Vietnam contract law: a modern legal system favorable for the establishment of foreign companies
Vietnam contract law is the foundation of business law in Vietnam. The country has a comprehensive legal system favorable for the establishment of foreign companies. Vietnam’s contract law has changed recently following Vietnam’s accession to the World Trade Organization.
Legal system of Vietnam contract law
Vietnam’s civil law is based on the French civil code. It is a branch of private law involving several areas of the law: the law of persons, property law, contract law, the family law and inheritance law. Contract law and the law of obligations are of particular interest in the process of creating companies and business life.
Vietnamese law obligations regulate legal documents (contracts, agreements) and legal facts (unfair competition, etc). Vietnamese contract law is, more specifically, the legal formatting of relationships between two or more people. It is the basis of economic and social life of the country.
Vietnamese law has two main systems of accountability:
- contractual liability, which is implemented when a contract has been concluded between the parties in dispute;
- tort, which is implemented when no contract has been concluded between the parties.
Reforms to Vietnam contract law promoting integration into the international economy
- Reforms related to the internationalization of the Vietnamese economy: Vietnam’s civil law is mainly governed by the Civil Code, which holds a prominent place in the Vietnamese legal system. The first Vietnamese Civil Code was adopted in 1995 and reformed in 2005. This reform took place within the framework of Vietnam’s accession to the World Trade Organization (WTO). Indeed, accession to the WTO meant for Vietnam the need to revise and adapt its legislative framework in order to ensure compliance with the commitments made within this international organization. Thus, Vietnam, as a member of the WTO, must meet the requirements of the principle of transparency, including in particular the principle of the publicity of judgments.
- Principles of Vietnam’s contract law: basic principles, which are found in many countries, are present in the Vietnamese Civil Code, such as the principle of contractual freedom, the principle of liability, the principle of equality, or the principle of good faith and loyalty. A new Civil Code reform was passed November 24, 2015 by the National Assembly. The new Civil Code will enter into force on 1 January 2017. It keeps the cardinal principles of the old Code.
- Adaptation of civil law to practice: The reform aims to adapt the civil law to the practice and to meet further requirements of investors. Thus, many rules have been modified to meet these goals. Thereby, rules on pre-contractual periods, for example, civil transactions not meeting the formal requirements laid down by the Civil Code will not be declared invalid if one party or both parties have executed at least two-thirds of their obligation. Security law (internal debt payment guarantees or performance bonds guaranteed), a branch of civil law, has also been profoundly remodeled. This reform reinforces the legal security for foreign investors.
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