What is a deposit contract?
Deposit is one of the security for performance of obligations measures specified in Article 292 of the Civil Code 2015. According to Article 328 of the Civil Code 2015, a deposit is the handover by one party (hereinafter referred to as the depositor) to the other party (hereinafter referred to as the recipient of a deposit) a sum of money or precious metals, gems or other valuable objects (hereinafter referred to as the deposit property) for a period of time to secure the conclusion or performance of the contract.
In case the contract is entered into or performed, the deposit property shall be returned to the depositor or deducted to fulfill the payment obligation; if the depositor refuses to enter into and perform the contract, the deposit property belongs to the recipient of the deposit; if the recipient of the deposit refuses to enter into and perform the contract, he/she must pay the depositor the deposit property and an amount equivalent to the value of the deposited property, unless otherwise agreed.
Therefore, the deposit contract is the contract which is made to ensure the implementation of the civil obligations of the parties and bound the parties to implement the other relevant civil transaction.
Notes when signing a deposit contract
Subject of deposit contract
The subject of the deposit contract is the depositor and the recipient of the deposit must have civil legal capacity, full civil act capacity and the parties to the transaction are completely voluntary, there is no coercion, deception or misrepresentation to establish a transaction.
Form of deposit contract:
Currently, there is no legal instruments specifying the form of the deposit contract. Therefore, whether the deposit contract is notarised or certified or not will depends on the agreement of the parties.
Rights and obligations of parties in the deposit contract
- The depositors’ rights and obligations:
Pursuant to Article 38.1 of Decree 21/2022 ND-CP, the depositor has rights and obligations as follow:
- Requesting the recipient of the deposit to cease extracting, using or establishing civil transactions for deposited properties; preserve and keep deposited properties from losing value;
- Exchanging and replacing deposited properties or include deposited properties in other civil transactions when the recipient of the deposit agrees;
- Paying for the recipient of the deposit the reasonable expenses for managing, preserving deposited properties.
Reasonable expenses specified at this point are actual necessary and lawful expenses at the time of payment which under normal conditions must be paid by the recipient of the deposit to ensure that the deposited property is not lost or destroyed or damaged;
- Registering property ownership or fulfill other obligations as per the law to enable the recipient of the deposit to possess deposited properties;
- Other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
- The recipient of the deposit’s rights, obligations:
Pursuant to Article 38.2 of Decree 21/2022 ND-CP, the recipient of the deposit has rights and obligations as follow:
- Requesting depositors to cease exchanging, replacing or establishing other civil transactions with deposit properties without consent of the recipient of the deposit;
- Possessing deposit properties in case depositors violate commitment regarding contract conclusion and execution;
- Preserving deposit properties;
- Refraining from establishing civil transactions, extracting, using deposit properties without consent of depositors;
- Other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
In addition to the basic terms prescribed by law, the parties when making a deposit need to consult legal advice from professional service providers to minimise risks to with civil transactions that they enter into.
Above is the general content of notes when signing a deposit contract. If you have difficulty in finding a Law Firm to advise and support in legal aspect related to drafting a deposit 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, Mergers and acquisition, and Litigation. We are confident in providing customers with optimal and effective service
