Experience from the case "Dispute over a house rental contract" in Vietnam

You may refer to a similar situation in the notification of lessons drawn by the Supreme People's Procuracy as follows:

Through supervising the resolution of civil, marriage, and family cases via cassation procedures, the Supreme People's Procuracy in Vietnam issued a notification summarizing lessons from errors and violations in the case "Dispute over a lease contract," between the plaintiff, Mrs. Nguyen Thi Le N, and the defendants, Mr. Nguyen Ba C and Mrs. Nguyen Thi S. To be specific:

1. Case Details

On June 5, 2015, Mrs. N signed a lease contract from Mr. C and Mrs. S for part of a house measuring 90m² located at 83 AC Street, Group 51, KB Ward, LC District, Da Nang City, for the purpose of opening a cafe. The lease term was 4 years and 7 months, starting from June 1, 2015; the monthly rental fee was 13,000,000 VND (increasing no more than 10% per year after 2 years); payment method was once a year every December. Mrs. N paid the rent in full for 2015 and 2016. In 2017, Mrs. N continued her business, but in March 2017, since she had not paid the rent for 2017, on March 20, 2017, Mr. C asked his son-in-law, Mr. T, to text Mrs. N about her non-compliance with the contract. He requested her to settle the payment immediately, threatening to close the cafe if she did not comply by March 22, 2017. Mrs. N then transferred 140,000,000 VND to Mr. T's account to pay the rent for Mr. C and Mrs. S (transferring 60,000,000 VND on March 20, 2017; 30,000,000 VND on March 23, 2017; and 50,000,000 VND on April 28, 2017).

On March 23, 2017, Mr. C and Mrs. S invited the KB Ward Police Officer, Mr. MH, Group Leader, and Mr. NT, a neighbor, to witness the locking of the cafe. On the same day, Mr. C and Mrs. S issued a notice to Mrs. N, giving her 7 days to terminate the lease. If she failed to comply, they would terminate the contract unilaterally and inventory her assets at the cafe.

Mrs. N claimed that Mr. C and Mrs. S had unilaterally terminated the lease contract, demanding compensation from them totaling 1,420,000,000 VND, including 1,320,000,000 VND in lost revenue (4,000,000 VND per day from February 2017 to December 2017) and 100,000,000 VND in damages for expired inventory. Conversely, Mr. C and Mrs. S argued that Mrs. N violated the lease payment obligation stipulated in the contract and that her cafe caused public disturbances multiple times, giving them the right to unilaterally terminate the lease. Mr. C and Mrs. S counterclaimed, requesting the Court to compel Mrs. N to pay the rent from January 1, 2017, to the primary trial date of August 13, 2019, totaling 408,633,000 VND and to continue until the handover date at a rate of 13,000,000 VND/month.

2. Case Resolution Process

In the First Instance Civil Judgment No. 19/2019/DSST dated August 13, 2019, the People’s Court of LC District, Da Nang City adjudicated: Rejecting the original lawsuit and additional lawsuit of the plaintiff, Mrs. N, against Mr. C and Mrs. S. As for the contractual relationship: Terminating the lease contract between Mrs. N and Mr. C signed on June 5, 2015, at the NY Notary Office, Da Nang City. Requiring Mrs. N to remove all her assets from the ground floor and sidewalk of 83 AC Street, Group 51, KB Ward, and handover the premises to Mr. C from the date of the verdict.

Regarding the counterclaims: Accepting all counterclaims and additional counterclaims of Mr. C and Mrs. S, requiring Mrs. N to compensate Mr. C and Mrs. S 408,633,000 VND. From August 13, 2019, if Mrs. N still does not handover the premises, in addition to paying interest on delayed execution at the rate defined in Clause 2, Article 468 of the 2015 Civil Code, Mrs. N must also compensate for the rent from August 14, 2019, until the handover date at a rate of 13,000,000 VND per month, specifically: 433,333 VND per day... Additionally, the Court decided on the interest rates for delayed execution, court fees, charges, and the litigants’ right to appeal.

On August 27, 2019, the People's Procuracy of LC District issued Appellate Protest Decision No. 03/QDKNPT-VKS-DS requesting the annulment of the aforementioned First Instance Civil Judgment.

In the Appellate Civil Judgment No. 59/2019/DSPT dated November 30, 2019, the People's Court of Da Nang City decided: Not accepting Mrs. N's appeal; rejecting the Appellate Protest of the People's Procuracy of LC District; maintaining the First Instance Civil Judgment No. 19/2019/DSST dated August 13, 2019, of the People's Court of LC District. On March 31, 2020, the High-level People's Procuracy in Da Nang issued the Cassation Protest Decision No. 41/QDKNGĐT-VKS-DS requesting the annulment of the Appellate and First Instance Civil Judgments mentioned above, transferring the case files to the LC District Court for re-adjudication.

In Cassation Decision No. 38/2020/DS-GDT dated July 6, 2020, the Judicial Committee of the High-level People's Court in Da Nang decided: Rejecting the aforementioned cassation protest of the High-level People's Procuracy in Da Nang, upholding the appellate judgment.

- On August 24, 2020, the High-level People's Procuracy in Da Nang reported proposing a protest against the aforementioned cassation decision.

- On March 14, 2022, the Chief Prosecutor of the Supreme People's Procuracy issued Protest Decision No. 05/QD-VKS-DS requesting the Judicial Council of the Supreme People's Court to cassate according to the direction of annulling Cassation Decision No. 38/2020/DS-GDT dated July 6, 2020, of the High-level People's Court in Da Nang, the Appellate Civil Judgment No. 59/2019/DS-PT dated November 30, 2019, of the People’s Court of Da Nang City, and the First Instance Civil Judgment No. 19/2019/DS-ST dated August 13, 2019, of the People’s Court of LC District, Da Nang City; transferring the case files to the People’s Court of LC District, Da Nang City for reassessment to ensure the rights of the litigants in accordance with the law. In Cassation Decision No. 12/2022/DS-GDT dated April 27, 2022, the Judicial Council of the Supreme People's Court accepted Cassation Protest Decision No. 05/QD-VKS-DS dated March 14, 2022, of the Chief Prosecutor of the Supreme People's Procuracy.

3. Violations and Issues to be Drawn from Supervising the Resolution of the Case

Regarding Mr. C and Mrs. S unilaterally terminating the lease contract and the notice obligation before unilateral termination of the lease:

According to the content of the aforementioned contract, at Article 4, Clause 2, the parties agreed on the payment method: Annual payment once in December each year. Although the contract does not explicitly stipulate the payment obligation, the file shows that both parties agreed that house rent must be paid in December of the previous year to use the leased house for the following year. Mrs. N transferring the rent on March 20, 2017, through Mr. T, Mr. C's and Mrs. S's son-in-law (only transferring 60,000,000 VND, not the full amount agreed upon) constitutes a breach of the rent payment obligation toward Mr. C and Mrs. S. The lease contract stipulated that Mr. C and Mrs. S must "notify in advance" if they terminate the lease (no agreement on the number of days in advance). Before this, Mr. C and Mrs. S had informed Mrs. H (whom Mrs. N had entrusted with watching the cafe) and Mr. T to remind Mrs. N to pay the rent and to be present to resolve the issue; otherwise, the cafe would be closed on March 22, 2017. Thus, Mr. C and Mrs. S unilaterally terminating the lease was in accordance with the agreement in the lease contract.

Determining Damage Due to Unilateral Termination of the Contract:

Clause 3 Article 426 of the 2005 Civil Code; Clause 3 Article 428 of the 2015 Civil Code provides: When the contract is unilaterally terminated, it terminates from the time the other party receives the termination notice. The parties do not have to continue performing obligations... The party that has performed the obligations may request the other party to make payments...

From the time the lease contract termination took effect (March 23, 2017), Mrs. N was no longer obligated to pay the rent. However, Mrs. N did not pay the rent nor did she clear out her assets to hand over the premises to Mr. C and Mrs. S. Article 8 of the Lease Contract dated June 5, 2015, stipulated that in the event of a dispute, both parties must negotiate to resolve the issue based on mutual respect. If unresolved, either party can file a lawsuit with the competent Court. In practice, Mr. C and Mrs. S did not file a lawsuit but arbitrarily locked up the house, leading to damage as lost income from renting out the premises. Mr. C and Mrs. S could have rented out the space (or part of it, if needed to store Mrs. N's belongings). Mrs. N also suffered damage due to Mr. C and Mrs. S terminating the lease.

The First Instance and Appellate Courts did not consider Mrs. N's actual damages, attributing fault entirely to Mrs. N and ordering her to compensate for rent from the termination date to the trial date, which was inappropriate and severely affected Mrs. N's rights. Thus, Cassation Decision No. 38/2020/DS-GDT dated July 6, 2020, of the High-level People's Court in Da Nang, upholding Appellate Judgment No. 59/2019/DS-PT dated November 30, 2019, from the People’s Court of Da Nang City, was incorrect.

The People’s Procuracy of LC District, Da Nang City, and the High-level People's Procuracy in Da Nang determined that although Mrs. N violated the payment obligation, she hadn't violated it for 3 months, so Mr. C and Mrs. S were not entitled to unilaterally terminate the lease and reclaim leased property. However, they promptly issued protests within their jurisdiction after identifying other violations by the Courts.

Respectfully!

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