Settling Disputes Over Compensation For Non-Contractual Damages

Non-contractual damage is the one arising when there is no contract or agreement on damage entered into between the aggrieved party and the party having caused damages. When there are grounds for liability to compensate for damages, an aggrieved party may claim the party having caused damages for compensation. The party having caused damages will not take responsibility in case the damage is the result of force majeure events or entirely due to the fault of the aggrieved party, unless otherwise agreed or regulated by the law.

The party may negotiate on compensation for damages. However, the relationship between the aggrieved party and the damage-causing party involves the conflict of interest, the parties hardly reach a mutual agreement that causes dispute. Thus, the dispute over compensation for non-contractual damage has recently become a very common civil dispute. In order to assist in settling disputes over compensation for non-contractual damages, the Judicial Council of the Supreme People’s Court issued Resolution No. 03/2006/NQ-HDTP guiding the application of some articles of the Civil Code 2005 on compensation for non-contractual damages (“Resolution 03”). Although the Civil Code 2005 has expired, up to now the Resolution 03 has still been valid for reference in settling disputes over compensation for non-contractual damages.

Accordingly, when settling disputes over compensation for non-contractual damages, it is necessary to respect the agreement of the parties on the amount of compensation, the form of compensation, and the method of compensation, if such agreement does
not violate a prohibition by law or is not contrary to social morals.

If the parties cannot reach a mutual agreement, settling disputes over compensation for non-contractual damages must be conducted in accordance with the principles of compensation for damage. Article 585 of the Civil Code 2015 stipulates the principles of compensation for damage as follows:

Actual damage must be compensated in full and promptly.

Actual damage is compensated in full means when there is a claim to settle for damage as the result of infringing property, health, life, honour, dignity, and reputation, it must be based on the corresponding provisions law of the Civil Code stipulates, in that particular case, what damages are included, how much is the damage, and the extent of the parties’ fault to claim the party having caused damage for the respective damage.

In order for the actual damage to be compensated promptly, the Court must promptly settle the claim for damages within the statutory time limit. In case of necessity, one or some temporary urgent measures may be applied according to the provisions of the procedural code to settle urgent requests of the involved parties.

Persons responsible for compensation for damage may be entitled to a reduction in the amount of compensation when fully meeting the following two conditions:

The person having caused the damage is not at fault or under unintentional; and
The damage is very large in comparison to the financial position of the person responsible for compensation.

If the amount of compensation becomes unrealistic, the aggrieved party, or the party having caused damage, has the right to request a court or another authorised State body to change the amount of compensation.

The amount of compensation becomes unrealistic means due to changes in socio-economic situation and fluctuations in prices, the amount that is being compensated is no longer appropriate or due to a change in the injury or working capacity of the aggrieved person, so the amount of compensation is no longer suitable for such change or due to a change in financial position of the person causing the damage.

Where an aggrieved party is at fault for causing loss and damage, such party shall not be entitled to compensation for the part of the loss and damage arising from their fault.
A party with infringed rights or benefits shall not be compensated if the loss and damage results from failure to apply necessary and reasonable measures to prevent or mitigate the loss and damage to such party

In case the parties are unable to settle disputes over compensation for non-contractual damages by themselves, the person with the right to make the request can initiate legal action claiming compensation for damage. The limitation period for initiating legal action claiming compensation for damage shall be three years from the date on which the person with the right to make the request knew or should have known that his or her legal rights or interests were infringed.

The above is an overview of settling disputes over compensation for non-contractual damages. If you have trouble with legal issues of settling disputes over compensation for non-contractual damages, please contact us: Phuoc & Partners is a professional consulting firm established in Vietnam which currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners. It is 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.

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