Contract disputes in Georgia are claims built on the liability norms of the Civil Code: upon the debtor's breach, the creditor claims compensation of damage — both the loss actually incurred and the profit not received. The Code determines precisely when the claim may be brought, how an additional period is set in case of delay, and when the obligation converts into money. This page explains these rules under Articles 394, 404, 409, 410 and 411 of the Code.
Claiming damages upon breach
Under the first part of Article 394, upon the debtor's breach the creditor may claim compensation of the damage caused thereby. The rule does not operate where the debtor bears no liability for the breach — the ground of liability comes first, the claim after.
The second part of the same article governs delay: the creditor may set the debtor a period necessary for performance, and if the debtor fails to perform even within that period, the creditor may, instead of performance, claim compensation of damage. Under the third part, an additional period is not required where it is evident that it would produce no result, or where special circumstances — considering the interests of both parties — justify the immediate application of the claim.
The structure of a claim on these norms has three steps: first, the existence of the obligation and its breach; second, a ground of liability on the debtor's side; third, the establishment of damage with both of its components. Before the claim is filed, each step must be substantiated: the obligation fixed by the contract, the fact of non-performance or defective performance, and the damage connected with precisely that breach.
In practice the third step is decisive: the creditor must show what income would have been received upon due performance and how real that income was; the calculation of lost profit must rest not on conjecture but on a reasonable forecast.
The norm on delay is placed in the chapter on breach of obligation in bilateral contracts, so the claim of damage caused by the exceeding of the term is an independent ground that works together with the additional-period mechanism: the creditor first sets the debtor a period necessary for performance, and after its expiry claims compensation of damage instead of performance. The advance waiver admissible under Article 410, for its part, is the first thing checked when the contract is reviewed before a dispute — only the law or the parties' own agreement can deprive the creditor of the right to compensation.
Damage caused by delay
Article 404 frames delay separately: the creditor may claim compensation of the damage caused by the exceeding of the term. The norm compensates those cases where performance is not abandoned but postponed in time — and precisely that postponement causes the creditor damage.
Restoration in kind and monetary compensation
Article 409 governs the conversion into money: where compensation of damage by restoration of the original situation is impossible, or requires disproportionately great expenditure, the creditor may be granted monetary compensation. The choice of the object of the claim is thereby governed by economic reasonableness.
The wording of the norm deserves attention: monetary compensation "may be granted" to the creditor — the law frames the conversion into money as a possibility that opens when either of two conditions holds: restoration of the original situation is impossible, or it requires disproportionately great expenditure. The two conditions are alternatives, and the dispute usually turns on which of them the creditor can substantiate.
The scope of compensation and advance waiver
Article 411 broadens the content of damage: damage must be compensated not only for the property loss actually incurred but also for the income not received. Income counts as not received which the person did not receive and would have received had the obligation been duly performed.
Article 410 then sets the boundary of waiver: an advance waiver of the right to claim compensation of damage for breach is admissible only where it is provided for by law or by the parties' agreement — the creditor loses the right to compensation only through the law or his own agreement.
The additional-period institution serves fairness: the creditor applies the tightened sanction — refusal of performance — only after the debtor has been given an opportunity to perform. Yet the evident futility of that step, or special circumstances, lift the intermediate barrier and move the creditor's position directly to compensation.
Frequently Asked Questions
Below we answer the key questions about contract disputes.
What does the creditor claim on breach?
Compensation of the damage caused — where liability is imposed on the debtor.
What happens in case of delay?
The creditor may set an additional period and then, instead of performance, claim damages.
Is lost profit forfeited?
No — it forms part of the damage, if it would have been received upon due performance.
Is an advance waiver possible?
Only a waiver provided by law or by the parties' agreement is admissible.
Is setting an additional period always necessary?
No — an additional period is not required where it is evident that it would produce no result, or where special circumstances, considering the interests of both parties, justify the immediate application of the claim.
How We Help on Legal.ge
The Legal.ge team analyses the contract and the fact of breach, counts the full content of damage — actual loss and lost profit — chooses the route between performance and compensation, and prepares the claim with the appropriate demand.
If a contract has been breached or performance delayed, write to us on Legal.ge — we will assess the grounds of the claim and build a promising dispute.