Vietnam: The rate of penalty for breach of contract obligations shall not exceed 8% of value of obligation of breached contract

According to Circular No. 27/2013/TT-BCT of the Ministry of Industry and Trade of Vietnam, the rate of penalty for breach of electricity sale contract obligations is specified as follows:

- The rate of penalty for breach of contract obligations is based on the agreements specified in contract but not exceeding 8% of value of obligation of breached contract.

- Where the parties do not have agreements upon penalty for breach, the aggrieved party only has the right to require the damage compensation.

- Where the parties have agreements upon penalty for breach, the aggrieved party has the right to apply the sanction and penalty for breach with required damage compensation.

The rate of damage compensation due to breach of contract obligations is based on the agreements in the contract. If there is no agreement in the contract, follow the regulations of law.

The method of determining the obligation of breached contract and value of damage compensation to each act of violation is specified in Article 29, 30, 31 and 32 of this Circular. Both parties shall reach an agreement in case of generated damages.

The time limit for payment of damage compensation is agreed upon by both parties but must not exceed 15 days from the date of acceptance of requirement for damage compensation. If such time limit is over, the offending party must pay the late payment interest over the amount of damage compensation as stipulated by law.

View more relevant provisions at Circular No. 27/2013/TT-BCT of the Ministry of Industry and Trade of Vietnam, effective from December 15, 2013.

Thu Ba

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE