Although contractual institution admits rights of contractual parties to freely negotiate a contract, the contractual parties need to comply with the compulsory conditions for effective civil contract during period of establishment to ensure its legal validity. Civil legislation does not specifically regulate on compulsory conditions for effective civil contract. Nevertheless, on the grounds of regulation that the civil contract is a type of civil transactions in accordance with Article 116 of Civil Code 2015, it can be drawn a conclusion that the conditions of effective transaction is also compulsory conditions for effective civil contract. In particular, compulsory conditions for effective civil contract comprise of:
(i) Subjects of the civil contract have legal personality and/or legal capacity in conformity with such civil contract;
(ii) Participants in the civil contract act entirely voluntarily;
(iii) Intention and content of the civil contract do not violate against to prohibition of law or contrary to social ethics; and
(iv) The forms of the civil contract shall be the conditions for its effectiveness in cases where it is so provided for by law.
The first condition in the compulsory conditions for effective civil contract is the subjects of the civil contract. Accordingly, the participants in the civil contract must have legal personality and legal capacity must conform with the created civil contract. Several regulations in relation to conditions of legal personality to establish and execute the contract are such as only the persons who are from 18 years of age, by themselves, are entitled to enter into a contract and perform such contract related to real estates, registered movable estates; minors are not allowed to make and perform a contract by themselves except those established for purposes of daily living appropriate their age[1].
The will of contractual parties is also one of the compulsory conditions for effective civil contract. Accordingly, participants in establishing and executing the contract shall be free of will and completely voluntary. A civil contract is deemed to be involuntary of participants when there is a forgery, confusion, deception, threat, coercion, or the person who entered into the contract at the time when he/she does not have awareness and ability to control his/her own behaviours.
Although free of will and voluntary in establishment of a contract is one of the compulsory conditions for effective civil contract, but the free of will and voluntary must not violate the regulations of laws. Thus, intention and content of a civil contract must not violate against to the prohibition of laws and contrary to social ethics[2].
In several cases, form of contract is one of elements to review, consider and may be impact to effectiveness of a contract. Accordingly, in several specific civil transactions, in accordance with laws, contracts must be established in writing, notarized, authenticated or registered with competent authorities to be recognized their effectiveness i.e. contracts for transfer, gift, mortgage or capital contribution with land use rights, land use rights and assets attached to land must be notarized or authenticated, except for contracts for transfer of land use rights, land use rights and assets attached to land in which one party of the transaction is a real estate business organization[3]. However, the contracts are not satisfied the condition of form shall not be automatically considered to be invalid since in case that a party or parties had already performed at least two-third their agreed obligation, such contracts are till recognized their effectiveness in accordance with decisions of the court[4].
Above is an overview of the compulsory conditions for effective civil contract. If you have trouble with legal issues regarding of the compulsory conditions for effective civil contract, please contact us: Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specializing in business law in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.
[1] Article 21 of Civil Code 2015.
[2] Article 123 of Civil Code 2015.
[3] Article 167.3 of Law on Land 2013.
[4] Article 129.2 of Civil Code 2015.
