Whether purpose contract has been achieved or not does not only
depend on compliance with contract but also is controlled by conditions,
objective circumstances. In the current pandemic situation, which
regulations do participants in contract need to pay attention to?
According to Vietnam laws, event shall be regarded as force
majeure if it meets three conditions: (i) objective factors; (ii) not able to
be foreseen; (iii) not able to be remedied by all possible necessary and
admissible measures being taken. It should be noted that epidemic is regarded
as event of force majeure if there is factor of “not able to be remedied”.
Covid-19 pandemic, in legal aspect, initially was not a force majeure event.
Only when it broke out and the Government issued Directive on nationwide social
distancing, it appears that this pandemic become force majeure event.
Specifically, according to request of Directive, all operation must stop, and
this request seems to make Covid 19 epidemic meeting enough three mentioned
conditions. Legal consequences of force majeure event is that if there is loss,
and the obliger shall not take responsibility.
However, in the current pandemic situation, not all contractual
relations will apply above principle. When force majeure event occurs, factor
in performance of contract must be considered. This is fundamental difference
between definition of “force majeure event” and “basic change of circumstances”.
Specifically, the contract will not be performed
in force majeure event and will be performed with many considerable changes
compared to initial estimate in basic change of circumstances. According to the
laws, the change of circumstances shall be deemed basic when it meets all
following conditions: (i) The circumstances change due to objective reasons
occurred after the conclusion of the contract; (ii) At the time of concluding
the contract, the parties could not foresee a change in circumstances; (iii)
The circumstances change such greatly that if the parties know in advance, the
contract has not been concluded or are concluded, but with completely different
content; (iv) The continuation of the contract without the change in the
contract would cause serious damage to one party; (v) The party having
interests adversely affected has adopted all the necessary measures in its
ability, in accordance with the nature of the contract, cannot prevent or
minimize the extent of effect.
In the case of basic circumstances change, the affected party may
request the other party to the re-negotiate the contract in a reasonable period
of time. If the parties can not reach an agreement on amending the contract
within a reasonable period of time, any of the parties may request a court or
arbitration to terminate the contract at a specific time or amend the contract
to balance the lawful rights and interests of the parties due to basic change
of circumstances. The court may only decide to amend the contract in the event
that the termination of the contract would cause greater damage than the cost
to perform the contract if it is modified. In the process of negotiating on
amendments and termination of the contract and the court or arbitration
handling the case, the parties must continue to perform its obligations under
the contract, unless otherwise agreed.
In the current pandemic situation, many places are still allowed
to operate normally but there must be careful prevention measures. But these
prevention measures are the cost that enterprise has to cover which is not
small. Therefore, the contract can still be performed but one party has to
suffer huge losses compared to initial estimate. In this case, the law allows
parties to re-negotiate. If parties cannot reach any agreement, such case shall
be brought to the court or arbitration to be solved. There are two
possibilities: firstly amending the contract to balance the parties’ rights,
secondly terminating the contract at a specific time if the contract cannot be
amended. And it is important to consult with dispute lawyers for possible
options before taking the matters further to protect best interests in the
transaction.
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international standard, local expertise and strong international network. We
focus on customers’ needs and provide clients with a high quality legal advice
and services. For advice or service request, please contact us via email
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