Pham Diem
State and Law Institute of Vietnam
A trader’s activities to carry out commercial transactions on behalf of another or other traders were referred to in the 1997 Commercial Law as the “relation of providing commercial services.” These activities are dealt with by the 2005 Commercial Law in a more explicit manner as “intermediary activities in commerce.” Under Vietnam’s commercial law, intermediary activities in commerce cover four types of commercial activities: representation of traders, commercial brokerage, sale and purchase of goods by mandated dealers, and commercial agency.
Definitions
Representation of traders is defined in Vietnam’s commercial law as an activity whereby a trader (referred to as representative) is authorized by another trader (referred to as nominator) to conduct commercial activities in the name and under the instructions of the latter for remuneration. The nomination by a trader of his/her/its own staff to represent him/her/it is not categorized as intermediary activities and is, therefore, subject to the Civil Code.
The 2005 Commercial Law retained and further specified almost all provisions of the 1997 Commercial Law regarding the representation of traders, including provisions on contracts for representation, scope of representation, duration of representation, the right to enjoy remuneration for representation, the right to retention (lien), and obligations of nominators and representatives.
Under the commercial law, contracts for representation of traders must be established in writing or in other forms of equivalent legal validity. Such a contract shall be entered into by a trader and its representative. Legally, contracts of representation of traders constitute a type of authorization contract under civil law. The Civil Code’s general principles on entry into contracts shall also be applicable to the entry into contracts for representation of traders.
Regarding the scope of representation, the commercial law allows parties to agree that the representative may conduct part or all of commercial activities within the scope of operation of the nominator. The scope of representation means both territorial areas (localities) and domains of commercial activities where representation service is provided.
The duration of representation is agreed upon by the involved parties. Where no agreement is reached, the duration of representation shall expire when the nominator notifies the representative, or the representative notifies the nominator of the termination of the contract.
Unless otherwise agreed, the representative has the following obligations:
- To conduct commercial activities in the name and for the interest of the nominator;
- To notify the nominator of opportunities and results of performance of authorized commercial activities;
- To follow instructions of the nominator if such instructions do not violate the provisions of law;
- To refrain from conducting commercial activities in his/her/its own name or in the name of a third party within the scope of representation; and,
- To refrain from disclosing or supplying to other people secrets related to commercial activities of the nominator during the period of representation and within two years after the termination of the representation contract.
Representatives shall enjoy remuneration for contracts entered into within the scope of representation. The right to enjoy remuneration arises from the time agreed upon by the parties in representation contracts. Representatives may request the payment of reasonable expenses for the performance of representation activities. Representatives shall have lien over assets and documents assigned to them to secure the payment of remuneration and expenses which are due.
The nominator has the following obligations:
- To notify promptly the representative of the signing of contracts to be performed by the representative, and the acceptance or non-acceptance of activities conducted by the representative beyond the scope of representation;
- To supply assets, documents and information necessary for the representative to perform activities of representation;
- To pay remuneration and other reasonable expenses to the representative; and,
- To notify promptly the representative of the impossibility of entering into or performing the contract within the scope of representation.
Commercial brokerages
Under Vietnam’s commercial law, commercial brokerage means a commercial activity whereby a trader acts as an intermediary (referred to as broker) between parties selling and purchasing goods or providing commercial services (referred to as principals) in the course of negotiations and entering into contracts for sale and purchase of goods or provision of services and shall be entitled to remuneration under a brokerage contract. The real estate, securities and insurance brokerage and other types of brokerage do not fall within the governing scope of the commercial law.
The 2005 Commercial Law saw many new provisions on commercial brokerage as compared to the 1997 Commercial Law. For instance, the 1997 Commercial Law did not specify activities of commercial brokerage but only defined commercial brokers. As a result, even not-for-profit brokerage activities, i.e., those of a purely civil nature, would be governed by the commercial law if they are conducted by commercial brokers. Meanwhile, the 2005 Commercial Law identified commercial brokerage as a commercial activity.
The 1997 Commercial Law was overly specific on principal contents of commercial brokerage contracts, thus creating certain risks for involved parties when they failed to stringently abide by such provisions, and therefore did not realize the principle of freedom of contract and were unsuitable to present-day commercial activities. Fortunately, such provisions are no longer seen in the 2005 Commercial Law, which allows parties to commercial brokerage relations to agree on any contents they are interested in when deeming it necessary, provided that such agreements are not otherwise against the law. In this regard, the 2005 Commercial Law is compatible with international commercial practices in developed countries. Agreements between parties to commercial brokerage contracts, though being not specifically provided for by law, are recognized by the State, provided that the contents of such contracts are not contrary to principles of law.
Under the 2005 Commercial Law, unless otherwise agreed upon, a commercial broker shall have the following obligations:
-To preserve goods samples and documents assigned for the performance of brokerage activities, and to return them to the principals after the completion of brokerage;
-To refrain from disclosing or supplying information to the prejudice of the principals’ interests;
-To be responsible for the legal status of the principals but not for their solvency; and,
-To refrain from taking part in the performance of contracts between the principals, unless where so authorized by the principals.
Brokers shall enjoy brokerage remuneration from the time principals enter into contracts.
A brokerage principal shall have the following obligations:
-To supply information, documents and necessary means related to brokerage goods and services; and,
-To pay brokerage remuneration and other reasonable expenses to the broker.
Compared with the 1997 Commercial Law, the new provisions on the rights and obligations of parties to brokerage relations are more flexible.
Mandated dealers
Under Vietnam’s law, purchase and sale of goods by mandated dealers means commercial activities whereby the mandatory conducts the purchase and sale of goods in his/her/its own name under terms agreed upon with the mandator and is entitled to receive mandate commission. Like the latest provisions on commercial brokerage, those on purchase and sale of goods by mandated dealers have been improved in the direction of respecting the right to freedom of agreement of involved parties.
The 2005 Commercial Law’s institution on purchase and sale of goods by mandated dealers saw no substantive change from the 1997 Commercial Law, and the latest law still contains specific provisions on mandatories, mandators, mandated goods, mandate contracts, and rights and obligations of mandators and mandatories.
Under the current law, a mandatory for purchase and sale of goods is a trader dealing in goods which are consistent with the mandated goods and conducting the purchase and sale of goods under terms agreed upon with the mandator. A mandator of purchase and sale of goods may, or may not, be a trader that authorizes a mandatory to conduct the purchase and sale of goods at his/her/its request and pays a commission. All goods permitted for lawful circulation may become the subject matter of a mandated sale and purchase. A mandatory shall not be allowed to sub-mandate a third party to perform the signed mandate contract for purchase and sale of goods, unless it is so approved in writing by the mandator, but may accept the mandate for purchase and sale of goods from different mandators.
However, the 2005 Commercial Law added a new provision to prevent mandators from shirking their responsibility: mandators shall have to bear joint responsibility in cases where mandatories commit violations of law which are attributable to acts of mandators or intentional law-breaking acts of involved parties.
Commercial agency
Under Vietnam’s commercial law, commercial agency means a commercial activity whereby the principal and the agent agree that the agent, in its own name, sells or purchases goods for the principal or provides services of the principal to customers for remuneration.
Principals are traders that deliver goods to agents for sale or deliver money to agents for purchase of goods, or traders that authorize the provision of services to service-providing agents. Agents are traders that receive goods to act as sale agents or receive money to act as purchase agents or accept authorization to provide services.
Commercial agency may take any of the following forms:
- Off-take agency, which is a form of agency whereby the agent definitely sells or purchases a specific quantity of goods or provides a full service for the principal;
- Exclusive agency, which is a form of agency whereby a sole agent is authorized by the principal to sell or purchase specific goods or to provide one or more types of services within a given geographical area;
- General goods sale or purchase or service provision agency, which is a form of agency whereby an agent organizes a network of sub-agents to sell or purchase goods, or provide services for the principal. Sub-agents operate under the management and in the name of the general agent; and,
- Other forms of agency agreed upon by the parties.
Concerning the domain of commercial agency, the current Commercial Law also provides for agency contracts, agency remuneration, rights and obligations of principals, rights and obligations of agents, payment in agency activities and duration of agency.
In general, the 2005 Commercial Law saw several important amendments and supplements to the commercial agency institution from the 1997 Law. For example, while the 1997 Commercial Law provided for only goods purchase and sale agency, the 2005 Law dwelt on a broader concept - commercial agency, which covers goods purchase and sale agency and service provision agency. The relevant provisions were also amended and supplemented to suit such a broader concept.