Delchev & Partners

INDEMNIFICATION OF THE CREDITOR IN THE EVENT OF A DEBTOR’S DEFAULT IN PAYMENT 

The changes to the CA brings in a new right for the creditor who has fulfilled his obligations entitling the creditor to claim fair compensation of the damages resulting from the debtor’s default in payment. This new right is parallel and independent with respect to the general rules in contract law for indemnification of the creditor’s interest in case of a debtor’s default.

If the creditor has fulfilled his obligations under the agreement but the debtor has delayed the payment, the creditor is entitled to claim, without sending a payment notification, indemnification in the amount of the statutory interest rate starting from the date of the debtor’s default, as well as compensation for the expenses needed for collecting the receivable in the of amount of no less than BGN 80.

This rule should be applicable unless otherwise agreed between the parties, i.e. the liability of the debtor in such cases can be limited. However, such limitation should not constitute a gross abuse of the creditor’s interest and good faith. For example, pursuant to the Directive a clause in the agreement stating that the creditor is not entitled to claim any expenses for collecting the receivable will always constitute such gross abuse.

When debtor is a public contractor, any limitation of his liability will be considered null and void.

This Legal Alert has been prepared for information purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.