What are Conditions for Cancellation of Contract?
When entering into a contract, the parties in a contractual
relationship always aim for certain interests and purposes. However, in
reality, the contract is not always implemented seriously and in good faith.
According to Vietnam laws, parties are entitled to cancel the contract to
protect rights and interests. Therefore, it is not rare for a party to request
to cancel the contract in order not to be bound by the contract. However, it
should be noted that the right of cancellation is only applied in some certain
circumstances which stipulated by the law. This is to limit arbitrariness of
cancelling the contract.
Contract dispute law
firm in Vietnam
The basic condition for cancelling the contract is the breach.
However, it should be noted that not all breaches of contract will result in
cancelling the contract. This is stipulated in both of general law and
specialized law. According to Commercial law 2005 (“CL”), the sanction of
cancelling the contract is applied in case of breaching act be a condition for
the cancellation of the contract as agreed upon by the parties or in case of
substantial breach of contractual obligations from a party. Specifically,
contractual breach means the failure of a party to perform, to fully or
properly perform its obligations according to the agreement between the parties
or the provisions of CL. Substantial breach means a contractual breach by a
party, which causes damage to the other party to an extent that the other party
cannot achieve the purpose of the entry into the contract. Civil Code 2015
(“CC”) also stipulates correspondingly but it uses the term “serious breach”:
“A party has the right to cancel the contract and shall not be liable to
compensate for damage in the following cases: (i) A breaching act of one party
is a condition for the cancellation of the
contract as agreed upon
by the parties; (ii) The other party seriously violates the obligations in the
contract; (iii) Others circumstances as provided by law. Serious violation
means the failure to fulfill obligations properly by a party which make the
other party cannot achieve the purpose of the entry into the contract”.
However, currently there is no specific guidance on identifying the substantial
breach of contractual obligations and the serious breach of contractual
obligations. Therefore, determining whether a party’s breach is considered as a
substantial breach of contractual obligations or a serious breach of
contractual obligations will be within the competence of the jurisdiction.
A lawfully concluded contract may be canceld when a party
breaches its basic contractual obligations. After cancelling the contract, such
contract shall be invalid from the time it is entered into, and the parties
shall not have to continue performing their contractual obligations, except for
their agreements on their post-cancellation rights and obligations and
resolution of disputes. The parties shall have the right to claim benefits
brought about their performance of their contractual obligations. If parties have
indemnity obligations, their obligations must be performed concurrently. Where
it is impossible to make the indemnity with benefits which one party has
enjoyed, the obliged party must make the indemnity in cash. Breached parties
are entitled to claim damages.
In conclusion, from the regulation of law, it can be seen that
nature of contract is to benefit for the parties and not to be canceld. The
cancellation is very serious so the contract can only be canceld in some
certain conditions. The contract cannot be canceld as a sanction if there is no
contract breach. Simultaneously, the party requesting cancellation also needs
to know that such request is only accepted if there is enough foundation to
affirm that the other party has substantial breach of contractual obligations
or the serious breach of contractual obligations. Parties
encountering potential dispute should consult with dispute lawyers in
Vietnam for proper resolution.
ANT Lawyers – A Law firm in Vietnam has law offices in Hanoi,
Ho Chi Minh City and Da Nang. The lawyers at each law offices in Vietnam
have consistently made valuable and important contributions to our profession
through the cases we handled on daily basis to facilitate business transaction
or represented our clients to access justice
