Fines for breach of contract

Hi DMS Law office in Vietnam! Could you advise me about grounds for penalty for breach of contract ? Is there a maximum level of penalty for violation of contract stipulated by law ? Thank you!

Hi!

Fines for breach of contract and the fine levels:

Article 418 The Civil Code No.91/2015/QH13 dated November 24, 2015:

Fine for breach is the amount of money agreed by the parties to a contract that the default party will pay in case of breach of contract.

The fine levels shall be agreed by the parties, unless otherwise prescribed by relevant laws.

The parties may reach an agreement that the default party only has to pay only a penalty but is not liable to any compensation for damage, or has to pay both a penalty and a compensation for damage.

In case the parties have an agreement on fines for breach of contract which does not specify that the default party has to pay both a penalty and a compensation for damage, then the default party only has to pay the penalty.

Articles 300 and 301 The Commercial Law No. 36/2005/QH11 dated June 14, 2005:

Penalty for breach means the aggrieved party requests the breaching party to pay an amount of penalty for its breach of a contract, if so agreed in the contract, except for cases of liability exemption specified in Article 294 of this Law.

The penalty level for a breach of a contractual obligation or the aggregate fine level for more than one breach shall be agreed upon in the contract by the parties but must not exceed 8% of the value of the breached contractual obligation portion, except for cases specified in Article 266 of this Law

Article 146 The Construction Law No. 50/2014/QH13 dated June 18, 2014:

Rewards or fines for construction contracts shall be agreed upon by the parties and stated in the contracts.

For works using state funds, the fine level must not exceed 12% of the value of the violated contract. In addition to the fine level as agreed upon, the breaching party shall compensate for damage caused to the other party and a third party (if any) in accordance with this Law and relevant laws.

In conclusion, from the above provisions of law, the grounds for penalty for breach of contract include: having a validity contract (if the contract is invalid, the agreement regarding penalty is also invalid); having a violation; both parties to a contract have agreed on penalty for breach of contract.

The level of penalty for breach of contract shall be agreed by the parties to a contract. The Civil Code 2015 did not provide for a maximum level of penalty, but the Commercial Law 2005 stipulated a maximum penalty of 8% of the value of the breached contractual obligation portion and the Construction Law 2014 stipulated a maximum fine of 12% of the value of the violated contract for those using state funds.

Related topics:

Unilateral termination of contracts

Compensation for damage caused by breach of contract

Consulting services:

Phone: 0914 165 703 or Email: dmslawfirm@gmail.com

Penalty for breach of contract