ARMENIA Law and Practice Contributed by: Narine Beglaryan and Anahit Aloyan, Concern Dialog
4.2 Termination In the case of paid service provision contracts, the law allows the customer to terminate the contract unilater - ally at any time. When doing so, the customer is obli - gated to compensate the service provider only for the actual costs incurred in performing the services up to the point of termination. This mechanism ensures that the service provider is not financially disadvantaged for work already performed, while giving the customer flexibility to stop the contract if necessary. Conversely, the service provider also has the right to terminate the contract if the customer’s actions or failures make proper performance impossible, but in such cases, the provider must fully compensate the customer for any resulting damages. In the case of contractor agreements, the customer may terminate the contract if it becomes clear dur - ing performance that the work is not being properly executed. In such circumstances, the customer must first provide the contractor with a reasonable period to correct the defects. If the contractor fails to rem - edy such defects within this period, the customer may terminate the contract and, if necessary, hire another party to complete or correct the work, with the con - tractor bearing any resulting costs. Additionally, the customer has the right to terminate the contract at any time before the work is delivered by paying the contractor for the work already performed, while also compensating for any losses caused to the contrac - tor due to early termination. Similarly, the contractor has the right to suspend or refuse performance if the customer fails to fulfil its obligations – such as failing to provide materials, equipment or required instruc - tions – or if such failures make timely or proper com - pletion impossible. Upon termination, the contrac - tor is required to return any materials, equipment or property provided by the customer, or compensate the customer for their value if return is impossible. Furthermore, if the contract ends before the customer formally accepts the work, the customer has the right to receive the unfinished results of the work, with reim - bursement of costs already incurred by the contractor. 4.3 Liability Under Armenian law, the injured party is entitled to full compensation for all damages caused by the breach, unless a lower measure of compensation is expressly
provided by law or contract. This includes both actu - al loss – such as damage to or loss of property, or expenses incurred to restore rights – and lost profit, which covers income that would have been earned under normal conditions had the breach not occurred. Non-material losses, such as harm to dignity or repu - tation, are recoverable only in cases explicitly pro - vided by law. Armenian law does not explicitly use the “direct” or “indirect” (consequential) loss terminology. In prac - tice, however, actual loss is treated similarly to what other jurisdictions call direct loss, while lost profit can encompass what might be considered indirect or consequential loss elsewhere. Courts generally allow recovery for losses if they are causally linked to the breach and reasonably foreseeable. As already mentioned, lost profit is expressly recover - able if causally connected to the breach. Goodwill, business reputation, and honour are pro - tected under Article 1087.1, which provides remedies for injury caused by insult or defamation, including public apologies, publication of court decisions, or monetary compensation. Compensation for harm to business reputation is treated as non-material damage and is recoverable if proven through judicial process. Certain losses cannot be limited or excluded under Armenian law: • Non-material damages arising from violations of fundamental rights, including the right to life and liberty, the prohibition of torture, the right to a fair trial, and property rights, as regulated in Article 1087.2: These damages are assessed according to principles of reasonableness, equity and pro - portionality, and compensation is payable from the state or local budget, depending on the responsi - ble authority. • Intentional or grossly negligent acts: Liability can - not be excluded for deliberate misconduct or gross negligence. • Harm to honour, dignity or business reputation: Compensation for insult or defamation under Arti - cle 1087.1 cannot be contractually limited. Reme - dies may include monetary compensation (ranging
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