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Below are the cases of contract termination according to Vietnamese law. Contracts are an important and common form of transaction in today’s society. However, not all signed contracts are executed fully and smoothly. In some cases, contracts may be terminated after signing. This article will help you understand more about contract termination from a legal perspective.
What is Contract Termination?
Contract termination refers to the cancellation of the execution of obligations under a signed contract. Contract termination includes total and partial termination:
- Total Termination: Refers to the cancellation of the execution of all obligations agreed upon in the contract.
- Partial Termination: Refers to the cancellation of the execution of some obligations agreed upon in the contract while the remaining parts of the contract remain effective.
Grounds for Contract Termination According to Vietnamese Law
In the following cases, a party to the contract has the right to terminate the contract without having to compensate for damages:
- The other party breaches the contract, and this breach has been agreed upon by the parties as a condition for contract termination.
- The other party commits a serious breach or fundamental breach of contractual obligations. A serious breach of contractual obligations is one that makes it impossible for the other party to achieve the purpose of the contract.
Specific Cases of Contract Termination According to Vietnamese Law
Termination Due to Delayed Performance of Obligations
If the obligated party fails to fulfill their obligations under the contract, and the entitled party has requested performance within a reasonable time but the obligated party still fails to perform, the entitled party may terminate the signed contract.
If due to the nature of the contract or the intent of the parties, the purpose of the contract cannot be achieved if not performed within a specific timeframe, and the obligated party fails to perform within that time, the other party has the right to terminate the contract.
Termination Due to Impossibility of Performance
If the obligated party cannot perform part or all of their obligations under the contract to the extent that the purpose of the entitled party cannot be achieved, the entitled party may terminate the contract and request compensation for damages.
Termination Due to Loss or Damage of Assets
If a party loses or damages the assets that are the subject of the contract and cannot replace, compensate, or repair with other similar assets, the other party has the right to terminate the contract and request compensation for damages.
Termination in the Case of Partial Delivery or Service
If the parties have agreed on partial delivery of goods or services, and a party fails to fulfill their obligations in a delivery or service installment, resulting in a fundamental breach, the other party may terminate that part of the contract.
If the interrelation of deliveries leads to the previous deliveries or services being unusable due to the termination of the current installment, the entitled party may terminate the entire contract for past and future deliveries or services.
Consequences of Contract Termination According to Vietnamese Law
When a contract is terminated, it becomes invalid from the date of signing, and the parties do not have to fulfill contractual obligations except for penalty clauses, compensation for damages, and dispute resolution provisions. Upon termination, the parties are obliged as follows:
- Return what was received, minus reasonable expenses for contract execution, preservation, and asset development. If return in kind is not possible, it must be compensated in monetary value. If both parties have obligations to return, the return must occur simultaneously unless otherwise agreed.
- The party in breach leading to contract termination must compensate for damages caused to the other party.
Notification of Contract Termination
The terminating party must immediately notify the other party about the contract termination. If failing to notify causes damage to the other party, the terminating party must compensate for damages.
Statute of Limitations for Requesting Contract Termination by the Court According to Vietnamese Law
In case of disputes related to contract termination that the parties cannot agree on, they may file a lawsuit to the competent People’s Court for resolution. The statute of limitations for filing a lawsuit to resolve contract disputes is 3 years from the date the plaintiff knows or should have known that their rights and legitimate interests were violated.
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