Author: TNTP LAW

Efficient debt collection steps for businesses (Part 1)

Written by TNTP LAW on 12 April, 2023. Posted in Thu hồi nợ, Thu Hồi Nợ.

To carry out the debt collection process effectively, businesses need to follow a specific procedure. Debt collection needs to be done in a sequence to ensure time, cost, and effort. In this article, TNTP will provide efficient debt collection steps for businesses.

Step 1: Negotiation

This is the first stage in the debt collection process, negotiating with the debtor for two main purposes: determining if the debtor has the intention to pay and initially assessing the debtor’s ability to pay. Specific tasks in the negotiation stage include:

1. Contacting the debtor via email and phone

The debtor uses the contact information provided to send payment requests, and using email and phone in the first step is fast and timesaving. The content of the exchange includes payment requests and the amount of payment. In case the debtor cannot be contacted through email and phone, the business can switch to contact via official letter.

2. Using payment request letters

When initial phone contact is ineffective, businesses need to draft payment request letters. The content of these letters is similar to that of payment requests made through email and phone, including: Request for payment of the debt, specific amount, and time of payment request; Legal measures if the debtor fails to make payment.

Payment request letters are usually sent by mail to the debtor’s address. The purpose of sending the letter is to determine whether the debtor is still operating at the registered address. If the debtor is no longer operating at the registered address, the business can use the returned mail as evidence that the debtor is not working at the registered address when dealing with the relevant state authorities.

Payment requests should accurately state the necessary information and should be accompanied by related documents so that the debtor has a basis for checking the debt. In addition, the content of the payment request letter must include a deadline for the debtor to respond, ensuring that the debtor responds promptly after receiving the business’s letter. Failure to respond will be considered uncooperative in the payment recovery process, which can impact the timeline for debt collection.

3. Work directly at the debtor’s headquarters

In case the enterprise has sent a request for payment but has not received any response from the debtor, the next step in debt recovery is to work directly at the debtor’s registered address. The enterprise needs to send an employee with necessary documents to request payment, and the purpose of working directly is to have a stronger impact on the debtor and to determine whether the debtor is still operating at the registered address, whether its operation is stable, and whether it is capable of payment.

One thing to note when meeting the debtor is that, besides the payment request, the enterprise needs to inquire about the reason why the debtor did not respond to previous letters, emails, or phone calls to determine whether the debtor is cooperative in the payment process. In addition, the employee working directly at the debtor’s address needs to request the authorized person, such as the accountant or director, to handle the debt to ensure that the payment request is accurately conveyed to the person who has the right to decide on payment. If the authorized person cannot be reached, the employee needs to prepare a handover record for the debtor’s staff to demonstrate that the enterprise has worked on the case and sent the necessary documents to request payment. These records can be used to prove the communication between the enterprise and the debtor in case the enterprise takes further action at the relevant state agency.

If the direct work with the debtor does not yield any result due to the debtor’s non-cooperation, the enterprise may consider filing a lawsuit at the relevant dispute resolution agency. This topic will be analyzed in the next article.

Above is part one of the article “Effective debt recovery steps for enterprises”. Hopefully, this article will be helpful for enterprises in their debt recovery process.

Best regards,

The right to request late payment interest

Written by TNTP LAW on 4 April, 2023. Posted in Giải quyết tranh chấp.

In life, borrowing money to meet spending or investment needs is very common. However, not always does the borrower repay the loan on time as agreed, which can lead to disputes between the parties. Therefore, the right to request interest when the borrower is late payment is a matter that is raised to ensure the rights of the lender and also creates more pressure for the borrower in debt repayment. In this article, TNTP will analyze the right to request late payment interest within the scope of a loan agreement for money between individuals and legal entities that are not credit institutions with each other (hereinafter referred to as the property loan contract).

1. Borrowing activities and interest

● Borrowing money, in the legal language called a property loan contract, in Article 463 of the Civil Code (“CV”) 2015, a property loan contract is stipulated as an agreement between the parties, whereby the lender delivers the property (in this case money) to the borrower and when it is due, the borrower must repay the lender the entire amount previously borrowed. If the parties agree on the interest rate, the borrower must also pay the interest to the lender.

● Interest is an amount that the borrower must pay to the lender by agreement or by law. Interest includes interest agreed upon by the parties in the contract and interest prescribed by law, which includes late payment.

2. Determination of interest and interest rates in property loan contracts in the case of application of the 2015 Civil Code

● In cases where a loan is interest-free, and the borrower fails to repay the debt or only partially repays it when it comes due, the lender has the right to demand payment of interest at a rate of 10% per year on the overdue amount corresponding to the time the payment was late, except in cases where there is a different agreement or the law has different regulations.

Interest on overdue principal = (unpaid overdue principal) x (10% interest rate per year) x (time the principal payment was late).

● In cases where a loan is with interest, and the borrower fails to repay the debt or only partially repays it when it comes due, the borrower must pay interest as follows:

a) Interest on the overdue principal during the agreed term but not exceeding 20% per year of the loan amount (except in cases where the law has different relevant regulations) corresponding to the period of principal payment not yet paid at the time of contract establishment. If the parties agree to pay interest but do not specify the interest rate and there is a dispute, the interest rate shall be determined at 10% per year.

Interest on the overdue principal during the agreed term = (unpaid principal) x (interest rate according to the agreement or 10% interest rate per year) x (time of unpaid interest on principal).

b) In case of late payment of interest on the principal during the agreed term, interest overdue interest on the principal must also be paid at a rate of 10% per year corresponding to the period of late payment of interest on the principal, except in cases where there is a different agreement.

Interest on overdue interest on principal = (unpaid interest on principal) x (10% interest rate per year) x (time of late payment of interest on principal);

c) Interest on overdue principal not yet paid is 150% of the loan interest rate agreed by the parties in the contract corresponding to the period of late payment, except in cases where there is a different agreement. The interest rate on overdue principal agreed by the parties cannot exceed 150% of the interest rate of 20% per year.

Interest on overdue principal not yet paid = (overdue principal) x (interest rate agreed by the parties or 150% of the loan interest rate agreed by the parties) x (time the principal payment was late).

3. Cases where the lender has no right to claim interest due to late payment

● Due to agreement between parties: In case the parties have an agreement, it may be in the contract or at the time when the borrower is late payment. Since demanding interest for late payment is a right, the lender may or may not require the borrower to pay the interest for late payment;

● Due to the fault of the lender: If the borrower is late payment interest entirely due to the fault of the lender, the lender may not have the right to demand the borrower fulfill the obligation of paying interest for late payment. For example, if the lender intentionally refuses to receive payment from the borrower on time;

● Due to force majeure events: According to Article 156 of the Civil Code of 2015, the occurrence of force majeure events will exempt civil liability, including the obligation to pay interest for late payment. Therefore, the lender will not have the right to demand the borrower fulfill this obligation. Force majeure events are events that occur objectively and cannot be foreseen or remedied despite applying all necessary measures and capabilities.

Above is the content of the article “The right to request late payment interest”. We hope the article will be useful to you.

Best regard.

Dispute resolution methods in commercial activities

Written by TNTP LAW on 4 April, 2023. Posted in Dispute Settlement, Giải quyết tranh chấp.

In the field of commerce, there is always a potential dispute because the parties always aim to benefit themselves. The dispute can be considered a disease and the issue is how to treat it both when it arises and even before it does. Within the scope of current legal regulations, there are many ways to resolve disputes in the field of commerce, we will research these methods in the following article.

1. Commercial activities

● According to the provisions of Clause 1, Article 3 of the Law on Commerce of 2005 (“LCM”), commercial activities are understood as activities for profit-making purposes, including activities of buying and selling goods, providing services, investment, trade promotion,…

● Objects in commercial activities are goods, whereby goods are all types of movables, including those to be formed in the future and things attached to land such as trees,…

2. Dispute resolution methods in commercial activities

Article 317 of the LCM stipulates 03 methods of dispute settlement as follows:

● Negotiation: The process involves parties in commercial activities, whereby the parties will negotiate and come to an agreement based on specific arguments and legal regulations to find a suitable resolution that aligns with the intentions of the parties. At this stage, the parties may negotiate on their own or seek the assistance of lawyers or experts. The result of the negotiation will depend on the voluntary nature and compromise of the parties, and it is not legally binding. Therefore, the legal rights and interests of the parties may be difficult to ensure adequate.

● Mediation: Apart from resolving disputes through negotiation, when resolving through mediation, in addition to the parties involved in commercial activities, individuals and organizations are acting as third parties to mediate. These may be commercial mediators or commercial mediation organizations chosen by the parties or designated by the commercial mediation organization at the parties’ request.

The participation of third parties is essential in persuading and encouraging the parties to resolve disputes in the best possible way. However, fundamentally, whether the parties can mediate or not depends largely on the agreement and will of the parties. When the parties reach a mediated settlement, for the settlement to be binding, the requesting party must seek recognition of the mediated settlement in court as prescribed by civil litigation law.

● Arbitration or court

Arbitration: To resolve disputes in this way, the parties must have an arbitration agreement, which can be either institutional or ad hoc arbitration. Institutional arbitration is a form of dispute resolution that takes place at an arbitration centre. Typically, the parties prefer to choose a specific arbitration centre for resolving their disputes.

The arbitration award is binding and enforceable, which is an advantage over other methods of dispute resolution such as negotiation and mediation. In addition, arbitration ensures confidentiality and saves time in resolving disputes. This is also the common trend for resolving international commercial disputes. Therefore, the parties may consider choosing and regulating the contract about arbitration as a dispute resolution mechanism.

Court: Resolving disputes through the court system will involve the power of the state, which means that there will be the involvement of a state agency, specifically the court, acting on behalf of the state in the conduct of legal proceedings. The court’s judgment/decision is binding and enforceable, and if a party fails to voluntarily comply, the other party may request the competent civil enforcement agency to enforce the judgment. One of the parties must file a lawsuit stating the facts of the case and petition, along with relevant evidence, to the competent court. However, resolving disputes in court has limitations, such as prolonged resolution time, complex procedures, and difficulty in ensuring confidentiality.

3. Experience in dispute resolution in commercial activities

● Priority on the agreement: In case of disputes, parties should first try to resolve them through negotiation and mediation as these methods are usually quicker, cost-effective, and help parties to understand each other better. However, depending on the specific circumstances, if one party does not receive the good faith of the other, this party may choose to use dispute resolution methods such as Arbitration or Court;

● Regulate provisions on dispute resolution in contracts: Disputes are not something any party desires when entering into a commercial contract. However, to anticipate potential disputes, parties should regulate provisions on the dispute resolution methods when drafting the contract. In case of disputes, parties can refer to those provisions to achieve the most effective dispute resolution.

Above is the content of the article “Dispute resolution methods in commercial activities”. We hope the article will be useful to you.

Best Regard.

Distinguish between an employment contract and a service contract

Written by TNTP LAW on 4 April, 2023. Posted in Luật Lao động.

In fact, the line between the employment contract and service contract is very fragile. Especially for service contracts that stipulate signs related to remuneration, salary payment, working time, rest time, etc., in many cases, can be considered as labor contracts. How to distinguish the employment contract and the service contract? How to draft service contract that does not overlap with the employment contract? Let’s find out regarding this issue with TNTP through the article below.

I. Distinguish

1. Governing law of the employment contract and service contract

Currently, the governing law of employment contracts is the Labor Code 2019. And service contract is governed by two main sources of law, the Civil Code 2015 and the Commercial Law 2005. Accordingly, depending on the subject and purpose of signing, service contract may be identified as a regulated entity of the Civil Code 2015 or the Commercial Law 2005.

2. Concept of the employment contract and service contract

Article 13 of the Labor Code 2019 stipulates that the employment contract is an agreement between an employee and an employer on a paid job, salary, working conditions, and the rights and obligations of each party in labour relations.

In addition, a document with a different name is also considered an employment contract if it contains the agreement on the paid job, salary, management, and supervision of a party.

According to Article 513 of the Civil Code 2015, service contract is an agreement between parties whereby a service provider performs an act for a client which pays a fee for that act.

On the other hand, according to Clause 9 Article 3 of the Commercial Law, provision of services means commercial activities whereby a party (hereinafter referred to as the service provider) is obliged to provide a service to another party and receive payment; the service-using party (hereinafter referred to as the customer) is obliged to pay to the service provider and use the service as agreed.

Thus, it can be visible that the concept of “labor contract” and “service contract” is quite similar and complex to distinguish. Accordingly, both of these types of contracts are agreements between the parties, with payment for the performance of the work. Therefore, determining whether the contract is a service or an employment contract is not always straightforward and transparent.

3. Legal binding between the parties in the employment contract and service contract

The employment contract is legally binding between the employee and the employer. Accordingly, during the contract performance, the employee shall be managed and supervised by the employer and comply with the rules and regulations issued by the employer.

Service contract will not have management and supervision between the parties. The result that the parties would like to achieve is the work outcome. Unless otherwise agreed, the service provider can perform work anywhere, at any time without the management and supervision of the service-using party as long as the service provider ensures the achievement of the work as agreed in the contract.

4. Subjects performing the employment contract and service contract.

The employment contract is an agreement between an employee and an employer on a paid job and salary, which is understood as the employee “selling” his or her employment power to receive the salary. Thus, the employee will have to perform the contract by themself, not transfer it to another person, unless otherwise agreed with the employer.

For service contracts, the service provider may transfer the work to another person to perform it with the consent of the service-using party.

5. Liability to pay social insurance of employers and service using-party

According to the provisions of the Law on Social Insurance 2014, within 30 days from the date of signing the employment contract, the employer shall submit a dossier of registration for participation in social insurance for the employee.

For service contracts, the service-using party is not liable for paying social insurance for the service provider.

II. How to draft service contract so as not to overlap with the employment contract

As aforementioned, defining the line between the employment contract and service contract is not always straightforward and transparent. In many cases, although the contract name is service contract, it can also be identified as the employment contract. Thus, to draft service contract so as not to overlap with the employment contract, clients should note the following:

Firstly, regarding the terms:

When drafting service contract, do not use confusing phrases such as “employee”, “employer”, “salary”, “wage”, “working conditions”, etc.

Secondly, regarding the scope of work:

● The contract needs to show the content: there is no management and supervision of the service-using party, and the service provider does not have to comply with the company’s rules and regulations, etc., but only needs to ensure the volume of work and work results;

● Description of work; work targets; service fee and method of charging corresponding to each work.

Thirdly, regarding attached supporting documents:

● There should be a record of acceptance and the content of the minutes showing the completed work (pass/fail) corresponding to the scope of work agreed upon in the contract.

● Pay service fees corresponding to the part of the work performed and accepted by the parties.

Above is the content of the article “Distinguish between an employment contract and service contract” that TNTP sent to readers. We hope this article is useful for those who are interested in this content.

Best regards,

Note when authorizing in business management

Written by TNTP LAW on 4 April, 2023. Posted in Legal newsletter.

Authorization is a common activity in business management. Ordinarily, in order to unify management and control, the number of entities authorized to manage the enterprise is limited. Nevertheless, this also leads to the inability to ensure comprehensiveness and efficiency in the management process when the enterprise’s scale is large, its activities are diversified and complicated, and many situations arise. In order to aim at efficiency and convenience in business management, authorization is an optimal measure, however, the enterprise does not always perform the authorization in accordance with the provisions of the law. So, when authorizing business management, what should be noted? Let’s find out with TNTP through the article below.

I. Who has the authority to authorize in business management?

Not everyone has the authority to authorize performing tasks in connection with business management. According to the current law, only the legal representative is entitled to do so.

Nevertheless, there is an exception where the attorney may sub-authorize to a third person. According to Clause 1 Article 564 of the Civil Code 2015, the attorney may only sub-authorize its authorization to the third person in any of the following cases:

● With the consent of the principal;
● Due to force majeure events , if the sub-authorization does not apply, the purpose of entering into a civil transaction for the principal’s interests is unachievable.

II. Cases where authorization is required

In principle, the legal representative can authorize another person to perform tasks within his/her jurisdiction at any time. However, there are cases where authorization is required by law. Specifically, Clause 3 Article 12 of the Law on Enterprises 2020 stipulates that the enterprise shall have at least one legal representative residing in Vietnam. Whenever this representative leaves Vietnam, he/she has to authorize another Vietnamese resident, in writing, to act as the legal representative.

III. Cases where authorization is not allowed

Enterprises should note that in cases where the legal representative is not authorized to another person in business management. For instance, if the legal representative is concurrently the chairman or member of the Board of Directors of a credit institution, he or she may not authorize persons who are not members of the Board of Directors to exercise their rights and perform their obligations (Clause 5 Article 81 of the Law on Credit Institutions 2010). Or a depositor must come to a transaction office of a credit institution in person and present his/her identity proof; in case of a joint savings deposit, all depositors must present their identity proof in person. If the savings deposit is going to be made by the legal representative, the legal representative must present his/her representative status proof and identity proof and identity proof of the depositor.

In the aforementioned cases, if the authorization is still established, the authorization may be refused upon implementation or may be invalidated with sanctions as prescribed by law.

IV. How to handle when the authorization document does not specify the time limit?

The duration of the authorization shall be as agreed by the parties or as provided by the law and shall be stated in the authorization document. Such duration can be a specified period or period from the date of authorization until the time the work is completed. In case the authorization period is not recorded in the authorization document, it shall be considered in accordance with civil law. Specifically, according to Article 563 of the Civil Code 2015, if there is no agreement and the duration is not provided by law, the authorization period shall be effective for 01 (one) year from the date on which the authorization is made.

V. Liabilities of the parties after authorization

Kindly note that the establishment of the authorization document does not mean that the principal will no longer have any liability for his or her rights and obligations or that the authorized person will have full decision-making power over the authorized work.

According to the provisions of law, the principal is still liable before the law for the acts performed by the attorney within the scope and duration of the authorization. Meanwhile, the attorney shall be liable before the principal and before the law for the acts that he/she performs. Thus, although authorizing others, the principal still needs to monitor the implementation of the authorization content to be able to intervene when necessary. On the other hand, the attorney also needs to make sure that the work she/he does is lawful and in accordance with the will of the principal.

VI. Consequences of performing work beyond the scope of authorization

According to the provisions of law, the work performed by the authorized person beyond the scope of authorization shall not give rise to the rights and obligations of the principal concerning that part of the transaction which exceeded the scope of representation, except for any of the following cases:

● The principal gives consent;
● The principal knows it without any objection within an appropriate time limit;
● It is the principal’s fault that the other party does not know or is not able to know that the attorney entering into and performing the civil transaction therewith was beyond his/her scope of authorization.

Conclusion: When authorizing in business management, the subjects need to pay attention to the authorized authority (including the principal and the attorney), the cases where authorization is required, the cases where the authorization is not allowed, authorization duration, liabilities of the parties when authorizing and legal consequences when performing tasks beyond the scope of authorization.

Above is the content of the article “Note when authorizing in business management” that TNTP sent to readers. We hope the above sharing is useful for those who are interested in this content.

Best regards,

Techniques for drafting a borrowing property contract

Techniques for drafting a contract for borrowing property

Written by TNTP LAW on 4 April, 2023. Posted in Pháp luật Hợp đồng.

The contract for borrowing property is a common type of civil contract, and currently, this type of contract is also widely known and used by parties for different purposes. In the following article, TNTP sends you some notes when drafting the contract for borrowing property.

I. What is the contract for borrowing property?

According to Article 494 of the Civil Code 2015, the contract for borrowing property is understood as an agreement between parties whereby a lender delivers property to a borrower for use free of charge for a period of time and the borrower returns the property at the end of the period of time or when the purpose of the borrowing has been achieved.

The nature of the contract for borrowing property is to deliver the property to the borrower for use within a period of time. At the end of the period, such property returns to the lender. Thus, the subject matter of this contract is any non-consumable property such as gold, silver, cars, motorbikes, televisions, refrigerators, etc.

II. Features of the contract for borrowing property

(i) The subject matter of this contract is any non-consumable property. Accordingly, the non-consumable property means an object that is used many times but retains the original properties, shape, and features of use. After using the borrowed property, the borrower shall return such property to the lender. The borrower shall compensate for damage where the borrower causes damage to or loss of the borrowed property.

(ii) There is no transfer of property ownership in this contract.

(iii) This contract is a bilateral contract which means a contract whereby each party has an obligation to the other.

(iv) This contract is an unidentifiable contract because the borrower does not have to pay any material benefits when using the borrowed property of the lender.

III. Drafting the contract for borrowing property

In order to ensure the interests of the parties and to constrain disputes, when drafting the contract for borrowing property, it is necessary to ensure that the basic terms are as follows:

(1) Draft detailed and clarified information about the parties. Specifically, the contract should clearly show information regarding the full name, address, identification card (if it is an individual), tax code (if it is a legal entity), contact information (phone number, email address), etc. of the borrower and the lender.

When entering into the contract, the parties should be attentive to the subjectivity of the borrower and the lender. Accordingly, participants who make and enter into the contract have legal personality and legal capacity in conformity with such a contract. The determination of the legal capacity of the parties is extraordinarily essential. It is the first condition to determine whether the contract for borrowing property is legally concluded or not, legally valid or not. Thus, the borrower and the lender must have legal capacity in accordance with the provisions of the law.

(2) Stipulate the subject matter of the contract. Specifically, the parties need to agree in the contract on the type, quantity, quality, and condition of the property. For instance, if the subject matter of the contract is television, the parties need to describe in detail characteristics such as brand, new or old condition, the value of the television, etc.

(3) Agree on the term of the contract. Accordingly, the duration of the contract shall be agreed upon by the parties. If the parties do not agree on a specific borrowing term, the lender is entitled to reclaim the property as soon as the borrower achieves the purpose. However, the lender still has the right to reclaim the property even if the contract is not due or when the borrower has not achieved the purpose of use in case the lender has an unexpected and urgent need to use it but with reasonable advance notice. Reasonable time will be based on each specific case.

(4) The parties can consider the actual situation to draft their rights and obligations. The parties can refer to some basic contents as follows:

● The borrower has the following rights: Use the borrowed property strictly in accordance with its utility and agreed-on purpose; require the lender to reimburse reasonable expenses incurred in carrying out repairs or improvements to the borrowed property which increase its value if so agreed; and do not bear liability for normal wear and tear of the borrowed property.

● The borrower has the following obligations: Take care of and preserve the borrowed property and not change the condition thereof at the volition of the borrower; the borrower must repair any normal damage to the property; do not on-lend the property to any other person without the consent of the lender; return the borrowed property on the due date; if there is no agreement on the time for returning the property, the borrower must return the property immediately after the purpose of the borrowing has been achieved; compensate for damage where the borrower causes damage to or loss of the borrowed property and the borrower must bear the risk in relation to the borrowed property during the period of late return.

● The property lender has the following rights: Reclaim the property immediately after the borrower has achieved its purpose where there is no agreement on the borrowing period; if the lender suddenly and urgently needs to use the borrowed property, the lender may reclaim it upon giving reasonable prior notice to the borrower, even if the borrower has not yet achieved its purpose; reclaim the property where the borrower fails to use it strictly in accordance with the agreed purpose, utility, or method or where the borrower on-lends the property without the consent of the lender; and demand compensation for damage to the property caused by the borrower.

● The property lender has the following obligations: Provide necessary information on the use of the property and its defects; reimburse the borrower for expenses incurred in carrying out repairs or improvements to the borrowed property which increase its value if so agreed; and where the lender knows but fails to notify the borrower of a defect in the property which results in damage to the borrower, to compensate the borrower for such damage, except where the borrower knows or should know of such defect.

(5) Agree on the purpose of using the borrowed property. According to the provisions of law, the property lender has the right to reclaim the property if the borrower fails to use it strictly in accordance with the agreed purpose, or the borrower must return the property immediately after the purpose of the borrowing has been achieved. Thus, the agreement on the purpose of using the property will relate to the rights and obligations of the parties. Therefore, this provision should be considered and agreed upon by the parties.

Besides, in case one of the parties breaches the contract, the parties should agree on sanctions such as compensation for damage or fines for violations. Furthermore, dispute resolution provisions are also important content. Accordingly, the parties may agree that the dispute shall be settled through negotiation or conciliation. If no settlement is reached by doing so, the parties may initiate a lawsuit at Arbitration or Court.

Above is the content of the article “Techniques for drafting a contract for borrowing property” that TNTP sent to readers. If you have any further questions, please do not hesitate to contact TNTP for the best support.

Best regards

Contracts for “thue khoan” of property – The fundamental contents you need to know

Contract for “thue khoan” of property – The fundamental contents

Written by TNTP LAW on 4 April, 2023. Posted in Legal newsletter.

Contract for “thue khoan” of property is an exceptional type of property lease contract, with the purpose of renting the property to exploit its utility, and to enjoy the yield and income from such property. In order to constrain disputes and ensure the contract performance in accordance with the provisions of the law, each individual and organization needs to understand the regulations of the law as well as how to draft this contract.

I. What is a contract for “thue khoan” of property?

Pursuant to Article 483 of the Civil Code 2015, the contract for “thue khoan” of property means an agreement between parties whereby a “thue khoan” lessor delivers the property to a “thue khoan” lessee for the exploitation of its utility and for the enjoyment of the yield and income derived from such property and the lessee shall pay rent to the lessor.

Therefore, the contract for “thue khoan” of property is a specific form of the lease contract. Such contracts aim to produce and do business so the lessee can enjoy the yield and income from such property. In business, the lessee may get or not get the yield or income. Nevertheless, regardless of the production and business results, even if the use of the contracted property is not exploited, the lessee still shall pay rent to the lessor.

II. Features of the contract

The contract for “thue khoan” of the property has the characteristics of the property lease contract. Besides, this contract also has distinctive features as follows:

Firstly, according to Article 484 of the Civil Code 2015, the subject matter of this contract is the means of production that can be exploited for utility, yield and income such as land, forests, water surfaces that have not been exploited, livestock, production and business facilities, and other production materials with the necessary equipment unless otherwise provided for by law. It means that properties not listed aforementioned cannot be “thue khoan”. Thus, the parties need to consider selecting the type of contract appropriate for the subject matter.

Secondly, according to Article 485 of the Civil Code 2015, the duration of a “thue khoan” shall be determined by the agreement of the parties. In case the parties do not reach an agreement and reach an unclear agreement on the term of “thue khoan”, such period shall be determined under the production or business cycle appropriate to the nature of the subject matter of “thue khoan” to ensure that the lessee obtains the yield or income from the use of the property.

Thirdly, according to Article 486 of the Civil Code 2015, the rent in respect of a “thue khoan” shall be as agreed by the parties. In case the subject matter of the contract is a property of the State with a fixed price bracket, the parties may agree on that price bracket. If a “thue khoan” is awarded by tender, the rent in respect of such “thue khoan” shall be determined in the bidding process. Ordinarily, contract bidding is applied to the property of great value such as land, production, and business facilities or other means of production in order to determine the exact rental price and ensure fair and effective competition.

III. The form of this contract

The form of the contract for “thue khoan” of property is a manner of expressing the agreement of the parties. For other leases, the formality of the contract can be expressed verbally, in writing, or through specific acts. However, as the subject matter of this contract is the means of production, the parties need to consider relevant legal documents when making the contract. Accordingly, depending on each specific object, the contract shall be notarized, certified, or registered by an authority competent.

IV. The contents of the contract for “thue khoan” of property

The fundamental contents needed in the contract for “thue khoan” of the property include:

● Subject matter of the contract;
● Rent in respect of “thue khoan”;
● Duration of “thue khoan”;
● The method of delivering “thue khoan” property and the method of payment “thue khoan” rent;
● Rights and obligations of the parties: Rights and obligations of the “thue khoan” lessor and of the “thue khoan” lessee;
● Termination of the contract.

Above is the content of the article “Contracts for “thue khoan” of property – The fundamental contents” that TNTP would like to send readers. We hope the above sharing is useful for those who are interested in this content.

Best regards,

The difference between penalty for violation and compensation for damages

Written by TNTP LAW on 20 March, 2023. Posted in Dispute settlement.

Article 292 of Commercial Law No.36/2005/QH11 stipulates types of commercial remedies. Therein, material remedies to recover and compensate for the aggrieved party’s damage include fines for breaches and forcible payment of damages. So, what is the difference between fines for breaches and forcible payment of damages, in this article, we will focus on clarifying the differences between these two remedies to serve as a basis for practical application.

1. Concept and definition

● Fine for breach (the penalty for violation) means a remedy whereby the aggrieved party requests the breaching party to pay an amount of fine for its breach of a contract if so agreed in the contract, except for cases of liability exemption (according to Clause 1, Article 418 of Civil Code 2015, and Article 300 of Commercial Law 2005).

● Forcible payment of damages (compensation for damages) means a remedy whereby the breaching party pays compensation for the loss caused by a contract-breaching act to the aggrieved party (Clause 1, Article 302 of Commercial Law 2005).

2. Purpose

● Fine for breach means a remedy has two purposes:

– Deterring, preventing the breach of contract and raising people’s awareness of compliance with the contract;

– Punishing the party that breaches the contract.

● Forcible payment of damages aims at compensating in kind for the aggrieved party.

3. Grounds for commercial remedies

● Fine for breach can only be applied when there is a breach of contract and the contract has an agreement on a fine for breach. If the contract does not agree on a fine for breach, the aggrieved party will not be able to apply this remedy. In case the parties have an agreement on a fine for the breach but the fine level did not agree upon by the parties, as a result, there is a high probability of leading to disputes when a breach of contract occurs.

● Liability to pay damages shall arise upon the existence of all of the following elements:

– Breach of the contract;
– Material loss;
– The act of breaching the contract is the direct cause of the loss.

Thus, unlike the fine for breach that forces the parties to agree on the contract, payment of damages is applied regardless of whether there is an agreement on damages in the contract, depending on the three elements mentioned above. The party claiming damages must prove the loss, the loss level caused by the breach, and the direct profit that the aggrieved party would have received if the breach of contract did not occur.

On the other hand, the party claiming damages must take all reasonable measures within the ability to limit the loss caused by the breach of contract. In cases where it is possible to take measures to limit the loss, but the aggrieved party does not apply, the breaching party has the right to demand a reduction in the amount of compensation equal to the loss that could have been limited.

4. Fine level and level of damages

● The parties can agree on a fine level, but if the law provides for a maximum fine level, the parties must not agree to exceed that limit.

For example, the Law on Construction stipulates that for works using public and non-public investment state funds, the fine level must not exceed 12% of the value of the violated contract. The Commercial Law stipulates that the maximum fine for breach of contract is 8% of the value of the breached contractual obligation portion, the only exception is the fine for traders providing assessment services issue assessment certificates showing incorrect results caused by their unintentional faults must not exceed ten times the assessment service charge (Article 266 of Commercial Law 2005).

● The value of damages covers the value of the material and direct loss suffered by the aggrieved party due to the breach of the breaching party and the direct profit that the aggrieved party would have earned if such breach had not been committed. Due to the compensation, the number of damages cannot exceed the material loss.

5. The relationship between fines for breaches and forcible payment of damages

● According to Article 418 of Civil Code 2015, the parties may reach an agreement that the violating party has to pay a fine for violations and is not liable to any compensation for damage, or has to pay both a fine for violations and compensation for damage. In case the parties have an agreement on fines for violations that do not specify that the violating party has to pay both a fine for violations and compensation for damage, then the violating party has to pay only the fine for violations.

● According to Article 307 of Commercial Law 2005, where the parties do not agree upon fines for breaches, the aggrieved party shall only be entitled to claim damages, unless otherwise provided for by this Law. Where the parties agree upon fines for breaches, the aggrieved party shall be entitled to apply both remedies of fines and damages, unless otherwise provided for by this Law.

Above is the article “The difference between penalty for violation and compensation for damages”. We hope this article was useful to you.

Best regards,

Debts and the importance of debt collection

What is company debts? why is debt collection important?

Written by TNTP LAW on 17 March, 2023. Posted in Thu Hồi Nợ.

The end of the year is usually the time when companies focus on debt collection within that year to recover the capital after one year of production and business. However, debt collection is not a simple matter and often causes “headaches” for companies. Understanding the debts’ nature and classifying them into definite groups plays an essential part in company debt collection. Please find the information regarding the nature of company debts, and the reasons why debt collection is important in the following article of TNTP.

1. What is company debt?

Company debts include all amounts of money including: receivables from customers, payables to suppliers, advances and other receivables and payables.

According to each approach, there will be many concepts related to company debts as follows:

– Receivables from customers: For receivables from customers, it can be understood that when a company delivers their final products to customers with invoices and tax declaration documents, but for some reasons, the customer has not yet made the payment or only made a partial payment. In this case, to collect debts effectively, the company is required to have a clear policy on customer debts and monitor such debts closely.

– Payables to suppliers: In contrast to receivables from customers, a debt payable to suppliers arises after the company has received tools, supplies, goods and services from the suppliers in the course of business but the payment has not been made by the buyer.

– Other receivables and payables: In addition to the above cases, there are other receivables and payables for companies such as deposits, advances, security deposits, shortages of assets for unknown reasons, and damages or lost supplies, etc. When these problems occurs, it is required that companies have an optimal policy to solve the problem of debt control and avoid unnecessary expenses.

Besides, additional payables such as employee salary, the deduction for health insurance, social insurance, state taxes payment are all mandatory payables of companies in the course of business operation.

2. Company debt classification

2.1 Receivables

Receivables include items such as: Cash from sales of goods, revenue from providing services to customers but not yet receiving the full payment, financial investments.

In order to avoid long-term debts, causing consequences of different severity for the company, the debt accountant must ensure to closely monitor and control these cases for debt collection in due course.

Therefore, managing the problems of debt limit, time limit, etc. optimally is an issue that each company needs to handle to avoid significant deficits as well as facilitate the debt collection process at a later stage.

2.2 Payables

Payables include payables to suppliers of tools, instruments, supplies, equipment, raw materials, services, goods, etc. arising in the company’s production and business activities. These payables have not been made by the company such as airfare debts for a business trip for a part of the company which have not been made yet paid to the ticket agent.

2.3 Other receivables and payables

This is understood as other receivables in addition to the receivables from customers, internal receivables, advances and escrow such as: the value of the missed property for unidentified reasons, which are pending for the final decision of the competent authority, receivables for material compensation made by individuals or collectives for causing damage and loss of supplies, goods, etc.

3. The importance of company debt collection

Despite many different types of company debts, receivables are the most important and influential one because the debt collection plays a key role, directly affecting the company’s finance.

Debt collection will help to ensure the company’s business profits. In fact, most companies want to occupy the capital of others as long as possible, especially in this difficult economic situation for the past few years. Most companies misappropriate capital from others through non-payment, or prolonging the payment period. Therefore, when the debt is not recovered, it means that the company’s profit is not guaranteed, which greatly affects its cash flow and financial status.

Another reason why debt collection should be taken into consideration is that the longer a debt is left, the less likely it is to be recovered. Because the debtors who have not been reminded of the payment for a definite period will tend to delay and focus on paying other debts. Moreover, many insolvent debtors may be sued by other creditors and their assets are likely to be enforced by the Court’s judgment, which makes the debtor no longer have any assets to make the payment.

It can be seen that debt collection is extremely important to companies which ensures the financial safety and facilitate the operating systems and avoid possible risks in business activities. To facilitate the debt collection, companies should apply a variety of debt collection policies and measures. If appropriate measures are applied for a specific debtor, the debt collection will be easier. In contrast, applying illegal or inappropriate measures against the debtor can make the debt collection much more difficult.

Above is an article by TNTP analyzing the company debts and the importance of debt collection. Hope this article is useful to companies.

Sincerely,

Expenses businesses need to pay for debt collection services of law firms

Written by TNTP LAW on 17 March, 2023. Posted in Legal newsletter.

The demand for debt collection services by businesses in today’s society is increasing due to the recovery phase of Vietnam’s and the world’s economy after the Covid-19 pandemic. The change in Vietnam’s law regarding debt collection activities led to an urgent need for debt collection. TNTP will provide information on the service fees that businesses need to pay when using the debt collection services of the law firm to help you choose a suitable service according to their financial capacity.

1. Fixed service fee

Similar to using other services in society, the law firm’s debt collection service will also have a corresponding service fee. The first is the fixed service fee, which is the fee that the business will have to pay before the law firm proceeds with the necessary debt collection activities and is usually paid immediately after the parties sign the legal service contract. This fee will be used by the law firm to maintain personnel and carry out measures included in the debt collection service contract with the customer and is non-refundable in any case.

Depending on the value of the debt and the ability to collect the debt, the value of the fixed service fee will vary. Typically, a debt of several hundred million VND or more will have a fixed service fee ranging from 5,000,000 VND to 10,000,000 VND.

2. Success fee

Unlike the fixed fee, the success fee is the amount the customer pays the law firm for debt collection after receiving any payment from the debtor. Usually, the success fee rate will be calculated on the percentage of the amount of money the business successfully receives from the debtor.

The success fee percentage will be agreed upon between the customer and the debt collection law firm before starting the collection activities. Depending on each specific case, the success fee percentage may range from 10% to 30% of the successfully collected debt.

3. Travel expenses

To carry out debt collection activities, the law firm performing the debt collection service will have to travel regularly to the debtor’s address. It could be a home address, office address, or address of the debtor’s factory. Depending on the distance and means of transportation, the travel expenses will be calculated differently.
However, in many cases, businesses using debt collection services can negotiate to support the law firm in traveling to necessary addresses to serve debt collection activities. Then, depending on the agreement between the parties, the travel expenses may be shared or entirely paid by the customer.

4. Costs for litigation activities

In addition to the service fees for debt recovery that businesses must pay, there are also costs associated with litigation activities if the business agrees to pursue dispute resolution through dispute resolution agencies such as the Commercial Arbitration Center or the Court. In that case, the business will have to pay fees, including the Arbitration Fee if the business initiates the case at the Commercial Arbitration Center, or the Temporary Advance Fee when the business initiates the case at the competent People’s Court.

Similarly to other costs that businesses have to incur in debt recovery activities, the costs for litigation activities at dispute resolution agencies depend on the value of the debt that the business requires the debtor to pay. Generally, the value of the Arbitration Fee will be higher than the Temporary Advance Fee, depending on the content of the Contract, and the business can choose the corresponding dispute resolution agency.

The above is an article by TNTP on ” Expenses businesses need to pay for debt collection services of law firms”, hope that this article will be useful for the activities of businesses.

Best regards.

Author: TNTP LAW

Step 1: Negotiation

1. Contacting the debtor via email and phone

2. Using payment request letters

3. Work directly at the debtor’s headquarters

1. Borrowing activities and interest

2. Determination of interest and interest rates in property loan contracts in the case of application of the 2015 Civil Code

3. Cases where the lender has no right to claim interest due to late payment

1. Commercial activities

2. Dispute resolution methods in commercial activities

3. Experience in dispute resolution in commercial activities

I. Distinguish

1. Governing law of the employment contract and service contract

2. Concept of the employment contract and service contract

3. Legal binding between the parties in the employment contract and service contract

4. Subjects performing the employment contract and service contract.

5. Liability to pay social insurance of employers and service using-party

II. How to draft service contract so as not to overlap with the employment contract

I. Who has the authority to authorize in business management?

II. Cases where authorization is required

III. Cases where authorization is not allowed

IV. How to handle when the authorization document does not specify the time limit?

V. Liabilities of the parties after authorization

VI. Consequences of performing work beyond the scope of authorization

I. What is the contract for borrowing property?

II. Features of the contract for borrowing property

III. Drafting the contract for borrowing property

I. What is a contract for “thue khoan” of property?

II. Features of the contract

III. The form of this contract

IV. The contents of the contract for “thue khoan” of property

1. Concept and definition

2. Purpose

3. Grounds for commercial remedies

4. Fine level and level of damages

5. The relationship between fines for breaches and forcible payment of damages

1. What is company debt?

2. Company debt classification

2.1 Receivables

2.2 Payables

2.3 Other receivables and payables

3. The importance of company debt collection

1. Fixed service fee

2. Success fee

3. Travel expenses

4. Costs for litigation activities

TNTP & ASSOCIATES INTERNATIONAL LAW FIRM

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