Cases of unilateral termination of civil contracts in Vietnam 2022

Parties establish civil contracts based on the agreement in the contract. Unlike other things and phenomena, civil contracts arise from the conscious acts of the contracting parties. Accordingly, the act of terminating a civil contract must come from the intentional purpose of the subject or according to the provisions of law. In this article, LSX legal firm provides you with: “Cases of unilateral termination of civil contracts in Vietnam 2022″

Legal ground

• Civil Code 2015

Civil contract under Vietnamese legislation

Under the law, a civil contract understood as an agreement between parties on the establishment, change, or termination of the rights and obligations of the parties in buying, selling, renting, borrowing, lending, gifting assets; doing or not doing a thing, service or other agreement in which one or the other parties aim to meet the needs of daily life or consumption.

When is a civil contract invalid?

Currently, the Civil Code 2015 stipulates 08 cases of civil contracts invalidated. Due to failure to ensure the effective conditions of civil transactions; or the parties can not perform the contract for objective reasons.
Thus, a civil contract has no validity when:

The invalidity of civil transactions due to breach of legal prohibitions or contravention of social ethics 

• Civil transactions with objectives and contents which breach legal prohibitions or which contravene social ethics shall be invalid. 
• Legal prohibitions mean provisions of law that do not permit entities to perform certain acts. 
• Social ethics mean common standards of conduct between persons in social life that recognized and respected by the community.

Invalidity of civil transactions due to falsification

• If the parties falsely enter into a civil transaction for the purpose of concealing another transaction, the false transaction shall be invalid and the concealed transaction remains valid unless it is also invalid under the provisions of this Code or relevant laws. 
• If the parties enter into a civil transaction falsely for the purpose of evading responsibilities to a third person, such transaction shall be invalid.

Invalidity of civil transactions established and performed by minors or legally incapacitated persons or persons with limited cognition and behavior control or persons with limited legal capacity

When a civil transaction established or performed by a minor, a legally incapacitated person, a person with limited cognition and behavior control, or a person with limited legal capacity, a court shall, at the request of the representative of that person, declare such transaction invalid. If it is provided for by law that such transaction must be established and performed by or with the consent of the representative of that person, except for the following cases:

• The civil transaction of a child less than 6 years of age or a legally incapacitated person established for his/her daily needs.
• The civil transaction only either arising rights or exempts from obligations for the minor, the legally incapacitated person, the person with limited cognition and behavior control, the person with limited legal capacity, and their contracting parties.
• The civil transaction of which validity is recognized by the person who established such transaction that becomes an adult or restores his/her legal capacity.

Invalidity of civil transactions due to misunderstanding

If having a misunderstanding in a civil transaction that makes a party or the parties fails to meet the objectives of the transaction establishment, the mistaken party shall have the right to request a court to declare such transaction invalid, except for the following case:

• A civil transaction having a misunderstanding shall not become invalid if the parties met the objectives of the transaction establishment or the parties may correct the misunderstanding resulting in the achievement of the objectives of the transaction establishment.

Invalidity of civil transactions due to deception, threat or compulsion

Any party entering into a civil transaction as a result of deception, threat or compulsion has the right to request a court to declare such transaction invalid. 

• Deception in a civil transaction means an intentional act of a party or a third person for the purpose of misleading the other party as to the subject, the nature of the entity, or contents of the civil transaction which has caused the other party to enter into such transaction. 
• Threat or compulsion in a civil transaction means an intentional act of a party or a third person which compels the other party to conduct the civil transaction in order to avoid danger to the life, health, honor, reputation, dignity, and/or property or that of its relatives.

Invalidity of civil transactions established by person lacking in cognition and behavior control

A person who has legal capacity but has entered into a civil transaction at the time that he/she lacks cognition and behavioral control shall have the right to request a court to declare such civil transaction invalid.

Invalidity of civil transactions due to non-compliance with form

A civil transaction violating conditions for validity pertaining to form shall be invalid, except for any of the following cases: 

• If the form of a civil transaction, required to be established in writing, does not comply with regulations of law, but a party or the parties has/have fulfilled at least two third of the obligations in the transaction, a court, at his/her/their request(s), shall issue a decision on recognition of the validity of such transaction. 
• If the form of a civil transaction, required to be established in writing, violates against regulations on notarizing or authorization, but a party or the parties has/have fulfilled at least two third of the obligations in the transaction, a court, at his/her/their request(s), shall issue a decision on recognition of the validity of such transaction. In this case, the parties need not perform the notarizing or authorization. 

Invalidity of civil contracts due to impossibility of performing subject matter

If, immediately as from the time a contract is signed, it is impossible to perform the subject matter of the contract for objective reasons, the contract shall be invalid.
If, when entering into a contract, one party knew or should have known that it was impossible to perform the subject matter of the contract for objective reasons but failed to notify the other party which entered into the contract, the former party must compensate the latter party for damage, unless the latter party knew or should have known that it was impossible to perform the subject matter of the contract.
This provision shall also apply to a contract containing one or more parts with subject matter which is impossible to perform, but the remaining parts of the contract shall remain valid.

Cases of unilateral termination of civil contracts

Unilateral contract termination is specified in Article 428 of the Civil Code 2015, specifically as follows:

Article 428. Unilateral termination of performance of contracts

A party has the right to terminate unilaterally the performance of a contract without any compensation for damage when a party violates its obligations seriously if so agreed by the parties or so provided by law.
A party terminating unilaterally the performance of a contract must notify the other party immediately of its termination of the contract and must compensate if the failure to notify causes damage.
Where the performance of a contract is terminated unilaterally, it shall terminate from the time when the other party is notified of the termination. In such cases, the parties are not required to continue to perform their obligations, except for agreement on fines for violations, compensation for damage, and settlement of disputes. A party that has already performed its obligation may demand the other party to make payment for the performed obligation.
The aggrieved party shall receive compensation for damage caused by the improper performance of obligation by the violating party.
If a contract is terminated unilaterally without any basis prescribed in Clause 1 of this Article, the party terminating unilaterally the performance of the contract shall be deemed to be the violating party and must perform civil liability as prescribed in this Code and relevant laws.

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