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Exemption of liability in the contract under Vietnamese Law

Exemption of liability in the contract under Vietnamese Law

Written by TNTP LAW on . Posted in Contract Law.

During the performance of the contract, the parties may not be able to dutifully fulfill their obligations due to reasons beyond the control of the parties. Therefore, liability exemption is considered a necessary matter for contract law. Accordingly, the parties do not have to bear legal consequences if the breach is not due to the fault of the violating party. In this article, TNTP will introduce to readers cases of liability exemption in contracts according to Vietnamese law.

1. Exemption by the agreement of the parties

This is the case recognized in Point a, Clause 1, Article 294 of the Commercial Law 2005. Accordingly, the parties are not responsible if an event within the parties’ agreement on exemption from liability occurred. The parties can agree on the exclusion of remedies when there is a breach of contract such as penalty, compensation for damages,…

A liability-exempt agreement can be in two forms: First, a total liability-exempt agreement, which means an agreement that allows the parties not to be responsible for all obligations if the exemption event that the parties agreed on happens; Second, an agreement on partial liability exemption. This agreement allows the parties not to be subject to sanctions due to breach of contract within a certain range when a breach of contract occurs.

2. Exemption from liability due to force majeure events

The exemption for liability due to force majeure events is specified in Point b, Clause 1, Article 294 of the Commercial Law 2005 and Clause 2, Article 351 of the Civil Code 2015. Accordingly, the obligatedbreaching party who fails to perform their obligations due to force majeure events are not subject to civil liability, unless otherwise agreed or otherwise provided by law. Pursuant to Clause 1, Article 156 of the Civil Code2015, if a force majeure event occurs that meets the following conditions, the breaching party may be exempted from liability:

• First, the events are objective. An event is considered objective when that event is not created by the parties or arises due to subjective errors of the parties. Some events can be mentioned as natural phenomena: storms, floods, tsunamis…; political and social events: riots, wars…;.

• Second, that event cannot be be foreseeable and is beyond the perceptivity of by the parties. This is understood that when signing a contract, the parties cannot take that event into account during the performance of the contract.

• Third, the consequences of the event cannot be avoidable or cannot be overcome even though the affected party has taken all necessary and permissible measures.

• Fourth, the force majeure event is the direct and sole cause of the breach of contract. Accordingly, only force majeure events that affect the obligation and are the sole cause of the breach of obligation can the violating party be exempt from liability.

3. Exemption from liability due to the other party’s fault

The fact that a party is exempted from liability due to the other party’s fault is stipulated in Point c, Clause 1, Article 294 of the Commercial Law 2005. Clause 3, Article 351 of the Civil Code 2015 also stipulates that the breaching party is exempted if it can be proven that the obligation cannot be performed entirely due to the aggrieved party’s fault.

In essence, both parties commit violations, however, the breaching party’s violation is caused by the fault of the aggrieved party. The conditions for applying the exemption from liability in this case are: First, there must be a fault of the aggrieved party. This error can be an act or no action omission of the aggrieved party and that error must have an impact on the performance of the breaching party’s obligations in the contract. Second, the aggrieved party’s fault must be the sole and direct cause of the breaching party’s inability to fulfill the contract.

4. Exemption from liability due to decisions of state authorities

Exemption from liability due to a decision of a competent authority is stipulated in Clause 4, Article 294 of the Commercial Law 2005. Accordingly, the breaching party is exempt from liability if it can prove that the breach was because of the decision of competent state authorities that the parties cannot know at the time of entering into the contract. That decision may fall into the following cases:

• One party must stop performing its obligations to the other party because it must comply with orders from a state agency for the common benefit of society during the contract implementation process (for example, a decision about social distancing to prevent COVID – 19COVID–19 pandemic);

• One party must comply with administrative orders while the contract is being performed (for example, a competent state agency’s decision to ban the transaction of a certain item).

The breaching party will be exempt from liability if the effects of the above decision fall into one of the following two situations:

• The decision by a competent authority directly affects the subject of the contract, causing the subject of the contract to no longer exist.

• The decision by a competent state agency prevents the parties from fulfilling their obligations in the contract.

Above is the article “Exemption of liability in the contract under Vietnamese Law” that TNTP sends to readers. If there is anything that needs to be discussed, please contact TNTP for answers.

Best regards.

Does the bank have the right to auction mortgaged assets without the consent of the mortgagor?

Does the bank have the right to auction mortgaged assets without the consent of the mortgagor?

Written by TNTP LAW on . Posted in Debt Collection.

Mortgage is a measure to ensure the implementation of obligations which is popularly applied in current practice. This measure is often used in the loan procedures at the Bank through Credit Contracts or Mortgage Contracts to ensure their loan. However, many disputes arise because the Bank arbitrarily auctioned the mortgaged property without the consent of the mortgagor when they cannot pay the loan. In this article, TNTP will analyze more clearly whether the banks have the right to auction mortgaged property without the consent of the mortgagor.

1. In what cases are banks allowed to dispose of mortgaged property?

• Pursuant to Article 299 of the Civil Code 2015 prescribed Cases of disposal of collateral, mortgaged property can be disposed of in the following cases:

“1. An obligator fails to perform or perform not as agreed an obligation when it falls due.
2. An obligator must perform the secured obligation before the time limit due to his/her violation of the obligation as agreed or prescribed by law.
3. Other cases as agreed by the parties or prescribed by law.”

• Pursuant to Clause 6, Article 320 of the Civil Code 2015 prescribed Obligations of the mortgagor, the mortgagor is obliged to deliver the mortgaged property to the mortgagee for realization in one of the cases prescribed in Article 299 of this Code.

Based on the above regulations, in principle, Banks have the right to dispose of the collateral and the mortgagors must deliver the mortgaged property when they fail to perform their obligations. At the same time, the Banks must notify the mortgagor in writing before proceeding with the realization of collateral according to Article 300 of the Civil Code 2015 on Notification of disposal of collateral.

However, normally the mortgagors will try to reach an agreement with the Banks before the mortgaged property is disposed of. In case the parties cannot agree on a debt settlement solution, the Banks will proceed to collateral disposal. In fact, the mortgagor who is the owner of the mortgaged property often refuses to deliver and does not cooperate with the Bank in collateral disposal.

2. If the mortgagor does not agree, does the Bank have the right to arbitrarily auction the mortgaged property?

• According to the regulations of Clause 2, Article 7 of Resolution 42/2017/QH14 on pilot settlement of bad debts of credit institutions, the Bank is only allowed to conduct collateral disposal with the consent of the mortgagor, specifically:

“Article 7. Right to seize collateral
…
2. A credit institution or the bad debt purchaser/manager is entitled to seize collateral put up by a grantor or holder of collateral only if it satisfies fully the following conditions:
a) Occurrence of any case in terms of disposal of collateral prescribed in Article 299 of the Civil Code;
b) The security agreement clearly indicates the grantor’s consent to the credit institution’s right to seize the collateral upon the occurrence of the case of collateral disposal as per the law;
c) The secured transaction or security interests have been registered as prescribed by law;
d) The collateral is not in dispute in a case that has been accepted but remained unsolved or has been resolved at an authorized court; the collateral is not put under temporary emergency measures; and the collateral is not distrained or under judgment enforcement as prescribed by law;
dd) The credit institution or bad debt purchaser/manager has published information as prescribed in Clause 3 or Clause 4 of this Article.”

Thus, if the Contract signed by the parties does not contain content showing that the securing party agrees with the Bank having the right to seize the collateral of the bad debt when a case of realization of collateral occurs according to the regulations of law, the Bank does not have the right to seize the collateral.

• Pursuant to Clause 6, Article 52 of Decree 21/2021/ND-CP on Delivery of collateral, disposal of pledged properties, mortgaged properties, in case securing parties or individuals holding properties do not hand over collateral, secured parties have the rights to consider and conduct inspection of collateral to prevent dispersion of collateral, disposal or request courts for resolution.

Thus, it can be seen that without the consent of the mortgagor, the Bank is not allowed to arbitrarily conduct the disposal of the collateral by any measures. In case the debtor does not deliver the collateral to the Bank, the Bank only has the right to review and inspect the collateral to prevent the dispersion of the collateral, to be in disposal or request the competent Court to settle disputes according to the regulations of law.

Above are the contents and legal sharing of TNTP’s lawyer on: “Does the bank have the right to auction mortgaged assets without the consent of the mortgagor?” We hope this article is useful to readers.

Sincerely,

Decree No. 206/2013/ND-CP of Management of debts of Enterprises with 100% State-Owned Charter Capital

Decree No. 206/2013/ND-CP of Management of debts of Enterprises with 100% State-Owned Charter Capital

Written by TNTP LAW on . Posted in Debt Collection.

When it comes to debt management, we often think of debt management of private enterprises. However, the debt management activities of state-owned enterprises are specifically regulated by law in many legal documents. In this article, TNTP’s lawyer will provide the main points of Decree No. 206/2013/ND-CP of the Government on debt management of enterprises with 100% state-owned charter capital (Hereinafter referred to as Decree 206/2013).

1. Classification of debts

According to Article 3 of Decree 206/2013, debts of state-owned enterprises are classified into 4 following main groups:

(i) Outstanding debts means overdue receivables which an enterprise cannot recover after having applied such handling measures as comparison, confirmation and urging of payment, and overdue payables an enterprise is unable to pay.

(ii) Bad debts mean receivables that are overdue for over 6 months (counted according to the initial payment deadline, excluding the extended payment time) and an enterprise cannot recover after having applied such handling measures as comparison, confirmation and urging of payment; or receivables which are not yet due but the debtors, who are economic institutions have fallen bankrupt, carrying out procedures for dissolution or individual debtors that are missing, have absconded, being prosecuted, held in custody or adjudicated by law agencies, enforcing the Judgement or have died.

(iii) Irrecoverable debts mean receivables that are overdue or are not yet due but fall into one of the following cases:

– Debtors are enterprises or institutions that have been completely dissolved or gone bankrupt in accordance with law.

– Debtors are enterprises or institutions that have terminated operations and are unable to pay debts and have nobody taking over their debt payment obligation.

– Individuals debtors have died, are missing or are still alive but have lost working capacity or civil act capacity, or their heirs under law have no payment capability.

– Debtors have obtained debt write-off decisions from competent agencies in accordance with law.

– They are remaining amounts of irrecoverable debts after handling the responsibilities of individuals and collectives liable to pay material compensations.

– The debt is overdue for 1 year or more, and the debtors still exist or operate but have run the business at a loss for 3 or more consecutive years, meet extreme difficulties, have no payment capability, and the enterprise cannot recover such debts after having actively applied various measures.

(iv) Unpayable debts mean due or overdue debts an enterprise is unable to pay to their creditors according to committed contracts.

2. Principles of debt management and settlement

According to Article 4 of Decree 206/2013, state-owned enterprises shall draft and issue Regulations on debt management (applicable to both receivables and payables), clearly identifying the responsibilities of competent collectives and individuals in monitoring, collecting and paying debts; comparing, confirming and classifying debts, urging the collection thereof and proactively handling outstanding debts.

In addition, for bad debts or unpayable debts, enterprises shall, first of all, make provisions according to regulations and apply every measure to recover debts and share difficulties with creditors and debtors in the handling of debts through freezing, rescheduling, write-off, purchase and sale. Enterprises shall report on cases beyond their handling capacity and competence to competent agencies for settlement support measures.

In the case of the debt receivables and payables in foreign currencies must be converted into Vietnam dong at the time of accounting and making financial statements in accordance with the law. Exchange rate differences arising in the period and resulting from the revaluation of the balances of receivables and payables in foreign currencies at the end of a fiscal year must be handled under the regulations of the Ministry of Finance.

Finally, once every six months and at the end of the fiscal year, when making and submitting financial reports and supervision reports, enterprises shall report to the owners on the management and collection of debts, handling of outstanding debts, the debt payment capability and situation according to this Decree.

3. Order of handling of irrecoverable debts

According to Article 7 of Decree 206/2013, the debt handling order is applied according to 03 main groups including:

(i) For irrecoverable debts, it must be handled in the following sequence:

– Enterprises identify the causes and liabilities of collectives and individuals and request such collectives and individuals to pay compensations under law.

– Using the provisions for bad debts to offset.

– Accounting them into business expenses or incomes of enterprises on a case-by-case basis.

(ii) For enterprises that are transforming, if they suffer losses after handling once irrecoverable debts under Clause (i), they may continue handling them under state regulations applicable to transformed enterprises.

(iii) For irrecoverable debts that have been handled (excluding sale of debts) but debtors still exist, enterprises shall continue monitoring them off the balance sheet and in the notes to financial statement for at least 10 years from the date of handling and take measures to recover these debts. If recovering these debts, enterprises can account for the recovered amounts minus related expenses into their incomes.

In addition, agencies receiving these debts shall continue monitoring and collecting irrecoverable debts that have been handled but the debtors still exist. During the handover pending time, enterprises must still monitor and collect these debts.

From the above analysis, it is evident that the sequences and procedures of debt management in state-owned enterprises share some similarities with those of private enterprises. These include management by Regulations, debt classification, and the method of handling debts from the easiest to the most difficult to collect. However, due to the unique characteristics of state-owned enterprises with 100% charter capital, which is directly regulated by administrative organization regulations and has an organizational structure similar to state agencies — these enterprises must adhere to specific state-issued debt management regulations. This requirement significantly limits their flexibility in conducting debt management and collection activities compared to private enterprises.

Above is TNTP’s lawyer article about Decree No. 206/2013/ND-CP of the Government on debt management of enterprises with 100% state-owned charter capital. Hope this article is useful to readers.

Best regards,

What should enterprises do to mitigate the potential consequences of internal disputes?

What should enterprises do to mitigate the potential consequences of internal disputes?

Written by TNTP LAW on . Posted in Dispute settlement.

Internal enterprise disputes are conflicts and disagreements when practicing rights and obligations between entities in the company. These disputes mainly involve economic interests, decision-making and company management rights. In fact, internal disputes are unavoidable, but businesses can still implement solutions to limit disputes from occurring. In the following article, TNTP sends readers solutions to limit internal disputes.

1. Choosing the right type of business

Choosing the type of business is very important to start a business, because this will affect the ability of the founding members in managing and making decisions. At the same time, each type of business will have a different organizational management structure and ability to raise capital.

Based on the provisions of the Enterprise Law 2020, there are 04 (four) types of enterprises that organizations and individuals can choose when establishing a company. These include: Joint stock companies (“JSCs”), one-member limited liability companies or limited liability companies with two or more members, partnerships and sole proprietor enterprises (“SPEs”).

Accordingly, at the time of starting business, when the business model is small, to save the costs and the founding members need to manage the entire business activities of the company, individuals can establish SPEs or one-member Limited Liability Company or Limited Liability Company with two or more member.

At a later time, when the business has grown and needs to expand its business activities, the founding member(s) in the company can raise more capital from other organizations and individuals. At that time, enterprises may have to carry out procedures to change the type of business, especially for enterprises that initially have only one founding member but later mobilize more capital from other organizations and individuals.

Thus, choosing the right type of business at each time not only helps businesses operate firmly but also can limit possible internal disputes.

2. Building a strict company charter

• The company’s charter is a mandatory document when submitting an enterprise establishment registration dossier at the Business Registration Office, which is an internal document of the company, regulating the establishment, management, organizational structure, operation, organization, dissolution and other aspect of the company. Therefore, a valid and strictly drafted charter will contribute in limiting possible internal disputes in the future.
However, in the current situation, many enterprises, when preparing business establishment registration dossier, do not prepare a charter in accordance with the organizational structure of the enterprise but copy the template charter from other enterprises. This is one of the reasons why the charter of that company is ineffective.

• Accordingly, by the provisions of law, enterprises build a company charter to apply within their enterprises. The company’s charter must ensure to contain main contents specified in Clause 2, Article 24 of the Enterprise Law 2020. In addition, the company may have additional contents but must not be contrary to the provisions of law.

In order to limit internal disputes, when building the company’s charter, founding members/shareholders should pay special attention to the following contents:

 Select the legal representative(s) of the company, clearly specify the number of representatives, the authority and scope of each person to avoid disputes and conflicts.

 Clearly stated in the charter: “charter capital, percentage of contributed capital, total number of shares, types of shares and par value of each type of share”. Because these are the legal basis for establishing the membership/shareholder status of the company. It is also the basis for establishing the rights and obligations of members/shareholders in the company.

 Specific rights and obligations of members, shareholders; the mode and rate of approval of the company’s decisions, cases in which the company buys back the contributed capital of members or shares of shareholders; principles of profit distribution after tax and handling of losses in business; modalities of amending or supplementing the company’s charter; dissolution and liquidation of company assets, internal dispute settlement mechanism in the company’s charter; standards and obligations of company managers.

 In addition, the company’s charter may recognize additional mechanisms for increasing rights, such as increasing voting rights by issuing voting preference shares and binding the responsibilities of the founding members to ensure that they will stick and run the company’s activities in accordance with the strategy and business plan that the company has set out.

3. Establish agreements between founding members

In addition to the company’s charter, the founders (or some members and shareholders in the company) can sign one or several individual agreements with others. The purpose is to agree on issues related to the management of the company, as well as protect their legitimate rights and interests to ensure that the company will operate in accordance with the goals and business ideas previously defined by the founders.

This agreement is often referred to by names such as “shareholder agreement”, “capital contribution agreement”, “membership agreement”, “founding shareholder agreement”,… These written agreements, if clearly established, will have an important impact in the internal management of the company, limiting disputes or be an effective way for settlement when a dispute arises.

Above is the content of the article “What should enterprises do to mitigate the potential consequences of internal disputes”. We hope the information shared above will be useful for our readers.

Best Regards,

Procedures for resolving disputes by ad hoc arbitration

Procedures for resolving disputes by ad hoc arbitration

Written by TNTP LAW on . Posted in Dispute settlement.

Ad hoc arbitration is a form of arbitration widely used around the world. The arbitration laws of various countries recognize the existence of this form of arbitration. In Vietnam, Ad hoc arbitration is regulated in the 2010 Commercial Arbitration Law, primarily characterized by procedures and processes agreed upon by the parties. How is a commercial dispute resolved through Ad hoc arbitration? The following article will discuss the procedures and Procedures for resolving disputes by ad hoc arbitration that parties can refer to for implementation.

1. Filing a Lawsuit

The plaintiff is responsible for sending the lawsuit file to the defendant and the Arbitration Council. The arbitration proceedings start when the defendant receives the plaintiff’s lawsuit. Accordingly, the lawsuit file includes:

• A lawsuit petition;

• Arbitration agreement;

• Documents and evidence proving the lawsuit is based on valid and legal grounds (Contracts, Handover records, Contract termination records, and other documents);

• If the plaintiff is an individual: Certified copy of the plaintiff’s identity card;

• If the plaintiff is an organization: Certified copy of the Business Registration Certificate or establishment decision, operating license of the plaintiff, etc.; Certified copy of the legal representative’s identity card of the plaintiff;

• Certified copy of the Business Registration Certificate or establishment decision, operating license of the defendant (if any),…

Within 30 days from the date of receiving the plaintiff’s lawsuit and accompanying documents, the defendant must send a defence statement to the plaintiff and the arbitrator. If the parties disagree with an arbitrator to resolve the case, the defendant must send the plaintiff the arbitrator’s information, including the name and address.

If the defendant countersues the plaintiff, the defendant must send the counterclaim to the Arbitration Council and the plaintiff at the time of submitting the defense statement. Within 30 days of receiving the counterclaim, the plaintiff must send a defense statement to the Arbitration Council and the defendant.

2. Establishing the Ad hoc arbitration Council

Before or after a dispute arises, the parties can agree on the arbitrator(s) to resolve the case. The number of arbitrators can be one or three. If the case is resolved by three arbitrators, the president of the Arbitration Council must be determined. The president can be agreed upon by the parties or the arbitrators. If there is no other agreement between the parties, they will apply the provisions of Article 41 of the 2010 Commercial Arbitration Law to establish the Ad hoc Arbitration Council.

3. Paying Arbitration Fees

The parties can agree with the Arbitration Council on the arbitration fee. The fee is determined by the Arbitration Council. When filing a lawsuit, unless the parties agree otherwise, the plaintiff must pay the arbitration fee as required by the Arbitration Council. In case of a counterclaim, unless otherwise agreed by the parties, the defendant must pay the arbitration fee as required by the Arbitration Council. The losing party must bear the arbitration fee unless the parties agree otherwise or the Arbitration Council decides otherwise.

4. Preparing for Trial

At this stage, if deemed necessary or upon request by the parties, the Arbitration Council may:

• Verify the facts;
• Collect evidence;
• Summon witnesses;
• Apply temporary emergency measures.

Additionally, during the trial preparation, upon the parties’ request, the Arbitration Council may mediate to allow the parties to negotiate dispute resolution. If the parties reach an agreement on dispute resolution, the Arbitration Council will record a successful mediation with the signatures of the parties and the confirmation of the arbitrators. The Arbitration Council issues a decision recognizing the parties’ agreement. This decision is final and has the same value as an arbitration award.

5. Dispute Resolution Hearing

The parties may agree on the time, place of the dispute resolution hearing, arbitration language, and law applied to resolve the dispute. If the parties do not agree on these matters, the Arbitration Council will decide. The Arbitration Council will send a summons to the parties to attend the hearing.

The dispute resolution hearing is held in private unless otherwise agreed by the parties. The legal representatives or authorized representatives will attend the dispute resolution hearing, have the right to invite witnesses and defend their legitimate rights and interests. With the parties’ consent, the Arbitration Council may allow others to attend the dispute resolution hearing. The order and procedures of the dispute resolution hearing are agreed upon by the parties.

The arbitration award is issued either immediately at the hearing or the latest within 30 days from the end of the last hearing. The arbitration award must be sent to the parties immediately after issuance. The parties have the right to request a copy of the arbitration award from the Ad hoc Arbitration Council. The arbitration award is final and effective from the date of issuance.

Above is the article “Procedures for resolving disputes by ad hoc arbitration” sent to readers. Hopefully, the information provided is useful to those interested in this issue.

Best regards,

The difference between dispute resolution in Court and Arbitration

The difference between dispute resolution in Court and Arbitration

Written by TNTP LAW on . Posted in Dispute Settlement.

Dispute resolution is an important part of the legal system in every society. Nowadays, in the process of dispute settlement, the parties always prioritize negotiation and conciliation. In case the conflict reaches a peak, the parties who cannot negotiate by themselves will choose either Arbitration and the Court. However, there are fundamental differences between dispute resolution in Court and Arbitration. Accordingly, with this article, TNTP will send you the article “The difference between dispute resolution in Court and Arbitration”.

1. Legal nature

• The Court is the judicial body of the State, exercising judicial power. During the proceedings, the Court shall, on behalf of the State, consider and settle the dispute to maintain public order and protect the legitimate rights and interests of the parties.

• Arbitration is non-governmental dispute settlement method, of a social and professional nature. Arbitration can settle through ad hoc or an Arbitration Center, which established based on the agreement of arbitrators and the approval from State authorities. Arbitration is neither part of any structure of the State apparatus nor a judicial body of the State. Arbitration does not represent the judicial power of the State, so it is well suited for resolving disputes involving foreign factors.

2. Jurisdiction

a. Jurisdiction by case

• From the perspective of jurisdiction by case, the Court has broader jurisdiction than arbitration. Courts have jurisdiction to resolve virtually all types of disputes such as commercial business, inheritance, marriage and family-related, tort law…

• Meanwhile, Arbitration only resolves disputes between parties arising from commercial activities; at least one party has commercial activities, or the law provides that it must be settled by Arbitration. The disputing parties may only refer the dispute to Arbitration for settlement when there is an agreement on this. This means the Arbitration agreement is the must-have condition for the parties’ right to initiate arbitration proceedings.

b. Jurisdiction by territory

• In the process of settling disputes at the Court, the jurisdiction by the territory of the Court is specified quite clearly and in detail in the Code of Civil Procedure and the petition is settled only when submitted to the right competent Court agency for settlement as prescribed by law, except where the provisions Code of Civil Procedure allow the claimant to choose the Court.

• In contrast, Arbitration does not have the territorial jurisdiction, the disputing parties have the right to choose any Arbitration Center to settle according to their will and credibility. When the parties agreed to bring the dispute to any arbitration center, that center has is entitled to accept the dispute.

3. Judicial principle, time and cost of dispute resolution

a. Judicial Principles

• The court not only adjudicates for the purpose of protecting the rights and interests of the parties, but also has the meaning of educating the obedience of the law. As a result, most trials are conducted in public, and verdicts are often made public by the public. This makes it difficult to protect business confidential information and affect the reputation of the business.

• Meanwhile, when settling disputes at Arbitration, all facts and results shall not be published without the consent of the parties. Stemming from the need to protect business professional secrets, the law does not force Arbitration hearings to be public. The Arbitral award will also be kept confidential, not made public if the parties do not request to make it public. This principle is quite different from the Court’s principle of public trial.

b. Settlement time

• When the parties settle their dispute at the Court, there are many stages of trial from first instance to appellate, in some cases the judgment or decision of the Court may also be reviewed according to the procedure of cassation and retrial. Because the dispute resolution procedure in the Court must go through many different stages, it can sometimes lead to a lengthy trial time, the time from filing the application to the time of issuing a Judgement/Decision can be extended to several years. This is something that business units often tend to avoid.

• Arbitration only hears business or commercial disputes once. The Arbitral Award is final, enforceable, and cannot be appealed. This is the characteristic principle of Arbitration compared with Court. It comes from the nature of Arbitration that it is the will and right of disposition of the parties, and since the parties have agreed to settle their dispute through arbitration, they must comply with the final award.

At the same time, in settling disputes at Arbitration, the parties may choose the Arbitration organization, choose the arbitrator they trust. Being able to appoint an arbitrator helps the parties choose a good, experienced arbitrator who deeply understands the issue in question, thereby facilitating quick and accurate settlement of disputes.

c. Cost

• When filing a lawsuit petition with the Court, after the petition has been received by the Court, the plaintiff must pay advance Court fees and charges. Thereafter, upon trial, the Court shall declare the amount of court fees incurred by the litigant on the principle that the losing party shall be liable for court fees and charges. In case the plaintiff’s petition requests are accepted in whole, they shall not be liable for court fees and charges and will be refunded by the Enforcement Authority for the advance amount they had paid. Thus, if the case is won, the plaintiff will not lose the advance of court fees and charges paid.

• Unlike resolving disputes at the Court, when filing a lawsuit petition at Arbitration, the Claimant must pay the entire arbitration costs to the Arbitration Center. The amount of arbitration costs are set by the Arbitration Center, usually the more reputation the Arbitration Center is, the higher the costs. In fact, the amount of arbitration costs payable by the plaintiff will be much higher than the advance amount of court fees and charges in resolving disputes through Court.

With the dispute settlement by Arbitration, normally the losing party is subject to arbitration costs, unless otherwise agreed by the parties or otherwise provided by the rules of arbitration, or the arbitral tribunal makes a different allocation. Under this principle, if the plaintiff wins the case but the defendant is unable to enforce the award, it is considered that the plaintiff will be liable for the amount of arbitration cost paid. This is something the Plaintiff needs to consider before initiating arbitration.

From the above contents, we can see the differences between the Court and Arbitration. Therefore, it is necessary to carefully consider the specific characteristics of the dispute, take the context of the legal nature and content of the dispute into consideration to make the decision between choosing a Court or Arbitrator, in order to ensure fairness, efficiency and maximum protection of interests.

Above are the contents and legal sharing of TNTP in the article “The difference between dispute resolution in Court and Commercial Arbitration”. We hope this article is useful to you.

Best regards.

Court or commercial arbitration – which method is optimal in resolving construction contract disputes?

Court or commercial arbitration – which method is optimal in resolving construction contract disputes?

Written by TNTP LAW on . Posted in Dispute Settlement.

In the course of executing a construction contract, disputes may arise when one or both parties have not complied with the contractual requirements. Common disputes result from project cost overruns, failure to meet construction schedules, design changes, late payments, and non-compliance with safety content during the contract execution. After negotiation and mediation efforts fail, parties can opt for one of two methods to resolve disputes: Court or Arbitration. This article by TNTP will analyse the advantages and disadvantages of both methods, helping parties determine the most suitable method for resolving construction contract disputes.

1. Efficiency

For resolving disputes through Commercial Arbitration, parties can freely choose arbitrators to resolve disputes. Arbitrators can be experts in the construction field without necessarily being legal professionals. With a deep understanding of construction, these experts can accurately and thoroughly resolve disputes.

Additionally, courts in Vietnam may face difficulties in resolving contract disputes involving foreign elements. These difficulties stem from language barriers, the application of non-Vietnamese laws to interpret the contract, differences in business customs, contract interpretation, and expertise in the construction field. Meanwhile, choosing arbitrators in Commercial Arbitration can lead to more accurate and swift dispute resolution.

2. Procedural convenience

Arbitration proceedings are simpler and more flexible than court proceedings, such as scheduling hearings at convenient times for all parties. This flexibility allows for quicker dispute resolution, minimizing business disruption and related costs due to prolonged litigation.

3. Costs

Arbitration costs are higher than court costs. Arbitration fees include the expenses for remuneration of Arbitrators and the expenses for travelling, accommodation and other relevant expenses of the Arbitrators, etc, which are not required in court proceedings. Conversely, dispute resolution in courts requires parties to pay court fees and other legal costs, typically lower than the costs of arbitration. However, because arbitration tends to resolve disputes faster than courts, parties can save time, effort, and money that would otherwise be spent on court litigation.

4. Confidentiality and private dispute resolution

The dispute resolution mechanism by Commercial Arbitration is more confidential and private than the Court. In Vietnam, court trials are mostly public, and court judgments/decisions can be published on the Supreme People’s Court’s electronic portal. In contrast, all information and documents related to the dispute and Arbitral Award remain confidential unless otherwise agreed by the parties. In the construction sector, protecting trade secrets safeguards competitive advantages and maintains relationships with clients, reducing reputational risks.

5. Finality of arbitral award

Parties can appeal against a court’s first-instance judgments/decisions, seeking a review in the appellate court. If they disagree with the appellate court’s judgments/decisions, they can request a higher court for retrial or cassation.

In contrast, the arbitral award shall be final, binding on the parties and take effect from the day of issuance. Like court judgments/decisions, parties can request the competent civil enforcement authority to enforce the arbitration award. However, an arbitration award can be annulled by a competent court if it falls under certain conditions specified in the 2010 Commercial Arbitration Law, such as lack of an arbitration agreement or if the agreement is invalid, non-compliance with the agreed arbitration procedure, etc. If an arbitration award is annulled, parties must resolve the dispute from scratch through negotiation, mediation, courts, or arbitration, depending on their agreement.

Thus, depending on the circumstances of the dispute and the resolution goals, etc, parties can choose the most appropriate method. This article discusses “Court or commercial arbitration – which method is optimal in resolving construction contract disputes?” hoping to provide valuable insights to individuals and organizations involved in construction contracts.

Sincerely,

Common disputes arise from the sale of goods contract

Common disputes arise from the sale of goods contract

Written by TNTP LAW on . Posted in Contract Law.

The sale of goods contract is one of the most common commercial contracts. Due to the ongoing development of commercial activities, disputes arising from sales contracts are becoming increasingly, along with the complexity of each case. In this article, we will delve deeper into the sale of goods contract and common disputes that often arise from this type of contract.

1. The definition of sale of goods contract

• According to Article 430 of Civil Code 2015, a Sale of asset contract is an agreement between the seller and the buyer in which the seller transfers the possession right of the asset to the buyer, and the buyer pays the seller.

• In Clause 8 Article 3 Commercial Law 2005, the sale of goods is defined as a commercial activity in which the seller will deliver and transfer the possession of goods to the buyer and receive payment, as the buyer will pay the seller and receive the goods and along with possessing the right as their agreement.

From the above, it can be observed that the sale of goods contract is an agreement between the parties, wherein the seller is obligated to deliver the goods, transfer ownership of the goods to the buyer, and receive payment. On the other hand, the buyer is obligated to pay the seller, receive the goods, and obtain ownership of the goods as agreed upon. The parties should take care to fulfill their respective obligations as stipulated in the contract.

2. Common sale of goods contract disputes

• Disputes in the sale of goods contract are conflicts, disagreements, or breaches of contract terms regarding rights and obligations among the contracting parties involved in the sale of goods contract.

• The contents of disputes in the sale of goods contract are diverse. In practice, the following types of disputes often occur:

 The seller delivers the goods late or does not deliver the goods after receiving the deposit payment from the buyer;
 The seller delivers goods that are not of the correct type and quantity as committed in the contract signed by both parties;
 The buyer violates payment obligations;
 The seller violates the conditions on the time of goods transfer;
 One party must compensate for damages due to the breach of contract;
 One party violates the other party’s information security as stipulated in the contract.

In all those kinds of disputes, the dispute regarding the failure to perform the payment obligation of the buyer is the most common one.

3. The causes of disputes arising from the sale of goods contracts

The reason that leads to the dispute in the Sale of goods contract can lie within each party. Specifically:

• During the contract negotiation process, the parties failed to clearly agree on certain issues such as detailed technical standards of the goods, passing of risk issues, and payment deadlines, leading to difficulties in resolving these issues when they arise.

• When delivering the goods, due to the seller or the transport unit’s lack of due care, the quantity and quality of the goods may not be guaranteed. There are also other reasons that could lead to a dispute regarding the delivery of goods such as: The buyer does not have the capacity to receive the goods, unforeseen circumstances that prevent the delivery of goods,…

• Violations regarding payment obligations are mainly because the payment term is vague on payment time; the buyer provides incomplete payment documentation or the documents do not have the signature of the parties’ representative; The buyer caused difficulty in payment or is unable to pay; discrepancies in the data provided by each party leading to unsettled accounts.

• Disputes over compensation for damages arising from the difficulty of proving the behavior causing the damage as well as determining the value and extent of the damage, which is highly complex among the parties involved.

4. Measures to limit disputes on sale of goods contract

To ensure the rights and interests of the parties, each party needs to properly perform the Contract to minimize possible Contract disputes. In addition, to best prevent disputes from arising, the parties can pay attention to the following measures:

• Draft the contract precisely, in accordance with the contract performance of each party. There are many cases where one party violates their obligations because the circumstances of the contract implementation are unfavorable to the signed terms, or because the contract terms are unclear, leading to a breach of contract. Therefore, when drafting the Contract, it must be precise and suitable for each party. If there are unclear terms, they must be explained or adjusted and supplemented by the parties in the Appendix attached to the Contract.

• The parties need to clearly stipulate penalties for violations and liability for compensation when one party violates its obligations to perform the Contract. Strict sanctions regulation is an effective measure to make the parties self-aware and remind each party to respect and properly perform the Contract as committed.

• When a party violates the Contract, the aggrieved party can remind the breached party to adjust and rectify the existing contractual violation. Negotiation and mediation can be pursued to prioritize voluntary resolution and goodwill among the parties, thus limiting the escalation of disputes that may turn into legal proceedings.

Therefore, to minimize unwanted disputes, before entering into a sale of goods contract, the parties should thoroughly understand the causes of potential disputes and the legal consequences that may arise. This awareness allows the parties to take preventive measures against the risks of disputes that could harm all parties involved. Prior to contract formation, seeking legal advice from lawyers/legal experts can ensure the legal rights and interests of all parties in commercial transactions and provide prompt and timely resolution directions in case of disputes. Additionally, parties should enhance their knowledge of the critical aspects of agreements and clearly define contract provisions to prevent disputes from arising.

Above is the article “Common disputes arising from goods purchase and sale contracts” that TNTP sends to readers. If there is a problem that needs to be discussed, please contact TNTP for answers.

Sincerely,

Key point to consider in arbitration agreements

Key point to consider in arbitration agreements

Written by TNTP LAW on . Posted in Dispute Settlement.

The settlement of disputes by arbitration method is considered as a convenient out-of-court dispute settlement method, flexible and fast procedures; have finality; keep business secrets as well as the reputation of enterprises in the market. However, the dispute of the Parties must meet the conditions to be resolved by arbitration. In the following article, TNTP will provide an overview of the Key point to consider in arbitration agreements.

I. First, there must be an arbitration agreement

● Pursuant to Clause 1, Article 5 of the Law on Commercial Arbitration 2010, disputes can be settled by arbitration if the parties have an arbitration agreement. The arbitration agreement may be drawn up before or after the dispute has arisen. Thus, the condition for resolving disputes by arbitration is to have an arbitration agreement.

● An arbitration agreement may be a dispute settlement clause written in a separate contract or agreement, may be an Appendix attached at the time of signing the Contract or signed by the parties after a dispute arises in the form prescribed in Article 16 of the Law on Commercial Arbitration 2010.

According to TNTP’s dispute settlement experience, TNTP proposes that the parties, when signing the Contract, should always stipulate in the Contract about the dispute settlement clause to avoid cases when a dispute arises, one party wants to initiate a lawsuit at Arbitration but the other party always avoids signing attached annexes or agreements to settle disputes at Trong talent.

II. Second, the form of the arbitration agreement is established in accordance with the law

The arbitration agreement must be established in writing. The following forms of agreement are also considered established in writing:

● The Agreement shall be established through exchange between the parties by telegram, fax, telex, email and other forms as prescribed by law;
● The agreement is established through the exchange of written information between the parties;
● The agreement is recorded in writing by a lawyer, notary or a competent organization at the request of the parties;
● In the transaction, the parties have a reference to a document showing the arbitration agreement such as contracts, documents, company charters and other similar documents;
● Through the exchange of the lawsuit and the self-defense which demonstrates the existence of an agreement made by one party and not denied by the other.

The arbitration agreement is completely independent of the contract. The change, renewal, cancellation of the contract, the contract is invalid or unenforceable does not invalidate the arbitration agreement.

III. Third, the arbitration agreement does not fall under the circumstances of statutory invalidity

In addition to the necessary condition that an arbitration agreement is required, a sufficient condition to apply the arbitration method is that the arbitration agreement does not fall into the following invalid cases:

● Disputes arising in areas not within the jurisdiction of Arbitration, that is, cases where the arbitration agreement established to settle the dispute does not fall into the following cases: Disputes between parties arising from commercial activities; Disputes arising between parties in which at least one party has commercial activities; Other disputes between the parties provided for by law shall be resolved by Arbitration.

● The person establishing the arbitration agreement does not have jurisdiction under the provisions of law, i.e. the person establishing the arbitration agreement when he is not a legal representative or is not a legally authorized person or is a legally authorized person but exceeds the scope of authorization.

In principle, an arbitration agreement established by a person without jurisdiction, such arbitration agreement is null and void. Where the arbitration agreement is established by a person without jurisdiction but in the process of establishing and performing the arbitration agreement or in the arbitration proceedings that the person competent to establish the arbitration agreement has accepted or known without objection, the arbitration agreement shall not be invalid.

● The person establishing the arbitration agreement has no civil act capacity, i.e. a minor, a person who has lost civil act capacity or a person with limited civil act capacity. In this case, the Court needs to collect evidence to prove that the person establishing the arbitration agreement does not have civil act capacity, must have documents proving the date of birth or conclusion of the competent authority or the decision of the Court determined, declaring that the person has lost civil act capacity or has limited civil act capacity.

● The form of the arbitration agreement is inconsistent with the provisions of Article 16 of the Law on Commercial Arbitration.

● One of the parties is deceived, threatened or coerced in the process of establishing an arbitration agreement, which is the case specified in Article 4, Article 123 of the Civil Code.

● The arbitration agreement violates the prohibition of law, which is an agreement in the case specified in Article 123 of the 2015 Civil Code.

Pursuant to the above conditions, the effective condition of the arbitration agreement is that the parties must have an arbitration agreement, the form in accordance with the law and not in cases where the arbitration agreement is invalid.

Above is the article: ” Key point to consider in arbitration agreements”. We hope this article was useful to you.

Respect.

TNTP & ASSOCIATES INTERNATIONAL LAW FIRM

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