What are rights and obligations of parties to lease contracts in Viet Nam?

Lease of goods is a commercial activity that enables the lessee and the lessor to achieve their own commercial purposes. 2005 Commercial Law has specific provisions on rights and obligations of parties to lease contracts. Let’s find out with Lawyer X  about this issue through the following situation: “Hello, lawyer! I am about to organize the opening of a newly established company, I want the event to be grand, but I don’t want to spend too much money. Instead of buying for display, I just want to hire some mutant orchids to display in 1 day of opening, then return it to the seller. So if I conclude a lease contract in Viet Nam, what are rights and obligations of the parties? Looking forward to your consulting! ”

Legal grounds

2005 commercial law

What  is lease of goods?

Lease of goods means a commercial activity whereby one party transfers the right to possess and use goods (lessor) to another party (lessee) for a certain duration to enjoy rentals.

Lease contracts mean agreements between parties whereby one party transfers the right to possess and use goods (lessor) to another party (lessee) for a certain duration to enjoy rentals.

Rights and obligations of parties to lease contracts

*Rights and obligations of lessors

 Unless otherwise agreed, lessors shall have the following rights and obligations:

– To deliver leased goods to lessees as agreed upon in lease contracts;

– To ensure that the right of lessees to possess and use leased goods is not disputed by a concerned third party in the lease duration;

– To ensure that leased goods are suitable to the use purposes of lessees as agreed upon by the parties;

 -To maintain and repair leased goods within a reasonable duration. Where the maintenance and repair of leased goods cause harms to the use of such goods by lessees, lessors shall have to reduce rent rates or prolong lease duration corresponding to the time of maintenance and repair;

– To receive rentals according to agreements or provisions of law;

 – To take back leased goods upon the expiration of the lease duration.

*Rights and obligations of lessees

Unless otherwise agreed, lessees shall have the following rights and obligations:

– To possess and use leased goods according to lease contracts and the provisions of law. Where there is no specific agreement on the manner in which leased goods should be used, such leased goods shall be used in a manner appropriate to their nature;

– To maintain and preserve leased goods in the lease duration and return such goods to lessors upon the expiration of the lease duration;

– To request lessors to perform the maintenance and repair of goods. If lessors fail to perform such obligation within a reasonable period of time, lessees may perform the maintenance and repair of leased goods and lessors shall bear all reasonable expenses for such maintenance and repair;

– To pay rentals as agreed or according to the provisions of law; 5. Not to sell or sub-lease the leased goods.

*Repair or alteration of original status of leased goods

 Lessees must not repair or alter the original status of leased goods if not so consented by lessors. 2. Where lessees perform the repair or alter the original status of the leased goods without lessors’ consents, lessors shall have the right to request lessees to restore the original status of the leased goods or claim damages.

*Liability for loss occurring in the lease duration

 Unless otherwise agreed, lessors shall bear loss of leased goods occurring in the lease duration if lessees are not at fault in causing such loss. Lessors shall have to repair leased goods within a reasonable duration to ensure the achievement of use purposes of lessees.

*Pass of risks incurred to leased goods

Where the parties agree on the pass of risk to the lessee but the point of time of passing risks is not determined, that point of time shall be determined as follows:

– In cases where the lease contract involves the transportation of goods:

+ If the contract does not require the leased goods to be delivered at a designated place, risks shall be passed to the lessee when the leased goods are delivered to the first carrier;

+ If the contract requires the leased goods to be delivered at a designated place, risks shall be passed to the lessee or the person authorized by the lessee to receive the goods at such place;

 – In cases where the leased goods are received by a bailee other than a carrier for delivery, risks shall be passed to the lessee as soon as the bailee acknowledge the lessee’s right to possess the leased goods;

– In other cases not mentioned above, risks shall be passed to the lessee upon the receipt of the leased goods by the lessee.

*Leased goods inappropriate to contracts

 Where there is no specific agreement, goods shall be deemed inappropriate to contracts when such goods fall into one of the following cases:

– They are not suitable to common utility of goods of the same type;

– They are not suitable to specific purposes which the lessee has informed the lessor or the lessor should have known at the time the contract was entered into;

 – Their quality is not the same as goods samples handed over by the lessor to the lessee.

*Rejection of goods

 The lessor shall give the lessee a reasonable time after the receipt of goods for inspection thereof. The lessee may reject the goods in the following cases:

– The lessor does not give conditions and a reasonable time to the lessee for inspecting the goods;

– When inspecting the goods, the lessee discovers that the goods are inappropriate to the contract.

*Rectification or replacement of leased goods inappropriate to contracts

– Where the lessee rejects leased goods inappropriate to the contract, if the time limit for delivery of goods has not yet expired, the lessor may promptly notify the lessee of the rectification or replacement of the goods and then perform such rectification or replacement of goods within the remaining duration. – Where the lessor, when performing the rectification, causes inconvenience or unreasonable expenses to be borne by the lessee, the lessee shall have the right to request the lessor to remedy such inconvenience or pay such unreasonable expenses.

*Acceptance of leased goods

– The lessee shall be deemed having accepted the leased goods after being given a reasonable opportunity to inspect the leased goods and taking one of the following acts:

+ Not rejecting the leased goods;

+ Certifying the appropriateness of the leased goods to agreements in the contract;

+ Confirming the acceptance of the goods despite their inappropriateness to agreements in the contract.

– If the lessee discovers the inappropriateness of the leased goods to the contract after accepting such goods and such inappropriateness is detectable through a reasonable inspection before the acceptance, the lessee shall not be entitled to rely on such inappropriateness as an excuse for returning the goods.

*Withdrawal of acceptance

– Lessees may withdraw their acceptance of part or whole of the leased goods if the inappropriateness of such leased goods may render them unable to achieve the objectives of the entry into of contracts and falls into one of the following cases:

+ Lessors fail to make reasonable rectification according to Article 277 of this Law; b/ Lessees fail to detect the inappropriateness of the goods due to lessors’ guarantee. 2. The withdrawal of acceptance must be made within a reasonable period of time, which must not exceed three months as from the date lessees accept the goods.

 *Responsibility for defects of leased goods

Unless otherwise agreed, responsibility for defects of leased goods is provided for as follows:

– In the lease duration, lessors shall be responsible for any defects of leased goods which already exist at the time of delivery of such goods to lessees, except for cases mentioned below

– Lessors shall not be responsible for any defects of leased goods which already exist prior to the entry into of contracts and which lessees knew or should have known;

– Lessors shall not be responsible for any defects of leased goods which are detected after lessees have accepted the leased goods and which would have been detected by lessees through reasonable inspections before accepting the goods.

– Lessors shall be responsible for any defects of leased goods appearing after the time of passing risks due to lessors’ breaches of their committed obligations.

*Sub-lease

– Lessees shall be entitled to sub-lease goods only when they obtain consents of lessors. Lessees shall be responsible for sub-leased goods, unless they otherwise agree with lessors.

– Where lessees sub-lease leased goods without consents of lessors, lessors may revoke lease contracts. Sub-lessees shall have to return the goods to lessors immediately.

*Benefits arising in the lease duration

Unless otherwise agreed, all benefits arising from leased goods in the lease duration shall belong to lessees.

*Change of ownership in the lease duration

Any change of ownership over leased goods shall not affect the validity of lease contracts.

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