Laws of Vietnam

THE JUDGES’ COUNCIL OF THE SUPREME PEOPLE’S COURT

RESOLVES:

I. DETERMINING INVALID ECONOMIC CONTRACTS

1. Under the provision at Point b, Clause 1, Article 8 of the Ordinance on Economic Contracts, an economic contract shall be considered totally invalid when "either of the parties to the economic contract has no business registration as prescribed by law for the performance of the jobs agreed upon in the economic contract." When applying this provision, it is necessary to distinguish the following cases:

a/ In cases where upon entering into an economic contract, either of the involved parties has not yet obtained business registration and disputes arise between the involved parties in the course of performing the economic contract, and by the time such disputes arise, the party without business registration, when entering into such economic contract, still fails to obtain business registration for the performance of jobs agreed upon in the contract, such economic contract shall fall into the cases prescribed at Point b, Clause 1, Article 8 of the Ordinance on Economic Contracts and be considered totally invalid.

For example: The business registration certificate of Company A does not cover the registration for industrial construction, but Company A signed an economic contract for the construction of workshops for Company B. In the course of construction, disputes arose between the two parties in the performance of the contract and either of them initiated a lawsuit requesting the Court to settle the case. When settling this case, if there are enough grounds to believe that by the time the disputes arose, Company A had not been given the additional registration of industrial construction, the Court shall apply Point b, Clause 1, Article 8 of the Ordinance on Economic Contracts to declare this economic contract totally invalid and handle the invalid economic contract according to the provisions of Article 39 of the Ordinance on Economic Contracts.

b/ In cases where upon entering into an economic contract, either of the involved parties has not yet made business registration and disputes arise between the involved parties in the course of performing the economic contract, and by the time these disputes arise, the party without business registration, when entering into the contract, has already made business registration for the performance of the jobs agreed upon by the involved parties in the contract, such economic contract shall not fall into the cases prescribed at Point b, Clause 1, Article 8 of the Ordinance on Economic Contracts, and therefore, not be considered totally invalid.

For example: If in the example at Point a of this Section 1, when settling the case, there are enough grounds to believe that by the time the disputes arose, Company A had been made additional registration of industrial construction, the economic contract shall not fall into the cases prescribed at Point b, Clause 1, Article 8 of the Ordinance on Economic Contracts and not be considered totally invalid.

2. Under the provision at Point c, Clause 1, Article 8 of the Ordinance on Economic Contracts, economic contracts shall be considered totally invalid when: "The persons sign such economic contracts not according to their competence …"

In order to suit the spirit stated in Article 154 of the Civil Code, economic contracts shall not be considered totally invalids if they were signed by persons who have no competence to sign but in the course of performance, they are approved by the persons having the competence to sign such economic contracts according to law provisions (hereinafter called competent persons for short). Economic contracts shall be considered as having been approved by competent persons if these persons know that the economic contracts have been signed but do not oppose such signing.

The signing of economic contracts shall be considered as having been known but not opposed by the competent persons in the following cases:

a/ After the economic contracts are signed, there are enough grounds to prove that the persons signing these economic contracts have already reported the signing to the competent persons (such reporting is expressed in the minutes of briefings of the directorate, the minutes of meetings of the Members’ Councils or Managing Boards, or many persons confirmed that the reporting had been really made…).

b/ The competent persons, through accounting as well as statistical vouchers and documents, know that these economic contracts have been signed and are being performed (having signed receipts, ex-warehousing bills or revenues from and expenditures for the performance of these economic contracts or accounting books of legal entities…).

c/ The competent persons have had acts which prove that they have participated in exercising rights and obligations arising under the agreements in the economic contracts (having signed documents applying for extension of payment terms, having committed to perform the contractual obligations, having signed document approving revenues, expenditures or the final settlement of credits and debts related to the performance of these economic contracts…).

d/ The competent persons have directly used assets or profits earned from the signing and performance of the economic contracts (having used cars for travel and/or business, which, to their knowledge, have been obtained from the signing and/or performance of these economic contracts; having used working offices obtained from the signing and/or performance of economic contracts on property lease…).

3. For economic contracts in which the involved parties have agreed on prices and payment in foreign currencies, they should be distinguished as follows:

a/ If the economic contracts contain agreements on prices and payment in foreign currencies between the involved parties while either or both parties is or are not allowed to make payment in foreign currencies, the economic contracts shall be considered totally invalid under the provisions at Point a, Clause 1, Article 8 of the Ordinance on Economic Contracts (the involved parties violate the State’s regulations on foreign currency management). In this case, if either or both parties request the Court to settle the cases, the Court shall declare the contracts invalid and settle the consequences of invalid contracts according to general procedures.

b/ If the economic contracts contains agreements on prices and payment in foreign currencies between the involved parties while either or both parties is or are not allowed to make payment in foreign currencies, but later the involved parties agree to make payment in Vietnam dong or in the economic contracts, the involved parties agree to use foreign currencies as price-determining currency (in order to stabilize the value of the contracts) but make payment in Vietnam dong, these economic contracts shall not fall into the cases prescribed at Point a, Clause 1, Article 8 of the Ordinance on Economic Contracts and therefore not be considered totally invalid.

II. HANDLING OF INVALID ECONOMIC CONTRACTS

Point a, Clause 2, Article 39 of the Ordinance on Economic Contracts prescribes: "The involved parties shall have the obligation to return to one another all properties they have received from the performance of contracts. In cases where it is impossible to return such properties in kind, they must return them in cash, provided that such properties are not confiscated according to law provisions." When applying this provision, it is necessary to distinguish the following cases:

1. For properties being movables:

a/ The received properties can be returned in cases where the parties receiving properties from the performance of the economic contracts have not yet exploited or used these properties, and still maintain their quality, functions and utility. The returned properties shall not be accepted if they are not the very property received from the performance of such contracts even though they are of the right categories, quality, function and utility, except for cases where the parties reach otherwise agreements not contrary to law provisions.

b/ The properties received from the contract performance cannot be returned in kind when they fall into one of the following cases:

b.1. They have been put into exploitation or use;

b.2. They have been lost or damaged;

b.3. They have been transferred to other persons and been put into exploitation or use, lost or damaged, or the use duration thereof have been expired;

b.4. Their quality, functions and utility cannot be maintained due to the faults of the property-receiving parties (for example: the property recipients failed to preserve the properties in strict accordance with regulations);

b.5. One or several parts of the properties have been lost and cannot be restored to their original conditions when received.

c/ In cases where the received properties cannot be returned in kind as guided at Point b of Section 1, the property-receiving parties shall only have to make cash payment to the property-delivering parties at the prices agreed upon by the involved parties, except where the parties reach otherwise agreements not contrary to law provisions.

d/ For cases of returning the received properties being foreign currencies, the foreign currency-receiving parties shall have to return to the delivering parties the received foreign currency amounts converted into Vietnam dong at the buying exchange rate between the foreign currencies and Vietnam dong announced by the State Bank at the time of receiving such foreign currencies without having to pay interests, except for cases where the parties reach otherwise agreements not contrary to law provisions.

2. For properties being real estates or land use right

In general principles, properties being real estates or land use right shall be handled by forcing the parties receiving the properties from the performance of economic contracts to return them to the property-delivering parties.

In cases where the property-receiving parties have dismantled, repaired, renovated or made investment in, thus raising the value of, these properties, they shall, on a case-by-case basis, be forced to restore the initial conditions of, or dismantle the properties or make cash payment to the other parties, expect for cases where the involved parties reach otherwise agreements not contrary to law provisions.

3. Responsibility to bear damage incurred when the economic contracts are considered totally invalid

Under the provision at Point c, Clause 2, Article 39 of the Ordinance on Economic Contracts, in cases where economic contracts are considered totally invalid, the involved parties shall have to bear incurred damage regardless of the seriousness of their faults.

III. APPLICATION OF POINT 3, ARTICLE 32 OF THE ORDINANCE ON PROCEDURES FOR THE SETTLEMENT OF ECONOMIC CASES

Under the provision at Point g, Clause 1, Article 39 of the Ordinance on Procedures for Settlement of Economic Cases, the Courts shall issue decisions suspending the settlement of economic cases when: "There have been Court decisions starting the procedures for the settlement of the requests to declare the bankruptcy of enterprises which are the parties involved in the cases." When applying this provision, attention should be paid to the following:

1. In order to ensure the legitimate rights and interests of the involved parties in cases where the Courts issue decisions suspending the settlement of economic cases on the grounds that there have been Court decisions to carry out the procedures for the settlement of the requests to declare enterprise bankruptcy, but later the Courts issue decisions suspending the settlement of the requests for declaration of enterprise bankruptcy, if the involved parties re-initiate lawsuits for the economic cases for which they have filed lawsuits earlier and are subject to suspension, the Courts shall accept and handle the cases according to general procedures.

2. The statue of limitations for initiating lawsuits in these cases shall be six months as from the date the Courts issue decisions suspending the settlement of the requests for declaration of enterprise bankruptcy, except for cases where the statute of limitations for initiating lawsuits is otherwise provided for by law.

For cases where the Courts have issued decisions suspending the settlement of the requests for declaration of enterprise bankruptcy before the effective date of this Resolution, the statute of limitations for initiating lawsuits shall be counted as from the effective date of this Resolution.

IV. IMPLEMENTATION EFFECT OF THE RESOLUTION

1. This Resolution was adopted by the Judges’ Council of the Supreme People’s Court on May 27, 2003 and takes effect 15 days after its publication in the Official Gazette.

The guidance on matters in this Resolution, which were provided by the Supreme People’s Court before the effective date of this Resolution, are hereby annulled.

2. For economic cases for which the Courts have accepted to handle but the first instance, appeal, supervisory or review trial has not yet been carried out, this Resolution shall apply to the handling thereof.

3. For court judgments and decisions which took legal effect before the effective date of this Resolution, this Resolution shall not be applied to lodge protests according to supervisory or review-trial procedures, except for cases where there are other grounds for protesting.

On behalf of the Judges’ Council of the Supreme People’s Court
Chief Judge
NGUYEN VAN HIEN