Whether purpose contract has been achieved or not does not only depend on compliance
with contract but also is controlled by conditions, objective
circumstances. In the current pandemic situation,
which regulations do participants in contract need to pay attention to?
According to Vietnam
laws, event shall be regarded as force majeure if it meets three conditions:
(i) objective factors; (ii) not able to be foreseen; (iii) not able to be
remedied by all possible necessary and admissible measures being taken. It
should be noted that epidemic is regarded as event of force majeure if there is
factor of “not able to be remedied”. Covid-19 pandemic, in legal aspect,
initially was not a force majeure event. Only when it broke out and the
Government issued Directive on nationwide social dítancing, it appears that
this pandemic become force majeure event. Specifically, according to request of
Directive, all operation must stop, and this request seems to make Covid 19
epidemic meeting enough three mentioned conditions. Legal consequences of force
majeure event is that if there is loss, and the obliger shall not take
responsibility.
However, in the current
pandemic situation, not all contractal relations will apply above principle.
When force majeure event occurs, factor in performance of contract must be
considered. This is fundamental difference between definition of “force majeure
event” and “basic change of circumstances”. Specifically, the contract will not be
performed in force majeure event and will be performed with many considerable
changes compared to initial estimate in basic change of circumstances.
According to the laws, the change of circumstances shall be deemed basic when
it meets all following conditions: (i) The circumstances change due to
objective reasons occurred after the conclusion of the contract; (ii) At the
time of concluding the contract, the parties could not foresee a change in
circumstances; (iii) The circumstances change such greatly that if the parties
know in advance, the contract has not been concluded or are concluded, but with
completely different content; (iv) The continuation of the contract without the
change in the contract would cause serious damage to one party; (v) The party
having interests adversely affected has adopted all the necessary measures in
its ability, in accordance with the nature of the contract, can not prevent or
minimize the extent of effect.
In the case of basic
circumstances change, the affected party may request the other party to the
re-negotiate the contract in a reasonable period of time. If the parties can
not reach an agreement on amending the contract within a reasonable period of
time, any of the parties may request a court or arbitration to terminate the
contract at a specific time or amend the contract to balance the lawful rights
and interests of the parties due to basic change of circumstances. The court
may only decide to amend the contract in the event that the termination of the
contract would cause greater damage than the cost to perform the contract if it
is modified. In the process of negotiating on amendments and termination of the
contract and the court or arbitration handling the case, the parties must
continue to perform its obligations under the contract, unless otherwise
agreed.
In the current pandemic
situation, many places are still allowed to operate normally but there must be
careful prevention measures. But these prevention measures are the cost that
enterprise has to cover which is not small. Therefore, the contract can still
be performed but one party has to suffer huge losses compared to initial
estimate. In this case, the law allows parties to re-negotiate. If parties can
not reach any agreement, such case shall be brought to the court or arbitration
to be solved. There are two possibilities: firstly amending the contract to
balance the parties’ rights, secondly terminating the contract at a specific
time if the contract can not be amended. And it is important to consult
with dispute lawyers for possible options before taking the matters further to
protect best interests in the transaction.
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