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Resolving Business Cooperation Contract disputes in Vietnam (BCC) is crucial to ensure that the involved parties protect their rights and address arising conflicts effectively.
Examples of Business Cooperation Contract Disputes in Vietnam
Here are some examples of business cooperation contract disputes in Vietnam:
Business Cooperation Contract Dispute Between Individuals
Mr. Minh and Ms. Lan decided to collaborate and open a café in downtown Hanoi. They signed a business cooperation contract with the following terms:
- Mr. Minh: Contributed 60% of the capital for leasing premises and purchasing equipment and materials.
- Ms. Lan: Contributed 40% of the capital and was responsible for daily café management, including hiring staff, purchasing materials, and maintaining service quality.
- Profit and Cost Sharing: Profits and costs were to be shared based on the capital contribution ratio after deducting operating expenses.
- Contract Term: 3 years, extendable if both parties agreed.
After a year of operation, the café began to make a profit, but conflicts arose due to:
- Inefficient Management: Mr. Minh believed Ms. Lan’s management was ineffective, leading to unnecessary costs and lower-than-expected profits.
- Non-transparent Profit Sharing: Mr. Minh suspected Ms. Lan was not transparent in recording revenue and expenses, resulting in inaccurate profit distribution.
- Conflict Over Decision-making: Ms. Lan felt Mr. Minh was overly involved in daily management, despite the agreement that she was primarily responsible for management.
Business Cooperation Contract Dispute Between Companies
Company A and Company B signed a business cooperation contract (BCC) to jointly develop a real estate project in Hanoi. According to the contract, Company A was responsible for providing land and project management, while Company B was responsible for capital contribution and construction technology.
- Scope of Cooperation: Develop a new urban area project, including residential areas, commercial centers, and public amenities.
- Capital Contribution Ratio: Company A contributed 40% of the capital (including land use rights), and Company B contributed 60% of the capital.
- Profit Sharing: Profits from the project were to be shared based on the capital contribution ratio after deducting costs.
- Contract Term: 5 years from the date of signing.
After two years of project implementation, conflicts arose due to:
- Project Delays: The project was delayed due to prolonged legal procedures related to land-use conversion.
- Cost Overruns: Construction costs exceeded the initial budget, and Company B demanded that Company A cover the excess costs, while Company A believed it was Company B’s responsibility.
- Management Differences: Company A and Company B had differing management approaches, leading to decision-making delays.
Business Cooperation Contract Dispute Between an Individual and a Company
Mr. Hung, an individual investor, wanted to cooperate with ABC Company, a real estate development company, to jointly develop a resort project in Da Nang. They signed a business cooperation contract with the following terms:
- Mr. Hung: Contributed 30% of the investment capital in cash.
- ABC Company: Contributed 70% of the investment capital in assets, including land use rights and initial infrastructure.
- Profit Sharing: Profits from the project were to be shared based on the capital contribution ratio after deducting incurred costs.
- Contract Term: 5 years, extendable if both parties agreed.
Rights and Obligations:
- Mr. Hung: Ensure capital contribution as committed, participate in supervision, and provide input on important project-related decisions.
- ABC Company: Responsible for project management and implementation, reporting progress and financial status to Mr. Hung.
After two years of project implementation, conflicts arose due to:
- Project Delays: The project was delayed due to issues with construction permits and site clearance.
- Cost Overruns: Additional costs exceeded the initial budget, and ABC Company demanded Mr. Hung contribute more capital to cover the shortfall.
- Lack of Transparency: Mr. Hung believed ABC Company was not transparent in financial reporting and project progress, leading to suspicions of mismanagement and inefficient use of funds.
Invalid Business Cooperation Contracts in Vietnam
A business cooperation contract can be declared invalid for various reasons. When declared invalid, the contract has no legal effect from the time of signing and does not bind the parties to perform the rights and obligations stipulated in the contract. Here are common causes and legal consequences of invalid business cooperation contracts.
Causes of Invalid Business Cooperation Contracts in Vietnam
Lack of Full Civil Capacity: One party lacks the full civil capacity, such as minors or persons with impaired civil capacity.
Unauthorized Representation: The person signing the contract is not the legal representative or authorized person, or lacks proper authorization.
Illegal Business Purpose: The business cooperation aims to conduct illegal activities or violates social ethics.
Invalid Contract Form: Certain contracts must be in writing and notarized or authenticated according to legal regulations. Failure to comply can render the contract invalid.
Coercion or Fraud: One party is coerced, deceived, or not voluntarily signing the contract.
Legal Consequences of Invalid Business Cooperation Contracts in Vietnam
No Legal Effect: The contract has no legal value from the time of signing and does not bind the parties.
Mutual Restitution: Parties must return what they have received under the contract. If in-kind restitution is impossible, monetary compensation equivalent to the value of received assets is required.
Compensation for Damages: The party at fault for invalidating the contract must compensate the other party for any damages. If both parties are at fault, compensation responsibilities are shared based on the degree of fault.
Resolving Business Cooperation Contract Disputes in Vietnam
Here are common methods and processes for resolving business cooperation contract disputes in Vietnam:
1/ Negotiation
Description: Parties negotiate directly to reach an agreement without third-party intervention.
Advantages: Saves time and costs, maintains cooperative relationships.
Disadvantages: Depends on goodwill, may prolong if no agreement is reached.
2/ Mediation
Description: A neutral third-party (mediator) assists parties in reaching an agreement.
Advantages: Increases chances of agreement, keeps dispute information confidential, maintains cooperative relationships.
Disadvantages: Mediation results are not legally binding unless formalized in writing.
3/ Commercial Arbitration
Description: Parties agree to settle disputes through arbitration, where one or more arbitrators issue a legally binding decision.
Advantages: Quick and flexible process, arbitration decisions are binding and enforceable like court judgments.
Disadvantages: Higher costs compared to negotiation and mediation, limited appeal options.
4/ Litigation
Description: Parties take the dispute to a competent court. The court examines evidence and issues a binding decision.
Advantages: Court judgments are highly binding and enforceable through the judicial system.
Disadvantages: Lengthy and complex proceedings, public disclosure of dispute information.
Resolving business cooperation contract disputes is a complex process requiring deep legal knowledge and negotiation skills. Choosing the appropriate dispute resolution method and adhering to legal procedures help parties protect their rights and maintain future cooperative relationships.
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DCNH LAW
Address: 38B Tran Nhat Duat, Phuoc Hoa ward, Nha Trang city, Khanh Hoa province, Vietnam.
Phone: (+84) 343320223 – 974278893
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