NEGOTIATE AND EXECUTE CIVIL CONTRACT

According to Article 385, Civil Code 2015: “Civil contract means an agreement between parties in relation to the establishment, modification or termination of civil rights and obligations.”. In fact, parties should take into consideration following issues when drafting and signing a Civil Contract:

Parties of civil contract: According to Civil Code 2015, a civil transaction shall be effective if with juridical persons that the civil contract must be signed by Legal representatives of juridical persons (Article 2014 Civil Code 2015) or another person who is authorized in writing by Legal representatives (Article…) and if with natural personal that this person shall have full legal capacity.

The civil contract must be concluded involuntary and truthfulness (Article 117, 123 and 17 Civil Code 2015) and inconsistent with the law;

Form of Civil contracts: Depending on each type of contract which the law requests the compulsory requirements for its form. For the contracts that the corresponding law requires to be made in writing, they shall strictly comply. In case, where the law requires to be in notarized form, authentication, parties shall follow. (Example: Contract on trading in apartment, vehicles or contract for the transfer of land use rights as provided in Article 122 Law on Housing 2014, Article 117 Civil Code 2015 and Article 167 Land Law 2013). Therefore, the parties shall understand the laws so as to comply with the form properly and avoid the possibility that the contract is nulled by the form inconsistency.

Rights and obligations of the parties: Vietnamese laws imposed some general regulations on the rights and obligations of the parties in a civil transaction. However, in practice, the parties can also agree to some other terms that are appropriated to the parties’ financial capacity and demands. However, in general, the parties cannot agree and add more contents to the contract which is prohibited by Vietnam’s law. For example, the terms about:

• Interpretation of civil contracts: Based on Article 404 Civil Code 2015, the interpretation of civil contracts depends on many factors such as language, will, purpose, and nature of the contract. For some special types of civil contracts, there will have some specialized terms or terminology that can easily cause confusion. Therefore, the parties in the transaction need to clearly understand the definitions of important terms.
• Article about dispute settlement: when entering into a Civil contract, the Parties shall not pay attention to this issue. However, in practice, when a dispute arises, it is difficult for the Parties to find a common language to choose competent state agencies to settle their disputes. Therefore, in the negotiation process and Civil contract conclusion, the Parties must stipulate necessary terms to settle the disputes quickly and effectively. If the Parties choose the legal and competent state agencies to settle when having a dispute, this term will be a priority.
• Provision on applicable laws: civil relations are subject to substantial domination by the applicable law provisions. In many civil transactions, the law often changes so frequently and, therefore, the inappropriate recognition of applicable legal documents in such transactions can directly affect the legal rights and obligations of the parties. In fact, Civil Code 2015 has specific provisions on the application of foreign laws, specifically in Article 667 Civil Code 2015, especially for civil transactions involving foreign elements.

Some civil contract terms are frequently broken: quality, price, and payment method. The parties need to use clear terms and the content of the terms should also be written clearly which avoiding using terms with many different interpretations.

Breach of contract remedies: The parties in the contract often agree on some provision on damages compensation when the other party breaches its obligations. Sometimes, the parties also add a clause “Penalty for breach of contract”. According to Article 418 Civil Code 2015, the monetary fine should be agreed among the parties, unless otherwise prescribed by relevant laws (different from the Commercial Law 2005, under that Article 301 stipulates the fine levels shall be agreed among the parties, but not more than 8% of the value of the breached contract obligation, except for the case specified in Article 266 of this Law). However, in case the parties deliberately fail to carry out the contract, the parties can agree on a higher fine level than the penalty prescribed by law, but in that case, the exceeded fine level is highly likely that the court will be declared invalid.

Lac Duy & Associates with many lawyers, legal experts trained from the UK, US, and Japan and has many years of experience in consulting on drafting, consulting on entering to the contract and settling contract disputes. If you have any questions that need advice or support, readers can immediately contact Lac Duy & Associates for prompt answers and support.