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Chapter VII - Commercial remedies and resolution of commercial disputes

* This translated version is originated from Ministry of Justice and for reference only.

Section 1. COMMERCIAL REMEDIES

Article 292.- Types of commercial remedies

1. Specific performance of contracts.

2. Fines for breaches.

3. Forcible payment of damages.

4. Suspension of performance of contracts.

5. Stoppage of performance of contracts.

6. Cancellation of contracts.

7. 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.

Article 293.- Application of commercial remedies against insubstantial breaches

Unless otherwise agreed, aggrieved parties are not entitled to apply the remedy of suspension of performance of contracts, stoppage of performance of contracts or cancellation of contracts against insubstantial breaches.

Article 294.- Cases of exemption from liability for breaching acts

1. A party that breaches a contract shall be exempted from liability in the following cases:

a/ A case of liability exemption agreed upon by the parties occurs;

b/ A force majeure event occurs;

c/ A breach by one party is entirely attributable to the other party's fault;

d/ A breach is committed by one party as a result of the execution of a decision of a competent state management agency which the party cannot know, at the time the contract is entered into.

2. The contract-breaching party shall bear the burden of proof of cases of liability exemption.

Article 295.- Notification and certification of cases of liability exemption

1. The party must promptly notify in writing the other party of cases of liability exemption and possible consequences thereof.

2. When a case of liability exemption no longer exists, the contract-breaching party must promptly notify such to the other party. The breaching party must pay damages if it fails to notify or notifies the other party not in a prompt manner.

3. Breaching parties are obliged to prove their cases of liability exemption to aggrieved parties.

Article 296.- Extension of time limit for performance of contracts, or refusal to perform contracts in force majeure circumstances

1. In a force majeure circumstance, the parties may agree to extend the time limit for performing their respective contractual obligations. If the parties do not agree or cannot agree upon such extension, the time limit for performing contractual obligations shall be extended for a period of time equal to the time length of such force majeure circumstance plus a reasonable period of time for remedying consequences, but not exceeding:

a/ Five months for goods or services for which the agreed time limit for their delivery or provision does not exceed twelve months from the date the contract is entered into;

b/ Eight months for goods or services for which the agreed time limit for their delivery or provision exceeds twelve months from the date the contract is entered into.

2. Beyond the time limits specified in Clause 1 of this Article, the parties may refuse to perform the contract and neither party is entitled to request the other party to pay damages.

3. Where a party refuses to perform a contract, it must, within ten days from the expiry date of the time limit specified in Clause 1 of this Article, notify the other party thereof before the latter begins to perform its contractual obligations.

4. The extension of the time limit for performing contractual obligations mentioned in Clause 1 of this Article does not apply to contracts for purchase and sale of goods or contracts for provision of services with fixed time limit for goods delivery or service completion.

Article 297.- Specific performance of contracts

1. Specific performance of a contract means a remedy whereby the aggrieved party requests the breaching party to properly perform the contract or apply other measures to cause the contract to be performed and the breaching party shall have to bear any costs incurred.

2. Where the breaching party fails to deliver goods in full or provide services in accordance with the contract, it shall have to deliver goods in full or provide services in accordance with the contract. Where the breaching party delivers goods or provides services of inferior quality, it shall have to rectify defects of the goods or shortcomings of the services or to deliver other goods as substitutes or provide services in accordance with the contract. The breaching party must not use money or goods or services of other types as substitutes unless so consented by the aggrieved party.

3. Where the breaching party fails to comply with Clause 2 of this Article, the aggrieved party may purchase goods or receive services of correct type as stated in the contract from another seller or provider for substitution and the breaching party must bear the price difference and relevant expenses, if any; or may rectify defects of the goods or shortcomings of the services by itself, and the breaching party must pay actual and reasonable expenses for the rectification.

4. The aggrieved party shall have to receive goods or services and make payments therefor if the breaching party has fulfilled all obligations according to Clause 2 of this Article.

5. Where the breaching party is the purchaser, the seller may request the purchaser to pay for and receive goods or fulfill other obligations stipulated in the contract and provided for in this Law.

Article 298.- Extension of time limit for performance of obligations

In case of specific performance of a contract, the aggrieved party may extend the time limit for a reasonable period for the breaching party to perform its contractual obligations.

Article 299.- Relationship between the remedy of specific performance of contracts and other remedies

1. Unless otherwise agreed, during the period of application of specific performance of a contract, the aggrieved party may claim for damages and fines to be paid but must not apply other remedies.

2. If the breaching party fails to carry out the remedy of specific performance of a contract within the time limit set by the aggrieved party, the aggrieved party may apply other remedies in order to protect its legitimate rights.

Article 300.- Fine for breach

Fine for breach means a remedy whereby the aggrieved party requests the breaching party to pay an amount of fine for its breach of a contract, if so agreed in the contract, except for cases of liability exemption specified in Article 294 of this Law.

Article 301.- Fine level

The fine level for a breach of a contractual obligation or the aggregate fine level for more than one breach shall be agreed upon in the contract by the parties but must not exceed 8% of the value of the breached contractual obligation portion, except for cases specified in Article 266 of this Law.

Article 302.- Damages

1. Damages means a remedy whereby the breaching party pays compensation for the loss caused by a contract-breaching act to the aggrieved party.

2. The value of damages covers the value of the material and direct loss suffered by the aggrieved party due to the breach of the breaching party and the direct profit which the aggrieved party would have earned if such breach had not been committed.

Article 303.- Grounds for liability to pay damages

Except for cases of liability exemption specified in Article 294 of this Law, liability to pay damages shall arise upon existence of all of the following elements:

1. Breach of the contract;

2. Material loss;

3. Act of breaching the contract is the direct cause of the loss.

Article 304.- Burden of proof of loss

The party claiming damages shall bear the burden of proof of the loss, the extent of the loss caused by the act of breach, and direct profit amount which the aggrieved party would have earned if the breach had not been committed.

Article 305.- Obligations to mitigate loss

The party claiming damages must apply appropriate measures to mitigate the loss caused by a contract breach, including the loss of direct profit which it would have earned. If the party claiming damages fails to do so, the breaching party may request a rebate of the value of damages to the extent of the loss that would have been mitigated.

Article 306.- Right to claim interest on delayed payment

Where a contract-breaching party delays making payment for goods or payment of service charges and other reasonable fees, the aggrieved party may claim an interest on such delayed payment at the average interest rate applicable to overdue debts in the market at the time of payment for the delayed period, unless otherwise agreed or provided for by law.

Article 307.- Relationship between remedy of fines and remedy of damages

1. Where the parties do not agree upon fines for breaches, the aggrieved partyshall only be entitled to claim damages, unless otherwise provided for by this Law.

2. Where the parties agree upon fines for breaches, the aggrieved partyshall be entitled to apply both remedies of fines and damages, unless otherwise provided for by this Law.

Article 308.- Suspension of performance of contracts

Except for cases of liability exemption specified in Article 294 of this Law, suspension of performance of a contract means a remedy whereby a party temporarily ceases the performance of its contractual obligations in one of the following cases:

1. Upon commission of a breaching act which serves as a condition for the suspension of performance of the contract as agreed upon by the parties;

2. Upon a substantial breach of contractual obligations by a party.

Article 309.- Legal consequences of suspension of performance of contracts

1. Contracts which are suspended from performance are still in full force and effective.

2. Aggrieved parties are entitled to claim damages according to the provisions of this Law.

Article 310.- Stoppage of performance of contracts

Except for cases of liability exemption specified in Article 294 of this Law, stoppage of performance of a contract means a remedy whereby a party terminates the performance of its contractual obligations in one of the following cases:

1. Upon commission of a breaching act which serves as a condition for stoppage of the performance of the contract as agreed upon by the parties;

2. Upon a substantial breach of contractual obligations by a party.

Article 311.- Legal consequences of stoppage of performance of contracts

1. Where a contract is stopped from performance, it shall be terminated from the date when one party receives the notice on stoppage. The parties shall not have to further perform their contractual obligations. A party that has performed its contractual obligations may request the other party to pay or perform its reciprocal obligations.

2. The aggrieved party may claim damages according to the provisions of this Law.

Article 312.- Cancellation of contracts

1. Cancellation of a contract includes cancellation of part of a contract or cancellation of the entire contract.

2. Cancellation of the entire contract means the complete annulment of the performance of all contractual obligations for the entire contract.

3. Cancellation of part of a contract means the annulment of the performance of some contractual obligations while other parts of the contract are still valid.

4. Except for cases of liability exemption specified in Article 294 of this Law, the remedy of cancellation of contracts shall be applied in the following cases:

a/ Upon commission of a breaching act which serves as a condition for the cancellation of the contract as agreed upon by the parties;

b/ Upon a substantial breach of contractual obligations by a party.

Article 313.- Cancellation of contracts in case of delivery of goods or provision of services in installments

1. Where there is an agreement on delivery of goods or provision of services in installments, if one party fails to perform its obligation for the delivery of goods or provision of services and such failure constitutes a substantial breach in that time of delivery of goods or provision of services, the other party shall have the right to declare the cancellation of the contract for such delivery of goods or provision of services.

2. Where the failure of a party to perform its obligation for a delivery of goods or a provision of services serves as the basis for the other party to conclude that a substantial breach of the contract shall happen in subsequent deliveries of goods or provisions of services, the aggrieved party shall have the right to declare the cancellation of the contract for subsequent deliveries of goods or provisions of services, provided that such party must exercise that right within a reasonable period of time.

3. Where a party has declared the cancellation of a contract for a single delivery of goods or provision of services, such party shall still have the right to declare the cancellation of the contract for a delivery of goods or provision of services that has been conducted or will be conducted subsequently if the interrelation between the deliveries of goods makes the delivered goods or provided services unable to be used for the purposes intended by the parties at the time they enter into the contract.

Article 314.- Legal consequences of cancellation of contracts

1. Except for cases specified in Article 313 of this Law, following the cancellation of a contract, such contract shall be invalid from the time it is entered into, and the parties shall not have to continue performing their contractual obligations, except for their agreements on their post-cancellation rights and obligations and resolution of disputes.

2. The parties shall have the right to claim benefits brought about by their performance of their contractual obligations. Where both parties have indemnity obligations, their obligations must be performed concurrently. Where it is impossible to make the indemnity with benefits which one party has enjoyed, the obliged party must make the indemnity in cash.

3. Aggrieved parties are entitled to claim damages according to the provisions of this Law.

Article 315.- Notification of suspension of performance of contracts, stoppage of performance of contracts or cancellation of contracts

A party that suspends the performance of a contract, stops the performance of a contract or cancels a contract must immediately notify the other party of such suspension, stoppage or cancellation. Where a failure to do so causes a loss to the other party, the party that suspends the performance of the contract, stops the performance of the contract or cancels the contract must pay damages.

Article 316.- Right to claim damages when other remedies have been applied

A party shall not lose its right to claim damages for the loss caused by a contract breach by the other party when other remedies have been applied.

Section 2. RESOLUTION OF COMMERCIAL DISPUTES

Article 317.- Forms of resolution of disputes

1. Negotiations between the parties.

2. Conciliation between the parties by a body, organization or individual selected by the parties to act as the conciliation mediator.

3. Resolution by the Arbitration or the Court.

Procedures for resolution of commercial disputes by arbitration or a court shall comply with procedures applicable to arbitrations or courts provided for by law.

Article 318.- Time limit for lodging complaints

Except for cases specified at Point e, Clause 1, Article 237 of this Law, the time limit for lodging complaints shall be agreed upon by the parties, where there is no such agreement, the time limit for lodging complaints shall be provided for as follows:

a/ Three months from the date of delivery of goods for complaints about quantity of goods;

b/ Six months from the date of delivery of goods for complaints about quality of goods. Where goods are under warranty, the time limit for lodging complaints shall be three months from the expiry of the warranty period;

c/ Nine months from the date on which the breaching party shall have to fulfil its contractual obligations; or in the case of a warranty, from the expiry of the warranty period, for complaints about other violations.

Article 319.- Statute of limitations for initiating lawsuits

The statute of limitations for lawsuits applicable to commercial disputes shall be two years from the moment when the legitimate rights and interests are infringed upon, except for cases specified at Point f, Clause 1, Article 237 of this Law.

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