Vietnam Civil Code 2015: what changes from 1 January

Vietnam Civil Code 2015 becomes law for every company in the country on 1 January next year. The National Assembly passed it on 24 November 2015 as Law No. 91/2015/QH13. It replaces the Civil Code of 2005. If your company signs contracts, lends money or takes security, you have about five months to check your paperwork.

What is the new Code?

The Civil Code is the base law for private dealings. It sets the rules for people, property, contracts and debts. Other laws, such as the Commercial Law, cover special cases. When those laws say nothing, the Civil Code fills the gap.

The 2015 Code is a full rewrite of the 2005 text. It is organised differently and has 689 articles, against 777 in the 2005 text. Some old gaps are closed, and some rules are new. The new Code starts on 1 January next year, so contracts you sign from now on should be written with it in mind.

Source: Civil Code, Law No. 91/2015/QH13, passed 24 November 2015, in force from 1 January next year.

Contracts: freedom, but with limits

The Code keeps the idea that parties are free to agree their own terms. A contract is an agreement to set up, change or end rights and duties. The Code also says that parties must act in good faith and must not break the law or public morals.

A deal can be made in writing, by speaking, or by conduct. For a business, writing is still the safe choice. A written contract is much easier to prove if there is a dispute.

Review your standard contracts now. Check how they describe delivery, payment, late payment and ending the deal. Make sure each clause still fits the new Code. Pay special attention to clauses on late payment and on ending the deal early, since these are where disputes most often start.

Source: Civil Code, Law No. 91/2015/QH13, the general principles and the part on contracts.

Security interests: more tools for lenders

The Code sets out the ways to secure a debt. They include pledge, mortgage, deposit, security deposit, escrow, guarantee, retention of property and the new retention of ownership. The last one lets a seller keep title to goods until the buyer has paid in full.

This matters for suppliers who sell on credit. It also matters for banks and trade partners who want a clear claim on assets. If you take or give security, have a lawyer check that the deal follows the form the Code asks for.

Source: Civil Code, Law No. 91/2015/QH13, the part on measures to secure performance of obligations.

Loan interest: the 20 percent cap

The new Code sets a ceiling on interest for civil loans. Parties may agree the rate, but it may not go above 20 percent a year of the loan amount, unless another law says otherwise. If the agreed rate is higher, the extra part has no legal effect.

The 2005 Code used a different limit, tied to the State Bank base rate. The new fixed ceiling is simpler to apply. If your company lends to partners or staff, or borrows from firms that are not banks, check the rate written in each loan.

Lending by credit institutions follows the banking laws. Check which law covers your loan.

Source: Civil Code, Law No. 91/2015/QH13, the provision on interest in loan contracts.

Time limits for claims

The Code also sets how long you have to take a case to court. For contract disputes, the period is three years from the day you knew, or should have known, that your rights were harmed. Under the 2005 Code the period was two years.

A longer period gives you more time, but it also works against you. Others can claim against your company for longer. Keep contract files and payment records for at least that long. Good records also help when a partner disputes what was agreed, what was delivered or when payment was due.

Source: Civil Code, Law No. 91/2015/QH13, the provisions on limitation periods.

A short checklist before 1 January

First, list your active contracts and loans. Second, mark any that run past the start date. The Code's transition rule says a deal made earlier, and not yet carried out, may stay under the 2005 Code, unless the parties agree to update it to the new one. Ask a lawyer which rule fits each deal. Third, check interest rates against the 20 percent cap. Fourth, update your standard contract templates. Fifth, ask a qualified Vietnamese lawyer about your own case.

This article is general information, not legal advice.

Source: editorial summary of Civil Code, Law No. 91/2015/QH13.

Sources

Civil Code, Law No. 91/2015/QH13, passed by the National Assembly on 24 November 2015, full Vietnamese text, including the transition rule in Article 688 and the interest rule in Article 468. Civil Code, Law No. 33/2005/QH11 (replaced).