In commercial activities, the contract is considered as a document that stipulates the agreement between the parties and clearly defines the obligations that each party must perform. However, a breach of contract can still occur, whether intentionally or unintentionally. In this case, the aggrieved party needs to apply commercial sanctions to protect its rights and legality, while resolving conflicts and ensuring compliance with contractual commitments.
According to the provisions of the Commercial Law 2005, commonly applied commercial sanctions include:
1. Specific performance of a contract
This is a sanction that has the function of ensuring that the contract is performed as agreed, in accordance with the original intentions of the parties.
How to apply:
- Require the violating party to properly comply with the agreements in the contract.
- In case the violating party does not comply with the agreements in the contract, the aggrieved party has the right to apply other measures such as: purchasing goods or receiving services from others instead; self-repair defects in goods, etc. The violating party must pay the difference and other costs incurred.
This sanction cannot be applied concurrently with other sanctions except fines for violations and compensation for damages. If the violating party does not comply, the aggrieved party has the right to continue applying other sanctions.
2. Penalty for breach
It is a sanction that has the function of enhancing the awareness of contract compliance of the parties. The aggrieved party has the right to request the violating party to pay a fine for breach of contract.
The condition for applying this sanction is that there must be an agreement on penalties for violations between the parties, and at the same time, a violation has occurred that the parties agree is a condition for applying sanctions.
The maximum penalty for violation is 8% of the value of the violated contractual obligations, except for some specific fields such as construction (Maximum fine is 12% of the value of the violated contractual obligations) or inspection service (fine not exceeding 10 times the assessment service fee).
3. Compensation for damages
This is a sanction that has the function of compensating for material losses to the violated party. The violating party is responsible for compensating for the value of the actual loss and direct benefits that the aggrieved party would have received if there had been no violation.
Compensation for damages arises when three factors are present:
- There is a breach of contract;
- There is actual damage;
- The breach of contract is the direct cause of the damage.
Compensation sanctions may be applied concurrently with other sanctions.
4. Temporary suspension of contract performance
Except for cases of liability exemption specified in the Commercial Law 2005, temporary suspension of contract performance is the temporary failure of one party to perform its obligations in the contract in one of the following cases:
- The occurrence of a violation that the parties have agreed upon is a condition for temporarily suspending the performance of the contract;
- One party fundamentally violates contractual obligations.
One point to note is that suspending the contract will not affect the validity of the contract. Therefore, the violated party has the right to request compensation for damages according to the provisions of the law.
5. Suspension of contract performance
Except for cases of liability exemption specified in the Commercial Law 2005, suspension of contract performance is the termination of one party’s performance of contractual obligations in one of the following cases:
- The occurrence of a violation as agreed upon by the parties is a condition for suspending the contract;
- One party fundamentally violates contractual obligations.
When a contract is suspended, the contract terminates from the moment one party receives notice of suspension. The parties do not have to continue performing their contractual obligations. The party that has performed the obligation has the right to request the other party to pay or perform the reciprocal obligation and the violated party has the right to request compensation for damages according to the provisions of law.
6. Termination of contract
Cancellation of a contract is the complete abolition of the performance of all contractual obligations for the entire contract or the abolition of partial performance of contractual obligations, the remaining parts of the contract are still valid.
Except in the case of partial delivery of goods or provision of services, after cancellation of the contract, the contract is not effective from the time of signing and the parties do not have to continue to perform the obligations agreed in the contract, except for agreements on rights and obligations after contract cancellation and on dispute resolution.
In short, legal sanctions are not only a tool to protect the rights and interests of parties involved in trade activities, but also a foundation for the development and prosperity of the global economy. Understanding and implementing them wisely is an important part of building a fair and sustainable trading environment.
