What is a commercial contract? What is the fine for breaching acts in commercial contracts in Vietnam?
What is a commercial contract in Vietnam?
Currently, Vietnamese law has not yet regulated the concept of commercial contract or the concept of "commercial" in general; Therefore, through the concept of commercial activities in the 2005 Commercial Law to clarify commercial contracts, specifically as follows:
Pursuant to Clause 1, Article 3 of the 2005 Commercial Law of Vietnam, commercial activities are as follows:
Interpretation of terms
In this Law, the following terms shall be construed as follows:
1. Commercial activities mean activities for the purpose of generating profits, including: sale and purchase of goods, provision of services, investment, commercial promotion and other activities for the profit purpose.
Thus, it can be understood that a commercial contract is an agreement between related parties to establish, change or terminate the rights and obligations between the parties in activities for the purpose of generating profits, including: sale and purchase of goods, provision of services, investment, commercial promotion and other activities for the profit purpose.
What is a commercial contract? What is the fine for breaching acts in commercial contracts in Vietnam?
What is the fine for breaching acts in commercial contracts in Vietnam?
Pursuant to Article 300 of the 2005 Commercial Law of Vietnam on the fine for breach as follows:
Fine for breach
Fine for breach means a remedy whereby the aggrieved party requests the breaching party to pay an amount of fine for its breach of a contract, if so agreed in the contract, except for cases of liability exemption specified in Article 294 of this Law.
Pursuant to Article 294 of the 2005 Commercial Law of Vietnam on the cases of exemption from liability for breaching acts as follows:
Cases of exemption from liability for breaching acts
1. A party that breaches a contract shall be exempted from liability in the following cases:
a/ A case of liability exemption agreed upon by the parties occurs;
b/ A force majeure event occurs;
c/ A breach by one party is entirely attributable to the other party’s fault;
d/ 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.
2. The contract-breaching party shall bear the burden of proof of cases of liability exemption.
Thus, if the party that breaches a contract is not exempt from liability as prescribed above, the other side has the right to request the party that breaches a contract to pay a fine for breach of contract if so agreed in the contract.
Pursuant to Article 301 of the 2005 Commercial Law of Vietnam stipulating the fine level as follows:
Fine level
The fine level for a breach of a contractual obligation or the aggregate fine level for more than one breach shall be agreed upon in the contract by the parties but must not exceed 8% of the value of the breached contractual obligation portion, except for cases specified in Article 266 of this Law.
Thus, the fine level for a breach of a contractual obligation or the aggregate fine level for more than one breach shall be agreed upon in the contract by the parties but must not exceed 8% of the value of the breached contractual obligation portion (except for cases specified in Article 266 of the 2005 Commercial Law of Vietnam)
What is the interest rate for delayed payment in commercial contracts in Vietnam?
Pursuant to Article 306 of the 2005 Commercial Law of Vietnam, the right to claim interest on delayed payment is as follows:
Right to claim interest on delayed payment
Where a contract-breaching party delays making payment for goods or payment of service charges and other reasonable fees, the aggrieved party may claim an interest on such delayed payment at the average interest rate applicable to overdue debts in the market at the time of payment for the delayed period, unless otherwise agreed or provided for by law.
Pursuant to Article 11 of Resolution 01/2019/NQ-HDTP on determining average interest rate on delayed payment as follows:
Determining average interest rate prescribed in Article 306 of the 2005 Commercial Law
In case an agreement is subject to the scope of Article 306 of the 2005 Commercial Law, when determining the interest on late payments, the Court shall determine the interest rate on late payments on the basis of average interest rates on overdue debts announced by at least 03 (three) commercial banks (such as Vietcombank, VietinBank, Agribank, etc.) whose headquarters, branch or transaction office is located in the same province or central-affiliated city where the headquarters of the Court in charge of the case is located at the payment date (the date of first-instance trial), except otherwise agreed upon by the parties or regulated by laws.
Thus, in case the breaching party is late in paying the money in a commercial contract, the breached party has the right to demand interest on the amount of late payment corresponding to the late payment period.
The average interest rate is specified as above unless otherwise agreed by the parties.
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