Author: TNTP LAW

Contract cancellation is the unilateral termination of a contract by one party’s will. However, due to its “retroactive” nature, contract cancellation is a more complex matter. Therefore, the law tightly regulates contract cancellations. In this article, TNTP will present some key points that parties need to consider when applying this measure, helping them choose an appropriate contract cancellation strategy in line with their goals and legal regulations.

1. Definition of Contract Cancellation

Contract cancellation includes cancelling the entire contract or cancelling a part of the contract. Cancelling the entire contract means completely abandoning the performance of all obligations under the contract. Cancelling a part of the contract means abandoning the performance of some obligations, while the remaining parts of the contract remain valid.

2. Grounds for Contract Cancellation

Except for cases of exempting liability specified in Article 294 of the Commercial Law of 2005, parties can cancel a contract in the following cases:

• When there is a breach of the agreed-upon conditions for contract cancellation. Depending on the type of contract and the parties’ objectives when entering into the contract, the parties can agree on actions that constitute grounds for each party to cancel the contract.

• When one party fundamentally breaches the contractual obligation. Fundamental breach refers to a breach of a party’s contract that causes damage to the other party to the extent that the other party cannot achieve the purpose of entering into the contract. In specific contracts, the parties should consider the purpose of entering into the contract, the nature of the breach, and its impact on the other party’s contractual purpose. If the breach directly affects and prevents the other party from achieving its contractual purpose, it is considered a fundamental breach.

3. Legal Consequences of Contract Cancellation

• Except in the case of cancelling a contract for the delivery of goods or partial service, after cancelling a contract, the contract is not effective from the time of formation, and the parties are not obligated to continue performing the agreed-upon obligations in the contract, except for agreements on post-cancellation rights and obligations and dispute resolution.

• Parties have the right to claim benefits resulting from the performance of their obligations under the contract. If both parties must return, their obligations must be performed simultaneously. If restitution cannot be made in the form of benefits received, the obligated party must make restitution in cash.

• The violated party has the right to claim compensation for damages. The party cancelling the contract does not lose the right to claim compensation for losses arising from the other party’s contract violation when the contract cancellation measures are applied.

4. Notification Obligations in Contract Cancellation

The party cancelling the contract must promptly notify the other party of the contract cancellation. In cases where delayed notification causes damage to the other party, the cancelling party must compensate for the damages. Although the law does not specify the form of notification, it is advisable to notify in writing or by email. In dispute resolution at an arbitration body, this notification will be considered evidence that the parties need to submit.

5. Contract Cancellation in the Case of Delivery of Goods, Partial Services

• In cases where there is an agreement on the delivery of goods or partial services, if one party fails to fulfil its obligation regarding the delivery of goods or services, constituting a fundamental breach for that delivery or service, the other party has the right to declare the contract cancelled for that specific delivery or service.

• If one party fails to fulfil its obligation for a specific delivery or service, creating grounds for the other party to conclude that a fundamental breach will occur in subsequent deliveries or services, the violated party has the right to declare the contract cancelled for subsequent deliveries or services, provided that this is done within a reasonable time.

• If a party has declared the cancellation of the contract for a specific delivery or service, that party still has the right to declare the contract cancelled for the deliveries or services already performed or to be performed later if the ongoing relationship between the deliveries leads to the delivered goods or services being unable to be used for the intended purpose agreed upon at the time of contract formation.

The above is the article “Commercial remedy: Cancellation of contracts” that TNTP is sharing with readers. In case of any issues for discussion, please contact TNTP for timely support.

Best regards,

When entering into a sale of goods contract, there are some important provisions to be aware of in order to minimize risks. Therefore, the parties participated in the contract need to understand the basic contents to propose to their business partner during the contract negotiation process. In the following article, TNTP will analyze some basic contents you need to know about this type of contract.

I. Definition of the sale of goods contract

The current legal documents in Vietnam do not have a definition of the sale of goods contract, but based on the definition of a contract (Article 385 of the Civil Code 2015), sale of asset contract (Article 430 of the Civil Code 2015), and the definition of sale and purchase of goods (Clause 8 Article 3 of the Commercial Law 2005), we can provide the following definition of the sale of goods contract as follow:

The sale of goods contract is an agreement between the parties, whereby the seller has the obligation to deliver the goods, transfer ownership rights of the goods to the buyer, and receive payment; the buyer has the obligation to make payment to the seller, receive the goods and ownership rights of the goods as agreed.

Depending on the subject, object, place of establishment and performance of the contract, the sale of goods contract is divided into domestic sale of goods contract and international sale of goods contract.

II. Form of the sale of goods contract

According to Article 24 of the Commercial Law 2005, the form of the contract can be expressed orally, in writing, or established by specific behavior. Contracts sale of goods that are required by law to be in writing by the law must comply with those provisions.

In principle, the parties are free to choose the form of the contract, except in cases where the law stipulates a specific contract form.

For example, the international sale of goods contract must be performed based on a written contract or another form with equivalent legal value (Clause 2 Article 27 of the Commercial Law 2005). The form with equivalent legal value includes electronic message, telex, fax, data message, and other forms as prescribed by law (Clause 15 Article 3 of the Commercial Law 2005).

III. Basic contents required in the sale of goods contract

During the drafting and review process to prepare for the signing of the sale of goods contract, the parties need to ensure that the contract includes the following basic contents:

– The information of the parties participated in the sale of goods contract;
– The subject of the contract;
– The price of the goods;
– Terms of payment;
– Terms of delivery;
– Right and obligation of the parties;
– Warranty of the goods;
– Commitment and guarantee;
– Force majeure events;
– Exemption from liability cases;
– Duration of the contract;
– Applicable remedies;
– Termination of the contract;
– Applicable law and dispute resolution.

The above is the content of the article ” Sale of Goods Contract – Basic Contents That Need To Know”. If you have any issues that need clarification, don’t hesitate to get in touch with TNTP for the best support.

Sincerely,

Vacation is a precious time that many people look forward to relaxing, discovering, and enjoying life. Currently, there are many forms of tourism and resort formed to serve the needs of everyone. One of them appears in the form of customers entering into the “Vacation Ownership Contracts” with companies or resorts – A form of resort that is quite new to Vietnamese people. However, in addition to the benefits that the Vacation Ownership Contract may bring, the Customer may face many risks from this Contract. In this article, we will give an overview of the Vacation Ownership Contract and analyze the risks that Customers may face.

1. Overview of Vacation Ownership Contract

In the provisions of Vietnamese law, there are currently no specific provisions for “Vacation Ownership Contract”. However, one can be understand that a “Vacation Ownership Contract” is a type of contract where the buyer buys the right to use a specific resort location for a fixed period of time, usually annually. This is a form of vacation investment and is often used to secure ownership of vacations in popular resort locations at domestically and internationally.

Vacation Ownership Contracts usually come with specific terms and conditions, including periods of use, maintenance fees, and the rights and responsibilities of the buyer. Under the Contract Contract, the buyer may transfer or resell their ownership in this Vacation Ownership Contract to someone else.

2. Risks to the Customers

The Trade Remedies Authority of Vietnam (Ministry of Industry and Trade) said that over the past time, disputes, reflections and complaints related to the Vacation Ownership Contract have continued to be reported by the media as well as consumers to the consumer rights protection agency.

A Vacation Ownership Contract is essentially a service registration contract, based on Case Law No. 42/2021/AL which makes it very clear that this is a form of accommodation service contract. Therefore, owning a vacation is not the same as owning real estate, or property there, but what the buyer owns is the time and service enjoyed in the future, not in the present. So it has a lot of potential risks for buyers. As follows:

• First, in fact, the term of Vacation Ownership Contracts is often quite long, which means that the buyer has to pay large amounts of money to own, it is possible that at the time of entering into the Contract, the project of the resort under the Contract has not been completed. Therefore, it is necessary to carefully evaluate the risks and profit margins before entering into the Contract.

• Second, in addition to the risk of external factors, such as the salesperson pressuring to sign the contract, the seller also uses untrue forms of advertising. The risk that future performance of the Contract may be “delayed” or even “broken” if the vacation seller fails to complete the Project on time or, worse, the Project “dies”.

• Third, in addition to the one-time payment at the time of signing the contract, the Customer must also pay annual expenses (from several million to several tens of millions of VND) depending on the specific rights and utilities that the Customer wants to enjoy when using the service at the resort. However, in the Contract there may not be specific and clear provisions about these expenses and related issues.

• Fourth, many people consider Vacation Ownership Contracts as a profitable investment channel. However, during the Contract, there are many buyers who want to resell or terminate the Vacation Ownership Contract for many reasons such as the vacation seller does not comply with the Contract, promises, the resort project is not completed on schedule to participate in the service, detecting signs of deceiving customers, mobilizing capital to build resorts by entering into vacation ownership contracts, … Many Customers after paying a lot of money to the vacation seller and receive the Contract after payment. At this point, the Customer can carefully read the Contract and realize that there are many unfavorable terms for vacation buyers. Therefore, if the Customer considers this as a profitable investment channel and wants to sell/re-transfer the Vacation Ownership Contract, the Customer will face difficulties because the terms of sale or transfer are very unfavorable, even in cases stipulating that the Customer must have the approval of the vacation seller to proceed with the transfer. Customers who have purchased vacations often have difficulty exiting this agreement.

• Fifth, the current Vietnamese law also does not have specific legal provisions to regulate the subject of “Vacation Ownership Contract” and the fact that investors through the sale of vacations to raise capital from entering into contracts with customers, has created a large legal gap. Businesses use a strong legal team, using a pre-written contract (Sample Contract) that stipulates terms that are favorable to them and disadvantageous to customers, especially for those who are not knowledgeable about the law.

3. Minimizing risks when entering into Contracts

• Before entering into the Vacation Ownership Contract in particular and the types of Contracts in general, the Customer should carefully study information about the subject of the Contract which products or services are introduced in the event, as well as about the supplier. In this way, it is possible to identify important issues of benefits and risks that may be encountered, thereby having the opportunity to decide and ask for further answers before signing the contract.

• For the Vacation Ownership Contract, the Customer should carefully read and understand all the terms and conditions in the Contract, pay special attention to the fees and durations, rights and obligations of the Customer, the value of the Contract and related costs, as well as the terms of termination/assignment of the Contract and handling of breach of the Contract. Clients can use legal aid services from a legal service provider to advise on entering into this type of Contract.

• In addition, Customers can report and denounce to the police agencies organizations, businesses and individuals that take advantage of the activity of “Owning vacations” to commit illegal acts.

Above is the article “Risks to Customers when entering into “Vacation Ownership Contract” that TNTP sent to readers. In case there is a problem to discuss, please contact TNTP for answers.

Best regards,

To ensure the performance of obligations in a contract, one of the measures often chosen by parties is Property Mortgage. Property Mortgage has common characteristics with other methods of securing obligations, such as enhancing the responsibilities of the parties regarding their commitments and supplementary obligations. To help parties apply this measure in accordance with legal regulations, in this article, TNTP will present an important aspect that all parties should pay attention to: the Rights and Obligations of the Mortgagee in Property Mortgage.

1. Rights of the Mortgagee

The mortgagee in Property Mortgage has the following rights:

• Examine and inspect directly the mortgaged property provided that such examination and inspection does not hinder or cause difficulty to the use and exploitation of the mortgaged property.

• Require the mortgagor to provide information on the current status of the mortgaged property.

• Require the mortgagor to apply necessary measures to preserve the property and the value of the property if there is a danger that use and exploitation of the mortgaged property will cause loss of value or depreciation in the value of the property.

• Conduct the registration of mortgage as prescribed by law.

Registering the mortgage in accordance with legal regulations is the obligation of the mortgagee if the mortgage measure falls under the cases mandated by the law to be registered as a secured transaction. On the other hand, registering the mortgage is also the right of the mortgagee because only when the mortgage is registered as per legal regulations does it gain enforceability against third parties. From that point onward, the mortgagee has the right to claim the mortgaged property from the possessor and is entitled to establish the priority order for payment when handling the mortgaged property.

• Require the mortgagor or a third person holding the mortgaged property to deliver it to the mortgagee for realization if, upon expiry of the term for the fulfilment of the obligation, the obligor has failed to perform or performed incorrectly the obligation.

• Hold documents related to mortgaged property as agreed by parties, unless otherwise prescribed by law.

• Follow procedures for realization of a mortgaged property as prescribed in the cases: i) An obligator fails to perform or perform not as agreed an obligation when it falls due; ii) An obligator must perform the secured obligation before the time limit due to his/her violation against the obligation as agreed or prescribed by law; iii) Other cases as agreed by the parties or prescribed by law.

2. Obligations of the Mortgagee

The mortgagee has the following obligations:

• Return the documents to the mortgagee after the termination of the mortgage in cases where the parties have an agreement, except when the law specifies otherwise.

Although the law only stipulates that a mortgage is the “use of property” and does not require the mortgagor to transfer documents related to the mortgaged property, in practice, the mortgagee often requests the mortgagor to transfer such documents regarding the mortgaged property. This transfer of documents helps the mortgagee prevent the mortgagor from transferring ownership rights to the mortgaged property. In cases where the mortgagee holds documents related to the mortgaged property, the mortgagee has an obligation to return these documents to the mortgagor when the mortgage is terminated.

• Follow procedures for the realization of mortgaged property in accordance with regulations of law.

Realization of mortgaged property is both a right and an obligation of the mortgagee. However, when carrying out this process, the mortgagee must comply with the procedures and regulations prescribed by the law.

This article, “Rights and Obligations of the Mortgagee in Property Mortgage” is provided by TNTP for your reference. If you have any questions or need further clarification, please feel free to contact TNTP for timely assistance.

Sincerely,

Property mortgage involves one party using their own property to secure the performance of obligations without transferring the property to the other party. When implementing Property mortgage measures, one of the critical aspects that all parties involved need to pay attention to is the rights and obligations of the Mortgagor. In this article, TNTP will provide information about the Rights and Obligations of the Mortgagor in Property mortgages.

1. Rights of the Mortgagor

The Mortgagor in asset mortgages has the following rights:

• Exploit, and enjoy the yield and income derived from, the property, except where the yield and income also form part of the mortgaged property as agreed.

• Invest in order to increase the value of the mortgaged property.

• Recover the mortgaged property and related documents held by a third person when the obligation secured by the mortgage is terminated or is substituted by other security.

• Sell, replace, or exchange the mortgaged property, if it is goods circulating in the process of production or business. In this case, the right to demand payment from the buyer, the amount received, property formed from the amount received, or the property replaced or exchanged becomes part of the mortgaged property.

When a warehouse is mortgaged, the mortgagor may substitute goods in the warehouse but must ensure the value of the goods in the warehouse remains the value agreed.

• Sell, exchange or give mortgaged property not being goods rotating during the production and business process with the consent of the mortgagee or as prescribed by law.

• Lease or lend the mortgaged property provided that notice must be provided to the lessee and the borrower that the property is being mortgaged and that the mortgagee must also be notified that such notice has been provided.

2. Obligations of mortgagor

The mortgagor in property mortgages has the following obligations:

• Transfer documents related to the mortgaged property, unless otherwise agreed or prescribed by law.

• Take care of and preserve the mortgaged property.

• If the mortgaged property is in danger of losing its value or depreciating in value due to its exploitation, to take necessary remedial measures, including ceasing the exploitation of the mortgaged property.

• When the mortgaged property is damaged, the mortgagor is obligated to, within a reasonable period, repair or substitute another property with equivalent value, unless otherwise agreed.

• Provide information about the actual condition of the mortgaged property to the mortgagee.

• Deliver the mortgaged property to the mortgagee for realization in one of the cases prescribed in the cases: i) An obligator fails to perform or perform not as agreed an obligation when it falls due; ii) An obligator must perform the secured obligation before time limit due to his/her violation against the obligation as agreed or prescribed by law; iii) Other cases as agreed by the parties or prescribed by law.

• Notify the mortgagee of any third-person rights with respect to the mortgaged property (if any). In the case of failure to provide such notice, the mortgagee shall have the right to cancel the contract of mortgage of property and demand compensation for damage or the right to maintain the contract and agree on the rights of the third person with respect to the mortgaged property.

• Do not sell, exchange or give the mortgaged property, except in the cases:

i) In cases where the mortgaged property is goods circulating in the process of production or business, the mortgagor is allowed to sell, replace, or exchange this property. In the case of mortgaged goods, the mortgagor has the right to replace the goods in the warehouse but must ensure the value of the goods in the warehouse as agreed.

ii) In cases where the mortgaged property is not goods circulating in the process of production or business, the mortgagor can only sell, exchange, or donate this property if agreed upon by the mortgagor or as stipulated by the law.

This article, “Rights and Obligations of the Mortgagor in Property Mortgage” is provided by TNTP for your reference. If you have any questions or need further clarification, please feel free to contact TNTP for timely assistance.

Sincerely,