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Official Gazette

Friday, October 7, 2022

New Civil Code with a wider governing scope

Updated: 14:30’ - 09/08/2005

I. Part One: General provisions

This part provides for tasks and effect of the Civil Code, basic principles, and legal status of subjects being individuals, legal persons, households, and cooperatives, matters related to civil transactions, representation, time limits and statue of limitations. As compared with the 1995 Civil Code, this part sees the following basic amendments:

1. On the governing scope (Article 1)

According to Article 1, the Civil Code is a general law that regulates social relations understood in a broad sense to cover marriage and family, business, commercial and labor relations. The Civil Code provides for the most general matters while the specialized laws on marriage and family, business, commerce and labor deal with particular issues in such fields respectively. In cases where such specialized laws do not contain specific provisions, relevant provisions of the Civil Code shall apply.

This is an amendment necessary for ensuring the consistency of Vietnam’s legal system.

2. On the principle of free and voluntary undertaking and agreement (Article 4)

If the 1995 Civil Code (Article 7) stipulates that “The right to freely undertake and agree on the establishment of civil rights and obligations in accordance with the provisions of law shall be guaranteed by law,” Article 4 of the 2005 Civil Code says “The right to freely undertake and agree on the establishment of civil rights and obligations shall be guaranteed by law, provided that such undertakings and agreements do not violate legal prohibitions or are not contrary to social ethics.” This is a very important change as it allows subjects of civil relations “to do what are not banned by law” instead of “to do what are compatible with the provision of law.”

Moreover, in the 2005 Civil Code, basic principles are rearranged more rationally as compared to the 1995 version.

3. On personal rights

The 2005 Civil Code contains new provisions on personal rights, including the right to donate human organs and corpses, the right to re-determine gender, viewed from the angle of civil rights of individuals. These are new matters, which have arisen in the reality and need to be tackled legally. However, the Civil Code deals with these matters only in general principle from the angle of civil rights while specific regulations shall be included in separate documents.

Civil status registration constitutes an administrative relation between state agencies and citizens; hence, the provisions on civil status registration have been excluded from the Civil Code and will be incorporated in the law on civil status. Only some civil status rights viewed as individual’s personal rights, including the right to birth registration and the right to death registration, are retained in the new Civil Code.

4. On place of residence (Article 52)

Article 48 of the 1995 Civil Code stipulates: “The place of residence of an individual is the place where such person permanently lives and has a permanent residence registration.” This concept of residence place has signified nothing but administrative management. Therefore, the 2005 Civil Code provides for the place of residence in conformity with civil relations, defining the only criterion for determination of the place of residence of an individual is the place where such person permanently lives.

5. On civil transactions

Regarding the conditions for a civil transaction to be effective, Clause 2 of Article 122 stipulates: “The form of a civil transaction constitutes one condition for that civil transaction to become effective in cases where it is so provided for by law.” This is an important amendment to the provisions of Clause 4, Article 131 of the 1995 Civil Code. Such a provision will restrict the possibility that a civil transaction is declared invalid only for the reason of breaching its form.

Besides, a new form of civil transaction is added (Article 124), that is “civil transactions through electronic means in the form of data messages shall be considered written civil transactions,” which is in line with the present scientific and technological development level.

II. Part Two: Property and ownership rights

In the 2005 Civil Code, Part Two “Property and ownership rights” consists of seven chapters (Chapter X thru Chapter XVI) with 117 articles (Article 163 thru 279). It defines the principles for exercise of ownership rights, assorted types of property, contents of ownership rights, forms of ownership, establishment, termination, and protection of ownership rights, with the following fundamental new provisions:

1. On the concept of property (Article 163)

Article 163 stipulates: “Property comprises objects, money, valuable papers and property rights.” So, the phrase “tangible things” provided for in the 1995 Civil Code is amended to “things.” The deletion of the word “tangible” has broadened the concept “things” to cover both existing things and future things. In reality, many objects of transactions are things being formed. For example: works under construction, ships being built. This amendment is important because it expands the objects of transactions, thus suiting the reality and meeting the requirements of transactions a market economy.

2. On forms of ownership (Article 172 and relevant articles in Chapter XIII)

Article 172 stipulates that on the basis of the regime of ownership of all the people, collective ownership and private ownership, the forms of ownership include the ownership of the State, the collective ownership, the private ownership, the common ownership, the ownership of political or socio-political organizations, and ownership of social-professional-social or socio-professional organizations.

So, under the 2005 Civil Code, there are six forms of ownership. The form of ownership of all the people is changed to the form of ownership of the State. This provision aims to clarify the subjects of ownership rights. The State of the Socialist Republic of Vietnam exercises the rights of an owner over property under the ownership of the State and has the powers as well as obligations of an owner. The form of ownership of social-political-professional organizations is newly added due to the emergence of such organizations. The form of mixed ownership stipulated in the 1995 Civil Code is now integrated into the form of common ownership and provided for in Article 218 on mixed common ownership.

3. Regarding mechanisms for the exercise and protection of ownership rights

3.1. On the registration of property ownership rights (Article 167)

Article 167 stipulates: “Ownership rights to immovables shall be registered in accordance with this Code and the law on registration of immovables. Ownership rights to movables shall not be registered, except for cases where otherwise provided for by law.”

This is an amendment to Article 174 of the 1995 Civil Code, which fails to specify types of property subject to registration, causing difficulties in the application.

The mechanism of registration of property ownership rights aims to publicize the ownership rights of subjects. When the ownership rights have belonged to a subject, on principle, all other subjects must respect the ownership rights of such subject. This helps people be well aware of their ownership rights. In many countries, there are two mechanisms applied separately to movables and immovables. For movables, ownership rights are expressed through possession, while for immovables, registration is a measure to publicize ownership rights, which conforms to international practices. Registration of immovables also constitutes a legal mechanism aiming to develop a real estate market in a healthy and transparent manner, ensuring safety for subjects when participating in real estate transactions. This is truly a very important principle in the exercise of ownership rights and other rights to immovables. Meanwhile, for movables, possession is a way of publicizing ownership rights, except for cases where the law expressly provides that these types of property are subject to registration. The Civil Code provides for general principles while leaving such specific matters as registration order and procedures, registries, etc., to be regulated in a law on registration of real estates, which is being drafted and expected to be promulgated in the coming time.

3.2. On the time of transferring property ownership rights (Article 168)

The 2005 Civil Code contains a new article, Article 168, which stipulates:

“1. The transfer of the ownership rights to immovables shall be effective as from the time of registration of property, except for cases where otherwise provided for by law.

2. The transfer of the ownership rights to movables shall be effective as from the time of hand-over of such movables, except for cases where otherwise provided for by law.”

Hence, this Article has perpetuated the current provisions of law on registration principles, which constitutes a condition for the effective transfer of ownership rights.

3.3. On the rights of non-owners of property (Article 173)

Article 173 retains in its Clause 1 the contents of Article 180 of the 1995 Civil Code, stipulating: “A non-owner of property shall only have the rights to possess, use and dispose of property which is not under his/her ownership pursuant to an agreement with the owner of such property or in accordance with the provisions of law.”

A new clause is added in order to clearly define the rights of non-owners of property, including land-use rights, restricted use rights to adjoining real estates; and other rights as agreed or provided for by law.

3.4. On the protection of rights and interests of owners and bona fide possessors

The ownership rights of individuals, legal persons and other subjects are recognized and protected by law; no one may be illegally restricted in or deprived of his/her ownership rights to his/her property. Owners shall have the right to protect their ownership rights by themselves, to prevent any person from infringing upon their ownership rights, to search for and reclaim their property which has been possessed, used or disposed of by other persons without a legal basis (Article 169). This constitutes a general and basic principle for the protection of rights of owners.

However, there are some exceptional cases where property is being under the ownership of bona fide possessors. The 2005 Civil Code handles these cases through its provisions on the right to reclaim movables not subject to registration of ownership rights from bona fide possessors (Article 257) and the right to reclaim movables subject to registration of ownership rights or immovables from bona fide possessors (Article 258).

These two articles are newly added in order to protect the interests of both owners and bona fide possessors.

III. Part Three: Civil obligations and civil contracts

Part three of the 2005 Civil Code, with 351 articles arranged in five chapters (Chapter XVII thru XXI), provides for civil obligations, civil liability, civil contracts, performance of tasks without mandate, the obligation to return property being under possession or use without a legal basis, and the liability to compensate for non-contractual damage. It contains the following new points:

1. On the concept of civil obligations (Article 280)

In the new Civil Code, a civil obligation is defined more specifically. It is not only a task which one or several subjects must do or refrain from doing in the interest of one or several other subjects, but also a task to hand over an object, transfer certain rights, pay an amount of money or return other valuable papers.

2. On the security for the performance of civil obligations (Article 318 thru Article 373)

Amendments are seen in the provisions on the entry into and performance of pledge, mortgage and guaranty contracts, which now enable contractual parties to act in a more flexible manner when settling practical problems.

Under such provisions, the parties may reach agreement on the scope of security for the performance of both present and future obligations. They may also use a property to secure the performance of many obligations.

The new Civil Code allows the parties to pledge or mortgage a property for the performance of many obligations, provided that the value of the property at the time of entry into pledge or mortgage contracts is higher than the total debts, except for cases where otherwise agreed upon by the parties or provided for by law. Furthermore, in principle, all property can be used to secure the performance of obligations under agreement, except for cases where otherwise provided for by law. In order to satisfy the practical requirements, security property may be objects, valuable papers or property rights, which may exist at the time of entry into the contracts or will be formed in the future.

In order to ensure publicity and transparency of relations involving security transactions, the new Civil Code stipulates that security transactions may be registered according to the provisions of law on registration of security transactions. It also determines the order of payment priority upon the disposal of the security property (Article 325). Regulations which have been tested in reality and proved to be effective for the process of advancing domestic and overseas capital investment are codified in the Code. The registration of security transactions aims to publicize transactions and supply information to those who wish to know such information before deciding to conduct transactions related to the property, and at the same time, to determine the order of payment priority upon the disposal of the security property for performance of the payment obligations.

3. On civil contracts (Article 388 thru Article 593)

The amendments related to civil contracts express the viewpoint of formulating contractual institutions in the Civil Code into a foundation for general contract law to govern contractual relations established on the principle of equality, voluntariness, agreement and responsibility. In cases where specialized laws on contracts contain specific provisions, such provisions shall apply. Therefore, the application scope of provisions on civil contracts in the Civil Code is expanded to cover all types of contracts, civil, economic and commercial. Consequently, as from the effective date of the Civil Code (January 1, 2006), the Ordinance on Economic Contracts will cease to be effective and the 2005 Commercial Law does not contain general provisions on contracts.

The provisions on the entry into and performance of civil contracts are also amended to suit contractual relations in the civil, business, commercial and labor domains, focusing on the following major contents:

a/ Enhancing the rights to contractual freedom by allowing the parties to decide on their partners, forms and contents of contracts and liabilities for contractual breaches.

The Civil Code determines the time of entry into contracts on the basis of recognizing the effectiveness of commitments and agreements between the involved parties, irrespective of contractual forms and procedures. It, thereby, provides for a general principle that a contract is entered into at the time the proposer receives the reply of acceptance. The time at which an oral contract is entered into is the time at which the parties have agreed on the contents of the contract. The time at which a written contract is entered into is the time at which the last party signs the contract (Article 404).

On principle, a contract shall become effective as from the time it is entered into as stated above. However, worthy of note is that the parties may otherwise agree upon or the law may otherwise provide for the effective time of a contract. For example, under the Land Law, a pledge contract shall become effective as from the time of its registration.

b/ Performance of contracts (Article 412 thru 422)

In addition to the principles for performance of civil contracts stated in Article 409 of the Civil Code, new provisions on lien on property in civil contracts and on the performance of contracts with terms on penalties for violations are added.

c/ On the statute of limitations for initiating lawsuits on civil contracts

The statute of limitations for requesting a court to declare a contract invalid is prolonged from one year under the 1995 Code to two years under the new Code.

A totally new issue, that is tontines, is added to the new Civil Code in order to regulate relations which have actually arisen in civil life but not yet been provided for. Nevertheless, the Civil Code only provides in general that tontines aims for mutual assistance among people and that tontines in the form of usury is strictly prohibited by the State. Specific matters shall be guided by concerned agencies.

4. On the liability to compensate for non-contractual damage (Article 604 thru Article 630)

Amendments to this Section aim to ensure the principle of equitability, protect the victims and raise the responsibilities of damage-causers.

The statute of limitations for initiating a legal action to claim for compensation is two years, as from the date the legitimate rights and interests of individuals, legal entities or other subjects are infringed (Article 607). This provision is added in order to avoid prolonged disputes, causing difficulties to the collection and verification of evidence in service of the adjudication.

On the responsibility to make compensation for spiritual damage, the 2005 Civil Code provides that the parties shall make agreement on the level of compensation for spiritual damage in cases where damage is caused by infringement upon health, life, honor, dignity or reputation. If the parties fail to reach an agreement, the maximum compensation level shall be equal to 30 months’ minimum salary stipulated by the State, in case of infringement upon health (Clause 2, Article 609); 60 months’ minimum salary, in case of infringement upon life (Clause 2, Article 610), and 10 months’ minimum salary, in case of infringement upon honor, dignity or reputation (Clause 2, Article 611). These provisions aims to ensure the uniform application of law.

The 2005 Civil Code also contains new provisions on compensation for damage caused by infringement upon dead bodies (Article 628) and graves (Article 629).

(to be continued in the next issue)

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