{"id":9349,"date":"2024-03-01T10:44:50","date_gmt":"2024-03-01T03:44:50","guid":{"rendered":"https:\/\/cdlaf.vn\/?p=9349"},"modified":"2024-05-28T09:38:46","modified_gmt":"2024-05-28T02:38:46","slug":"civil-or-commercial-law-governing-contracts","status":"publish","type":"post","link":"https:\/\/cdlaf.vn\/en\/civil-or-commercial-law-governing-contracts\/","title":{"rendered":"Civil or commercial law governing contracts?"},"content":{"rendered":"<p>Understanding the nature of a transaction that the parties are establishing will help them maximize the benefits of its terms and minimize risks, especially those related to liability for damages or contractual penalties. Currently, transactions between individuals are understood to be civil transactions, which are considered easy to identify. However, for transactions involving enterprises, determining whether it is a civil or commercial transaction to which civil or commercial law should be applied is not always easy for the parties involved, and even legal professionals can make mistakes about the applicable law. To better understand this issue, this article will share some things to keep in mind when determining whether a transaction is civil or commercial, as well as the differences in some important terms.<\/p>\n<figure id=\"attachment_9318\" aria-describedby=\"caption-attachment-9318\" style=\"width: 800px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-9318\" src=\"http:\/\/cdlaf.vn\/wp-content\/uploads\/2024\/02\/pexels-rdne-stock-project-7841411_re-1200x800.jpg\" alt=\"\" width=\"800\" height=\"533\" srcset=\"https:\/\/cdlaf.vn\/wp-content\/uploads\/2024\/02\/pexels-rdne-stock-project-7841411_re-1200x800.jpg 1200w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2024\/02\/pexels-rdne-stock-project-7841411_re-600x400.jpg 600w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2024\/02\/pexels-rdne-stock-project-7841411_re-768x512.jpg 768w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2024\/02\/pexels-rdne-stock-project-7841411_re-1536x1024.jpg 1536w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2024\/02\/pexels-rdne-stock-project-7841411_re-2048x1366.jpg 2048w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/><figcaption id=\"caption-attachment-9318\" class=\"wp-caption-text\">Source: pexels-rdne-stock-project-7841411<\/figcaption><\/figure>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of contents:<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #a32411;color:#a32411\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #a32411;color:#a32411\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/cdlaf.vn\/en\/civil-or-commercial-law-governing-contracts\/#1_When_is_a_Contract_Governed_by_Civil_Law\" >1. When is a Contract Governed by Civil Law?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/cdlaf.vn\/en\/civil-or-commercial-law-governing-contracts\/#2_When_is_Commercial_Law_applied\" >2. When is Commercial Law applied?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/cdlaf.vn\/en\/civil-or-commercial-law-governing-contracts\/#3_Differences_Between_Applying_Civil_Law_and_Commercial_Law\" >3. Differences Between Applying Civil Law and Commercial Law<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/cdlaf.vn\/en\/civil-or-commercial-law-governing-contracts\/#SEND_CONSULTATION_REQUEST\" >SEND CONSULTATION REQUEST<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"1_When_is_a_Contract_Governed_by_Civil_Law\"><\/span>1. When is a Contract Governed by Civil Law?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Civil law, or more precisely, the provisions of the Civil Code, is the general law that serves as the foundation for the development and application of specialized laws. Accordingly, laws such as Commercial Law, Labor Law, and Enterprise Law are promulgated and applied based on the general principle of regulating specific subjects in detail without contradicting the Civil Code.<\/p>\n<p>Civil law will be applied to govern the relationships and transactions of the parties when the legal issue is not specifically regulated by specialized laws, or there are regulations but when specialized laws refer to the applications of the regulations of the Civil Code, or in cases where specialized laws contradict the general provisions of the Civil Code.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"2_When_is_Commercial_Law_applied\"><\/span>2. When is Commercial Law applied?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Commercial law is applied to govern commercial activities, where commercial activity is understood as an activity for profit, including buying and selling goods, providing services, promoting trade, and other activities for profit. The Commercial Law also applies to non-profit activities of one party in a transaction with a merchant carried out on the territory of Vietnam, where the parties agree in the contract to choose the Commercial Law as the governing law. Therefore, the parties must rely on the nature of the contract, the participating parties&#8217; capacity, and the profit motive to determine whether the contract they establish will be governed by commercial or civil law. Similar to the Civil Code, the Commercial Law also lists several types of contracts, such as Service contracts, Sale and purchase contracts, and Transportation contracts. However, determining the applicable law will not be based solely on the type of contract but on the full identification of the factors mentioned above. This is because even civil law also lists the names of types of contracts similar to those in commercial law.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"3_Differences_Between_Applying_Civil_Law_and_Commercial_Law\"><\/span>3. Differences Between Applying Civil Law and Commercial Law<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As mentioned above, the Civil Code is a general law, while the Commercial Law is a specific law that cannot contradict the provisions of the Civil Code, except in cases where the Civil Code has open regulations in the form of &#8220;unless otherwise provided by specialized law.&#8221; Here, specialized law can be understood as the provisions of commercial law.<\/p>\n<p>What are the consequences of misunderstanding the law applicable to a transaction that the parties are negotiating? The first impact to consider is the regulation on penalties for breach of contract. It is understood that one of the important factors in enforcing compliance with the agreed-upon content of a contract and binding the parties&#8217; responsibilities, besides goodwill, is the penalty for breach of contract. According to commercial law, the penalty for breach of contract in any case cannot exceed 8% of the value of the obligation breached. Specifically:<\/p>\n<p><strong><em>Article 301. <\/em><\/strong><em>Penalty for Breach of Contract<\/em><\/p>\n<p><em>The penalty for breach of contractual obligation or the total penalty for multiple breaches shall be agreed upon by the parties in the contract, but shall not exceed 8% of the value of the breached contractual obligation, except as provided for in Article 266 of this Law.\u201d<\/em><\/p>\n<p><em>In contrast, civil law does not impose any restrictions on this issue. The parties to a civil transaction can agree and specify the penalty in the contract, and this penalty may be higher than the 8% mentioned above. This is stated in Article 418 of the Civil Code 2015 as follows:<\/em><\/p>\n<p><strong><em>Article 418.<\/em><\/strong><em> <strong>Agreement on Penalty for Breach of Contract<\/strong><\/em><\/p>\n<p><em>\u201cA penalty for breach of contract is an agreement between the parties to a contract, under which the party in breach of obligation must pay a sum of money to the party not in breach.<\/em><\/p>\n<p><em>The amount of the penalty shall be agreed upon by the parties unless otherwise provided by law.<\/em><\/p>\n<p><em>The parties may agree that the party in breach of obligation shall only be subject to a penalty and not be liable for damages, or that the party in breach of obligation shall be subject to both a penalty and damages. If the parties agree on a penalty but do not agree that the party in breach of obligation shall be subject to both a penalty and damages, the party in breach of obligation shall only be subject to the penalty.\u201d<\/em><\/p>\n<p>Accordingly, the penalty for breach of contract in civil law will be agreed upon by the parties. In practice, the 8% penalty under commercial law is not enough in some cases to deter or make the other party hesitate to breach the contract. Therefore, there are many cases where one party chooses to breach the contract because they find that fulfilling the contract will cause them more damage. If the transaction between the parties is a commercial transaction, the parties will inevitably be subject to the 8% penalty limit in the contract. However, if the transaction between the parties is a civil transaction or is allowed to choose to apply civil law, the application of the penalty clause under civil law will make the parties more cautious because the penalty for breach of contract, as mentioned above, is not limited.<\/p>\n<p>Therefore, if the parties are mistaken in identifying the type of transaction and understand that their contract is a commercial contract, leading to the misapplication of the penalty, they will be forced to apply the penalty recorded in the contract, because the &#8220;penalty&#8221; under civil law is based on the agreement of the parties.<\/p>\n<p>Regarding the punishment of \u201c<strong>compensation for damages<\/strong>\u201d, there is a clear difference between civil law and commercial law. Under commercial law, the compensation for damages will be applied regardless of whether the parties have regulated it in the contract. However, conversely, for contracts governed by civil law, the compensation damages will only be applied if the parties have agreed to apply it in the contract. Therefore, if in a civil contract, the parties agree to apply a penalty but not to apply compensation damages, then when one party breaches the contract, only the penalty will be applied and no compensation damages.<\/p>\n<p><strong><em>Time of writing:<\/em><\/strong> 23\/02<em>\/2024<\/em><\/p>\n<p><em>The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer \u00a0at\u00a0 <a href=\"https:\/\/mail.google.com\/mail\" target=\"_blank\" rel=\"noopener\"><strong>info@cdlaf.vn<\/strong><\/a><\/em><\/p>\n<div class=\"content-post-nd\">\n<div style=\"text-align: center;\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5519 size-full aligncenter\" src=\"http:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG.png\" alt=\"\" width=\"1080\" height=\"600\" srcset=\"https:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG.png 1080w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG-720x400.png 720w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG-768x427.png 768w\" sizes=\"auto, (max-width: 1080px) 100vw, 1080px\" \/><\/div>\n<\/div>\n<div class=\"content-post-nd\">\n<p><strong>Why choose CDLAF\u2019s service?<\/strong><\/p>\n<ul class=\"li-content\">\n<li>We provide effective and comprehensive legal solutions that help you save money and maintain compliance in your business;<\/li>\n<li>We continue to monitor your legal matters even after the service is completed and update you when there are any changes in the Vietnamese legal system;<\/li>\n<li>Our system of forms and processes related to labor and personnel is continuously built and updated and will be provided as soon as the customer requests it;<\/li>\n<li>As a Vietnamese law firm, we have a thorough understanding of Vietnam&#8217;s legal regulations, and grasp the psychology of employees, employers, and working methods at competent authorities;<\/li>\n<li>CDLAF&#8217;s team of lawyers has many years of experience in the field of labor and enterprises, as well as human resources and financial advisory.<\/li>\n<li>Strict information security procedures throughout the service performance and even after the service is completed.<\/li>\n<\/ul>\n<\/div>\n<p><strong style=\"color: #a32411;\">You can refer for more information:<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/cdlaf.vn\/en\/contracts-for-ocean-freight-in-vietnam-the-basic-features-of-contracts-for-the-carriage-of-goods-by-sea-in-vietnam-featuring-the-relevant-sections-of-vietnamese-law\/\">Contracts for Ocean freight in Vietnam. The basic features of contracts for the Carriage of goods by sea in Vietnam, featuring the relevant sections of Vietnamese law.<\/a><\/li>\n<li><a href=\"https:\/\/cdlaf.vn\/en\/direct-investment-in-vietnam-definition-process-and-people\/\">Direct Investment in Vietnam: Definition, Process and People<\/a><\/li>\n<li><a href=\"https:\/\/cdlaf.vn\/en\/how-to-establish-a-non-governmental-fund-and-manage-its-activities\/\">How to establish a Non-Governmental Fund and manage its activities<\/a><\/li>\n<\/ul>\n\n<div class=\"wpcf7 no-js\" id=\"wpcf7-f2681-o1\" lang=\"en-US\" dir=\"ltr\" data-wpcf7-id=\"2681\">\n<div class=\"screen-reader-response\"><p role=\"status\" aria-live=\"polite\" aria-atomic=\"true\"><\/p> <ul><\/ul><\/div>\n<form action=\"\/en\/wp-json\/wp\/v2\/posts\/9349#wpcf7-f2681-o1\" method=\"post\" class=\"wpcf7-form init\" aria-label=\"Contact form\" novalidate=\"novalidate\" data-status=\"init\">\n<fieldset class=\"hidden-fields-container\"><input type=\"hidden\" name=\"_wpcf7\" value=\"2681\" \/><input type=\"hidden\" name=\"_wpcf7_version\" value=\"6.1.5\" \/><input type=\"hidden\" name=\"_wpcf7_locale\" value=\"en_US\" \/><input type=\"hidden\" name=\"_wpcf7_unit_tag\" value=\"wpcf7-f2681-o1\" \/><input type=\"hidden\" name=\"_wpcf7_container_post\" value=\"0\" \/><input type=\"hidden\" name=\"_wpcf7_posted_data_hash\" value=\"\" \/>\n<\/fieldset>\n<h2 class=\"tt-form\"><span class=\"ez-toc-section\" id=\"SEND_CONSULTATION_REQUEST\"><\/span>SEND CONSULTATION REQUEST\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><label>Full name<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"full-name\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-text wpcf7-validates-as-required\" aria-required=\"true\" aria-invalid=\"false\" value=\"\" type=\"text\" name=\"full-name\" \/><\/span><br \/>\n<label>Email<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"email\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-email wpcf7-validates-as-required wpcf7-text wpcf7-validates-as-email\" aria-required=\"true\" aria-invalid=\"false\" value=\"\" type=\"email\" name=\"email\" \/><\/span><br \/>\n<label>Phone Number<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"phone\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-tel wpcf7-text wpcf7-validates-as-tel\" aria-invalid=\"false\" value=\"\" type=\"tel\" name=\"phone\" \/><\/span><br \/>\n<label>Message<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"coment\"><textarea cols=\"40\" rows=\"10\" maxlength=\"2000\" class=\"wpcf7-form-control wpcf7-textarea\" aria-invalid=\"false\" name=\"coment\"><\/textarea><\/span><br \/>\n<input class=\"wpcf7-form-control wpcf7-submit has-spinner btn-yellow\" type=\"submit\" value=\"Send\" \/>\n<\/p><div class=\"wpcf7-response-output\" aria-hidden=\"true\"><\/div>\n<\/form>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Understanding the nature of a transaction that the parties are establishing will help them maximize the benefits of its terms and minimize risks, especially those related to liability for damages or contractual penalties. Currently, transactions between individuals are understood to be civil transactions, which are considered easy to identify. However, for transactions involving enterprises, determining&#8230;<\/p>\n","protected":false},"author":4,"featured_media":9318,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[64],"tags":[],"class_list":["post-9349","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles"],"acf":[],"_links":{"self":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/posts\/9349","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/comments?post=9349"}],"version-history":[{"count":0,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/posts\/9349\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/media\/9318"}],"wp:attachment":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/media?parent=9349"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/categories?post=9349"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/tags?post=9349"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}