Are fines for breaches of contract and forcible payment of damages the only two commercial remedies in Vietnam?

Are fines for breaches of contract and forcible payment of damages the only two commercial remedies in Vietnam?

Regarding sanctions in trade, are fines for violations and compensation for damage the only two sanctions in commercial activities?

Reply:

Pursuant to Article 292 of the 2005 Commercial Law stipulates the following commercial sanctions:

1. Specific performance of contracts.

2. Fines for breaches.

3. Forcible payment of damages.

4. Suspension of performance of contracts.

5. Stoppage of performance of contracts.

6. Cancellation of contracts.

7. Other remedies agreed upon by involved parties which are not contrary to the fundamental principles of Vietnamese law, treaties to which the Socialist Republic of Vietnam is a contracting party and international commercial practices.

Thus, according to regulations in Vietnam, there are many sanctions in the above commercial activities, not only the two most popular sanctions are fines for breaches of contract and forcible payment of damages.

Is delivery of goods delayed due to the collision of ship responsible for compensation in Vietnam?

In the process of transporting goods from Cat Lai port to Singapore port (the consignee is an enterprise in Singapore), due to a general average incident (collision of ship and the ship was punctured, the captain decided to take some goods to fill it up), so the goods arrived at the port of Singapore 5 days later than expected, causing the selling price (vegetables) to decrease, causing the loss of goods to the shipper by about 500 million VND compared to the estimated arrival time. So does my company have to compensate 500 million dong?

Reply:

According to Clause 2, Article 663 of the 2015 Civil Code, scope of guarantees are as follows:

2. Civil relation involving a foreign element means any of the following civil relations:

a) There is at least one of the participating parties is a foreign natural person or juridical person;

b) The participating parties are Vietnamese natural persons or juridical persons but the basis for the establishment, modification or termination of such relation arose in a foreign country;

c) The participating parties are Vietnamese natural persons or juridical persons but the subject matter of such civil relation is located in a foreign country.

Thus, this relationship between your company and the company in Singapore belongs to a civil relationship with foreign elements, so the application of the law can be resolved in the following order:

- The parties themselves choose the applicable law (Vietnamese law, Singapore law);

- According to international treaties that the two countries of the parties have signed;

- Applicable in accordance with the national law referred to.

Therefore, if the two parties choose Vietnamese law to settle in this case, the case will be resolved as follows:

According to Clause 1, Article 156 of the Civil Code 2015,

An event of force majeure or other objective hindrance which renders the person with the right to initiate legal action for a civil case or make the request not able to do so within the prescriptive period.

An event of force majeure is an event which occurs in an objective manner which is not able to be foreseen and which is not able to be remedied by all possible necessary and admissible measures being taken.

If the parties do not agree on how to understand the force majeure event, it will be understood in the above way, so when the ship collides, the damage occurs objectively, which cannot be foreseen and cannot be remedied, although has taken all necessary and permissible measures, it will be considered a force majeure event and the freight company is not liable to compensate for the loss suffered by the Singapore side ( according to Article 294 of the Commercial Law 2005).

If, on the other hand, the collision of a ship causing damage to the ship occurs, it is not objectively unpredictable and can be remedied. loss suffered by Singapore (VND 500 million) under Article 303 of the Commercial Law 2005.

The above is the way to settle the case according to the provisions of Vietnamese law, if the parties choose another law to settle, they will comply with the regulations of that country.

When does the obligor have to bear both fines for breaches of contract and forcible payment of damages in Vietnam?  

Thanks to you for advising me the following case:

Foreign Trade University and Binh Minh Company signed a contract, under the contract Foreign Trade University bought 50 computers of Binh Minh Company with a value of 500 million VND, Binh Minh company is obliged to deliver all goods for Foreign Trade University on June 20, 2017. On June 20, 2017, Binh Minh Company only delivered 30 computers, the rest until July 30, 2017 the company has not yet delivered to Foreign Trade University. Foreign Trade University sent an application to the competent authority requesting that Binh Minh Company must deliver the remaining 20 computers within 1 week from July 30, 2017, and at the same time must be fined for breach of contract and claim compensation. Normally damage to the University, Binh Minh Company does not accept because the computer shipment imported on June 20, 2017 had problems and failed to arrive on time, so it did not deliver the goods to Foreign Trade University on time according to the signed contract. Does Binh Minh Company have to pay a penalty for breach of contract and claim for damages?

Reply:

Pursuant to the provisions of Article 294 and Article 303 of the 2005 Commercial Law, there are specific provisions as follows:

Article 294.- 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.

Article 303.- 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, based on the provisions of current law in Vietnam, in this case, if Binh Minh company proves that it is slow to perform its obligations in the contract with Foreign Trade University, it is in the cases specified in Article 3 of this Law. 294 Commercial Law 2005, Binh Minh company will not be obliged to pay a penalty for breach of contract. On the contrary, if Binh Minh company can't prove it, Binh Minh company will have to pay a penalty for breach of contract. Pursuant to Article 300 of the Commercial Law 2005.

According to this Article: "A fine for a breach is the fact 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 this Law."

In addition, for the issue of compensation for damage, apart from the conditions that do not fall into the cases specified in Article 294 of the Commercial Law 2005, the problem of compensation for damage only arises when all the factors specified in Article 303 Commercial Law 2005 are satisfied in Vietnam. 

Above is the content of our advice on the issue that you have questions about

Best regards!