The responsibility is assumed and whether the fault is intentional or unintentional does not increase or decrease the responsibility. For example, when the seller delivers the goods late, the buyer has the right to immediately assume that the seller is at fault for not delivering the goods on time as agreed and thus, the buyer can hold the seller responsible. When being held responsible, the party in breach who wants to escape responsibility must prove that he is not at fault, as long as he cannot prove it, he is of course still considered at fault and must bear responsibility.
c/ Bondholders suffer material damage:
This is a necessary factor, especially in cases where one wants to assign responsibility for compensation for damages. Normally, the damage that bondholders have to bear can be material damage and spiritual damage. However, Vietnamese Commercial Law as well as the laws of other countries usually only recognize material damage (damage to property or valuable property rights) as a factor for assigning responsibility.
Property damages typically include the following types of damages: actual loss and lost profits, revenues that would have been received if the other party had performed the contract properly.
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- Actual loss: Is a type of damage that is real and can be calculated specifically. Actual loss includes:
+ reduction of assets in kind: such as when one party violates an obligation that causes the other party's assets to decrease (the seller delivers goods of poor quality compared to the agreement, causing the buyer to not receive the goods of the correct quality, so they have to sell at a discount or use them for another purpose...)
+ Expenses already paid and additional expenses: expenses already paid such as negotiation costs, contract signing costs, L/C opening costs, ship rental costs, insurance costs for goods but the seller does not deliver the goods. Additional expenses during the process
contract performance such as compensation costs to a third party due to the seller's late delivery of goods causing the buyer to be fined for late delivery, storage costs that the seller must pay because the buyer (under FOB terms) has not come to pick up the goods, late unloading penalties that the seller must pay to the carrier because the buyer refuses to come to pick up the goods...
All of these decreases in assets and expenses incurred and additional expenses can be converted into specific material values and are the basis for claiming compensation for damages.
- Foregone benefits, revenues that would have been received if the other party had performed the contract correctly but were not received. These are the lost benefits that both parties expected when signing the contract. Whether or not the injured party actually received these benefits if there was no breach of contract is not important. If there is a breach causing damage that results in the loss of the expected benefits, the injured party still has the right to claim compensation from the violating party. To claim actual damages, the injured party must prove that it has suffered such damage and to escape liability, the violating party must prove the opposite.
d/ There is a direct relationship between the breach of contract and the material damage:
This relationship is shown in that the breach of contract is the direct cause of the damages, and the actual damages are the direct consequences of those acts. For example, the seller delivers the goods later than the time specified in the contract, causing the price of the goods to decrease compared to the price of the period when the goods should have been delivered, and thus the buyer misses out on the benefits that he or she would have enjoyed. So the act of late delivery is the direct cause of property damage to the buyer (not receiving the profits that he or she is entitled to from the contractual relationship). Or in the case where the seller has delivered the goods according to the agreement in the contract but the buyer refuses to receive the goods at the port of destination, causing the cost of detaining the ship because of the seller's act of not receiving the goods.
The buyer is the direct cause of the consequence that the seller has to pay additional costs for storage and preservation of goods. The obligation to prove this causal relationship belongs to the breached party. It is important to note that when proving, indirect damages, unforeseen damages, and foreseeable damages must be excluded. In fact, the obligation to prove direct damages falls on the breached party because the breached party wants to claim as much compensation as possible, so it often lists the damages. In order to avoid having to compensate for all the damages mentioned by the bondholder, the breaching party must prove that only a part of the damage occurred due to the breach of its obligations, and the remaining property damage was due to other causes that were not its fault by providing relevant documents and evidence.
2. Types of sanctions for breach of contract:
When there is a breach of contract in the sale of goods, the breaching party must be responsible to the injured party through forms of liability called sanctions.
According to Vietnamese commercial law, commercial sanctions are understood as legal measures of a property nature chosen by the aggrieved party to apply to the breaching party for the purpose of prevention, punishment and education. Thus, commercial sanctions are applied to materially restore the aggrieved party or to prevent damage or have the meaning of materially punishing the breaching party. Therefore, these sanctions are applied by the parties to breaches occurring from the time of signing, performing and terminating the contract.
According to the provisions of the 2005 Law on Commerce of Vietnam, sanctions for breach of contract include the following sanctions:
- Compensation for damages;
- Compel proper performance of the contract;
- Penalty for violation
- Suspension of contract performance;
- Suspension of contract performance;
- Cancel contract;
- Other sanctions agreed upon by the parties.
2.1. Compulsory performance of the contract
2.1.1.Concept
Compelling proper performance of a contract is when the injured party requests the breaching party to properly perform the contract or take other measures to ensure that the contract is performed and the breaching party must bear the costs incurred (Clause 1, Article 297 of the 2005 Commercial Law).
The purpose of the parties when signing a contract is to have the rights and obligations arising from the contract performed correctly, fully and in good faith, bringing economic benefits to each party. This is the practical basis of the measure of forcing proper performance of the contract, a measure commonly applied when there is a breach of contract.
The sanction of compulsory performance of a contract is applied to ensure the actual performance of the signed contract, making the contractual obligations continue to be performed. The parties sign the contract based on business objectives, not to gain benefits from paying fines or compensation for damages from the customer. In many cases, fines or compensation for damages cannot replace the benefits from the performance of the signed contract by the parties.
2.1.2 Basis for applying sanctions to force proper performance of the contract
The basis for applying sanctions to force proper performance of the contract includes:
- There is a breach of contract
- Fault of the violating party
Failure of the parties to perform or improperly perform their commitments in the contract, such as: non-delivery, insufficient delivery, delivery of goods of incorrect quality... is the basis for the creation of sanctions to force proper performance of the contract. The party whose rights are violated only has the right to force the violating party to properly perform the contract if the violating party is at fault.
Thus, for the form of sanction to force proper performance of a contract in commerce, the basis for application includes only the two above bases, which is sufficient for the injured party to apply to the violating party.
The Commercial Law (2005) allows the parties to extend the contract performance period or refuse to perform the contract in case of force majeure:
“1. In case of force majeure, the parties may agree to extend the time limit for performing contractual obligations; if the parties do not have an agreement or cannot reach an agreement, the time limit for performing contractual obligations shall be calculated for an additional period of time equal to the time of occurrence of the force majeure event plus a reasonable time to remedy the consequences, but shall not be extended beyond the following periods:
a) Five months for goods and services for which the agreed delivery or service provision period does not exceed twelve months from the date of contract conclusion;
b) Eight months for goods and services for which the agreed delivery or service provision period is over twelve months from the date of contract conclusion.
2. In case of extension beyond the time limits specified in Clause 1 of this Article, the parties have the right to refuse to perform the contract and neither party has the right to request the other party to compensate for damages.”
Thus, in case of force majeure (natural disaster, enemy attack, ...), the behavior
Failure to perform or improper performance of the contract is not considered a fault. The aggrieved party has no right to force the breaching party to properly perform the contract. Even when the additional time for performance of the contract has expired due to force majeure, the aggrieved party cannot apply the sanction of forcing proper performance of the contract and neither party has the right to demand compensation for damages from the other party, because Article 296 does not allow the parties to refuse to perform the contract.
2.1.3. Contents of sanctions for compulsory contract performance
The content of the sanction of forcing proper performance of a contract is that the injured party forces the violating party to properly perform its obligations under the contract or take other measures to ensure that the contract is performed and the violating party must bear the costs of loss incurred.
When the breaching party delivers insufficient goods or provides services that do not comply with the contract, the aggrieved party has the right to request the breaching party to deliver the full goods or provide services in accordance with the agreement in the contract. If the breaching party delivers poor quality goods or provides services that do not comply with the contract, the aggrieved party has the right to request the breaching party to eliminate the defects of the goods or service or to deliver other goods or provide services in accordance with the contract. In case the breaching party fails to comply with the request for proper performance of the contract, the aggrieved party has the right to purchase goods or receive services from another party of the correct type of goods or services stated in the contract and the breaching party must compensate for the price difference. The aggrieved party may also repair the defects of the goods or service and request the breaching party to pay the actual reasonable costs.
The party whose rights are violated in a contractual relationship is not only the buyer but also the seller, when delivering goods or services as committed in the contract but they are not received. If the violating party is the buyer, then the seller
has the right to request the buyer to pay, receive goods or perform other obligations of the buyer as stipulated in the contract or as prescribed by the Commercial Law. This is an important addition and new point of the Commercial Law (2005) compared to the Commercial Law (1997).
To apply the measure of compulsory performance of the contract, the party whose rights are violated may extend a reasonable period of time for the violating party to perform its obligations. This extension is entirely decided by the violated party based on the consideration of the benefits of continuing to perform the contractual obligations. Therefore, the extension to continue performing the contract is part of the process of applying the sanction of compulsory performance of the contract and is absolutely not a re-agreement on the time of contract performance between the parties. If there is no other agreement, during the time of applying the sanction of compulsory performance of the contract, the party whose rights are violated has the right to request the application of sanctions for violations, compensation for damages but cannot apply other sanctions (suspension of contract performance, temporary suspension of contract performance, contract cancellation). When the violating party fails to implement the sanction of compulsory performance of the contract within the time limit set by the violated party, the violated party may apply other sanctions to protect its legitimate rights.
According to the provisions of law, the aggrieved party decides to apply the sanction of compulsory performance of the contract before using other contractual sanctions. The aggrieved party applies the sanction of compulsory performance of the contract in cases where the extension of the contract performance period does not affect its economic interests. For seasonal goods that depend on each time of the year (moon cakes, soft drinks, blankets, etc.), the aggrieved party cannot choose to apply the sanction of compulsory performance of the contract if the opportunity to consume the above products has run out. Compared to other forms of liability, compulsory performance of the contract is a flexible and friendly sanction.
Its effectiveness and efficiency are likely to limit damage.
2.2. Penalties for violations:
a/ Penalties for violations
has been stipulated in legal documents such as
Commercial Law 1997, Economic Contract Ordinance 1989, Civil Code 2005...
And with the advent of sanctions for violations stipulated in the Commercial Law
2005 then the fine for violations really became a
important regime
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in trade relations. Nowadays, this regime is increasingly used by both parties .
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The Law on Commerce 2005 stipulates in Article 300 as follows: “ Penalty for violation is the act of
The injured party requests the violating party to pay a penalty for breach of contract if the contract so agrees . According to the above provisions, the subject entitled to claim a penalty for breach is the injured party, the subject with the obligation is the violating party, and the object
In this relationship , both parties are liable for a fine .
Penalties for breach may only be imposed where the parties have agreed otherwise .
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There is an agreement in the contract on this issue. However, in reality
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What about this matter, simply because I think I have the right to be protected by the law ?
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Due to lack of understanding of the law , the parties could not distinguish
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Therefore, to make the penalty system fully effective in