April 6, 2021
Force Majeure from the perspective of Vietnamese Law
The purpose of this brief article is to briefly delineate the meaning of force majeure as defined in Vietnamese law, and illustrate the legal implications for contracts as provided for in Vietnamese law.
To start with, the Civil Code, 2015 (Law No. 91/2015/QH13) of Vietnam provides for a definition of force majeure in article 156. According to provision of the said article:
“An event of force majeure is an event which occurs in an objective manner which is not able to be foreseen and which is not able to be remedied by all possible necessary and admissible measures being taken. “
Further, pursuant to article 294 of the Commercial Law, 2005 (Law No. 36/2005/QH11), a force majeure event is classified as an exemption from liability for breaches of a contract.
Even though force majeure is a world-wide accepted concept, in many jurisdictions the meaning of force majeure comes forth through contract interpretation (e.g. in common law countries) or is drawn from the related provisions interpretation and jurisprudence (e.g. in some civil law countries ). To the contrary, Vietnamese Law , like some other laws ,contains a statutory definition of force majeure, and force majeure applies in contracts governed by Vietnamese Law irrespective of whether the parties have included a related force majeure clause in their contract. From the aforesaid definition, the following requirements of a force majeure event are extracted:
- It is an objective event. That means no party is subjectively at fault for its occurrence.
- It is an event that the parties could not foresee, in the sense that the parties could not forecast the occurrence of the event at the time that the contract was formed;
- It is an irremediable event, meaning that its effects cannot be averted even with the application of all necessary and possible measures on behalf of the obligor.
Although the law is silent on whether a causal link between the event and non-performance of a contract is needed, causality could be perceived as an implied requirement under the Civil Code.
As far as the consequences of force majeure are concerned, article 351 paragraph 2 of the Civil Code 2015, stipulates that “where an obligor is not able to perform a civil obligation due to an event of force majeure, it shall not have civil liability, unless otherwise agreed or otherwise provided by law.” Additionally, article 414 of the Code regulates failure to perform obligations not due to fault of the parties in bilateral contracts, providing that “…when one party is not able to perform its obligations but there is no fault of any party, the party not being able to perform does not have the right to demand the other party to perform its obligation with respect to the former party...” According to both instruments, the primary consequence of force majeure is that the affected party is relieved from civil liability for the contract breach.
By law, the exception from liability is linked with notification obligations. Under article 295 of Commercial Law 2005, the affected party must promptly notify the other party a) on the occurrence of the force majeure event and the possible consequences thereof; the notice must be in writing, and b) when the event of force majeure is terminated. For an exemption from liability, the burden of proof of the force majeure event lies on the obligor.
In what concerns the performance of the contracts, article 296 of Commercial Law 2005 rules on the suspension of the contract performance, which means that the party is temporarily relieved from - but still owes- performance. In particular, the parties may agree to extend the time limit for performing their respective contractual obligations.
Yet, even in the absence of an agreement by the parties, the time limit for performance will be extended by the law, for a period of time equal to the time length of the force majeure circumstance plus a reasonable period of time for remedying consequences, which may not exceed the maximum of either five or eight months from the time of the contract execution, depending on the timing agreed for obligation performance. Beyond the said time limits, the parties may refuse to perform the contract, but they do not have the right to request damages. With regard to cases of long-lasting events of force majeure hindering contract performance, it shall be noted that the law does not explicitly grant the parties the right to terminate their contract . However, a termination of the contract may be judicially sought, where there is a basic change of circumstances according to article 420, a legal concept which appears to have less strict requirements.
In conclusion, the Vietnamese approach on force majeure is clear in what concerns civil liability exception and suspension of performance of contractual obligations. Of course, these consequences require that the legal conditions for the application of force majeure are satisfied, which is to be examined on a case-by-case basis. In case the related requirements of force majeure are not met, there are alternatives routes for relief which the parties may resort to -depending on the factual circumstances of each case; such as a renegotiation of the contract on the basis of a basic change of circumstances, under article 420 of the Vietnamese Civil Code 2015.