Author: TNTP LAW

In some cases, due to various reasons, the parties cannot perform the contract as agreed initially. One of these reasons can be the basic changes of circumstances. In the following article, we will analyze the contract performance upon the basic change of circumstances.

1. Performance of contract upon the basic change of circumstances according to regulations of the Law

According to Article 420 of the 2015 Civil Code (“Civil Code”), the change of circumstances shall be deemed basic when it meets all following conditions:

• The circumstances change due to objective reasons that occurred after the conclusion of the contract. The objective reasons do not arise from the subjective consciousness of the parties.

In case one of the parties performs an act so that the contract is not performed or is performed improperly and fully, it is not considered a basic change of circumstances. This violating party will have to perform the contract and pay compensation if it causes damage or be fined for the breach per the mutual agreement.

• At the time of concluding the contract, the parties could not foresee a change in circumstances. Determining whether the parties did not foresee such change depends on the honesty and goodwill of the parties.
• The circumstances change such greatly that if the parties know in advance, the contract has not been concluded or is concluded, but with completely different content. In this case, the parties did not foresee that after the conclusion of the contract, the change which is considered a basic one would occur.
• The continuation the contract performance without the change in the contract would cause serious damage to one party. Thus, it can be understood that, when the basic change of circumstances takes place, the parties can still continue to perform the contract, but the performance of the contract will cause serious damage to one of the parties.

The continuation or termination of the contract performance depends on the agreement of the parties. One party will not have the right to unilaterally change the content of the contract. In case one party unilaterally changes the content of the contract. without the consent of the other party, this change will not take effect and if it causes damage, the violating party will have to compensate for damage according to the provisions of law.

• The party having interests adversely affected has adopted all the necessary measures in its ability, in accordance with the nature of the contract, cannot prevent or minimize the extent of effect. In case a party having interests adversely affected by a change in circumstances does not take the necessary measures in its ability to prevent the change, it will not be considered a basic change in circumstances. Accordingly, the party with affected interests will bear the risk when damage occurs.

2. Solutions for basic change of circumstances

• Negotiation: In the case of basic circumstances change, the affected party may request the other party to re-negotiate the contract in a reasonable period of time. This is considered one of the solutions that should be applied first because it is the most effective one. If the parties are in good faith, the dispute can be resolved quickly and in a timely manner.
• Failure of negotiation: If the parties cannot reach an agreement on amending the contract within a reasonable period of time, one of the parties may request the competent People’s Court to settle the dispute. The court can settle the dispute in two ways:
• Terminate the contract that the parties have entered into at a specified time, this time may be proposed, requested by the parties or determined by the Court within a reasonable period of time after the fundamental change of circumstances occurs;
• Amend the contract to balance the lawful rights and interests of the parties due to basic changes of circumstances.

3. The difference between basic changes of circumstances and force majeure events

Basic changes of circumstances and force majeure events are both changes in circumstances arising from the impact of objective factors, affecting the contract performance process that the parties cannot foresee. In addition to the similarities, there are certain differences between basic changes of circumstances and force majeure events. Determining the right type of change plays an important role in determining the rights and obligations of the parties as well as the legal consequences of the contract performance.

The difference between basic changes of circumstances and force majeure events is expressed through the following criteria:

• Regarding the performance of the contract: when a force majeure event occurs, the parties will not be able to continue to perform the contract, but in the case of basic changes, the contract can still be performed. For example, due to the increase in the price of input materials, the products’ cost increases. In such case, if the seller still mantains the initial selling price as agreed, he/she will suffer serious damage, but the seller can still make the sale to the buyer. This is considered a basic change of circumstances. In another case, due to the Covid-19 epidemic, China was forced to ban foreign entry and exit, making Vietnamese goods unable to be transported to Chinese buyers. This case is considered a force majeure event.
• Regarding the obligations of the parties: when a force majeure event arises, if the parties do not otherwise agree, the obligor will not be required to properly and fully perform the obligations that the parties had previously agreed in the contract. On the other hand, when there is a fundamental change in circumstances, in the course of negotiation to amend or terminate the contract or when the Court is handling the case, the parties must still perform their obligations as agreed in the contract. In case a party fails to perform the contract or performs improperly and fully, leading to definite damages, it shall be responsible for compensating for damage or being fined for violations if agreed by the parties.

4. Notes for the parties during the performance of the contract upon the basic change of circumstances

• The parties need to prepare in advance how to deal with the situation of the basic change of circumstances so that they can stipulate and agree on appropriate solutions for these basic changes.
• In case the parties request the Court to settle the dispute, it should be noted that the Court will only decide to amend the contract in the event that the damage of the contract’s termination will be greater than the costs of amendment.
• In the course of negotiation to amend or terminate the contract, or when the Court settles the case, the parties must continue to perform their obligations under the contract, unless the parties agree that they will not have to perform the contract when there are basic changes of circumstances until the case is resolved. If the parties do not reach an agreement, the parties must continue to perform their obligations

Above is the article “Performance of contract upon the basic change of circumstances”. We hope this article is useful to you.

In the practice of resolving commercial contract disputes, we often encounter cases that the buyer has paid or deposited money for the goods, but the seller violates the obligation to deliver the goods and must refund the money received. It is obvious that the seller is obliged to refund the amount received. But besides requesting a refund of the amount received, does the buyer have the right to require the seller to pay interest arising from this amount? And how is the interest rate calculated on this amount? Are penalties for breach of contractual obligations and compensation for damage at the same interest rate as the amount to be refund? These issues have been expressed by the Court through Precedent No. 09/2016/AL, which is considered as a typical and unified example for how to calculate interest and explain the problem of paying interest on the amount of penalties for violations and compensation for damage.

A. SUMMARY OF PRECEDENT NO. 09/2016

CONTENT OF THE CASE

1. On October 3, 2006, Viet Y Steel Joint Stock Company (“Viet Y Steel Company”) signed with Hung Yen Metallurgy Joint Stock Company (“Hung Yen Metallurgy Company”) 04 Economic Contract are No. 03/2006-HDKT, 05/2006-HDKT, No. 06/2006 and No. 01/2007.
2. On July 07, 2007, Viet Y Steel Company filed a lawsuit asking Hung Yen Metallurgy Company to be responsible for payment and compensation for all damages due to breach of delivery obligations in Contracts No. 03/2006, 05/2006, 06/2006, 01/2007 at the time of lawsuit is 12,874,298,683 VND, of which the goods cost is equivalent to 1,777,020 kg of steel billet = 11,181,662,503 VND, the fine for violation is 1,316,490,480 VND, overdue interest 376,145,700 VND
3. In the first-instance business and commercial Judgment No. 01/2007/KDTM-ST dated November 14, 2007 (“BAST 01”), the People’s Court of Bac Ninh Province (“People’s Court of Bac Ninh”) decided: “Force Hung Yen Metallurgy Joint Stock Company to pay Viet Y Steel Joint Stock Company the total amount of 04 contracts No. 03 dated October 3, 2006; No. 05 dated November 20, 2006; number 06 dated December 20, 2006 and number 01 dated February 1, 2007 are: 24,674,428,500 VND”.
4. On November 27, 2007, Hung Yen Metallurgical Joint Stock Company filed an appeal.
5. In the Appellate Business and Commercial Judgment No. 120/2008/KDTM-PT dated June 18, 2008 (“BAPT 120”), the Court of Appeal of the Supreme People’s Court in Hanoi (“Hanoi Supreme People’s Court”) decided: “Cancel the first-instance business and commercial judgment No. 01/2007/KDTM-ST dated November 14, 2007 of the People’s Court of Bac Ninh. Transfer the case file to the People’s Court of Bac Ninh to re-settle the case in accordance with the law”.
6. At the first instance business and commercial Judgment No. 09/2008/KDTM-ST dated October 23, 2008 (“BAST 09”), the People’s Court of Bac Ninh decided: “Forcing Hung Yen Metallurgy Joint Stock Company to have responsibility to pay Viet Y Steel Joint Stock Company the amount of 04 contracts No. 03 dated October 3, 2006; No. 05 dated December 20, 2006; number 06 on December 20, 2006 and number 01 on February 1, 2007 are: 31,902,035,179.56 VND”.
7. On November 5, 2008, Hung Yen Metallurgical Joint Stock Company filed an appeal.
8. In the Appellate Business and Commercial Judgment No. 32/2009/KDTM-PT dated February 19, 2009 (“BAPT 32”), the Hanoi People’s Court decided: “1. Canceling the first-instance business and commercial judgment No. 09/2008/KDTM-ST dated October 23, 2008 of the People’s Court of Bac Ninh on the “dispute on the sale and purchase contract” between the Metallurgical Joint Stock Company and Viet Y Steel Joint Stock Company 2. Transfer the case file to the first-instance Court to re-settle the case”.
9. In the first-instance business and commercial judgment No. 18/2009/KDTM-ST dated September 3, 2009 (“BAST 18”), the People’s Court of Bac Ninh decided: “1. Force Hung Yen Metallurgy Joint Stock Company to be responsible for paying Viet Y Steel Joint Stock Company the amount of 04 economic contracts: Contract No. 03/2006 dated October 3, 2006; Contract No. 05/2006 dated December 20, 2006; Contract No. 06/2006 dated December 20, 2006 and Contract No. 01/2007 dated February 1, 2007 with a total amount of VND 28,145,956,647 and must issue a value-added invoice to pay to Vietnam Italy Steel of 2 contract includes Contract No. 06/2006 corresponding to the amount of goods is 21,544,992,000 VND and Contract No. 01/2007 corresponding to the amount of goods is 30,469,842,000 VND”.
10. On September 23, 2009, Hung Yen Metallurgical Joint Stock Company filed an appeal.
11. In the Appellate Commercial and Business Judgment No. 63/KDTM-PT dated April 5, 2010 (“BAPT 63”), the Hanoi People’s Court decided: “Cancel the first-instance business and commercial judgment No. 18/ 2009/KDTM-ST dated September 3, 2009 of the People’s Court of Bac Ninh. Transfer the case file to the People’s Court of Bac Ninh for re-settlement in accordance with law”.
12. On July 25, 2010, the People’s Court of Bac Ninh issued Official Letter No. 110/2010/CV-TA requesting the Chief Justice of the Supreme People’s Court (“Chief Justice”) to review the appellate judgment according to cassation procedures.
13. At the Appeal Decision No. 17/2012/KDTM-KN dated June 25, 2012, the Chief Justice proposed that the Judicial Council of the Supreme People’s Court conduct a trial according to cassation procedures in the direction of canceling BAPT 63 of the Hanoi People’s Court; hand over the case file to the Hanoi People’s Court for appellate trial again in accordance with law.
14. Judges Council of the Supreme People’s Court:

• In this case, the Court needs to take the average overdue interest rate of at least three local banks to recalculate the interest due to late payment in accordance with the law, instead of interest rate announced by the State Bank at the time of first-instance trial at the request of the plaintiff.
• Regarding penalty for breach of contract: If Hung Yen Metallurgy Company does not deliver enough goods to Viet Y Steel Company, it must be fined 2% of the value of the breached contractual obligation as agreed upon by both parties and according to the provisions of Article 300 and Article 301 of the Commercial Law 2005. The first-instance court accepted the request for penalty for breach of contract of the Viet Y Steel Company as grounded, however, it charged interest on the fine amount for breach of contract is not correct.
• About the amount of compensation: The first-instance court also calculated the interest on the amount of compensation, which is not in accordance with the provisions of Article 302 of the Commercial Law 2005.

B. PRECEDENT NO. 09/2016 COMMENTS

Based on the summary of the Precedent, TNTP has a few comments as follows:

1. Determine the correct amount of late payment interest

• According to Article 306 of the Commercial Law 2005, “in case the breaching party is late in paying for goods or late in paying service fees and other reasonable expenses, the breached party has the right to demand payment interest on such amount of late payment shall be at the average overdue debt interest rate on the market at the time of payment corresponding to the late payment period, unless otherwise agreed or otherwise provided by law”. This regulation has the scope of adjusting the subjects entitled to late payment interest such as “delayed payment of goods or late payment of service fees and other reasonable expenses”.
• In the content of Case Law No. 09/2016/AL: “For the amount of advance without receiving goods of 4 economic contracts, the first-instance court correctly determined the amount and forced Hung Yen Company to must be returned to Vietnam Y Company is correct. However, when calculating interest for late payment of the above-mentioned amount, the first instance court, although applying Article 306 of the 2005 Commercial Law, did not take the average overdue interest rate on the market at the time of payment (first-instance trial) to calculate, but apply the basic interest rate announced by the State Bank at the time of first-instance trial at the request of the plaintiff to apply the overdue interest rate (which is 10.5 %/year) is incorrect. In this case, the Court needs to take the average overdue interest rate of at least three local banks (Bank for Agriculture and Rural Development of Vietnam, Joint Stock Commercial Bank for Foreign Trade of Vietnam, Bank for joint-stock commercial goods of Vietnam Industry and Trade…) to recalculate the interest due to late payment in accordance with the provisions of law”.

This shows that late payment interest is applied to both the seller’s refund of the goods due to the buyer’s failure to receive the goods as agreed, and the calculation of interest is applied on the basis of Article 306 of the Commercial Law.

2. The penalty for breach of contract and compensation for damage does not generate interest on late payment

As stipulated in Article 306 of the 2005 Commercial Law, this provision does not regulate the fines for breach of contract and compensation for damage that are subject to late payment interest. The content of Precedent No. 09/2016/AL also shows that the request for penalty for breach of contract and the calculation of interest on compensation for damage is incorrect.

3. Determine how to calculate late payment interest

• At the time of the case, because there was no specific guidance document, the Court applied many ways to determine the average overdue debt interest rate. However, thanks to the birth of Precedent 09/2016/AL, it is the unification for the calculation of overdue debt interest and is the premise for the Council of Judges of the Supreme People’s Court to issue Resolution 01/2019/NQ-HDTP guides the application of a number of legal provisions on interest, interest, and penalties for violations.
• For the settlement of this Precedent, the Court established the formula for calculating the overdue debt interest rate as follows:

Overdue interest rate due to late payment = average overdue interest rate of at least three local banks (Bank for Agriculture and Rural Development of Vietnam, Joint Stock Commercial Bank for Foreign Trade of Vietnam, Joint Stock Commercial Bank for Industry and Trade of Vietnam…)

This formula will not apply to the calculation of interest on the number of fines and damages.

TNTP considers that the final settlement of this precedent is reasonable, because this is a solution in accordance with the provisions of Article 306 of the Commercial Law 2005 and the provisions of the Civil Code 2015. In addition, related to the method of determining the interest rate of overdue debt, this solution contributes to ensuring that the legal document system follows the principle that a Law can only be interpreted in a single way.

Above is a comment on Precedent No. 09/2016/AL of TNTP. Hopefully, this article will help enterprises understand clearly how to determine the interest rate on overdue debt and the payment of interest on the fine for violation, compensation for damage when resolving Contract disputes.

Sincerely,

Currently, many businesses are aware of the beneficial role of corporate counsel and need to recruit legal executives. Corporate counsel is also a career chosen by many law students after graduating from university because the income for the position is considered stable and often higher than the income of the majority of employees who are working at law firms or law offices. Compared to other jobs at enterprises such as administrative executive, secretary, assistant, etc., the legal executive can do the right jobs with the law major. To give readers an overview of the business legal profession, in today’s article, we will briefly analyze the jobs of corporate legal staff.

1. What is corporate counsel?

Corporate counsel is defined as the role of drafting and developing internal rules and regulations while also regulating and controlling to ensure that the enterprise’s activities comply with legal provisions as well as internal regulations. Corporate counsel includes two types: in-house counsel and outsourcing counsel.

2. In-house counsel at the enterprise

In-house counsel is the focal point in charge of solving legal issues for an enterprise. In-house counsel includes one or a group of lawyers, employees/executives working in the enterprise under the labor contract mechanism. The structure of the In-house counsel is often diverse, depending on the size and needs of the business. The work of In-house counsel at each business will be different, depending on the characteristics of each business.

In terms of business fields and lines, when working at a construction enterprise, In-house counsel is usually in charge of consulting on the legal conditions of investment projects, the legal conditions of contractors; reviewing contracts for construction, procuring contracts for materials and equipment, contracting to supply manpower and construction equipment, etc. And when working as an In-house counsel that manufactures and trades goods, the main job is usually to negotiate, draft, and review principle contracts, purchase and sale contracts, service contracts, etc; register and settle disputes over intellectual property rights…

Considering the size of the enterprise, large-scale enterprises often have a separate legal department, many of which are also divided into a legal department and a compliance department. Legal work has been specialized, and these enterprises have built an internal document system. The new In-house counsel will be guided and will work with the enterprise’s existing internal document systems. As for small-sized enterprises, where there is almost no In-house counsel or there is a small amount, In-house counsel often has to create and build an internal document system for the enterprise. Some In-house counsel, in addition to doing law-related work, also have to be in charge of administrative and personnel jobs such as insurance, employee salaries, clerical and archival work, accountant work, import, and export work,…

However, the work of In-house counsel has certain commonalities, which are classified into the following groups of jobs:

• Work related to supporting internal management and administration activities of the enterprise

– Drafting, preparing documents, adhering to legal procedures, and organizing Board of Directors, Supervisory Board, and General Meeting of Shareholders meetings;

– Amending of the enterprise’s charter; operational regulations of the board of directors; operational regulations of the supervisory board; and other regulations as prescribed by law;

–  Advising on procedures for election, appointment, and dismissal of enterprise managers;

– Building shareholder relations and managing shareholders;

– Building a system of internal management documents and control compliance with this document system;…

• Supporting labor-management activities at work

– Developing a system of internal documents on labor such as probationary contracts, labor contracts, information confidentiality agreements, training contracts, collective labor agreements, labor rules, salary regulations, and bonuses;…

– Assisting in the implementation of labor management procedures such as recruitment, probation, signing, amending, supplementing, terminating, transferring employees to non-labor contracts, suspending labor contract performance;…

– Supporting in carrying out procedures for handling labor discipline, forcing employees to compensate for damage;…

• Work-related legal advice for businesses, managers, departments, and personnel in the enterprise

– Advising on legal issues for the competent person to make decisions related to the enterprise’s daily business activities;

– Receiving and handling legal issues from enterprise departments such as sales, tax, human resources;…

– Updating legal documents and legal policies related to business operations and providing business orientation;

• Work involving enterprise contracts and transactions

– Attending meetings with business, department, and partner representatives; customers on business, projects, and transactions;

– Consulting, drafting, or assisting in drafting contracts and cooperation minutes;

– Negotiating, drafting, and reviewing contracts;

• Work-related litigation activities for disputes arising from business activities

– Conducting records searches and advising businesses on lawsuits;

– Collecting evidence and documents; preparing and submit lawsuit dossiers; paying court fee advances;

– Representing enterprises in pre-litigation negotiations and conciliation sessions; meeting to review evidence handover, access, and disclosure conciliation in court; first-instance court sessions in court; dispute resolution sessions at commercial arbitration;

– Consulting, carrying out the procedures for appealing the court’s decision, and participating in the appellate proceedings;

– Request for enforcement of court judgments or decisions, commercial arbitration awards;…

• Work related to the representation of non-procedural work

– Procedures for obtaining various permits and certificates;

– Representing businesses to work with state agencies;

3. Outsourcing counsel

Outsourcing counsel is understood as the legal department outside the enterprise (commonly law firms, law offices) hired by the enterprise to provide regular legal consulting services for the business. Outsourcing counsel is frequently used when an enterprise does not have an internal legal department, or must use outsourcing legal services even if it does.

For businesses that do not have a legal department, because they do not have employees who are knowledgeable about legal regulations, legal risks are very likely to occur and the organizational apparatus of the enterprise cannot operate smoothly. Enterprises should use the regular legal consulting services of law firms/law offices to ensure their operations are always efficient and by the law. In addition, some businesses, even though they have their legal department, still have to hire a lawyer or go to a law firm when they have legal problems. For example, businesses need to deal with litigation-related jobs where In-house counsel is not knowledgeable and jobs that require in-depth expertise such as tax, investment, and M&A,…

Depending on the needs of the business, the work that the law firm/law office can perform includes:

+  Drafting and reviewing contracts, agreements, commitments, or other documents provided by enterprises;

+  Studying the provisions of the law to review risks, and ensure the operation of the business is by the provisions of the law;

• Legal advising on issues that businesses require;

+ Participating in meetings with enterprises to protect the legitimate rights and interests of enterprises;

+ Other jobs may arise at the request of the enterprise.

Legal is a “silent” job, which does not bring directly visible profit like sales and marketing departments, etc. Legal, on the other hand, serves as a “doorkeeper” for legal compliance issues of the enterprise, back-up/preventing/limiting risks for enterprises when disputes arise. Because there is no legal department, many businesses have committed illegal acts, leading them to find law offices and law firms to deal with the legal consequences. Therefore, businesses need to take a new look at the importance of corporate counsel and then recruit In-house counsel or use appropriate outsourcing counsel.

The proper determination of the statute of limitations of a counterclaim is one of the important factors in court proceedings. To remove obstacles in the trial process, help litigants protect their legitimate rights and interests.  On November 25, 2021, the Council of Judges of the Supreme People’s Court adopted Case Law No.44/2021/AL, published under Decision No. 594/QD-CA dated December 31, 2021, of the Chief Justice of the Supreme People’s Court.  In the following article, TNTP shares its assessment of Case Law No.44/2021/AL and provides the necessary information on determining the current date of the counterclaim.

Case law no.44 Summary

1. Summary of the dispute

Case Law No.44/2021/AL case law is a commercial business case “design consultancy contract dispute” between the plaintiff H Joint Stock Company (“Company H”) and the defendant P Design and Construction Company Limited (“Company P”).

On 29/01/2008, Company H and Company P signed a Design Consultancy Contract (“Contract”) with the following contents:

• Company P is responsible for designing the entire project “4-star commercial center-hotel HD Hotel” on a land area of 8,971m2 in D7, Ward X, District T, Hanoi city invested by Company H;
• The total value of the contract is 1,754,550 USD (excluding value added tax);
• The work is allocated in three stages: phase 1 of construction design, phase 2 of landscape interior design, and phase 3 of author supervision.

Company H has transferred payment to Company P in 02 installments specified in the Contract, the total amount of payment in the above 02 installments is 396,751.75 USD, equivalent to 6,374,689,675 VND.

After that, due to the change in the scale of the project and the two parties could not agree on the adjustment of the contract value for the new design, Company H unilaterally terminated the Contract and had a dispute with Company P about the payment value.

Company H contends that it has advanced the overpayment compared to the actual amount of work that Company P performed in the first payment. Therefore, Company H only accepts to pay Company P the amount amounting to 8% of the construction design fee for both payments. In addition, Company H only accepts a penalty equivalent to 1% of the contract value.

However, Company P did not accept the plaintiff’s request for money back because it was money Company H had paid to Company P according to the schedule agreed in Company H, not an advance.

Company P also filed a Counterclaim, requiring Company H to continue to pay Company P the 3rd payment due to Company P’s technical support to approve the project’s design documents.

2. Conclusions of the Court

On 20/06/2011, TAND of Hoan Kiem District, Hanoi city issued the first instance judgment No. 01/2011/KDTM-ST deciding to accept Company H’s petition against Company P. Forcing Company P to refund to Company H the advance amount of the Contract of 272,571.41 USD equivalent to 5,642,228,187 VND. Hoan Kiem District TAND denies Company P’s counterclaim against Company H.

On 1/07/2011, Company P appealed the entire first instance judgment. At the appellate judgment No. 27/2011/KDTM-PT dated September 21, 2011, TAND of Hanoi decided not to accept the appeal of Company P and upheld the decision of the first instance judgment No. 01/2011/KDTM-ST.

Subsequently, Company P further filed a petition for the assessee for the aforesaid appellate judgment.

On September 15, 2014, the Chief Justice of TAND issued Appeal Decision  No. 60/2014/KN-KDTM appealed the appellate commercial business judgment No. 27/2011/KDTM-PT dated September 21, 2011, of TAND of Hanoi.

Accordingly, the Chief Justice of TAND requested the TAND Economic Court to hear the chief justice in the direction of annulling the aforesaid first instance judgment and appellate judgment. At the same time, hand over the case file to TAND of Hoan Kiem district, Hanoi city for retrial by the provisions of the law.

3. Contents of case law

At the court of cassation, representatives of the High People’s Procuracy in Hanoi requested the Committee of Judges of the High People’s Court in Hanoi to accept the appeal of the Director of the High People’s Procuracy in Hanoi. Accordingly, the court found that the counterclaim,  the judgment of the Court of  Appeal in Judgment No. 82/2020/KDTM-PT on the fact that the counterclaim is not limited to the statute of limitations is not true. According to the provisions of the  Civil Procedure Code (“CPC”) of  2004 and the CPC of 2015, a counterclaim is a request that is not part of the plaintiff’s request, which can be resolved by an independent case; The resolution of the counterclaim in the same case is for a more accurate and faster resolution result. A lawsuit request is also a lawsuit request, so it must comply with the statute of limitations for lawsuits. Therefore, in cases where there is a counterclaim and a litigant case proposes to apply the statute of limitations, the court of the first instance and the court of appeals must determine whether the counterclaim has a statute of limitations or not.

Rule commentary

Neither the CPC 2004 nor the 2015 CPC have clear statutes of limitations for counterclaims. Therefore, before case law No.44/2021/AL, there were many different views and interpretations on determining the counterclaim statute of limitations.  The first view is that: A counterclaim must also comply with the statute of limitations. The second view is that a counterclaim does not have to comply with the statute of limitations because the statute of limitations applies only to the plaintiff’s claim.

Case Law No.44/2021/AL issued has resolved the problem, agreeing that the trial court’s view that the statute of limitations for counterclaims must also comply with the statute of limitations for lawsuits.

TNTP considers that a counterclaim must also comply with the statute of limitations  for determining a  counterclaim as a claim, specifically:

• The procedure for requesting a counterclaim is carried out by the provisions of the CPC on the plaintiff’s lawsuit procedure. The defendant who wants to make a counterclaim must show the same content as the petition and must pay advance court fees if not exempted, accompanied by documents and evidence proving that legal rights are violated.
• For counterclaims, the defendant has the rights and obligations of the plaintiff specified in Article 71 of the CPC 2015.
• The defendant has the right to sue in another case if the counterclaim is not accepted by the Court to settle in the same case.

Thus, the essence of the counterclaim is the defendant’s claim against the plaintiff, which does not arise based on the claim, it is a claim independent of the claim. The counterclaim can be resolved by another case. The purpose of the counterclaim is to offset or exclude the plaintiff’s claim. The counterclaim in the same case resolves to make it faster, more accurate, and more convenient for the litigant. Since a counterclaim is treated as a lawsuit request, it must also comply with the statute of limitations.

Above is the content of case law No.44/2021/AL and TNTP’s judgment on the correct determination of the statute of limitations of the counterclaim. Hope the above article helps you.

Best regards,