partners shall perform acts relating to liquidation jointly even if the management right was previously granted only to some of the partners. If the management right is granted to some of the partners by the contract of partnership, these partners may perform acts of management until such time as they become aware or should become aware of the dissolution of the partnership.

 (2) If, due to the joint management right arising from the dissolution of a partnership, the interests of the partnership are endangered as a result of the belated consent of all partners for the performance of a transaction, each partner has the right and obligation to continue performing the management obligations granted to him or her by the contract of partnership until such time as the partners are able to organise the performance of the act in another manner. The successors of a partner have the same obligation upon the death of the partner.

§ 602.  Performance of obligations

 (1) The obligations of a partnership for which the partners are solidarily liable shall be the first to be performed out of the partnership property, including the obligations which are divided between the partners with respect to obligees and the obligations with respect to a partner for which the other partners are liable as obligors. If an obligation has not fallen due or is contestable, the amount necessary for the performance of such obligation shall be deposited.

 (2) If the partnership property is insufficient to perform the solidary obligations, the partners shall be liable for the amount missing in proportion to their share in the covering of losses. If the amount to be borne by a partner cannot be obtained from the partner, the other partners shall cover the deficit in proportion to their share in the covering of losses, and the claim against the partner who failed to perform the obligation shall pass to them.

§ 603.  Return of contributions

 (1) After the obligations are performed, contributions made by the partners shall be returned from the remaining partnership property.

 (2) If the value of a contribution has decreased, the corresponding partner shall be compensated for the decrease in value.

 (3) If the return of a contribution is not possible, compensation shall be paid for the value of the contribution at the time it was made. Compensation shall not be paid for a contribution which consisted of the provision of services to the partnership or the delivery of objects for the partnership to use.

 (4) If the partnership property is insufficient to return the contributions, the provisions of subsection 602 (2) of this Act apply.

§ 604.  Distribution of residue

  Assets remaining after the performance of solidary obligations and the return of contributions belong to the partners in proportion to their share in the distribution of profits.

§ 605.  Continuation of partnership

  If the partnership contract prescribes that, upon the cancellation of the contract by a partner, the death of a partner or the declaration of a partner as bankrupt, the partnership is to be continued by the remaining partners, the partner is deemed to have departed from the partnership if any of these events occur.

§ 606.  Exclusion of partner

  If cancellation of the contract of partnership is based on violation of an obligation by a partner, the partner who violates the obligation may be excluded from the partnership by a joint resolution of the other partners. Exclusion shall be effected by making a petition concerning the partner to be excluded.

§ 607.  Payment of compensation to departed or excluded partner

  If a partner departs or is excluded from a partnership, the other partners shall return or pay compensation for the contribution made by the departed or excluded partner to the partner pursuant to the provisions of § 603 of this Act to the extent that the partner would have received upon the liquidation of the partnership if the partnership had been dissolved at the time of his or her departure or exclusion.

§ 608.  Liability of departed or excluded partner

 (1) A partner who has departed or been excluded from the partnership shall be solidarily liable with the other partners for any obligation of the partnership with respect to obligees which arose before the departure or exclusion of the partner from the partnership if the obligation has fallen due or will fall due within five years after the departure or exclusion of the partner from the partnership.

 (2) If an obligee of a partnership demands the performance of an obligation specified in subsection (1) of this section from a partner who has departed or been excluded from the partnership, the other partners shall be liable for the performance of the obligation of the partnership with respect to the partner who has departed or been excluded from the partnership. If such obligation has not yet fallen due, the other partners shall provide the partner who has departed or been excluded from the partnership with security at the partner's request.

 (3) If the partnership property is insufficient to perform the joint obligations and cover the contributions, the partners who have departed or been excluded from the partnership shall be liable to the other partners for the amount missing in proportion to their share in the covering of losses.

§ 609.  Completion of transactions

 (1) A partner who has departed or been excluded from a partnership shall participate in the distribution of profits and the covering of losses of the partnership arising from the transactions which were not completed by the time of his or her departure or exclusion. The other partners have the right to complete such transactions in the manner which they consider to be the most profitable.

 (2) With regard to transactions specified in subsection (1) of this section, a departed or excluded partner may, at the end of each financial year, demand that the partnership submit a report concerning transactions which have been completed in the meantime, pay the amount belonging to the partner and communicate information concerning the status of transactions not yet completed.

Chapter 34 CONTRACT OF SILENT PARTNERSHIP  

§ 610.  Definition of contract of silent partnership

 (1) In a contract of silent partnership, the silent partner undertakes to make a specific contribution to the management of the enterprise or a part thereof and the undertaking undertakes to pay the silent partner a share of the profits corresponding to the silent partner's contribution.

 (2) It shall be presumed that the assets delivered by a silent partner are transferred to the property of the undertaking.

 (3) Rights and obligations which arise from transactions concluded in the process of managing of an enterprise are created only with respect to the undertaking. The undertaking shall manage the enterprise diligently and act in good faith with respect to the silent partner.

 (4) The provisions concerning contracts of partnership apply to contracts of silent partnership unless the provisions of this Chapter provide otherwise.

§ 611.  Transfer of rights and obligations arising from contract of silent partnership

  The rights and obligations of a silent partner arising from a contract of silent partnership may only be transferred with the consent of the undertaking. Consent thereto may be granted in advance in the contract of silent partnership.

§ 612.  Withdrawal of management right from silent partner

  If a silent partner has been granted the right in a contract to participate in the management of the enterprise, the undertaking may deprive the silent partner of such right only in the cases prescribed by the contract, in the case of a material violation of an obligation by the silent partner, or in the case of the inability of the silent partner to manage the company.

§ 613.  Silent partner's inspection right

  A silent partner has the right to inspect the accounting records of an undertaking which concern the economic activities in which the silent partner participates, and to receive a copy of the annual report of the undertaking.

§ 614.  Distribution of profits and covering of losses

 (1) It shall be presumed that the profits of an enterprise are distributed and the losses covered corresponding to the relationship between the value of the enterprise and the contribution of the silent partner at the time of entry into the contract of silent partnership.

 (2) Any agreement which precludes the participation of a silent partner in the distribution of profits is void.

 (3) If, pursuant to the contract of silent partnership, a silent partner participates in the management of the enterprise, the silent partner has the right to receive a reasonable share of the profits for such activity. The remaining profits shall be distributed pursuant to the provisions of subsection (1) of this section.

§ 615.  Calculation of profits and losses

 (1) An undertaking shall calculate profits and losses within two months after approval of the annual report and pay the share attributable to the silent partner thereto.

 (2) A silent partner is not required to return a share of the profits which has already been paid thereto after subsequent losses.

 (3) If a silent partner has not paid the contribution in full or the contribution has decreased due to losses, any profits created shall be used primarily to cover the contribution of the silent partner.

 (4) It shall be presumed that the share of the profits which is not paid to a silent partner does not increase the contribution of the silent partner.

§ 616.  Death of silent partner

  If a silent partner dies, the successor of the silent partner shall become the party to the contract of silent partnership. The contract of silent partnership may be cancelled by either the undertaking or the successor within three months after the death of the silent partner and the cancellation is effective as of the end of the financial year.

§ 617.  Termination of contract of silent partnership

 (1) Upon the termination of a contract of silent partnership, the undertaking shall return the contribution of the silent partner, either increased by profits or reduced as a result of losses, within two months after the dissolution of the partnership.

 (2) A silent partner shall also participate in the distribution of profits and the covering of losses which arise from any transactions not completed by the time of the termination of the silent partnership.

§ 618.  Bankruptcy of undertaking

 (1) A contract of silent partnership terminates upon the declaration of the undertaking as bankrupt, and the silent partner may, on the basis of the silent partner's contribution, file a claim against the undertaking as a creditor in bankruptcy proceedings to the extent which the contribution of the silent partner exceeds the share of the silent partner in the covering of losses.

 (2) If a silent partner has not paid the contribution, the silent partner shall transfer the missing share to the bankruptcy estate in the extent which is necessary to cover the silent partner's share in the covering of losses.

Part 8 CONTRACTS FOR PROVISION OF SERVICES 

Chapter 35 AUTHORISATION AGREEMENT  

§ 619.  Definition of authorisation agreement

  By an authorisation agreement, one person (the mandatary) undertakes to provide services to another person (the mandator) pursuant to an agreement (to perform the mandate) and the mandator undertakes to pay remuneration to the mandatary therefor if so agreed.

§ 620.  Diligence of mandatary upon performance of mandate

 (1) Upon the performance of a mandate, the mandatary shall act in a loyal manner with respect to the mandator and exercise the necessary level of diligence commensurate with the nature of the mandate.

 (2) A mandatary shall perform the mandate to the maximum benefit of the mandator in the light of and according to the mandatary's knowledge and abilities and shall prevent any damage to the property of the mandator. In addition, a mandatary who is acting for the purposes of the mandatary's economic or professional activities shall apply the generally recognised skills of the mandatary's profession.

§ 621.  Instructions of mandator

 (1) A mandatary shall adhere to the instructions provided by the mandator upon performance of the mandate. A mandator shall not provide specific instructions concerning the manner or conditions of performance of the mandate in the case where the mandatary is expected to perform the mandate based on the mandatary's professional skills or abilities.

 (2) If a mandatary wishes to deviate from the instructions of the mandator, the mandatary shall inform the mandator thereof and wait for the decision of the mandator, except in the case where a delay would be likely to cause unfavourable consequences for the mandator and if it may be presumed under the circumstances that the mandator will approve of the deviation.

 (3) In the case where adherence to the instructions of a mandator would be likely to cause unfavourable consequences for the mandator, the mandatary shall comply with the instructions only after the mandatary has called the mandator's attention to such consequences and if the mandator fails to modify the instructions.

 (4) A mandatary shall not be liable for violation of the obligations provided for in subsections (1)–(3) of this section if the mandator later approves of the action of the mandatary.

§ 622.  Performance of mandate in person

  It is presumed that a mandatary shall perform the mandate in person. A mandatary also has the right to use the assistance of third parties in performing the mandate.

§ 623.  Conflict of interests

 (1) In the case where the object of a mandate is entry into a transaction, the mandatary may concurrently be the other party to the transaction to be entered into for performance of the mandate or the mandatary of the other party to the transaction only if the possibility of a conflict of interests is precluded.

 (2) In the case of a mandate specified in subsection (1) of this section, the mandatary shall inform the mandator of the mandatary's direct or indirect interest with regard to the transaction which is the object of the mandate.

 (3) A transaction entered into by the mandatary with the mandatary upon the performance of a mandate does not restrict the right of the mandatary to receive remuneration and to the reimbursement of expenses if the provisions of subsection (1) of this section have been adhered to.

 (4) The provisions of subsections (1)–(3) of this section do not preclude or restrict the validity of the right of representation of a mandatary.

§ 624.  Notification obligation of mandatary

 (1) The mandatary shall inform the mandator of all relevant facts relating to performance of the mandate, above all of facts which may cause the mandator to modify the mandator's instructions, and, at the request of the mandator, shall provide the mandator with information on performance of the mandate.

 (2) Upon performance of a mandate, the mandatary shall provide the mandator with an overview of the expenditure and revenue relating to performance of the mandate together with the documentation which is the basis for the overview.

 (3) Any agreement to derogate from the provisions of subsections (1) or (2) of this section to the detriment of the mandator shall be entered into in writing.

§ 625.  Duty to maintain confidentiality

 (1) During the performance of a mandate, the mandatary shall maintain the confidentiality of facts which become known thereto in connection with the mandate and which the mandator has a legitimate interest in keeping confidential, above all by maintaining the mandator's production and business secrets. A mandatary is not required to maintain confidentiality if the mandator has granted the mandatary permission to disclose facts or if the mandatary's duty to disclose arises from law.

 (2) A mandatary's duty specified in subsection (1) of this section shall continue after the expiry of the authorisation agreement to the extent needed to protect the legitimate interests of the mandator.

§ 626.  Obligation to transfer

 (1) A mandatary shall hand over anything received or created in connection with performance of the mandate to the mandator, along with anything which the mandatary received and did not use to perform the mandate.

 (2) If a mandatary uses money in the mandatary's own interests despite being required to use the money in the interests of the mandator or to hand over the money to the mandator, the mandatary shall pay interest in an amount provided by law for the time during which the mandatary used the money.

 (3) Claims and movables which a mandatary acquires when performing a mandate in the mandatary's name but on account of the mandator, and claims and movables which the mandator transfers to the mandatary for performance of the mandate are not included in the bankruptcy estate of the mandatary and they cannot be subject to a claim against the mandatary in an enforcement procedure.

§ 627.  Remuneration of mandatary

 (1) In the case where the amount of remuneration payable has not been agreed upon in the authorisation agreement, remuneration shall be paid if it can be reasonably presumed that the mandate would only be performed for remuneration, above all if the mandatary performed the mandate for the purposes of the mandatary's economic or professional activities.

 (2) If the amount of remuneration has not been specified, remuneration which is reasonable under the circumstances shall be paid.

§ 628.  Procedure for payment of remuneration to mandatary and for reimbursement of expenses and compensation of damages

 (1) If the remuneration payable to a mandatary is determined on the basis of certain periods of time, the remuneration shall be paid after each corresponding period. In the case of a mandate where the object is entry into a transaction, it is presumed that remuneration is payable after performance of the mandate.

 (2) A mandator shall reimburse the mandatary for any reasonable expenses which the mandatary has incurred in performing the mandate and which the mandatary could have deemed to be necessary in the circumstances, except in the case where the expenses are to be covered from the remuneration of the mandatary. It is presumed that the expenses arising from the performance of a mandate which are usually incurred by the mandatary and the expenses which the mandatary would have incurred even without entering into an authorisation agreement shall be covered from the remuneration of the mandatary.

 (3) The mandator shall release the mandatary from obligations to third parties which the mandatary has assumed for performance of the mandate.

 (4) Before commencing performance of a mandate, the mandatary has the right to demand that an advance payment be made by the mandator in a reasonable amount for the remuneration payable and expenses to be reimbursed.

 (5) A mandator shall compensate for damage which is caused to the mandatary upon performance of a mandate and which arises from the risks usually involved in the performance of such a mandate or from the instructions of the mandator, except in the case where damage is to be covered from the remuneration of the mandatary or if the damage was caused by the mandatary behaving in a manner which, under the circumstances, could not be deemed to be necessary for performance of the mandate.

 (6) It is presumed that remuneration paid to a mandatary covers the damage specified in subsection (5) of this section.

§ 629.  Payment of remuneration in event of expiry of authorisation agreement

 (1) If the mandatary is to be remunerated after performance of the mandate or expiry of the term granted for performance of the mandate and if the authorisation agreement expires before the mandate is performed or before the expiry of the term granted for the performance thereof, the mandatary is entitled to receive a reasonable part of the remuneration. In such case, the mandatary is entitled to receive full remuneration only if the agreement was terminated due to circumstances dependent on the mandator and if the payment of remuneration is justified under the circumstances.

 (2) Upon determination of the amount of remuneration in the case specified in subsection (1) of this section, anything which has already been performed by the mandatary, the gains created thereby to the mandator and the reason for termination of the agreement shall taken into consideration among other circumstances. Any amounts which the mandatary would have saved as a result of the termination of the agreement or which the mandatary would have obtained in any other manner or could reasonably have been expected to obtain shall be deducted from the remuneration.

 (3) If the mandatary cancels the authorisation agreement before the performance thereof, the mandatary has the right to demand that remuneration be paid to the extent which corresponds to the services already provided and that expenses not covered by the remuneration be reimbursed in so far as the mandator has an interest in the services provided up to that point.

§ 630.  Ordinary cancellation of authorisation agreement entered into for unspecified term

 (1) Both parties have the right to cancel an authorisation agreement entered into for an unspecified term at any time until the mandate is performed.

 (2) However, a mandatary has the right to cancel an authorisation agreement entered into for an unspecified term only on condition that the mandator can receive the service or enter into the transaction which is the object of the mandate in another manner. If the mandatary cancels the authorisation agreement without considering the above, the mandatary shall compensate the mandator for any damage caused thereby.

 (3) If an authorisation agreement is entered into for the life of one party or for a period longer than five years, the mandatary has the right to cancel the contract once five years have passed from the date of entry into the contract by giving at least six months' advance notice.

§ 631.  Extraordinary cancellation of authorisation agreement

  Both parties have the right to cancel both an authorisation agreement entered into for a specified term and an authorisation agreement entered into for unspecified term without observing the provisions of § 630 of this Act if it becomes evident that, bearing in mind all the circumstances and the interests of both parties, the party wishing to cancel the agreement cannot be expected to continue performance of the authorisation agreement until expiry of the term for cancellation or the term of the agreement or until the mandate is performed.

§ 632.  Death or bankruptcy of mandator

 (1) It is presumed that an authorisation agreement does not expire upon the death of the mandator.

 (2) In the event of the bankruptcy of the mandator, the authorisation agreement shall expire upon the declaration of bankruptcy, except in the case where there is no connection between the authorisation agreement and the bankruptcy estate.

 (3) If an authorisation agreement expires upon the death of the mandator or upon the declaration of the mandator as bankrupt, the authorisation agreement is nevertheless deemed to be in force until such time as the mandatary becomes aware or ought to become aware of the death of the mandator or of the declaration of the mandator as bankrupt.

§ 633.  Death or bankruptcy of mandatary

 (1) It is presumed that an authorisation agreement expires upon the death of the mandatary.

 (2) In the event of the bankruptcy of the mandatary, the authorisation agreement shall expire upon the declaration of bankruptcy, except in the case where there is no connection between the authorisation agreement and the bankruptcy estate.

§ 634.  Notification obligation of successors

  In the event of the death of a party to an authorisation agreement, the successors of the party shall immediately inform the other party thereof.

Chapter 36 CONTRACT FOR SERVICES  

§ 635.  Definition of contract for services

 (1) By a contract for services, one person (the contractor) undertakes to manufacture or modify a thing or to achieve any other agreed result by providing a service (work), and the other person (the customer) undertakes to pay remuneration therefor.

 (2) The provisions of §§ 620–626, subsections 628 (2) and (3), § 629 and §§ 631–634 of this Act apply to a contract for services where the object of the contract is entry into a transaction.

 (3) It is presumed that a contractor is not required to perform the obligations arising from the contract in person.

 (4) A consumer contract for services is a contract for services entered into by a contractor acting for the purposes of the contractor's economic or professional activities and a customer who is a consumer where the object of the contract is the provision of a service with regard to a movable of the consumer or the manufacture or production of a movable for the consumer.

§ 636.  Obligation to deliver

 (1) A thing produced as work shall be delivered to the customer by the contractor. If the thing is manufactured from material provided by the contractor, the contractor shall enable the ownership of the thing to be transferred to the customer.

 (2) If a thing to be manufactured is a fungible thing, the provisions concerning sale apply to the obligation to deliver.

 (3) If, upon the manufacture of a thing, it is agreed that the ownership of the thing will remain with the contractor until the remuneration is paid, the provisions of § 233 of this Act apply.

 (4) Failure of a contractor to deliver a thing to the customer in due time under a consumer contract for services is deemed to be a fundamental breach of the contract.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 637.  Duty to pay fee

 (1) If remuneration or the amount thereof has not been agreed in a contract for services, the standard remuneration or, if there is no standard remuneration, reasonable remuneration under the circumstances is payable.

 (2) It is presumed that a contractor shall not demand remuneration for preparation of the budget for the work.

 (3) The claim of a contractor for payment falls due after the completion of the work.

 (4) If acceptance of work by a customer has been agreed upon or is usual, the claim of the contractor for payment falls due after the work has been accepted or is deemed to have been accepted. If work is to be delivered in parts and the price has also been calculated in parts, each part shall be paid for after the acceptance of the corresponding part of the work.

 (5) A customer is not required to pay for work before having the opportunity to examine the thing, unless the agreed manner of delivery or the terms and conditions of payment do not grant the customer such opportunity.

 (6) [Repealed - RT I, 04.02.2011, 1 - entry into force 05.04.2011]

§ 638.  Duty to accept work

  A customer is required to accept completed work if the delivery of the work had been agreed upon or is usual due to the nature of the work. Work is also deemed to have been accepted if the customer fails, without legal basis, to accept the completed work during a reasonable term granted by the contractor to the customer therefor.

§ 639.  Budget overdraft

 (1) A budget for the work, which may be binding on the contractor or not, may be agreed in the contract of services. It is presumed that the budget is binding unless agreed otherwise.

 (2) In the event of a significant overdraft of a budget which is not binding budget, the contractor may demand that remuneration be paid in the amount exceeding the amount prescribed in the budget unless the overdraft was foreseeable. In such case, the contractor shall immediately notify the customer of the significant overdraft. In the case of failure to notify, the contractor has the right to demand that the amount exceeding that prescribed in the budget be paid only to the extent to which the customer was unjustifiably enriched as a result of the overdraft.

 (3) If the customer cancels the contract due to a budget overdraft, the customer is not required to pay remuneration in the amount exceeding the amount prescribed in the budget.

§ 640.  Transfer of risk of accidental loss or damage

 (1) The customer shall pay the contractor for work performed also in the case where the work was accidentally destroyed or damaged after the risk of accidental loss of or damage to the thing had passed to the customer.

 (2) A contractor shall bear the risk of accidental loss or damage until the completion of the work. If acceptance of the work by a customer has been agreed upon or if this is usual, the contractor shall bear the risk of accidental loss or damage until the work has been accepted or is deemed to have been accepted.

§ 641.  Conformity of work

 (1) Work shall conform to the contract. Documents accompanying work shall also conform to the contract.

 (2) Work does not conform to the contract if, among other things:
 1) the work does not have the agreed qualities;
 2) in the absence of an agreement concerning the qualities of the work, the work is not fit for the specific purpose for which the customer needs it and of which the contractor was aware or ought to have been aware at the time of entry into the contract if the customer could reasonably have expected to be able to rely on the professional skills or expertise of the contractor, and in other cases for the purpose for which work of the same description would ordinarily be used;
 3) the use of the work is hindered by provisions of legislation of which the contractor was aware or ought to have been aware at the time of entry into the contract;
 4) third parties have claims or other rights which they may submit with respect to the work;
 5) under a consumer contract for services, the work is not of the quality which is usual for such type of work and which the customer may reasonably have expected based on the nature of the work and considering the declarations made publicly by the contractor with respect to the particular qualities of the work, in particular in advertising the work or on labels, unless the contractor proves that the declarations had been modified by the time of entry into the contract or that the declarations did not affect entry into the contract.

 (3) The contractor is not liable for the non-conformity of work resulting from the instructions provided by the customer, defects in the material supplied by the customer or preliminary work performed by third parties if the contractor had sufficiently checked the instructions of the customer, the materials or the preliminary work.

 (4) The lack of conformity of a thing produced as work resulting from the incorrect installation of the thing is deemed to be equal to a lack of conformity resulting from the work if the installation was carried out by the contractor or under the contractor's responsibility. The same applies if the thing is installed by the customer and the incorrect installation thereof results from insufficient information provided by the contractor with respect to installation of the thing.

§ 642.  Liability of contractor in event of lack of conformity of work

 (1) The contractor is liable for the lack of conformity of work at the time when the risk of accidental loss or damage passes to the customer even if the lack of conformity only becomes evident later. Under a consumer contract for services, the contractor is liable for the lack of conformity of work at the time of delivery of the work to the consumer even if the passing of the risk of accidental loss or damage was agreed at an earlier date.

 (2) Under a consumer contract for services, the contractor is liable for any lack of conformity of work which becomes evident within two years as of the delivery of the work to the consumer. Under a consumer contract for services, it is presumed that any lack of conformity which becomes evident within six months as of the date of delivery of the work to the customer already existed before delivery of the work, unless such presumption is contrary to the nature of the work or lack of conformity.

 (3) The contractor is also liable for the lack of conformity of work which occurs after the risk of accidental loss of or damage to the thing passes to the customer if the lack of conformity of the work arises from a violation of the obligations of the contractor.

§ 643.  Duty to examine work

  If a customer has entered into a contract for services in connection with the customer's professional or economic activities, the customer shall promptly examine the work performed or have the work performed examined.

§ 644.  Notification of lack of conformity of work

 (1) The customer shall notify the contractor of the lack of conformity of work within a reasonable time after the customer becomes or should have become aware of the lack of conformity. Under a consumer contract for services, the consumer shall notify the contractor of the lack of conformity of work within two months.

 (2) A customer who entered into a contract for services in connection with the customer's professional or economic activities shall provide a detailed description of the lack of conformity upon notification thereof.

 (3) The customer shall not rely on the lack of conformity of work if the customer does not notify the contractor of the lack of conformity in due time or, in the case of a contract entered into by a customer in connection with the customer's professional or economic activity, if the customer does not provide a sufficiently detailed description of the lack of conformity. If failure to notify is reasonably excusable, the customer may, by relying on the lack of conformity, still reduce the amount of remuneration payable or claim compensation for damage from the contractor, except for any loss of profit.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 645.  Specifications for relying on lack of conformity of work

 (1) A customer may rely on the lack of conformity regardless of the customer's failure to examine the work or failure to give notification of the lack of conformity in due time if:
 1) the lack of conformity is caused due to the intent or the gross negligence of the contractor;
 2) the contractor is aware or ought to be aware of the lack of conformity or the circumstances related thereto and does not inform the customer thereof.

 (2) Upon failure to perform the obligation to examine work, a customer who is acting in the course of the customer's economic or professional activities may rely on the lack of conformity of a thing, which the customer could have discovered by examining the thing only if the customer proves that the work already lacked conformity at the time when the risk of accidental loss or damage passed to the customer.

 (3) A contractor shall not rely on an agreement which precludes or restricts the rights of the customer which are related to the lack of conformity of work if the contractor was aware or ought to have been aware that the work did not conform to the contract and failed to notify the customer thereof.

§ 646.  Requirement to perform contract as legal remedy

 (1) If work does not conform to the contract, the customer may demand that the work be improved or substitute work be performed by the contractor if this does not cause the contractor to incur unreasonable expenses or suffer unreasonable inconvenience taking into consideration, inter alia, the value of the thing and the significance of the lack of conformity. The contractor may, instead of improving the work, perform substitute work which conforms to the contract.

 (2) In the case specified in the first sentence of subsection (1) of this section and provided that the given contract for services is not a customer contract for services, the customer may, in the event of the lack of conformity of work, demand that substitute work be performed only if the lack of conformity of the work constitutes a fundamental breach of the contract.

 (3) If the contractor performs work which conforms to the contract to replace non-conforming work, the contractor may demand that the customer return the non-conforming work. In such case, the provisions of §§ 189–191 of this Act apply.

 (4) The contractor shall incur the expenses relating to remedying the lack of conformity of work or performance of substitute work, in particular expenses relating to transport, work, travel and materials.

 (5) If the customer legitimately demands that the work be improved and the contractor fails to do this within a reasonable period of time, the customer may improve the work or have the work improved and claim reimbursement of any reasonable expenses incurred thereupon from the contractor.

 (6) The customer loses the right to demand that the contractor improve the work or perform substitute work if the customer fails to submit a corresponding request to the contractor with the notice concerning the lack of conformity of the work or w