Seven Types of Remedies in Commercial Transactions

Seven Types of Remedies in Commercial Transactions

1. Compulsory Performance of the Contract

• Compulsory performance of the contract means that the aggrieved party requires the breaching party to perform the contract correctly or take other measures to ensure that the contract is performed, with the breaching party bearing any arising costs.
• In case the breaching party delivers a deficient quantity of goods or provides services not in accordance with the contract, they must deliver the full quantity or provide the services as agreed. If goods or services are of substandard quality, the breaching party must rectify the defects in the goods, deficiencies in the services, or provide replacement goods or services in accordance with the contract. The breaching party may not substitute money, different types of goods, or different services unless approved by the aggrieved party.
• If the breaching party fails to comply with the above, the aggrieved party has the right to purchase goods or obtain services from another party as specified in the contract. The breaching party must pay for the price difference and any related expenses, if any. The aggrieved party may also rectify the defects themselves, and the breaching party shall reimburse the reasonable actual costs incurred.
• If the breaching party has fully performed its obligations, the aggrieved party must accept the goods or services and make the corresponding payments.
• If the breaching party is the buyer, the seller has the right to demand payment, acceptance of goods, or performance of other buyer obligations as stipulated in the contract and the Commercial Law.

2. Penalty for Breach

A penalty for breach means that the aggrieved party may demand the breaching party to pay a penalty amount for breaching the contract if the contract contains such a provision, except in cases of exemption from liability under Article 294 of the Commercial Law 2005.
(Article 294 – Exemptions from Liability: (a) Occurrence of an exemption event agreed upon by the parties; (b) Force majeure event; (c) Breach caused entirely by the other party’s fault; (d) Breach due to execution of a decision by a competent state authority unknown to the parties at the time of contract conclusion.)

3. Compensation for Damages

• Compensation for damages refers to the breaching party compensating the aggrieved party for losses caused by the breach of contract.
• The value of compensation includes actual and direct losses suffered by the aggrieved party and the direct benefits that the aggrieved party would have enjoyed if the breach had not occurred.

4. Temporary Suspension of Contract Performance

Except for cases of exemption from liability under Article 294 of the Commercial Law 2005, temporary suspension of contract performance means a party temporarily suspends performance of contractual obligations in the following cases:

• A breach occurs that the parties have agreed constitutes grounds for temporary suspension;
• A party commits a fundamental breach of contract.

Legal Consequences of Temporary Suspension:

• The contract remains in effect during the suspension.
• The aggrieved party has the right to claim damages in accordance with the law.

5. Termination of Contract Performance

Except for cases of exemption under Article 294 of the Commercial Law 2005, termination of contract performance means a party ceases to perform contractual obligations in the following cases:

• A breach occurs that the parties have agreed constitutes grounds for termination;
• A party commits a fundamental breach of contract.

6. Contract Cancellation

• Contract cancellation includes cancellation of the entire contract or part thereof.
• Cancellation of the entire contract means all contractual obligations are annulled.
• Partial cancellation means annulment of part of the obligations, while the remaining parts remain in effect.

Except for exemptions under Article 294 of the Commercial Law 2005, cancellation may apply in the following cases:

• A breach occurs that the parties have agreed constitutes grounds for cancellation;
• A party commits a fundamental breach of contract.

Legal Consequences of Cancellation:

• Except in cases specified in Article 313 of the Commercial Law 2005 (Cancellation in case of partial delivery or service provision), after cancellation, the contract becomes void from the time of conclusion. The parties are released from further performance, except for obligations related to post-cancellation rights and dispute resolution.
• The parties may reclaim the benefits from the performance already rendered; if mutual restitution is required, it must be done simultaneously. If restitution in kind is impossible, it must be done in monetary value.
• The aggrieved party may claim damages in accordance with the law.

7. Other Remedies

Other remedies as agreed upon by the parties, provided that such agreements do not violate the fundamental principles of Vietnamese law, international treaties to which the Socialist Republic of Vietnam is a party, and international commercial customs.

(Legal basis: Articles 292, 297, 300, 302, 308, 309, 310, 312, 314 of the Commercial Law 2005)