The Precedent No. 21/2018/AL on faults and damages in case of unilateral termination of a property lease contract in Vietnam

The Precedent No. 21/2018/AL on faults and damages in case of unilateral termination of a property lease contract in Vietnam (Image from the Internet)

According to Decision 269/QD-CA of 2018, the Precedent No. 21/2018/AL on faults and damages in case of unilateral termination of a property lease contract has the following content:

Source of the Precedent:

Cassation Decision No. 08/2016/KDTM-GĐT dated May 20, 2016 of the Council of Judges of the Supreme People's Court on the business and commercial case "Dispute on property lease contract" in the province Quang Ninh between the plaintiff, Limited Liability Company D, and the defendant, Joint Stock Company C.

Location of the Precedent content:

Paragraph 1 of part “Comments of the Court”.

Overview of the Precedent content:

- Precedent situation:

The property lease contract has a fixed term, with no agreement on contract termination conditions. The lessee terminates the contract ahead of time without the consent of the lessor.

The time between the lessee's written notice and the termination of the contract is so short that the lessor cannot have another replacement contract within the remaining term of the lease.

The lessor requires the lessee to pay property rental for the remaining term of the contract.

- Legal solutions:

In this case, it must be determined that the lessee is at fault and responsible for the damage caused to the lessor. The actual damages to consider are the vehicle rental payments for the remaining period of the contract.

Legal provisions related to Precedent:

Article 426 of the 2005 Civil Code (corresponding to Article 428 of the 2015 Civil Code);

Articles 269, 302, 303 of the 2005 Commercial Law;

Keywords of the Precedent:

“Property lease contract”; “Conditions for terminating the contract”; “Terminate the contract before the deadline”; "Damages"; “Actual damage”; "Error".

CONTENTS OF THE CASE:

In the petition dated March 18, 2007 and subsequent testimonies, the representative of Company D presented:

On April 10, 2006, Company D (hereinafter referred to as Company D) signed economic contract No. 1141/HD-CNQN (on leasing towing machines) with Joint Stock Company C. According to the contract, Company D leased to Joint Stock Company C 02 steel-shell machines of pull + push type with capacity of 135 CV with license plate numbers NB2010 and NB2172; At the same time, receiving three towing and towing bows of C Joint Stock Company's ships entering and leaving the port to pick up goods at port 10-10 and Khe Day port in Quang Ninh; The unit rental price (including VAT) is 50,000,000 VND/month for one locomotive; The total fuel cost for the locomotive is paid by Joint Stock Company C to Company D according to the norm of 17 liters of Diesel oil/1 hour of starting/1 machine with a capacity of 135 CV + 0.23 liters of lubricating oil/ 01 hour/01 engine capacity, (fuel price will be calculated by both parties at the time of payment and expenses incurred at both ends of the wharf, if any). Company D is responsible for arranging human resources and positions on the vehicle including 01 captain, 01 chief engineer, 01 sailor; must pay all wages to workers on the vehicle.... The contract is valid from the date of signing until December 31, 2006.

On August 17, 2006, Joint Stock Company C issued Document No. 2349 INDEVCO requesting Company D to terminate and liquidate Contract No. 1141/HD-CNQN dated April 10, 2006 before the deadline from August 20. -2006.

On August 18, 2006, Company D issued Official Dispatch No. 59.CVCty responded to Official Dispatch No. 2349 INDEVCO of Joint Stock Company C with the content: requesting Joint Stock Company C to completely pay the rent for 02 heads. machines in the second quarter of 2006 (with settlement reconciliation minutes dated July 13, 2006) and in case Joint Stock Company C no longer needs to rent 02 machines from August 20, 2006, then apply. Proposal to settle the rent for 02 machines for the remaining period of the contract from August 1, 2006 to December 31, 2006.

On September 4, 2006, Joint Stock Company C and Company D prepared a record of settlement of locomotive rental; Accordingly, the two parties jointly determined that the total amount payable by Joint Stock Company C to Company D as of August 21, 2006 was 511,539,505 VND.

On January 16, 2007, Joint Stock Company C paid Company D the amount of 511,539,505 VND.

On August 18, 2006, Company D issued Official Letter No. 59. Company D responded to Official Letter No. 2349 INDEVCO from Company C with the content: requesting Company C to settle the final payment for renting 02 machines in the second quarter of 2006 (with the reconciliation report dated July 13, 2006) and in case Company C no longer needs to rent 02 machines from August 20, 2006 onwards, then request to settle the rental payment for the remaining period of the contract from August 01, 2006 to December 31, 2006.

Representative of Joint Stock Company C presented:

The signing and implementating of Contract No. 1141/HD-CNQN dated April 10, 2006 with Company D as presented by the plaintiff. On August 17, 2006, because there was no longer any need to use the two rented machines, Joint Stock Company C sent an official dispatch to Company D requesting to terminate the contract ahead of schedule. Joint Stock Company C paid Company D 511,539,505 VND. Joint Stock Company C did not agree to pay Company D 403,000,000 VND because it was not realistic and requested Company D to recalculate. Joint Stock Company C only accepts support for 50% of the total declaration but must be correct and appropriate.

In First Instance Business and Commercial Judgment No. 01/2012/KDTM-ST dated January 18, 2012, the People's Court of Quang Ninh province decided:

Do not accept Company D's request for Joint Stock Company C (now Group I Joint Stock Corporation) to pay the remaining value of Contract No. 1141HD-CNQN dated April 10, 2006. is 303,000,000 VND and late payment interest is 157,260,000 VND.

In addition, the Court of First Instance also decides on court fees and the litigants' right to appeal according to the provisions of law.

On February 10, 2012, Company D filed an appeal against the first instance judgment (postmark of date of submission is February 25, 2012).

In Decision not to accept the overdue appeal No. 87/2012/KDTMPT-QD dated May 17, 2012, the Court of Appeals of the Supreme People's Court in Hanoi decided not to accept the appeal of D limited liability company, on the grounds that the appeal is beyond the time limit prescribed in Article 245 of the Civil Procedure Code.

On June 7, 2012, Company D filed a request for review according to cassation procedures for the above appellate decision.

In Appeal Decision No. 29/2015/KN-KDTM dated May 4, 2015, the Chief Justice of the Supreme People's Court requested the Council of Judges of the Supreme People's Court to adjudicate according to cassation procedures in the direction of Cancel the Decision not to accept the overdue appeal No. 87/2012/KDTMPT-QD dated May 17, 2012 of the Court of Appeals of the Supreme People's Court in Hanoi and First Instance Business and Commercial Judgment No. 01 /2012/KDTM-ST dated January 18, 2012 of the People's Court of Quang Ninh province; hand over the case file to the People's Court of Quang Ninh province for retrial in accordance with the provisions of law.

At the cassation trial, the representative of the Supreme People's Procuracy agreed with the appeal decision of the Chief Justice of the Supreme People's Court.

COURT'S OPINION:

[1] On April 10, 2006, Company D leased two steel machines to Joint Stock Company C and towed ships in and out at 10-10 port and Khe Day port in Quang Ninh, effective from the date of signing until dated December 31, 2006 according to Economic Contract No. 1141/HD-CNQN. In the contract there is no agreement on contract termination conditions. However, on August 17, 2006, Joint Stock Company C issued Document No. 2349/INDEVCO announcing the termination of the contract from August 20, 2006 with the reason "there is no need to rent 2 machines". The time from Company C's notification to contract termination was too short, causing damages to Company D as they could not immediately secure a replacement contract. The fault lies with Company C and they must take responsibility for the damages incurred by Company D. The actual damages to be considered are the rental fees for the remaining period of the contract.

[2] Before filing the lawsuit, Company D issued Official dispatch No. 75CVCtyDG (no date or month, only year 2006) requesting Joint Stock Company C to pay the rent for 02 machines from August 21, 2006. until December 31, 2006 with a total amount of 250,000,000 VND. In Official Dispatch No. 2774 INDEVCO dated October 17, 2006, Joint Stock Company C only agreed to support the payment of train driver salaries. Disagreeing, on March 18, 2007, Company D sued to request Joint Stock Company C to pay the amount of 403,000,000 VND (the amount for renting 02 machines for the remaining period of the contract). ). Thus, this can be considered the actual damage that the plaintiff claims.

[3] When the Court of First Instance accepted the case for retrial, Company D requested to claim the remaining value of the contract from August 21, 2006 to December 31, 2008, which was 403,000,000 VND. and interest. Because Joint Stock Company C has already paid 100,000,000 VND, it still has to pay 303,000,000 VND and late payment interest. The first instance court said that this request was unfounded and did not accept it because it considered this to be the remaining value of the unfulfilled contract. On the other hand, the Court of First Instance also found that because Company D had the right to request compensation for damages but Company D did not request it, it did not consider Company D's request to be incorrect and affect its legal rights. 

[4] According to the minutes of the first instance court hearing dated January 18, 2012, the representative of Company D was present at the trial so he must know the content and decision of the Court. On February 10, 2012, Company D filed an appeal (postal stamp dated February 25, 2012, dispatch stamp dated February 27, 2012) which was overdue as prescribed in Article 245. Civil Procedure Code. However, Company D believes that the reason for the overdue appeal is because the Company representative did not clearly hear the chairman's verdict, which is unfounded according to the provisions of Section 5, Part I of Resolution No. 05/2006/NQ-HDTP dated August 4, 2006 of the Council of Judges of the Supreme People's Court. Therefore, it is correct that the Court of Appeal did not accept the overdue appeal.

[5] Although the Decision not to accept the overdue appeal No. 87/2012/KDTMPT-QD dated May 17, 2012 of the Court of Appeal of the Supreme People's Court in Hanoi is well-founded, due to the first instance judgment has legal effect according to this decision, so it is also necessary to annul the Decision not to accept the overdue appeal No. 87/2012/KDTMPT-QD dated May 17, 2012 of the Court of Appeal of the People's Court. Supreme Court in Hanoi and First Instance Business and Commercial Judgment No. 01/2012/KDTM-ST dated January 18, 2012 of the People's Court of Quang Ninh province; hand over the case file to the People's Court of Quang Ninh province for retrial in accordance with the provisions of law.

For the above reasons, based on Clause 3, Article 297, Clauses 1 and 2, Article 299 of the Civil Procedure Code (amended and supplemented by Law No. 65/2011/QH12 dated March 29, 2011),

DECISION:

1. Cancel the Decision not to accept the overdue appeal No. 87/2012/KDTMPT-QD dated May 17, 2012 of the Court of Appeals of the Supreme People's Court in Hanoi and the first instance business and commercial judgment. No. 01/2012/KDTM-ST dated January 18, 2012 of the People's Court of Quang Ninh province adjudicating a business and commercial case of dispute over a property lease contract between the plaintiff, Company D, and the defendant, Joint Stock Company C.

2. Hand over the case file to the People's Court of Quang Ninh province for retrial in accordance with the provisions of law.

CONTENTS OF THE PRECEDENT

“[1] On April 10, 2006, Company D leased two steel machines to Joint Stock Company C and towed ships in and out at 10-10 port and Khe Day port in Quang Ninh, effective from the date of signing to December 31, 2006 according to Economic Contract No. 1141/HD-CNQN. In the contract there is no agreement on contract termination conditions. However, on August 17, 2006, Joint Stock Company C issued Document No. 2349/INDEVCO announcing the termination of the contract from August 20, 2006 with the reason "there is no need to rent 2 machines". The time taken by Joint Stock Company C to issue a written notice to terminate the contract was too short, causing damage to Company D due to not being able to get another replacement contract immediately. The fault belongs to Joint Stock Company C, so it must be responsible for the damage caused to Company D. The actual damage that needs to be considered is the vehicle rental fee for the remaining period of the contract."

Above is the content of Precedent No. 21/2018/AL on errors and damages in case of unilateral termination of a property lease contract.

In addition, you can refer to the comprehensive list of 39 Precedents published and applied in Vietnam (Latest) here.

Best regards!