A contract is an agreement of the parties on the establishment, change, and termination of civil rights and obligations. In which termination of the contract is defined as one of the agreements of the parties on the termination of civil rights and obligations. The question is under what circumstances will the parties termination of civil contract ?  Let’s find out the article below with TNTP.

1. What is the termination of a civil contract?

Termination is the fact that one of the parties does not have to perform the rights and obligations as previously agreed in the contract because of specific reasons. The effective time of termination of the contract is also the time of termination of rights and obligations between the parties.

2. Cases of contract termination

]According to Article 422 of the Civil Code (Civil Code) in 2015, the following cases of contract termination  :

  • The contract has been completed: When the parties have fully exercised their rights and obligations to each other and achieved the purpose of entering and performing the contract, in which case the contract will naturally be terminated from the moment the party is obliged to perform its final obligations to the party have rights. The contract is completed sooner or later depending on the contract performance, the nature and complexity of the contract…
  • By agreement of the parties: In this case, the contract is terminated by agreement between the subjects of the contract. Applicable law respects the parties’ agreement to establish, change and terminate civil rights and obligations, including the right to agree on the issue of termination of the contract. This agreement may be made verbally, in writing, or the form of electronic data. From the point of view of TNTP, when the Parties agree to terminate the contract, a record of liquidation of the contract or a certificate of termination should be made

In case one of the parties agrees on the termination of the contract to evade obligations to a third party or to infringe on other entities than the termination of the contract will not arise in effect, then the parties are required to continue to perform the contract;

  • The individual entering the contract dies, and the legal entity entering the contract ceases to exist, but the contract must be performed by that individual or legal entity.

The subjects performing the contract are identified as individuals and legal entities, so in case these entities die/ cease to exist, the contract will cease. The death event of the individual is understood as the actual biological death, that is, the individual has ceased all life activities such as respiration, giving metabolism, or division of cells.

Legal entity ceases to exist is a case in which such legal entity is bankrupt, dissolved, consolidated, or merged following the provisions of law and is acquired by an agency decision-making authority recognizes that termination.

Not in all cases where the individual dies, the legal entity ceases to exist, and the contract will be terminated, but in case the contract must be due to the individual himself. entities, that entities.

In many cases, the contract is terminated if the performance of the contract cannot be transferred to another entity. For example, the individual entering the contract dies but has no heirs to continue to perform the contract.

  • The contract is canceled, unilaterally terminated:  Cancellation, unilateral termination of the contract is one of the sanctions for acts violations of the parties during the contract. Accordingly, cancellation and unilateral termination of the contract shall apply when the parties agree; there is a serious violation of a party’s contractual obligations. A serious violation is a failure to properly perform the obligations of one party to the point of causing the other party to fail to achieve the purpose of entering a contract. In this case, the party canceling or unilaterally terminating the contract will not be obliged to compensate for damages.

However, the canceling Party unilaterally terminating the Contract should note that it must immediately notify the other party of the cancellation, if it does not notify but causes damage, compensation must be paid.

  • The contract cannot be performed because the subject of the contract is no longer available:

The subject of the contract is no longer defined as the case where the subject has lost, destroyed, or for other reasons resulting in the object no longer physically existing. The fact that the subject will no longer be the main reason why the parties cannot continue to perform the contract. When the subject matter of the contract is no longer available, the parties can agree again on changing the subject of the contract.

For example, A and B agree that to enter a purchase contract, Party A will buy 10 quintals of rice, but due to the impact of storms and floods, 10 rice was broken. In this case, the subject of the contract is determined to be 10 quintals of rice, so when 10 quintals of rice are damaged, the subject of the contract is no longer, and it will be grounds for termination.

  • The contract terminates in case of fundamentally changing circumstances: The fundamentally changing circumstances are identified as one of the grounds for termination of the contract. If a change is a fundamental change, it should be based on the following criteria:
  • The change of circumstances due to objective causes occurs after entering a contract.
  • At the time of entering the contract, the parties cannot anticipate a change in circumstances.
  • The circumstances changed so much that if the parties had known in advance, the contract would not have been entered into or entered but with a completely different content.
  • The continued performance of the contract without changing the content of the contract will cause serious damage to a party.
  • The party whose interest is affected has taken all necessary measures to the extent permissible, by the nature of the contract that cannot be prevented., minimizing the extent to which the benefit is affected

Above is TNTP’s article on “Cases of statutory civil contract termination”. Hope the above article provides you with useful information for you.

Best Respect.