Rules of interpretations of Vietnamese law contracts

Under Vietnamese law, the rules of interpretation of contract are mostly provided under Article 404 of the Civil Code 2015. According to this provision, the order of priority in interpreting a contract seems to be (1) “mutual intention” (ý chí chung) of the parties; (2) contract wording; and (3) each party’s intention and customary practice. In particular:

  • Mutual intention has priority over contract wording, and therefore the top priority in contract interpretation. This is because according to Article 404.5, in case of conflict between the “mutual intention” of the parties and the wording used in a contract, the mutual intention of the parties will be used in order to interpret the contract.

  • Unlike common law principles, under the Civil Code 2015, determining “mutual intention” of the parties is a subjective exercise (as opposed to an objective exercise using reasonable person’s standard), which requires examination of the parties’ intention before and at the time of execution and performance of the contract. Therefore, it would be difficult to determine “mutual intention” of the parties without concrete evidence of the same.

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Written by Nguyen Quang Vu On In ,

The Vietnam Supreme Court’s opinion on unauthorised corporate loans

In September 2019, the Supreme Court has given an important opinion to lower courts about how to deal with a loan agreement by a borrower who has failed to obtain appropriate corporate approval. The opinion relates to a borrower being a limited liability company which has failed to obtain Members Council’s approval for a bank loan. However, the opinion should generally be applicable for borrower being joint stock companies. The court’s opinion is not a law. But it could still help lenders in protecting their loans in case a corporate borrower wants to get out of the loans on the ground the loan does not have appropriate corporate approvals.

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Written by Nguyen Quang Vu On In ,

Coronavirus Outbreak - The Effect of A Force Majeure Event Under Vietnamese Law

This is our final post relating the force majeure event in Vietnam. In this post, we will cover the effect of a force majeure event after the existence of a force majeure event is confirmed (see our earlier post here). This post is written by Nguyen Quang Vu and Tran Thuy Tien.

In summary,

  • A party affected by a force majeure event will be exempted from contractual liabilities. It is not necessary for a contract to have a separate force majeure clause for the affected party to claim force majeure.

  • The Commercial Law 2005 is not clear whether the default of an affected party must be caused by the force majeure event.

  • The law does not clearly allow a contract to be terminated on the basis of a prolonged force majeure. However, in case of a prolonged force majeure event, the Commercial Law 2005 allows the parties to refuse to perform the contract.

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Written by Nguyen Quang Vu On In , ,

Pledge over intangible assets in Vietnam

Pledge (cầm cố) of property is a transaction in which a party (the pledgor) handovers (giao) a property owned by the pledgor to the other party (the pledgee) to secure the performance of a obligation(s). The law does not clarify what action could be considered as “handover” of a property. Therefore, it is not clear whether one can use intangible asset such as the right to claim debt as a pledged asset.

On one hand, the definition of pledge suggests that the pledged assets must be tangible so that it can be handedover or delivered to the pledgee. In this regard, intangible asset cannot be pledged because it cannot be physically delivered from one party to another party.

On the other hand, other provisions of the law suggest that pledge over intangible assets could be permissible because:

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Written by Nguyen Quang Vu On In ,