On 26 March 2024, the Supreme People’s Procuracy of Vietnam (the Supreme Procuracy) issued Official Letter no. 1083/VKSTC-V9 (the Official Letter) to respond to inquiries from local procuracies regarding supervision in legal proceedings regarding civil, marriage and family matters. Although these clarification and interpretation are non-binding, they constitute an important source of interpretation for the procuracy system to rely on. However, one should note that interpretation by a procurator is not binding on the court and therefore is not as important as a guidance issued by the superme court.

In this post, we will discuss some statements of the Supreme Procuracy under the Official Letter that we find interesting or noteworthy:

1)       Q&A no. 34: If (i) a civil transaction is not in the required form for it to be legally effective, (ii) the obligation therein cannot be quantified, and (iii) the court cannot determine how many parts of the obligation has been performed by the obligor then (a) Articles 129.1 and 129.2 of the Civil Code 2015, which allow an otherwise invalid transaction to remain valid if two thirds of the relevant obligations have been performed, would not be applicable to recognize the validity of such transaction and (b) such civil transaction would be consider invalid.

Our comments: The Supreme Procuracy seems to have taken the view that a party (i.e., the obligor who has performed a certain amount of work under such transaction) may only seek for recognition of the validity of a civil transaction if their situation is captured under Articles 129.1 and 129.2 of the Civil Code 2015.

Although this might be an understandable deduction from the straightforward reading of Article 129’s wordings, we believe that the aforementioned party should be able to request the court to consider their claim according to Article 14.2 of the Civil Code 2015 (i.e., the court should seek to apply customary practice, analogous law, basic principles of civil law, case law, and equity law to the case if Article 129 is not applicable) instead of being rejected immediately.

2)       Q&A no. 36: If a land use right (LUR) transfer agreement is invalidated by the court after the transferee has (i) successfully registered their ownership with such LUR and been issued with the corresponding Land Use Right Certificate, and (ii) mortgaged (thế chấp) such LUR to a bona fide bank then, applying Article 133.2 of Civil Code 2015, the mortgage agreement would not be invalidated, and the transferor cannot reclaim the LUR from the bank.

Our comments: The Supreme Procuracy has essentially taken the view that the LUR has been “assigned” (chuyển giao in Vietnamese) to the bank just by the parties’ execution of the mortgage agreement. While this interpretation seems reasonable, it seems to be contrary to the regulations under the Civil Code 2015 that: (1) a property (i.e., the LUR) is considered to be transferred at the time the obligee party (i.e., the bank) possesses the property;[1] and (2) under a mortgage transaction, the mortgaged property (i.e., the LUR) is held by the mortgagor (i.e., LUR owner) and would not be under the possession of the mortgagee (i.e., the bank).[2]

3)       Q&A no. 37: The parties may agree on a deposit penalty of greater value than the deposit itself, but if the discrepancy is too great and/or the deposit penalty amount exceeds the obligor’s ability to pay then the Court may not accept such agreement.

Our comments: Article 328.2 of the Civil Code 2015 provides that if the recipient of the performance bond (i.e., the deposit) refuses to enter into or perform the contract, it must return the performance bond property (e.g., cash) and pay an amount (i.e., deposit penalty) equivalent to the value of the performance bond property to the depositor, unless otherwise agreed. The Supreme Procuracy has confirmed that the wording “unless otherwise agreed” means that the parties may agree on a deposit penalty of higher value than the deposit itself. Although not specified by the Supreme Procuracy, we think that such agreement might be invalidated by the court in certain cases if, for example, the extravagant deposit penalty is considered to be in contravention of social morals.

4)       Q&A no. 41: Under the land use right transfer agreement with the condition that the transferor must convert the land use purpose, if the transferor fails to then the agreement is not yet legally effective.

Our comments: The Supreme Procuracy clarifies that a conditional contract would not be legally binding if the condition to perform such contract has not happened, which is not clearly governed under Article 402.6 of the Civil Code 2015.

5)       Q&A no. 43: The “adjoining immoveable property” of another immoveable property (the entitled immoveable property) does not necessarily mean to cover only those that are immediately adjoining the entitled immoveable property but also cover those in the vicinity of said property.

Our comments: This is a welcomed clarification from the Supreme Procuracy.

 This post is written by Le Thanh Nhat and edited by Nguyen Quang Vu.