Regulations on payment obligation and Violations against payment obligation in Vietnam

1. Regulations on payment obligations

Payment obligation is the basic obligation of the buyer in a contract of sale of goods. The obligor must perform properly and sufficiently as agreed in the contract or as prescribed by law in the absence of such agreement.

The Commercial Law 2005 of Vietnam specifically provides for payment obligations as follows:

“Article 50.- Payment

1. The purchaser is obliged to pay for goods and receive goods as agreed upon.

2. The purchaser must comply with the payment modes and make the payment according to the agreed order and procedures and the provisions of law.

3. The purchaser shall still have to pay for goods in cases where goods are lost or damaged after the time the risk is passed from the seller to the purchaser, except for cases where the loss or damage is caused due to the fault of the seller."

The Civil Code of Vietnam also provides for payment obligations in Articles 280 and 440:

An obligation to pay money shall be performed in full, strictly on time, at the place and by the method as agreed, unless otherwise agreed.

A purchaser must pay the full price at the agreed place and time specified in the contract.

Thus, the buyer must be obliged to pay the seller as agreed. Usually, the contents of the payment terms will be agreed upon and specified by the parties in the contract, such as payment method, payment term, late payment interest, etc. If the parties do not reach a specific agreement on each content, the following legal regulations shall be applied:

Regarding the place of payment: Article 54 of the Commercial Law 2005 stipulates that when there is no agreement on specific place of payment, the purchaser must pay to the seller at one of the following places:

- The seller’s place of business, which is identified at the time of entering into the contract; or the seller’s place of residence where the seller has no place of business.

- The place where the goods or documents are delivered, if the payment is made concurrently with the delivery of goods or documents.

Regarding the payment term: Article 55 of the 2005 Commercial Law stipulates that, unless otherwise agreed, the time limit for payment is provided for as follows:

- The purchaser must make payment to the seller at the time the seller delivers the goods or the goods-related documents.

- The purchaser is not obliged to make payment until the goods examination can be completed in cases where an agreement is reached according to the provisions of Article 44 of this Law.

Regarding the Determination of prices:

This issue is regulated in Articles 52 and 53 of the Commercial Law, whereby the price of goods shall be determined according to the price of such type of goods under similar conditions on mode of goods delivery, time of goods purchase and sale, geographical market, payment mode and other conditions which affect the prices, unless the two parties agree on the price of goods and the method of price determination.

Unless otherwise agreed, if the goods price is determined according to the weight of the goods, such weight must be net weight.

Case-specific risk transfer is regulated from Article 57 to Article 61 of the Commercial Law.

2. Violations against payment obligation

If the buyer violates the payment obligation, the seller can apply the sanctions specified in the Commercial Law.

Specific performance of contracts according to Article 297: Specific performance of a contract means a remedy whereby the aggrieved party requests the breaching party to properly perform the contract or apply other measures to cause the contract to be performed and the breaching party shall have to bear any costs incurred.

Where the breaching party is the purchaser, the seller may request the purchaser to pay for and receive goods or fulfill other obligations stipulated in the contract and provided for in this Law.

The seller may extend a reasonable time for the buyer to perform its contractual obligations.

Penalties for violations:

Penalty for breach means that the aggrieved party requests the violating party to pay a fine for breach of contract if so agreed in the contract, except for the cases of liability exemption specified in Article 294 of the Commercial Law.

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.

In addition, Article 306 also stipulates that 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.

Please refer to the actual judgment on how to handle when there is a breach of payment obligation

Judgment No. 09/2022/KDTM-ST on request to perform payment obligation 

Company T and Company V have signed two contracts to sell bricks. Company V still owes money to Company T. Now, T Joint Stock Company requests the People's Court of Dong A District, Hanoi City to declare that V Transport Company Limited is still in debt with the principal amount of VND 1,956,232,282 and the temporary late payment interest as of September 30, 2021, is VND 1,503,203,057. The total amount of both principal and interest on late payment is: 3,459,435,339 VND (In words: three billion, four hundred fifty-nine million, four hundred thirty-five thousand, three hundred thirty nine dong).

The People's Court of Dong Anh district, Hanoi, said: "This is an obligation to pay for goods, arising in the course of commercial activities of two legal entities. Between the parties, there is no dispute over the content or terms of the contract." The plaintiff asked the defendant to pay the debt for the purchase of bricks. This is a commercial activity between legal entities but not specified in the Commercial Law, so based on Clause 3, Article 4 of the Commercial Law, the provisions of the Civil Code must be applied to settle the principal debt. Using the provisions of article 280 of the Civil Code 2015 to force the respondent to pay the plaintiff the principal amount of the debt: 1,956,232,282 VND

Therefore, the People's Court of Dong Anh district decided to accept a part of the plaintiff's petition against the defendant about the request to perform the payment obligation. V Transport Company Limited is compelled to pay (debt) to T Joint Stock Company VND 1,956,232,282.

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