How to Claim a Penalty for Delayed Performance of Work by a Contractor

Legal grounds for claiming a penalty

A penalty is a monetary amount payable by a debtor in case of breach of an obligation (Article 330 of the Civil Code of the Russian Federation). In contracts for work, it applies to delays in performing work or making payments and may be statutory or contractual.

Statutory penalty is provided in cases explicitly established by law. For household contracts involving an individual customer, Article 28 of the Consumer Rights Protection Law applies: the contractor pays 3% of the work price for each day of delay, unless otherwise provided by law.

Contractual penalty is established by agreement between the parties. The contract specifies its type (fine, late fee), amount, and calculation method. The penalty provision must be included in the written form of the work contract.

Under construction contracts (Articles 740–757 of the Civil Code of the Russian Federation), the parties independently determine the conditions for a penalty, including its amount, accrual period, and grounds for termination.

If a penalty clause is absent, the customer may claim interest for the use of another’s funds under Article 395 of the Civil Code of the Russian Federation, calculated based on the key rate of the Bank of Russia.

Types of penalties under a work contract

In contracts for work, the following types of penalties are applied:

1. Late fee (penya) — an amount accrued for each day or other period of delay in fulfilling an obligation. It is calculated as a percentage of the contract price, the value of part of the work, or the cost of unperformed work.

2. Fine (shtraf) — a fixed amount payable for a breach of obligation. It may be set as a one-time sanction or for each individual violation.

3. Combined penalty — a combination of a fine and a late fee. It is used to establish a minimum level of liability and provide additional incentive for performance.

Conditions for claiming a penalty

Recovery of a penalty from a contractor is possible only if the conditions established by law and the contract are simultaneously met.

1. Legal basis

A contractual penalty is enforceable if the contract includes a clause specifying its amount, type (fine or late fee), and method of calculation. A statutory penalty applies without reference in the contract if its amount and conditions are established by law.

2. Proof of delay in performance

The fact of a delay must be documented to establish the date when the work was supposed to be completed and the actual completion date. Such evidence may include:

• acceptance certificate (act of work completion);

• project schedule or work timeline;

• correspondence between the parties documenting changes in deadlines;

• inspection reports of the object.

3. Absence of customer’s fault

Under Article 401 of the Civil Code of the Russian Federation, a contractor is exempt from paying a penalty if they prove that the delay was caused by the actions or inaction of the customer. This can occur, for example, due to untimely provision of project documentation, obstacles to accessing the site, or delays in approving changes.

4. Compliance with the claims procedure

In most disputes under work contracts, it is mandatory to send a pre-trial claim before going to court (part 5 of Article 4 of the Arbitration Procedure Code). The claim must indicate the basis for the penalty, calculation of its amount, and a deadline for voluntary fulfillment. Failure to comply with this procedure may result in the court refusing to consider the claim.

5. Statute of limitations

The general limitation period is three years (Article 196 of the Civil Code). The start of the period is counted from the day after the contractually established completion date. For ongoing delays, the limitation period for each day of delay is calculated separately, allowing partial recovery of the penalty for the last three years.

Calculation of a penalty

Under a contractual penalty, the parties independently determine the type of sanction (late fee, fine, or a combination), the rate, and the method of its application. A statutory penalty is calculated according to fixed rules established by normative acts.

Formula for a late fee (penya)

Late fee = Contract price × Late fee rate × Number of days of delay

If the late fee is set as a fraction of a percent (e.g., 0.1% per day), it is calculated based on the total contract price or the cost of the delayed portion of work, depending on the agreement.

Formula for a fine

Fine = Fixed amount established by contract or law

A fine is applied regardless of the length of the delay, unless otherwise provided by the parties’ agreement.

Statutory penalty under the Law on Consumer Protection

For household contracts involving a citizen-customer, under Article 28 of the Law on Consumer Protection:

Penalty = Contract price × 3% × Number of days of delay

The parties cannot reduce this penalty in the contract.

Interest under Article 395 of the Civil Code

If the contract does not include a penalty clause, recovery is possible in the form of interest for using another’s money. The amount is calculated based on the key rate of the Bank of Russia for the relevant period.

Table 1. Examples of penalty calculation

Recovery of damages together with a penalty

According to Article 394 of the Civil Code of the Russian Federation, the creditor has the right to claim compensation for damages in addition to the penalty, unless otherwise provided by law or the contract. This rule allows for reimbursement of actual losses and lost profits arising from the delay in performing work.

Joint recovery is possible if the contract does not explicitly state that the penalty is exclusive and replaces compensation for damages. In such cases, the customer may submit two claims: one for the penalty and one for the reimbursement of damages.

Examples of damages recoverable along with a penalty:

• Costs of engaging another organization to complete the work;

• Additional expenses for renting equipment or premises;

• Losses related to production downtime or disruption of the project schedule at the facility.

Judicial practice confirms that joint recovery is allowed if damages are proven and calculations are provided. The amount of damages must be supported by documents, such as contracts, payment records, acts, and accounting statements.

Timeframes for recovering a penalty

The start of penalty accrual is determined by the contract or law. For a contractual penalty, the countdown begins the day after the agreed deadline for completing the work. For a statutory penalty under Article 28 of the Law on Protection of Consumer Rights, accrual starts from the moment the delay is documented.

Accrual ends on the day the obligation is actually fulfilled—upon completion and acceptance of the work. If the work is not completed, accrual continues until the contract is terminated or a court decision is issued.

The statute of limitations for claiming a penalty is three years (Article 196 of the Civil Code of the Russian Federation). For ongoing violations (daily accrual of a penalty), the limitation period is calculated separately for each day of delay, allowing recovery of the penalty for the last three years.

Calculation specifics:

• If the work completion deadline is extended by agreement, accrual starts from the newly agreed date;

• During interruptions caused by force majeure, penalty accrual for that period is suspended.

Pre‑litigation procedure for recovering a penalty

For most disputes under contracts for work, compliance with a pre‑litigation (claim) procedure is mandatory (Part 5, Article 4 of the Russian Arbitration Procedure Code).

Preparation of the claim letter includes:

• Indicating the details of the parties and the contract;

• Describing the circumstances of the delay in performing the work;

• Citing the contract terms or legal provisions providing for the penalty;

• Calculating the penalty amount, specifying the period of delay and the formula used;

• Stating the requirement for payment of the penalty and setting a deadline for voluntary fulfillment.

The period for sending the claim is determined by the contract or law. If not specified, a reasonable period is 10–30 calendar days.

Delivery methods must allow confirmation of receipt:

• Registered mail with delivery confirmation;

• Courier service;

• Electronic form with proof of delivery.

Documentation of the pre‑litigation procedure:

• The contractor’s response (agreement or objections);

• Absence of a response after the specified period, confirming the need to proceed to court.

Failure to follow the mandatory pre‑litigation procedure, if required, may result in the court refusing to consider the claim.

Judicial procedure for recovering a penalty

If the claim for payment of a penalty is not voluntarily satisfied, the matter is submitted to court through litigation.

Jurisdiction depends on the nature of the dispute and the parties involved:

• Cases between legal entities and individual entrepreneurs are heard by arbitration courts;

• Disputes involving private individuals are heard by courts of general jurisdiction.

The amount of the claim determines the level of court (magistrate or district court).

The statement of claim should include:

• Information about the parties and the contract;

• Description of the circumstances of the delay in performing the work;

• Legal justification of the claim with references to the contract and applicable law;

• Calculation of the penalty amount with supporting documents attached;

• Evidence of compliance with the pre‑litigation (claim) procedure.

Evidence must confirm both the fact of the delay and its duration, such as:

• Acts of acceptance of work;

• Project schedules or timelines;

• Correspondence between the parties;

• Claim letters with proof of sending and receipt.

Reduction of the penalty is possible under Article 333 of the Civil Code of the Russian Federation if the court considers it clearly disproportionate to the consequences of the breach. A corresponding motion with reasons and calculations should be submitted.

Enforcement of a court decision

Enforcement begins once the court decision enters into legal force, unless the court specifies otherwise.

Obtaining the writ of execution:

• The writ is issued by the court that rendered the decision.

• It is delivered to the claimant personally, to their representative, or sent by mail.

Submitting to bailiffs:

• The claimant files an application with the territorial office of the Federal Bailiff Service (FSSP), attaching the writ of execution and the payment details for the recovered funds.

• The bailiff initiates enforcement proceedings, sends demands to the debtor, and applies enforcement measures, such as account or property seizure and restrictions on registration actions.

Alternative enforcement:

• The writ of execution can be sent directly to the debtor’s bank to withdraw funds up to the available balance.

Timing of enforcement:

• Depends on the debtor’s available assets.

• If assets are insufficient, enforcement may be partial or extended over time.

Recovery of court costs:

• Possible within the limits determined by the court upon filing the corresponding request during enforcement proceedings.

Legal support for claiming penalties

Engaging a lawyer is essential for accurate calculation of the penalty, drafting legally sound claims, and avoiding procedural mistakes that could lead to the rejection of a lawsuit.

Services provided by KDpartners include:

• Legal analysis of the contract and circumstances of the delay;

• Preparation of claims and pre-trial correspondence;

• Representation in court proceedings;

• Monitoring enforcement of the court decision.

KDpartners’ specialists have extensive experience in disputes arising from contracts for work and services and provide comprehensive support at all stages—from pre-trial negotiations and drafting claims to court representation and enforcement control.