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Force majeure events in Vietnam: Payment obligations

COVID Question: Can payment obligations be suspended as a result of the Force Majeure event in Vietnam, or will the Force Majeure event only excuse the inability to perform obligations other than monetary obligations? The following article will provide the answers to the above questions, typically under COVID impact.

This is a frequent occurrence, where the affected party often uses force majeure to delay payment obligations. Looking at Clause 2, Article 351 of the Vietnam Civil Code, we see that in case the obligor fails to properly perform the obligation due to force majeure events in Vietnam, it is not liable to civil liability unless otherwise agreed or provided for by law. Therefore, it can be seen that the affected party can be exempt from civil liability for failing to perform properly.

However, for the case of the obligation to pay, the Vietnam law has other provisions, specifically, according to Clauses 1 and 3, Article 440 of this Code, which stipulates that the buyer is obliged to pay money according to the time limit, location, and amount specified in the contract, and in case the buyer fails to properly perform the payment obligation, he/she must pay interest on the late payment amount as prescribed by law.

The obligation to pay can be considered an obligation to perform for any reason and if the buyer does not pay on time, it must pay interest in accordance with the law, especially with the powerful current development of technology, the buyer can pay at any time and any place. Besides, proving that the buyer has applied all necessary measures but still cannot fulfill the payment obligation is very difficult when the buyer can use many different ways such as borrowing money from a third party, payment through banks, etc. Therefore, a force majeure event only exempts the affected party from the performance obligation, but not the payment obligation.

However, in fact, there are a few cases where the buyer has a lot of difficulties and cannot pay the seller because of the restrictions of the Government of the seller’s country, although the buyer has made every effort and tried every way to do so. For example, there is a case where the government strictly controls the payment outside the country, so when exporting the domestic currency to the outside, it must be approved by the government of that country, making it impossible for one party to perform the payment obligation properly. In this case, it can be considered a force majeure case.

ASL LAW is the top-tier Vietnam law firm for Employment and Labor Law. If you need any advice, please contact us for further information or collaboration.

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