Juristica International

1. Introduction

The aim of this article is to find an answer to the question of whether agreements and decisions as multilateral transactions differ from one another and, if so, how they differ and what the legal meaning of those differences is.

Agreements and decisions pertaining to the joinder of parties contain at least two declarations of will. Unlike a decision, an agreement may include not declarations of will but will performances (Willensbetätigungen)—that is, expression of will performed without the intention to tell anybody about one’s intention to cause a legal consequence.  *1 The standard example of such agreement is the agreement on transfer of cash into ownership, as concluded by the representative who manages the cash account of a party, on his behalf, with regard to himself, and which consists of two expressions of will that are not in pursuit of the aim of communication, aimed at the transfer of the right of ownership for currency notes, and the real act (of transfer of currency units from the cash account of the representative to the cash account of the party he is representing).  *2

Clause 154 of the Civil Code (CC) of the Russian Federation (RF) distinguishes between bilateral and multilateral agreements (deals), not mentioning decisions as multilateral deals. Such differentiation, which encourages jumping to an inappropriate conclusion with respect to multilateral deals being limited to agreements entered into by three or more parties, is not justified, since a bilateral agreement is a type of multilateral agreement.  *3 As for decisions pertaining to the joinder of the parties, the omission of this type of multilateral deal from clause 154 of the Civil Code of the RF does not change anything in the merits of the case: since the decision consists of several expressions of will, aimed at causing legal consequences that correspond to their contents, it cannot be anything else but a multilateral deal. To eliminate the shortcomings mentioned above from clause 154 of the CC of the RF, it should reflect the fact that multilateral deals—i.e., those deals that are performed by two or more parties—that are set in contrast to unilateral deals are divided into agreements and decisions on the joinder of parties.

2. Agreements

Since we are not dealing with agreements including will performances, the agreement consists of concerted expressions of will. That the expressions of will are concerted means that each party has expressed its will in relation to another party, aimed at bringing about one and the same legal consequence (for example, establishing the obligations of the seller to transfer the object and the right of ownership of this object and the obligation of the buyer to pay the purchase price). Concerted expressions of will, as a rule, are not identical, meaning that the parties to the agreement shall express their will via different agreement functions (as in the case of a seller who says: ‘I’m selling’ and a buyer who says: ‘I’m buying’).  *4 However, some agreements (for example, the contract of particular partnership—see clause 1041 (1) of the CC of the RF) consist of identical expressions of will, since their parties perform similar contractual functions.

The parties to the agreement wish to create the legal consequence in conformance with the contract’s contents, not isolated from each other but in connection with the expression of will of another party.  *5 This is why, on its own, each of the expressions of will included in the agreement is not a unilateral deal.  *6 Hence, if a minor concludes an agreement for the conclusion of which the consent of his legal representative is required, the expression of will of the minor in the absence of said consent shall not be the expression of will that cannot come into effect, which would be the case if he were to carry out a unilateral deal; jointly with the expression of will of the contractual counterparty, it can be approved and thus brought into effect by the legal representative.  *7

The actual composition of the agreement usually includes two concerted expressions of will. For example, a bank-guarantee contract (see clause 368 of the CC of the RF)  *8 consists of the expression of will of a guarantor and the expression of will of a beneficiary, while a contract for forgiving of debt (see clause 415 of the CC of the RF)  *9 consists of the expression of will of a debtor and of a creditor. However, agreements can consist of expressions of will in greater numbers. In particular, this is the case with a simple partnership agreement (see clause 1041 (1) of the CC of the RF) that includes the expressions of will of three of more partners. Such agreements should be differentiated from those agreements consisting of two expressions of will under which each of them is performed by several parties (for example, several sellers and buyers within one purchase and sale contract). Each party to agreements that contain three or more expressions of will expresses his will in relation to another party, while the parties representing one and the same party to an agreement consisting of two expressions of will perform joint expression of will in relation to another party to the agreement, which is represented by several parties.

There are agreements that, alongside expression of will, also have other constituent elements.  *10 For example, the actual composition of the tradition—or, in what amounts to the same thing—the contract for transfer of a movable object into ownership  *11 consists of agreement on the transfer of the right of ownership of the object and of the real act (the transfer of the object)  *12  *13 ; the contract for the transfer of the immovable object into ownership includes agreement on the transfer of that ownership right and the state registration of this agreement  *14 . The notarised claim-assignment contract, based on the transaction, consists of the agreement on the transfer of this claim and the actions of the notary public certifying the act.  *15

The entry into effect of some contracts depends on the availability of a prerequisite lying outside the framework of their actual composition.  *16 A prerequisite for the entry of the contract into effect might be another transaction (for example, the creditor’s consent to the transfer of the debt—see clause 391 (1) of the CC of the RF), an administrative act (for example, state registration of the contract of lease of a building or structure, entered into for the term of at least one year—see clause 651 (2) of the CC of the RF  *17 ), violation of the law (for example, the non-performance of an obligation secured by a bank guarantee, on the part of the principal being a prerequisite for the entry into effect of a bank-guarantee contract  *18 ), etc.

Many agreements are binding deals. Examples include contracts of purchase and sale (see clause 454 (1) of the CC of the RF), donation contracts (see sub-clause 572 (1) 1) of the CC of the RF), and leasing contracts (see sub-clause 606 (1) of the CC of the RF).  *19 Depending on whether binding contracts are entered into with the aim of the establishment of regulatory or protective obligations, they are divided into regulatory, regulatory-protective, and protective contracts.  *20 The usual examples of regulatory contracts are the barter contract (see sub‑clause 567 (1) of the CC of the RF), the contract for rental of living accommodation (see sub-clause 671 (1) of the CC of the RF), and the contract of work and labour (see sub-clause 702 (1) of the CC of the RF). A regulatory-protective contract is the contract of property insurance (see clause 919 (1) of the CC of the RF).  *21 The protective contracts are the forfeit (see clause 330 (1) of the CC of the RF), the contract of surety (see clause 361 (1) of the CC of the RF), and the bank-guarantee contract (see clause 368 of the CC of the RF).  *22

Binding contracts exist in a contrast to regulatory contracts. The former often are entered into with the aim of the performance of binding contracts, preparing the transfer of property rights—in particular, the right of ownership—and mediate that transfer. For example, being a binding transaction, the contract of purchase and sale (covered by clause 454 (1) of the CC of the RF) obliges the seller to transfer the object and the right of ownership thereto, while it binds the buyer to pay for the object. The transfer of the ownership right for the purchased object takes place through the real contract (tradition), which for the seller is the order and for the buyer is the acquisitive transaction. The payment of the purchase price, since it is performed by means of paying in cash—i.e., through the transfer of the right of ownership into currency units—is also mediated by the real contract, the actual composition of which includes the agreement on the transfer of the right of ownership for currency units and the real act (the transfer of currency units). Thus the economic outcome pursued by the parties comes about only through the performance of the three transactions mentioned above.

In addition to the transfer of the movable object into ownership, examples of regulatory contracts include the contract for the establishment of servitude (see clause 274 (3) of the CC of the RF); the pledge agreement (see clause 341 of the CC of the RF); the claim-assignment agreement (see sub-clause 382 (1) 1) of the CC of the RF); the contract for the transfer of debt (see clause 391 (1) of the CC of the RF); the contract of the forgiving of debt (see clause 415 of the CC of the RF); the contract of establishment of the limited real right of the buyer to an object sold and transferred to him with a proviso of preservation of the right of ownership (see clause 491 of the CC of the RF); the contract of establishment of the limited real right of the tenant to a movable object transferred to his temporary ownership and use  *23 ; and the marriage contract (see clause 40 of the FC of the RF), through which those to be spouses transform the right to joint property belonging to them into the sole property right of the husband.  *24

The legal consequence of the contract usually comes about within the legal sphere of the parties entering into it. Under the conditions for the validity of the principle of private autonomy (see clause 1 (1), sub-clause 2 (1) 1) of the CC of the RF), the parties to a contract cannot change the legal status of a party not entering into the contract against his will by their agreement.

If a party enters into the contract as a representative (see sub-clause 182 (1) 1) of the CC of the RF), the person who is being represented becomes the party to the contract. This is not a departure from the principle of private autonomy, since in the case of voluntary representation, the person represented grants, of his own will, the authorisation right to the representative, which enables him to enter into the contract on behalf of and with direct effect for the person being represented; in the case of legal representation, the person being represented is usually unable to enter into contracts independently, which is why his legal status can be changed only at the will of his legal representative.  *25

An exception to the principle of private autonomy is the possibility of entering into a contract on behalf of a third party, prescribed by clause 430 (1) of the CC of the RF, according to which the debtor undertakes to make provision not for his counteragent but for a third party indicated in the contract. However, the law minimises the effect of this exclusion by authorising the third party to reject the claim against the debtor that he has acquired against his will (see clause 430 (4) of the CC of the RF) if he is not interested in preserving this claim for himself.  *26

3. Decisions

The main difference between decisions and contracts lies in the fact that the principle of equality of the parties underlies any contract, while the basis for any decision is formed by the decision of the partners to manage the activities of a general partnership (see clause 71 (1) of the CC of the RF), the decision of a general meeting of shareholders to introduce changes to the articles of association of a joint-stock company (see clause 49 (4) of federal law 208-ФЗ, ‘On Joint-Stock Companies’, passed on 26 December 1995), the decision of a meeting of creditors about establishment of the size and procedure for payment of additional compensation to insolvency officials (see sub-clause 12 (2) 7) of federal law 127-ФЗ, ‘On Insolvency (Bankruptcy)’, passed on 26 October 2002), a decision of a general meeting of the owners of rooms in a block of flats about its renovation (see sub-clause 44 (2) 1) of the Housing Code of the Russian Federation ), etc.—it is based on the principle of majority rule.  *27

Let’s have a look at the most typical features of the decision about the joinder of parties as a type of multilateral deal.

The decision is made by means of voting on the issue put to the vote. The voting can take place in a meeting or outside a meeting, which means that it can take place either in the presence of the voters or in their absence. Accordingly, clause 50 (2) of federal law 208-ФЗ, ‘On Joint‑Stock Companies’, prescribes voting at a meeting when the decision is being made by shareholders and about the election of the Board of Directors, while clause 38 (1) of the federal law On Limited Liability Companies (14-ФЗ), passed on 8 February 1998, prescribes the possibility of voting outside the meeting when the members of the company are making a decision about the allocation of issue-grade securities. The procedure for voting is established by special legislation and acts of the company in which the voting takes place.

By voting on the issue put to the vote, each participant expresses his will in terms of a ‘yes’ or ‘no’.  *28 This expression of will, which, together with the expressions of will of other voters, constitutes the actual composition of the decision, is not a unilateral deal, since it cannot in itself cause legal consequence corresponding to its content.  *29 The expression of will of a person taking part in making of a decision has to be expressed to the other participants or to their representative, who is usually the chairman of the meeting or another person authorised to oversee the voting.  *30

Expressions of will of people taking part in making a decision are similar to expressions of will of the parties to a contract, since both of them are mutual expressions of will—i.e., expressions of will performed by the parties in relation to each other or to representatives of other parties. However, unlike the expressions of will of contractual counteragents, the expressions of will of people taking part of making a decision can be aimed at different legal consequences, since the participants express their will in the sense of a ‘yes’ or ‘no’.  *31 Since the people taking part in making a decision usually perform expressions of will in relation to one and the same person, their expressions of will are similar to the expressions of will of people performing a joint act. However, in the joint act, the expressions of will, which are identical in their content, are expressed by one party to the deal and are directed to their recipient as an addressee of a unilateral deal or to the common representative of several parties, acting on one side of the contract, while the people taking part in the decision-making express their will, meaning ‘yes’ or ‘no’, as different parties to the deal and address the person carrying out the voting as the representative of another party to the deal; hence, in a contradiction to the opinion of A. Tuhr  *32 and H. Brox  *33 , the expressions of will of the people taking part in making a decision are not parallel expressions of will.

The decision is aimed at the formation of common will of those who are part of the company  *34  *35 , which means the will of the majority of voters, who have voted with similar meaning, and also at the establishment of an obligation of each member of the company to other members to behave in accordance with the common will along, with the right of each participant, corresponding to this obligation, to demand this type of behaviour from other participants.

The common will of the company can be the will of the simple majority of the voters, expressed during voting. A simple majority of the voters may consist of a minority of the members of the company. In particular, this is the case if only eight out of 10 members of the company are present at the meeting at which the voting is taking place and three of them vote with the meaning ‘yes’ whilst five abstain from voting. So that the most important decisions of the company cannot be made via votes of a minority of members, the law sometimes prescribes the formation of common will of the company by the qualified majority of votes. For example, the decision to introduce changes to the articles of association of a limited liability company is made through a majority of not less than two thirds of the total number of votes of the members of the company (see sub-clause 37 (8) 1) of federal law 14-ФЗ, ‘On Limited Liability companies’), while a decision about the restructuring of a joint-stock company shall be made by a majority of three fourths of the votes of shareholder-owners of voting shares taking part in the general meeting of shareholders (see clause 49 (4) of federal law 208‑ФЗ, ‘On Joint-Stock Companies’). The formation of common will of the company by simple or qualified majority of votes may be prescribed not only by law but also through a contract (e.g., a simple partnership contract—see clause 1044 (5) of the CC of the RF).

Cases wherein the common will of the company is determined by the will of half or even a minority of the people taking part in making a decision are possible too. Therefore, if the vote of the member who has made the highest-value contribution to the share capital of a general partnership has crucial importance; the uniform voting of half of the members taking part in making a decision leads to their victory in the voting only if the member with the deciding vote votes among them.  *36 If the vote of one of 55 people taking part in making a decision at the general meeting of shareholders has the weight of four votes, 26 members casting uniform votes are going to win only if the person holding the vote that is worth four votes votes among them. The cases described above do not constitute an exception to the principle of majority rule, because the majority here are the voters who have won in the voting together with the voter whose vote has priority over those of other participants on account of the special importance that the decision being made has for him.

For some decisions of a company, the law prescribes unanimity of participating votes. For example, clause 1044 (5) of the CC of the RF states that decisions on the common issues of the parties to a simple partnership contract shall be made only by common agreement, while sub-clause 19 (2) 1) of federal law 14-ФЗ (‘On Limited Liability Companies’) states that a decision of the general meeting of shareholders in the company pertaining to an increase in share capital in connection with the acceptance of a new member should be made unanimously by all participants. However, these decisions are based not on the principle of majority rule but on the principle of equality, which is valid in relation to contracts. This is why in reality these are not decisions but contracts  *37 , aimed at causing the legal consequence, similar to the legal consequence of a decision.

The law mentions the decision also if one person (for example, a shareholder who owns all of the shares in a joint-stock company that entitle their holders to votes—see clause 47 (3) of On Joint-Stock Companies (federal law 208-ФЗ)—or the only member of a limited liability company, as discussed in clause 39 of federal law 14-ФЗ, On Limited Liability Companies) expresses his will, in accordance with which the members of the company should act—for example, the members of the management board of the joint-stock company (see clause 70 (1) of the law On Joint-Stock Companies) or of the limited liability company (see sub-clause 41 (1) 1) of On Limited Liability Companies). It seems—and actually is true—that in both cases we are dealing not with decisions but with unilateral deals, because decisions cannot consist of the expressions of will of only a single person.

The obligation to act in a certain way, conditioned by the decision that corresponds to the common will of the company, is imposed upon each of its members, regardless of whether he has taken part in the voting and whether he has voted with the meaning ‘yes’ or ‘no’. The content of this obligation is determined by the content of the issue put to the vote and the result of the voting. It can be either the obligation of performance of an action or the obligation of forbearance. Let us consider an example in which the parties to a contract of simple partnership, who have common business, have made a decision about the conclusion of a certain contract with a third party; each member undertakes to express his will to another member, which is an element of their common offer or acceptance. If the parties to the contract of simple partnership, each one of them authorised to act on behalf of all other parties, have made the opposite decision, all members undertake to abstain from conclusion of the contract about which the decision was made.

The right and obligations of the members of the company, arising from the decision, constitute corporate relations, built among the parties. The decision cannot cause an obligation for the members of the company (or for a legal person that this company represents) to a third party or parties. In order to cause such an obligation, all members of the company or their common representative have to carry out a relevant transaction.  *38 In particular, the decision made by the general meeting of the members of a limited liability company about the assignment of A as the head of said company does not cause the emergence of the rights and obligations in A that would bind him with this company; they emerge in A only after a relevant management contract has been concluded with A by the chairman of the general meeting of the members of the company at which A was elected as the head of the company (see clause 42 (3) of federal law 14-ФЗ, ‘On Limited Liability Companies’); in doing this, the chairman of the general meeting shall act as a representative of all members of the general meeting, and, since they form the body of the limited liability company, the expression of their common will is equal to the expression of the will of the company itself.

Since the decision is a transaction, only persons sui juris can participate in making decisions (see clause 21 (1) of the CC of the RF). The law here does not refer to highly personalised transactions; this is why each member of a company can take part in making decisions through voting representatives (Stimmbote)  *39 or grant the right to take part in the voting to some other person—for example, in the voting at the general meeting of shareholders (see clause 57 (1) of On Joint-Stock Companies) or the owners of properties in a block of flats (see clause 48 (1) of the HC of the RF).

As any other transaction can, the decision can be invalid—for example, in consequence of not conforming to legal requirements (see clause 168 of the CC of the RF). If there is a circumstance that invalidates one of the expressions of will that is part of the actual composition of the decision, the guidelines of the CC of the RF as to the invalidity of transactions shall apply to this expressions of will, in a parallel to transactions, although the expression of will is not a transaction. For example, the voting of a person who is not sui juris can be held to be void (see sub-clause 171 (1) 1) of the CC of the RF)  *40 , while the voting of a person who was mistaken as to the legal nature of the transaction in question can be contested (see clause 178 (1) of the CC of the RF).  *41 Invalidity or inefficient contesting of the expression of will included in the decision leads to invalidity of the decision as a whole only if a result of the invalidity of this expression of will is that the decision has been made by 50% or a minority or, if a qualified majority is required for making of the decision, a simple majority of votes.  *42

The special procedure for performing the expression of will on the part of the people taking part in making a decision assumes the availability of special reasons for invalidity of that decision, connected with the non-performance of the voting procedure prescribed by law or contract. Therefore, for example, pursuant to clause 43 (6) of federal law 14-ФЗ (‘On Limited Liability Companies’), a decision of a general meeting of the members of the company that is made in connection with an issue not on the agenda of the meeting is not valid, regardless of legal recognition of this decision as being invalid, and, consequently, it is a void transaction.

4. Conclusions

The expressions of will included in the contract are concerted expressions of will. The fact that the expressions of will are concerted means that each party has expressed will in relation to another party, aimed at causing one and the same legal consequence. As a rule, contractual expressions of will are not identical, meaning that the parties to the contract express their will in different contractual functions.

The actual composition of the contract may consist of concerted expressions of will or feature some other constituent elements (for example, a real act, the state registration of a contractual agreement, or the assistance of a notary public). The cases wherein the contract, in addition to the expressions of will of the parties, includes also other constituents should be distinguished from those in which there is a prerequisite lying outside the framework of the actual composition of the contract for that contract’s entry into effect. Another transaction, an administrative act, and violation of the law can be such prerequisites.

Binding contracts can be aimed at the establishment of regulatory and protective obligations. Accordingly, they are divided, as mentioned above, into regulatory (for example, contracts of purchase and sale), regulatory-protective (for example, contracts of property insurance), and protective contracts (for example, the surety contract). The regulatory contracts not researched by civilists include the contract for establishment of the limited real right of the buyer to the object that has been sold or transferred to him with a proviso of retaining the right of ownership and the contract of the establishment of the tenant’s limited real right to the movable object transferred to his temporary ownership and use. The legal basis of these contracts is causa solvendi, while the actual composition of each of them consists of an agreement on the establishment of a relevant limited real right and the real act (of the transfer).

In summary, the main difference between the contract and the decision lies in the fact that the principle of equality of the parties underlies the contract, while the basis of any decision is formed by the principle of majority rule.

The decision is described by the following peculiarities: a) it is made by voting on the issue put to a vote; b) each participant in making of the decision performs the expression of will meaning ‘yes’ or ‘no’; c) the decision is aimed at the formation of common will of the members of the company, under which the will of the majority of those voting with similar meaning is assumed along with the establishment of the obligation of each member of the company to other members to behave in accordance with the common will and also the establishment of the right of each member to demand such behaviour from the other members, in line with this obligation; and d) the rights and obligations of the participants that arise from the decision constitute the corporate relations that are built among the participants.

The decision is invalid if, as a result of its invalidity or inefficient contesting of the expression of will embodied in the decision, it turns out to have been made by 50%; a minority; or, if a qualified majority is required for making of the decision, only a simple majority of votes.