Partially invalid contract in Vietnam

What is a partially void contract? How is a partially invalid contract resolved? This is a question asked by many different entities participating in the contract. To answer this question, Viet An Law Firm will present the article on partially invalid contract in Vietnam as follows.

Legal basis

• Vietnam Civil Code 2015.

Civil transactions

Based on the provisions of Article 116 of the Vietnam Civil Code 2015 on civil transactions, a civil transaction can be understood as a contract or unilateral legal act that creates, changes, or terminates rights and obligations.

Accordingly, it can be seen that the contract is a civil transaction. A void contract can also be called a void civil transaction. This issue is also regulated in Article 407 of the Vietnam Civil Code 2015 on invalid contracts.

Contracts invalid

According to the provisions of Article 122 of the Vietnam Civil Code 2015 on invalid civil transactions, unless the law has other provisions, a civil transaction is invalid when it does not meet the conditions for a civil transaction to be valid according to the provisions of law, then that civil transaction is considered invalid.

Conditions for a civil transaction or contract to be valid are specified in detail in Article 117 of the Vietnam Civil Code 2015. Specifically, the conditions for the validity of a civil transaction include the following conditions:

• The subject participating in the transaction has civil legal capacity and civil act capacity appropriate to the civil transactions that that subject establishes;
• Subjects participating in any civil transaction must rely entirely on their own voluntariness, and must not be forced or threatened by others to hinder their free will;
• The purpose and content of civil transactions must not violate the provisions of the law. At the same time, it must not violate social ethical principles.
• If a civil transaction requires formality, the form of the civil transaction will become one of the conditions for the civil transaction to be valid. Cases requiring the form of civil transactions are prescribed by law.

How is a partially invalid contract resolved?

The contract is partially void

Before answering the question of how to resolve a partially void contract, it is necessary to understand what a void contract is. Once you understand the nature, you can solve the problem.

Pursuant to the provisions of Article 130 of the Vietnam Civil Code 2015 on partially invalid civil transactions, accordingly, a partially invalid civil transaction is when part of the content of the civil transaction is invalid but this invalid part does not affect the validity of the remaining part of the civil transaction.

For example, company A and company B both enter into a goods purchase and sale contract, accordingly, company A will deliver goods in 3 installments to company B, and the value of the orders is 30 million VND, 55 million VND, and 40 million VND respectively. However, the signatory representing company A does not have the authority to sign transactions over 40 million VND. Therefore, the transaction worth 55 million VND will be invalid.

In the above situation, the contract was partially invalidated because the representative of one party to the contract did not have the authority to sign transactions over 40 million VND, but this invalid part did not affect other parts of the contract such as the delivery of shipments worth VND 30 million and VND 40 million.

Legal consequences of a partially invalid contract

Based on the provisions of Article 131 of the Vietnam Civil Code 2015 on the legal consequences of invalid civil transactions, combined with the provisions of Article 130 of the Vietnam Civil Code 2015 on each invalid civil transaction. Partly, it can be inferred that a partially invalid contract will lead to the following legal consequences:

• Part of the contract is void, the remaining part remains valid.
• The invalid part of the contract will not create, change, or terminate the rights and obligations of the parties in the contract from the time the contract is entered into.
• If part of the contract is invalid, the parties to the contract must restore the original condition, return to each other what they have received, or exchange it in kind for a refund.
• Any party in the contract who is at fault and causes damage to the other party by causing the contract to be partially invalid must compensate for that invalid part.

How is a partially invalid contract resolved?

Based on the legal consequences of a partially void contract given above, the partially void contract can be divided into two separate parts as follows:

• Part of the contract is invalid;
• Part of the contract is valid.

To resolve a partially invalid contract, both invalid and valid parts of the contract must be resolved. Basically, a partially invalid contract can be resolved in the following way:

For the invalid part of the contract:

• The validity of the invalid part of this contract will no longer exist;
• The parties to the contract restore to each other what they have received or exchanged in kind for reimbursement related to the void part of the contract.
• The party at fault in the contract causing the contract to be partially invalid will have to compensate the injured party for the damages caused by part of the contract being invalid.
• Or the parties to the contract can come up with another agreement to compensate for this invalid part of the contract.

For parts of the contract that are not void:

• If part of the contract is not invalidated, the validity of this part will not be lost but will remain intact.
• The parties to the contract will continue to perform the remaining part of the contract in accordance with what the parties committed to in the contract.

Notes for businesses regarding partially invalid contracts

When entering into a contract, a breach of contract from any part of the contract may cause the contract to be invalid. The contracting enterprise must first determine whether the contract will be void completely or partially.

The reason is that a completely invalid contract will cause the entire validity of the contract to be lost, the parties will not continue to perform this contract and must return to each other everything they have received. Meanwhile, a partially invalid contract will only cause part of the contract to lose its validity, while the rest of the contract is still valid and the parties must continue to perform as they committed. conclude.

Distinguishing between a fully invalid or partially invalid contract requires the support and assistance of experts with specialized knowledge such as the team of lawyers and consultants of Viet An Law Firm.

If you have any questions about partially invalid contract in Vietnam, please contact Viet An Law for our best support!