What is commercial contract damages in Vietnam? How is compensation for damages in commercial contracts different from penalties for breach of commercial contracts in Vietnam?
- What is commercial contract damages in Vietnam? What are the grounds for liability to pay damages?
- What are the similarities between commercial contract damages and commercial commercial breach?
- How is compensation for damages in commercial contracts different from penalties for breach of commercial contracts in Vietnam?
What is commercial contract damages in Vietnam? What are the grounds for liability to pay damages?
The concept of damages to a commercial contract is defined in Article 302 of the 2005 Commercial Law in Vietnam as follows:
Damages
1. Damages means a remedy whereby the breaching party pays compensation for the loss caused by a contract-breaching act to the aggrieved party.
2. The value of damages covers the value of the material and direct loss suffered by the aggrieved party due to the breach of the breaching party and the direct profit which the aggrieved party would have earned if such breach had not been committed.
Thus, it can be understood that damages to a commercial contract is the fact that the breaching party makes compensation for the loss that he/she causes to the aggrieved party when there is a breach of the commercial contract.
Pursuant to Article 303 of the 2005 Commercial Law in Vietnam, there are provisions on the grounds for liability to pay damages as follows:
Grounds for liability to pay damages
Except for cases of liability exemption specified in Article 294 of this Law, liability to pay damages shall arise upon existence of all of the following elements:
1. Breach of the contract;
2. Material loss;
3. Act of breaching the contract is the direct cause of the loss.
Thus, liability to pay damages shall arise upon existence of all of the following elements:
- Breach of the contract;
- Material loss;
- Act of breaching the contract is the direct cause of the loss.
In which, in the following cases, the violating party is exempt from compensation liability:
- A case of liability exemption agreed upon by the parties occurs;
- A force majeure event occurs;
- A breach by one party is entirely attributable to the other party’s fault;
- A breach is committed by one party as a result of the execution of a decision of a competent state management agency which the party cannot know, at the time the contract is entered into.
What is commercial contract damages in Vietnam? How is compensation for damages in commercial contracts different from penalties for breach of commercial contracts in Vietnam?
What are the similarities between commercial contract damages and commercial commercial breach?
Compare the provisions in Article 266 of the 2005 Commercial Law in Vietnam, Article 300 of the 2005 Commercial Law in Vietnam, Article 301 of the 2005 Commercial Law in Vietnam, Article 302 of the 2005 Commercial Law in Vietnam, and Article 303 of the 2005 Commercial Law in Vietnam. Compensation for damage in a commercial contract and a breach of a commercial contract have the following similarities:
- They are all forms of commercial sanctions applied to the subjects entering into contracts;
- There are grounds for arising liability as a breach of contract;
- Both are intended to protect the legitimate rights and interests of the parties;
- All are exempted from liability in the following cases: Occurrence of liability exemption as agreed by the parties; Occurrence of force majeure events; The breach by one party is entirely the fault of the other party; A breach by one party due to the implementation of a decision of a competent state management agency that the parties could not have known at the time of entering into the contract.
How is compensation for damages in commercial contracts different from penalties for breach of commercial contracts in Vietnam?
Pursuant to the provisions of the 2005 Commercial Law in Vietnam, the differences between compensation for damage and fines for breach of commercial contracts are made as follows:
Criteria | Fines | Damages |
Definition | It is the fact that the aggrieved party requests the violating party to pay a fine for breach of contract if there is an agreement in the contract. | It is the compensation of the breaching party for the damage caused by the breach of contract to the aggrieved party. |
Purpose | - Protect the interests of both parties - Preventing and limiting possible contract violations - Increase the awareness of the parties to strictly implement the agreements | - Protect the interests of the violated party - To restore and compensate for the lost material benefits of the infringing party |
Ground of application | - There is an agreement of the parties in the contract (If the two parties do not agree, it will not arise) - There is a violation as agreed in the contract - There is no need for damage to occur | - There is a breach of contract - There is actual damage - The act of breach of contract is the direct cause of damage |
Penalty/Compensation rate | - The fine level for breach of contractual obligations or the total penalty for many violations shall be agreed upon by the parties in the contract; - not more than 8% of the value of the breached contractual obligation. | Includes the value of actual, direct loss suffered by the aggrieved party caused by the breaching party and the direct profit that the aggrieved party would have been entitled to if the breach had not occurred. |
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