Vietnam: How to distinguish deposit, security collateral, escrow deposit

Criteria

Deposit

Security collateral

Escrow deposit

Definition

Deposit is an act whereby one party transfers to another party a sum of money or precious metals, gemstones or other valuable things for a period of time as security for the entering into or performance of a contract.

Security collateral is an act whereby a lessee of a movable property transfers a sum of money or precious metals, gems or other valuable things to the lessor for a specified time limit to secure the return of the leased property.

 Escrow deposit is an act whereby an obligor deposits a sum of money, precious metals, gems or valuable papers into an escrow account at a credit institution to secure the performance of an obligation.

Purpose

To serve as security for the entering into or performance of a contract.

To secure the return of the leased property.

To secure the performance of an obligation.

Security property

Sum of money or precious metals, gemstones or other valuable things

sum of money or precious metals, gems or other valuable things

Sum of money, precious metals, gems or valuable papers

Involved parties

- Deposit party

- The party receiving the deposit

- The leesee or 3rd party.

- The leeser

- Escrow party

- Credit institutions receive Escrow deposit 

- The competent party

Legal consequences

- Upon a contract being entered into or performed, any deposited property shall be returned to the depositor, or deducted from the amount of an obligation to pay money.

- If the depositor refuses to enter into or perform the contract, the deposited property shall belong to the depositary.

- If the depositary refuses to enter into or perform the contract, it must return the deposited property and pay an amount equivalent to the value of the deposited property to the depositor, unless otherwise agreed.

- In cases where the leased property is returned, the lessee shall be entitled to reclaim the security collateral property after pay the rental;

- If the lessee does not return the leased property, the lessor shall be entitled to reclaim the leased property; if the leased property is no longer available for the return, the security collateral property shall belong to the lessor.

In cases where the obligor has failed to perform or has improperly performed an obligation, the obligee shall be entitled to receive payment and compensation for damage caused by the obligor from the bank where the escrow deposit is affected, after deducting the bank service charges.

Legal basis

Article 330 of Civil Code 2015