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Council of Ministers     Socialist Republic of Vietnam
     No. 17-HDBT        Independence-freedom-Happiness
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                               Hanoi, 16 January 1990.

DECREE ON ECONOMIC CONTRACTS MAKING DETAILED PROVISIONS fOR THE IMPLEMENTATION Of THE ORDINANCE ON ECONOMIC CONTRACTS

• THE COUNCIL Of MINISTERS

  Pursuant to the Law on Organization of the Council of Ministers date 4 July 1981;

  Pursuant to the Ordinance on Economic Contracts dated 25 September 1989;

  On the proposal of the Chairman of the State Economic Arbitration body;

• DECREES:

  • Article 1

    The parties to an economic contract are legal entities and individuals with business registration under the provisions of the law:

    • 1. A legal entity means an organization which:
      • (a) Has been legally established.

      • (b) Has its own separate assets for which it is independently responsible.

      • (c) Has the right to make independent decisions in relation to its production and business operations.

      • (d) Has the right to enter into legal relations.
    • 2. An individual with business registration under the provisions of the law means an individual who has been granted a business license and has registered his business with an authorized organization in accordance with the provisions on business registrat ion:
  • Article 2

    Measures which may be taken to ensure the performance of economic contracts are as follows:

    • 1. Charge over assets means the act of a person who commits his property, chattels or other assets as security for the performance of his obligations under a signed economic contract.

      A charge over assets shall be in writing and certified by a notary public or where no such notary is available, the authorized organization in charge of business registration.

      A person who grants a charge as security for performance of his obligations under a contract shall be responsible to maintain the value of the assets charged. He shall not be permitted to transfer the ownership or dispose of any asset charged to any other person during the period for which the charge remains in force.

    • 2. Mortgage means the act of a person who transfers the ownership of his chattels to the other party to the contract for the purpose of securing the repayment of any debts in the event that a breach of the contract occurs. A mortgage shall be writing, and certified by a notary public or where no such notary is available, the authorized organization in charge of business registration.

      The mortgage shall be obligated to maintain the value of the mortgaged chattels and shall not transfer the ownership of them to any other persons during the period for which the mortgage remains in force.

    • 3. Guarantee means the promise of a third party to answer the debts or default of a party to an economic contract in the event that that party breaches the contract. The third party guarantor must own assets, the value of which is no less than the amount which he has agreed to guarantee.

      A guarantee of assets shall be in writing and certified by a notary public, or where no such notary is available, the organization in charge of business registration shall provide confirmation. The value of the assets of the guarantor shall be certified b y the bank with which the guarantor has a banking relationship.

  • Article 3

    Where a breach of economic contract occurs, assets charged, chattels mortgaged, and guarantees by third parties shall be dealt with at the same time as resolution of the economic contract dispute by the authorized economic arbitration body.

  • Article 4

    Certification of an economic contract means confirmation by a State notary organization agreed by the parties that the parties have signed the contract. In the event that no such notary organization is available, the organization in charge of business reg istration shall provide confirmation.

  • Article 5
    • 1. Only one representative of each party to the economic contract shall be required to sign the economic contract.

    • 2. The legal representative of a legal entity is the person who has been appointed or elected to and holds the highest position of authority within that entity.

    • 3. The registered owner of a business is the person who has applied for, and been granted, a business license and has registered his business with an authorized organization in accordance with the provisions on business registration.
  • Article 6
    • 1. The authorization of a attorney to sign a economic contract shall be in writing and state clearly the name, position, work place, and identification of the attorney and the scope and duration of the authorization granted.

    • 2. Where an economic contract is signed by an attorney he shall sign it in accordance with his responsibilities and within the limit of the authorization granted. Where an economic contract is signed by an attorney outside the scope of his authority that part of the contract which is signed outside the scope of authority shall be invalid but savable and the remainder of the contract shall otherwise be valid.
  • Article 7
    • (a) An economic contract shall be signed by both parties at the same time or at different times provided that it is the same contract in writing which is signed by both parties.

    • (b) The signing of an economic contract by an attorney shall not be permitted where the contract is constituted by an exchange of documents such as official letters, fax letters, letters of offer for sale or orders, or is of a type which is required to be registered in accordance with the law.
  • Article 8

    In cases involving economic contracts for the purchase and sale of defective goods and products or of used materials intended to be fully used as is, the provisions of clause 1 of article 13 of the Ordinance on Economic Contracts shall not apply.

  • Article 9

    The terms contained in an economic contract which relate to price shall be regulated as follows:

    • 1. The parties shall agree upon and specifically state in the economic contract the price to be paid and shall agree on the principle and procedure to be adopted in changing this price in the event that a fluctuation in the market price occurs during the performance of the economic contract.

    • 2. Where the price of a particular product or good is fixed or regulated by a State authorized body, then the price of the same product or good agreed in an economic contract shall be the same as that fixed or regulated. Neither party shall be entitled to reduce or increase such price under or over those regulated by the State authorized body.
  • Article 10

    In the event that an economic contract for the sale and purchase of products and goods, in respect of which guarantees are required to be supplied under the provisions of the State, contains no such guarantee or where a guarantee has been offered in an ad vertisement or letter of offer for sale made by the manufacturer of products and goods. (in cases where there are no provisions on guarantees stipulated by the State) the economic contract in respect of both shall be deemed to contain a guarantee provisio n with the same terms and conditions as those stipulated by the State or contained in the advertisement or letter of offer made by the manufacturer.

  • Article 11

    The mode of payment to be used pursuant to the economic contract shall be agreed upon by the parties and shall not be contrary to the provisions of the law in force at the time. In the event that the economic contract does not clearly state the mode of p ayment to be used, the parties may agree upon the method at later time. Where the parties disagree on the mode of payment the dispute shall be brought to economic arbitration for resolution.

  • Article 12
    • 1. The duration of an economic contract shall be the period of time required for the parties to perform their rights and obligations contained in the contract. This period shall commence when the economic contract takes legal effect and continue to the ti me at which the parties agree that the performance of the economic contract is complete.

    • 2. In the event that the parties agree that performance of an economic contract shall commence at a specific time different from that at which it takes legal effect, the duration of the economic contract shall commence at that specific time.

    • 3. Where a dispute arises in respect of the time for performance of an economic contract due to the duration of the economic contract not being confirmed, the economic arbitrator shall examine the time required for the parties to perform their tasks and o bligations contained in the contract and thereby determine its duration.
  • Article 13
    • 1. Where an incentive to perform an economic contract well is required, the parties may agree upon a bonus to be paid in proportion to the value of the contract or in a fixed sum.

    • 2. The amount of liquidated damages to be paid for a breach of an economic contract shall be in conformity with the range of damages regulated for each type of economic contract and the type of breach as follows:
      • (a) Breach of the standard of quality: damages paid in an amount equivalent to between three and twelve per cent of the value of that part of the economic contract which has been breached in terms of quality.

      • (b) Breach of the time within which the contract is to be performed: damages in an amount equivalent to two per cent of the value that part of the economic contract which has been breached and not performed within ten days of the first day of delay. This amount shall increase in an amount from half of one per cent to one per cent is respect of each subsequent ten day period of delay until such time as the total amount equals but does not exceed the total value of that part of economic contract breached an d not performed in the first ten days of delay. In the event that a signed economic contract is not performed at all, the damages to be paid may be in a sum equivalent to up to twelve per cent of the total value of the contract.

      • (c) Breach of the obligation to complete or provide proper products, goods, services, and tasks required: damages in an amount equivalent to between six per cent and twelve per cent of the value of that part of the economic contract breached.

      • (d) Breach of the obligation to accept delivery of finished products, goods, services and tasks in accordance with the contract: damages in a sum equivalent to four per cent of the value of that part of the economic contract which has been completed, and delivery of which has not been accepted within the first ten days of completion. This amount shall increase by one per cent in respect of each subsequent ten day period until such time as the total amount of damages equals but does not exceed twelve per cent of the value of that part of the contract completed, but delivery of which was not accepted within the first ten day period.

      • (e) Breach of the obligation to make payment: liquidated damages shall be paid in a sum equal to the level of interest which would otherwise be due in accordance with the penalty rates of interest fixed by the State bank of Vietnam. The amount of the liqu idated damages shall be calculated as from the date upon which payment was due in accordance with the provisions of article 23 of the Ordinance on Economic Contracts. In this case, there shall be no limit to the maximum amount of liquidated damages to be paid.
    • 3. In the event that a breach of economic contract occurs, the amount of damages to be paid is disputed, and the economic contract concerned does not contain an agreement on the amount of damages to be paid, the amount to be paid shall be calculated in ac cordance with the provisions of this article and of the regulations in respect of that specific type of economic contract.

    • 4. Where the law does not specify the amount of damages to be paid, the parties may agree on the amount by reference to a percentage proportion of the value of that part of the economic contract breached or a fixed sum.
  • Article 14

    Where necessary, the parties may incorporate into an economic contract other agreements, provided those agreements are not contrary to the law and are aimed at the strict and effective performance of the contract, or they ensure the strict and timely perf ormance of such matters as examination, quarantine, payment of compensatory damages where one party wishes to cancel the signed economic contract, and appointment of a mediator or economic arbitrator to resolve disputes in the event that disputes arise.

  • Article 15
    • 1. The obligation to make payment shall arise only when the economic contract has been either partly or wholly performed by the contracting parties pursuant to their agreement and the amount of payment to be made is proportionate to that part of the econ omic contract which has been performed, except in those economic contracts where payment is required to be made in advance in accordance with the provisions made by the Council of Ministers.

    • 2. The obligation to make payment shall also be deemed to be discharged where the party making payment has proposed, and the other party has accepted that payment be made in kind or by way of enforcement of the charge , mortgage or guarantee provided as s ecurity to the extent of the value of the payment required and the payment in kind by way of such enforcement has been completely performed.

    • 3. In the event that the obligation to make payment has been assigned to a third party, the obligation of the paying party shall be deemed to be discharged upon the third party having paid in full the amount due to the payee.
  • Article 16
    • 1. Where a party to an economic contract assigns, either in whole or in part, its production and business capacities, but does not carry out fully the procedure necessary to assign his obligations under the economic contract in accordance with article 24 of the Ordinance on Economic Contract, with the result that the economic contracts are not performed completely or at all:
      • (a) If that party has not been dissolved then it shall remain totally liable in terms of property responsibility, as it did not perform the economic contract completely or at all;

      • (b) If that party has been dissolved then the organization which made the decision to dissolve the party shall deal with the consequences resulting from the economic contract not being performed completely or at all.
    • 2. In the event that a party to an economic contract assigns its production business to a third party and requests that a signed economic contract be terminated without assigning its obligations under it to the third party, the other party to the contract shall not be entitled to demand that liquidated or compensatory damages be paid as a result of the contract being terminated prior to the expiry of its duration.
  • Article 17

    Where a party to an economic contract is a legal entity which has been dissolved without notice being given to the other party to the economic contract:

    • (a) The organization or individual which made the decision to dissolve the legal entity shall deal with the consequences of having to terminate the economic contract which arise as the result of the dissolution.

    • (b) The representative of the legal entity which signed or authorized an attorney to sign the economic contract shall be personally liable before the law:
  • Article 18

    Where an individual who is a party to an economic contract ceases to carry on his registered business operation he shall terminate his economic contract with contracting parties. Where that individual is sentenced to a jail term the person who is appoint ed to manage his assets shall be obliged to terminate the economic contracts signed by him. Where the person who has business registration dies or is missing, then the beneficiary of the estate of the deceased or missing person shall be obligated to termi nate contracts signed by the deceased or missing person. In the event that an economic contract is not terminated those persons shall be liable to pay damages for breach of contract as is the case where signed economic contracts are not performed complete ly or at all.

  • Article 19

    During performance of an economic contract the parties to the contract may agree upon amendments to, or cancellation or termination of, performance of the contract. These agreements shall be made in writing and state clearly the legal consequences of the amendment, cancellation or termination. In the event that the economic contract concerned is one which required a certificate of registration then the written agreement to amend, cancel, or terminate the contract shall, within five days of its signing, be sent to the organization which issued the certificate or registered the contract. The legal consequences referred to above, of the amendment, cancellation or termination of the economic contract include:

    • * the irrecoverable expenses already incurred in the performance of the economic contract by the performing party (including transport and maintenance fees);

    • * the expenses already incurred in relation to the preparation of material and raw material or the purpose of implementation of the economic contract after use or sale, which expenses are not capable of being recovered through repayment of the initial va lue of those materials; and

    • * liquidated and compensatory damages to be paid due to the amendment, termination or cancellation of performance of the economic contract.
  • Article 20
    • 1. Where the matters referred to in article 28 of the Ordinance on Economic Contracts arise, the time within which the parties to an economic contract may terminate the contract is ten days from the date on which those matters arose. Where the economic co ntract is not terminated within the above time period the parties shall be entitled to request that an economic arbitration body resolve the matter. In the event that the economic contract has been performed and the parties have completely discharged thei r obligations in accordance with the agreements contained in the contract then the economic contract shall be deemed to be terminated.

    • 2. The termination of an economic contract shall be made by way of a separate contract in writing in which there shall be contained the following principal terms and conditions:
      • (a) Confirmation of the extent to which the obligations contained in the contract have been performed by the parties, and the extent to which the obligations of the parties remain to be performed.

      • (b) Confirmation of the provisions on property responsibility, and the legal consequences for the parties to the contract (if any) which arise due to the fact that the economic contract has been terminated prior to its expiry.
    • 3. Upon the parties signing a termination contract their contractual relationship shall be deemed to be terminated. The rights and obligations of each party which are specified in the termination contract shall, however, remain in effect until the parties have completely discharged all obligations.
  • Article 21

    In the relationships which arise in an economic contract, the party in breach shall be directly liable to pay damages to the innocent party, and shall not be entitled to avoid that liability on the grounds that another body, organization or individual cau sed the breach.

    Damages which the breaching party is liable to pay to the innocent party shall include:

    • (a) Liquidated damages payable in respect of breaches of economic contracts in accordance with the rate agreed upon by the parties in the contract and which is consistent with the framework for liquidated damages stipulated in article 13 of this Decree. W here the economic contract does not provide a rate to be applied or provides a rate which is inconsistent with the framework provided, and a dispute arises, the economic arbitrator shall apply a rate which is consistent with that framework;

    • (b) Compensatory damages shall, subject to the terms of the contract and valid legal evidence, be paid for: the value of the assets lost including interest, or directly lost revenue and the expenses incurred in preventing and mitigating the loss suffered due to the breach of the contract and fines and compensation for breach of the contract.
  • Article 22

    In an economic contract each particular type of breach of a contract shall be subject to a particular type of damages to be paid to the innocent party. Where several breaches occur simultaneously, the party in breach shall pay the type of damages which re sult in the largest sum being paid in accordance with the rates agreed upon by the parties in the economic contract. In the event that the contract does not provide a rate to be applied then the rate provide in article 13 of this Decree shall apply.

  • Article 23

    Where the liability to make payment is breached the party in breach shall, apart from damages paid in accordance with the rates of penalty interest, pay to the innocent party damages in a sum equal to the total amount of interest which would ordinarily b e paid by a bank in respect of such a sum, on the basis that the responsibility of the party in breach to make payment has not been discharged.

  • Article 24

    The party in breach of an economic contract shall be granted a reduction in, or exemption from, property responsibility which arises as the result of the execution of an emergency order of a State body provide that the order has been signed by one of the following persons:

    • - The Chairman of the Council of Ministers

    • - The Head of the Central Committee Against floods and Cyclones.

    • - The Chairman of a People's Committee, of a province, city, or special zone under central authority.
  • Article 25

    Ministers, Chairmen of the State Committees, heads of other bodies of the Council of Ministers and chairmen of people's committee of provinces, cities and special zones under central authority shall be responsible for the implementation of this Decree.

  • Article 26

    This Decree shall be of full force and effect as of the date of its signing. Any previous provisions which are inconsistent with this Decree are hereby repealed.

    The Chairman of the State Economic Arbitration body shall be responsible for the implementation of this Decree.

• for the Council of Ministers
• Vice Chairman

• VO VAN KIET
• (Signed)