DINH THI MAI PHUONG, LLM
Deputy Head
Civil, Economic and Commercial Law Research Committee
Jurisprudence Institute - Justice Ministry
Until the Civil Code and Commercial Law take effect on January 1, 2006, three types of contract exist: The civil contract, the commercial contract and the economic contract, governed by the 1995 Civil Code, the 1997 Commercial Law and the 1989 Economic Contract Ordinance, respectively. In fact, the relationship between these three legal documents were not clearly defined, and the contents were inconsistent or even contradictory, resulting in difficult and inconsistent application of their provisions. This necessitated a reasonable and absolute solution to unify the provisions of Vietnamese law of contract, and create a stable, transparent and reliable basis for regulating contractual relations in accordance with socio-economic conditions and international requirements in the process of integration and globalization.
In the spirit of perfecting Vietnam’s contractual legislation, the 2005 Civil Code and the 2005 Commercial Law were drafted with the concept that the 2005 Civil Code would be the root of the private law branch. As a result, the concept of “civil” under the new Civil Code is broader, embracing civil, marriage and family, business, commercial and labor relations (and not only personal and property relations as provided for in the old Civil Code). In addition, the 2005 Commercial Law provides, in Clause 3, Article 4: “Commercial activities which are not provided for in the Commercial Law and/or other laws shall comply with the provisions of the Civil Code.”
As far as their relation is concerned, the 2005 Commercial Law is regarded as a specialized law regulating peculiar commercial relations while the 2005 Civil Code as a common law. Meanwhile, the 1989 Ordinance on Economic Contracts has proved to be no longer suitable to the conditions of the market economy and the process of Vietnam’s international integration, and will, therefore, cease to be effective as of the effective date of the 2005 Civil Code. So, all the relations which have been formerly governed by the Ordinance will be regulated by the new Civil Code and specialized laws such as the Commercial Law, the Credit Institutions Law, etc.
I. New provisions on contracts in the 2005 Civil Code
Civil contracts provided for in Part Three of the Civil Code (from Article 388 thru Article 593) constitute an important part of the Code.
1. A broader perception of the civil contract
The 2005 Civil Code states that: “A civil contract is an agreement between the parties to establish, change or terminate civil rights and/or obligations” (Article 388). However, this perception of the civil contract is broadened in a sense to cover all civil transactions, not only the personal relations and property relations provided for in the old Civil Code.
This is attributed to the change in the governing scope of the 2005 Civil Code compared to the 1995 Civil Code.
The 1995 Civil Code provided in Article 1: “The Civil Code prescribes the legal status of individuals, legal persons and other subjects, and the rights and obligations in relations involving property, personal relations in civil intercourse, and establishes legal standards for the conduct of the subjects participating in civil relations.”
Meanwhile, the 2005 Civil Code also states in Article 1: “The Civil Code provides the legal status and legal standards for the conduct of individuals, legal persons and other subjects; the rights and obligations of subjects regarding personal identity and property in civil, marriage and family, business, trade, and labor relations (hereinafter referred collectively to as civil relations).”
Under the above provisions, civil relations are defined more broadly in the 2005 Civil Code, embracing not only civil contracts in a narrow sense, but also the civil contracts previously governed by the Ordinance on Economic Contracts, commercial contracts, labor contracts and assorted contracts in the aviation, maritime, and credit domains.
2. More objects can be used to secure the performance of civil obligations
The 1995 Civil Code only provided that “objects used to secure the performance of a civil obligation must be under the ownership rights of the securing party and be permitted for transaction” (Article 326). Meanwhile, under Article 320 of the 2005 Civil Code, “objects used to secure the performance of civil obligations must be under the ownership rights of the securing party and be permitted for transaction” and “objects used to secure the performance of civil obligations are existing objects or objects to be formed in the future. Objects to be formed in the future are movable property or immovable property under the ownership rights of the securing party after the time the obligations are established or the security transactions are entered into.”
Under this new provision, the objects used to secure the performance of civil obligations are not restricted to existing objects owned by the securing party, but expanded to objects to be formed in the future. This enables borrowers to use assets to be formed by loaned funds to secure their debt repayment obligations, thus making civil transactions, especially secured civil transactions, more flexible.
3. Better measures to secure the performance of civil obligations
Under the 1995 Civil Code, “a pledge of property is the task in which the obligor hands over movable property under his/her ownership to the obligee as security for the performance of a civil obligation” and “a mortgage of property is the use by the obligor of immovable property under his/her ownership to secure the performance of an obligation towards the obligee.” This indicated that an act of securing the performance of civil obligations by pledging or mortgaging a property depends on whether the property used to secure the performance of such civil obligations is movable or immovable property. Moreover, the old Code provided that the property pledgee could only hold the papers certifying the property rights, thus failing to secure their interests according to the provisions on their rights in Article 335.
The 2005 Civil Code has determined that the obligee shall hold the property in the process of securing the performance of civil obligations as a basis for distinguishing acts of securing the performance of civil obligations. If the obligor has to hand over the property being the objects to secure the performance of his/her obligations to the obligee, such act is called a pledge of property, regardless of whether the property is movable or immovable property (Article 326). If the obligor has only to use his/her property to secure the performance of his/her obligations towards the obligee, such act is called the mortgage of property, even if it is a movable property (Article 342). In this case, the obligee often holds the papers certifying the property ownership rights (or the land use rights). This new provision has reflected the true nature of the terms “pledge” and “ mortgage.”
In addition, the new Civil Code has abolished the provision in Article 332 of the old Civil Code that the pledgor has to hand over “the originals” of documents evidencing ownership rights of the pledged property to the pledgee. It has also separated the “pledge of trust” from the section on security into a separate section for proper understanding of security in general and pledge of trust in particular.
It has also provided guaranty as a personal securing measure and transferred the guaranty with specific property into the pledge or mortgage of a third party’s property. Consequently, the provision on guaranty with the land use rights no longer exists.
The 2005 Civil Code has also specified the mortgage of land use rights. To ensure stable and long-lasting land-related legal relations, it has not specified the conditions for the mortgage of land use rights (as in Article 728 of the 1995 Civil Code) or subjects eligible to mortgage land use rights (as in Article 730 of the 1995 Civil Code).
New provisions can also be seen in Clauses 3, 4 and 5 of Article 349, permitting the property mortgagor to sell mortgaged property which is commodities circulated in the process of production and/or business, or to lease or lend the mortgaged property. The new Code has also created a mechanism more favorable for the disposal of pledged property (Article 336), which is suitable to the objective requirements of the market, whereby the parties, if failing to reach agreement, can auction such property consistent with provisions of law.
In order to ensure the publicity and transparency of relations involving secured transactions, the 2005 Civil Code contains new provisions on registration of secured transactions (Article 323) and defines the priority of payment upon the disposal of property securing an obligation (Article 325). The registration of secured transactions aims to supply information to all those who wish to inquire into the property before deciding to effect transactions related to the property and to establish priority when the security property is disposed of for the performance of payment obligations.
4. Clearer definition of the interests of a bona fide third party when civil transactions are invalid (Article 138)
According to Article 147 of the 1995 Civil Code, “in cases where a civil transaction is invalid but the transacted property has already been transferred to a bona fide third party through another transaction, then the transaction with the third party shall still be valid.”
Meanwhile Article 138 of the new Code has distinguished property subject to ownership registration from property not subject to ownership registration, stating: “In cases where a civil transaction is invalid but the transacted property being moveable and not subject to ownership registration has already been transferred to a bona fide third party through another transaction, the transaction with the third party shall still be valid, except for the case specified in Article 257 of this Code.” But for property subject to ownership registration, it states that “the transaction with the third party shall be invalid, except for cases the bona fide third party receives such property through auction or transaction with a person who, under court judgment or decision of a competent state agency, was the owner of the property, but later is not the owner of the property as the court judgment or decision is cancelled or modified.”
This new provision has, on one hand, increased the responsibility of the bona fide third party, who must know the property subject to ownership registration and bear all risks if it still continues the transaction with such property and, on the other hand, will make people get used to making ownership registration of their property in order to be protected by the State in case of disputes, and at the same time facilitate the state management of such property.
5. The 2005 Civil Code has abolished the provision in the 1995 Civil Code that “an agreement on the penalties for breach must be made in writing” and not provided for “penalties for breach” in a separate clause.
The 2005 Civil Code has left out the provision in Clause 2, Article 377 of the 1995 Civil Code that “an agreement on the penalties for breach must be made in writing, either in a separate document or incorporated in the principal contract” as well as the provision on the maximum penalty level of 5% in Article 378 of the old Civil Code.
Penalties for breach have been specified mainly in Article 422 of the new Code, under which the agreement on this issue shall fully rest with the contractual parties. The new provision has secured the principle of respect for the parties’ rights of disposal in civil intercourse, thus avoiding the State’s excessive intervention in the legal relations. It has also reflected the viewpoint of not considering penalties for breach a measure to secure the performance of obligations but only a contractual sanction.
6. New provisions on currencies to be used for performance of obligations
The 2005 Civil Code has replaced the provision in Article 327 of the 1995 Civil Code that “monies used as security for the performance of a civil obligation must be the Vietnam Dong” with the provision that Vietnam Dong and foreign currencies can be used to secure the performance of civil obligations.
Such a new stipulation will facilitate civil intercourse and avoid the invalidity of some transactions using foreign currencies to secure the performance of civil obligations.
7. Clearer and more specific provisions on offers to enter into civil contracts
In the 1995 Civil Code, the offer to enter into civil contracts was provided in only four articles from 396 to 399. But, in the 2005 Civil Code, it is specified in 11 articles from Article 390 thru Article 400, covering the definition of entry into contracts, the time for an offer to take effect and expire, the time limit to reply or accept the entry into contracts, the conditions for modification or revocation of offers to enter into contracts, cases of cancellation or termination of offers to enter into contracts, etc.
In addition, cases of offerees’ proposals on offer modifications, cases where offerors or offerees die or lose their civil act capacity, the revocation of notice of acceptance to enter into contracts have also been detailed in the new Code.
8. More flexible provisions on form and content of civil contracts
In order to address the situation that many contracts have been unnecessarily declared invalid, the 2005 Civil Code has affirmed that “contracts shall not be invalidated in case of form-related breaches, unless otherwise provided for by law” (Article 401). This is an important progress in legislative thinking compared to the 1995 Civil Code. Contracts are an agreement between the parties on the establishment, change or termination of civil rights and obligations; hence, contractual forms simply constitute a way of expressing these agreements. When the parties can prove the existence of such agreements, the agreement shall naturally be valid, and the State cannot use its power to reject them. For types of contracts which must be registered with competent state bodies for the state to perform its management function in a number of domains, such as for contracts on land use rights transfers, the registration of which are required for the contracts to be effective, the written form is naturally valid.
The 2005 Civil Code has abolished the form-related condition for civil transactions to be effective. Instead, it has stated that in cases where the law provides that civil transactions must be expressed in notarized or authenticated written documents, or must be registered or permitted, such provisions must be complied with.
Regarding the contractual content, unlike the 1995 Civil Code which provided that the major contents of contracts shall be prescribed by law or agreed upon by the parties if they are nor prescribed by law, the 2005 Civil Code has only given out some fundamental contents to guide the contractual parties.
An important modification related to the right of freedom to enter into contracts is the modification of the perception of the property, which includes, under the 2005 Civil Code, not only existing property but also the property to be formed in future.
9. Regarding the time of entry into contracts and the effective date of the contracts
The 2005 Civil Code has specified the time of entry into civil contracts in Article 404 and the effective time of civil contracts in Article 405.
As compared to the 1995 Civil Code, which provided in Clause 5 of Article 403 that “with respect to contracts that must be notarized by the State Notary Office, registered or permitted, the time at which the contracts are entered into shall be the time at which the contracts are notarized, registered or permitted,” the provisions in the new Code have conformed to each specific type of contract on the basis of recognition of the effect of commitments or agreements between the parties. The new Code has also separated the time of entry into civil contracts from the time they take effect with regard to contracts which must be registered, notarized, authenticated or permitted.
10. Regarding invalid civil contracts
The 2005 Civil Code provides in Article 410 for invalid civil contracts. It fails to specify cases of invalid civil contracts and the legal consequences thereof but refers to the application of provisions on invalid civil transactions defined in Articles 127 to 138. The new Code has also prescribed the relationship between principal contracts and auxiliary contracts and added provisions on invalid contracts due to the existence of objects which cannot be realized.
11. More objects of sale and purchase contracts
According to Article 429 of the 2005 Civil Code, “the object of a sale and purchase contract shall be a property permitted for transaction,” which, according to Article 163, “comprises tangible things, money, valuable papers and property rights.” So, as compared to the old Civil Code, the objects of sale and purchase contracts have been broadened and more clearly defined.
12. More flexible provisions on prices and mode of payment
A new provision in Clause 3, Article 431, states that “the agreed price may be a specific price level or a method of determining the price. In cases where the agreement on the price level or the price-determining method is not clear, the price of the property shall be determined, based on the market price at the place and time the contract is entered into.” The 2005 Civil Code has increased the possibility to reach agreement, which is faithful to reality because, in fact, not every matter can be anticipated in the contract.
13. Regarding the transferee of ownership rights
The new Civil Code’s provision on the transferee of the ownership rights has been broadened to cover not only “the purchaser” as provided for in the 1995 Civil Code but also a party authorized by the purchaser. Moreover, the new Code has added a new provision that “in cases where the property for sale and purchase has not yet been handed over while yields and/or incomes are generated, such yields and/or incomes shall belong to the seller” (Clause 3 of Article 439). Such a new provision has conformed to realities of commercial activities.
14. More diverse forms of contract on sale and purchase of houses
New ideas have also been seen in the forms of contract on sale and purchase of houses, which can be made not only in writing as provided for by the 1995 Code, but also in other forms agreed upon by the parties unless otherwise provided for by law.
15. More subjects entitled to property auction
The 2005 Civil Code has provided in Article 456: “A property may be sold by auction at the will of its owner or as provided for by law.” So, with this provision, the scope of subjects entitled to auction their respective property has been broadened to cover not only “agencies or organizations” as stated in Clause 2 of Article 452 of the 1995 Civil Code, but also individuals.
16. Brand-new provisions on tontine
This is a totally new issue provided for in the 2005 Civil Code, aiming to regulate civil relations which practically take place in daily life but which have not been tackled due to the lack of legal bases. However, this is a complicated matter; and it is mentioned in principle that “the form of tontine for the purpose of mutual assistance among people shall comply with the provisions of law” and “it is strictly prohibited to organize tontines in the form of usury.”
1. New and amended provisions on foreign traders, compared to the 1997 Commercial Law
The 2005 Commercial Law determines forms of and rights of foreign traders to commercial activities in Vietnam. Compared to the 1997 Commercial Law, it adds two forms of foreign traders’ presence in the country, namely the form of joint venture and the form of enterprise with 100% foreign capital, besides the forms of branch and representative office.
a/ Scope of regulation
The 2005 Commercial Law does not govern the determination of legal status of traders, but regulates a new domain covering commercial activities which are understood as activities for profit-generating purposes, including sale and purchases of goods, provision of, services, investment, commercial promotion and other activities for profit-making purposes (Clause 1, Article 3). So, its regulatory scope expands to embrace business activities, not only the 14 commercial acts provided for in the 1997 Commercial Law.
b/ Subjects of application
The 2005 Commercial Law does not stop short at traders conducting commercial activities in Vietnam but also covers those conducting commercial activities in foreign countries (where the parties agree to apply this Law or where foreign laws or treaties to which the Socialist Republic of Vietnam is a party contain provisions on application of this Law).
Its subjects of application also include non-traders who conduct activities not for profit-generating purposes in transactions with traders in Vietnamese territory if the former opt to apply this Law.
Under the new Commercial Law, traders include economic organizations which are lawfully set up and individuals conducting commercial activities independently, regularly and with business registration (Article 6).
c/ Clearer definition of principles for application of law
The position of the 2005 Commercial Law in Vietnam’s legal system is more clearly defined as a specialized law in relation to the 2005 Civil Code or as a common law in relation to the laws governing porticular commercial activities.
d/ Commercial activities of foreign traders in Vietnam
The 2005 Commercial Law devotes a whole Section in Chapter I to the rights and obligations of representative offices, branches, foreign-invested commercial enterprises and the competence to grant licenses to these subjects.
It also recognizes new forms of foreign traders conducting commercial activities in Vietnam. In addition to the forms of representative office and branches of foreign traders in Vietnam, the new Commercial Law also prescribes two types of commercial enterprises with foreign capital, including joint ventures and enterprises with 100% foreign capital.
2. More new and amended provisions on purchase and sale of goods
a/ The 2005 Commercial Law contains more amendments to the general provisions on purchase and sale of goods in the 1997 Commercial Law, specifically:
-Regarding goods banned from business, goods subject to business restrictions, and goods subject to conditional business, the 2005 Commercial Law provides the bases for management of goods circulation on the market. Goods circulated on the market fall under one of the following forms: free business, banned business, restricted business and conditional business. Under the Law, the Government shall base on the socio-economic conditions in each period and on the treaties to which Vietnam is a party, the conditions for management of goods circulated on the market.
-Regarding domestic trade in goods, the new Commercial Law provides that traders may trade in all kinds of commodities, excluding those banned. For goods subject to business restrictions or conditional business, traders must satisfy the conditions prescribed by law.
-Regarding international trade in goods, the 2005 Commercial Law confirms all traders’ rights to import and export every type of goods, excluding those banned by law from import or export. Based on the socio-economic conditions of each period and the treaties to which Vietnam is a party, the Government shall specify goods banned from import or export. For goods subject to import or export management with permits, permit-granting procedures must ensure the principle of publicity and transparency in accordance with the WTO’s Agreement on granting of import and export permits.
-The application of urgent measures in domestic circulation of goods is a new provision of the 2005 Commercial Law. It defines more clearly such urgent measures including: recovery of goods, circulation ban, circulation suspension, conditional circulation or permitted circulation as well as bases for application of these urgent measures such as goods being epidemic sources or vectors or the occurrence of a state of emergency.
-The application of urgent measures in international trade in goods is also a new provision of the 2005 Commercial Law which is necessary to restrict the adverse impacts of international economic integration as clearly seen in the recent past when foreign countries imposed non-tariff measures.
Moreover, the 2005 Commercial Law contains new provisions on mode of import and export activities and on labels and origins of goods which shall serve as legal bases for the Government to detail the implementation with a view to increasing the legal effect and practical enforcement.
b/ More amendments to provisions on the rights and obligations of parties to contracts for the purchase and sale of goods
- Regarding the seller’s obligations, the Law contains new provisions on goods delivery in case of non-agreement or unclear agreement on places of delivery (Article 35) or delivery time limit (Article 37); on seller’s obligations in cases where goods are security for performance of civil obligations (Article 48); on obligations to secure the intellectual property rights over sold goods, i.e., the seller is not allowed to sell goods which infringe upon intellectual property rights and must bear responsibility for any disputes (Clause 1, Article 46) unless the seller acts at the buyer’s request in terms of techniques, designs, formulae or specification (Clause 2, Article 46).
However, under this new provision, the seller is obliged to promptly notify the buyer of third party complaints about the delivered goods after the seller knew or should have known such complaints, except for cases where the buyers already knew or should have known them. If the seller fails to notify, the seller loses the right to this reference (Clause 1, Article 47), and the buyer also loses the right to this reference if failing to promptly notify the seller of third party complaints about the delivered goods after the buyer knew or should have known such complaints, except for cases in which the seller knew or should have known about the third party complaints (Clause 2 of Article 47).
- Regarding risks and transfer of ownership right, new provisions on transfer of risks are also seen in the Commercial Law, specifically in cases where:
-The delivery places are available, the risks of loss of or damage to goods shall be passed to the buyer when the goods have been handed over to the buyer or entrusted persons at such delivery places, including cases where the seller is entrusted to retain vouchers on the establishment of ownership rights to the goods (Article 57).
-The delivery places are unidentified, the risks of loss of, or damage to goods shall remain with the seller from the time the goods have been delivered to the first carriers (Article 58).
-The goods are held by the consignees and not by carriers, the risks of loss of or damage to goods shall be passed to the buyer if the buyer has already received the vouchers on ownership or if the consignees have certified the buyer’s ownership of the goods (Article 59).
-The contractual goods are being transported en route, the risks of loss of, or damage to goods shall be passed to the buyer from the time of entry into contract (Article 60).
In cases other than those mentioned above, the risks of loss of, or damage to goods shall be passed to the buyer from the time the goods belong to the buyers’ right to disposal and the buyer breaches the contract by refusing to receive the goods, on the condition that the goods are clearly identified with signs and transportation vouchers and the buyer is notified (Article 61).
- Regarding the buyer’s obligations, the 2005 Commercial Law contains new and amended provisions on places of payment (Article 54), payment time limits in case of non-agreement between the parties (Article 55); and obligations to receive goods (Article 56) and to perform reasonable jobs to ensure the legitimate rights of sellers. This is an important change based on the general principle of “reasonableness” - the most fundamental principle for determining the obligations of parties in commercial transactions. Commercial realities show that such compulsory contents as goods delivery time limits, delivery places, prices, payment time and places must always be agreed upon by the parties as provided for in the 1997 Commercial Law. So, in cases where the contractual parties fail to reach agreement or reach unclear agreement on goods delivery time limits, the law must provide them in order to create favorable conditions for the parties to perform the contracts.
c) Goods trading through Goods Exchange is provided in Section 3 (from Articles 63 thru 73). This is a new provision of the 2005 Commercial Law which also sets forth the most fundamental regulations serving as bases for the development of this activity in the future. Such regulations are characterized by:
First, the legal framework in the Commercial Law is not “coercion” to formulate definitive markets but a “legal corridor” for the formation and development of such markets;
Second, the creation of legal bases for activities of goods trading through Goods Exchange shall be handled through not only the provisions of the Commercial Law but also those of other normative documents;
Third, compatible with Vietnam’s current realities, the Commercial Law does not specify all matters related to the transaction, although the Government shall detail and guide the implementation of the commercial law;
Fourth, the Commercial Law encourages the formation and development of definitive markets but still upholds the strict management of these activities; and,
Fifth, the Commercial Law recognizes and confirms traders’ rights in conducting activities of buying and selling goods through overseas Goods Exchanges.
3. Commercial agency
The 2005 Commercial Law contains the following major amendments on commercial agency compared to the 1997 Commercial Law:
-The conception of commercial agency is broadened to cover goods sale and purchase agency and service provision agency (Article 166). Therefore, all relevant provisions have been amended or supplemented to suit the expansion of the agency concept.
-The principle of free agreement of the parties on forms of agency, rights and obligations of agents and principals, agency contracts and agency commission is expressed.
-The provisions on agents’ rights in conclusion of agency contracts, whereby an agent may conclude agency contracts with many principals, except for cases provided for by law (Article 174), is amended to meet current practical requirements.
-The addition of the provision on agency duration with the view to protect agent’s interests in cases where the principals terminate the agency contract (Article 177). In fact, the agent must initially invest human and material resources in opening markets for the principal’s goods and/or services. Therefore, in case of non-agreement, the agency shall terminate after a reasonable period of time as from the time either party proposes the termination of the agency contract. In cases in which a principal proposes the termination of contract, he/she/it must pay a sum of money as compensation to the agent under the provisions of law.
4. Lease of goods (Section 7, Chapter VI)
This is a commercial activity newly added to the Commercial Law. Realities show that leasing of property has taken place more and more widely, but is not yet been governed by the current commercial law as a specific commercial activity. Even the Civil Code itself has just set out only general provisions on property lease contracts which are, however, not enough and even not proper for regulating leasing activities on the market as contracts in specific domains shall be governed by specialized laws.
For this reason, the 2005 Commercial Law contains new provisions on leasing activities with 15 articles (from Articles 269 thru 283). Being formulated on the basis of study of, and references to, such foreign laws on this matter as the Unified Commercial Code of the United States and the Law on Contracts of China, these new provisions have been appreciated as fairly standard for this type of commercial activity.
5. Commercial franchise (Section 8, Chapter VI)
This constitutes a commercial activity very common in other countries but still quite new in Vietnam, which has been included in Vietnam’s commitment to open the distribution market but not yet governed by any current regulations.
With 8 new articles (Articles 284 thru 291) on commercial franchise, the 2005 Commercial Law lay the general legal foundations for carrying out this type of commercial activity in Vietnam while ensuring the legitimate rights and interests of the involved parties. Foreign traders will be entitled to conduct business by mode of commercial franchise if it is so provided for by treaties to which Vietnam is a party and so permitted by the Minister of Trade.
6. Commercial remedies
What is new in this regard is that acts of breaching contracts are classified into two types, namely basic breaches and non-basic breaches, which shall serve as important bases for the application of commercial remedies. This new provision is compatible with the provisions of international law and suitable to commercial activities in Vietnam.
As compared to the 1997 Commercial Law which only provided in its Article 222 such remedies as specific performance of contract; penalty for breach; compensation for damage, and cancellation of contract, the 2005 Commercial Law adds two new remedies including suspension of performance of contract and stoppage of performance of contract. But what is most important is that the new Commercial Law recognizes “other remedies agreed upon by involved parties, which are not contrary to the fundamental principles of Vietnamese law, treaties to which the Socialist Republic of Vietnam is a contracting party and international commercial practices” (Clause 7 of Article 292).
In addition, the 2005 Commercial Law contains amendments concerning:
-Cases of exemption from liability for breaching acts (Articles 294 and 295).
-Relationship between remedy of fine for breach and the remedy of damages (Article 307), whereby if the parties agree upon fines for breaches, the aggrieved party shall be entitled to apply both the remedy of fine for breach and the remedy of damages. The 1997 Commercial Law provided that the aggrieved party might apply either of these two remedies, unless otherwise agreed upon by the parties.
-More specific provisions on remedy of cancellation of contracts (Article 312), with the cancellation of part of a contract or the entire contract.
7. Resolution of commercial disputes
The 2005 Commercial Law contains no additions and only a few amendments to suit commercial realities.-