Regulations on extension of time limit for performance of contracts, or refusal to perform contracts in force majeure events in Vietnam

Regulations on extension of time limit for performance of contracts, or refusal to perform contracts in force majeure events in Vietnam (Internet image) 

Regarding this matter, LawNet would like to answer as follows:

1. Regulations on extension of time limit for performance of contracts, or refusal to perform contracts in force majeure events in Vietnam

According to Article 296 of the Commercial Law 2005, regulations on extension of time limit for performance of contracts, or refusal to perform contracts in force majeure events in Vietnam are as follows:

- In a force majeure event, the parties may agree to extend the time limit for performing their respective contractual obligations. If the parties do not agree or cannot agree upon such extension, the time limit for performing contractual obligations shall be extended for a period of time equal to the time length of such force majeure event plus a reasonable period of time for remedying consequences, but not exceeding:

+ Five months for goods or services for which the agreed time limit for their delivery or provision does not exceed twelve months from the date the contract is entered into;

+ Eight months for goods or services for which the agreed time limit for their delivery or provision exceeds twelve months from the date the contract is entered into.

- Beyond the time limits specified in Clause 1 of Article 296 of the Commercial Law 2005, the parties may refuse to perform the contract and neither party is entitled to request the other party to pay damages.

- Where a party refuses to perform a contract, it must, within ten days from the expiry date of the time limit specified in Clause 1 of Article 296 of the Commercial Law 2005, notify the other party thereof before the latter begins to perform its contractual obligations.

- The extension of the time limit for performing contractual obligations mentioned in Clause 1 of Article 296 of the Commercial Law 2005 does not apply to contracts for purchase and sale of goods or contracts for provision of services with fixed time limit for goods delivery or service completion.

Thus, in case of breach of commercial contract due to a force majeure event, the parties may agree to extend the time limit for performing their respective contractual obligations; if the parties do not agree or cannot agree upon such extension, the time limit for performing contractual obligations shall be extended for a period of time equal to the time length of such force majeure event plus a reasonable period of time for remedying consequences

In case it lasts longer than prescribed, the parties have the right to refuse to perform the contract and no compensation liability arises. However, the party violating the contract has the burden of proving the circumstances of exemption from liability.

2. What is force majeure event under the law in Vietnam?

According to Clause 1, Article 156 of the Civil Code 2015, a force majeure event 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.

A force majeure event 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.

An objective hindrance is a hindrance which in an objective context results in a person with civil rights or obligations not knowing that his or her lawful rights and interests have been infringed or not being able to exercise his or her rights or fulfill his or her civil obligations;

To Quoc Trinh

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